- Norfolk Island Regional Council
- Following the abolition of the Norfolk Island Legislative Assembly in 2015, the Norfolk Island Regional Council (NIRC) was established as the local democratic governing body. This chapter examines the establishment of the NIRC, its functioning and dismissal, and the various perspectives shared regarding its failure to operate effectively.
Establishment of the NIRC
3.2In 2015, the Norfolk Island Act 1979 was amended to abolish the Legislative Assembly, in place since 1979, and replace it with a system of local government. A range of other reforms were also implemented that sought to replace the former functions of the Legislative Assembly, including integrating Norfolk Island into the Australian taxation and social security system, and the extension of Commonwealth superannuation, immigration, biosecurity, and employment law to include Norfolk Island.
3.3In July 2015, an interim Advisory Council was established to advise on the legal framework for the future NIRC and its governance functions, assist the community to understand the new governance arrangements, and support the administration to provide services to Norfolk Island. The Advisory Council was comprised of five Norfolk Islanders. This transitional arrangement ended in July 2016, with the establishment of the NIRC.
3.4The Department of Infrastructure, Transport, Regional Development, Communications and the Arts (DITRDCA) told the Committee that the NIRC governing body was ‘comprised of five councillors, including the Mayor, elected for a four-year term’. It was constituted under section 219 of the applied Local Government Act 1993 (NSW) (NI) (the LG Act), and its roles included to:
- direct and control the affairs of the Council in accordance with the applied LG Act;
- ensure, as far as possible, the financial sustainability of the Council;
- determine and adopt a rating and revenue policy and operational plans that support the optimal allocation of the Council’s resources to implement the strategic plans of the Council and for the benefit of the local area;
- keep under review the performance of the Council, including service delivery; and
- determine the process for appointment of the General Manager by the Council and to monitor the General Manager’s performance.
- The NIRC governing body was supported by an administrative arm—the office of the General Manager—which was responsible for the administration of the Council, including:
- conducting the day-to-day management of the Council in accordance with the plans, strategies and policies for the Council;
- implementing decisions of the Council; and
- preparing, in consultation with the mayor and governing body, the Council’s community strategic plan, resourcing strategy (for instance, the long-term financial plan) and operational plan.
- In May 2016, elections were held for the first NIRC. It returned:
- Robin Adams as Mayor;
- John McCoy as Deputy Mayor;
- Rod Buffet, David Porter and Lisle Snell as councillors.
- Between 2016 and September 2019, the General Manager of the NIRC was Ms Eva Liselotte Jackson. Ms Jackson was replaced by Mr Bruce Taylor as interim General Manager in September 2019 before the current General Manager, Mr Andrew Roach, took on the role in January 2020.
- As noted by DITRDCA, the responsibilities of the NIRC went beyond the usual suite of activities of local governments in Australia. They include ‘a range of state-level services’ such as:
- Sea port operations;
- Administration of courts, tribunals and boards;
- Public health administration;
- Administration of registries and licencing, including motor registry, land registry and births, deaths and marriages;
- Electricity generation and distribution;
- Telecommunications services; and
- Operation of the Norfolk Island International Airport.
Operation of the NIRC
3.9This section examines the various perspectives put forward by stakeholders regarding the NIRC’s operations between its commencement and dismissal.
Council environment
3.10The NIRC commenced in July 2016, and according to its submission ‘the atmosphere among the councillors was combative from the outset’ which developed into a ‘disruptive’ environment. The NIRC also told the Committee that:
At the inaugural council meeting, one of the councillor’s opening remarks challenged the legitimacy of the Council as established by the Commonwealth Government.
3.11Mr Mike Colreavy, NIRC Administrator, elaborated on this at a public hearing noting that ‘from day one there were certain members of the governing body who were not happy with the council model’. According to Mr Colreavy, this was indicative of the dissatisfaction being with ‘the Government’s decision to establish a council’. As a result, following their election some councillors ‘developed a platform of making things difficult rather than making things easy for the organisation to succeed’.
Expenditure and funding
3.12One uncontested matter in relation to the NIRC’s operation relates to its expenditure, although views vary on what caused its financial problems. According to the NIRC’s submission, from the start it ‘struggled to perform adequately’ and made ‘irresponsible financial decisions’ that led it to the ‘brink of insolvency’.
