Appendix H : Progress in Achieving Microeconomic Reform
Effective and efficient local government
Effective and efficient local government is important because local government delivers key human, economic and regulatory services. There are several ways that local government can pursue efficiency and effectiveness other than by developing performance indicators. They include:
- working towards benchmarking;
- identifying leading practice and innovation;
- implementing initiatives, such as Victoria's Best Value;
- sharing resources; and
- effective strategic planning and reviewing of legislation to reduce the red tape burden for all.
This section of the report incorporates a summary of reports from most States on activities in 2000-01 towards meeting these aims.
New South Wales
As New South Wales has concentrated on developing performance indicators, their input has been incorporated into that section of the report rather than here.
In April 2001, the Local Government Regulations 2001 were completed following a review of the Local Government Regulations 1990. The main objective of this review was to provide accountability mechanisms for councils, ensuring public awareness of matters affecting their municipality, balanced against councils' capacity to function efficiently.
A process to update the Local Government Act 1989 then began in November 2000. The purpose of this update is to keep the Act up-to-date to reflect contemporary thinking about the role of local government, its accountability to its constituents and its relationship with the State. The objective being to prepare logically structured, realistically brief and clear legislation that reflects the Government's partnership approach to local government and corrects anomalies in the existing Act.
Following release of the Infrastructure Study, Facing the Renewal Challenge, in January 2000, a reference group has been established comprising representatives from the local government peak bodies, VicRoads, Department of Treasury and Finance, the Office of the Auditor-General and the Department of Infrastructure. The reference group's required outcomes are to:
- improve the asset management culture throughout local government;
- devise sound asset management practices in the local government sector; and
- build the capacity to demonstrate the improvements made in asset management in the sector.
Implementation of best value
Introduction of the Best Value Principles, in December 1999, was followed by the release, in December 2000, of a best value framework or guide that was developed in consultation with councils by the Best Value Victoria Taskforce. The guide provides the sector with broad descriptions of the principles.
Best Value Principles have replaced Compulsory Competitive Tendering and represent a new approach for local government. They remove many of the complex, costly and overly bureaucratic procedures associated with Compulsory Competitive Tendering while ensuring that councils remain accountable for their expenditure and obtain value for money in the delivery of council services.
In December 2000, the Minister for Local Government also released the Best Value Code of Reporting and the Programme Code. The decision to apply the Codes recognised the need for some consistency across the sector and they were prepared with the capabilities of both large and small councils in mind.
All councils were required, by 31 December 2000, to submit to the Minister a copy of their Best Value Implementation Programmes. These programmes illustrated the service name and the commencement date of the service review. A compilation of these implementation programmes is available on the Department of Infrastructure's website. An analysis of the programmes indicates that, by 30 June 2001, over 27 per cent of service reviews would have commenced, and by 30 June 2002, 55 per cent of service reviews would have commenced. Best Value Principles must be applied to all council services by December 2005.
Best Value Victoria gives councils the flexibility to develop and deliver services that are relevant and responsive to community needs. The principles of Best Value Victoria will become increasingly important as the tools that will drive improved economic and social outcomes within local communities.
The Reporting Code provides the sector with a consistent framework from which to report to the community. The Code is not about reporting to the State Government, rather, it is about reporting to the Victorian community so it can assess the benefits of Best Value as a tool for change. All councils' Best Value Annual Reports for 2000-01 are to be submitted to the Government by 30 September 2001.
Business Management Assistance Programme
Under the Local Government Act 1993, the largest 18 councils in Queensland were required to consider some form of National Competition Policy reform for their significant business activities. The remaining 107 councils were encouraged to consider the reforms on the basis of good management.
The Queensland Competition Authority assesses reform progress and recommends payments to local government from the $141.5 million (unindexed) local government National Competition Policy Financial Incentive Package implementation pool.
Because the Local Government Association of Queensland believed that a significant number of local governments were missing out on bonus payment entitlements, it created the Business Management Assistance Programme, which is designed to help local government implement National Competition Policy reforms and other business and financial management reforms. Without this programme, Queensland councils might otherwise have missed out on between $50 million and $70 million of Financial Incentive Package payments.
The Local Government Association of Queensland aims to improve the capacity of Queensland councils and enhance their effectiveness in providing services to their communities through an improved understanding of financial management tools and information.
