An internal report allegedly shows significant financial blunders made by Kiama Municipal Council (KMC) in New South Wales.

The audit of KMC's financial statements for the year 2021-22 reportedly exposes a $41 million overstatement of its financial position.

Several errors were identified, including the double-counting of council assets and the overvaluation of a council-owned residential aged care home.

Additionally, a staff member was found to have approved orders with a company where he held a directorship.

The NSW Audit Office allegedly sent this report to KMC's Mayor, Neil Reilly, and other senior staff members. The audit had been delayed due to significant accounting issues discovered in the previous year's financial statements.

As of June 2022, KMC's property and infrastructure assets were valued at $551 million, but $349.8 million worth of assets could not be verified. 

The audit revealed overvaluations exceeding $52.5 million, resulting in KMC's reported equity being $41 million less than actual.

The council's misstatements included the duplication of property investments and a miscalculation of the Blue Haven Bonaira Residential Aged Care Home's value, which was overstated by $49.1 million.

Reports say the NSW Audit Office intends to issue a modified opinion on KMC's financial statements, indicating they cannot be relied upon to accurately represent the council's financial status. Importantly, none of the misstatements were found to be the result of fraud.

To address mounting debts arising from the $105 million construction of the Blue Haven Bonaira Residential Aged Care Home, KMC has initiated a sale of assets. 

A previous audit of the construction project revealed underestimations of construction costs by approximately $30 million, inaccurate reporting of the project's financial feasibility, and potential use of restricted funds.

The aged care home is currently up for sale, and KMC recently sold land at Akuna Street for $28 million to alleviate debts owed to the NSW government.

Former NSW local government minister Wendy Tuckerman issued a performance improvement order to the council in October, alleging breaches of the Local Government Act in the use of restricted funds.

More details are available here.