It started out as a simple motion to adopt the investment reports for February and March and developed into a full on stoush.
Liberal Cr Rebecca Gale put up a motion that council allow the CEO to investigate using Developers Funds for operational needs.
In a miscount, the motion was lost when in fact Cr Gale had the numbers. She didn't challenge it on the night or put in a rescission motion at the next meeting.
Now, “operational needs” is a very interesting term and is the key to what possibly happened afterwards.
Cr Greg Best asked acting Council Financial Officer Carlton Oldfield to explain how intra-council borrowing worked in “layman’s terms”.
Mr Oldfield said words to the effect of: “You could think of as buckets. You borrow from one bucket and put it in another bucket, pay interest and then pay the loan back later”.
Cr Kyle MacGregor vehemently opposed this plan. “It’s economic vandalism, robbing Peter to pay Paul. While I understand the sentiment, this money is for works like footpaths and roads”.
In mid-May, Finance Minister Rob Stokes introduced legislation which would allow councils to be more flexible in their use of Developers Funds to finance works during the pandemic.
It would appear that council senior staff may have thought that the legislation was for “operational needs” rather than “works”.
“Apart from budget mismanagement, Council funded much of (its) new expenditure from Restricted Reserves, which was either unlawful, or done without the approval of the elected Body,” Administrator Mr Dick Persson said in his 30-day report.
“The previous CFO, Mr Craig Norman and CEO, Mr Gary Murphy were aware of this unlawful use of funds. While the exact time they became aware remains hard to ascertain, emails and notes indicate they continued to spend funds unlawfully after they became aware and before they advised the elected body.”
A report by the NSW Audit Office found that between 2001 and 2019, more than $13M in developer contributions collected by the Council were misspent on administration costs, in breach of the law.
Did this spending continue from 2019? Well, council had an enthralling financial journey from mid-2019 onward.
IT resolved in October to defer the review of 2018-19 Financial Reports, because they weren’t ready, to November and then in November, they deferred them to the end of February.
The Audit, Risk and Improvement Committee (ARIC) had met in February to review Council’s draft 2018-19 Consolidated Financial Reports and the draft 2018- 9 Financial Report for Council’s Water Supply Authority functions.
“Should ARIC recommend any material changes to the Financial Reports this will be reported to Council at the March 9 Council meeting,” a media release said.
"Should any changes be required from the external audit these changes will be made in readiness for the Council meeting on March 9, 2020 to adopt the audited Financial Reports.”
But none of these audits picked up an illegal use of funds although the external audit found Council was “high risk” and failed four of eight key Local Government indicators: Failed cash flows, operating surpluses, outstanding rates and infrastructure backlog.
Given that councils had history of illegally using funds for the previous 20 years, the council and ARIC committee should have been much more vigilant.
Added to this was the fact that council failed to report the illegal payment of $10M in “body hire” to its appointed auditors on the ARIC committee.
The rest, as they say at the end of a blockbuster, is history. There was indeed a big hole in the bucket.
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