Some edited highlights from the just released Auditor General’s report (uploaded) Business Planning for Major Capital Works and Recurrent Services in Local Government –
This audit examined Glen Eira City Council, City of Whittlesea, South Gippsland Shire Council and Hepburn Shire Council as a representative selection of councils to determine whether they had effectively integrated their planning and budgeting, considered the long-term sustainability of selected investments and produced accurate and reliable budgets and forecasts.
While Glen Eira generally manages its planning and budgeting well, considerable improvement is still required by the other three councils examined before they can provide adequate assurance to ratepayers they are spending their funds appropriately and effectively.
While all councils had long-term financial plans going out 10–15 years, there was little assurance they were soundly based because they were not adequately supported by equivalent strategic and/or service and asset management plans. Further, none of the councils examined could demonstrate they adequately consulted their communities on the financial and other consequences of their aspirations when initially developing their council plans.
Glen Eira mitigated this through its ongoing program of community consultation informing its annual Best Value reviews, service delivery decisions and business cases for capital projects, but this was not so at the other councils.
In addition to progressive engagement during the course of the audit, in accordance with section 16(3) of the Audit Act 1994 a copy of this report, or relevant extracts from the report, was provided to the Department of Planning and Community Development, Glen Eira City Council, City of Whittlesea, South Gippsland Shire Council and Hepburn Shire Council with a request for submissions or comments. The Glen Eira City Council acknowledged the request and elected not to make a submission. Submissions were received from the Department of Planning and Community Development, City of Whittlesea, South Gippsland Shire Council and Hepburn Shire Council.
Best Value Principles
The Act also sets out the Best Value Principles that should inform council decisions on services. The application of these principles aims to improve local government services by making them affordable and responsive to local needs, and to encourage councils to engage with their communities in shaping councils’ services and activities. The Act identifies the following six principles to guide how a service should be monitored and reviewed on an ongoing basis:
- • all services should be responsive to community needs
- • each service should be accessible to those community members to whom the service is intended
- • a council should achieve continuous improvement in the provision of services to its community
- • a council should develop a program of regular consultation with its community in relation to the services it provides
- • all services provided to the community should meet cost and quality standards set by the council.
Developing good quality plans is central to assuring that councils effectively and efficiently meet community needs. This requires engaging with local communities on the feasibility of their immediate and long-term priorities. It also requires measurable objectives linked to these priorities supported by clear strategies, actions and performance monitoring, and clearly identifying the service levels, resources and responsibilities for achieving them.
By closely integrating their strategic, operating and financial plans councils will be better assured that their services are sufficiently funded and delivered at an appropriate cost to the public.
Glen Eira’s planning and budgeting is well integrated and generally effective. However, the quality of the strategic, financial and asset management plans at the three remaining councils is poor. Objectives, strategies and actions were not clearly specified nor linked to useful performance indicators. Community input into the development of council plans was limited, and these plans, including shorter-term operational plans, are not underpinned by rigorous service and asset management strategies. Consequently, the plans are not sufficiently integrated and do not align well with their annual budgets.
Accordingly there is little assurance that these three councils have sufficiently identified community needs, that they have appropriate strategies in place to address them, and that they have made sound budget decisions.
Quality of planning
There was significant scope to improve the quality of the strategic, operational and financial plans of three of the four councils examined. Glen Eira had an ongoing program of community consultation, but the remaining three councils had not adequately consulted their communities on the feasibility of their priorities in initially developing their council plans. Strategic and operational objectives were not clearly specified, nor were they supported by soundly developed strategies, actions and performance indicators. Operational plans also lacked sufficient detail on the required service levels, resources needed and responsibilities for achieving objectives.
2.3.1 Community consultation
Council planning begins with consulting the community on its needs and expectations for the future, and its ability and willingness to pay for services and assets. The community needs to be well-informed on the social, environmental and financial implications of its aspirations to give the council reliable guidance on its long-term direction.
Glen Eira, South Gippsland and Hepburn have a community engagement policy but only Glen Eira applied it as intended when developing its council plan.
Long-term strategic plans
Only Whittlesea had developed a long-term strategic plan that outlined its vision to 2025. Glen Eira indicated that it intends to start consultation on the development of a 10-year community plan in mid-2011.
Long-term financial plans
All four councils examined had a long-term financial plan covering 10 to 15 years, designed to assure services are provided in a financially sustainable manner. However, they were not paired with equivalent long-term strategic plans in any council except Whittlesea.
