Wrap up of July 13 extraordinary meeting

Monday, 13 July, 2020

Councillors today resolved to ask the NSW Government to fund a review of Council's financial position through the NSW Auditor General and Office of Local Government, with advocacy for this from Member for Bega, Andrew Constance.

General Manager, Leanne Barnes said today’s meeting was also an opportunity to reiterate Council’s challenging financial position for the benefit of every member of this community and confirm the steps that have been and are being taken to improve the situation, as well as identify the challenges Council has been aware of for several years in relation to our presentation of financials and financial reporting.

Ms Barnes said all Councils struggle financially in NSW in a rate pegged environment and Bega Valley Shire Council is no different. She said adding to that underlying pressure is the volatile environment in which we live.

“Natural disasters in 2014, 2016, 2018 and 2020 have sadly been a constant that we have had to respond to - supporting community through recovery, and importantly undertaking safety and emergency works as well as rebuilding critical community infrastructure,” she said.

“Into this context has come the overlay of unprecedented levels of capital funding from the Federal and State governments.Our capital works program has increased many times over bringing challenges with the opportunities.

“These projects benefit our community and are hard to argue against, but they were not necessarily Council priorities, and as such, not part of our Long Term Financial Plan.

“Rather than ignore the opportunity presented by these projects, this Council has sought to do what is needed to bring them to life. However, the number of assets we manage has grown.”

Last year Council resolved to progress with one of three Special Rate Variations (SRVs) proposed as part of our Long Term Financial Plan, aimed at addressing the community held position to keep six pools, freeing up Council’s General Fund to focus on other assets.

“Rightly, in response to our current and ongoing disaster response and the financial pressures being felt in our community, in January Council changed its position and dropped the SRV.  The expenditure and asset pressures of the pools continues,” Ms Barnes said.

“An SRV remains an option in the Long Term Finance Plan for 2023 and will be a decision for the next Council. Rates in the next financial year will rise by 2.6% - the rate pegged limit.”

In summary, Council has not progressed with any new SRV, and experienced long delays in rationalising and divesting of assets. 

“We have found ourselves with a growing asset portfolio to maintain and we have also stepped up work in roads, bridges and recreation and leisure assets. Council has not undertaken any loans borrowing program to support theses capital assets projects, rather Council has sought to pay down the existing loans programs,” Ms Barnes said.

The impact of recent natural disasters in this context should not be underestimated, and why Council has recommended to the current Royal Commission that funding arrangements in response to such scenarios need to change.

“I raise this not as an excuse but a reality check. I do not step away from the fact that poor financial reporting and problems with staff turnover have compounded our issues,” Ms Barnes said.

“There has hardly been a period over the past six years where our staff, who are also members of this community, have not been responding to, recovering from or rebuilding after a disaster.

“All that aside, we absolutely acknowledge that there are fundamentals that we need to get right and be better at.

“Our highest priorities are simple - supporting our community in recovery, improving Council’s financial position and delivering the large suite of capital projects and rebuilding projects on our program.

“Council staff, led by myself and our new Director of Business and Governance, have already started working with the independent Audit Risk and Improvement Committee, the NSW Auditor General, and the Office of Local Government and our external auditors on our financial improvement approach and actions.

“I take full responsibility for the governance and reporting oversights highlighted again at today’s meeting,” Ms Barnes said.

However, the General Manager said today’s extraordinary meeting confirmed that the reporting error identified had not affected the cash position of Council.

Council will consider its cash reserve position in briefings in the coming weeks and a report will be presented to Council in August for resolution prior to the finalisation of the 2020 Audit.

“Yes, we have financial challenges and have had operating deficits for a considerable number of years but we also know that as at 30 June 2020, Council’s cash figure is $85.315 million and a program of reform and now further external review has been laid out,” Ms Barnes said.

"Work is still being done to reconcile reserves for the 2019/2020 year. This work can’t be completed until Council has received and paid all invoices for work completed prior to 30 June 2020.

“We are also still calculating the full impact of the waivers from fires and COVID we have introduced for the community. These impacts have had an effect on Council’s cash flow and this may continue for a number of years as we respond to community needs,” Ms Barnes said.

“We face unprecedented times and we will only rise to these challenges with a spirit of cooperation and fairness.  I look forward to working with all who step up to that.”

Following the motion adopted at today’s meeting, Council will write to the Member for Bega seeking his support and advocacy for a funded review of Council’s financial position through the NSW Auditor General and Office of Local Government, with a focus on restricted and unrestricted reserves and cash positions. The Mayor has also indicated that she will go straight to the Minister for Local Government as well, highlighting the importance of this review.

Council will keep the community informed as our internal improvement plan continues and as our request of the NSW Government moves forward.