Local Government Sustainability in Queensland – Where to from here? Samantha Cieslar Department of Infrastructure, Local Government and Planning

Local government sustainability? LGA Definition of financial sustainability Other factors eg people, community

LGA Definition – financial sustainability A local government is financially sustainable if the local government is able to maintain its financial capital and infrastructure capital over the long term.

Financial management system required by the LGA must include 5 year corporate plan Long term asset management plan (10 years) Long term financial forecast (10 years) Annual budget with revenue statement Annual operational plan General purpose financial statements Asset registers Annual report

Long-term financial forecast Accountability (LGA) Included in budget Used to derive ratios for budget year + 9 (incl) Ratios included in annual report Current year sustainability statement (audited) Long-term sustainability statement (not audited) Management tool Used to inform decisions, adjust policies and monitor outcomes Needs to be consistent with the AMP

Ratios – these are also a management tool Asset Sustainability Ratio Operating Surplus Ratio Net Financial Liabilities Ratio Must be included in budget and annual report Targets set but these should be viewed over the long term Councils can publish other ratios, explain variances, explain strategies

Key Performance audit findings On average, over the 10 year forecast period, the local government sector is reporting that it is financially stressed. Many councils are forecasting deficits and an inability to maintain assets at the condition they desire.

Key Performance Audit Findings “Most councils plan poorly for the long term. Their long-term financial forecasts and asset management plans lack substance and rigour.” “The problem is exasperated by many councils not prudently managing long-life assets which provide value for many generations.”

Key Performance Audit Findings “As a result, most councils cannot judge if their present and proposed revenue and expenditure policies are financially sustainable.” “finally, when councils’ sustainability ratios indicate stress, or that assets are not being renewed at optimal times, councils are not responding appropriately to these signals..”

Key Performance Audit Findings “Many councils acknowledge they are poor at planning for the long term and consequently have low confidence in their own forecasts.” “…many councils systemically lack good quality data and a clear financial strategy….they report having limited resources to dedicate to understanding their financial trajectories.”

LTFP - Management tool or compliance burden?

LTFP and AMP - Management tool or compliance burden? A quality LTFP and AMP will not make a council financially sustainable BUT they can help council make informed decisions toward financial sustainability explain decisions to the community save money Justify rate increases

Recommendations 4 for councils, 5 for the department “While the department agrees in principle with the report’s recommendations, there is no formal, one-size-fits-all solution. Councils have limited resources and are increasingly required to do more with less. Any future action will need to balance the recommendations with other considerations that deliver practical outcomes for local governments with minimal regulatory burden.”

Councils improved the quality of their LTFF & Planning by Maintaining complete and accurate asset condition data & AMPs Implement a scalable project decision making framework for all infrastructure asset investments Engage directly with their communities on future service levels Develop financial plans to explain their financial forecasts

Maintaining complete and accurate asset condition data & AMPs Councils need these people working together: Asset manager Asset accountant Engineer Budget/forecasting accountant DILGP/LGAQ diploma - IPWEA - AIFMM

Implement a scalable project decision making framework for all infrastructure asset investments Whole of life costs QTC ‘Project decision framework’ Qld Govt’s Project Assurance Framework

Engage directly with their communities on future service levels Linked with decisions in formulating the AMP Councils do already collect – may be not documented Required by the Statutory Planning Act 2009 for new infrastructure demand identified in council’s planning scheme

Develop financial plans to explain their financial forecasts No longer a requirement under LGA QAO’s key characteristics – figure F1 of the report, includes LTFF Financial objectives, key strategies ,sources of data, key assumptions, key policies, key risks ratios and targets, sensitivity analysis

Becoming financially sustainable Active use of management tools Make decisions Path to financial sustainability

How can we better assist? What are the impediments to using the tools? Robust LGFF Robust AMP? Getting asset condition data? Project decision frameworks? Regularly updating and using the tools for decision making? Can the tools be improved/simplified? Can the department have a greater facilitation role?

Recommendations for the Department Ratios Allow councils to set their own targets Asset renewal funding ratio (once condition data improved) Strengthen governance role Increase support Require councils to report actual vs budget

Further information www.dilgp.qld.gov.au www.qtc.com.au www.lgaq.asn.au www.qao.qld.gov.au Department of Infrastructure, Local Government and Planning Po Box 15009 City East QLD 4002 Samantha Cieslar Phone: 3452 6721 Email: samantha.cieslar@dilgp.qld.gov.au