Knoll replaces troubled council with an administrator

Local Government Minister Stephan Knoll has called in an administrator to replace the elected members of a troubled South Australian council.

Jan 24, 2019, updated Jan 24, 2019
Photo: AAP/Kelly Barnes

Photo: AAP/Kelly Barnes

The Governor this morning ratified a recommendation from Knoll that an administrator be appointed to run Coober Pedy Council, after a July 2018 Ombudsman’s report found the council had been responsible for one of the most serious examples of maladministration he had seen.

The Auditor-General later found multiple breaches of the council’s obligations under the Local Government Act and warned that the Outback town’s administration carried an unsustainable $6 million in debt.

Knoll’s decision was delayed by the local government elections late last year, but he declared today that the council was “defaulting” – a statutory definition that allows the Minister to replace elected members with an external administrator.

Some of the newly-elected council members – including the mayor – were not on the previous council.

Under the Local Government Act, the council’s elected arm is effectively suspended, with the Minister needing to make a recommendation within the next 12 months that either reinstates the council or calls for a new election to replace it.

Knoll said that experienced former Playford Council CEO Tim Jackson would be the administrator for an indefinite period.

He said the State Government would consider “further action” once Jackson had been in place “for some time”.

“Given the extent and seriousness of the problems at the council, it’s time to do what is necessary to make sure that the council is placed on a secure footing, and can provide the Coober Pedy community with the high standard of administration and service that it needs,” Knoll said.

He said Jackson was highly-regarded in the local government sector, having served for 18 years as the CEO at Playford.

Knoll stressed that the council had not been “sacked”, but rather suspended.

Newly-elected mayor Les Hoad said that while he had not had enough time in the job to work out exactly what had gone wrong at the council, he believed an administrator had to be appointed.

“The last couple of weeks taught me that this was inevitable – that this had to happen,” he told InDaily.

He said he had put himself forward for election because he was sick of complaining about the council’s performance and wanted to do something about it – but he had not predicted the depths of the council’s problems.

“I knew things were bad, but they are worse than I thought.”

The council in the remote opal mining town has been beset with problems for many years, churning through numerous senior administrative staff, experiencing mounting debt and failing to keep proper records.

The council had effectively raised the white flag on the parlous position of its books last year, accepting the Auditor-General’s general findings about the state of its finances.

“The Council’s financial position, and particularly its current level of indebtedness, is unsustainable,” the Auditor-General’s December report finds. “The Council cannot meet its operational cash flows and has no realistic prospect of repaying its indebtedness from its own resources.”

The report raises doubts about the ability of the council to continue to provide essential services to the community.

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The earlier Ombudsman’s report was centred on one of these essential services – electricity.

As InDaily has reported extensively over the past two years, the previous State Government actively encouraged the off-grid council to sign a 20-year electricity deal worth nearly $200 million. The deal, effectively underwritten by the taxpayer via electricity subsidies, was the subject of the scathing Ombudsman’s report in 2018, which found the council had committed serious maladministration by agreeing to sign the deal without putting it through its procurement processes.

The circumstances of the council signing the agreement with energy company EDL are contentious in the Coober Pedy community, where the council – unusually – is essentially the electricity retailer.

The 20-year power deal replaced the off-grid town’s diesel generators with a hybrid renewable system, and received a subsidy from the Federal Government’s renewable energy agency.

While it appears to have been successful in making the town’s electricity generation greener, it remains a controversial project, with the previous council warned by its energy consultant that it was paying too much because it did not subject the deal to a tender process.

Some members of the previous council have claimed that the council felt pressured into signing off on the deal, due to concern about legal action and losing its government subsidies.

However, the Ombudsman did not accept that view.

Confusing the picture is considerable evidence that the council was concerned about the potential long-term cost of the agreement throughout the long process of negotiating the deal – negotiations in which the State Government was heavily involved.

The stoush over the energy deal appears to have been the final straw in a long list of concerns about the council’s performance over many years – concerns that were raised by the community as well as council insiders.

The Auditor-General found last year that some councillors had warned the State Government in 2015-16 about financial mismanagement.

The Auditor-General’s examination of the council’s books had been ordered by the previous Labor State Government due to its failure to provide audited statements for that financial year.

The Ombudsman also found in 2017 that the council, and an unnamed past financial manager, had committed maladministration by misspending a $1.3 million State Government grant in 2015.

The size of the task facing administrator Jackson is enormous, judging by the Auditor-General’s report.

Acting CEO Colin Pitman told InDaily last year that unless the council could enact a “very strict program” of financial action, a State Government bail-out would be required.

“The draft long-term financial plan shows we can get our financial position into positive territory by 2021/22 with a very strict program of rate growth and a strong focus on essential asset renewals,” he said. “But the fundamental underlying debt from the community in many cases is unresolvable.”

He said selling off assets was could be one way to put the council’s position into surplus.

“The power distribution network, for example, has been sold in every other part of the state by the State Government,” he said. “Coober Pedy remains as a sole trader with an asset in power and water distribution. The alternative is a bail-out…”

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