The timetable for the Financial Incentive Package was extended from 30 June 2002 to 30 June 2003 and the Local Government Association of Queensland secured up to $600,000 from the Financial Incentive Package implementation pool to fund the Business Management Assistance Programme to provide a regional support strategy for local councils.
All local councils were invited to participate in briefings, attend regional technical workshops, receive guidelines and checklist material, and access technical assistance by telephone and email from regional consultants or mentors. The Local Government Association of Queensland believes the programme will benefit mainly the medium and smaller councils as the larger councils are generally well advanced and better resourced to complete any reforms.
Finance Reference Group
Councils and the Local Government Association of Queensland identified the appropriate framework for financial reporting for local government bodies in Queensland as an issue. As councils continue to implement competition reforms and their businesses begin to operate in a more competitive environment, the Local Government Association believes it will be essential that councillors (as the Board of Management) and community members (as the shareholders) be presented with information that is both useful and informative. Effective management and resource allocation decision making can only be achieved if relevant and reliable information is presented in a timely manner.
In addition to requirements in Australian Accounting Standard 27, Financial Reporting by Local Government, Queensland councils prepare extra financial statements that many believe are onerous and of little value. However, little attention is given to preparing appropriate complimentary financial management reporting. This does not mean that councils are not focused on prudent financial management. The problem appears to be that there is no mechanism to allow this information to be prepared independently of public sector general purpose financial statements.
To help councils meet these different financial reporting requirements the Local Government Association of Queensland set up a Financial Reference Group.
With the introduction of the new Water Act 2000, the Association has directed considerable effort towards implementing the requirements of the Act. The Act provides for:
- water use planning, management and allocation;
- a regulatory framework for water asset management, customer service standards and dam safety; and
- governance of water supply statutory authorities of the State Government.
The Local Government Association of Queensland has commissioned consultants to examine the likely impacts on councils of new water allocation processes arising from the Act. The review will also look at how councils and ratepayers may be affected as a result of pricing polices accompanying the corporatisation of State Water Projects. The consultant will also examine the potential for substantial increases in bulk water charges associated with new contracts.
The review will be of particular interest to the 30 or more Queensland councils that source all or part of their bulk water supplies from SunWater, formerly State Water Projects. Case studies will be used to illustrate the likely effects of current policies upon councils and ratepayers. The final report is to provide background on issues and concerns raised by councils as well as providing a basis for the Association to develop responses to government on behalf of members.
The Water Act 2000 provides for regulation of service provision, asset management plans, and customer service standards. Subject to the Queensland Government finalising implementation guidelines, the Local Government Association of Queensland plans to commence a series of council seminars in 2001-02 to promote understanding of, and provide advice on, implementing these regulations.
During 2000-01, a number of councils received funding, through the State Local Government Development Fund, for projects that focused on improving service delivery, particularly opportunities for the shared delivery of services. These included:
- an assessment of opportunities for structural reform in the Shires of Augusta Margaret River, Busselton and Nannup;
- the appointment of a shared specialist information technology coordinator for the seven councils in the Avon Region (that is, Cunderdin, Dowerin, Goomalling, Northam Town, Northam Shire, Toodyay and York);
- an assessment of the opportunities for sharing ranger resources in the Shires of Murray, Waroona and Serpentine-Jarrahdale; and
- an assessment of alternative methods for completing annual construction and maintenance of road networks in the Shires of Chapman Valley, Mullewa and Northampton.
Review of legislation
In 2000, the Western Australian Department commenced a major review of the Local Government Act 1995. One of the main objectives of the review was to assess the impact of the Act on the efficiency and effectiveness of local government operations.
The Department has assessed around 450 issues since the review process began and it is proposed that approximately 100 separate amendments to the Act will be made in early 2002.
In addition to the review process, other sections of the Act were amended over the past year. These amendments are outlined below.
Proposed amendments arising from review of Act
Local public notice - The Act requires local government to give public notice about a number of its activities and functions. An amendment to change the definition of 'local public notice' will give councils the ability to choose the most effective method of communicating with members of its community.
Process for adopting local laws - The process prescribed in the Act in relation to adopting local laws is to be streamlined. It is proposed that the requirement for State-wide advertising once a local law has been made will be replaced with a requirement for local public advertising. In addition, the requirement to read out the name and purpose of a proposed local law is to be removed.
