The state government has started action to suspend a NSW council after the Office of Local Government was forced to throw it a $6.2 million lifeline so more than 2000 staff could be paid.

Central Coast Council, which is facing an $89 million deficit, now has seven days to argue its case against suspension and the appointment of an interim administrator.

Issuing a notice of intent on Wednesday, Local government minister Shelley Hancock attacked Council for its “abject failure” to address its own financial mismanagement.

Ms Hancock said she would advance $6.2 million in Financial Assistance Grants so council could meet payroll expenses and pay its bills to suppliers.

Council says a review of its budget shows after a year of natural disasters and the impact of COVID-19 its position has deteriorated and the $41 million deficit reported at March 2020 has now more than doubled.

Council has also pointed to council amalgamations in 2016 as contributing to its woes.

“Council is in a critical financial situation and faces an immediate and serious liquidity issue,” it says.

Council prepares response

In a statement late on Wednesday Central Coast mayor Lisa Matthews said councillors would meet with the acting CEO and lawyers to prepare a response to the notice of suspension.

She says a 100 day recovery action plan has been endorsed by Council.

“I can assure the Minister that we are addressing our financial issues,” she said in a statement.

Earlier on Wednesday Cr Matthews announced that she had lost confidence in CEO Gary Murphy in the wake of revelations about what she said were long-term structural problems with Council’s finances that been allowed to “grow unchecked” within the operational division of the council.

She said council had not been given adequate information about the financial situation and only discovered the full extent of the problem on Tuesday night when it was revealed that Council would struggle to pay its own staff.

“The only course of action now available is to insist on a new CEO to manage the day to day operations,” she said.

The United Services Union said it was representable to threaten not to pay staff.

“It is absolutely outrageous that Central Coast Council thought they could use this threat as some sort of bizarre bargaining chip,” USU General secretary Kelly said in a statement.

He said the union would continue to work with the OLG over the coming weeks  to ensure workers didn’t suffer hardship.

Gaps in governance

Ms Hancock said the community was sick of excuses from council.

She said the problems came to light two weeks ago and since then all council had done was write letters, issue media releases and form a finance committee.

“It’s hard to think of a more fundamental failing of a Council than not to pay its own staff,” Mrs Hancock said.

“There is no question that Council needs to be held responsible for these failures,” she said.

A report by the NSW auditor general released in August found Central Coast Council and the former Gosford City Council had spent $13.2 million on administration costs in breach of legislation.

It also found gaps in governance and controls over Local Infrastructure Contributions.