LGA Financial Sustainability Program

The Inquiry established its own website which has now been discontinued and the LGA has transferred all of its contents into an area on this website. It contains the final report of the Inquiry and other relevant information regarding its processes and publication. It can be accessed here.

In general terms the Inquiry found that Councils were putting community needs and demands for services ahead of their own financial sustainability and that this could not continue. The Inquiry also found that Councils had very low net debt but extraordinarily large amounts of community infrastructure (almost $10 billion in total at the time of the Inquiry) which was slowly decaying without the level of maintenance and renewal funding it deserved.  It also found that SA Councils were not getting a fair share of Commonwealth funding for Local Government and that the SA Government provided the lowest per capita funding to Councils of any mainland State or Territory government. It made 62 recommendations to address these issues.

The Inquiry's independent board expressed the view that Local Government was capable of, and should, address its own challenges. All of its recommendations were directed to Councils individually or collectively, or to the LGA.    The LGA, with the support of Councils, subsequently embarked on a comprehensive Financial Sustainability Program to implement the Inquiry's recommendations and support improved Council performance.

The commissioning of the Inquiry was the first time in Australia's history that Local Government has used an independent Inquiry at the State level to provide leadership. Subsequently the NSW Association commissioned a similar Inquiry (NSW Inquiry website) and the WA LGA commissioned an Inquiry of a similar nature (WA Inquiry website). The Australian Local Government Association later commissioned an national overview to highlight national issues (ALGA website).

The LGA won the Efficiency category in the 2006 National Local Government Awards for commissioning the Financial Sustainability Inquiry - see the Federal Minister's Media Release and the 2006 National Local Government Awards Winners.

Policy is effectively setting broad targets. It is therefore the logical starting point for our work in this area to ensure we are all aiming for the same general target. The LGA's 2006 General Meeting adopted a range of new policies including a lead commitment:

A key objective for Local Government is the achievement and maintenance of the financial sustainability of SA Councils, both collectively and individually.

and a definition of financial sustainability:

A council's long-term financial performance and position is sustainable where planned long-term service and infrastructure levels and standards are met without unplanned increases in rates or disruptive cuts to services.

For several years after the Inquiry, the LGA reported on Councils' progress against achieving the intent of the recommendations resulting from the Inquiry. The final, 2008 Financial Sustainability Council Survey report can be accessed here:  Financial Sustainability Survey 2008 - Final Report.

In line with the Inquiry's recommendations the LGA reports to each AGM on the latest values, history  and comparisons for the key financial sustainability indicators for the sector as a whole.  SA Local Government Sector Financial Indicators Report 2011

Both the LGA and the Office for State/Local Government Relations (OSLGR) are keen to ensure that there is an understanding of the financial performance and position of Local Government in South Australia and trends in its finances over time.

There is a large amount of financial information made available publicly by individual Councils.  In recent years, the LGA has worked collaboratively with OSLGR and the Local Government Grants Commission to draw together financial data from all Councils and publish summary information for the Local Government sector as a whole.  The Financial Indiactors Report mentioned above is an example of such work. 

OSLGR has a separate webpage on Local Government finances. That page includes a section providing a high-level summary and analysis of the financial performance and position of the Local Government sector over recent years.  

From 2006 to 2011 the LGA issued a number of Financial Sustainability Information Papers.  These Papers were updated (and the range of Papers broadened) in 2012 to take account of legislative changes, emerging improvements in good financial governance and other developments.  

2012 editions of Information Papers:

LG FS Info Paper 1 - Financial Sustainability - 2012 (394 kb)

LG FS Info Paper 2 - Overview of Audit Mechanisms - 2012 (421 kb) 

LG FS Info Paper 3 - Audit Committees - 2012 (586 kb)

LG FS Info Paper 4 - Specifications for External Audit - 2012 (491 kb)

LG FS Info Paper 5 - Efficiency and Economy Audits - 2012 (328 kb)

LG FS Info Paper 6 - Infrastructure and Asset Management - 2012 (122 kb)

LG FS Info Paper 7 - Service Delivery Framework and the Role of Shared Services - 2012 (128 kb)

LG FS Info Paper 8 - Long-term Financial Plans - 2012 (135 kb)

LG FS Info Paper 9 - Financial Indicators - 2012 (133 kb)

LG FS Info Paper 10 - Debt 2012 (123 kb)

LG FS Info Paper 13 - Annual Business Plan - 2012 (127 kb)

LG FS Info Paper 15 - Treasury Management - 2012 (148 kb)

LG FS Info Paper 17 - Depreciation and Related Issues - 2012 (152 kb)

