Local Government Performance

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Application of National Competition Policy in Local Government
Performance indicators
Other State developments
Federal activities to support Local Government performance improvement

The National Report is to include an assessment of the performance of councils of their functions, including their efficiency. The assessment is to be based on comparable national data and for the financial year under review.

At the time the legislation was passed in 1995, the Commonwealth's intention was to work with States and Local Government Associations to develop national performance indicators for Local Government. In support of this, a resolution had been passed at a meeting of the Local Government Ministers' Conference in April 1995. Local Government Ministers agreed to jointly pursue a three-pronged benchmarking and efficiency programme covering:

  • the development of national performance indicators for specific services or functions, which measure not only unit costs but also quality and appropriateness of services
  • processes of continuous improvement that enable councils and their staff to identify best practice through comparing their performance and strategies with other councils through informal networks of councils
  • projects to develop, at a national level, specific new technologies, new practices and systemic reforms that substantially increase efficiency and/or effectiveness of Local Government performance.

Progress in developing national performance indicators under the first prong of this strategy proved difficult.

In 1997, the Industry Commission (now the Productivity Commission) was asked to review the value and feasibility of developing national performance indicators for Local Government. It concluded that a nationally consistent approach to performance indicators was not warranted at that stage but that there would be considerable benefit to the community by improving existing State and Territory performance measurement systems.1

1 Industry Commission 1997, Performance measures for councils: Improving Local Government performance indicators, Research Report, Australian Government Publishing Service, Melbourne, October.

It also concluded that, although national performance indicators would facilitate reporting by the Federal Minister on Local Government 's performance in the National Report, this requirement could be met by providing information and analysis on:

  • the application of the National Competition Policy to Local Government
  • progress by the States in improving the use of performance indicators
  • developments in areas such as competitive tendering and contracting, increased use of service charters and measures of customer satisfaction, and changes in the structure of Local Government.

For the purpose of the 2001-02 National Report, State Local Government Ministers and Presidents of Local Government Associations were asked to provide a report to the Federal Government on measures taken in 2001-02 to improve efficiency and effectiveness of Local Government to deliver services. They were also asked to report on measures taken in 2001-02 to develop comparable performance indicators for Local Government. These reports are at Appendix G.

This chapter examines the reports in Appendix G in relation to the issues suggested by the Industry Commission.

Application of National Competition Policy in Local Government

At the 11 April 1995 meeting of the Council of Australian Governments (COAG), Federal and State Governments agreed to implement a package of legislative and administrative reforms called National Competition Policy (NCP). NCP is a national, coordinated approach to increasing competition in Australia across both business and industry in both the public and private sectors.

NCP has involved:

  • separating the regulatory and commercial functions of public monopolies
  • providing third party access to significant infrastructure facilities essential to competition
  • requiring government business enterprises (GBEs) to face a similar tax and regulatory regime to private businesses
  • reforming regulation that unjustifiably restricts competition
  • applying trade practices legislation and prices scrutiny to GBEs.

Although Local Government was not formally a party to the NCP agreement, the reforms have impacted on Local Government. Councils have mainly been affected where:

  • they operate 'significant government business enterprises' or 'undertake significant business activities' as part of a broader range of functions which compete with, or could compete with, private sector businesses, and/or
  • they have regulations that unnecessarily restrict competition.

In addition, councils with water supply functions were affected by water industry reforms that were adopted by COAG in 1992. These are considered as 'related reform' and are part of the NCP reform package.

As part of NCP, the Commonwealth agreed to provide competition payments to the States. These payments are subject to regular assessments by the National Competition Council that the States are achieving satisfactory progress with NCP implementation. Progress by Local Government in implementing reforms may be considered as part of the Council's assessment of a State.

In 2001-02, $733.3 million was provided in competition payments. These ranged from $242.5 million to New South Wales to $7.6 million to the Northern Territory. Only Queensland, Victoria and Western Australia have provided Local Government in their States with a portion of the competition payments as an incentive to implement reforms.

All States and Territories received their full allocation of payments in 2001-02, with the exception of Queensland. The National Competition Council found that:

while the Queensland Government has taken a positive and active approach to encouraging reform among Local Governments, one Local Government, Townsville City Council has failed to explain why introducing reform of water pricing within its jurisdiction is not in the public interest. In this assessment, the Council recommended a permanent reduction of $270 000 in Queensland's NCP payments from 2001-02 (reflecting the remaining money available to Townsville Council for water reform through the Queensland Competition Authority's Financial Incentive Scheme). This reduction relates to the failure by Townsville City Council to take a rigorous approach to considering consumption-based price reforms. The Council will reconsider Townsville's approach to two-part tariffs in the 2002 NCP assessment. It will look at both the progress made by Townsville and the State Government's efforts to resolve the issue. At that time, the Council will reconsider whether a continued reduction in competition payments is warranted and the appropriate size of any such reduction.2

2 National Competition Council 2001, Assessment of governments' progress in implementing the National Competition Policy and related reforms: June 2001, AusInfo, Canberra.

