Local, Opinion/Comment

‘Grants as far as the eye can see’. Is this Council’s financial ‘strategy’?

In 2015 the Coffs Harbour City Council (CHCC) decided it would follow a simple strategy to ‘financial viability’.  It would continue to raise revenue by way of rate levies, grants and contributions and from loans taken out by Council.

By Rob Steuermann

Interestingly making up 49% of all CHCC ‘revenue’ grants were the greatest source of funds.  Rates represented a further 40%.   At the same time the CHCC also had 24 loans outstanding.

At this time the State Government, through the Office of Local Government (OLG), had a program to amalgamate or merge numerous local government administrations. 

There was opposition to amalgamations in some quarters including the CHCC. 

In the end, to get better results for residents, the prolonged campaign by the State Government took on the name ‘Fit For The Future’ (FFTF).  Among a number of objectives one aim was to maximise scarce resources which  is often referred to as obtaining “economies of scale”.

The CHCC seemed to have a point to prove and they were determined to stand alone.   Amalgamation or merger with other councils in nearby areas was out of the question for the CHCC. Even to the extent they did not want to be part of a very loose resource sharing amalgamation with Bellingen, Nambucca, Kempsey and Port Macquarie. Something the NSW Government calls Joint Organisations. 

In fact the CHCC was one of only two out of 52 regional councils in NSW not join a Joint Organisation.

Yet to be able to do this the Council had to address the criteria the OLG put in place.  It took a while but eventually the CHCC managed to reduce the level of loans below the suggested ratio of 30%.

But, was it a hollow achievement?  Was it a matter of ‘passing the buck’, so to speak? 

Mayor Denise Knight. Photo – Coffs Coast Advocate

If one examines the published accounts, as I have, the picture becomes clearer.  Council ‘ticked the right box’ for the OLG.  The loans component fell to be below the prescribed ratio figure. 

But remember the rates are increasing under the decision made by the OLG making the loan component fall.   It was not solely a result of action by the CHCC.

In the years ended 30 June 2016, 2017 and 2018 our Mayor (pictured above) admitted in the Chamber, that Council “had scrounged money from everywhere” it could. Was it some sort of justification to support a failing Council or not?   It gives a hint as to how CHCC approached the problem of the budgets and plans.

This “scrounging” was to include a continuous application for grants and contributions.

In the published accounts totals are in place for capital and revenue items.  But that is as far as it goes.  Any break-up of grants received by specific project is hard to find or it is missing. 

But, take a step back here.  Grant money is “ad hoc”, in other words, it is not on-going and has a strong discretionary element to it.  

Fresh application needs to be made for each grant.  It is a lottery.

 So the question really is this; Are such actions a proper strategy and plan to sustain the needs of the CHCC’s electorate?

But, more to the point, the CHCC over the past three years has received grants to a total of $178M (or $181M).  This is staggering.

It is clear some loans are for unforeseen incidents  such as the north wall’s rebuild after an act of nature.  No amount of planning would predict this. 

Yet some of the grants are included under operating income or costs.   

This raises a few questions;

  1. What are the projects and the nature of the work done?
  2. What resources, apart from the cash, were required for the project?
  3. Were any new jobs created?

The OLG, when interviewed for this article, were unaware of any consolidated register of grants or contributions either in their office or at a State Government level.

A spokesperson did say the state government had multiple departmental programs with separate funding available

But this was of no real help. To not have a central register of funding appears to a definite weakness in the state system.  It potentially provides opportunity to access multiple fund sources and for possible duplication of expenses across projects or agencies.     There appears to be no check being done as there is no known consolidated register. 

However, this is not a matter for the CHCC or this article to pursue.  

In the CHCC published accounts it shows total grants of

  • 2016 -2017                          $74M
  • 2017-2018 (see note)    $56M
  • 2018 -2019 (projected)  $51 M

This is a total of $181 M.

GRANTS ARE NOT ONGOING REVENUE

In the Income Statement (pictured below) the heading reads Income from continuing operations. The purpose of the statement is misleading. It shows grants and contributions for capital purposes

The 2017-18 CHCC accounts showing the high percentage of grants

Later it goes on to show the expenses from continuing operations. Apparently these items exclude any capital components and the statement goes on to give the net operating result. 

The statement is a mix of operating and capital but the treatment is inconsistent in dealing with the expenses. 