Closure of thoroughfares - At present, the power for a local government to close or make modifications to a thoroughfare only lasts for four years. At the end of this period another order is required to be made. This process is very time consuming and costly to councils with no real benefit to the community. It is proposed to amend the Act so the period for closures is unlimited.
Disposing of land - When selling land by private treaty, the Act prevents the property from being sold unless a valuation has been obtained within the previous six months. This is particularly onerous for country councils which subdivide and sell land over a period of years. The Act is to be amended so that council is simply satisfied that the valuation is appropriate at the time of sale.
Leasing of local government property - Advertising requirements of the Act in relation to leasing commercial property will be amended to allow a council to advertise a business plan and a private treaty leasing arrangement simultaneously if details of the proposed lessee are known when the business plan is being prepared. The amendment will help make leasing property more efficient.
Adoption of budget - The Act is to be amended to allow councils to adopt their budget from 1 June each year. At present, councils can adopt their budget from 1 July which has the potential to impede some councils' efficient provision of services to their communities.
Strategic planning - The Act currently prescribes a process for councils to follow when developing and adopting a plan of forward activities. A number of amendments to the forward planning provisions are proposed. The proposed amendments are to provide greater flexibility for councils in terms of the type of plan to be prepared and the process used to develop it. It is expected that community involvement will be enhanced and that the plan will better reflect the community's wishes.
'Attending' meetings using electronic means - A number of councils in Western Australia are geographically very large. Attending council meetings can be time consuming and costly both to councils and elected members. In addition, on occasions, natural phenomena, such as cyclones and floods, make it impossible for elected members to attend meetings. It is proposed to amend the legislation so members can participate in meetings using electronic means, such as teleconferencing or videoconferencing. On most occasions, members of the public will be permitted to observe meetings at the venues from which the councillors are linked.
Other amendments made during the year
Tendering process - A number of amendments to the regulations governing the local government tendering process were made during the year. These included:
- a requirement for councils to indicate, in the tender documents, whether it will be submitting an inhouse tender;
- the ability for a local government to receive tenders by fax or electronic means;
- a requirement for tenders to be evaluated against tender evaluation criteria; and
- the ability for a local government to delegate to other parties the right to open tenders under certain circumstances.
The State Government has recently announced formation of a Working Group to look at State and local government relations. The Group will consider aspects such as:
the shared vision of the State and local government;
- consultation mechanisms;
- partnership models;
- financial relationships; and
- decision-making processes.
The Group will comprise senior representatives from State and local government and will report to the Premier, the Minister for Local Government and Regional Development and the Executive of the Western Australian Local Government Association.
State-Local Government Partnerships Programme
The State-Local Government Reform Programme involved the three closely inter-related and overlapping phases of:
- boundary restructuring,
- legislative reform, and
- clarification of roles and responsibilities between State and local government.
In the initial stages, voluntary amalgamations of councils under the Local Government Boundary Reform Board reduced the number of South Australian councils from 118 to 68 and the Local Government Act was rewritten. Rewriting the Act brought to the local government system a modern, comprehensively updated, set of constitutional and operational legislative provisions.
The programme is now in its third phase of functional and related financial reform. A State-Local Government Partnerships Programme has been established to advance the third phase. The programme aims to coordinate development of new and better ways for State and local government to work together to improve service delivery to the community.
A joint management framework has been established to operate the Partnerships Program. This involves a Partnerships Forum chaired by the Minister for Local Government with members including the President of the Local Government Association of South Australia and a number of nominees of the State and local government sectors. This group provides a high-level forum for information sharing, discussion and cross-sector dialogue. The forum is supported by a steering group of senior State and local government officers which first met in September 2000.
The first stage of the Partnerships Programme has been a State-Local Government Scoping Study, jointly funded and supported by the State Government and the Local Government Association of South Australia.
The Scoping Study was designed to develop a shared understanding of the objectives of the Partnerships Programme and to identify practical opportunities and priorities for advancing the reform agenda. The Scoping Study has drawn together information previously gathered by both sectors and has identified a range of key issues for advancing good partnership arrangements. The study involved discussions with and input from a range of key stakeholders.
