The following is an open letter written by former Kiama Mayor Sandra McCarthy OAM and former Kiama Councillor Howard R Jones to the current members of Kiama Council and the Minister for Local Government, republished with permission.

Re: Lack of Social Licence for the proposed sale of Blue Haven Bonaira and call for an independent review.

Council’s website indicates that the closing date for tender proposals is 19th December

2023. This suggests that Councillors will be called upon to select a new owner early in

2024.

Kiama Aged Care Centre of Excellence a.k.a. Blue Haven Bonaira, is part of Kiama’s

most significant public asset, an asset which has helped to define Kiama LGA for many

years, an asset which is part of the highest employer in the LGA and which has touched

the lives of a large part of the Kiama area community.

These facts place a serious burden on the Council to ensure that the community is

prepared to give Council a “social licence” to sell the asset. The term refers to the

“acceptance” granted to the Council by the community to act in some way. It goes

beyond whether or not the Council has acted legally. The Ethics Centre suggests:

The social license to operate is made up of three components: legitimacy, credibility, and trust.

• Legitimacy: this is the extent to which an individual or organisation plays by the ‘rules of the

game’. That is, the norms of the community, be they legal, social, cultural, formal or informal

in nature.

• Credibility: this is the individual or company’s capacity to provide true and clear information

to the community and fulfil any commitments made.

• Trust: this is the willingness to be vulnerable to the actions of another. It is a very high quality of relationship and takes time and effort to create.

In this letter we highlight matters which suggest the community remains unconvinced that all avenues leading to retention have been investigated, that much of the decision making has been out of sight and that confusion in the status of Kiama’s financial circumstances has allowed an ideological belief that Aged Care is not core business for Kiama Council to dominate the outcome from the beginning.

The lack of trust engendered by this process will have long term implications for Council’s relationship with its community as we face the challenges of the next decade.

Our Request:

We call on Council to support a motion:

1. To suspend all action on the process of the divestment of assets located at Blue Haven Bonaira, on the basis that the process lacks a social licence, has not been transparent, has been flawed due to incorrect and changing financial statements during the course of the debate, and that the process has lacked any serious reference to the historical corporate knowledge of what has been a successful model of opera/on of the service by Kiama Municipal Council over decades.

2. Following a suspension of action (as per 1. above), to seek an intervention by the

Minister for Local Government to independently review the entire process (reclassification and proposed sale) so that both Councillors and the Community can be fully informed before such a major decision is made.

Background to these concerns:

A sale of Blue Haven Bonaira and Community services would be the finalisation of

what has been a confusing and complicated process for Council and the Community

and would involve the loss of Kiama Community’s most significant public infrastructure asset, and an aged care service for the Kiama Community which has been part of defining Kiama as a compassionate and caring Local Government Area for decades.

Such a profound sale must not only tick any legal boxes, but should also satisfy the

requirements of a “social licence” to make such a decision on behalf of the Kiama

Community. As such, it must also tick the boxes of “legitimacy”, “credibility”, and

“trust”.

For over two years the Community and Councillors have been provided via media

reports, a negative view and future for a much-loved asset and service to support an

ideological opinion that aged care services are not core Council business, despite aged

care being a core Kiama Council business for 40 years. This negative public campaign

appears to have been to boost support for a sale and inadvertently or otherwise, we

believe has unnecessarily harmed the reputation of Blue Haven.

Further, such an ideological position flies in the face of the Royal Commission into

Aged Care Quality and Safety which found that not-for-profit agencies such as Local

Government provide a better level of care than for-profit services. It also immediately

establishes a bias towards the sale of the asset and suggests to the Community an unwillingness to properly assess and balance the financial and social factors. We

believe that Council has demonstrated apprehended bias in this regard.

Given the importance of the facility in the lives of so many people, the growing older

demographic of the LGA and the ongoing standing of Kiama LGA, we believe that a

social licence to sell has not been established with the Kiama Community.

It is extremely concerning on reading the recent Independent Auditor’s Reports that

the elected Councillors voted to sell Blue Haven Bonaira on information and reports

that were deemed to be incorrect and subject to a disclaimer. This would appear to

be a breach of fiduciary duty and trust of the elected Council. Councillors are elected

to protect the public interest.

