Central Coast Public Inquiry: Suspended councillors, former councillors and former CEO Gary Murphy give evidence
The Public Inquiry into Central Coast Council’s budget has now heard from all suspended and former councillors as well as former CEO Gary Murphy. Here’s a run down as “red flags” along with other shocking issues are raised.
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Twelve suspended Central Coast Councillors and two councillors who resigned when the financial crisis hit have now given evidence before the Public Inquiry.
Hearings on the Inquiry are running over the next two weeks as part of the investigation into what has been described as the largest financial failure in local government history.
Councillors have raised issues and “red flags” such as a lack of handover when they were first elected, unnecessary spending, budgets being rushed through and the “combatic” behaviour in the chamber.
However a common theme in all the evidence has been not being able to access information from staff.
Former CEO Gary Murphy has also opened up about his time at the council.
Suspended Mayor Lisa Matthews gave evidence on day one when technical issues delayed the Inquiry, however the Inquiry is now running smoothly.
From the line of questioning it appears Inquiry Commissioner Roslyn McCulloch was keen to hear from suspended councillors about the handover they received when they were elected, their relationship with staff, performance of the former chief executive officer Gary Murphy along with IT system upgrades which have since emerged as a massive cost to council.
She is also keen to hear the councillors views on controversial issues such as the Warnervale Airport contract and the Regional Performing Arts Centre including the council’s bold plans to create a cultural precinct which were eventually dropped.
Here’s a snapshot of what Mr Murphy along with the suspended and former councillors had to say.
Suspended councillor Chris Burke
Cr Burke, who has had a long history in local government, said he was unaware of the level of debt that came into the merger and believed the former Gosford council was in debt to the tune of $18m.
“I was a supporter of the merger and was trying everything to make it work,” he told the Inquiry.
When talking about behaviour among councillors he said there were “strong willed people”, some who were against the merger.
“Unfortunately it became very political,” Cr Burke, who was a Liberal, said.
“We were behind the eight ball the whole time. For those three years we didn’t make any decision for the council, it was all done by Labor and the Greens.”
When asked about external and internal auditors, he said checks and balances always came back with “a clean skin”.
Cr Burke was on the selection committee for Mr Murphy and said it was a fair and equitable process.
“As a councillor it was the biggest job that I had and I wanted to get it right. I think we did pick the right person,” he said.
He said Mr Murphy was “head and shoulders above the rest”.
The only issue he pointed to was once asking Mr Murphy to be more firm with councillors.
Suspended councillor Bruce McLachlan
Cr McLachlan said he came into council as an independent with clean eyes.
However a red flag came up at his first meeting, where councillors voted that in the event a councillor stepped down that instead of doing a count back at no cost council would pay for a $350,000 by-election.
“I thought ‘what planet am I on?’,” he said. “What body would not want to save $350,000 of the public’s money. I was never comfortable with the way public moneys were treated.”
He also pointed to a time where a staff member referred to “only $4m”.
“There was a view that money was cheap and we should be borrowing more money,” he told the Inquiry.
“One thing needed in public sector is respect for public moneys.”
Cr McLachlan criticised the process of hiring former CEO Gary Murphy and said only one candidate was brought to the council chamber by the hiring committee.
“The full council never got a chance to interview acting CEO Brian Glendenning,” he said.
“Brian knew the business, he was a learned barrister … he could answer question on the spot. There was a chance of stability to keep him in the business.”
Cr McLachlan said questions were being asked around finances, giving the example of Cr Best asking for a quarterly report in November 2019 and receiving pushback from the staff.
“There were warning bells. Councillors didn’t just sit idle. I take umbrage too that it was all councillors fault. There was a lot of budgeted questions raised and answers weren’t given.”
He said Labor councillors weren’t in favour of the merger and made it obvious from the start, saying staff were trying to get on with it and the political arm was “trying to tear it up”.
