New GM announces financial overhaul for future sustainability
Lismore City Council’s new General Manager Shelley Oldham has announced a major overhaul of Council’s finances to ensure the future sustainability of the organisation.
The quarterly budget review statement being reported to an additional ordinary meeting tonight, 26 February, reveals a cash deficit of $6.1 million. In September 2018, the cash deficit was reported as $258,400.
Ms Oldham said the variance was discovered following a two-month due diligence study by independent consultants Grey Advantage that uncovered a series of previously unreported costs.
Lismore Mayor Isaac Smith expressed his concern at the revelations but added he was relieved to have a clear picture of Council’s financial position. He said the community would rightly expect immediate and direct action.
“We are all deeply concerned at the findings and I know the community will feel the same. We knew we had some financial challenges that we needed to look at, but nothing to this extent,” Mayor Smith said.
“We chose our new General Manager specifically because of her previous business experience and proven track record of financial acuity. She has exposed where there are problems and that is the kind of leadership we need.
“Now we have all the facts before us we can make a sensible plan about how to fix our financial position. It is going to be a difficult time and there will be some very tough decisions ahead.”
Several factors have contributed to the larger than anticipated deficit:
Northern Rivers Waste compliance, transport and safety costs
Council must dispose of 12,000 tonnes of contaminated biosolids. The waste was contaminated with plastic and metals after a failed research attempt to create a new compost product for sale. This was not approved by senior leadership or endorsed by Council.
- Council must dispose of waste off-site for the next nine months as landfill Cell 2A has reached capacity. The project to construct landfill Cell 2B was delayed and is expected to be complete by late 2019.
- Several safety measures need to be put in place immediately, including an extra fire exit on the recently constructed commercial waste sorting facility.
Beardow Street landslip remediation
Contamination was found in a landslip in Lismore Heights caused by the March 2017 flood. This contamination made Council ineligible for compensation through the National Disaster Relief & Recovery Arrangements (NDRRA) scheme.
Northern Rivers Quarry operating and compliance costs
Council’s quarry has been poorly managed resulting in outstanding compliance issues and lower than expected revenues.
- A Quarry Management Plan will need to be developed to look at better governance and compliance structures.
Revenue from sale of property, plant and equipment lower than forecast
- Council needs to put in place a Fleet Management Plan to ensure efficient use of fleet and plant equipment as well as optimal utilisation and efficient and effective maintenance scheduling.
Ms Oldham said her charter as the new General Manager was to look at the Council’s overall financial position and ask the tough questions.
“The due diligence study has revealed a genuine need to look at management practices and address a lack of oversight around our commercial areas of operation,” Ms Oldham said.
“We need to modernise our technology and systems, improve our accountability and project management capability, and tighten controls around governance, compliance and risk. Much of what has occurred could have been avoided if we had better project and risk management in place.
“The Mayor and Councillors will need to put individual agendas aside and work together as a team in the coming months to get Lismore City Council back on track. To date, nine of the 11 Councillors have been briefed and are ready to take immediate action to remediate this issue.”
Council will develop a transformation plan with a short-term goal to improve cash flow and a long-term goal to reduce the deficit. This plan is likely to include:A review of plant and fleet utilisation and maintenance as well as changes to procurement practices to immediately improve cash reserves.
Deferral or cancellation of projects that are not in the four-year Imagine Lismore Delivery Program or do not have allocated funding.
A reconfiguration of the organisation and workforce assessment.
Internal changes including improved project management capability and new governance, reporting, risk and compliance controls. An evaluation of the leadership group and development of a detailed transformation plan.
The development of a 10-year rating strategy.
“We are looking across the board at all Council services to see where we can make the best gains with the least disruption to the community,” Ms Oldham said.
“We have a big job to transform this organisation. Our systems are antiquated and our governance and reporting structures are poor. There has been a breakdown in our systems and controls, and that’s what we need to fix.”
Ms Oldham said Council would also need to consider putting in place a staged, 10-year rating strategy.
“Rate increases are something Council will need to consider – our rates are simply not keeping pace with our expenses. Other Northern Rivers councils have undertaken rate increases of between 20 and 30% in the last decade,” Ms Oldham said.
“Council will need to have a realistic and genuine conversation with our community about what services they want from Council and what they are prepared to pay for.”
Ms Oldham said a reconfiguration of Council and a workforce assessment would commence in March.
“There is a perception from some sectors of the community that staff numbers have grown dramatically in recent times, when in fact we have only employed two extra full-time staff in the last four years,” Ms Oldham explained.
“In a recent survey conducted by PWC for LG Professionals, it stated payroll costs represented 35% of total operating expenses for the average NSW council while in Lismore it represents just 27%. Despite this figure being a good one, we still need to look closely at our payroll expenses.
“Our wage bill rises at around 3% each year due to CPI but our revenue only rises at the rate-pegging limit of somewhere between 1.8% and 2.8% each year. That leaves us in an unsustainable position in the long term, and that does not account for the rising cost of labour and materials year on year. We need to consider options for increasing revenue to offset escalating costs while reducing our overall payroll bill. With careful planning I believe we can achieve that with little disruption to our day-to-day business.”
Ms Oldham praised staff for their hard work during the due diligence study and said they were an asset to the Lismore community.
“One of the things I have been most impressed with through this difficult time is how dedicated and committed the staff are to this community,” she said.
“I ask members of the community that feel disappointed in Council to resist the temptation to lash out at Council staff – what has transpired is not the responsibility of individual staff members.
“Lismore rightly deserves its regional city status and needs a strong team working to further its prosperity. I will work with the Mayor, Councillors and staff to mature Lismore City Council as an organisation, focus on fixing this problem and get on with the job of driving our economy and our city forward.
“We will keep the community informed as our plans unfold.”