New audit raises concerns that local governments in Queensland could be hiking rates beyond the legal limit and are failing to disclose reasons for rate increases, prompting a call for regulatory reform.
Five councils audited by the Queensland Audit Office failed to “fully explain” the reasons for rate hikes to constituents or whether the increases supported the councils’ financial sustainability.
“The rate increase decisions we audited were generally made behind closed doors,” the auditor found.
The audit office’s report, released last week, also found that all five councils were failing to seek community input on rate decisions.
Similarly, none of the councils “provide enough information to help ratepayers predict how rates may change in the longer term,” the audit found. This lack of transparency can lead to distrust in local government rates practices, the auditor said.
The report noted that, unlike other states, Queensland’s councils are not legislatively required to undertake public consultation when setting rates and charges.
The auditor also reviewed published budget documents from all 60 non-indigenous councils and found only a few were disclosing information to the regulation’s standard. Indigenous councils were excluded as most do not charge general rates.
Weak legislative and regulatory thresholds and poor compliance with the laws mandating rate hike disclosure are driving a lack of transparency, according to the report.
The auditor warned that poor compliance could see councils setting rates beyond the legal collection limit and that a number of councils’ rates resolutions mirrored those of the Fraser Coast Regional Council, whose rates resolutions were found to be invalid by the Supreme Court last year.
Legislation passed last year validating councils’ prior rates resolutions won’t shield their future resolutions if they do not comply with the statute and regulations, the report warned.
The head of Queensland’s Local Government Association refuted the report’s finding that councils make rate decisions “behind closed doors,” noting that all annual budgets are voted in open general meetings.
Greg Hallam told Government News most councils in Queensland “go well beyond what they are obliged to do to engage the community in their budgeting process.”
It was important to note that while the audit office reviewed just five of the state’s 77 councils for its report, it acknowledged that the sector was working to better inform the public of its rating decisions, Mr Hallam said.
The auditor’s report comes as the Queensland Government moves to amend the Local Government Act 1989 to ensure council rates do not exceed the cost of services.
Call for community input; regulatory reform
The Queensland auditor recommended that councils engage with and seek input from communities on rate hike decisions, train council staff on legislative and regulatory compliance and document actions to achieve financial sustainability.
The report also recommended the state amend the Local Government Regulation 2012 to require mandatory reporting of revenue policies in long-term rates strategies and require council CEOs to certify that their budgets comply with legislation.
The audit also called on the State Government to develop tools to improve councils’ understanding of current laws and best practice community engagement.
“Councils need more support and guidance to help them in understanding their obligations under the Act and Regulation and in making sure they comply with all requirements,” the report said.
Most councils operating at a deficit
Elsewhere, the auditor found that over the five years to 2016–17, Queensland’s 77 councils as a whole spent 4 per cent more than it earned each year, with only one of the five councils operating in surplus.
Councils are “walking a fine line” in balancing financial sustainability against fairness and equity, with most increasing rates according to what is fair for constituents, not based on forecast revenue needs, the audit found.
While the majority of councils had plans to broadly address gaps between budget forecasts and targets, none of the councils had specifically documented action plans to enable them to monitor progress.
The audit also found that none of the audited councils had ongoing formal training or quality assurance processes to improve rate debt recovery activities or to assist ratepayers in financial hardship.