Council’s financial turnaround reached a landmark with the February Council Meeting adoption of the 2021/2022 Financial Statements after an unqualified audit by the NSW Audit Office.

The process to receiving a clear audit opinion was an arduous one, with an enormous amount of work in reconciling and revaluing Council’s almost $9billion worth of assets particularly in roads, drainage, water and sewer which make up the bulk of this asset value. 

The audited financial statements showed an operating surplus before capital items of $40.4million, an improvement of $106.4million over the previous financial year’s large deficit. The audit report also showed that the Council met all the key Office of Local Government financial performance benchmarks.

Council CEO David Farmer said it was particularly satisfying to have a clear audit as another milestone that the financial performance of the organisation had turned around. 

“Just over two years ago we were unable to pay our staff or creditors, and now we have had confirmed by audit that we have run a surplus and met all the key financial performance benchmarks,” said Mr Farmer. 

“There is still a challenge going forward however, as this $40million surplus is only around a quarter of what we lost in the two previous years, and we have to claw back those losses by repaying the loans we needed to take out to cover them.

“A turnaround of this magnitude has been achieved through effort and sacrifice by many. The Independent Pricing and Regulatory Tribunal (IPART) approved a rate increase of 13% above the rate cap which raised an extra $22million, but the largest contributor to the turnaround was a $60million reduction in employee costs, around 27% lower than the previous year. 

“A key point to note was that depreciation increased by over 7% as an increased value, and quantity of assets was recorded. It is likely that this will impact our future financial performance as we see the costs of renewing our assets increase,” said Mr Farmer. 

Mr Farmer said that Council’s financial performance for the first 7 months of the current budget year showed good progress, but he sounded a note of warning that the budget will need to be adjusted to accommodate the increased depreciation trend and this will impact on the current strong year to date result.   

“We are currently showing a strong surplus with debt down and cash up,” said Mr Farmer.  

“Our strong financial turnaround has placed us in a sound position to be able to absorb the large increases in project costs that we are seeing in the market and that are reflected in our depreciation costs. 

“This commitment to our ongoing long term financial sustainability strategy means we can allocate surpluses to pay down some debt earlier than originally forecast and set aside funds for future needs, while we continue to prudently manage other financial challenges such as rising costs due to inflation,” Mr Farmer said.

“As reported last December, funds of $50million have been allocated to early repayment of a portion of the emergency loans which were taken out in late 2020. One of these loans will reset in December 2023. We hope the sale of Council’s Gosford Administration building to TAFE NSW will be complete by this time as it is intended to add the proceeds of that sale to this early repayment.

“The second emergency loan taken out in December 2020 will have an outstanding balance of $82.6million in December 2023.  

“To recap, Council secured $150million in emergency loans in late 2020 to reimburse restricted funds unlawfully accessed and to provide liquidity while Council’s financial recovery plan was implemented. These external loans, the first $50million and the second $100million are required to be repaid within ten years from forecasted surpluses as outlined in Council’s Long Term Financial Plan,” Mr Farmer said.

Mr Farmer added that last year, funds of $5million were also allocated to a Future Projects Reserve, building a fund for Council to apply to initiatives for the future. 

“We will continue to review our financial position and consider additional transfers to the internal restrictions on a quarterly basis. This is to ensure we can repay the emergency loans as soon as is practical and then free up cash flow that we can direct into services that our community want,” Mr Farmer said.

“The accelerated reduction in General Fund emergency loans, while retaining the flexibility to borrow for major assets which are supported by long term income streams in areas such as water, sewer and waste, are key parts of Council’s Financial Strategy which was adopted last year,” Mr Farmer said. 

Administrator Rik Hart said Council’s strong financial performance was another sign the organisation is well and truly moving ahead in a positive way.

“Our focus now will continue to be addressing those areas of concern where we are not meeting our community expectations on service delivery, as well as now looking at other proactive measures to improve infrastructure assets,” Mr Hart said.

To stay up to date with information about Council finances and service delivery, go to:

‘Finance Monthly Reports’ at centralcoast.nsw.gov.au
‘Financial Strategy’ at centralcoast.nsw.gov.au
‘Delivery Program and Operational Plan 2022-23' at centralcoast.nsw.gov.au
‘Capital Works Program’ at centralcoast.nsw.gov.au

ENDS