In March 1936, three Councillors of Erina Shire were dismissed from office for having held office while subject to a special disqualification, and it was also revealed that Council staff had not been paid since February. As the Council could not meet due to lack of quorum, on 24 March 1936 the Minister for Local Government, Eric Spooner, dismissed the Council and appointed an Administrator, B. C. Hughes. Spooner commissioned Hughes to undertake an inquiry into the administration of Erina Shire and, following a January petition from Gosford and Point Clare residents for a new Gosford municipality, also to investigate the question of the separation of Gosford from the Shire. The inquiry found in favour of a separation of Gosford, which was accepted by Spooner, and Erina Shire was divided again to re-form the Municipality of Gosford on 24 October 1936, including the areas of the former Gosford Municipality abolished in 1908 and also new areas from Narara to Woy Woy and Point Clare. A nine-member provisional council was appointed the same day, and at the first meeting on 24 October 1936 William Calman Grahame was elected as the first Mayor and Charles Staples, the former Mayor of Woy Woy, was elected Deputy Mayor. Following the first Council election on 23 January 1937, Grahame and Staples were re-elected to their positions on 29 January.