Early publicity relating to Council’s troublesome financial position was quickly blamed

on Blue Haven Bonaira and yet the most recent audited financial statements (for the

financial year ended 30 June 2022) show that Blue Haven was out-performing Council’s other municipal operations in that year. Given the financial “moving feast” described in the public reports and financial statements over recent times and more detailed forensic reviews being subject to confidentiality restrictions, together with an unwillingness by the auditors to fully sign off on Council’s “books”, the Community is justified in having very little confidence in any decision to sell.

The difficult financial status of Kiama Council was from the beginning, both linked to the Blue Haven Bonaira facility as well as to supposed systemic financial problems dating back many years to previous administrations and elected Councils. Under the cloak of confidentiality, little of any comprehensive detail required to support such allegations has been made available to the Community, nor to those whose reputations have been questioned as a result.

Councillors and the Community were assured from the beginning that all avenues

open to Council would be assessed however the Community is yet to see the full

detailed comparison of the long-term business plans that supported a “sell” rather

than “lease”, “joint venture”, or “retain” options.

As so often happened in this matter, principal documents remained confidential, and

the community saw only those extracts which supported the case for sell. Why has

the Community been shielded from these business cases and proof that all avenues

have been exhausted?

The highly publicised “existential threat” posed by Council’s loan commitments, were

originally only seen as being resolved through the sale of Blue Haven. Over time we have seen Council assets sold which have contributed to all but $15 million of the loan

being repaid. This latter amount is now the subject of a renegotiated agreement with

TCorp, questionably Ted to a sale of Blue Haven Bonaira.

Very little information has been made public about whether the sale of other assets

being considered by Council might fill the “TCorp” gap allowing Blue Haven Bonaira to

remain in public hands.

We highlight a number of specific matters below and request Councillors note with

concern that these inconsistencies and/or lack of clarity and transparency undermine

any “social licence” needed to take the profound action of “sale” on behalf of the

Kiama Community.

1. The promised detailed study of the relative benefits of the “lease”, “sell”, “joint

venture” or “retain” options prior to Council making a decision to “sell”, has not

been presented in full to the Community

Comprehensive business cases, outlining the “lease”, “sell”, “joint venture” or “retain” options as per a Council resolution of 23 May 2022, were also a requirement of the Performance Improvement Order in November 2022.

The Community is entitled to see the full detailed business cases for each option, particularly given the early call for a sale, the comments about aged care not being a core business of Council and the uncertainty about the financial status of council.

Access to these cases is fundamental if the community is to understand the reasons for choosing “sell” over the other options.

Given the full report was confidential, the Community should not have to “second guess” the basis of decisions being made about a sale.

This lack of transparency and fulfilment of both the promises via Council resolution and Ministerial directive undermines any social licence the Council may believe it has to make a sale.

2. Report on the general purpose financial statements does nothing to provide the

community with confidence in Council’s decision.

There is significant uncertainty implicit in the 28 September 2023 Disclaimer of Opinion of the Independent Auditor’s Report where the Director, Financial Audit Branch, Lisa Berwick, states:

“I do not express an opinion on the accompanying financial statements of the Council. Because of the significance of the matters described in the Basis for Disclaimer of Opinion section of my report, I have not been able to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion on the financial statements.”

“Council disclosed $53.9 million of externally restricted cash in Note C1-3 'Restricted and allocated cash, cash equivalents and investments' at 30 June 2022. I was unable to obtain sufficient appropriate audit evidence to support the completeness and accuracy of the amount that Council has designated as externally restricted as at 30 June 2022 with respect to holiday parks (Crown Land); Blue Haven aged in-home care unspent client fund; domestic waste management; Blue Haven ILU Maintenance Levy carried forward surplus

(Terralong and Bonaira); Blue Haven Residential aged care prudential standards and Blue Haven Community Services Bus replacement fund. These components are reported at $11.5 million.”

”The material nature and pervasiveness of these issues means I cannot express an opinion on the accompanying financial statements for the year ended 30 June 2022.”

”I draw attention to Note A1-1 'Basis of Preparation', where the Council reported it has accessed externally restricted funds without the required Ministerial approval. Such unapproved use does not comply with sections 409 and 410 of the LG Act.”

“The Councillors are responsible for the preparation and fair presentation of the financial statements in accordance with Australian Accounting Standards and the LG Act, and for such internal control as the Councillors determine is necessary to enable the preparation and fair presentation of the financial statements that are free from material misstatement, whether due to fraud or error.”

“In preparing the financial statements, the Councillors are responsible for assessing the Council’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting.”

“......... because of the matters described in the Basis for Disclaimer of Opinion section of my report, I was not able to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion on the financial statements.”

