The Business Papers [Warning: do not attempt to open the 855 page document on your phone] for the February Meeting of the new Council, its first full meeting, include a detailed report on the State of the Organisation that frankly outlines the myriad of issues impacting on Council’s financial sustainability.

Councillors have already been briefed on the issues as part of their induction, as has the State Government; Council’s Audit, Risk and Improvement Committee (ARIC) and Finance Advisory Committee; the Blue Haven Board; and TCorp, Council’s financier.

“As the CEO of two businesses, both facing significant viability risks, I have responsibility to make the elected representatives and our three key stakeholder board members aware of the situation and appraised of what management action and options can be explored in addressing these matters,” says Council’s CEO Jane Stroud in the report.

Sessions have been organised for Ms Stroud to present the report to all staff.

Speaking with The Bugle after its release, she said, “I want to reassure people that doesn’t mean we are broke.

“We have good reserves. But like every household we have to live within our means, and spend within budget.

“We’ve learnt from other councils experiences like Central Coast, and their advice is to act early, know all the facts, and importantly to be open and honest about what we are experiencing with the public. They are our shareholders, and deserve the truth from their local government.”

Mayor Neil Reilly says the councillors are right behind the new transparency.

“The far ranging scope of the report reveals that Council has a lot of work to do to get the ship back on a steady keel.

“Along with Jane, we were determined to get this report in the open as soon as possible.”

Mayor Neil Reilly

While Council’s income took a battering from COVID, it also revealed systemic weaknesses as questions were asked about cashflow.

“We’ve got some big decisions to make about what is really important to this community,” says CEO Jane Stroud.

“What are our realistic levels of service?

“We can’t keep doing what we’ve done. We need to take a more mature approach to running the two businesses – local government services and aged care.”

She says after six months in the job, the tipping point came for her at the first meeting of the newly established Blue Haven Board in early December. She made her first report to the State Government a couple of days later.

“In the absence of an elected body [Council was in caretaker mode], I went to the three most senior committees we had,” she said.

A variety of Blue Haven issues to do with care and service delivery are mentioned in the report, but on top of these is the problem that until now Blue Haven’s activities have not been separated out from the rest of Council.

“Blue Haven has no separate operating accounts and its finances are completely merged with Council’s general ledger,” says the Report.

With Blue Haven accounting for more than half Council’s workforce and a large portion of its income (precise amount unknown because of the merged accounts), this has had the result of skewing data on a number of fronts.

“It is a fundamental problem,” says Ms Stroud.

“Council’s operations and Blue Haven are two distinct businesses.

“I’m not sure why this has not been raised as an issue before by our external auditors.”

Forensic auditors are already in the process of dividing the accounts, with Ms Stroud expecting it to be completed by late March.

Significantly the Report puts on the public record for the first time that Council’s initially indicated investment in Blue Haven Bonaira of $56 million has more than doubled to $106 million.

Indications are that its profitability is trending downwards and that it is unsustainable in its current operational model.

TCorp lent $45 million for the Blue Haven Bonaira development, and $10 million has already been repaid.

Ms Stroud has been meeting with TCorp weekly, and says they are quite satisfied with how Council is addressing the issues.

“They are really happy with how they have been engaged,” she says.

Kiama Council's CEO Jane Stroud

In summary, the Report says that there are three fundamental matters immediately affecting the business and its future:

• Financial sustainability – cash flow, liquidity, and financial management
• Organisational capability, culture and performance – investment in people, systems, performance management and culture has been weak
• Risk and governance – risk exposure created by lack of strategic direction, policy, poor decision making and lack of resources and revenue.

The Report says it has taken decades to arrive at this position, “Across the board there has been a lack of planning, governance, staffing and quality systems and procedures to help inform quality Council decisions.”

For example, the policy on Developer Contributions was last revised in 1993.

“Legislatively we are supposed to do that every seven years, and it is a revenue generating activity,” says Ms Stroud.

“And the way that we measure and reward our employees’ performance hasn’t been updated in 20 years.” 

Ms Stroud is keen to improve Council’s commitment to professional project management, as lack of it has caused problems on a variety of fronts.

The CEO says she has not released the information to attribute blame, but rather so it can to be used constructively to help develop the required update of the 10 year Community Strategic Plan (CSP).

“It isn’t going to serve anyone to do that. It is more important to look at the systems, and fix the root cause.

“With so many different challenges in the organisation – everything urgent, everything needing attention and resources – there is a desperate need for prioritization,” says Ms Stroud.

“That’s what I need to do with the councillors and the councillors need to do with the community through the CSP.

“It is a lead document that should shape all our work.

“What is the point of having a vision if it isn’t grounded in reality?”

The guiding principles in the 2017-27 Community Strategic Plan

She has extensive experience in the development of CSPs, and is looking forward to the process.

Given the amount of staff turnover, none of the senior staff involved with the development of the last CSP are still with Council.

A large number of options are outlined in the Report, including asset sales – not only Akuna St [which is about to go to market], but also the old nursing home site at Havilah Place.

Ms Stroud cautions against quickly taking these easy options to restore the finances.

“The thing is you only ever get to sell something once, so we need to be considered in what we do,” she says.

That applies to the Blue Haven business as well.

“We will look at whether full ownership and management is the best way going forward. There are many different models for us to consider.”

The same goes for the imposition of a special rate variation.

Mayor Neil Reilly says, “The Council’s job is to identify the root causes and challenges and develop with our councillors, staff and community a pathway forward.

“We’d like as many people as possible to attend the CSP workshops so we can benefit from their opinions.”

Factsheets are being prepared by Council as backgrounders for the CSP meetings.

Workshop details:

Mon 21 Feb (5.30pm – 8pm): Jamberoo School of Arts

Wed 23 Feb (5.30pm – 8pm): North Kiama N’hood Centre

Thur 24 Feb (9.30am – 12pm): Joyce Wheatley C’ty Centre

Thur 3 Mar (5.30pm – 8pm): G’gong Library and Museum

Bookings essential www.kiama.nsw.gov.au/csp-workshops