Local Government Sustainability Objectives and · PDF file1.3 The Local Government...
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Local Government Division
Department of Premier and Cabinet
Local Government
Sustainability Objectives
and Indicators
DECEMBER 2011
LOCAL GOVERNMENT SUSTAINABILITY: OBJECTIVES AND INDICATORS
2 Sustainability Objectives and Indicators
Contents
1. INTRODUCTION ................................................................................. 3
1.1 Challenges to the sustainability of the local government sector ................................................ 3
1.2 Responding to the challenges ....................................................................................................................... 4
1.3 The Local Government Sustainability Objectives and Indicators Project ............................. 4
2. OVERVIEW OF THE SUSTAINABILITY OBJECTIVES AND
INDICATORS PROJECT .................................................................... 6
3. DATA COLLECTION METHOD .................................................... 7
4. SUSTAINABILITY OBJECTIVES ........................................................ 8
Table 1: Sustainability objectives ........................................................................................................................ 9
5. SUSTAINABILITY INDICATORS ................................................... 10
5.1 Financial and asset management indicators ......................................................................................... 11
Table 2: Sustainability indicators ....................................................................................................................... 13
6. TARGETS .............................................................................................. 19
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1. Introduction 1.1 CHALLENGES TO THE SUSTAINABILITY OF THE LOCAL
GOVERNMENT SECTOR
The local government sector in Tasmania is facing a number of challenges to its
sustainability in the medium to long term. These challenges include skills shortages,
financial stress, limited revenue-raising capacity, asset deterioration and replacement
costs, ageing populations, growing community demands, and governance issues.
The sector is committed to sustainability, and performance measurement and
improvement.
This is clear from consultation with the sector undertaken for the Local Government
Sustainability: Objectives and Indicators Project.
This is also true at the national level. The Australian Government has committed to
assisting sustainability reform within the sector, providing $8 million to the Australian
Centre of Excellence in Local Government (ACELG) to ‘Enhance professionalism
and skills in local government, showcase innovation and best practice, and facilitate a
better-informed policy debate.’ Further information can be found at ACELG’s
website: http://www.acelg.org.au/index.php
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1.2 RESPONDING TO THE CHALLENGES
The State Government is working with local government to progress a range of
initiatives to help the local government sector enhance its sustainability. Initiatives
include:
The implementation of long-term financial and asset management plans in all
councils – Tasmania received $870 000 under the Australian Government’s
Local Government Reform Fund to develop long-term financial and asset
management planning templates and implement plans in all councils. The
project has been led by the Local Government Association of Tasmania
(LGAT) with input from the State Government.
A review of valuation and local government rating –the review aims to
identify a valuation and local government rating model that will be simpler,
more efficient, cost-effective, equitable and sustainable into the long term.
The implementation of regional planning schemes – The Tasmanian
Government provided over $2.3 million to develop three regional land-use
strategies to improve consistency among council planning schemes leading to
development, investment, settlement and infrastructure decisions that meet
regional needs.
1.3 THE LOCAL GOVERNMENT SUSTAINABILITY OBJECTIVES AND
INDICATORS PROJECT
The Local Government Sustainability: Objectives and Indicators Project (SOI Project) is a
key initiative of the Tasmanian Government to drive sustainability reform and
performance improvement, and to support and encourage councils to do the same.
The SOI Project is supported by the Premier, the Minister for LGAT’s General
Management Committee. It is overseen by the Premier’s Local Government Council
(PLGC).
At its December 2009 meeting, the PLGC agreed to oversee the SOI Project. A
Steering Committee, which contained local government representatives, was
established shortly afterward to progress the project. In August 2010 a discussion
paper was released for consultation. The consultation paper is available at
http://www.dpac.tas.gov.au/divisions/lgd/measuring_sustainability
In September 2010, the SOI Project Steering Committee established an Expert
Working Group (EWG) to develop draft indicators, which the PLGC approved for
further consultation at its April 2011 meeting. The final set of indicators, contained
in this document, was approved by the PLGC at its December 2011 meeting.
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The local government sector, the Tasmanian Audit Office, State Government
agencies and other relevant stakeholders, as well as the broader community, have
had input into the project.