The net operating result leads the reader to believe Council performed well.  To highlight this, the font size is increased.

But when the figure for grants is removed the operating result for Council is a loss.  This is despite claims of Council “being in profit” being made by some councillors.

The readers eye is drawn to “Net operating result for the year $38.688 M”.   Below with a bit of spacing between the items in smaller font at the bottom of the page it reads “Net operating result for the year before grants and contributions provided for capital purposes ($383)”. 

This is a loss of $383,000.

It is very hard to say what the real picture is given the accounts as they are presented.  Page 6 of the report uses a figure of $56M. On page 13 the grants for capital purposes is $39M and for continuing purposes the figure is $21.8M.  By adding the two figures this is $60M, which is inconsistent with Page 6.

In another instance the value of the assets goes up by $55M.  

Some $39m from capital grants was received.   It still leaves $16M unaccounted for.  

A footnote elsewhere in the accounts explains some $22M arose out of putting a value on the land under the roads.  There nevertheless appears to a discrepancy of $6m.

It would also seem the OLG does not monitor the accounts presented as required by law and neither do most Councillors.  Could it be Councillors are relying on a system believed to be self-balancing and with a consistent application of the chart of accounts?   

But this does not explain why the paid employees did not notice anything out of the ordinary.  Perhaps if there was a brief reconciliation it would help to focus any review of operating results.

It is noted these accounts have been audited.

To be fair the auditor made standard disclaimers and these indicate a full in depth analysis might not have been done.  Whilst there may be a comment on the internal controls it is not readily apparent.   There are some 100 pages in the third volume of accounts.  It is interesting to note the internal controls should have been an integral component of any new accounting system the council was buying.

There is insufficient information in the published accounts to delve in-depth into the anomalies shown.    But it looks as if the final figures are “fluid” depending upon the need to use them.  

This is interesting given a recent claim in relation to financing the proposed  new Council Administration Building in Gordon Street.  It is claimed there are available $10.6M in savings (source unknown).  Does it come from making a loss?

Is it true to believe we are genuinely  “Fit For The Future” when Council’s strategy is to rely so heavily on “ad hoc”, often one-off grants, that are not really ongoing revenue? 

How might this effect the CHCC’s eligibility to get T-Corp loans for Gordon Street?

Over the last three years grants equate to 66% of total rate income (100%).   Does this really qualify as “paying our way” and genuinely being “Fit For The Future”?

This is the way our council administration manages our money and assets apparently. Can we put any faith in the estimates and figures supplied for Gordon Street as a result?


Rob Steuermann is a retired forensic auditor for the Federal and State Governments. He has published previously on Outlook, see; https://coffscoastoutlook.com.au/coastal-works-returns-not-enough-to-cover-gms-office/


Previous stories here at Outlook on this can be found here; https://coffscoastoutlook.com.au/chcc-puts-four-properties-linked-to-gordon-street-up-for-sale-tender/.

And here; https://coffscoastoutlook.com.au/roll-up-for-the-sale-of-the-century/

The CHCC accounts referred to are available to the public in hard copy format in Council Libraries and also online at the following three URL links; https://www.coffsharbour.nsw.gov.au/Your-Council/Our-Responsibilities/Documents/Corporate%20Planning%20and%20Reporting/Att1%202017-18%20Annual%20Report%20Section%201%20-%20Significant%20Achievements%20-%20reduced.pdf

Also; https://www.coffsharbour.nsw.gov.au/Your-Council/Our-Responsibilities/Documents/Corporate%20Planning%20and%20Reporting/Att2%202017-18%20Annual%20Report%20Section%202%20-%20Regulatory%20Information%20-%20reduced.pdf

And lastly; https://www.coffsharbour.nsw.gov.au/Your-Council/Our-Responsibilities/Documents/Corporate%20Planning%20and%20Reporting/Att3%202017-18%20Annual%20Report%20Section%203%20-%20Annual%20Financial%20Statements%20-%20reduced%20-%20rotated%20pages.pdf

15 Comments

  1. Thankyou Rob for your insightful analysis of CHCC financial planning and reporting. With so many discrepancies, inconsistencies and omissions, ratepayers could be forgiven for thinking that these financial statements are at best misleading, if not a case of cooking the books.

  2. What a can of worms! Is it possible for the residents to engage Rob (if Rob is willing) to conduct a proper audit and investigation into the financial management and processes of our Council and particularly McGrath’s executive team?

