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Council Secrecy Extends Beyond Ratepayers to the Office of Local Government

by Patricia Gardiner, Deua River Valley

The Beagle Editor,

It appears that it is not only ratepayers being kept in the dark regarding the final updated Business Case and ongoing financial projections for the Batemans Bay Regional Aquatic, Arts and Leisure Centre(BBRAALC).

Information has been gleaned through a Government Information Public Access (GIPA) request,

Prior to committing to a major capital project over $10 m (BBRAALC = $69 m), council was required to conduct a ‘Capital Expenditure Review’ and submit it to the Office of Local Government (OLG).

This enables the OLG to ensure that council has complied with OLG’s Capital Expenditure Guidelines The Guidelines aim to ensure that a council’s evaluation of the proposed capital expenditure is consistent and rigorous, the merits of projects can be compared and resource allocation can be made on an informed basis. It is important that the evaluation of the project is carried out in a clear, transparent and systematic way. The process of evaluation and reporting methods outlined in these Guidelines will enhance the transparency and rigour of capital expenditure project evaluation. The OLG’s Capital Expenditure Guidelines have been issued pursuant to section 23A of the Local Government Act 1993. As such, councils must consider these Guidelines before committing to capital projects. It should be noted that councils are expected to undertake the processes outlined in the Guidelines, irrespective of the funding sources of projects.

“The council must demonstrate that its decision to carry out the capital expenditure is based on sound strategic and financial planning, supported by valid data and research; and that it reflects the views, priorities and objectives of the broader community.”(Guidelines p. 3) When calculating future costs it is appropriate that project costs are indexed based on prudent and reasonable assumptions. These assumptions should be documented and able to be provided on request or provided as part of the project’s capital expenditure review. (Guidelines p. 13)

One of the main inclusions required by the Guidelines is a “comprehensive Business/Management Project Plan,” that outlines the costs and revenues, includes the business structure and objectives, the reasons the proposal will be successful and financial projections - both direct and indirect costs, capital and ongoing recurrent costs as well as expected costs once the project becomes operational. Yet ESC had the audacity to include the following cover letter (obtained through GIPA) with its Review documents, to the OLG:

------------------------------------------------------------- From: Stephen Phipps <Stephen.Phipps@esc.nsw.gov.au>

Sent: Monday, 23 March 2020 10:07 AM

To: olg@olg.nsw.gov.au

Cc: Catherine Dale; Lindsay Usher

Subject: For Performance Team - Batemans Bay Regional Aquatic, Arts and Leisure Centre project

Attachments: Risk Log 161018.xlsm; Comms Strategy V.03.docx; Project Plan OLG Version.docx; Project190320.pdf; Capital Expenditure Requirements Checklist FINAL.docx; BBRAALC Statement of Environmental Effects 011019.pdf


Good Morning,

Please find attached and referenced below the suite of documents to assist in the Capital Expenditure Review of the Batemans Bay Regional Aquatic, Arts and Leisure Centre project being undertaken by the Eurobodalla Shire Council.

Other key documents are available at: https://www.esc.nsw.gov.au/inside‐council/project‐and‐exhibitions/majorprojects‐ and‐works/aquatic‐arts‐and‐leisure‐centre

Council has some documents, that if released to the public through a GIPA request, have the potential to severely impact our tender process. Given there is some uncertainty on what could be redacted should a GIPA request be sought through OLG, we have decided to not supply those documents that are directly related to our upcoming tenders.

The documents that have the potential to unduly impact our tenders are:

Quantity Surveyor estimates

 Updated business case

In addition, the funding sources identified by Council (contribution in addition to grant funding) can also be misconstrued if released in the public domain and could impact the building tender process. The documents that support this process are also being withheld.

Should the staff reviewing the project need to access these documents to complete the review we can discuss an arrangement that can hopefully satisfy both parties.

If you have any further questions please contact me.

Thanks

Project Coordinator Mackay Park

t 02 4474 1389 | m 0418 755 383| f 02 4474 1234

---------------------------------------------------------

Readers, It must be noted that under the GIPA Act, the fact that information may be “misconstrued” is not a reason for non disclosure.

Council states, “WE have decided NOT to supply” the Business Case and Quantity Surveyors estimates?

Without these documents how can Council ‘demonstrate’ sound financial planning?

And, how can the OLG validate council’s compliance with the Guidelines without it?

And, what sort of “arrangement” is council suggesting? The mind boggles!

Either they comply with the Guidelines and supply the required information, or they withhold it and fail to comply.

