Local government reform in NSW has accelerated since 2011. A key driver for this reform is issues pertaining to the financial sustainability of councils.

The financial sustainability of a council is closely linked to the management of infrastructure. A large majority of council services are provided by infrastructure, which typically represents the majority of a council’s assets.

NSW Treasury Corporation offers the following definition of financial sustainability: “A local government will be financially sustainable over the long term when it is able to generate sufficient funds to provide the levels of service and infrastructure agreed with its community.”

This definition recognises the need for a long-term view and one that considers the relationships between revenue, infrastructure and service levels.

The Charter under the Local Government Act, 1993 requires councils

• Provide directly or on behalf of other levels of government, after due consultation, adequate, equitable and appropriate services and facilities for the community and to ensure that those services and facilities are managed efficiently and effectively;

• Have regard to the long-term and cumulative effects of its decisions;

• Bear in mind that it is the custodian and trustee of public assets and to effectively plan for, account for and manage the assets for which it is responsible;

• Engage in long-term strategic planning on behalf of the local community.

For at least the first decade after the 1993 Act was proclaimed, only a small number of councils prepared strategic asset management plans. From 1993, most councils adequately developed asset registers to comply with the accounting standard AAS27. However, attention was generally not directed to the wider purpose of the Charter.

The requirements in the AAS27 general purpose financial reporting arrangements include the preparation of a Special Schedule Seven report, which reviews the status of a council’s assets.

The Local Government Act was amended in 2009 to include the Integrated Planning and Reporting Framework (IP&R) which will soon be strengthened under an amendment to the Act, and requiring all councils in NSW to establish a long-term financial plan, informed by an asset management plan. IP&R mandates improved reporting, benchmarking, collaboration and industry capacity building in respect of the sector’s asset management practices and ultimately the services delivered to the community.   

A key aspect of the IP&R framework is that asset management should have a service delivery focus and the assets provided should be appropriate to meet the needs of the community, as set out in the community strategic plan.

However, at the time of implementation of IP&R, the asset management plans developed by most councils modelled existing levels of service and used age-based, not condition-rated, deterioration models. Therefore the full benefits of the framework are yet to be achieved.

Your council has made good progress with asset management but still faces many challenges.

Dr Ian Tiley, administrator, Armidale Regional Council. To read the full column, visit www.armidaleexpress.com.au