The Federal Government accepted this recommendation.

In the State reports at Appendix G, only New South Wales, Queensland and Tasmania have reported on progress with NCP during 2001-02. In part, this reflects that the NCP reform process agreed in 1995 is now nearing completion.

New South Wales reported that, following a comprehensive review of the Local Government Act 1993 (NSW), amendments to the Act are proposed to remove a number of anti-competitive provisions.

In Queensland, the State Government has provided $150 million (in 1994-95 dollars) from NCP payments to create a financial incentive package to encourage councils to implement NCP. Total funding of the package is conditional on Queensland receiving the full amount of its competition payments from the Federal Government.

By 30 March 2002, Queensland councils had nominated 736 of their business activities for reform under NCP. Once a business is nominated, councils must undertake reforms to be eligible for financial incentive package payments. Although councils are reported to have made good progress in implementing NCP reforms, the deadline for completion of reforms has been extended for a year from the original deadline of 30 June 2002.

On current trends, Queensland councils may miss out on $50 to $70 million in incentive payments. For this reason, a Business Management Assistance Programme was established in August 2001, funded using $600 000 from the financial incentive package and administered by the Local Government Association of Queensland. As part of the programme, consultants work with the councils participating in NCP reforms to develop action plans to implement the remaining NCP reforms by the 30 June 2003 deadline. However, the programme's aims are broader than this. The programme seeks 'to improve the capacity of councils and to enhance their effectiveness in providing services to their community'.

The report for Tasmania documents progress since 1995 in implementing NCP reforms most of which occurred before 2001-02.

There were other NCP developments related to Local Government in 2001-02. The Productivity Commission undertook a review of Local Government exemptions under Section 2D of the Trade Practices Act 1974. Section 2D of the Act exempts Local Government licensing decisions and internal transactions from the competition provisions (in Part IV) of the Act. The exemption was reviewed in line with the Commonwealth's commitment under the Competition Principles Agreement to review all legislation that restricts competition to ensure that the legislation is of net benefit to community as a whole.

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Performance indicators

In support of State-based performance indicator systems for Local Government, the Federal Government has provided funding under the Local Government Development Programme and the Local Government Incentive Programme. For instance, it has provided:

  • funding of $200 000 in 1997-98 to the Victorian Government to develop a survey to measure community and customer satisfaction with councils
  • funding of $80 000 in 1997-98 to the Western Australian Government to develop key performance indicators for Local Government
  • funding of $85 000 in 1995-96 for the South Australian Government to develop performance indicators
  • funding of $150 000 in 1998-99 and $50 000 in 2000-01 to the Local Government Association of Tasmania and the Tasmanian Government to develop key performance indicators
  • funding of $25 000 in 1996-97 and $100 000 in 1998-99 for the Northern Territory Government to develop, amongst other things, a performance measurement system for Local Government.

A report from each of the States and Territories on their individual progress towards developing performance indicators is at Appendix G. From these reports, all States either have or are developing performance indicators but there are some major differences in approaches being taken and in the support and involvement of councils.

Most States have made performance information available through printed reports and published on the Internet and some States are able to provide the data for particular indicators for individual councils over a number of years.

A number of States have or are developing surveys to assess the level of satisfaction of customers to the services councils provide. Victoria has had such a survey in place for five years (see box 'Victoria's community satisfaction survey 2002'), while South Australia and Tasmania are in the process of developing these surveys. Such surveys, particularly when undertaken on a State-wide basis, can provide valuable feedback to councils and their associations not only on their performance, relative to that of other council in the State, of the services they provide but also on the particular council services that are of concern to their community and require attention. These surveys help to measure the effectiveness of the delivery of councils' services.

New South Wales released a report in September 2002 on comparative information for councils for 2000-01. This is the 11th edition of this publication available both as a printed publication and from the Internet at www.dlg.nsw.gov.au.

The publication permits comparisons for a single measure:

  • across a number of years for each council
  • across similar councils for the same year by grouping councils using a version of the Australian Classification of Local Governments (ACLGs).

In addition to the performance measures, some basic contextual information (such as population and area density) is provided for each council.

