By Angela Dorizas

Victorian councils do not understand the true cost of the services they provide to the community and the extent to which they subsidise them, the state’s Auditor-General has found.

In a report tabled in Parliament on Wednesday, the Victorian Auditor-General Des Pearson examined service costing and pricing policies for waste management, preschool and child care, aged care and recreation at four randomly selected councils.

The audit revealed that Ballarat, Campaspe, Frankston and Whitehorse city councils were not effectively managing the full costs of the services they provide.

The report found that at each of the four councils, fees and charges were not based on any clear understanding of service costs and other societal, economic and legal factors were not taken into account when setting prices.

“None of the four councils had adequate policies on service costing and fee setting,” the report stated.

“None provided sufficient guidance to staff on the procedures required to achieve good practice.

“Frankston and Campaspe had policies on service pricing, but while they made general references to cost recovery and fee setting principles they did not offer any detailed guidance.”

The report found that without a centralised policy on service costing and fee setting, individual business units had been left to develop their own procedures, which in most cases were not adequately documented and “fell short of good practice”.

The Auditor-General concluded that most councils did not understand the true cost of services they provide to their communities.

“While the results relate directly to the councils we examined, the consistency of our findings is considered indicative of practices in other councils,” the report stated.

“In this context, the audit has identified a number of issues that should be considered by all councils in service costing and fee setting.”
 
The Auditor-General made six recommendations to councils, including the development of centralised policies on service costing and measures to strengthen council oversight.

It also recommended that Local Government Victoria develop guidance for councils on setting fees and charges.

A spokeswoman for Minister for Local Government Richard Wynne said Local Government Victoria would assist councils with fee setting.

“Local Government Victoria will continue to work with local councils on developing guidance and improving their practices, including the setting of fees and charges, in order to enhance their operation and financial sustainability,” she said.

Read the full report: Fees and Charges – cost recovery by local government [PDF]