Such uncertainty undermines any social licence the Council may believe it has to

make a sale.

3. Report on the special purpose financial statements does nothing to provide the community with confidence in Council’s decision.

There is significant uncertainty implicit in the 28 September 2023 Disclaimer of Opinion of the Independent Auditor’s Report, where the Delegate of the Auditor-General for New South Wales, Lisa Berwick, states in relation to the Declared Business Activities of Council, i.e., Holiday Parks, Blue Haven (Residential Aged Care Facility and Independent Living Units), Commercial Waste and Plant Hire Activities, and the Pavilion:

“I do not express an opinion on the accompanying special purpose financial statements of the Council's Declared Business Activities. Because of the significance of the matters described in the Basis for Disclaimer of Opinion section of my report, I have not been able to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion on the special purpose financial statements.”

The Income Statement of Blue Haven for the financial year ended 30 June 2022 showed a surplus of $1.080 million. This figure is in contrast to the long running statements by some Councillors and Council staff during 2022, that Blue Haven was operating at a loss and the underlying cause of potential financial ruin of the Council.

It has taken until the October 2023 meeting for Councillors to be provided with more reliable financial facts for Blue Haven - a year later Council resolved to sell Blue Haven Bonaira.

It appears that we are faced with the spectre of a potentially profitable business of Council for decades providing a highly regarded community service, being sold and that services which are a greater drain on Council’s finances being retained.

Such uncertainty undermines any social licence the Council may believe it has

to make a sale.

4. The overstated value of Blue Haven Bonaira Residential Aged Care by $49.1M

Such an error does not engender Community confidence in the accuracy of information presented to Councillors when assessing the need to sell and the longer-term impacts of the sale. Was this over-valuation used as part of Council’s assessment of the value of a sale?

Such uncertainty undermines any social licence the Council may believe it has to

make a sale.

5. Inconsistencies in Council resolutions and statements regarding the future of

Home Care packages and Community Transport

Throughout the divestment process there has been considerable uncertainty

regarding the future of the Home Care Packages and Community Transport which had their offices in Blue Haven Bonaira. It has been an “on again, off again” merry- go-round driven by public statements, Council resolutions and Council reports. This uncertainty, associated with matters which were at the heart of support for residents and others gave little confidence in the process.

Such uncertainty undermines any social licence the Council may believe it has to

make a sale.

6. Reclassification process and the Public Hearing

In response to a Council resolution of 23 May 2022 requesting an analysis of all optons for Blue Haven in its entirety, i.e., “lease, sell, joint venture, or retain” being presented to Councillors “for approval of the preferred option”, a Council report was issued for the 28 June 2022 Council meeting, which stated:

“Reclassification of the Bonaira site to operational land must be undertaken to allow existing site usage to occur legally regardless of any option” [lease,sell, joint venture, retain] and that “$60,000” was required “for planning work and public hearing required for classification”.

Considering the language used that the land “must” be reclassified for existing site

usage to occur “legally”, it was understandable that a majority of Councillors would vote to put $60,000 towards planning work and Public Hearing required for reclassification, and thereafter support a reclassifcation.

The community is yet to see information in support of the statement that a reclassification “must” occur for Blue Haven Bonaira to operate “legally”.

It is extremely concerning that Councillors were provided with unsubstantiated

advice to facilitate a reclassification process.

Further, it was not until the Public Hearing for the Planning Proposal to reclassify

the land from Community to Operational that the Community became aware of

the restriction on the use of the land (by the Health Administration Corporation)

that until 2027, the land is not to be used otherwise than for the construction and

operation of a 134 bed Residential Aged Care Facility, seniors living accommodation including independent living units and assisted living units, and all ancillary facilities and uses.

This was agreed to by Council to expand aged care services for Kiama and the

Region.

NSW Health was supportive of the Council project as it provided aged care for citizens that were taking up public hospital beds awaiting nursing home placement.

Any purchaser of Blue Haven Bonaira would be entitled to do whatever they wish with the land and buildings after 18 January 2027 despite the hollow attempt to argue that somehow Council would be able to control what happened after the sale. The Council website states:

“Council has already said that any sale must be to an approved Aged Care Provider. Further, in the clear acknowledgement of its intention that the operations continue, it has stated the provider needs to operate under the Aged Care Act and Retirement Villages Act.”

All Aged Care Providers need to operate under the Aged Care Act and the Retirement Villages Act. This does not preclude any Aged Care Provider that may purchase the complex repurposing the land and buildings after 18 January 2027.