3.13The NIRC inherited difficulties from the dissolved Norfolk Island Government and transitional period. Specifically, these difficulties included:
- A large asset base, ‘the majority of which did not comply with the relevant standards for asset management’ and were ‘either at or well past their end-of-life functionality’.
- $14 million in liabilities, including a substantial loan from 2005 to conduct airport runway repairs.
- A budget deficit of $4.26 million from the transition period.
- Key senior staff in finance and accountability who were new to the island and unfamiliar with local conditions.
- Evidence from Norfolk Islanders noted the non-compliance of the asset base inherited by the NIRC. According to Dr Chris Nobbs, the NIRC in particular had ‘larger-than-common costs thrust upon’ it by the imposition of a regulatory burden through the introduction of New South Wales and Commonwealth laws and regulatory requirements.
- One example of increased costs following the perceived imposition of Australia standards relates to waste removal. The Norfolk Island All-Party Parliamentary Group (APPG) noted that the designation of surrounding sea areas as a national park and resultant requirement that waste be exported is seen by many on Norfolk Island as ‘not viable’.
- The APPG similarly highlighted the perceived imposition of Australian standards on Norfolk Island, stating that:
The attempt to ‘upgrade’ assets to Australian standards is not generally appropriate given Norfolk’s size and customs. New imposed rules have stopped the bulk freighter coming every few weeks resulting in food shortages and dramatic increases in costs.
3.17Some Norfolk Islanders consider the application of Australian standards on the asset base and the cost implications they carry to be the financial responsibility of Australia, rather than Norfolk Island. For instance, Mr Allen Bataille argued that the onus is on the Commonwealth to bear the costs of maintaining standards it has developed.
3.18Nonetheless, expenditure on asset renewal was considered critical due to the asset base being assessed as ‘mainly in a poor to very poor condition’. According to the NIRC submission, quoting the Report of the Public Inquiry:
At best, they required significant maintenance; at worst, they were physically unsound and beyond rehabilitation. The cost of maintaining ageing assets was significant and although poorly understood, the cost of replacing them well exceeding existing cash reserves.
First long-term financial plan
3.19In adopting its first long term financial plan in early 2017, the unsustainable financial situation of the NIRC was a key consideration. This plan proposed ‘a series of measures to ensure a small surplus’.
3.20However, the plan itself was ‘based upon a number of assumptions and premises that were never realised’, mostly related to the availability of grants and an optimistic accounting of the likely costs of significant upgrades to the airport.
3.21The NIRC’s Audit Committee and NIRC staff repeatedly advised the governing body that an efficient and responsible approach to deficits in council operations required ‘the setting of special rates, fees, and charges and through productivity efficiencies’. However, the 2021 Public Inquiry found that despite this the governing body ‘was never prepared to implement’ the essential aspects of the plan.
3.22The failure to implement a land rates target was one aspect that deserves attention. Notwithstanding the difficulties with implementing rates on Norfolk Island, which are discussed further in chapter 4, the Public Inquiry found that the governing body fell consistently short of the recommendations of its Audit Committee to give effect to land rates that would constitute 10 per cent of total revenues.
3.23Between 2016 and 2020, the NIRC’s own source revenue continued to decline as a proportion of total revenue, and the governing body did not take meaningful action to reverse this trend. Nor did it overcome its reluctance to increase land rate revenue in the face of local opposition.
3.24As a result, the Commissioner of the Public Inquiry found that:
…the governing body was reluctant to raise sufficient own source revenue to pay their way and thereby enable, or at least move towards enabling a truly balanced budget to be achieved. One result of this was that in the case of the net operating result of operations each year, excluding capital grants and unusual items, proposed capital expenditure was regularly carried forward owing the Council having insufficient funds in that year to complete capital works.
3.25When the NIRC found itself unable to secure the grants and own source revenue which underpinned the assumptions of the first long term financial plan, ‘there was little scope’ to ‘enable the sort of asset repair, renewal and replacement’ required to address the poor state of the assets and infrastructure on Norfolk Island.
