Kiama Council’s process for setting and monitoring its budget is to undergo a major overhaul, to introduce greater public scrutiny and transparency.

Her fresh set of eyes and experience with other council budgets and processes has led to Council’s new CEO, Jane Stroud, being surprised by some weaknesses in processes, reporting and engagement with staff.

These issues are in addition to the impact of COVID-19 and very low interest rates on Council’s income.

In a bold move, the August Meeting of Council unanimously endorsed her recommendations for Council to open its books and work side-by-side with experts, community members and councillors to create better plans and clear actions.

There was no public discussion by the councillors, who had been briefed ahead of the meeting by the CEO.

“Councillors were not aware of the situation earlier because they relied on the information provided to them,” says Mayor Mark Honey.

“I’m grateful for the extension of the life of this Council because it gives us an opportunity to get things in order for a new Council to come in.

“The preparedness of the new CEO to share information, good and bad, has really changed the focus of Council.”

Ms Stroud believes there are systemic issues that need to change, freely admitting that she is not entirely sure how the current system works.

“I have recommended an independent review into how the financial processes and decision making worked before,” she says.

“The budget was held very tightly at a very senior level.

“We are such a big organisation that more managers need to be involved.

“I think the whole budget needs rebuilding from the ground up.

“We need to understand the processes that occur so that we can move forward with more trust in the budget, more accountability in the budget and a plan to correct the operational deficit and improve our performance ratios.”

While Ms Stroud admits to losing sleep over the budget difficulties, she wants to reassure ratepayers that the situation isn’t dire (see end of this article) – but “requires intervention, careful thought and diligence, and is not sustainable without clear action”.

She knows there are many rumours and misconceptions about Council’s finances, and plans to change that by being more open.

Tough decisions will have to be made across the board, particularly to reduce operational costs.

“There needs to be conversation around what is the appropriate service level and are we sufficiently resourced to deliver on that service level. That is the critical question.”

On the income side, historically Kiama Council has relied on land sales to prop up its operational budget, yet the substantial land holding it has in the CBD has been in limbo for years.

“We need a review of the land Council owns, what it is for, and really consider what we need right now.

“If Council resolves to sell off parcels, our staff need dedicated focus on this job,” says Ms Stroud.

The August Council meeting was held via Zoom

In developing the plan of attack, she is keen to benefit from the expertise of community members with senior experience in finance and business strategy.

The call will soon go out for people to volunteer to join a new Community Working Group to advise on the new initiative of a Financial Sustainability Plan, which will lead into the development of the next Long Term Financial Plan.

“Lots of people have told me there are really skilled and talented financial professionals that live here and I’d love for them to come and work with us if they have some spare time.”

The Working Group will be composed of four community members, the Mayor, the CEO, the CFO and the Director Engineering & Works.

Key strategic projects to drive financial sustainability, already introduced in the 2020/21 budget, include:

• a review of Council’s income generating assets to maximise opportunities
• a formal review into Council’s fees and charges
• working with consultants to improve the financial performance of Blue Haven
• a strategic review into Council’s current use of recreation and open spaces
• measures to make the most of grant opportunities
• continual review of depreciation expenditure
• a review of borrowing costs
• better financial reporting to managers.

Working together with the Chief Financial Officer (CFO), a position that was only created six months ago, Ms Stroud has already given managers training in financial literacy, and access to their own budgets at a department level.

She believes there is no option but to begin the process as soon as possible.

A brief has recently gone out to firms qualified to conduct the independent financial review.

“They will be having a look at the last five years worth of financial reporting, because that is how long that we haven’t met our financial statements on time,” says Ms Stroud.

It is not yet possible to say how long it will take for the review to be conducted.

“With COVID restrictions added into the mix it could take longer than I would like,” she says.

Candidates running for election take note, it is not time for big promises.

“It will all boil down to how you cut the cloth,” says Ms Stroud.

“If we only have what we have, what does it go towards?”

Council’s financial situation

• As of the end of June, Council had available cash reserves of $13.2 million to pay for Council’s ongoing operational and capital budgets. It also had restricted cash assets of $32.9 million, which are tied to a legislative or contractual obligation.
• While Kiama Council only met three of the Government’s six required performance ratios in 2019/20, it is expected to have met four in 2020/21 (not yet finalised) and forecast to meet the same four in 2021/22.
• Draft Operational Plan for 2021/22 shows an operating loss of $2.74 million and a cash surplus of $5.6m, following an operating loss of $6.6 million operational loss and a $20.2 million cash surplus in 2020/21.