Shire of Coolgardie budget deficit blows out by more than $6 million as council set to confront crisis

Shire of Coolgardie councillors will confront the enormous scale of their financial crisis at Tuesday’s meeting, with a report revealing the 2024-25 budget closing deficit has blown out by more than $6 million. The 2024-25 budget review report identifies a slew of discrepancies which require adjustment, including $3.8m for the Bluebush Village workers accommodation facility in Kambalda. In his report Aaron Cook, who has been acting chief executive since the council suspended CEO James Trail last November, said the council adopted the 2024-25 budget with a closing deficit position of $627,236. “The budget amendments tabled for endorsement by council in note 5 of the budget review document will result in a forecast closing deficit position of $6,639,722,” he said. “This represents an unfavourable movement of $6,012,486.” Mr Cook also identified the current financial year budget had been adopted with an operating deficit of $1,882,308 — but the draft 2023-24 annual financial statements showed this figure was actually $6,558,718, “an unfavourable movement of $4,676,410”. “There were various reasons for the movement, the most notable being the treatment of the overdraft facility resulting in an unfavourable movement of $2,669,595,” he said. Mr Cook said the shire’s financial situation “is unsustainable and requires urgent review, attention and action”. “This has occurred over the last several years and was created through several large-scale transactions that have not returned the income projected or required to maintain the borrowings and administrative burden, and expenses have increased beyond forecasted recommendations,” he said. He identified Bluebush Village, the Coolgardie refuse site and the Coolgardie wastewater site as the large-scale transactions. Mr Cook said additional areas of expense that had a significant impact on the shire were roadworks and maintenance, consultants and contractors, swimming pools and recreation centres, and building and asset maintenance. He said a budget adjustment of $3,004,999 was needed because of reduced rental from lower occupancy levels at the Kambalda workers accommodation village, while there was also $548,000 in additional management and maintenance costs, and an extra $250,000 for provision of electricity and water. Mr Cook said there were several projects not included in the 2024-25 budget, including the footpath renewal program in both Coolgardie and Kambalda totalling $487,187. He said there was also expenditure of $589,058 for land and buildings, of which the council passed resolutions for $442,000 of this unbudgeted expenditure. Mr Cook said overspends were forecast for consultancy costs and legal fees, where adjustments of $380,000 and $220,000, respectively, had been made in these areas. He said because of timing and cash flow restraints, a significant portion of the 2024-25 road program would be carried over to the 2025-26 financial year. “The budget review has been prepared on the basis that any funding received to date for road projects will be spent in the 2024-25 financial year,” he said. “The net impact of this is an unfavourable movement of $1,070,349 resulting from a reduction in grant funding of $3,026,420 and capital works costs of $1,956,071 carried forward.” Mr Cook said the shire’s total borrowings at the end of January were $22.043m because of the major transactions that had occurred. “However, additional debt has been incurred through the facilitation of capital leases for the Bluebush Village and heavy plant for the Coolgardie waste facility to the amount of $2.948m as at the end of January,” he said. “Most local governments have significant cash reserves that are banked over years to cover unforeseen issues and are utilised for planned upgrades and requirements; however, this is not the case for the shire as these funds were utilised several years ago for other matters/projects. “Recently in January one portion of the bank loans was refinanced and the debt spread over a longer period with a lower interest rate being achieved, making council decent savings that has decreased the deficit.” Mr Cook said the financial situation had affected the entire organisation. “Limitations have been placed on what payments can be made,” he said. “These restrictions have affected a lot of businesses that provide goods and services to the shire and the requirement to wind back non-essential services. “These actions will need to continue into the future years until the shire can stabilise its financial position.” He said several actions could be taken to resolve the situation, but “immediate action is required to procure additional funding to mitigate the funding shortfall (to) see out this financial year until the next budget can be presented and adopted and 2025-26 rate income is received”. Mr Cook said the situation had also put an “unfair” level of stress on staff. “The actions of existing staff in attempting to manage this situation has been excessive, stressful and unfair on them to burden the responsibility of addressing the complaints received and, as such, (I) remind all readers of this agenda to treat all staff respectfully as the entire administration, along with council, are working to the goal to rebuild the financial sustainability of the Shire of Coolgardie,” he said.