Furthermore, if these ‘withheld’ documents are legitimately ‘commercial in confidence’ and/or fail the public interest test for disclosure, wouldn’t the OLG be legally bound to withhold them if a GIPA request were made?

Is the OLG not bound by GIPA legislation, the same as all other agencies?

Does ESC not trust the OLG to abide by legislation?

Or is it simply that the reason provided by ESC to withhold these financial documents ........... a porky pie? 

From the ESC’s email to OLG (below), also obtained under GIPA, it is apparent that the OLG did request further information:

---------------------------------------------------------------

From: Stephen Phipps <Stephen.Phipps@esc.nsw.gov.au>

Sent: Friday, 1 May 2020 1:24 PM

To: 'Helen Gustus'OLG

Cc: Sonja Hammond

Subject: RE: Capital expenditure review - Batemans Bay Regional Aquatic, Arts and Leisure Centre project

- Request for further information - 27/04/2020 - Our reference A696554

Attachments:

# BBRAALC operating costs April 2020.xlsx;

#SGS extract.docx

Hi Helen,

Please find attached two documents that hopefully will help with your analysis and provide the information you have requested.

Can I please stress again, the sensitivities associated with these documents, as we do not want to have our tender process for the management of the new centre compromised in anyway.

The SGS extract provides the economic modelling undertaken early in the project, I still believe that modelling is valid although the costs of the centre has changed.

Let me know if you need anything else or need any clarifications

Thanks

Stephen Phipps

Project Coordinator Mackay Park

-----------------------------------------------

Of particular note in this correspondence from ESC are the ATTACHMENTS : Operating Costs and an extract from SGS Economics.

There is no updated comprehensive Business Case or Quantity Surveyors Estimates that council said it had decided to withhold from the OLG in its initial cover letter.

Is this because there is no updated Business Case?

SGS was contracted in 2017 to provide info for a grant application – the same year Otium produced its preliminary Business Case.

It’s all outdated, changes have been made to the final design, costs have escalated and the world has changed.

Nowhere, in ESC’s Review, is there any mention of the impact on the project, of the implications associated with COVID 19.

The Guidelines state that council’s Risk Management Plan must identify all potential risks that may have an adverse impact on the project.

HOWEVER, the OLG, decided in its wisdom, in July 2020, to assess ESC’s Review as being compliant with the Guidelines.

Obviously, they must have come to some sort of “arrangement” whereby ESC was not required to complete a comprehensive Business Project Plan as required by OLG’s Guidelines below:


BUT, what is most noteworthy in OLG’s letter of assessment (below) is how it qualifies its assessment and distances itself from endorsing or approving the project:

“OLG notes that, factoring in all costs, the built facility is projected to operate at a loss for the first 10 years of operation. Council must be satisfied of the community demand for the facility, as proposed, and the ability to subsidise the facility from the General Fund. Council should also consider the potential adverse effect of the COVID-19 pandemic on the projected revenue of both the built facility and Council.”

“While Council has generally satisfied the OLG’s capital expenditure criteria, it is important to note that this response should not be construed as an endorsement or approval of Council’s proposal.”



EDITORS NOTE: Having read the above correspondence from the OLG date 13th July 2020 where they very clearly state their response SHOULD NOT be construed as endorsement or approval of Council's proposal the following extract from Council's agenda fails to accurately advise councillors and the community of the facts by suggesting OLG approval in the statement "OLG's assessment concluded that Council's review meets the relevant criteria of the Guidelines" where it is now clear that NOT all the guidelines were addressed as the required current Business Plan was not provided. The SGS extract, reluctantly offered, provided outdated (2017) economic modelling undertaken early in the project. SGS Economics and Planning Pty Ltd had been engaged to undertake a cost benefit assessment and economic impact analysis of the original Otium proposal. THE Question is: "Were the Councillors informed of the correspondences between Council and the OLG in regards to OLG's assessment and were they provided the July 13th letter from the OLG prior to the Council meeting of July 28th where they voted to go ahead with the project and commit to the $19 million GAP?

As the OLG has absolved itself of any responsibility towards the outcome of the BBRAALC project and its impact on the Eurobodalla community, will the true cost, financially or otherwise, only be revealed when it's too late for any intervention?

And what is so secret? The updated Business Case or the fact that there is no updated Business Case?

And why is the OLG accepting of this secrecy, to the point where it has assessed compliance with its own Guidelines, without a comprehensive, updated Business Case (among other things, but that’s for another day and another letter)?

Patricia Gardiner

Deua River Valley NOTE: you can view all of the documents provided under GIPA HERE

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