When it came to budgets, Cr McLachlan said staff made 95 per cent of decisions.
“Councillors were tinkering around the edges when it came to the budget. We didn’t affect the bottom line of the budget,” he said.
He said the community lost faith in council following decisions around dredging, flooding and tearing up the $4.6m grant for the Winney Bay
“We had serious reputational damage. It’s well documented that we were the first council ever to hand back a major tourism grant cheque,” he said.
He said while the financial crisis was not what he intended during his time at council, he hoped to see positive results com from the Inquiry.
“A lot of good things will come out of this, everything needs a broom through it,” he said.
“I hope this Inquiry will give Central Coast Council opportunity to move forward.”
Suspended councillor Jilly Pilon
Cr Pilon, who was a first-time councillor, said her time on the council particularly towards the end affected her mentally and she felt a lot of pressure around the perceptions it was “all the councillors’ fault”.
She said she also felt a sense of guilt for not picking up certain things, however pointed out there were “systemic problems far greater than just blaming certain councillors”.
Cr Pilon pointed to issues such as the systems in place around finances, failure to have a permanent CEO for nearly a year after the merger, and changing accounting practices.
She said there was never stability in the roles of CFO and CEO.
“We were let down very poorly in those two areas,” she said. “I don’t know how you combine two councils … without a CFO in place. That’s on the administration. That wasn’t our call. That was a disgrace.”
Cr Pilon said, being in the Liberal minority at the council, she also disagreed with many decisions made at the council.
“By end of 2019 I let the Liberal party know I wouldn’t run again, I found it too dysfunctional,” she said.
She gave examples where council decisions were made with little regard to financial consequences including when council gave the Australian Coal Alliance $200,000 towards its legal case against the Wallarah 2 coal mine which council lawyers strongly advised against.
She also highlighted the council handing back $4.6m from the State Government for the Winner Bay walking track upgrade, and councillors voting for a pay rise during Covid and when the crisis started to become evident.
“We had staff come to us to obtain a loan for $50m which I didn’t support,” she said.
“Not long after that we were in Covid. To me (the pay rise) doesn’t send a good message to the community.”
Cr Pilon said her main concern with former CEO Gary Murphy when he was hired that he didn’t like confrontation.
Former councillor Rebecca Gale
Ms Gale, who resigned in October 2020, expressed her frustration about not being able to access any financial information from the council staff, along with information on the merger and IT system upgrades.
“There was a culture of “we will take it on notice” when asking questions on the (council chamber) floor. The information didn’t always eventuate. We were making decisions on incomplete information.”
Ms Gale said some of the financial quarterly reports were up to eight months over due, however alarm bells sounded for her in 2020 when deficits were “ticking up”.
“My view is after all those catastrophes in 2020 the financial issues of Central Coast Council, whilst we didn’t have all the information, it was right in front of us and it was being called out by some of us,” she said.
“For anyone to agree to a $32m deficit after coming off so many catastrophes was in my view irresponsible.”
She said she relied on ARIC and external auditors as “peace of mind” to track how the council was tracking financially and raise any red flags.
“Did they do their job? I think it’s evident that they did not,” she said.
Ms Gale said she understood the way “restricted” funds worked and was shocked when information regarding the spending of those funds was revealed.
She recalled late meetings running until midnight and said the mayor and CEO needed to reign them in.
“By any means that’s an inefficiently run council,” she said. “I did not exhibit any untoward behaviour. I did receive it and I’d prefer to leave it there.”
She said when news of the crisis broke in October 2020, they were all of a sudden gagged and without a CFO and CEO to answer questions.
Ms Gale, along with other councillors, wrote to Local Government Minister Shelley Hancock to put the council into administration.
A week later she resigned and further called for administration, a move she said she was the most critical decision she made to allow the region to get back to financial stability.
Suspended councillor Doug Vincent
Cr Vincent was on the Audit, Risk, Improvement Committee (ARIC) which has been floated as a potential body that missed issues in the budget.
