Carol Altmann – The Terrier

Lyndoch Living, having recorded a fifth deficit in six years, is digging into residential bonds to fund its $100m masterplan.

And a warning – figures ahead, lots of figures – as we dive again into the swirling financials of Lyndoch Living.

One, two, three…jump!

When you bob up you will see that figures lodged by Lyndoch Living last week show an even greater loss – a $2.4 million deficit – than was reported at last October’s AGM (the one we were not invited to Zoom, but could watch later on YouTube).

The annual information statement lodged last week with the Australian Charities and Not for Profit Commission reveals a $600,000 increase on the $1.88 million loss reported at the AGM and in Lyndoch’s full financial statements to the commission.

The $2.4 m is the loss recorded by Lyndoch without taking into account the profit from the Warrnambool Medical Clinic, which it bought in 2019. Either way, it is the fifth deficit for Lyndoch in six years.

This doesn’t seem to trouble the board.

As reported here last November, Lyndoch’s overall asset base (assets minus its liabilities) also continues to slide and is now $47.6m down from $69m in 2015.

This doesn’t seem to trouble the board either.

There is a lot to digest in the 60-page financial statement, so I am going to break it into bite-sized chunks tonight and in follow-up pieces.

First, the report shows us that Lyndoch has funded at least part of its $13 million Swinton Wing expansion by doing something it has never done before, which is borrow money.

It has visited the bank and also borrowed a big chunk out of the $26 million it holds in residential bonds paid by residents.

From this $26 million in bonds, Lyndoch has thus far extracted $10,944,323.

By law, as long as an aged care provider can cover its residential bond refunds for the next 12 months, it can dig into the rest and repay it down the track.

If an aged care home defaults, the Federal Govt will pick up the tab, so it’s kind of a taxpayer-backed Ponzi scheme that relies on an aged care home doing the right thing.

It’s also cheap, interest-free money, but concerns about how these bonds are being used is one reason (among many) that the whole bond scheme is now under review as part of the Royal Commission into Aged Care.

The loans, of course, will need to be repaid at some point, including fairly substantial interest on the bank loans, despite low interest rates.

In 2018, Lyndoch paid zero interest on any loans.

In 2019, it paid $62,420.

In 2020, it paid $372,669.

As of 7 July 2020, Lyndoch signed up for another loan from the NAB for $3,386,000 which is due to be repaid by June 2022.

This was needed to fund the “redevelopment of a residential building” which, I assume, was the blowout in cost of the Swinton Wing.

That project, where residents are not allowed to hang any pictures on the walls despite paying huge bonds which helped fund it, grew from a budget of $10 million to $13 million.

Relying big on borrowed money is new territory for Lyndoch, which once upon a time used to spend only what it had, what the government gave it, and what it raised from the public.

But Lyndoch, as we know, is now a long way from those comfortable shores as it sails into a $100 million masterplan under the captaincy of a CEO and board that firmly believes you must spend money to make it.

This is why in 2019 Lyndoch bought the Warrnambool Medical Clinic, Health Spot and May Noonan Hostel, in Terang, for around $3.3 million.

(Lyndoch also recently hired JB Were – who will charge fees accordingly – to look after its complicated investment portfolio. We are not in Kansas anymore, Toto.)

The Warrnambool Medical Clinic last year turned over $3.8m in revenue, but had $2.8m in expenses.

According to the financials, the clinic returned a final profit of $539,249 to Lyndoch Living in 2020 which is not to be sneezed at… but $372,000 of this will be spent this year paying out the original owners of the clinic as the final instalment of the sale contract. Achoo!

The WMC was pretty much break even for last year.

As for this year, well this is when things get interesting, because Lyndoch has the wire fencing up and around its now-vacant Tomlinson Wing (built in 1991 with help from a generous donation from the Tomlinson family), all set for demolition to make way for a new, two-storey Lyndoch medical clinic to replace the existing WMC.

This clinic will have acute care, dentistry, an x-ray machine, up to 20 GPs, allied health, education rooms, a cafe, a chemist and no doubt wonderful indoor plants and a red-and-white colour scheme.

The cost? An estimated $24 million. Where is that money coming from?

