Rating Practices in Local Government Performance Audit

1. Rating Practices in Local Government Performance Audit • Andrew Evans • Acting Director, Performance Audit • Local Government Sector

2. Overview Auditor-General’s role Rating Practices in Local Government Performance Audit Future performance audits related to council budgetary and planning processes Questions

3. Auditor-General’s role To provide assurance to Parliament on the accountability and performance of the Victorian public sector. The Auditor-General has no executive authority and cannot direct the public sector but our findings can have a catalytic effect. Performance audit • Determine whether an authority is achieving objectives and operating economically, efficiently and effectively in compliance with all relevant Acts. • We do not question the merits of policy objectives. Sector teams • Conduct approximately 30 performance audits per year • Local Government team delivers four to five of these audits • Audits are selected on the basis of sector planning processes and published in VAGO’s Annual Plan, which has a four-year time horizon.

4. Rating practices in local government performance audit Audit rationale • Materiality of rate revenue which comprises $3.7 billion or 50 per cent of council’s total operating revenue. • Revenue from rates is critical to the ability of local government to deliver services and maintain infrastructure. • To assess compliance with legislative requirements and information around rating decisions. Local Government Legislation Amendment (Miscellaneous) Bill • The audit was planned prior to recent amendments to the Local Government Act 1989(LG Act) relating to new guidelines for the use of differential rates.

5. Rating practices in local government performance audit Audit objective The audit is examining the adequacy of rating practices and the setting of rates as part of the annual budget process, including consistency with local policy and the LG Act, and whether the basis of decisions is sound and clearly documented. The audit will assess whether councils have: • developed and applied a sound strategic framework for making rating decisions • adequately informed councillors and ratepayers about rate change proposals taken sufficient account of ratepayers’ feedback on their proposals before finalising rates been provided with sufficient guidance to understand how to apply legislated objectives and measure performance.

6. Rating practices in local government performance audit The audit will focus on the rating practices of 12 councils selected on the basis of a number of factors, including: • location or type (inner and outer metro, regional town, large and small rural) • socio-economic status of councils • approaches to setting rates e.g. uniform vs differential rates • VAGO’s consultations with stakeholders. Local Government Victoria’s (LGV) role is also included in the audit. The audit is currently at the end of planning phase and is scheduled for tabling in Parliament in February 2013.

7. Future performance audits Future performance audits related to council budgetary and planning processes: • Organisational Sustainability of Small Councils (2012–13) • will examine planning and strategies including those relating to financial sustainability and workforce capacity. Aim to identify best practice examples to assist sector as well as review the role of DPCD in supporting councils to maintain organisational sustainability. • Shared Services in Local Government (2013–14) • will examine take up of shared services, barriers and effectiveness of support provided by LGV. • Long-term Financial Planning by Local Government (2014–15) • examine long-term financial planning • important to organisational sustainability or managing other areas such as rapid urban growth.

8. Questions?