The final report of the Scoping Study, Partnering for Effective Government - Competitive Advantage for South Australia, was formally launched jointly by the Minister for Local Government and the President of the Local Government Association at the end of March 2001.
The report proposed six priority themes as a focus for further development and joint action. They were:
- State and local government strategic alignment
- Community asset management
- Community safety
- Human services
- Information management
- Natural resource management
The Partnerships Forum considered it important to separately identify the area of 'sustainable economic development' and this has been added to the six themes listed in the report. The Forum also resolved that the theme 'community asset management' should be expanded to be 'community infrastructure and asset management'.
Major priorities for advancing the Partnerships Programme at the end of 2000-01 were:
- further development of partnership projects 'on the ground' particularly at regional and local levels;
- promotion of good State-local government partnership models; and
- facilitating more effective strategic alignment and coordination of forward planning between State and local government.
While the Partnerships Programme is in its early stages, there are already several projects underway or soon to commence under the auspices of the Program. These include three projects that will be supported by grant funds from the Commonwealth Government provided specifically to the South Australian State-local government Partnerships Programme.
In early May 2001, the Federal Minister for Local Government and Regional Services announced a grant of $100,000 from the Local Government Incentive Programme for the Partnerships Program. These funds will be directed to:
- development of a Roads Infrastructure Database (to be managed by the Local Roads Advisory Committee, in conjunction with the Office of Local Government);
- a project aimed to increase the participation of Aboriginal people in local government, with a particular focus on the electoral processes (to be managed by the Office of Local Government and the Local Government Association, with support of the Department of State Aboriginal Affairs); and
- a Regional Workforce Accommodation Solutions study (to be managed by the Office of Regional Development under the auspices of the Partnerships Program).
Operation of new local government legislation
The framework now provided by the South Australian Local Government Act 1999 specifies the role of local government elected members, as members of the governing body of the council, in reviewing the effectiveness of councils' objectives and policies, and reviewing the efficiency and effectiveness of councils' service delivery, resource allocation, expenditure and activities.
All councils are required to develop and adopt Strategic Management Plans for management of their areas by 1 July 2002.
Such Strategic Management Plans must identify the council's objectives for the area and provide a clear indication of matters such as:
- the extent to which the council intends to coordinate with the State and Federal Governments in the planning and delivery of services in which there is a common interest;
- the measures (financial and non-financial) that are to be used to monitor and assess the performance of the council over the relevant period;
- the relationship between the council's objectives and activities, and its rating policy;
- the means by which its activities are to be carried out, with particular reference to its policies on contracts and tenders (which include policies on the contracting out of services and competitive tendering and the use of other measures to ensure that services are delivered cost-effectively); and
- issues associated with arranging its affairs so as to separate its regulatory activities from its other activities.
Moreover, councils must adopt a process or processes to ensure that members of the public are given a reasonable opportunity to be involved in the development and review (at least every three years) of their strategic management plans.
These plans form part of a clear accountability cycle and management framework which requires councils to link strategic plans with operational plans and policies. The plans and policies are designed to achieve the objectives that have been identified to set out ways of monitoring whether their activities are achieving their objectives and to report on these in their annual reports.
The South Australian Office of Local Government, together with the Local Government Association of South Australia, is supporting councils' development of their strategic management plans and associated policies in a variety of ways. These ways range from provision of training and advice to targeted financial and practical assistance for smaller rural councils under the Supporting Rural Councils programme.
Local government infrastructure
Councils in South Australia manage assets with an estimated value in excess of $8 billion. The local government sector has completed and disseminated the results of a major study on its infrastructure assets.
The objective has been to help councils improve their asset management through:
- providing a structural database and analytical tools;
- improving knowledge of the issues and good asset management practice; and
- providing a 'way forward' through suggestions, examples and recommendations.
The study has confirmed what local government in South Australia itself had recognised: the need to start planning now for increased attention to renewal of infrastructure assets.
New strategic directions for the Outback Areas Community Development Trust were developed as a result of the Government's review of the performance and operations of the Trust. In its new role the Trust will play a leading part in the coordination of services in the outback areas and link the forward planning of State agencies for outback service delivery with the Trust's strategic management planning and with local community plans.
