A report into Central Coast Council’s financial capacity by consultants in 2020 found a cultural lack of emphasis on the importance of its financial position and performance.
The consultants, Grant Thornton, found too many competing priorities that overshadowed the need for a financially sustainable organisation.
Council called in the consultants to consider the financial impacts from the economic downturn in 2020 from the COVID-19 pandemic lockdowns.
First thing the consultants noted was that Council was continuing to work through the integration process with many processes and systems yet to be consolidated following the merger in 2016 of Wyong and Gosford councils.
The report, still in draft form from August 2020, estimated that the integration had cost about $40M to that date.
It noted some data integrity issues, duplication of work and a high degree of manual input to enable reporting and that this was causing disruption within various streams of Council.
“Since the merger, there has been a growth in FTE (full time equivalent employee) numbers and an increased level of capital projects during this period, though operational performance has deteriorated,” the consultants said.
“As a result of the increased breadth of services and support that the Council provides, there are competing priorities internally which is placing great pressure on the limited financial resources of the Council.
“Council is currently at a point where it cannot support the level of services provided and changes are required to ensure that Council becomes more financially sustainable and has sufficient cash flow to meet their operations.”
The consultants said strong leadership would be required to drive the changes at all levels.
The finance team and systems were capable of producing a multitude of reports, but despite the systems and structure, there was a disconnect between the finance department and the directorates, and the actions required to set reasonable budgets, restructure costs and operate within budget.
“Given the past historical operational performance of Council and the lack of unrestricted cash reserves, there needs to be an immediate restructure of the cost base and a shift in culture to ensure Council is financially responsible and sustainable,” the consultants said.
To achieve this, the CEO and the leadership team would need to work collaboratively with finance and support the strategic financial objectives.
It said that the finance team needed to be able to progress from data compilation, remediation and reporting and have a greater focus on financial analysis and planning.
“In turn, all directors, section managers and unit managers must have an appropriate level of financial literacy to understand the reporting provided and actions required to rectify any performance issues,” the consultants said.
“Through analysis of financial outcomes and understanding the cost and expense drivers, negative variances to budget need to be identified and strategies put in place promptly to turn around poor performance; and there needs to be greater accountability for the financial performance at all levels.
“Section managers, unit managers and directors are ultimately in control of the financial performance of their directorates and are able to drive outcomes.
“As such, they need to be held accountable for negative budget variances and with the support of finance, implement strategies to turn around performance.”
The report, which totalled 70 pages in two phases, included a series of recommendations.
A key priority was cash flow reporting to be incorporated into the standard monthly finance reports for the leadership team, integrated with the profit and loss and balance sheet position.
It said the Long Term Financial Plan showed that the current budget could not be supported and the acceptance of running operational losses needed to cease.
A plan needed to be implemented to reduce expenditure, in light of there being limited opportunities acceptable to the Councillors to increase revenue, the report said.
The report has been made public and can be found on the council website under “public inquiry”.