The gravity of Kiama Council’s financial situation has been made clear, with the Business Papers for tonight’s August meeting revealing the State Audit Office has written to the Office of Local Government about its concerns.

While Council has yet to receive a copy of the letter, members of the Audit Risk & Advisory Committee (ARIC) and the Finance Advisory Committee were briefed that it is expected to outline “the key risks around legislative breaches; adequacy of books and records; and going concern”.

The going concern status which has been worsened by the delay in the sale of Akuna St due to legal issues.

Council is now awaiting a copy of the letter and a response from the Minister for Local Government, Wendy Tuckerman.

Options available to the Minister include issuing strategic improvement orders, assisting with finances, considering appointing an administrator, or providing a financial controller or other resources to assist the situation.

The Business Papers reveal a negative cashflow of $4.4 million for the month of July (following -$1.2 million in June), even after a $2 million investment was redeemed ‘to help meet Council’s immediate commitments’.

The Meeting is being asked to support additional measures including holding a financial workshop for councillors to assist their understanding of the situation and the options available to correct it. (Update: Last night's meeting passed this motion which included this and giving authority to the CEO, outlined below.)

“It is a really serious situation and Council needs to focus its efforts on financial sustainability,” says CEO Jane Stroud.

“Much work has already been done, but there is much more to do.”

Mayor Neil Reilly says, “I’m confident the councillors understand the issues and will work together to come up with a good plan to take us forwards.”

The degree of seriousness is emphasised by the Audit Office now requiring Council to provide two years’ worth of cash flow projections, on a month by month basis, showing where the cash is going to come from through asset sales.

This explains why a motion is being put to give the CEO authority to do the groundwork to establish the timeframe for the divestment of other identified land assets, so the expected value can be included in the projections.

The Minutes of ARIC’s 8 August meeting also reveal that it endorsed the 2020/21 accounts believing that all issues had been finalised. If it had been aware that the Audit Office had a new list of outstanding matters on the 2020/21 accounts (provided on 22 July), ARIC would not have endorsed the statements.