Councillors are a “gift from the community”, Central Coast Council CEO, David Farmer, said when speaking at the Public Inquiry into the Council’s financial crisis.
Commissioner, Roslyn McCulloch, asked Farmer if a return of the Councillors would derail the Council’s long-term strategy.
Farmer said it really depended on the make-up of the elected body.
“An elected body is a gift from the community in terms of who they elect,” he said.
“It is a risk. How great a risk really depends on the people who get elected.”
He explained an elected Councillor had two roles.
“They are a representative of the community but also they were a member of the governing board.
“I will actually refer to the Act, but they are a representative of the community, they are a politician, but they are also a member of the governing board of the organisation. Those two roles are difficult to marry together,” he said.
“In the end, you are dealing with assets and you make decisions that will last for hundreds of years in terms of decisions in the planning scheme and decisions on fixed assets. You might only be in power for four years or eight years,” he said.
Under questioning from the Commissioner about if his experience put him in a good position to be able to work at Central Coast Council, Farmer said he certainly had experience “in rebuilding from dark places”.
Farmer said the team had turned the place around.
“I’ve just seen the September figures and we’ve gone from two $90 million losses and we’re running a surplus and we’re running better than budget for the last three quarters. That’s fragile,” he said.
“There are a lot of externalities and there is a lot of good work by the staff to get us to that point but you need to stay on track.
“Financial success and stability takes years to create and can take, you know, six months to destroy by a lack of discipline.
“If you can work within the set of tram tracks you can then build reserves and you can do things, but you have to work within the overall strategy,” he said.
The Commissioner asked what controls were in place to stop Council dipping into restricted funds.
“If you are running an operating surplus and you have your capital program under some form of control, then your cash flow is an output of that,” Farmer said.
“You have to have your settings right in terms of what is the level of your capital spend and what’s the level of your operating performance, making sure your budgeting is right and making sure you stick to budget, and if budget has to be adjusted, making changes. It’s not that hard.
“It’s actually about information, being interested and having information, and will.
“If you have those two things you can do those things. It’s been shown in this organisation that reasonably quickly this organisation’s been turned around financially.”
Farmer talked about the IPART decision of 2019 reducing Council’s funds by $39M.
“I had a look at the statements last night and when you pulled everything apart, from the 17/18 year to the 18/19 year – so that’s from the year ended June 2018 to the year ended June 2019 – performance of the general fund went from a $20 million surplus, after you took book items out, to a $24 million deficit.
“You had a $44 million negative turnaround in that year.
“I don’t think anybody picked that up.
“So that was sitting lying underneath the surface when you, all of a sudden, lost $40 million in water and sewer income.
“At that point, that’s when you need to panic, and they didn’t panic.”
Farmer also spoke about the need for the current Special Rate Variation (SRV) to stay or the organisation would need to pull out another $27M in costs which would significantly reduce services and staff.
When asked about the IT system, he said there were still a few steps to be taken, with the most critical being the property and rating system.
There was still a lot of manual workarounds in place.
“We have a major program to finish by the end of this financial year,” he said.
“I think there was a strategic error made early on in terms of the choice of software solution and once we set out on that path, it would have taken really, really good management to avoid some of these problems.”
The Commissioner asked if all the hard decisions had been made.
“Oh, no, no. There are a range of things. You know, we’ve made sudden and urgent and crude decisions,” Farmer said.
“I spent some time in a session with the leadership team earlier this week and we started to look at what’s next after we have stabilised ourselves financially.
“There is a vast amount of improvements to occur in the organisation to begin to make it as capable an organisation as it can be, one that its staff are proud of and one that the community can respect and put its trust in.”
He said most decisions would not impact the community.