Council takes steps towards selling Blue Haven Illawarra

Published on 12 May 2022

Kiama Council will begin the process of selling its aged care business, Blue Haven Illawarra, as part of an urgent response to address the organisation’s financial and operational challenges.

At an Extraordinary Meeting this evening, Councillors formally received a forensic assessment report on Council’s financial management since 2016 that has further highlighted the need for both immediate and long-term action to ensure the organisation is financially solvent.

The assessment included:

• Council’s cash and investments
• Financial records and supporting documents
• Significant Blue Haven contracts
• The Blue Haven Bonaira construction project including costs, how funds were used, the tender awarding process and project management outcomes

Mayor Neil Reilly said the organisation is at a historic crossroads and this situation requires courageous and decisive action.

“We have made brave decisions before and we have been enormously proud of being able to deliver aged care in our region for the past 40 years,” he said.

“But it’s time for change. For us to refocus on being a local government service at our core, we need to allow Blue Haven to have the dedicated, direct leadership and attention that any complex aged care businesses deserves. We need to do that so our past good work can continue to live on.”

CEO Jane Stroud said while the forensic report has confirmed the issues already raised and reported to the community and to Councillors, it provides a level of detail that makes it clear Council’s very existence is no longer viable financially without immediate and significant action.

“As CEO, I’ve laid out a proposed way forward, in the face of an unsustainable environment where Council operates a complex aged care business, side by side with its core local government responsibilities. This environment is negatively affecting all aspects of the Council, and the Blue Haven businesses, and cannot continue to be supported financially without significant risk to our liquidity and solvency.

“It was my duty to bring that to Council’s attention and recommend sensible, albeit difficult pathways forward.”

“This decision is not taken lightly, and is based on the extensive information before us including the State of the Organisation report, the Strategic Improvement Plan and the continued considered advice of the Audit Office and that of the NSW State Government Department of Local Government. When I carefully consider all the facts available, I can no longer see a financial solution that allows Council to continue to keep owning and operating Blue Haven, without risking the business of local government.”

Councillors voted to give the CEO authority to begin the process of selling Blue Haven’s properties through a public tender process. They resolved:

• For the purposes of protecting and sustaining the core role of the local government authority that delegated authority be given to the Chief Executive Officer to sign all documentation associated with the contract to McVay Real Estate for the purposes of undertaking a sale through public tender for Blue Haven Lot 71 DP831089 and Lot 2 DP1215276.

Councillors also supported a recommendation to list for inclusion in the conditions of the contract with McVay Real Estate the following:

Mayor Reilly stressed that the high standard in quality of care for Blue Haven residents would be protected and continue uninterrupted, regardless of any future change of ownership.

“The wellbeing and care of Blue Haven residents and their families remains the highest priority and we will ensure that care is not compromised as we work through the various stages leading to the sale,” he said.

“The sale process will take time and we encourage the Blue Haven community, along with Council and Blue Haven staff and all residents of our local government area, to work with us as we navigate the waters ahead.”

The Mayor said the forensic assessment had identified a range of other actions to ensure Council continues towards a sustainable future.

“Since taking office in January, we have taken step after step of proactive and decisive actions. Our Strategic Improvement Plan will now be adjusted in response to the audit findings so that we bring about positive and lasting change,” he said.

Urgent factors highlighted in the report include:

• Council’s cash flow position and the risks associated with solvency, which immediately threaten the organisation’s viability and required due diligence reporting
• The proposed budget for 2022/23, noting a deficit position
• Continued trajectory of financial loss alongside significant capital and operational projected needs for Blue Haven 
• Lack of resources and cash to be able to progress the previously resolved position of “keep or lease” Blue Haven and its associated assets
• Diminished Council cash flow for core local government services

Ms Stroud said Council will continue to keep the community informed on all aspects of its actions to address the organisation’s challenges.

“In engaging outside experts to undertake the forensic assessment, we wanted to know exactly what Council’s position was, with no sugar-coating,” she said.

“We know that these findings will have significant consequences, but we must seize this opportunity to move to a position where Council is financially sustainable and our community and staff have certainty about the future.”

The full resolution 5.1:

That Council:

1. Receive the confidential forensic accounting assessment report of historic data, noting the findings and actions which will be required to be updated in the Strategic Improvement Plan (SIP) for Kiama Municipal Council.
2. That following improvements in Kiama Municipal Council’s financial position and preferably by the 2023-2024 financial year, that the forensic account assessment report be publicly released, subject to legal advice. 
3. For the purposes of protecting and sustaining the core role of the local government authority, that delegated authority be given to the Chief Executive Officer to sign all documentation associated with the contract to McVay Real Estate for the purposes of undertaking a sale through public tender for Blue Haven Lot 2 DP1215276 and Lot 71 DP831089.
4. List for inclusion in the conditions of the contract with McVay Real Estate specified at three (3) above, the following:
   1. The high standard in quality of care for the residents and families of the Blue Haven Residential Aged Care Facility be maintained, protected and uninterrupted and continue to meet the requirements of the Federal Government Aged Care Act 1997 requirements.
   2. The good reputation and care invested in our Blue Haven Independent Living Unit Community and Home Care Support Services be maintained, protected, uninterrupted and continue to meet the requirements of the Retirement Villages Act 1999.
   3. The good reputation, working environment, and conditions for Blue Haven Staff of Kiama Municipal Council be maintained and protected.
   4. Probity lawyers are appointed to act in Council’s interest and sound tender processes are used to ensure compliance with the Local Government Act.
5. Develop for consideration at the next timely-appropriate council meeting a Strategic Liquidity Plan (SLP) for submission to the Audit Office and the Office of Local Government (including accelerating the sale of appropriate englobo parcels of land identified in the Property Divestment Opportunity Register).

6. Delegate to the Chief Executive Officer to advise TCorp of the above decisions and commence discussions and negotiations on acceptable loan repayment options.