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Cemetery Wars: Chris Minns faces an $800m black hole in the NSW state budget

by Callum Foote | Jul 24, 2023 | Government, Latest Posts

Sydney is running out of burial space and the newish government of Chris Minns faces an $800m black hole in NSW state finances due to five years of bureaucratic and political dithering. Callum Foote and Michael West report. 

NSW Treasurer Daniel Mookhey faces some tough choices in early September when he hands down the 2024 state budget; not the least of which is the $800 million black hole in the finances of Sydney’s public cemetery sector.

 Left to them by the former government’s five years of fence-sitting, Sydney’s Crown cemetery sector is in a state of distress.

The business of running a cemetery requires money to be put aside for the maintenance of burial sites in perpetuity. Cemetery operators can’t simply chuck people in the ground and let the grass grow, forever.

Paralysed by ineptitude and indecision, the state’s politicians and bureaucrats have been unable to come to grips with this perpetual liability. They have failed to account for it in their financial statements; turned a blind eye despite the prodding from independent parties. 

Mind you, so has the largest private operator Invocare – now subject to a takeover offer by foreign asset strippers TPG. They too have failed to recognise the perpetual maintenance liabilities and appear to be in breach of their fiduciary duties to shareholders and regulators.

Catholics and consultants

For the state however, there is also the matter of both major parties being dominated by Catholics and therefore susceptible to lobbying by the Catholic Church and its Catholic Metropolitan Cemeteries Trust (CMCT) which is vying to control the sector and has fought efforts to introduce a dual operator model.

In any case, the Crown has not been recognising the need to put this money aside, and with an actuarial analysis putting the bill at $800 million to fund the liabilities for Sydney’s $5bn public cemetery sector, industry experts hope the issue is at the forefront of the Treasurer’s mind. 

Although the Coalition was in power for 13 years, all this should not come as a surprise to the Labor government. The Independent Pricing and Regulatory Tribunal of NSW (IPART), the regulatory body which conducts independent reviews of government properties, has already raised concerns.

According to IPARTs review into the NSW cemetery sector unfunded perpetual maintenance liabilities are exceeding $1bn across the entire sector. Ironically, given the spotlight on government consultants and their myriad failures, the actuarial arm of Big 4 firm Deloitte sides with IPART on the need to recognise perpetual liabilities. 

Yet the audit arm of Deloitte has failed to demand that its client Invocare recognises the cost in its balance sheets.

On with the clean-up 

Daniel Mookhey is on record saying he expects “to be spending a lot of my energy on repairs, dealing with many of the problems we’ve inherited from the previous government … almost like the clean-up operation that needs to be run [to] restore a bit of discipline to the public finances.”

His team could have said something about the cemetery conundrum from opposition. They chose not to make it an issue. Now it belongs to them.

Such is the issue that the newly created Metropolitan Memorial Parks (MMP) is already technically insolvent with perpetual maintenance liabilities exceeding total assets by more than $300m. 

This, in addition to the fact that the Memorial Park will run out of burial space in the next five years.

Premier Minns has given a commitment that MMP will be a sustainable operator, but without the acquisition and development of new cemeteries, MMP will not be able to compete in the Sydney market, against the likes of InvoCare and the Catholic Metropolitan Cemeteries Trust (CMCT).

Reprising Coalition budget tricks?

There is also the distinct possibility that the Labor government may be in danger of artificially inflating its budget ‘balance sheet’ by not recognising the unfunded liabilities.

As a controlled entity of the NSW Government, Metropolitan Memorial Parks (MMP) has transferred almost $500m of investment assets to TCorp. TCorp is the NSW government’s central financing authority for the New South Wales public sector.

This $500m has been included in the NSW Government’s General Sector Accounts. However, the independently actuarially assessed $800m of liabilities have not been realised on the MMP’s balance sheet, despite advice from IPART and Deloitte that such liabilities need to be realised.

The government’s non-treatment of the cemetery’s perpetual maintenance liabilities is redolent of the Transport Asset Holding Entity imbroglio, where the last government sought to shift billions in public transport liabilities ‘off balance sheet’ to artificially inflate the financial position of the NSW Government.

Both IPART’s, and another government-commissioned review of the sector The 11th Hour Report, recommended that the Audit Office include these liabilities on the balance sheet of all Crown cemetery operators.