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2. Overview of the
sustainability objectives
and indicators project The overall objective of the project is to promote excellence in council performance
and to support the long-term sustainability of the local government sector.
For the purposes of this project, sustainability is defined as the ability of a council or
councils to access and optimise all of its resources and capabilities to best serve its
individual community, and the Tasmanian community collectively, now and into the
future.
The project will allow councils to assess their performance in key areas. It will
enable better engagement between councils and communities. It will also assist the
State and Local Governments to set priorities for improved performance within the
sector.
For the purposes of this project, performance refers to how well councils provide
quality service to their communities, manage their resources, and ensure long-term
economic, social, environmental and cultural sustainability.
Councils’ performance in key strategic priority areas will be measured against
sustainability indicators that have been jointly developed through a comprehensive
consultation process. Councils will be supported and encouraged to continually
improve performance by:
identifying and sharing best practice after analysing their performance
against the indicators;
tracking their performance over time, and against other similar councils;
and
communicating with their communities about their performance.
The project has the following audiences:
councils;
communities; and
Australian, State and Local Government policy makers.
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3. Data collection method Robust and relevant data is necessary to measure and improve sustainability and
performance. It provides the foundation of evidence-based policy to achieve both
ends.
The Local Government Division (LGD) aims to be the central repository of local
government data and information and the SOI Project is a key part of achieving that.
In this role, the LGD will therefore:
be able to provide clear, relevant and robust data to the local government
sector, stakeholders, State and Australian Government agencies and the
Tasmanian community;
use this information to measure, and assist the sector to measure, local
council performance and sustainability;
develop evidence-based policy toward sustainability and performance
improvement; and
assist the local government sector itself to develop evidence-based policy.
Data for the SOI Project will be collected through existing data sources including the
annual Consolidated Data Collection (CDC) process and LGAT’s biannual
community satisfaction survey. The CDC is managed by the LGD and collects data
from Local Government on behalf of the Australian Bureau of Statistics and the State
Grants Commission as well as the State Government.
Data for financial management, asset management, and planning and development
will be collected on an annual basis using the annual CDC process and other State
Government agency sources.
Data on community satisfaction, and some on planning and development, will be
collected biannually from the LGAT survey.
The data collected as part of this project will be publicly available on the LGD’s
website: http://www.dpac.tas.gov.au/divisions/lgd
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4. Sustainability objectives The SOI Project has three sustainability objectives:
to improve performance management at the local council level;
to develop a culture of continuous improvement in the local government
sector; and
to provide a tool to build a sustainable local government sector.
Councils will be measured against four areas of measurement which are considered
to provide the best indication of a council’s sustainability and performance.
Achievement on each of the sustainability objectives is measured by councils’
performance in all four areas of measurement. Each area of measurement has a
related objective that is linked to one or more of the sustainability indicators.
This represents a linked hierarchy of measurement. Working backwards, the
indicators will show councils’ performance that relate to an objective, which are
linked to a related area of measurement. The areas of measurement (and the
objectives associated with them) are in turn linked to each of the sustainability
objectives of the project. Achievement of the objectives will be therefore be shown
by councils’ performance in the areas of measurement.
This will enable councils to:
identify and share best practice after analysing their performance against the
indicators;
track their performance over time, and against other similar councils; and
communicate with their communities about their performance.
This will help to achieve the overall objective of the SOI Project: to promote
excellence in council performance and to support the long-term sustainability of the
local government sector.
The sustainability objectives, their descriptors and the objectives linked to the four
areas of measurement are contained in Table 1.
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TABLE 1: SUSTAINABILITY OBJECTIVES
Sustainability
objective
Descriptor Areas of measurement and associated
objectives
Improve
performance
management at the
local council level
This refers to how well councils can improve quality
service to their communities;
manage their resources; and ensure long-term economic,
social, environmental and
cultural sustainability.
M
E
A
S
U
R
E
D
B
Y
1. FINANCIAL MANAGEMENT: To achieve and/or improve financial
sustainability through meeting the
requirements of sound fiscal management.
2. ASSET MANAGEMENT: To
manage assets in a way that
maximises asset service delivery, manages related risks and accounts
for whole-of-life costs.
3. PLANNING AND DEVELOPMENT: To develop,
implement and improve planning
and development practices that improve access to facilities and
services, utilisation of resources,
appropriate infrastructure provision and sustainable environmental
practices.