Cr Vincent said ARIC had professionals appointed by former Administrator Ian Reynolds.
He said while it was often pushed for time, the committee never had concerns when presented financial documents. He said ARIC, along with councillors, were blindsided by the financial crisis and its revelations.
“We had no idea restricted funds were being spent … no idea of the massive debts Wyong and Gosford councils brought into the merger.”
He pointed out that the council had four chief financial officers in four years along with four governance directors.
“By the time we got to second or third CFO or the second governance office I thought ‘this is not right’,” he said.
Cr Vincent described the budget process as rushed and last minute, especially in the 2019 and 2020 with councillors told if they didn’t pass it by a certain deadline the council could be put into administration.
“It was like a gun to councillors heads,” he said.
He also saw some of the earlier budgets as inequitable for the northern parts of the coast.
“The people I represented in the community were telling me regularly how they were paying higher rates and funds were being used to flow down south. I did not support one budget in that council.”
Cr Vincent said costs went up with various disasters such as bushfires and flooding along with “cost shifting” from the state government.
However at the same time he said council was also spending millions on the amalgamation process which should have gone towards every day council expenditure.
“That in my view was the major drain on the budget,” he said.
He recalled councillors asking in 2019/20 if the council was broke due to the budget deficit.
The response was “councillors the figures before you are correct” which he said was an “odd response”.
When asked about the performance of former CEO Gary Murphy he said he was a nice man however said he often thought in meetings “when is the GM going to participate?”
Former councillor Troy Marquart
Mr Marquart described councillors as “absolutely ineffective”.
“There's been a lot of excuses and talk about blaming staff and of course there’s definitely some merit to that. But the fundamental reason this council failed was the councillors.”
He spoke about council overspending on trivial matters and when he raised the issue, he was shut down.
“The absolute truth is ratepayers money was spent hand over fist,” he said.
“What the staff were getting were big grandiose motions, huge ideas with no costings.”
Mr Marquart said while there was little training or knowledge around accounting for many councillors, he was aware that councillors needed to be “fiscally responsible”.
He said councillors would be in briefings before meetings and they would “gorge on their tofu and mung bean casserole and then go into the chamber and they would spend millions and million of the taxpayers dollars. It was a very frustrating process”.
He said he opposed the deficit budgets and often raised questions around financial reports.
Mr Marquart also spoke about the “block of nine” that didn’t want to talk about finances when he raised the matters in council meetings.
“That coupled with motions going out to the back rooms and who knows what they costed, coupled with (former CEO) Mr Murphy at the top just created this horrific fiscal spending hurricane.”
Mr Marquart pointed out that he along with Greg Best, Jilly Pilon, Bruce McLachlan and Rebecca Gale wrote a letter to the Office of Local Government in September 2020 indicating that the council was “drowning in debt” and nobody answered.
He along with Ms Gale resigned in “disgust” in October “to bring administration on”.
Suspended councillor Jillian Hogan
Cr Hogan spoke about her time in council being a “very hard road” with her confidence, womanhood, relationships, values and professionalism “maligned”.
“From the beginning it was very combative within the chamber,” she told the Inquiry.
“It was very much about what people looked like, who they spoke to … there were certain councillors that came to undermine and to divide the council.”
She said some of the behaviour incited hysteria with councillors revving up residents to the point where she was hit in the head at a meeting.
“Both mayors tried to control it, it was extremely difficult. We were all very distracted from the business at hand.”
Cr Hogan reiterated the point that there was no official handover in terms of what occurred during Administration, however said in hindsight the councillors could have sought out that information.
“What we were told was that we had an $850m budget and we are responsible for that,” she said.
Ms Hogan was on the selection panel for the recruitment of Mr Murphy and said they “absolutely followed the guidelines”.
“Gary was the standout applicant and the only one that mentioned community and residents,” she said.