Strategic resource plans
The audit compared each council’s current operating and capital works budgets with the forecasts published in their 2009–10 strategic resource plans to assess the accuracy and reliability of their budgeting and forecasting. The variances in total revenue and expenditure were not material. However, the councils had greater difficulty estimating future capital expenditure, with variances of 14 per cent in Glen Eira, 19 per cent at Hepburn and in excess of 50 per cent for both Whittlesea and South Gippsland.
Annual budgets
The annual budget process at all councils informs councillors in a timely way of the assumptions underpinning the budget. However, the shortcomings identified at Whittlesea, South Gippsland and Hepburn mean there is little assurance councillors have sufficient, appropriate information to assess the soundness of proposed investment decisions or whether services are of appropriate cost and quality.
Investments in capital works are not supported by rigorous business cases at the councils examined except for Glen Eira. This provides little comfort that these councils’ investment choices are sound and adequately support the achievement of their long-term objectives.
Although Glen Eira had developed sound business cases for the vast majority of projects examined, three instances of inadequate practice were identified and are outlined in Figure 3C.
Figure 3C
Opportunities to improve business cases for capital projects – Glen Eira
In one case, $300 000 was included in the 2010–11 capital works budget for a dog agility park without a supporting business case. The project was added at the request of councillors but it had not gone through the usual capital evaluation process. Council staff advised that they do not retrospectively develop business cases when councillors exercise their prerogative to fund such projects. However, this may result in committing funds to projects whose need, scope and feasibility has not been sufficiently recognised.
In this case, after $54 500 had been spent, councillors decided in February 2011 not to proceed with the project and to re-evaluate its need following the outcomes of a dog off-leash review by the council.
The business cases for a new maternal child health and kindergarten centre worth $600 000, and the upgrade of ageing shopping centre infrastructure valued at $640 000, did not contain key information needed to demonstrate the rationale for proceeding with the projects: such as a description of why they were needed, an analysis of risks, whole-of-life cost, outcomes of consultations and a cost-benefit analyses were not included. Nevertheless, funding for each project was approved in the 2010–11 capital works budget. In the absence of this key information, it cannot be shown that the need, scope and long-term viability of the projects were adequately considered.
Glen Eira did Best Value reviews that assessed the quality, cost and responsiveness of its services. However the cost and quality indicators for aged care and recreation services were of limited use. For example, there was no quality standard/target for aged care services and the cost standard used was for the total cost of community care services, incorporating aged care, not the unit cost. Similarly, while quality standards were evident for recreation services, there was no cost standard. Despite these limitations, Glen Eira did have a range of other useful measures to monitor its services, which if incorporated would enhance its Best Value reviews.
Glen Eira Debates 
September 15, 2011 at 10:40 AM
From The Age –
Auditor slugs council plans
Jason Dowling
September 15, 2011.
RESIDENTS cannot have confidence that escalating local council budgets are being spent appropriately or effectively, a report by the Auditor-General has found.
The report, which looked at business planning for major capital works and service provision at four councils, Glen Eira, Whittlesea, South Gippsland and Hepburn, as a council snapshot, found that while Glen Eira generally managed its planning and budgeting well, ”considerable improvement is still required by the other three councils”.
”The absence of robust strategic, operational and financial plans supporting annual budget decisions at these councils mean they cannot demonstrate that they are effectively managing their costs or that their expenditure decisions are sound,” Auditor-General Des Pearson found.
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Victorian councils spend $7.6 billion annually on capital works and services, and an improvement in financial planning was urgently needed, the report found.
The average rate increase across Victoria’s 79 councils was 5.9 per cent this year and the report found ”none of the councils examined could demonstrate they adequately consulted their communities on the financial and other consequences of the aspirations when initially developing their council plans”.
Recommendations in the report called for councils to consult with their communities ”on their ability and willingness to pay for desired services and assets”, and ”develop business cases for proposed investments in major capital works to demonstrate they are soundly based”.
It called on the state government to improve its support and oversight of councils with regard to financial planning.
Municipal Association of Victoria president Bill McArthur said councils were dealing with challenges including booming populations, bushfires and floods.
He said councils were working on ways to improve their processes
Read more: http://www.theage.com.au/victoria/auditor-slugs-council-plans-20110914-1k9yh.html#ixzz1Xye8G3BW
September 15, 2011 at 11:12 AM
Ya really gotta hand it to Newton and Burke – spin masters without peer. Love the bullshit about consultation.
September 15, 2011 at 2:04 PM
An interesting report. Makes me wonder what and who the sources were and how thorough the entire investigation was. Would hazard a guess that Mr. Pearson, or his subordinates, swallowed everything presented to them hook line and sinker. All the comments regarding consultation and this council are definitely suspect and whatever is not so perfect has been laid fairly and squarely at the feet of councillors rather than administration.
