Sydney council boss urged ‘creative accounting’ to find $25 million, inquiry told

Liverpool Council’s former chief executive John Ajaka allegedly directed a senior council bureaucrat to use “creative accounting” to find $25 million in the council’s draft budget, an inquiry has heard.

The NSW Office of Local Government’s public inquiry into Liverpool City Council is examining councillors’ conduct, as well as the organisation’s handling of finances, property purchases, staff employment and more than $150 million in state government grants for infrastructure projects.

Liverpool City Council’s director of corporate services Farooq Portelli provides evidence at the inquiry on Thursday.

Local Government Minister Ron Hoenig announced the inquiry last July after a report detailed serious allegations of dysfunction and maladministration at the council in south-west Sydney.

Weeks earlier, the council had ousted Ajaka, the former president of the NSW Legislative Council and the council’s 10th chief executive in eight years, after a falling out with Mayor Ned Mannoun.

On Monday, the council’s director of corporate services, Farooq Portelli, told the inquiry Ajaka had directed him to “make changes to the budget, which I refused to do” months before he was axed.

Under questioning from Mannoun’s lawyer, Kate Richardson, SC, Portelli said Ajaka had called him into his office about March 2024, when preparations for the 2024-25 budget were in the early stages.

“He directed me to use creative accounting to find $25 million,” Portelli said.

Asked by counsel assisting the inquiry Trish McDonald, SC, whether the $25 million Ajaka had referred to had been needed for a particular council project, Portelli said: “No, at that moment that was the first-cut deficit of the budget, in other words, he wanted me to find the deficit through creative accounting.”

He said Ajaka had then instructed Portelli to “do what the other two did”, which Portelli understood was a reference to “two other [staff] who had inflated revenues which they couldn’t substantiate”.

The inquiry heard Portelli had identified line items “of concern” in the council’s draft budget which he had been unable to justify, and had taken out, after he had started work at the council in 2023.

John Ajaka, who was president of the Legislative Council, quit parliament in March 2021. He took up the Liverpool job in December 2022.Credit: Geoff Jones

Portelli recalled, as an example, that one of the items which he had taken out of the draft budget “was a proposal in an external consultant’s report for us to invest something like $20 million into IT, and that would provide savings over the next five years and there was a model of savings”.

“The cost and the savings [were included in the draft budget]. The problem we had at that time was, we didn’t have the funds to invest the $20 million. And secondly, even the efficiencies where, for example, you would save 2.6 jobs in this area and 8.4 jobs in that area … in local government, it’s very difficult to make those people redundant, and get those efficiencies.”

Portelli said the “first cut” of the budget had gone to councillors “in the order of $25 million in deficit, net”.

“[Those efficiencies] were taken out. It was me doing those things that the previous CEO was referring to … that was my understanding.”

A truck outside the Liverpool Council building in July 2024 on the day the interim report was released, which sparked the inquiry.Credit: Dion Georgopoulos

Portelli said he had not asked Ajaka for any further details during their conversation; however, when he had asked him to find the budget deficit of $25 million, Portelli had responded: “‘It’s not happening’. I was walking out of his office and [Ajaka] said words to the effect of, ‘Find the money’ … and I sarcastically remarked, ‘I’ll look under my pillow tonight’.

“I wasn’t happy. I mean, I was angry and so was he,” Portelli said.

Portelli told the inquiry he had “absolutely” refused to engage in any “creative accounting” in relation to the budget, as had other council staff.

Ajaka’s lawyer, Adam Searle, declined to cross-examine Portelli on the allegations and said he would reserve his position on the matters raised until his client provided his evidence to the inquiry.

“I’ve heard things here for the first time I haven’t had an opportunity to get instructions about,” Searle said.

The inquiry continues in front of Commissioner Ross Glover. Mannoun is also due to give evidence.

Start the day with a summary of the day’s most important and interesting stories, analysis and insights. Sign up for our Morning Edition newsletter.