LG FS Info Paper 18 - Financial Policies and Procedures - 2012 (176 kb)

LG FS Info paper 21 - Internal Financial Controls - 2012 (253 kb)

LG FS Info Paper 23 - Financial Governance - 2012 (141 kb)

LG FS Info Paper 25 - Monitoring Council Budget Performance - 2012 (196 kb)

LG FS Info Paper 26 - Service Range and Levels - 2012 (208 kb)

LG FS Info Paper 27 - Prudential Management. (199 kb)

Remaining original versions of Information Papers (to be updated in first-half 2012)

Financial Sustainability Paper 20 - Funding Policies and Strategies - April 2009

Financial Sustainability Paper 22 - Establishing a Risk Management Plan - December 2009

The LGA, in collaboration with the SA Local Government Financial Management Group (SALGFMG) commissioned the preparation of a Technical Information Paper on Infrastructure Asset Useful Lives.  The purpose of the Paper was to stimulate discussion on the topic among finance and engineering professionals and to supplement the content of the Australian Infrastructure Financial Management Guidelines prepared by the Institute of Public Works Engineering Australia.

• Technical Information Paper - Infrastructure Asset Useful Lives

Since 2006, the LGA, jointly with OS/LGR and SALGFMG, has worked with Coalface Software Solutions to develop the Model Financial Statements for South Australian Councils.  A copy of the Model Financial Statements 2011 is available here.

Workshop for Audit Committee Chairpersons - May 2010

In May 2010, the LGA conducted a workshop for Audit Committee Chairpersons.  The workshop provided an opportunity for participants to review the roles and responsibilities of Audit Committees and to report on the operation of their Committees to date.

The workshop also provided the opportunity for participants to receive a briefing on the Review of Audit Committee Operations undertaken by Starr Solutions and to provide comment on the recommendations contained in the draft final report of that project.   The findings of the final report have been incorporated into the 2012 revision of the Financial Sustainability Information Paper No. 3 - Audit Committees  (See above). 

In November 2006 the LGA, in consultation with Local Government Corporate Services (LGCS), commissioned a comprehensive sector-wide survey to capture examples of joint service delivery arrangements between Councils, the nature of savings being achieved and opportunities to enhance collaborative service delivery.   The survey report can be found here.

On 6 June 2007 the LGA conducted a forum involving Council Members and senior staff to consider key priority areas for service collaboration documented in the study and to identify areas that warrant further development of business cases for their implementation.  The information gathered through the forum has been distilled into an Implementation Framework for Shared Services in Local government which sets out a program for examination and implementation of the various service opportunities identified. The Framework can be found here.

Following the Inquiry, and with LGA support, the SA Parliament made changes to the financial management provisions of the Local Government Act 1999. The changes were in accord with key recommendations of the Inquiry and support the LGA's work in this area. Key changes to the Act mean that now:

• Councils are required to update their Strategic Management Plans every 4 years (within two years after each periodic election);
• A Long-term Financial Plan is required as part of a Council's Strategic Management Plans;
• An Infrastructure and Asset Management Plan also is required as part of a Council's Strategic Management Plans;
• Each Council must have an Audit Committee (previously this was an option); and,
• A Council auditor must be changed every five years.

These (and other) changes were made by two separate amending Acts, passed by State Parliament in 2005 and 2009. 

• LGA Circular 48.4 of 2005 includes an overview of the 2005 changes.
• An explanation of the 2009 changes is available here.

A complete re-make of the complementary Regulations came into effect in May 2011.  Information on the Local Government (Financial Management) Regulations 2011 is available from LGA Circular 18.1 of 2011, via this link.

• A glossary of terms and abbreviations relevant to financial and asset management and other financial sustainability topics
• A range of related financial management, accounting, and technical information papers can be found on the LGA's "Finance" web page
• Information to assist dealing with the public regarding Council rates can be found on the LGA's "Council Rates" web page
• LGA Education and Training service
• The South Australian Local Government Auditors' Group (SALGAG) provides a forum to facilitate the discussion of any matters relating to Local Government finance and auditing.
• The South Australian Local Government Financial Management Group represents financial management professionals working in local government in South Australia.

In February 2010 the LGA, working collaboratively with the Department of Planning and Local Government, received funding approval from the Australian Government's Local Government Reform Fund towards a comprehensive  "Improving SA Councils' Asset and Financial Management Practices" project. The LGA has underpinned this initiative with organisational changes to showcase an ongoing Local Government Reform agenda.

More information about the LGA's Local Government Reform Program and the "Improving SA Councils' Asset and Financial Management Practices" project can be obtained via the following link: www.lga.sa.gov.au/goto/reform.