Former CEO of Central Coast Council Gary Murphy speaks out about financial crisis

Gary Murphy takes full responsibility for the financial crisis facing Central Coast Council but says an email trail suggesting he hid the situation has been taken out of context.

Former Central Coast Council CEO Gary Murphy has spoked out. Picture: Sue Graham

Former Central Coast Council CEO Gary Murphy has spoken out following the release of documents which allegedly show he knew about the use of restricted funds.

Mr Murphy has stayed relatively quiet since his contract was terminated in November 2020 by administrator Dick Persson, following revelations the council was facing “liquidity issues”.

He told the Express Advocate that as the former CEO he takes full responsibility for the situation.

“I fully accept as CEO I have to take the blame,” he said.

However the release of the documents at Tuesday’s meeting has prompted him to speak out, saying the documents do not show any evidence of wrongdoing and have been taken out of context.

Former CEO Gary Murphy. Picture: Fiona Killman

Mr Persson released five documents which he says confirm Mr Murphy knew about the restricted funds long before it was announced. He said he released them to show that Mr Murphy’s previous claims that he blew the whistle when he realised council was facing liquidity issues were “just not true”.

“I am curious as to why those emails were released with no context and people have to draw their own conclusions,” Mr Murphy said.

Mr Murphy said when Mr Persson released his 30 day report into the crisis he stated that “interrogation of council’s emails and notes systems shows clearly that both the CFO and the CEO were aware that restricted reserves were being used for both, purposes prohibited by the Act and for purposes not approved by the council”.

Restricted reserves are funds that cannot be used for general use. The funds, such as developer contributions, are either subject to external legislative or contractual obligation or are kept for the purpose of covering future council commitments.

Mr Murphy said he wrote to Mr Persson in December to say he strongly denied the allegation that he knew about the use of restricted funds.

Dick Persson released emails and a file note which he claims shows the former CEO and CFO knew restricted funds were being used.

“I was disappointed that I was not given any evidence to support this,” he said. “I requested the opportunity to read and review the evidence.”

When he didn’t hear back, Mr Murphy wrote again in January and after being told he would not receive a response he lodged a Government Information Public Access (GIPA) form requesting all the information that was replied uponin the Administrator’s report.

He was told he would receive a response by March 12 and was shocked to see the chain of emails and a file note released publicly on Tuesday.

“I was quite furious and disappointed when the administrator decided to release the information with no context,” he said.

He said the emails do not back up the claim or show any evidence that he and the former CFO Craig Norman knew about the use of restricted funds.

“The Administrator has made a lot of comments about the fact that I knew about the use of restricted funds. That’s not correct, what I did know was that COVID-19 was going to have a huge impact on Central Coast Council,” he said.

The documents were released at Tuesday night’s council meeting. Picture: Mark Scott

Mr Murphy said the notes and emails have picked out parts of conversations around other issues at the time, mainly COVID-19 impacts, where the word “restricted funds” have been used.

He said the file note from November 2019 was written by himself after a one-on-one meeting with Mr Norman regarding financial strategies.

“There’s nothing unusual about my reference to restricted funds,” he said.

He explained that the reference related to a NSW Auditor General report in 2020 which revealed that councils were sitting on millions in developer contributions and should be using the funds.

“The Minister for Planning announced a number of changes regarding pooling of developer contributions,” he said. “There’s nothing wrong with the use of restricted funds, as long as they are used appropriately.”

He said an email where restricted funds were mentioned by the CFO was an outline of worst case scenarios.

The file note released by Mr Persson.

“That was talking about things that may happen not about things that have happened,” he said.

“This was the so called irrefutable evidence that the CEO and CFO were aware about funds being used? The realisation of the inappropriate use of restricted funds was only made known to myself and the executives in October.”

Mr Murphy said the email regarding questions to the CFO on unrestricted funds was completely unrelated and to do with the business support package council was offering during the pandemic. The reference to the word unrestricted should have read “unlimited”.

He said the CFO’s response in that email showed the understanding that the use of restricted funds, for anything other than what they are intended for, had to be approved by the State Government.