She said during performance reviews of Mr Murphy, only a handful of councillors showed up.
Suspended councillor Kyle MacGregor
Cr MacGregor also spoke about “pop up protests” at council meetings where he was struck, spat at and sworn at.
However he said 12 of the councillors generally worked well together with three working to undermine council internally.
Cr MacGregor was critical of staff in terms of the amount of information he was provided. He pointed to a time when he sent 20 questions to staff and received a five word response on flooding impacts at Tuggerawong. He said other inquiries took up to six months for an answer.
Cr MacGregor said further training at the start of the councillors’ term would have assisted.
“I don’t believe at the start of our term of council that the majority of councillors understood the (financial) restrictions,” he said.
He said he had heard “anecdotally” that there was a division in the staff after the merger between Wyong and Gosford.
“I believe a lot of council systems were separate,” he said. “There was a view from some that Central Coast Council was a Wyong takeover.”
He also indicated that, from what he heard, the finance department was considered a “dumping ground”.
“Staff would be seconded to that part of council rather than being moved on,” he said.
Cr MacGregor pointed to revenue issues at the council with low rates compared to other councils.
“Revenue is a huge issue and one which hasn't been identified buy others in their testimonies,” he said.
He said he voted against all the budgets in his time at council, with many missing vital projects or needlessly spending.
“When I voted on budgets and financial positions … I did it on an economic basis. I was criticised when I said I wanted people to look at an economic point of view.”
Suspended councillor Louise Greenaway
Cr Greenaway was hesitant to speak about her experiences with fellow councillors however described council meetings as “disrespectful to the community”.
“There was antagonism,” she said. “It was an unhelpful environment to make important decisions.”
She said she approached staff about the issue and felt unsupported.
Cr Greenaway, who was on the Audit, Risk and Improvement Committee (ARIC), said she was of the understanding the focus of the committee would be on financial matters.
She eventually left the committee and as it didn’t scrutinise or probe the financials of the council.
“To me it didn’t match what I was expecting from the degree of expertise that the members had,” she said.
She also expressed concerns about accessing information from staff.
Former CEO Gary Murphy
Mr Murphy has revealed how he “reluctantly” took a financial role at council in 2020 on top of his day to day role.
Mr Murphy gave evidence at the Public Inquiry into Central Coast Council’s financial crisis on Wednesday along with suspended councillors Jane Smith and Greg Best.
Mr Murphy, who had his contract terminated in November 2020, attracted the highest audience so far with 274 people tuning into the livestream.
He was questioned about his detailed submission into the Inquiry and was asked about the ever changing chief financial officer roles at council.
He said former CFO Craig Normal left for personal reasons however told the Inquiry he had put a lot of pressure on Mr Norman to address budgeting processes.
When the next acting CFO left in August 2020, Mr Murphy said he reluctantly took on a role of accounting officer on top of his day-to-day role after exhausting all avenues. However he pointed out that he engaged a lot of experts to help and advise him.
When asked about the 2020/21 Budget deficit of $32.5m Mr Murphy said he was not comfortable with the situation which prompted him to request a Price Waterhouse Coopers (PwC) report.
“I wasn't comfortable with it, I am never comfortable with deficit budgets,” he told the Inquiry. “It’s tolerable in the short term. We needed to have a long term plan to get out of that process. I was quite surprised that a number of councillors seemed quite satisfied with deficit budget given the circumstances that we were in.”
He said while the ultimate responsibility and accountability of the budgets sits with the council and the general manager, he described the budget process at the council as “fraught”.
“I was a little bit surprised there weren’t principles surrounding the development of the budget and capital works program,” he said.
He said he first became aware of the dire situation of council and use of restricted funds after commissioning a budget review to address the impacts of Covid.
“The Grant Thornton Report was first occasion where anybody had raised with me the use of, at that stage, internally restricted funds for purposes other than as intended,” he said.
