Local government changes - a sign of the times

As of mid-2022 all NSW local government councils and joint organisations were required to have considered the 2023 Risk and Audit Guidelines. The 2023 Guidelines replace the 2010 NSW Government’s Internal Audit Guidelines for Local Government in NSW. 

They seek to incorporate findings and lessons learnt from relevant industry reviews inclusive of recent Independent Commission Against Corruption (“ICAC”) investigations, the Revitalising Local Government inquiry (2013) and Auditor General enquiries.

Further, from 1 July 2024, all councils will be required to attest to compliance with the following requirements within their 2024/25 annual report:

• An appropriately qualified Audit, Risk and Improvement Committee “ARIC”. The ARIC is tasked with ensuring adequate and independent monitoring and oversight over council’s key risks, performance and governance arrangements, 
• A robust risk management framework that supports the achievement of council’s strategic
  and operational objectives, which clearly articulates and mitigates key existing and emerging risks, and
• An effective internal audit function that provides council with independent assurance services as to control effectiveness, industry best practice and opportunities to enhance both efficiency and performance.

For local government risk and audit practitioners, these changes are welcome as they will help ensure these important Council functions receive the necessary attention, support and resources.

For many councils their Risk and Assurance Frameworks are in varying states of maturity, with internal risk and assurance practitioners often wearing many hats. This includes
providing risk education and support, assisting with the development and review of risk registers and incident management, and providing timely advice to assist others with strategic, operational and project decisions. This of course impacts their capacity
and ability to deliver on their own strategic agenda.

If not already in place, we would recommend councils develop an enhancement roadmap or
project plan to support integration, establishment and continued maturity of the required guidelines and related governance mechanisms.

The consolidated work plan should detail objectives, the various tasks associated with achieving compliance and monitoring and oversight mechanisms to ensure the plan is
adequately resourced and remains on track.   

For the past ten years, Queensland local governments have reported against three key indicators of sustainability:

• Asset management and renewal
• Infrastructure capital sustainability
• Financial capital sustainability/viability.

These were measured by the following ratios:

• Asset sustainability ratio
• Net financial liabilities ratio
• Operating surplus ratio.

Queensland local governments have calculated and reported on these ratios in their financial statements each year. Following a comprehensive review, the Department of State Development, Infrastructure, Local Government and Planning issued new financial sustainability measures. These measures will apply for the first time for the financial year ending 30 June 2024.

The key changes include:

• Grouping of similar councils for sustainability monitoring and reporting purposes
• Removal of net financial liabilities ratio
• Expanding the number of relevant financial sustainability measures from three to nine

• Targets are based on the council’s allocated grouping and a small number of contextual measures have no targets.

The following measures must be calculated and included in the statutory financial reports and
Councils should be establishing systems and processes to calculate these measures.

PKF has local government expertise across the country and can assist with an independent tailored review to help build your roadmap and identify key priorities, and also help with the development, review and enhancement of key framework resources.

Please reach out if you need assistance with these fast-approaching reporting deadlines.