19th June 2007Claims by the Queensland Government that the State’s country councils would collapse in droves financially without amalgamations have been exposed as baseless and without foundation.
That’s the thrust of a just-released report by international receivers and administrators, McGrath Nicol, made public today.
“The LGAQ commissioned this report after a senior public servant from the Department of Local Government challenged me to put up or shut up on our criticism of the State’s claims on councils’ financial situations. I’m glad he did,” LGAQ president, Cr Paul Bell, said.
“The report, by McGrath Nicol, whose international reputation is beyond repute, speaks for itself. It looks specifically at the financial sustainability reviews by the Qld Government and the solvency of the 21 councils deemed to be `financially weak’,” he said.
McGrath Nicol’s report stated: “It would appear that none of the councils rated as `weak’ are currently insolvent. Similarly, the forecasts provided to us indicate the councils reviewed by us are unlikely to become insolvent within the forecast period (two to 10 years)”.
“In a private sector context, a business that demonstrated the characteristics set out in any of the 21 FSR (financial sustainability review) reports for councils rated as `weak’ that were reviewed by us would not need to appoint an Administrator, seek the winding up of the company or attract the scrutiny of a regulator on the basis of insolvency.
“We have researched three quantitative financial ratios for a number of listed Australian companies. This research indicates that the QTC minimum indicative measures for those financial measures are higher than the reported results for some of those companies.
“We consider that if a company in the private sector were rated as `weak’ pursuant to the FSR process, opportunities would exist within the two-to-five-year timeframe for that company and its stakeholders to fully consider its financial sustainability and implement remedial strategies where able to do so,” the McGrath Nicol report said.
Cr Bell said it was evident 43 per cent of councils weren’t going to the wall and would not collapse in their next terms.
“McGrath Nicol has outlined a range of measures the 21 so-called `weak’ councils should follow to remedy any current problems. I am sure these councils will fully embrace that advice. In South Australia and Victoria, that’s how their State governments are addressing the situation. Why not here in Queensland?”