At least one of the Crown cemetery operators stands in the way of this happening. The Catholic Metropolitan Cemeteries Trust (CMCT)

To recap, the (CMCT) is vying for control of the assets, yet both parties agree in principle (if not in spirit) that proper governance, competitive tender, should prevail. As the Catholics pile on the pressure, both are caught between probity and politics.

ICAC and ‘direct dealings’ breaches?

Labor committed before the election to a 2-operator model yet seems now to be backtracking, which puts the government at risk for breach of direct dealings guidelines and a potential referral to ICAC. 

And the clock is ticking because the CMCT is now still operating under an act repealed in 2018 and the Trust will cease to exist at the end February next year.

Steve Kamper, minister for Crown Lands, has declined to rule out any leasing of Crown land or the transfer of more than $160m in perpetual maintenance funds to the Catholic Archdiocese as part of the new industry structure.

Kamper has also declined to allow the NSW Audit Office to audit the accounts of the Catholic Metropolitan Cemetery Trust, a NSW Crown Land Trust, as the Archdiocese refuses to accept that it is a controlled entity of the NSW Government.

So it’s a mess, as many observers have noted. It is also worth noting that a Supreme Court decision in December confirmed that cemetery assets are government assets and not that of the religious denominations of the originating Rookwood Trusts voiding Kamper’s decision.

Sydney Cemetery War: meet the new boss, same as the old boss

The following questions have been put to the NSW Treasurer Daniel Mookhey

Catholic Metropolitan Cemeteries Trust (CMCT)

  1. Since 2016, NSW Treasury has repeatedly made determinations that the Catholic Metropolitan Cemetery Trust (CMCT) is a controlled entity of the NSW Government.  Do you agree with this view that the CMCT is a controlled entity of the NSW Government? If not, why not?
  2. Do you agree that the CMCT is a Crown Land Manager, managing Crown assets valued at approximately $400m (as per the latest CMCT Annual Report)?
  3. As a controlled entity, do you support the NSW Auditor General in her attempts to audit the CMCT? As a controlled entity, will you instruct the CMCT, via the Minister for Lands and Property, to allow the Auditor General to audit their accounts? If not, why not?
  4. Consistent with this controlled entity determination, will you instruct the CMCT to immediately transfer its $160m of perpetutal maintenance funds to TCorp, consistent with the same treatment of the other Crown cemetery operator, Metropolitan Memorial Parks (formerly OneCrown)? If not why not?
  5. As a controlled entity of the NSW Government and in the interest of competitive neutrality, will you instruct the CMCT to inform the Australian Charities and Not for Profit Commission (ACNC) of its ‘controlled’ status that will enable the ACNC to rescind the CMCT’s charity status? If not, why not?

Perpetual Maintenance Liabilities

  1. Are you aware of IPARTs review into the NSW cemetery sector and specifically their concerns about unfunded perpetual maintenance liabilities exceeding $1bn across the entire sector?
  2. As a controlled entity of the NSW Government, Metropolitan Memorial Parks (MMP) has transferred almost $500m of investment assets to TCorp, which have been included in the NSW Government’s General Sector Accounts. However, the independently actuarially assessed $800m of liabilities have not been realised on the MMP’s balance sheet, despite advice from IPART and Deloitte that such liabilities need to be realised. Will you immediately instruct MMP and the Audit Office to include these liabilities on the balance sheets of all Crown cemetery operators, as per the recommendations of IPART and The 11th Hour Report? If not, why not?
  3. The non-treatment of cemeteries perpetual maintenance liabilities is akin to the Transport Asset Holding Entity whereby liabilities have been deliberately held off ‘balance sheet’ to artificially inflate the financial position of the NSW Government. What are you proposing to do about the $800m of liabilities in the Crown cemetery sector?
  4. As Treasurer, are you concerned by the fact that the newly created Metropolitan Memorial Parks (MMP) is technically insolvent with perpetual maintenance liabilities exceeding total assets by more than $300m. How do you intend to attract a high quality board when the organisation is technically insolvent?
  5. Premier Minns recently gave a commitment on ABC Radio that MMP would be a viable and sustainable cemetery operators. Given that MMP currently has a net $300m deficit and is expected to run out of burial land within the next 5 years, do you intend to provide a capital injection to MMP? If not, why not?
Callum Foote

Callum Foote was a reporter for Michael West Media for four years.

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