“That prompted me to do a deeper dive and realised it was far worse than that.”
At that point Mr Murphy said he realised the council had used externally restricted funds.
He spoke about the numbers of staff and frustrations he had getting precise numbers with the two former councils having different ways of accounting for contractors, full time employees and casuals.
“There was also a disconnect between figures that payroll had and figures that HR had in terms of numbers of staff as well,” he said. “They were running separate systems, for me the more important thing was how many people were being paid on a weekly basis.”
A common theme in Commissioner Roslyn McCulloch’s questioning has been the disappearing line item “unrestricted cash position” from investment reports.
Mr Murphy said “it was brought to my attention after I left” and said he hadn’t been able to ask the former CFOs why that happened.
When asked about the ability to change councillor’ behaviour, he commented it would be “challenging”.
Suspended councillor Greg Best
Cr Best called on the Commissioner to not put all councillors in the same basket or with the people that had “full control of this council”.
He spoke about how he and fellow councillors Bruce McLachlan, Jilly Pilon along with former councillors Rebecca Gale and Troy Marquart, called out the issues at council and “championed good governance and financial probity”.
“To find I very may well be staring down the barrel of dismissal for actually whistleblowing,” he said.
“This is just patently unfair in the modern era for the Minister to, with stroke of a pen, dismiss this whole council and then the public has this view that everyone on the council dropped the ball and everyone trashed the reputation and the business.
“If you have your recommendations to make I appeal to you to delineate between those that called it and those that actually caused it.”
Cr Best told the Inquiry how he raised issues of staff numbers and concerns around finances.
He said he questioned the constant deficits in the budget, which some other councillors have said were consistent with council’s long term financial plan.
“It wasn’t like they weren’t warned about the budget going pear shaped,” Cr Best said.
“This council has run deficits every single year.”
He said in February 2018 he told the council to “stop sending like drunken sailors otherwise you won’t be able to pay your bills in a year’s time”.
Cr Best said some fellow councillors played party politics to bring down the amalgamation.
“The facts are that there was an agenda by certain councillors to not have the amalgamation succeed for political purposes,” he said.
When asked about changes in the investment reports in relation to the “unrestricted cash position” of council, Mr Best said information was lacking.
“It was hidden and I would like to know who did it. The buck stops with Mr Murphy and the councillors,” he said.
He also said staff were always on hand to help or provide information and councillors just needed to ask.
Suspended councillor Jane Smith
Cr Smith’s evidence was short as she had lodged an extensive submission to the Inquiry.
She noted there wasn’t a handover with former Administrator Ian Reynolds or a presentation to councillors on the state of council.
When questioned about IPART’s water pricing decision – which has played a role in the financial crisis – Cr Smith said there was a deficit forecast as a result with changes made to the budget which included deferred projects. A presentation was also delivered to councillors on the issue.
When asked how she handled the fallout against her time as mayor, Cr Smith said it resulted in a lot of misinformation in the community and the described the conduct in the chamber as “weaponised”.
Suspended councillor Chris Holstein
Cr Holstein, who was initially elected to the former Gosford council in 1991, expressed his disappointment and frustration into the situation.
Cr Holstein described the Administration period before the election of councillors as a rushed process and said more work needed to be done in establishing systems and procedures including the IT programs.
“I think that the foundation needed to be a lot stronger before the council with the elected representatives could have moved forward,” he said.
“My gut feeling is councillors came back too early and a lot of things needed to be addressed.”
When the Central Coast councillors came together Cr Holstein said it was “unusual” and “very regimented”.
“It was very much ‘councillors you speak to the ELT (executive leadership team)’,” he said.
Cr Holstein said councillors were not talked through costs and the ins and outs of the amalgamation process and its difficulties and often asked questions during meetings. However he said the animosity between councillors made this hard.
“There was also a lot of animosity between councillors and I think that came from the rigorous (election) campaign that had been conducted,” he told the Inquiry.