3.26Norfolk Island was able to access Commonwealth Government money through both Financial Assistance Grants and a Service Delivery Agreement, and between 2016 and 2020 it became increasingly reliant on these sources of funding. The Public Inquiry found that as own source funding declined, Commonwealth grant funding increased as a proportion of revenue from approximately 18 per cent in 2016 to 30 per cent in 2020.
3.27Compounding the financial difficulties it faced, the NIRC was also unable to access State funds, putting it at odds with most other regional councils around Australia. Ms Robin Adams described this as ‘the state disconnect’ in evidence to the Public Inquiry, and another councillor estimated that as a result of this disconnect the NIRC was unable to access $4.8 million in grants.
3.28However, the NIRC told the Committee this was ‘not a major problem’, and that accessing state-partner grants would have left Norfolk Island ‘worse off than under the current arrangements’. The NIRC elaborated on this in its submission:
Proven during the pandemic, NIRC worked directly with the Department [of Infrastructure, Transport, Regional Development, Communications and the Arts] to distribute funds similar to state-partner type grants for businesses across the island.
3.29The NIRC stated that reviewing the grants provided by the Commonwealth in the past three years shows that Norfolk Island received ‘a disproportionate amount per head of population to any other jurisdiction in Australia’. The classification of Norfolk Island as a regional council did not disadvantage it in terms of accessing Commonwealth grant money either. According to the NIRC, this is because:
Early in NIRC’s time, it challenged the inequity of funding calculated through the Financial Assistance Grants model. NIRC engaged KPMG (paid for by the Department) to assess a better model of funding. The result of this process increased NIRC’s funding to nearly four times what a normal rural council would receive.
Asset management
3.30In light of the deteriorating situation resulting from the inability to fund asset renewal, the NIRC adopted a new asset management plan in 2019. The Public Inquiry found that this plan ‘continued to be deficient’, and that:
As at that time, the constraints present in 2016—the absence of information regarding the assets and the time pressure to complete the asset management plans—were no longer present. The plans could and should have been more advanced.
3.31The 2019 asset management plan did not achieve this. According to the Public Inquiry:
It was underpinned by a number of assumptions. Those assumptions were not born out. The problem was compounded by less than expected revenue and departures by the NIRC from the long-term financial strategies adopted by it. This resulted in the deferral of critical work. In the result, the Council’s assets remain, by and large, in a state of disrepair.
3.32According to the NIRC, the Public Inquiry’s conclusions discussed above reflect the ‘unwillingness’ of the governing body to ‘address the revenue shortfalls that happened each year from the NIRC’s inception, despite their power to do so’. It stated that it was ‘the behaviour and incompetent decision-making’ of the governing body that caused the NIRC to ‘topple’, and not the statutory framework.
Communication
3.33Evidence from Norfolk Island highlighted communication issues between the governing body and the administrative wing of the NIRC. According to the Norfolk Island Law Association, the governing body of the NIRC ‘inherited a General Manager’, who had been appointed by the Advisory Council prior to the first Council commencing in July 2016.
3.34Ms Robin Adams, former Mayor of Norfolk Island, told the Committee that there was a ‘huge flaw in the system’:
One of the problems with the Council model —and whether it’s just peculiar to Norfolk Island I don’t know—is these operational and governing bodies. Continuously, on asking questions for information, I would be told ‘Madam Mayor, that’s operational’…
3.35This concern was echoed by Dr Chris Nobbs who told the Committee that:
In drawing a sharp distinction between councillors and council [General Manager] and staff, councillors have in the NIRC been consistently isolated from access to information that could inform their policy decisions.
3.36Dr Nobbs noted that prior to the dismissal of the NIRC, there were ‘examples of refusal to provide simple information and support to councillors even at Council meetings’, including ‘an egregious example’ where the General Manager refused ‘to discuss such a critically important matter as the airport contract’.
3.37Mr Mike Colreavy, Administrator of the NIRC, expressed similar concerns about the flow of information within the NIRC. He stated that in light of some of the examples Ms Adams provided him, that he ‘would question whether the Council was getting good advice over those things from its management’.