The bigger question, however, is will Lyndoch Living thrive or dive under this grand expansion and multi-million dollar spend up? Time will tell.

More soon.

Carol Altmann – The Terrier

As the count goes on to decide who will sit alongside frontrunner Vicki Jellie on the new Warrnambool City Council, we must remember that there is important, unfinished business from the last go round.

The first is whether the WCC has referred a crime to the police – the abuse and misuse of a council corporate credit card.

It is now almost four weeks since the Ombudsman recommended it consider doing so: we still don’t know if it has.

The latest statement from Acting CEO Vikki King is “at this stage there is no update in relation to the referral of the credit card findings to the Warrnambool Police”.

A former senior council manager lied and covered up his spending on a council credit card and yet, four weeks on from this confirmation, the council is apparently no further forward on pursuing any criminal charges.

For a council that allegedly couldn’t wait to throw a CEO out the door for pressing pause on a fishing pontoon, this is disturbing.

And for our local paper to argue that the stolen money was “paid back”…if only such justice was served to the poor bastards thrown into court for pinching a packet of chops.

Just as disturbing is the second item of unfinished business: the leaking of highly sensitive, highly personal documents from within council to at least two councillors, in the mail.

Three sworn affidavits from Tony Herbert, Sue Cassidy and Kylie Gaston all revealed that psychometric test results for those who applied for the position of CEO were leaked.

Senior council staff have known about this leak since at least April this year, when Robert Anderson asked for an investigation.

Has it been investigated? Did it turn the joint upside down? Did it run a full IT audit to see who had access to these highly personal documents? (I would guess, not many people.)

Has it contacted the Inspectorate or the anti-corruption body IBAC?

We don’t know, because the Acting CEO – as of today – has declined to comment.

“It would be inappropriate to comment on matters currently before the Supreme Court,” is the statement.

But this leak is not being challenged in the Supreme Court. It happened. And nothing, it seems, has been done to track down the person/s responsible.

As it happens, IBAC just today issued a newsletter on this very topic of misuse of private and personal information held by councils.

IBAC warns that such misuse “may constitute corrupt conduct”.

There is that c word again.

I am as invigorated as you are by the wave of change that is poised to roll through our council and the above just underscores – yet again – why such a change can’t come soon enough.

Carol Altmann – The Terrier

A final post on the Ombudsman’s report: the story does not end here.

One of the things picked up by the Ombudsman’s investigation was a strong sense of disunity and discord within the W’bool city Council, both among councillors and council officers.

A number of “concerns” about senior management’s handling of misconduct were raised with the Ombudsman during the investigation into the credit cards, but some were unfounded, some lacked substance and some were beyond the scope of this particular investigation.

These concerns may, however, still point to a broader problem that was most recently played out by the sacking of Peter Schneider (which rates a mention).

The Ombudsman, Deborah Glass, writes:

“While we did not find evidence of systemic abuse by Council officers or systemic failings by senior management…we did not deal with every allegation aired publicly or privately, and which continued during the investigation.

“Their prevalence and persistence suggest a disunity within Council which this investigation does not purport to deal with, but for the sake of ratepayers and the community must be addressed.

“Communities rely on their council to practice unified and strong civic leadership.”

No truer words have been spoken and none more timely.

Thankyou for hanging in here: this is a report with a lot to digest and it is worth a full read.

I am now off to have a lie down, but before I do, I just want to say this:

Thankyou to all of the brave souls who have helped to bring the truth to the surface today, despite the denials, excuses and dismissals that go on from enablers, even as we speak.

I remember the day these brave souls came to me about the busted culture at the WCC, because they had nowhere else to go. They had tried the “internal systems” and they got nowhere. They had approached councillors for help, and they got nowhere.

Nobody would listen. But they are listening now.

It has been a long, slow and exhausting road but here we are. Change has come and change is coming.

On. We. Go.

Carol Altmann – The Terrier

Update: The Ombudsman’s report reveals the 10 recommendations from the external auditor that were adopted by the council in March this year.

Why, oh why, were these rules around credit cards not in place in the first place? They seem so straight forward.

Here is the summary of the changes:

1. Provide fraud and corruption control training to all Council staff including reporting of actual or suspected fraud and corruption.

