local government sustainability objectives and · pdf file1.3 the local government...

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



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

http://www.acelg.org.au/index.php



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.

http://www.dpac.tas.gov.au/divisions/lgd/measuring_sustainability



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.



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.



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

http://www.dpac.tas.gov.au/divisions/lgd



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.



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.



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).



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.



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.



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



Areas of

measurement


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



Areas of

measurement


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



Areas of

measurement


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.




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.



Areas of

measurement


descriptions

Data

source

satisfaction

c) Infrastructure Safe and well

maintained

roads,

pedestrian

areas and

local road

networks.




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




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.




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



Areas of

measurement


descriptions

Data

source

f) Community

health and

safety

Hygiene

standards of

food outlets,

restaurants

and public

facilities,

council

immunisation

programs and

animal

control.




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



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.

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