Editorial: $37million unexplained

Last week, I voted not to adopt the Council’s budget as nobody could explain a disparity of $37million.

The most basic summary of the budget was on page 175 of the financials and it either shows Council plans to take out another $37million in loans, or there’s a $37million error in the budget. To be clear a $37million unexplained disparity is not something I will ever be prepared to sign off on.

For further context, Council has a rate base of $11million annually and has accrued $32million in loans, which cost $900,000 in interest repayments alone. All of the major projects Council has undertaken to make a surplus are amassing significant debts ranging from $100,000 to $1.3million each year. Bottom line: Millions in debt has been taken out, which is now creating millions more in debt each year.

So why are there another two loans for $19.6million and $17.4million, totaling another $37million listed in the budget over the next two years? Is it a $37million accounting error, or $37million of more reckless borrowing? If they are additional loans, this would bring Council’s total loans to a staggering $69million!

In May, I sent an email citing the page number and asking what the loans of $19.6million and $17.4million pertained to? I did not receive a response.

At Council’s June Corporate Services meeting, which specifically reviews Council’s finances, I asked again what the loans pertained to? Nobody in the meeting, including Deputy Mayor James Burns, Cr Belinda McKenzie or finance manager Wayne Phelps could answer me. My question was taken “on notice”.

Before the June Council meeting, I reviewed the one page of changes to the budget, hoping to find a correction or explanation for the $37million, but there was none. I did, however, pick up errors on that page, which were corrected in the meeting.

During the Council meeting, I asked through the Mayor when my questions from the Corporate Services meeting would be answered. The Mayor could not answer and deferred to the general manager Greg McDonald, who also could not answer and deferred to the finance manager, Wayne Phelps. Mr Phelps said my questions would be answered in July.

So, not one person in that meeting could explain to me what the loans were for, or the disparity of $37million, but we were expected to vote it through without knowing, and it wouldn’t be explained until the following month!

For the record, the people in the meeting who could not explain it were: Mayor Maurice Collison, Cr James Burns, Cr Ron Campbell, Cr Allison McPhee, Cr Tayah Clout, general manager Greg McDonald, directors Matthew Pringle and Raghavendra Vasudeva Upadhyaya and finance manager Wayne Phelps.

Fiduciary duties

If anyone in the Council meeting knew the answer to what the $19.6million and $17.4million loans pertained to, or if they were an error, they have a fiduciary duty to speak up. None of them did. If I am acting in good faith, that my fellow Councillors did not know what the loans pertained to or could not explain the $37million disparity, how in the hell can they still proceed to vote and approve a budget with a loan line item they can’t explain? There is an obligation for Councillors to “be aware of what they are approving” when they adopt the finances.

An office holder is required to exercise their obligations with skill, care, and diligence. There is no such thing as a “sleeping office holder”, you can’t say you didn’t know, or didn’t understand. It is incumbent on you as an office holder to know and understand. You especially can’t claim you didn’t know or understand when it has specifically been brought to your attention and you’ve had more than a month to come up with the answer!

And some office holders bear more responsibility than others. For example, the Chair of a meeting has a special responsibility, because they control the flow of information to the other office holders in the meeting. At the Corporate Services meeting when I asked the questions, that Chair was Deputy Mayor James Burns, and at the Council meeting last week, that Chair was Mayor Maurice Collison.

Upshot

The other Councillors voted to accept the budget, without clarification of the $37million.

Pressure to conform

Once Councillors have voted they can’t be asked why they voted for or against, but I am repeatedly asked to justify why I vote against some motions. The budget meeting was no exception, as the Mayor took exception to me voting against approval of the budget. I could think of 37million reasons why not and thought that spoke for itself, but apparently not!

The Mayor asked if it was because of some errors I pointed out on the budget changes page, but I explained no, it was due to my questions on the budget, going unanswered for months. The Mayor then said, “Council staff and Council’s put a big effort into this, there were workshops and there was meetings and that ‘ought to have been the time to bring up your frustrations.”

So to be clear, sending an email to Council to seek clarity, raising it at the Corporate Services (finance) meeting, or the Council meeting where we are asked to approve the budget is apparently NOT the time to bring up my questions; much less have them answered.

Attitudes to the finances

During an interview with A Current Affair, Mayor Maurice Collison explained Council did take the financial ramifications of their errors seriously:

Yes, here again, it’s not just a little muck up of $100, it’s millions of dollars…$37million!

Or perhaps Deputy Mayor James Burns’ attitude to the financial reporting is closer to the mark?

In a Corporate Services meeting, I noted variations to budget were only reported as a percentage ie: administration 20% over budget. I explained this percentage on its own was meaningless 20% could be $500 or $500,000. I asked for the contextual figures of revenue, expenses, budget and variation to be reported, and the percentage was an optional extra. Previously these figures had been provided, but had been taken out of a more simplified monthly report.

Cr Burns expressed concerns that it could take too much staff time. I explained the basic algebra, that you need those figures to calculate the variation percentage, so it would be no extra work.

Here’s how Cr Burn’s said he sees those financials:

I maintain the financials are more than just numbers on a page, they are other people’s money and how my fellow Councillors can vote to support a budget where they can’t explain $37million is confounding.

There’s more

There were many things revealed in the budget and broader Council financials that indicate Council’s financial position is increasingly untenable. I agree with the perspective of external financial people that have described Council as having “completely lost control of the budget”. I will continue to adhere to my obligations as an office holder, ask questions on the record and only vote to approve finances with proper skill, care, and diligence. In the coming days I will also be providing further information to residents and ratepayers on Council’s broader financial position.

Special rate variation

Oh and by the way, Council also voted last week to set the wheels in motion for a special rate variation. I was the only Councillor who voted no. I will not vote for a special rate variation, unless or until I see Council doing their job properly with the budget. Why should the ratepayers have to pick up the tab for all the vanity projects Council has undertaken which are hemorrhaging public monies? More to come… 

Cr Elizabeth Flaherty

All of the above are my perspectives, opinions and beliefs as a Councillor on the Upper Hunter Shire Council, are my own, which may not (in fact probably don’t) reflect Council’s position, but which as an elected representative I am supported in law to freely express.