June 22, 2020
Gympie Regional Council’s financial position is so bad it will need to borrow as much as $12 million just to cover wages and routine expenses for the coming quarter.
And Mayor Glen Hartwig warned residents at the weekend that “Mother Hubbard’s cupboard” was bare so there would be no more “shiny stuff” in the upcoming Budget.
He said Council would need to borrow another $30-$40 million just to attend to basic maintenance, which he says was neglected by the previous administration.
The Mayor made the shock announcements on his Facebook page on Saturday.
He said a recent report into Council’s finances had shown there were “serious systemic problems” in GRC’s financial intelligence and accountability, risk management, project costings and administration.
Mayor Hartwig said in GRC’s 2014 annual report the Council had $93.5 million in reserves and this gave the Council one of the top ratings for financial sustainability in the State.
However, since then the Council had been living beyond its means.
The full text of Mayor Hartwig’s statement appears below:
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A Synopsis Of Our Situation
As ratepayers, it is important to be aware of the condition of your council. It would be fair to say it doesn’t look good, in fact it’s pretty dismal!
The recent CPA report has shown the ratepayer that there is serious systemic problems in our Council around financial intelligence and accountability, risk management and project costings and administration. I recommend you read the report, it is on Council’s website. The current financial position of the Council is a direct result of the failure to have adequate standards and controls around finance.
What that means for this Council is that there are very few options when dealing with this Budget. In the 2014 annual report, the Gympie Regional Council had $93.5 million in reserves. Some of that money was constrained funds which means it can only be spent on particular things but nonetheless, it is a considerable amount of money which gave the GRC the number one rating for financial sustainability in Queensland, top of the pile.
In comparison, this year Council will borrow $10-12 million in the form of an overdraft to meet staff wages and other expense commitments until September 2020.
There is no money, in fact there is less than none and we have to borrow money to pay our staff. Constrained funds cannot be used to pay wages. This is after we have cut millions in projects from this current financial year to limit the amount we need to borrow. I hope the ratepayer understands the difficult predicament your Council is in. Council gets paid twice each year and we do not have enough money to make it until the next payday. To put it simply if you earn $50k per year and spend $60k how long before you are have to sell your kidney?
We have inherited Mother Hubbard’s cupboard and the nursery rhyme is correct, there is nothing in it.
I can hear you say but we have been told ‘everything is ok, there is plenty of money’. In my opinion you were misled, deceived. For the last three years, I have consistently maintained my view that Council’s spending was excessive.
Council could continue to ignore the risk management failures, pretend everything is ok, make a few minor changes but convince you that all is well and hit you with a 20 per cent rate rise to cover the unnecessary costs that council has had for the last years. Yes, that includes rural rate payers who have seen their rates go up by 60 per cent and more over the last four years.
Or Council could take our responsibilities seriously, begin to address the systemic issues that we are faced with, apply some financial accountability and literacy to this Budget process and make some of the necessary changes that will start to correct the gross failings of previous years. This approach is painful, it means cutbacks, it means the shiny stuff that Council used to do will no longer be done.
Of course we cannot delay the inevitable and ignore the failures of the past. If you take the soft option this year you still have to address the systemic issues and over spending at some point, unless the rate payer is prepared to have large rate rises each and every year. The pain will come and the longer you leave it to fester the larger the sore will be.
To add to the issues this current Council face, in the past general maintenance was seen as an option not a necessity. What this means is that generally in the past council’s bitumen resealing program was centred around resealing a road every 15 years depending on usage. Based on the program of the last years councils, the program now runs at 26 years.
Have you noticed more potholes? This is why and to repair those potholes is very expensive. General maintenance actually saves you money in the long run. Try driving your car for 100,000 km without servicing it, let me know how it goes for you.
For those in rural areas who drive gravel roads you will see that there is little gravel. Once again there has been a failure to do adequate minimum standard maintenance.
What does this mean for your organisation? Council could spend $30 million tomorrow on our road network, not to gold plate it but to get it back to where it should be. This is money we don’t have. The longer we fail to address this, the worse the scenario gets. This Council understands the important of maintenance.
This is not an isolated example. Many of our core business responsibilities have been neglected. We potentially need another $5-10 million to repair and maintain other assets.
When we add up the $10-12 million loan to pay staff and expenses, $30 million on roads and $5-10 million, you can see that this council is starting from a position of $40-50 million in the hole. That is not gold plating but getting things back to the minimum standard.
This council has very difficult decisions to make. Tough, painful, unpalatable decisions that if avoided will cause the entire region to suffer large rate rises for years to come.
I can assure you that NO councillor is enjoying this Budget process however NO councillor is shying away from the gravity of the financial position of the organisation and the acknowledgement that there is an unequivocal need to make positive changes to restore councils financial accountability and intelligence.
The issues we are dealing with are not COVID driven. COVID cannot be blamed. COVID makes it worse but the core of the problem is systemic failures in risk management, financial management and accountability.
There is no quick fix or Band-aid solution, unfortunately it will take years clean up this mess. However, your Council is working hard to address these issues and move Council into a more sustainable position.