A lot of councils in Queensland, and in the rest of Australia, are focused on improving their financial sustainability.
In 2017–18, 43 of Queensland’s 77 councils reported operating losses totaling $252.5 million. Over half of our councils are spending more on their operating activities than they are earning from rates, fees and grants.
Managing the sustainability of local government services (Report 2: 2019–20)
Last week we tabled a report on managing the sustainability of local government services. The report provided our conclusions, findings and recommendations on how five Queensland councils plan, budget and measure the performance of their services. This is our third report on local government sustainability, and next year we will be looking at asset management in local government.
The report is especially relevant to councils that have a focus on improving their sustainability. However, all councils could benefit from reading it, especially when it comes to looking at their services to check they are affordable and being delivered at the right level. We urge all local governments to read the report and consider what it means for their service budgets and plans.
In our report, we found that the five councils had some of the elements necessary for effectively planning and delivering financially sustainable services. But none had all the elements working together. This affects their ability to support long-term sustainability. And, surprisingly, there were few opportunities for councils to get together and share what they were doing and learn from each other.
The importance of sharing ideas and resources
While this is a cliché, there’s no need to re-invent the wheel. We know from our work in auditing Queensland’s councils that there are lots of different ways of doing things. And each council is unique. But if someone else has a good service planning template, use it. If a similar council has a good spreadsheet to allocate corporate overheads, ask for a copy. No one has time to do everything themselves, and there are a lot of great approaches and knowledge out there. So, our advice is to make use of it.
Councils can use the recommendations from our report to suit their own needs and capabilities. The recommendations can be scaled up for big councils with sophisticated finance systems or scaled down to suit small councils with limited time and budgets. We wrote the recommendations to help councils and the Department of Local Government, Racing and Multicultural Affairs to get together and share tools, approaches and ideas to improve their sustainability.
The importance of understanding total costs
A key message in the report is the importance of understanding the total costs for individual services. It is important to include corporate overhead costs.
One of the case studies we wrote about in our fact sheet Allocating corporate overhead costs to services was a childcare service in a remote regional community. The council was committed to delivering the service themselves as there were no other providers in the community and it was critical for the community to have access to quality childcare. However, the council understated the cost of delivering the service because it did not include corporate overhead costs. More importantly, because the childcare service owner was unaware of the costs, they could not challenge the level of corporate services provided to them.
Outlook and further resources
We have also developed fact sheets for councils. These give some simple advice on how to allocate your corporate overheads and how to develop good measures of service effectiveness and efficiency.
From our experience working with councils throughout Queensland, the level of commitment and passion for their communities gives us every confidence that by working together and sharing ideas that work, they will rise to the many challenges of providing financially sustainable services.