A baseline audit of council's finances will be conducted "as soon as possible" covering the years 2016-19 following a 4-3 vote at the last council meeting.
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The audit should give councillors a clear view of how and why council's cash figures went from positive in earlier years, to the $8.9m deficit of 2019, which then had to be offset against reserves.
The resolution comes after several iterations of financial figures have been presented to council and an extra-ordinary meeting called on July 13 at which Crs Mitchell Nadin and Robyn Bain unsuccessfully attempted to get agreement for a forensic audit.
On August 26, prior to the council meeting, councillors heard a presentation from a previous finance director at council, Lucas Scarpin, now a specialist local government consultant.
That's $1.45m in cash. That's all you will have in the bank in your general fund. Think about what that means. You must have spending obligations less than $1.45m.
- Lucas Scarpin, local government consultant
He told councillors that the documents published to date said council had "a massive problem" with its finances and he urged councillors to look at council's "spending problem" because it did not have sufficient funds to meet its obligations in the short-term.
He also said council's cash position appeared to be going backwards for the next few years.
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In the latest set of financial figures - and there have already been several iterations - the general fund is predicted to have $1.45m at July 2021.
"That's $1.45m in cash. That's all you will have in the bank in your general fund. Think about what that means. You must have spending obligations less than $1.45m, you can't owe any more than $1.45m," Mr Scarpin said.
"But in the 2019 audit it showed employee entitlements were more than $7m and section 94 reserves should be at more than $3m, plus there are internal reserves, grants, plant replacements and any other number of savings," which Mr Scarpin said should be available.
He said that council spent 70 per cent of its internal reserves at the end of 2019 to address the $8.9m cash deficit, something that had yet to be publicly addressed in the form of a resolution by councillors.
"Council has a spending problem, I know these are unprecedented times but you're spending in 2020/21 four times what you had to spend in your first year of office (2016/17). With bigger numbers comes bigger risk," Mr Scarpin said.
He said council had three levers; spend less, make more money which was difficult to do or bring in external money (borrow). But he cautioned against borrowing in the short-term, given council's own figures showed its cash position to be going backwards for the next couple of years.
This would be the first time I have seen a council have so little cash reserves across all categories of money that it wouldn't cover staff entitlements.
- Lucas Scarpin, local government consultant
"If you borrow money this financial year, how do you pay it back next year. You do not have cash left to pay it back," he told councillors.
While Mr Scarpin said it was quite usual not to fully fund employee benefits "you shouldn't have to borrow from the future to fund current obligations".
"This would be the first time I have seen a council have so little cash reserves across all categories of money that it wouldn't cover staff entitlements," he said.
He said that given the size of the organisation and the amount of money that it handled $1.45m was a very small amount to be sitting on.
But Cr Cathy Griff said she didn't see it as a catastrophe and said it was a situation that was replicated in local government throughout the country and in a later discussion at the council meeting said Snowy Monaro Council was consistently $6m in deficit.
However Mr Scarpin said he was only speaking as a community member.
"I am only seeing what the community sees and I can only judge on what I see. What I see in the general fund are the cash projections going down," he said.
He questioned what might happen in the event of another disaster.
"There's not enough cash reserves to support the community. You have been elected to make the tough decisions," he said and cautioned the situation could lead to the community having no money left for a disaster.
We need to stop and develop a plan on the strength of knowledge that it's right. We need to do it for ourselves, the people we represent and the staff. I'm sick of these changing figures.
- Cr Robyn Bain
During the council meeting Cr Bain once again proposed that there be a forensic audit but agreed to a baseline audit proposed by Cr Russell Fitzpatrick.
In speaking to the motion Cr Bain said it was important staff started with a clean slate and needed to know the figures were right.
"We need to stop and develop a plan on the strength of knowledge that it's right. We need to do it for ourselves, the people we represent and the staff. I'm sick of these changing figures.
"We talked about there being a new council in 2021, surely we can leave them with absolute financial knowledge. I've heard councillors say it's just a blip, none of us can say where did the $9m go," Cr Bain said in a reference to the $8.9m deficit at the end of 2019.
Cr Nadin said it was about an assessment of where council went wrong.
We had a whole year of quarterly budget reviews that were incorrect. March was $20m out.
- Cr Mitchell Nadin
"We had a whole year of quarterly budget reviews that were incorrect. March was $20m out. It's about transparency - having an honest dialogue with the community, there's nothing to hide - it's their business we're just running it for them and there should be no closed doors on this," he said.
Council resolved to:
1. Note the current iteration of the Long Term Financial Plan 2021-2030
2. Update the adopted Operational Plan 2020-2021 to include the revised cash flow projections in the attached Long Term Financial Plan 2021-2030 as per resolution 150/20 Item 2 and;
3. That Council resolve to commence as soon as possible, a baseline audit for the 2016, 2017, 2018 and 2019 financial years.
4. That on the completion of the baseline review, those figures are used as the starting point for the Long Term Financial Plan.
5. That the funding for this be taken from the General Managers legal and investigations fund.
IN FAVOUR: Crs Fitzpatrick, Bain, Nadin and Allen
AGAINST: Crs Griff, Seckold and Dodds
ABSENT: Crs McBain and Tapscott