Tasmania examines financial sustainability of councils

By Jane Garcia

One in five Tasmanian Councils may be financially unsustainable, according to a recently released report commissioned by the Local Government Association of Tasmania (LGAT) and conducted by Access Economics.

The report follows similar studies in South Australia, Western Australia and NSW, and its finding is consistent with last year’s PriceWaterhouseCoopers (PwC) report estimate that somewhere between 10 and 30 per cent of Australian councils had significant financial sustainability issues.

Six Tasmanian councils have been found to be under some pressure in terms of broad financial health and while this does not impact on their ongoing financial viability, there will be a need to address issues associated with their long-term finances,” LGAT said in a statement.
These councils serve approximately eight per cent of the population, which is less than the significantly 20 per cent plus population figures that resulted from the SA, NSW and WA studies.”

LGAT president Mike Gaffney told www.governmentnews.com.au the in-depth analysis of Tasmanian local governments’ financial situation highlighted “the need to make certain that you’ve got all your eyes dotted and tees crossed for the future”.

“The aim of this exercise was never to name and shame councils. The intention was not to say ‘who is the best and who is the worst?’,” he said.
“We’ve come up with 26 recommendations and now we’re forming a steering committee to look at those recommendations and help councils look at where their weaknesses are and tactics to address it and strengthen it.”


The Access Economics review’s recommendations include:
* developing mandatory long-term, 10-year financial plans for councils;

* that LGAT takes on responsibility for creating an accounting code of conduct aimed at encouraging a greater degree of uniformity in accounting practices and policy across councils;

* the creation of long-term asset management plans;

* establishing a working group, with State Government representation, to develop an online State of the State financial reporting framework; and

* each council could implement and publish a revenue and financing policy statement to clarify its approach to funding decisions.

Cr Gaffney was confident the Tasmania local government sector had the capacity to respond to the financial sustainability report and make the improvements needed.

“To be a responsible sector, you need to be able to do a lot of the work yourself,” he said.

“We have the capacity within local government in Tasmania to undertake quite a substantial amount of the work needed. Where appropriate, we will look at accessing some assistance to try and get this underway.
“We will do some template work about what we might need to do and councils will have to adjust accordingly if they want to satisfy that section where they’re weakest.”

LGAT CEO Allan Garcia said having the independent umpire come in and identify financial issues provided a good platform to get councils to improve their broad financial governance.

“Like many other places in the country, they abide by the standards and the provisions of the act, and yet if you actually scrutinise and benchmark them, they’re not necessarily doing particularly well in a lot of areas,” he said.

“This report has identified where a lot of those shortcomings are and provides us with a template of how we can work with councils to get them to the right place.”

LGAT will establish a steering committee in the next couple of months to work through the recommendations and produce an action plan. Cr Gaffney said the committee would be made up of eight to nine members, with representation from council general managers with appropriate skills, elected representatives and LGAT staff.


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