3.38Further, the Norfolk Island Law Association noted that upon commencement of the first elected council, the ‘General Manager wouldn’t let them anywhere near the financial management of the Council’:
They weren’t allowed to talk to the finance staff. They weren’t allowed to talk to any staff. They could only talk to the General Manager.
3.39Mr Colreavy noted that if the governing body was being told to ‘stay out of these things; they’re not the business of the governing body’, it demonstrated that ‘there wasn’t a really good understanding of what the councillors’ roles were and what they weren’t.
3.40Mr Colreavy further stated that, in his view, the ‘low level of maturity’ of the NIRC, having been formed only in 2016, meant that:
…there wasn’t expertise on the island as to the separation of roles between the governing body and the administration or the General Manager and the administration.
3.41This may have led, according to Mr Colreavy, to ‘some bluff games’ and ‘some manoeuvring’ between ‘the governing body and management as to what the roles and functions were’.
3.42Provisions existed that could have addressed this situation. Mr Colreavy told the Committee that:
There were simple solutions if people had known what the solutions were. Even to the point that if a Council is not happy with the administration, and the head of the administration is the General Manager, it’s always open to a Council to replace the General Manager.
3.43Indeed, this type of thing is common. In cases where such disagreements between General Managers and governing bodies emerge, assistance is available from the peak local government body in New South Wales to change the General Manager. According to Mr Colreavy:
It’s very common. After the last elections in New South Wales there were something like 40 general managers who were moved on because the incoming Councils took the view that they wanted a General Manager they had recruited.
3.44The Norfolk Island Law Association told the Committee that in addition to the councillors not selecting the General Manager, ‘no one told them that there was a clause in the back of her contract that allowed the elected councillors to dismiss her without cause’.
Dismissal of the NIRC
3.45By late 2019, the cash position of the NIRC was approaching crisis point. In order to understand what led to the current situation, it is necessary to briefly examine the so-called cash crisis, what led to it, and how it contributed to the dismissal of the governing body.
3.46One of the key assets which required upgrade was the Norfolk Island airport. As noted above, these repairs formed part of the 2016 long-term financial plan. However, the Public Inquiry found that while the repairs were entirely necessary, there were significant issues with the way the NIRC intended to fund the repairs. Specifically, while the bulk of the repairs would be conducted using Commonwealth grant money, the NIRC intended to seek a loan to fund the shortfall. Despite this, no loan was sought, and no provision was made to ensure the NIRC’s cash reserves were sufficient before signing the contract for the repairs.
3.47The effects of this funding shortfall were compounded by the costs being significantly underestimated, and the onset of the COVID-19 pandemic. Ultimately, in order to fund the project the NIRC was forced to commit $4.8 million from its cash reserves which placed its ability to fund day-to-day operations at risk. The Public Inquiry found that the governing body and administrative arm of the NIRC did not seek to engage with the Audit Committee about the project funding, nor did it raise the shortfall with the Australian Government.
3.48Another key asset requiring remediation was approximately nine kilometres of roads on Norfolk Island. In July 2019 the NIRC committed $5 million from its already limited cash reserves to fund the remediation. According to the NIRC this move ‘was not so essential as to require a further diminution’ of the NIRC’s cash reserves, and did ‘not compare to the threats posed by a failure to proceed with the runway project’.
3.49Further, the Public Inquiry found that:
When it is also recalled that the decision to proceed with the roads contract was made on the false assumption that the NIRC would meet any shortfall in the airport contract through a loan, the deficiencies in the governing body’s failure to properly manage these two projects is readily apparent.
3.50In June 2020, the NIRC governing body requested an independent external audit of its finances and governance. DITRDCA submitted that ‘in response, the Department contracted Nexia Australia and Grassroots Connections to review the finances and governance, respectively, of the Council’.
3.51DITRDCA told the Committee that these audits showed that the NIRC:
… did not have the capacity to fund significant challenges it faced in delivering essential infrastructure and services, and lacked a number of the fundamental systems essential for the proper operation of a local government authority.
3.52These two external audits identified ‘113 short-to-medium term improvements that would be required for the NIRC model to become sustainable’. The two audits also found that there were significant issues and ‘concluded that the Council did not have enough money to cover its operational costs’ for the 2020-21 financial year. According to Mr Colreavy, on receiving those reports the NIRC made no decision about what to do with the recommendations.