The Independent Living Units are subject to contract, but as for caring for our most vulnerable nursing home citizens there is absolutely no obligation after 18 January 2027. One future possibility is the closing of the only publicly owned nursing home in Kiama LGA and a loss of 134 aged care beds in the Illawarra region.

Such a lack of transparency undermines any social licence the Council may believe it has to make a sale.

7. A determination to sell seven (7) months prior to the Public Hearing, including

resolutions of Council and many public statements to that effect, provided an

unequal “playing field” in which the various Community concerns were not

treated with seriousness

Council’s frantic search for reasons as to why the land had not been classified within three (3) months of acquisition, ultimately settling on the questionable “oversight” reason stated in the Planning Proposal, and unsubstantiated reasons provided in Council reports as to why the facility “should” be reclassified to “Operational” did not cover up the fact that it simply needed to be reclassified in order for a sale to be made.

Whilst the Mayor said publicly that the Department of Planning and Environment “agreed” with Council’s proposition that the land defaulted to being “Community” due to an “oversight”, another more likely interpretation is that the Department was simply taking on face value that the “oversight” reason provided by Council in the Planning Proposal was correct.

We have ascertained that there is no letter from the Department to Council mentioning the word “oversight” nor “agreeing” with “oversight” as a reason for the default “Community” land classification.

At the time of acquisition of the Bonaira land, due to Council’s long term and continuing commitment to aged care, there was no suggestion that the land needed to be “Operational” nor was there any intention in the future to sell. 

It was totally reasonable for Council to let the default “Community” classification occur

after 3 months of acquisition, as the Local Government Act provides. Council concluded that the absence of a Plan of Management (POM) for Blue Haven Bonaira supported an “Operational” land classification, however the absence of a POM can reasonably be explained by “Timing”.

We note that residents of Independent Living Units and the Residential Aged Care Facility did not move to the new facility until mid-December 2019, and Barroul House did not open until mid-2020 with the opening delayed due to COVID-19 restrictions. The former General Manager took leave a few months later in November 2020 and resigned in December 2020, with the current CEO not commencing with Council until June 2021.

Enquiries were made with Council as to whether a Plan of Management would be produced, however the topic of a Plan of Management was disregarded in the pursuit of an “Operational” land classification. Enquiries were made with the Office of Local Government with their advice being that a Plan of Management be pursued with the Council. All attempts to address this issue with the Council proved fruitless.

Council’s decision to sell Blue Haven Bonaira in October 2022 made a mockery of the Public Hearing in May 2023 which effectively had a predetermined outcome and gave lip service to the Community concerns raised. This is evidenced in the Executive Summary for the finalisation of the Planning Proposal for the 20 June 2023 Council meeting, which states: “Council has previously resolved to reclassify the land in October 2022.”

Fifteen (15) out of sixteen (16) speakers at the Public Hearing either opposed the reclassification completely or opposed the inclusion of Barroul House. The 15 speakers opposing, represented significant involvement with and knowledge of the history, management, and social significance of Blue Haven.

The Public Hearing Report noted Community interest in Council’s ongoing decisions about the proposed reclassification and future of Blue Haven Bonaira and stated that the provision of information regarding questions raised “may assist in responding to community concerns and will need to be given consideration in furthering the reclassification process”. Council responded by issuing a half-page report which did not satisfactorily answer the questions raised in the Public Hearing Report.

The Public Hearing process of May 2023 was undermined by the prior decision of Council to “sell” in October 2022 and purportedly “again” in February 2023.

The Public Hearing process therefore undermined any social licence the Council may believe it has to make a sale.

8. Community faith in the process has been further eroded by the fact that Council

made no public references to the perceived conflict of interest that saw some of

those who advised the Council to sell then taking a major role in the sale process

Although not implying that any wrongdoing resulted from these actions, there are

concerns that Council did not demonstrate to the community that the potential for conflicts of interest had been identified and publicly responded to.

The Community was also given no explanation about the “en-masse” resignation of the Blue Haven Board and experts in mid-2022, contributing to the concerns about management and the perception of reduced Community involvement in the governance of Kiama Council’s largest asset.

The lack of transparency in these fundamental processes, and concerns about governance undermine any social licence the Council believes it has.

9. Retention of Barroul House as a public asset, on land which remained “Community” land was simply ignored as an option by Council staff and Councillors who voted for the reclassification

This was a total rejection of the submissions and arguments in favour of the well documented “public” and “community” role that the refurbished historic building should play. 