4. COMMUNITY SATISFACTION:
To ensure communities are satisfied with councils’ provision of services in
the areas of:
a) planning and development; b) community involvement;
c) infrastructure;
d) environmental management / waste;
e) recreation / culture;
f) community health and safety;
and g) overall satisfaction.
Develop a culture of
continuous
improvement in the
local government
sector
This refers to the ability of councils to continuously
improve:
the quality of their service to the community; and
performance in financial
and asset management, planning and
development and
community satisfaction.
Provide a tool to
build a sustainable
local government
sector.
This refers to the ability of
the sector to optimise all of
its resources and capabilities
to best serve the Tasmanian
community now and into the
future.
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5. Sustainability indicators Best practice performance management requires that performance indicators link
directly with objectives, therefore providing a measure of performance against those
objectives.
To usefully provide an insight into performance, performance indicators need to
measure efficiency, effectiveness and appropriateness.
Efficiency refers to ‘the relative cost of achieving positive impacts via the program
under consideration’. Effectiveness refers to the ‘match between program outcomes
and program objectives’. Appropriateness ‘refers to the match between current
community and government priorities and program objectives’.1
Indicators should also:
measure outcomes not activity;
be verifiable, free from bias, and based on credible information;
focus on the most important components of the objective; and
include both qualitative and quantitative information.
The sustainability indicators were developed to meet all the criteria above, to ensure
the data has greater descriptive power and utility. This will allow both State and
Local Governments to usefully measure sustainability and performance over time,
contributing to continuous improvement in the management and quality of services
and resources by councils. This will also lead to better outcomes for both Local
Government and the Tasmanian community.
The sustainability indicators including their descriptions are contained in table 2.
1 John M Owen, Program Evaluation: Forms and Approaches (1993).
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5.1 FINANCIAL AND ASSET MANAGEMENT INDICATORS
In 2007 the Local Government and Planning Minister’s Council (LGPMC) defined
financial sustainability as follows:
“A council’s long-term financial performance and position is sustainable where
planned long-term service and infrastructure levels and standards as prioritised
through community engagement and consultation are met without unplanned
increases in rates and charges or disruptive cuts to services.”2
In 2007 the LGPMC also endorsed national frameworks for assessing financial
sustainability, asset planning and management, and financial planning and reporting
for local government.
The Tasmanian Government is currently working with LGAT to implement the long-
term financial and asset management planning frameworks in all Tasmanian councils.
The other aspect of the LGPMC 2007 commitment is the development of national
performance indicators for financial and asset management. This is currently being
done by the Australian Centre of Excellence for Local Government (ACELG). The
indicators are likely to be the same as those used by the Institute of Public Works
Engineering Australia (IPWEA).
At the State level, the Tasmanian Audit Office (TAO) reports on financial and asset
management indicators from the local government sector in Tasmania.
The TAO has been reviewing its own financial and asset management indicators and
has worked with various parties to develop a suite of nationally consistent and
recognised indicators that can be used to meaningfully assess the financial
sustainability of local councils.
The TAO has arrived at a set of seven indicators, which align with seven of the eight
indicators currently used by the IPWEA.3 Given that the TAO has adopted the
seven national IPWEA indicators, these indicators have been used for the SOI
Project.
2 Local Government and Planning Minister’s Council, Local Government Financial Sustainability -
Nationally Consistent Frameworks. Framework 1: Criteria for Assessing Financial Sustainability
(May 2007).
3 The IPWEA financial and asset management indicators are contained in the Australian
Infrastructure Financial Management Guidelines – Version 1.0 (2009). The indicator that the Tasmanian Audit Office will not collect is the Interest Cover Ratio, which is a proportion of day to day income used to pay interest on loans net of interest income. The Auditor-General views this as an indicator of operational financial management, rather than an indicator of financial sustainability. Given this, and that the Project Steering Committee wished to align the SOI financial and asset management indicators with those collected by the Tasmanian Auditor-General, the Interest Cover Ratio Indicator has been omitted.
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The financial and asset management indicators are geared to:
measure those factors which define financial sustainability (noting the
definition of financial sustainability above);
be relatively few in number; and
be based on information that is readily available and reliable.