The final email where a staff member talks about the “current situation we are in” was regarding the Q3 financial results.

“The administrator has read into it saying we knew we had used restricted funds and we were in dire straights. That’s not correct,” he said.

Mr Murphy started at Central Coast Council in July 2018. Picture: Sue Graham

Mr Murphy said he engaged audit, tax and financial advisory company Grant Thornton tolook at council’s finances and COVID-19 modelling from April to August 2020, looking into rates, rent, fees and charges and a recruitment freeze.

When they raised questions about the use of restricted funds, DMB Accounting were then engaged to delve into the situation and revealed the full extent in October.

“I have said it before, until DMB released the report in October 2020 I can honestly say I was not aware of the extent and magnitude of the issue of restricted funds,” he said.

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Mr Murphy said it was also important to clarify his “so called whistle blowing”.

“When we became aware of the use of restricted funds in early October during the long weekend, we reported it to councillors on the Tuesday and also reported it to the Office of Local Government, Independent Commission Against Corruption and NSW Ombudsman,” he said.

“The reporting was based on legal advice we received about potential breaches in the Local Government Act.

“What the Administrator is saying is that based on emails, we were aware of council’s financial crisis and should have blown the whistle earlier. The whistle blowing was in relation to the use of restricted funds.”

He said Mr Persson’s message was “the problems were caused by the CEO, I have got rid of him and there’s nothing more to see here”.

Mr Murphy called for various investigations into the finances during his time, looking at strategies and impacts of the COVID-19 pandemic.

Mr Murphy said he called for the forensic audit, which came before council this week, back in October 2020.

“What I wanted out of that audit was what happened, how it happened and who knew what and when,” he said.

“Like the public I have seen the summary and while it is somewhat reassuring and supports there was no corruption or fraud, it does talk about legacy issues regarding the former council and financial practices that continued.

“There are a number of unanswered questions. Those emails released on Tuesday night don’t add any value, the entire audit should have been released. It’s important we get to the bottom of how that happened and what’s being put in place to make sure it doesn’t happen again.

“I’m not shying away that my actions contributed to what happened but there were a number of players over a number of years.”

He said council’s debt position was already well known, with council inheriting a $317m debt from the former Gosford and Wyong councils.

“On the 12th of May 2016 the brand new council had $317m worth of debt and $5m in the bank. That’s not a good start,” Mr Murphy said.

“There were three financial years where there were significant errors in audited financial statements, that was part of the problem. Council on amalgamation thought they had $80-90m in unrestricted cash.

At the time of amalgamation there was a $317m debt. Picture: Sue Graham

“The $565m — which has since been reduced by $107m — is made up of that $317m and council in 2017/18 repaid about $110m of that debt. Should that have happened in hindsight? The debt was very expensive and interest rates were low at the time.”

He said the bulk of the council’s accumulated debt is from the use of the $200 million worth of internal and external restricted funds.

“It shouldn’t be about a witch hunt, it’s trying to understand what happened,” he said.

“There were 80-odd people in the finance team. Somebody must have known what was going on.

“I know the administrator says you can’t blame the amalgamation and it was about what happened after. I accept responsibility for my actions and never denied the fact that things happened while I was there. However it can’t be denied that there were a number of legacy issues before amalgamation.”

Mr Persson wants to move forward.

Mr Persson told the Express he maintains that in his view “Mr Murphy is largely responsible for the financial disaster of Central Coast Council”.

“The information I released shows clearly he knew the extent of the impending crisis,” he said.

“What they also show is that he didn’t do anything when it was clear the ship was racing to the rocks. He acted too little too late.”

He said he was under no obligation to give any information to Mr Murphy in December or January as he was a member of the public and “had no entitlement to anything”.

“My focus was on fixing the mess he created and left behind. The most devastating decision of my career was paying him out $370,000 under the contract.

“My judgment was the best thing – to move him on and get a better person in place.

“I am not wasting any more time on these issues, the results are clear and I am moving forward.”