In today’s post and the next, I will discuss the emerging role of the Commonwealth and national agreements on local government reform in relation to the themes of Integrated Planning & Reporting (IPR).
Many important issues can only be touched on very briefly and your questions and comments are encouraged to help us explore these topics in more depth.
The Commonwealth and Local Government
The role of the Commonwealth in Local Government is tenuous, but growing. Politically, Federal interest and involvement has been subject to the priorities of the political party in office. As a generalisation, Labor under Whitlam, Hawke/Keating and Rudd has been more engaged than Coalition Governments. Constitutionally, the ‘Feds’ have no role and arguably no right to provide funding to Councils (as argued in a recent High Court challenge). As with many policy areas, we are presently in an era of expanding Commonwealth intervention as regards Local Government and urban planning.
The 2006 Inter-Government Agreement (IGA) on cost-shifting proclaimed itself “a watershed in the history of government in Australia. For the first time, the three spheres of government have agreed on a framework within which services are to be funded and delivered to the community at the local level.” The IGA includes a commitment by Local Government to “improving its practices including strategic planning at local and regional levels”.
In terms of the settings for IPR, a major part of the reform agenda is coming from the national level and this can be expected to increase. A key early driver was the 2001 Commonwealth Grants Commission review of funding arrangements. Momentum continued with the Australian Local Government Association’s 2006 study by PriceWaterhouse Coopers of the financial sustainability of local government.
Financial and Asset Planning frameworks
Recognition of the local infrastructure backlog challenge led to a 3-year process under the Local Government and Planning Ministers’ Council (LGPMC) to produce nationally consistent frameworks for Local Government asset and financial management. The documents cover:
- Local Government financial sustainability;
- asset planning and management; and
- financial planning and reporting
In May 2009 the LGPMC endorsed the asset and financial planning frameworks and committed to accelerated implementation through the states in their own local jurisdictions. Full implementation is due by 31 December 2010 (and is supported by the Local Government Reform Fund, to be discussed in the next post).
The national framework to promote a consistent approach to Local Government financial and asset planning and reporting include the following:
1. Financial sustainability: use of indicators to show that appropriate directions are being taken and whether they are being achieved, such as:
- Income generation (rates, other income, operating costs and results)
- Efficiently delivered services that are appropriate to needs
- Short and long term financial sustainability measured by liquidity and debt ratios
- Ability to maintain, renew and upgrade assets determined by spending to depreciation rates or deficiencies in the asset renewal gap
2. Asset planning and management including:
- Development of an asset management policy
- Strategy and planning
- Governance and management arrangements
- Defining levels of service
- Data and systems
- Skills and processes
- Evaluation
3. Financial planning: to be delivered in the form of a strategic longer-term plan, an annual budget and an annual report. These documents provide a framework that covers the Council’s direction setting, monitoring, and resource allocation.
The rivers of gold
Crucial to the Commonwealth’s growing formal and informal role in Local Government is its financial power. In the absence of taxation powers for Local Government (which would involve both Councils’ rates autonomy and the willingness to use it), only the Federal Treasury has the potential to resolve the multi-billion dollar infrastructure backlog.
Something of a feeding frenzy has therefore developed around Federal funding. This has been further encouraged by the targeting of the Rudd Government’s stimulus spending for local communities. The Australian Local Government Association (ALGA) recently summed up the largesse in infrastructure funding “achieved… in the past few years by working in partnership with the Australian Government”, from extensions of Roads to Recovery to the $1 billion Regional and Community Infrastructure Program.
The links to IPR
In the next post, I will further explore the Integrated Planning & Reporting links of these national settings.
Meantime, please let us know your views on the directions of change outlined in this post.
By Ross Kingsley, Senior Consultant Performance Planning, TechnologyOne
Tags: asset planning, frameworks, integrated planning & reporting, IPR, local government, NSW