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TABLE 2: SUSTAINABILITY INDICATORS
Areas of
measurement
Objective Indicator Indicator questions /
descriptions
Data
source
1. Financial
management
To achieve and/or
improve financial
sustainability
through meeting
the requirements
of sound fiscal
management.
Operating
surplus Description: The difference
between day-to-day income
and expenses for the period.
Comment: An operating
surplus (or deficit) arises when
operating income (excluding
capital income) exceeds (or is
less than) operating expenses
for a period (usually a year).
Calculation: Operating income
(excluding amounts received
specifically for new or upgraded
assets and physical resources
received free of charge) less
operating expenses for the
reporting period.
Auditor-
General
Operating
surplus ratio Description: The percentage
by which the major controllable
income source plus operating
grants varies from day to day
expenses.
Comment: The operating
surplus ratio is the operating
surplus (or deficit) expressed as
a percentage of general and
other rates and operating
grants.
Calculation: Operating surplus
(or deficit) divided by general
and other rate income and
operating grants.
Auditor-
General
Net financial
liabilities Description: What is owed to
others less money held,
invested or owed to the entity.
Comment: Net financial
liabilities equals total liabilities
less financial assets.
Calculation: Total liabilities less
financial assets (cash and cash
equivalents plus trade and
other receivables plus other
financial assets).
Auditor-
General
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Areas of
measurement
Objective Indicator Indicator questions /
descriptions
Data
source
Net financial
liabilities ratio Description: The significance
of net amount owed compared
with the period’s income.
Comment: Indicates the extent
to which net financial liabilities
could be met by operating
income.
Calculation: Net financial
liabilities divided by operating
income.
Auditor-
General
2. Asset
management
To manage assets
in a way that
maximises asset
service delivery,
manages related
risks and accounts
for whole-of-life
costs.
Asset
sustainability
ratio
Description: The ratio of asset
replacement expenditure
relative to depreciation for a
period. It measures whether
assets are being replaced at the
rate they are wearing out.
Comment: Indicates whether
the entity is replacing or
renewing non-financial assets at
the same rate that its overall
stock of assets is wearing out
for the period.
Calculation: Capital
expenditure on replacement /
renewal of existing plant and
equipment and infrastructure
assets divided by their annual
depreciation expense.
Auditor-
General
Asset
consumption
ratio
Description: The average
proportion of ‘as new’
condition left in assets.
Comment: Shows the
depreciated replacement cost
of an entity’s depreciable assets
relative to their ‘as new’
(replacement) value
Calculation: The depreciated
replacement cost of plant,
equipment and infrastructure
assets divided by the current
replacement cost of
depreciable assets.
Auditor-
General
Asset
renewal
funding ratio
Description: The ratio of net
present value of asset renewal
funding accommodated over a
Auditor-
General
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Areas of
measurement
Objective Indicator Indicator questions /
descriptions
Data
source
ten year period in a long-term
financial plan relative to the net
present value of the projected
capital renewal expenditures
identified in an asset
management plan for the same
period.
Comment: Indicates whether
the entity has the financial
capacity to fund asset renewal
as required and therefore
continue to provide existing
levels of asset-based services in
the future without additional
operating income or reductions
in operating expenses, or an
increase in net financial liabilities
above that currently projected.
Calculation: The net present
value of projected ten-year
capital renewal funding outlays
in a long-term financial plan
divided by the net present
value of projected ten-year
capital renewal expenditures in
an asset management plan in
current values.
3. Planning and
development
To develop,
implement and
improve planning
and development
practices that
improve access to
facilities and
services, utilisation
of resources,
appropriate
infrastructure
provision and
sustainable
environmental
practices.
Percentage of
Development
Applications
(DAs)
completed
within
statutory
timeframe.
What percentage of DAs was
completed within the statutory
timeframe of 42 days?
CDC -
Land Use
and
Planning
Section
Average days
to process
planning and
development
applications
(statutory
time as per
legislation,
exclude days
where clock
What are the:
Average number of
calendar days to
process applications:
- planning: permitted
use
- planning:
discretionary use
- building
CDC -
Land Use
and
Planning
Section
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Areas of
measurement
Objective Indicator Indicator questions /
descriptions
Data
source
stopped). Total number of all
planning applications
lodged
Total number of all
building applications
lodged
Percentage of
decisions by
the Resource
Management
and Planning
Appeals
Tribunal
(RMPAT) in
favour of the
council.
