BATHURST council's general manager, David Sherley, has shed more light on the circumstances that led to the $7.3 million decrease in the council's unrestricted cash position.
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In response to councillors' request for more information, Mr Sherley prepared a report for the May 21, 2025 ordinary meeting.
During the meeting, however, it was clear not all councillors were satisfied with the level of detail in the report, with Cr Cranston saying, to her, it "does not explain what went wrong".
The report highlights two instances when the council was in a negative unrestricted cash position.
The first occurred in the 2023-24 financial year and went unnoticed by council staff.
It was not picked up until the annual audit by the auditor general in September 2024.
"This was the first time such a situation has occurred at council," Mr Sherley said.
"Whilst total cash was monitored daily and reported in council business papers monthly, council had historically only calculated the unrestricted cash position as at June 30 each year.
"Without prior indicators of concern, ongoing monthly monitoring had not previously been conducted."
The council implemented changes after the audit findings, developing and implementing a financial model to forecast the monthly unrestricted cash position for the 2024-25 financial year.
The model was based on the closing balances as of June 30, 2024 and the adopted budget for the financial year.
Mr Sherley said regular monthly monitoring of the unrestricted cash position commenced in July 2024.
There were no issues until February 2025, when the unrestricted cash balance turned negative.
Consistent with what the council has previously said, Mr Sherley said the error was related to a lack of land sales in Windy 1100.
"The primary contributing factor to this negative shift was the ongoing lack of land sales, which had been a budgeted revenue source and a key assumption in the model's positive forecasts," he said.
"The continued underperformance of this revenue stream highlighted financial pressures facing the council.
"Moreover, this event exposed a modelling error. The financial model had assumed that all income (excluding rates and annual charges) and all expenses would be evenly distributed across each month of the year.
"In reality, this was not the case."
Since then, there has been a surge in land sales in Windy 1100, with the total number of lots sold sitting at 29 as of May 21, 2025.
A number of the lots recently sold are anticipated settle before the end of the 2024-25 financial year, while more are set to settle early in the following financial year.
Mr Sherley said the shortfall in the council's unrestricted cash position in February 2025 "underscored the need for a more sophisticated and dynamic forcasting approach".
The council will review the underlying assumptions within the financial model on a more frequent basis.
Mr Sherley said this includes:
- aligning income forecasts with the actual timing of grant receivables
- adjusting expenditure schedules based on project delivery timelines
- improving monitoring of key revenue streams
He said actions continue to be taken to address the negative restricted cash position, including deferring or pausing projects/works and cutbacks.
"This is consistent with the approach to services being provided that has occurred over recent years since the council determined not to pursue an SRV," Mr Sherley said.
While not subject of his report, councillors have confirmed internal conversations are already happening about a possible special rate variation (SRV).
Cr Cranston told the Western Advocate that the amount and the timing have not been determined.