For example, as shown in the Commonwealth Standard Grant Agreement – Building Better Regions Fund – Barroul House, which provided Council with $1.4 million for the refurbishment, there are a substantial number of statements confirming the “Community” values, including:

a. “The proposal will maximise the public access to Barroul House providing a safe entrance and use, and enhance the community engagement of the project and understanding of Barroul House.”

b. “The vision for Barroul House precinct is to be arts, cultural and community hub, helping to overcome social isolation in our ageing population and provide opportunities for children and ageing to link together in a community setting.”

c. “Council will liaise with the local Wodi Wodi Indigenous people to create a sensory and indigenous garden that tells the story of the local indigenous community in a landscaped and engaging way. It will be a combine plants, landscaping ie pathways, materials, story boards and opportunities for community to touch, smell and taste our local indigenous food. These components will also be linked café [sic] and where possible indigenous people and suppliers will be used.”

d. “The heritage listed Barroul House will be restored and re-opened to the public through the inclusion of a café, art gallery, art studio, meeting room space, landscaped gardens to provide a safe sensory area for dementia patients and dementia sufferers from the local area to visit.”

e. “The intention is that the entire site be vibrant and inviting to the community and the residents and act as the nucleus of Blue Haven Aged Care Facility.”

f. “Our Project has the ability to become a community and social hub both for residents, workers and the community. Improving community connection and social inclusion for our ageing population is improve to maintain active wellbeing, including mental health. A community hub that engages with all ages of our community will improve connectons within our community. Barroul House will improve our community connections.”

g. “Kiama Council have been working on the overall strategy since 2008 to ensure the region of Kiama have an aged care facility on the Kiama Hospital site. Part of this site includes the Historic Barroul House. The funding for Barroul House will ensure that the Kiama Aged Care Centre of Excellence (KACCOE) provides the residents and community with a safe meeting space away from the aged care facility, that will provide a sensory environment and garden area benefiting both dementia residents and the general community assisting with their quality of life. These senses will be not only sight, but sound, touch, taste and smell.”

h. “This part of the project is seen as the priority by the community and is an essential benefit to our community through the reusing of the old Kiama Hospital Site. It is only by achieving the full redevelopment of that site that Council will be able to provide the community of Kiama with a fully integrated health and aged care living precinct that will be a centre of excellence that also offers community facilities and welcomes people onto

the site.”

i. “This project represents a vision from Kiama Council for its community. The Commonwealth Grant Agreement for Barroul House, dated 15 September 2018, contains a substantial amount of information to show that the land at Blue Haven Bonaira was always intended to be classified as ‘Community’ land. Even from a “devil’s advocate” standpoint, if not the whole of the land at the very least Barroul House and its curtilage, the latter being supported by a “hatched plan” in the “Request To Note Retirement Village” that Council signed on 10 September 2019, which excluded Barroul House and its curtilage from being recorded as a “retirement village”.

The totality of this information discredits the “oversight” reason that was stated in Council’s Planning Proposal, on the Council website, by a Council staff presentation at the Public Hearing, by the Mayor, and reported in The Bugle newspaper.

It is extremely concerning that relevant content within the aforesaid Commonwealth Grant Agreement was not included in Council’s Planning Proposal or mentioned by Council at any time during the reclassification process, and that the document was not produced until the day before the 20 June 2023 Council meeting was held to reclassify the land.

On Monday, 19 June 2023 at 4:53:29 PM, Council issued a second Supplementary Agenda containing the Commonwealth Grant Agreement, with that timing preventing members of the Community from being able to read the 65-page document or register to speak about it at Public Access which was held at 5:00 PM.

The refusal of the Council to embrace their “public” and “community” responsibilities through the retention of Barroul House contributes to the Council failing to obtain the “social licence” needed to proceed with a sale.

Finally, as indicated on page 2 of this letter, we request that Councillors exercise the power of good governance and act with care and due diligence:

(1) By suspending all action on the process of the divestment of assets located at Blue Haven Bonaira; and

(2) By seeking an intervention by the Minister for Local Government to independently review the entire process (reclassification and proposed sale).

It is the most fundamental duty of elected Councillors to protect the assets and services that are owned by the Community.

We reassert that Council has not earned a social licence from the Community to proceed with a sale of any assets located at Blue Haven Bonaira.

Emeritus Mayor, Sandra McCarthy OAM

0409 366 723

Former Councillor and Deputy Mayor, Howard R Jones

0404 149 374