In June 1996, as required under the Competition Principles Agreement, the former Tasmanian Government submitted to the National Competition Council a policy statement called Application of National Competition Policy to Local Government (Application Statement). This statement was prepared by the then State Government, in consultation with local government, and provided a broad policy statement on how it intended the key principles, where appropriate, be applied to local government.
Progress to date on applying competitive neutrality, prices oversight and legislation review to local government is outlined below.
Under the Application Statement, when applying competitive neutrality principles, councils are required to:
- identify relevant business activities considered to be significant business activities;
- undertake public benefit assessments of the corporatisation of those business activities classified as public trading enterprises under the Australian Bureau of Statistics' Government Financial Statistics Classification, as outlined in the Application Statement (generally water and sewerage); and
- corporatise those public trading enterprises where a public benefit assessment indicates that the benefits outweigh the costs of doing so or apply full cost attribution to all other significant business activities.
Accordingly, councils undertook public benefit assessments of the corporatisation of their public trading enterprises during 1999.
All councils found that corporatisation of their public trading enterprises would not be in the public benefit, mainly due to the small size of Tasmanian councils and therefore of their business activities. These results were submitted to a peer review group consisting of the Local Government Association of Tasmania and council representatives. The peer review group endorsed the results of the public benefit assessments and provided a recommendation to the Treasurer to this effect in November 1999. The Treasurer endorsed the public benefit assessment and the outcome of the peer review assessment on 3 December 1999.
The joint bulk water authorities - Hobart Water, Esk Water and Cradle Coast Water - have been corporatised under the Local Government Act, independent of this process.
Councils are continuing to apply full cost attribution to their business activities in a form appropriate to their size. Importantly, the Local Government Act was amended in 1999 to require councils to disclose the full cost of operating their significant business activities in their annual reports.
To comply with the competitive neutrality principles, the Local Government Division of the Department of Premier and Cabinet has developed a Community Service Obligation Policy and Guidelines framework for councils. This policy is consistent with the policy applying to the State Government's Government Business Enterprises.
The main objectives of the Community Service Obligation Policy are:
- to ensure that a council's social and other objectives are achieved without impacting on the commercial performance of its significant business activities;
- to improve the transparency, equity and efficiency of Community Service Obligation service delivery; and
- to be consistent with National Competition Principle requirements.
The Policy was implemented in early 2001, in accordance with Tasmania's National Competition Principle obligations.
The Application Statement also requires a competitive neutrality complaints mechanism to be established. This mechanism was established under the Government Prices Oversight Regulations. Under the regulations, a person who believes that he or she has been adversely affected by a contravention of the competitive neutrality principles may lodge a complaint with the Government Prices Oversight Commission which has responsibility for investigating all alleged breaches of the competitive neutrality principles in the State.
During 2000-01, two complaints were lodged with the Commission relating to alleged breaches of the competitive neutrality principles by local government authorities. The complaints were in relation to operation of the Clarence Swim Centre leased out by the Clarence City Council and operation of the Launceston City Council trading as Total Workforce.
The Application Statement provided that local government monopoly or near monopoly providers were to be brought under the prices oversight jurisdiction of the Commission. The Government Prices Oversight Amendment Act 1997 extended the coverage of the Government Prices Oversight Act 1995 to include local government monopoly or near monopoly services.
In addition, in accordance with the Agreement to Implement the National Competition Policy and Related Reforms, Tasmania is required to implement the Council of Australian Governments' Strategic Framework for the Efficient and Sustainable Reform of the Australian Water Industry (Strategic Framework). The Strategic Framework requires metropolitan bulk water suppliers to charge on a volumetric basis to recover all costs. Metropolitan bulk water suppliers are to also earn a positive real rate of return on the written-down replacement costs of their assets.
Against this background, the Commission was required to undertake an investigation into the pricing policies associated with provision of bulk water by the Hobart Regional Water Authority, the Esk Water Authority and the North West Regional Water Authority in 1998. As a result, the Commission recommended maximum prices (in the form of maximum revenues and pricing principles) to be charged by each of the State's three bulk water authorities for a three-year period commencing 1 July 1999. The Government endorsed the Commission's pricing principles for bulk water which were to apply until November 2001. The Commission has recently begun the next investigation into the pricing policies of these authorities for prices commencing in April 2002.