“It then actually took briefing sessions and council meetings into a level of disarray that I found quite disturbing and difficult.”
He said council meetings and briefing sessions became a “farce” with the focus on certain councillors’ agendas and not the general business of council.
“I can say without naming staff that certain levels of staff were frustrated by behaviours of councillors.”
He said he believed this may have prevented staff from including certain items on the council agenda.
However Cr Holstein clearly stated that in his mind, the crisis was due to a myriad of issues.
“I believe that everybody has to take a certain level of responsibility,” he said.
“By all means councillors would have been a contributing factor but so would aspects of the managerial reporting, aspects of the initial decision to go into amalgamation and those initial foundations by Administration.”
He also highlighted the unprecedented year of natural diasters from bushfires to flooding, coastal erosion and Covid.
Suspended councillor Richard Mehrtens
Cr Mehrtens spoke about perceptions of “favouritism” among senior staff when councillors were elected.
“What I had heard on the council rumour mill was that some staff were untouchable due to how long they had been there,” he said.
He also highlighted the “political situation” between staff and councillors and said the relationship was “not built on trust”.
“My feeling was that there was not general trust between councillors or between the councillors and staff,” he said.
He said certain councillors had a view to “disruption” which went unchecked by the former CEO and he said attempts were made by both mayors to control that behaviour.
When asked by Ms McCulloch “would you like to name names?”, he declined.
Cr Mehrtens said the issue of the upgraded IT system was regularly referred to as a “key” to the amalgamation.
“It wasn’t, from my perception of things, going well at all,” he said.
“It wasn’t discussed in any great detail, it was just being worked on and it was very expensive.”
He said councillors were shocked to learn council had only one account, with restricted fund allocations just “partitions on a spreadsheet”.
Ms McCulloch revealed “it wasn’t just the bank account that was single, the funds were actually classified as unrestricted”.
Mr Mehrtens said it became clear there was an antagonistic relationship between the former Wyong and Gosford councils at merger.
“I do think that there was an issue there that undermined a lot of the decisions that were trying to be made for a united region,” he said.
When speaking about the various budgets handed down, he said councillors weren’t able to “influence the specifics of the budget”. He said during a weekend budget briefing in February 2020, many councillors tried to make substantial changes to the budget however were told to either vote for it before the deadline or the council would go into administration.
He said he believed councillors were “ill-equipped” and did not have access to the level of detail to uncover certain issues relating to the council crisis.
“I genuinely don’t believe that a group of lay people off the street should also be required to be the final financial arbiters of a council or organisation of this size,” he said.
Suspended councillor Jeff Sundstrom
Cr Sundstrom, who was on council for the first time, described the handover as more of an orientation.
“I don’t recall a big data dump to know the full extent of council business,” he said.
“As far as a handover is concerned, I don’t think there was one.”
He also indicated that access to staff was limited, indicating that he felt “guilty” one time when he had a chat at a park with council frontline staff members in case he was acting out of the Code of Conduct.
Cr Sundstrom also commented on the behaviour of councillors, stating that some councillors fought for their wards as opposed to working for the whole region which brought negatives to the chamber.
He said he heavily relied on staff for information, however said councillors could ask questions at briefings.
He said he was surprised to eventually learn that restricted money was in an accessible account and he knew council needed permission to use restricted funds.
“I just for the life of me can’t – I couldn’t understand why that could happen,” he said.
When questioned about the Warnervale Airport contract with Amphibian Aerospace Industries (AAI) that was terminated at a huge cost to council, Cr Sundstrom said he had doubts when it was initially announced.
“I didn’t see how that was the best outcome for the people of the Central Coast. I thought how is this company – and I didn’t see a great track record of work from that company – how is this company going to be a key stakeholder in a plan that was massive? I also was concerned that, as were others, the deal that was done was reliant on zoning changes that a future council would have to commit to.”
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