  3. Dear Rob
    Could you please send this critical piece of financial analysis to every Councillor. If they’ve been hoodwinked, shouldn’t they know about..? If they have been aware of how this city has been running on “reserve” or near empty, I would consider them to also be culpable. But at the heart of all this smoke & mirrors is one person.

  4. Sandra Fellows

    Why with our rates as high as in Sydney…we do not have a proper accounting and audit system? Our council gave themselves a pay rise an now McGrath is is going over the top with his new wage? No wonder the purse needs a hike…..I am with you john Christie….what a can of worms? Rob we certainly need your help.

  5. Sandra Fellows

    Why with our rates as high as in Sydney…we do not have a proper accounting and audit system? Our council gave themselves a pay rise an now McGrath is is going over the top with his new wage? No wonder the purse needs a hike…..I am with you john Christie….what a can of worms? Rob we certainly need your help.

  6. Rob, I have to agree with the concerns of all commentators and would agree with S Simon that your article should be sent to all the councillors. In addition, perhaps your article should be sent to the premier, OLG minister, MP Gurmesh Singh and ICAC.
    My working days was in engineering construction and from this experience, I would suspect that if CHCC was a private company it could be declared as insolvent. Improper (possibly illegal) management and anyone complicit would be considered culpable and prosecuted. There would be no way that such an insolvent business could continue to trade, let alone embark upon a $100m project that no one wants.

  7. Agree with the above comments.. Rob if you haven’t already done so please forward a copy of your analysis to various media outlets including Current Affairs, Ray Hadley etcetera. Well done and thank you for taking the time to provide ratepayers with a clearer picture of what is actually going on in CHCC.

  8. “In physics, a fluid is a substance that continually deforms under an applied shear stress, or external force”
    CHCC financials are fluid, application of pecuniary interest is fluid, selling assets at full price of valuation is fluid, reference to new council admin components of Gordon Street in speeches and media is fluid, listening to all the community- fluid, are council headed for liquidation?

  9. Rob, Councillor Adendorff’s article ‘Why I voted to support this historic development’ in today’s Advocate states “……a progressive council with healthy financials…..”.
    The rest of his article is a load of hogwash and dribble. This former South African is an embarrassment to his countrymen and just a McGrath/Knight puppet.

  10. well written all previous comment makers….and I particularly like yours, J. Sorie – very witty, but sadly…very true, too.

  11. A progressive council with healthy financials, wow tough call.After viewing issues with Port council and Mid Coast and Coffs council , I have come to the conclusion that councils are an anachronism from the last century,perhaps suitable in Henry Lawsons day but certainly not now.The whole process of council is open to potential incompetence and corruption,with vested interests, feather bedding and jobs for the boys .We need a massive overhaul of the local govt/council with some innovative ideas for the 21st century .Starting with qualified management with experience not councillors making decisions .I know it is a controversial suggestion ,but anything would be better than our present system that is so flawed and archaic

  12. Wow, Rob! This is quite an explosive expose`, and deserving of much wider distribution. It is obvious to the ratepayers of Coffs Harbour that this Council has hidden the truth of their financial (mis)management for a long time, and it has taken a forensic auditor with such a background as yours to highlight it. There are so many mis-truths and camouflaged entries in their balance sheets that this Council needs close scrutiny by the State Government and ICAC. I urge you, Rob, to post your article on the email site of Premier Berijiklian, with the request it be passed on to ICAC. With best wishes.

  13. Nothing out of the ordinary here this council should have been placed in administration years ago and the reason it hasn’t is we are 600 km from Macquarie st. Moved here 30 years ago from Sydney ‘s Northern Beaches and between Warringah and Pittwater Shire Councils they have been placed in administration 7 times to date yet Coffs just keeps doing what it is doing.

  14. Tom Strickland

    Thank you Rob. For generations communities have trusted their Local Government with a naive innocence. Misplaced trust has led to stoic acceptance that “they will do the best for us” – to the point that many of us have stopped monitoring the governance being delivered. It took a major uprising of community anger to cause our citizens to take stock and start to ask questions. We desperately need the Auditor General to conduct a forensic examination of all aspects of CHCC. Disappointment does not even begin to describe the community anger of the past two months. Thank goodness that half of our Councillors are prepared to ask questions.

  15. Well said Tom , Yes we took our eye off the ball , And They Took Advantage of it BIG TIME

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