Treatment of local government by-laws
The Local Government Division of the Department of Premier and Cabinet has implemented procedures for reviewing all proposed or existing by-laws to ensure that any restrictions on competition are fully justified as being in the public benefit. The By-Law Making Procedures Manual was released in August 1997 and represents the by-law section of the Government's Legislation Review Programme. All by-laws proposed since that date have been required to comply with the new procedures.
All by-laws made under the 1962 Act remained in force under the current Local Government Act (to the extent that they were consistent with the new Local Government Act) for a period of five years, and were due to expire on 17 January 1999.
A number of councils have been progressively reviewing their by-laws and a number have been repealed. As a result, there has been a continued decline in the overall number of by-laws. However, a significant number of councils were not prepared for the statutory expiry of all these by-laws on 17 January 1999. In December 1998, the Government therefore introduced the Local Government (Savings and Transitional) Amendment Act 1998 to extend the expiry date until 31 March 1999. This resulted in the automatic expiry at the end of March 1999 of approximately 500 by-laws made under the 1962 Act.
All the 115 new by-laws gazetted under the current Local Government Act since the commencement of that Act in January 1994 have been subjected to the legislation review processes. Councils are now carefully considering the subject matter they wish to deal with through by-laws, such that new by-laws are generally made to deal solely with matters of broad governance rather than relating to commercial operations. Tasmanian councils have repealed their obsolete by-laws and replaced them, where appropriate, with by-laws that focus on governance arrangements and comply with National Competition Principles.
Amendments to the Local Government Act in 1999 resulted in further application of National Competition Principles to local government by-laws, with the requirement that any new by-laws with a significant impact on the community be subject to a Regulatory Impact Statement. This amendment formalised the procedure already required in the By-Law Making Procedures Manual.
As the Northern Territory has concentrated on developing performance indicators, their input has been incorporated into that section of the report rather than here.
Australian Capital Territory
City Management Branch within the Urban Services Department is the ACT Government's purchaser of a range of municipal services. Its core business is the ownership and management of the use, maintenance and creation of public assets. To do this, it provides policy advice, sets standards, plans and implements programmes and purchases services from providers in the areas of:
- roads, stormwater, community paths, bridges and traffic signals;
- waste, recycling and resource recovery services; and
- urban parks, lakes and public open space.
In 2000-01 City Management achieved Quality Assurance certification ISO 9001 - Identified Compliance with Best Practice Procedures.
ACT Waste Management
Measures undertaken by ACT NOWaste include:
- preparation and development for online transactions;
- conducted trials of recycling services in public places and an organic waste 'bio bin' collection from households;
- expressions of interest were called to identify best practice options for future domestic waste collection, recovery and reprocessing technologies;
- implementation of a Development Control Code which ensures best practice waste management at residential and commercial developments including minimisation of waste during construction and demolition operations;
- rationalisation of the standards for the design and construction of infrastructure to maximise the use of recycled materials; and
- continuation of education programmes (including media releases, promotional materials, presentations to delegations, students, Government and other interested parties), to encourage the community to reduce, recycle and reuse waste.
Canberra Urban Parks and Places
In 2000-01, Canberra Urban Parks and Places, as the purchaser of park and public place maintenance services, continued its focus on improving the efficiency and effectiveness of delivery of services by:
- continuing the programme of market testing the delivery of services - contracts were let for a further two of the six horticultural regions, leaving only one horticultural region and tree services remaining to be tendered;
- widening the scope of open space maintenance contracts to integrate a variety of services associated with open space/road asset boundaries previously delivered separately, thus eliminating overlaps and improving service provider focus; and
- continuing to review contract management procedures and, in partnership with contractors, continuing to improve. Compliance with service specifications increased from 85.2 per cent in 1998-99 to 91.8 per cent in 1999-2000 and 92.7 per cent in 2000-01.
The Department of Urban Services has undertaken market testing of its maintenance services. Six term maintenance contracts (with the contract period of three years) have been developed for stormwater, streetlight, traffic light and road assets. These contracts will be performance based with the adoption of a standard format.
Recognising that existing standards for design and construction of urban infrastructure are several years old, tend to be prescriptive rather than performance based and do not recognise new technology, the ACT Government decided to review and update these standards as required. These standards will then be up to date and will align with Australian best practice.