2. Review and update Fraud and Corruption Control Plan and Procedure to include fraud incident reporting protocols to the Council.

3. Establish a criterion to determine the need for a credit card by a staff member.

4. Review and update the existing Corporate Credit Card Procedures, including to stipulate the roles and responsibilities of an authoriser, create list of risk factors for authorisers to be aware and create guidelines on ‘taking face value explanations’ versus ‘appropriate inquiry’.

5. Provide training to authorisers with respect to approval of monthly credit card expenses.

6. Review and update the existing Fraud and Corruption Controls Procedure to include specific trigger points when an independent auditor should be brought in (i.e. the period after unusual/misuse has been identified to when possible fraud is suspected).

7. Implement a process wherein pre-approvals (except CEO) shall be required for expenses such as (but not limited to):
a. Business travel
b. Accommodation
c. Conferences
d. Seminars

8. Implement an approval process which aligns with the practice recommended by the Victorian Auditor General. The Council’s Chief Financial Officer or Director Corporate Strategies, shall approve CEO’s credit card expenditure, and table the full transaction history to the Audit and Risk Committee.

9. Implement ongoing reporting and monitoring processes that fosters continuous improvement of credit card processes (with suggested areas for improvements including implementing Breach reports and Repeat Offenders report)

10. Incorporate a process wherein Statutory Declarations are witnessed by one of the many people authorised to do so (outside the Council).

I have one more update to come.

(You can download the full report here.)

Carol Altmann – The Terrier

More on the Ombudsman’s report – some key names:

Former WCC tourism chief David McMahon: found by the Ombudsman to have clearly misused his credit card and has recommended the council investigate further and consider police action.

The council accepts this recommendation.

Mr McMahon, the report says, has since expressed remorse, regret and shame and admitted he had openly betrayed his manager, Andrew Paton.
—-

City Growth Manager, Andrew Paton: the report says Mr Paton felt deceived by Mr McMahon, whom he trusted.

Given Mr McMahon adjusted some of his receipts and invoices, Mr Paton “could be excused for some of his errors” in approving this spending and failing to pick up other excessive spending “was due to his own inadvertence”.

The report says Mr Paton was considered by former CEOs Bruce Anson and Peter Schneider to be “of the highest level of professionalism and integrity and that he accepted his mistakes”.

Even so, the report says, once Mr McMahon’s spending was first exposed in November 2018 (after the Cape Schanck function), a “more structured approach to addressing the problem should have been instituted … including revisiting credit card oversight processes”.
—–

Former CEO Bruce Anson: took Mr McMahon’s explanations at face value and considered a first and final warning to be an appropriate response after Mr McMahon repaid some of his spending in November 2018.

At that time, based on Mr McMahon’s explanations, Mr Anson did not believe Mr McMahon’s conduct was criminal or corrupt and did not report it to IBAC.

Given this was Mr Anson’s belief, the Ombudsman accepts Mr Anson was not legally required to report the matter to IBAC.

He should, however, have reported it to the council’s Internal Auditor for further investigation, the report says.

Mr Anson “acknowledged in retrospect there should have been an independent audit of David McMahon’s credit card transactions in accordance with Council policy.”
—-
Former CEO Peter Schneider: was not aware of Mr McMahon’s credit card misuse – or the first and final warning in Nov 2018 – until inquiries by the media (The Terrier) in mid last year.

Mr Schneider met with Mr McMahon in early July last year and asked if there was anything else he should be aware of.

Mr McMahon said no.

After stories began to appear in The Terrier, Mr Schneider began his own inquiries on 8 July. Mr McMahon resigned on 16 July 2019, having repaid a further $3071.

Mr Schneider referred the matter to IBAC on 15 July, under mandatory notification. The council later hired an external auditor to assess the council’s credit card policies and make changes.

A memorable line from Mr Schneider in the report: “When asked by the investigation what a reasonable meal purchase under Council’s policies would be, Peter Schneider noted that a meal might be a ham and cheese sandwich, not ‘a T-bone steak washed down with a bottle of Grange”.

Amen to that.

The auditor’s 10 recommendations to follow.