September 15, 2011 at 5:07 PM
This would have been a far more useful report if the analyses contained detail and summary. There is none of that. The statements concerning Glen Eira are vague with no explanation of what “generally” means in terms of planning and budget.
September 15, 2011 at 6:58 PM
These comments and the conclusions drawn puzzle me –
In one case, $300 000 was included in the 2010–11 capital works budget for a dog agility park without a supporting business case. The project was added at the request of councillors but it had not gone through the usual capital evaluation process. Council staff advised that they do not retrospectively develop business cases when councillors exercise their prerogative to fund such projects. However, this may result in committing funds to projects whose need, scope and feasibility has not been sufficiently recognised.
In this case, after $54 500 had been spent, councillors decided in February 2011 not to proceed with the project and to re-evaluate its need following the outcomes of a dog off-leash review by the council.
The business cases for a new maternal child health and kindergarten centre worth $600 000, and the upgrade of ageing shopping centre infrastructure valued at $640 000, did not contain key information needed to demonstrate the rationale for proceeding with the projects: such as a description of why they were needed, an analysis of risks, whole-of-life cost, outcomes of consultations and a cost-benefit analyses were not included. Nevertheless, funding for each project was approved in the 2010–11 capital works budget. In the absence of this key information, it cannot be shown that the need, scope and long-term viability of the projects were adequately considered
I simply don’t understand why council staff do not “develop business cases” to put to councillors, before a vote is taken. I would have thought that that is their job – to correctly inform and provide the necessary information. They haven’t done this in relation to the dog park, yet they went out and spent over $54,000. For what? A design? The same with the child care centre. If this was private industry then I would want them all sacked. You can’t spend $600,000 on a design before you fully establish that it’s cost effective -ie. a proper business plan. Councillors have been left holding the bag on all of this but they can only decide on the information and advice that is provided to them. That is Newton’s responsibility and it doesn’t look like he’s done what he is supposed to. It would be fascinating to hear the justifications for these exhorbitant “design” costs and what information was given to councillors right from the start.
September 15, 2011 at 10:22 PM
I see the report contains the usual array of rhetorical devices. Although the A-G thought it important that “the public has assurance that this expenditure is effectively planned”, I’d prefer that the expenditure is actually effectively planned.
Seeing as how the A-G harped on about “Best Value Principles”, I thought I’d check them out. They’re enshrined in LGA 1989 Division 3 as amended over the years. 208D covers Quality and cost standards. [Curiously “quality” is listed ahead of cost–a throwback to 20 years ago when TQM was the philosophy-du-jour.]
(1) A Council must develop quality and cost standards for the provision of any service it provides for its community.
(2) A quality or cost standard must set out the performance outcomes determined by the Council in relation to each service.
So then one looks at the Glen Eira Best Value Report 2009-10, and in my case I go to the Town Planning section. What does Council consider to be a quality standard? That more than 50% of all new dwellings are in housing diversity areas. Now we know why they never comply with the standards and policies contained in the Glen Eira Planning Scheme. The document includes a gratuitous comment that those areas are “appropriate” areas, implying other areas aren’t appropriate. How reassuring to hear all cost standards were achieved. The subsidy of developers by the community is apparently by design.
And how can Council claim they have achieved the quality standard of “raising awareness of Town Planning issues”? What standard? Actually if you read on it starts to become clearer that making a decision faster is more important. To hell with accuracy or getting the decision right. Under “Continuous improvement” there’s mention of a “Heritage fast track process”. Pretty ironic given recent events.
What should you do if a statistic doesn’t meet your target? Change the definition. Under “Strategic plan implementation”, it states a target of “50% or more of new dwellings go into housing diversity areas” and an actual performance of 37%. So we get a footnote to reassure us: “There has been an increase in the number of student dwellings in nominated Minimal Change areas which has affected the total. A review of the planning scheme will rectify classifications of these areas into housing diversity.” There. Problem solved.
Now I actually think Council’s Housing Diversity policy is poorly thought out and its protagonists need to be removed from their privileged positions. Since the entire municipality is close to public transport and shops and services (using the VCAT definition), and since Council has admitted it doesn’t have the money to invest in the infrastructure needed to support a massive increase in density in the current Housing Diversity areas, its time to scrap the policy. Council can’t even adequately maintain the drains or provide open space. It has no idea of the public transport needs of the community in 10 or 20 years. Figure 1B in the A-G’s Report shows how little was actually in scope of the study. That *doesn’t* reassure me.
September 16, 2011 at 10:35 AM
Comparisons are questionable. Would have thought that looking at Glen Eira together with other city councils would make more sense than comparing it to basically country areas alone.