How many council planning
decisions were referred to
RMPAT?
How many decisions were in
favour of the council?
RMPAT
4. Community
satisfaction4 To ensure
communities are
satisfied with councils’
provision of
services in the areas of: a) Planning and
development
b) Community
involvement
c) Infrastructure
d) Environmental
management /
waste
e) Recreation /
culture
f) Community
health and
safety
g) Overall
LGAT
survey
a) Planning and
development
Satisfaction
with councils’
performance
in planning
and
development.
On a scale of 1-5, how do
respondents rate their
satisfaction on their council’s
performance in consistent and
appropriate planning policies
(see footnote 4 below)
LGAT
survey
b) Community
involvement
Satisfaction
with councils’
performance
in community
involvement.
On a scale of 1-5, how do
respondents rate their
satisfaction on their council’s
performance in community
involvement in relation to:
informing residents about
Council activities
involving residents in local
decision making
access to Councillors /
Aldermen
LGAT
survey
4 The questions in the LGAT survey ask the respondent to rate their satisfaction on a Likert scale of 1 to 5; 1
indicates very dissatisfied and 5 indicates very satisfied.
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Areas of
measurement
Objective Indicator Indicator questions /
descriptions
Data
source
satisfaction
c) Infrastructure Safe and well
maintained
roads,
pedestrian
areas and
local road
networks.
On a scale of 1-5, how do
respondents rate their
satisfaction on their council’s
performance in providing:
safe and well maintained
local roads
safe and well maintained
pedestrian areas
an efficient road network
an effective stormwater
system
LGAT
survey
d) Environmental
management /
waste
Waste
management
On a scale of 1-5, how do
respondents rate their
satisfaction on their council’s
performance in:
household garbage
collection
recycling services –
including kerbside
recycling and depots
operation of local tip and
transfer stations
maintaining a clean and
tidy city/town
LGAT
survey
e) Recreation,
cultural
facilities and
programs
Provision and
management
of
recreational
and cultural
facilities and
programs.
On a scale of 1-5, how do
respondents rate their
satisfaction on their council’s
performance in:
sports grounds and
recreation facilities
parks and playgrounds
community centres and
halls
arts and entertainment
facilities including
museums and art galleries
arts and entertainment
activities and special
events
management of natural
areas
LGAT
survey
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Areas of
measurement
Objective Indicator Indicator questions /
descriptions
Data
source
f) Community
health and
safety
Hygiene
standards of
food outlets,
restaurants
and public
facilities,
council
immunisation
programs and
animal
control.
On a scale of 1-5, how do
respondents rate their
satisfaction on their council’s
performance in:
hygiene standards of food
outlets, restaurants and
public facilities
council immunisation
programs
animal control
LGAT
survey
g) Overall
satisfaction
Satisfaction
with overall
performance
of council.
On a scale of 1-5, how satisfied
are you with your council’s
performance overall?
LGAT
survey
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6. Targets Performance targets give performance data meaning and provide a comparison
point that shows whether the performance of an organisation is satisfactory or
otherwise.
For consistency, the SOI project will adopt the benchmarks used by the Auditor-
General for the financial and asset management indicators.
The benchmarks are as follows:
Indicator Formula Benchmark [target]
Operating
surplus ratio
(net operating surplus)/(total
operating revenue)
Greater than 0
Asset
sustainability
ratio
(renewal and upgrade expenditure
on existing assets)/(depreciation on
existing assets)
At least 100 per cent
Asset renewal
funding ratio
(Future (planned) asset replacement
expenditure)/(future asset
replacement expenditure (actual)
required)
At least 90 per cent
Asset
consumption
ratio (roads)
(depreciated replacement
cost)/(current replacement cost)
Greater than 60 per
cent
Net financial
liabilities ratio
(total liabilities less liquid
assets)/(total operating revenue)
Between zero to
negative 50 per cent of
operating income
The PLGC will consider targets for other indicators once the data sets have been
established and populated. Targets will be easier to set and more meaningful
once data is available.