3.53At its December 2020 meeting, the NIRC was shown to have the ‘lowest cash balance since’ it commenced in 2016, and that it ‘did not have the funds required to meet its day-to-day operations’. Mr Colreavy noted that when he was approached to take on the role of interim administrator in January 2021:
I was informed that the Council had enough money to last for one more payroll, after that it would be out of funds, and that there had been an approach made to the government to somehow get them out of that problem by injecting some money into the system. So things were in a very dire situation.
3.54In February 2021, and in response to the impending insolvency and audit findings, the NIRC was placed into interim administration pending the conduct of a public inquiry, and the governing body was suspended.
3.55The Public Inquiry was conducted by Commissioner Carolyn McNally and reported in November 2021. The report ‘identified significant instances where the Council did not manage its finances in accordance with the principles of effective financial and asset management’. As a result in December 2021 the governing body was dismissed, and Mr Colreavy was appointed as Administrator until December 2024.
3.56Mr Colreavy described his remit as rectifying ‘what was wrong within the Council’, which were ‘hugely financial’. He noted that:
I recall that, at the first meeting that I held as interim administrator, those [external audits] were then resubmitted back to me and I adopted all of the recommendations that came out of those reports.
3.57According to Mr Colreavy, the report of the Public Inquiry made it ‘abundantly evident’ that the failure of the local government model was not due to the statutory framework. Rather, he told the Committee that ‘it was the behaviour and the decision-making of the NIRC’s governing body’ that led to the dismissal.
3.58Furthermore, Mr Colreavy stated that the statutory framework did not fail, but instead ‘cut in and gave the government a new framework’ under which the NIRC could ‘carry on and get itself out of trouble’.
3.59Mr George Plant, Administrator of Norfolk Island, summarised the affects the establishment and dismissal of the NIRC had on the community:
The abolition of self-government in 2015, followed by the Norfolk Island Regional Council being placed into administration six years later, has left a mix of emotions for Norfolk Island residents. Some residents are feeling disenfranchised and have a sense of loss of their home. Others, although saddened by the loss of self-government, acknowledge that these things were not working in recent years and have welcomed the additional support being provided by the Australian government, particularly in terms of health care, Medicare, and social services.
Committee comment
3.60The operation of the NIRC was beset with difficulties from the outset. While the views regarding these difficulties differ, significant problems did emerge with the operation of the local government model.
3.61These problems are multifaceted. Underpinning it appears to be a fundamental lack of preparation and capacity within the community to support the local government model. The speed of change in 2014-16, coupled with the lack of familiarity with the local government structure, no doubt contributed to this lack of preparation and capacity.
3.62This can be seen in multiple aspects of the evidence outlined above. The issues between the administrative and elected wings of the NIRC could have been resolved by the replacement of key senior staff. Had the governing body been aware of this ability, some of the operational outcomes may have been different.
3.63Similarly, local government has been in operation in Australia for more than 100 years. As a result, the requirements placed on local governments around financial management are well known to the personnel involved, both elected and otherwise. This is not the case for Norfolk Island, and much of its local knowledge base was geared towards a very different form of governance. This is important to recognise in any discussion of the functioning of the NIRC between 2016 and 2020.
3.64It is imperative that, in moving ahead, the community on Norfolk Island be provided with the time, tools, and training they require to make the next phase of governance on Norfolk Island work effectively.
3.65The steps towards dismissing the governing body, while no doubt disempowering for the community, were necessary at the time. Had the situation been left to continue deteriorating, the financial situation of Norfolk Island today would be even worse. The proud people of Norfolk Island would be left even more reliant on the Commonwealth for support.
3.66Nonetheless, the restoration of local democracy on Norfolk Island must be a high priority for Australia. The Committee notes the small steps that have recently been taken in this direction, with the announcement of the formation of the Norfolk Island Governance Committee and the associated local elections for the three community representatives. The Committee’s conclusions and recommendations for restoring local democracy on Norfolk Island, which can help to provide the basis for further local consultation via the Governance Committee, are discussed in chapter six.