Table of Contents EXECUTIVE SUMMARY i 1 INTRODUCTION 1 1.1 Regulation of local government 1 1.2 Purpose of this Regulatory Impact Statement 2 2 THE REASONS FOR REGULATING LOCAL GOVERNMENT PLANNING AND REPORTING 3 2.1 Background 3 2.2 Nature of the problem 4 2.3 Extent of the problem 6 2.4 Timing of changes 13 3 THE PROPOSED REGULATIONS 15 3.1 Objective 15 3.2 Base case 15 3.3 Good regulatory design and minimising the reporting burden 16 3.4 The proposed Regulations 17 3.5 Impact assessment of the proposed Regulations 22 4 ALTERNATIVE OPTIONS 28 4.1 Identification of alternative options 28 4.2 Approaches in other jurisdictions 28 4.3 Non-regulatory options 30 4.4 Options assessed in this RIS 31 4.5 Conclusion on alternative options 35 5 IMPLEMENTATION AND ENFORCEMENT 37 5.1 Implementation 37 5.2 Enforcement 39 6 IMPACTS ON COMPETITION 40 7 CONSULTATION 41 ATTACHMENTS 45
ABBREVIATIONS the Act – Government Act 1989 the current Regulations – Local Government (Finance and Reporting) Regulations 2004 the proposed Regulations – Local Government (Financial Planning and Reporting) Regulations 2014 ACELG – Australian Centre of Excellence for Local Government CPI – Consumer Index DTPLI – Department of Transport, Planning and Local Infrastructure ESC – Essential Services Commission LGA – local government areas LGCI – Local Government Cost Index LGPRF – Local Government Performance Reporting Framework LGV – Local Government Victoria MAV – Municipal Association of Victoria MCA – Multi-criteria Analysis NCC – National Competition Council PV – Present Premier’s Guidelines – Subordinate Legislation Act 1994 Guidelines RIS – Regulatory Impact Statement VAGO – Victorian Auditor-General’s Office VCEC – Victorian Competition and Efficiency Commission VLGI – Victorian Local Government Indicators VGC – Victorian Grants Commission
A follow up performance audit in 2012, Performance Reporting by Local Government, found that although councils produce large volumes of information for internal and external audiences, this reporting often lacked information about the timeliness, cost, quantity or quality of council services, and therefore did not adequately position councils to overcome performance challenges. VAGO provided a summary of audits that had identified shortcomings in local government performance (see Figure 2B). The recurring nature of the performance issues identified shows there are an ongoing impediment to councils’ ability to fulfill their statutory obligations. VAGO found that overcoming these challenges is therefore an urgent priority for the local government sector. Figure 2B Recurring performance issues for councils Theme Summary VAGO Audits Ineffective planning and budgeting Inadequate links between corporate plans, asset management plans and budget processes Inadequate funding models resulting from poor forward planning Management of by Local Councils (2002) Lack of rigour in developing business continuity plans Business Continuity Management in Local Government (2010) Inability to demonstrate that fees and charges reflect best value principles Fees and Charges: Cost Recovery by Local Government (2010) Inadequate asset management plans, compromising effective management of $1.6 billion in assets Lack of long-term strategic plans underpinning financial plans Business Planning for Major Capital Works and Recurrent Services in Local Government (2011) Inadequate adherence to policies and procedures Inadequate policies for the management of road assets Management of Roads by Local Government (2002) A lack of policies governing the enforcement of planning permits, leading to a lack of assurance that permits are compliant Enforcement of Planning Permits (2008) Inadequate assurance probity standards had been applied and that conflict of interests were avoided Tendering and Contracting in Government (2010) Limited and reactive practices for monitoring and reporting on compliance with building permits Compliance With Building Permits (2011) Weaknesses in accountability, oversight and monitoring Inadequate reporting preventing ratepayers from understanding whether road management is efficient and effective Management of Roads by Local Government (2002) Inadequate internal reporting preventing understanding of whether all development contributions are being collected Use of Development Contributions by Government (2009) Insufficient oversight over application of probity standards, and inadequate systems for monitoring aggregate payments Tendering and Contracting in Local Government (2010)
IMPACTS ON COMPETITION This section of the RIS discusses the impact of the proposed Regulations on competition. A measure is likely to have an impact on competition if any of the questions in Figure 6A can be answered in the affirmative. Figure 6A Competition questions Test question Assessment Is the proposed measure likely to affect the market structure of the affected sector(s) – i.e. will it reduce the number of participants in the market, or increase the size of incumbent firms? No Will it be more difficult for new firms or individuals to enter the industry after the imposition of the proposed measure? No Will the costs/benefits associated with the proposed measure affect some firms or individuals substantially more than others (e.g. small firms, part-time participants in occupations etc)? No Will the proposed measure restrict the ability of businesses to choose the quality, range or location of their products? No Will the proposed measure lead to higher ongoing costs for new entrants that existing firms do not have to meet? No Is the ability or incentive to innovate or develop new products or services likely to be affected by the proposed measure? No As the proposed Regulations impact directly on councils, which are public authorities, they will not have any impact on market structures. Overall, the proposed Regulations are assessed as not restricting competition.
the proposed percentage change for service rates and charges compared to that of the previous financial year 3 8(d) Other matter to be included budget Clarify that councils should compare the revised budget to the previously adopted budget Amend 8(d) to: in the case of a revised budget, matters referred to in paragraph (c) as applicable to any rates and charges to be levied as compared to the previously adopted budget. 4 9 Public notice Public notice for budget and revised budget could be streamlined Amend 8(c) to include sections which will significantly reduce the disclosures required in the public notice. Include a new requirement at 9(2) for the council to make the budget and revised budget available on its website and at its premises 5 New term ‘proposed budget’ introduced in the Regulations, with no definition provided Remove all reference to ‘proposed’ budget in Regulation 8 and 9 Part 4 Annual Report 6 11 General information Senior officers misspelt in 11(e)(ii) Amend 11(e)(ii) with correct spelling 7 Include website address in 11(f) Amend 11(f) to include Internet website address 8 14 to the financial statements Expand 14(b) to show operating and capital disclosure as well Include new provision after 14(b) that requires councils to further disclose grants and subsidies between operating and capital nature 9 Include provision to require reporting of capital works expenditure by class. Also require reporting of type of asset expenditure type For the annual report only, as a note to the financial statement, require councils to disclose capital expenditure by class of asset. Within those classes, to report expenditure by: Asset renewal Asset upgrade expansion New assets 10 Retain provision to report budget versus actual for revenue and expense and explain material variances For the annual report only, as a note to the financial statements, disclose revenue and expenses as set out in the comprehensive income statement prepared under 127(2)(a) that shows variations from the budget and if the variation is material, explain the reasons for the variation 11 As a result of item 10) above, remove requirement to explain material variances between budget and actual in relation to the financial performance indicators in the performance statement Remove requirement to explain material variances between budget and actual in a statement of variation to the financial performance indicators.
12 17 Meeting to consider Annual Report to account for clash with caretaker period in election year Include a new provision in Regulations that requires councils to hold a meeting before the election. Update election caretaker arrangements practice notes to include guidance on the meeting to consider the annual report. ATTACHMENTS