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.
