Local Government Sustainability Objectives and Indicators

Transcription

1 Local Government Sustainability Objectives and Indicators DECEMBER 2011 Local Government Division Department of Premier and Cabinet

2 Contents 1. INTRODUCTION Challenges to the sustainability of the local government sector Responding to the challenges The Local Government Project OVERVIEW OF THE SUSTAINABILITY OBJECTIVES AND INDICATORS PROJECT DATA COLLECTION METHOD SUSTAINABILITY OBJECTIVES... 8 Table 1: Sustainability objectives SUSTAINABILITY INDICATORS Financial and asset management indicators Table 2: Sustainability indicators TARGETS

3 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: 3

4 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 $ 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 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. 4

5 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. 5

6 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. 6

7 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: 7

8 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. 8

9 TABLE 1: SUSTAINABILITY OBJECTIVES Sustainability objective Improve performance management at the local council level Develop a culture of continuous improvement in the local government sector Provide a tool to build a sustainable local government sector. Descriptor 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. 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. 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. Areas of measurement and associated objectives M 2. ASSET MANAGEMENT: To manage assets in a way that E maximises asset service delivery, A manages related risks and accounts for whole-of-life costs. S 3. PLANNING AND U DEVELOPMENT: To develop, R implement and improve planning and development practices that E improve access to facilities and D services, utilisation of resources, appropriate infrastructure provision and sustainable environmental practices. B Y 1. FINANCIAL MANAGEMENT: To achieve and/or improve financial sustainability through meeting the requirements of sound fiscal management. 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. 9

10 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). 10

11 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 longterm 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. 11

12 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. 12

13 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 Operating surplus ratio 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. 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 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 13

14 Areas of measurement Objective Indicator Indicator questions / descriptions Data source 2. Asset management To manage assets in a way that maximises asset service delivery, manages related risks and accounts for whole-of-life costs. Net financial liabilities ratio Asset sustainability ratio Asset consumption ratio Asset renewal funding 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. 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. 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. Description: The ratio of net present value of asset renewal funding accommodated over a Auditor- General Auditor- General Auditor- General Auditor- General 14

15 Areas of measurement Objective Indicator Indicator questions / descriptions Data source 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. Average days to process planning and development applications (statutory time as per legislation, exclude days where clock 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. What percentage of DAs was completed within the statutory timeframe of 42 days? What are the: Average number of calendar days to process applications: - planning: permitted use - planning: discretionary use - building CDC - Land Use and Planning Section CDC - Land Use and Planning Section 15

16 Areas of measurement Objective Indicator Indicator questions / descriptions Data source stopped). Percentage of decisions by the Resource Management and Planning Appeals Tribunal (RMPAT) in favour of the council. Total number of all planning applications lodged Total number of all building applications lodged How many council planning decisions were referred to RMPAT? How many decisions were in favour of the council? RMPAT 4. Community satisfaction 4 a) Planning and development b) Community involvement 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 Satisfaction with councils performance in planning and development. 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 consistent and appropriate planning policies (see footnote 4 below) 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 LGAT survey 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. 16

17 Areas of measurement Objective Indicator Indicator questions / descriptions Data source satisfaction c) Infrastructure Safe and well maintained roads, pedestrian areas and local road networks. d) Environmental management / waste e) Recreation, cultural facilities and programs Waste management 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 providing: safe and well maintained local roads safe and well maintained pedestrian areas an efficient road network an effective stormwater system 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 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 LGAT survey LGAT survey 17

18 Areas of measurement Objective Indicator Indicator questions / descriptions Data source f) Community health and safety g) Overall satisfaction Hygiene standards of food outlets, restaurants and public facilities, council immunisation programs and animal control. Satisfaction with overall performance of council. 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 On a scale of 1-5, how satisfied are you with your council s performance overall? LGAT survey LGAT survey 18

19 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 Asset sustainability ratio Asset renewal funding ratio Asset consumption ratio (roads) Net financial liabilities ratio (net operating surplus)/(total operating revenue) (renewal and upgrade expenditure on existing assets)/(depreciation on existing assets) (Future (planned) asset replacement expenditure)/(future asset replacement expenditure (actual) required) (depreciated replacement cost)/(current replacement cost) (total liabilities less liquid assets)/(total operating revenue) Greater than 0 At least 100 per cent At least 90 per cent Greater than 60 per cent 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. 19