John H.
Man in dark suit jacket, wearing light checkered shirt, dark tie and glasses.

Financial sustainability is a common and enduring challenge for councils because of their geographic location, local population numbers, and the number and type of services they deliver for their communities. Small savings applied across many services can have a large impact on a council’s financial position. So, it’s important that councils regularly review their services to understand what value the community gets from them and then use this information to adjust their services to manage costs. It can also guide their decisions on implementing new services and reducing or removing services.

As part of our report Managing the sustainability of local government services (Report 2: 2019–20), we developed a Service prioritisation tool to help councils be confident that they are allocating funding to high‑value services. The tool helps councils identify which services to review, with a focus on services that have some level of optionality.

Finding savings in your services

Performing a full service review can give councils information on costs and value, meaning they can make informed decisions on how they spend their money – they can decide which services they can afford to deliver sustainably and at what level to provide those services to the community within their available revenue.

Finding permanent cost savings across a council’s services can improve its financial position and ensure it is able to deliver its services for the long term. For example, a council could vary operating hours, the assets it uses, and the level of the service to manage its costs. In our audit Managing the sustainability of local government services we observed a range of strategies councils used to make savings in their services, including:

  • optimising service hours to those times most suited to community expectations within the constraints of employment awards. If salaries are a major cost of delivering the service, aligning service (opening) hours with standard shift lengths can lead to savings
  • considering the savings in overhead costs (recruitment and payroll costs) for employing staff on a casual or permanent part-time basis. A high turnover of casual staff can create high overhead costs for payroll and human resources
  • giving service managers visibility of overhead costs, in particular information technology costs. For example, a greater understanding of the overheads involved in owning multiple devices can reduce over servicing. The cost of staff having multiple devices (mobile phones, tablets, laptops, and desktop computers) can affect the overall efficiency of the service.

Why review services?

Service reviews identify the level of service required, including quantity and quality. They can support councils’ budget processes and help them allocate their limited funding and resources to the services of most value to the community. Councils with moderate and higher sustainability risks may decide to conduct service reviews on services with high costs but low value first. This could be critical in freeing up resources that could be reallocated to higher-value services.

A greater understanding of the value and cost of individual services councils are delivering can inform councils’ 10-year forecasts and strategic asset management plans. Councils can prioritise the assets (maintenance and capital spend) and operations linked to high-value services in their long-term forecasting model.

Our Service prioritisation tool generates a score for value for each service assessed. Value is calculated using 5 value concepts that are weighted to give a score out of 100. The weightings in the tool are suggested based on our research. Councils can customise the weightings based on their own unique circumstances. The value concepts and their suggested weightings are:

Community amenity – 45 per cent. This is the value the local community obtains from using the service. It considers how the service is used, why it is in place, and the historical value of the service and associated assets. The number of links to the local community a service has, the greater the score.

Link to strategy – 15 per cent. This represents the link between the council’s service delivery and its strategic intent. It should include new strategies and business-as-usual activities. The stronger the link, the greater the score.

Alternative services 15 per cent. This assesses if there are similar or partial services that other council services, government activities, or the private sector deliver. The higher the availability of alternative services, the lower the score.

Functionality – 15 per cent. This assesses the council’s operational requirements to deliver the service. It includes the required skills of employees, technology, and sharing of assets. The more functionality of the operational requirements, the greater the score.

Risk – 10 per cent. This assesses risks associated with delivering the service to identify those the council desires and those it cannot manage efficiently. The greater the unmanageable risk, the lower the score.

How do I use the service prioritisation tool?

To use the tool, you need:

  • a listing of council services
  • the council's budget or costing reports
  • the council’s service plans, or an understanding of the objective and operation of each service
  • the council's strategy and objectives
  • community and user feedback
  • the council’s risk management documents.

While councils may need to scale reviews to suit their budgets and size, the Australian Centre of Excellence for Local Government has developed a manual for local government on how to conduct service reviews that may prove helpful.

Our next audit of local government sustainability

This blog highlights the tool we developed as part of our third report on sustainability issues facing local government entities – Managing the sustainability of local government services (Report 2: 2019–20). The report recognises the importance of councils understanding the value and costs of their services, and the key role that monitoring and reporting on the performance of services plays in allowing councils to adjust costs and change service levels where necessary.

In 2023, we are aiming to table our fourth audit on issues affecting the sustainability local governments, focusing on asset management. This audit will assess if councils are effectively managing their infrastructure assets to maximise service potential, while minimising the total cost of owning these assets.

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