Financial reports confirm worst fears

01st Dec 2020

Interim Administrator Viv May said the long-awaited finance reports tabled at the November meeting of Armidale Regional Council last week confirmed his worst fears and were a much-needed reality check for Council to move beyond its current woes and gain the respect of the community again.
Two financial reports titled Review of Council Finances and Financial Sustainability were considered at the meeting. The Review of Council Finances was undertaken by Ms Carolyn Foley from Northern Beaches Council and from this report Mr Robert Finch a former Local Government Auditor was engaged to complete the review.
The summary from the report identifies a decline by $11 million (working capital and reserves) in the first three years of the new Council. Operating expenditure in the 2017/18 Financial Year exceeded the budget by $11.6 million and put considerable strain on the budget which was already in deficit. Major capital projects like the new Armidale Library exceeded budget estimates by $4.2 million and Council proceeded with capital purchases without a budget or funding source such as the purchase of land adjacent to the airport.
“This report identifies a significant lapse is financial management in the early years of the merger,” said Mr May. “Many assumptions were made about the existence of cash reserves but they were pure fantasy, they didn’t exist. And the proper checks and balances were not being done to keep expenditure on operating and capital to budget forecasts.”
The second report presented to the Council meeting by Acting General Manager John Rayner provides information on Council’s current financial position and foreshadows a comprehensive improvement plan for Council operations.
Section 8A of the Local Government Act sets out guiding principles for Councils and Mr May said that the evidence shows that the guiding principles in the Act have not been adhered to for many years.
“In-fact it probably goes back to the management of the former Armidale Dumaresq and Guyra Shire Councils who were both deemed not fit for the future by the Independent Pricing and Regulatory Tribunal (IPART),” Mr May said.
“With this legacy from the former Councils to deal with, in the development of the new Council, it should have been a priority and a major focus to restore financial sustainability but unfortunately it turned into a spending spree.
“The report also shows a complete lack of judgement in the allocation of funds to implement roads renewal and maintenance. From the 2017/18 Financial Year until now there has been a 50 percent drop from $8.43 million to $4.2 million on local roads maintenance and renewal.”
On November 19, 2020 the Minister for Local Government, The Hon Shelley Hancock, served Notice of Intention that she plans to issue a Performance Improvement Order (PIO) on the Council. The Draft PIO has an emphasis on financial improvement and management. Elected representatives will be returning on 12 December.
“The PIO sets in place very stringent requirements for Council including the appointment of a Financial Controller who will act as a gatekeeper for Council spending,” said Mr May
“Rest assured that the financial mismanagement of the past will not occur and Council will be focused on a back to basics approach of restoring sound governance and financial management.
“The report by the Acting General Manager is the beginning of the turnaround for this Council and a focus on much needed financial discipline.”