Victoria has moved away from its suite of 76 indicators that had been developed to measure the health and performance of councils. The focus has moved to requiring councils to report to its community through their annual reports. For 2000-01, seven indicators were required:

  • the overall performance of the council as measured by the annual community satisfaction survey
  • the average rates paid by all properties, including residential, commercial and farms
  • the average rates paid by residential households
  • the expenditure per rating assessment on services to the community
  • the expenditure per rating assessment on renewing, replacing and providing infrastructure such as roads, bridges, building;
  • the level of debt and other liabilities per rating assessment
  • the operating result (that is, income less costs) per rating assessment.

Victoria did not publicly release the 2000-01 values of these key indicators for all councils. Instead, it published a report, Local Government in Victoria 2001, which provided the median value of the key indicators for councils in each of five council groups: inner metropolitan, outer metropolitan, regional cities, large shires and small shires.

Councils will report against four additional indicators in their 2001-02 annual reports.

Victoria's community satisfaction survey 2002

This was the fifth survey of Victorian residents' perceptions about the performance of councils with 75 of the 78 councils participating.

Across Victoria, 48 per cent of respondents rated their council's performance as 'excellent' or 'good' in 2002. This compares with a result of 47 per cent in 2001 and only 38 per cent in 1998. In 2002, 22 per cent of respondents rated their councils' performance as 'needs improving' compared with 21 per cent in 2001 and 31 per cent in 1998.

In 2002, the performance of councils against two attributes - recreational facilities and economic development - showed a statistically significant improvement in comparison to 2001. In the case of economic development, the change was driven by improved opinions of their council amongst respondents in inner metropolitan councils, large rural cities and regional centres, and large rural shires.

Metropolitan respondents were generally more satisfied than rural and regional respondents with their council's services. In particular, metropolitan respondents rated more positively their council's overall performance, advocacy, local roads and footpaths, recreational facilities and waste management. Rural and regional respondents rated their council's performance more positively in health and human services, traffic management and parking facilities and the appearance of public areas.

An analysis was undertaken of the individual services that had an impact on the overall performance of councils across Victoria. From this analysis, the most important drivers of the overall performance of councils were:

  • local roads and footpaths
  • economic development
  • town planning policy and approvals
  • recreational facilities
  • the appearance of public areas.

Further details of the survey can be found in Annual community satisfaction survey 2002: research results, prepared for the Victorian Department of Infrastructure by Newton Wayman Chong & Associates.

The 2000-01 edition of the Queensland Local Government Comparative Information report was released in July 2002. The report provides indicators of efficiency, effectiveness and quality of services as well as providing contextual information to assist comparisons of councils. Also included for the first time is time series data over the four years from 1997-98 to 2000-01. This allows a comparison of an indicator over a number of years for a particular council. The report is available as a printed document as well as available for download from (no longer available).

Queensland has also held training workshops to promote the development, application and integration of performance measurement processes within councils.

The Western Australian Government states that, although indicators have been developed in Western Australia, the reporting of comparative indicators across councils appears to be problematic at this stage. This is because most councils have not achieved a 'satisfactory level of performance measurement and disclosure'. Some indicators for councils are being calculated from council data available in financial statements and information returns to other agencies.

In South Australia, the Local Government Association is responsible for developing a comparative performance measurement system for councils.

The development and testing of 18 sector-wide comparative corporate performance measures has been completed and data for the measures has been collected. Included in the data is a community survey of residents. Individual results will be distributed to councils in 2002-03.

The intention is for the Association to manage the collection and distribution of performance information on an annual basis.

The 2000-01 report on performance indicators for councils in Tasmania was released in April 2002. All councils provided data on a voluntary basis for the publication of 51 key performance indicators.

In August 2001, the Tasmanian Local Government Association received Federal funding under the Local Government Incentive Programme to commission a State-wide customer satisfaction survey. During October 2001, approximately 1300 residents across the State participated in a telephone survey. The survey measured both the importance residents attached to, and the satisfaction they derived from, each service. A report on the survey's findings is available from the Association.

In the Northern Territory, the publication of performance indicators for Local Government is in its fourth year. Different approaches have been taken in the development of performance indicators for the municipal and larger councils compared to the smaller and remote councils. Despite this, the failure of a number of councils to provide data has resulted in a review of the method used to collect the data.

The Industry Commission in its research report on comparative indicators for Local Government stated that the goal for performance measurement should be to develop and publish dispassionate and objective data to facilitate well-informed judgements that result in sound public policy action. It also pointed to the following lessons it had learned through its work in developing performance indicators for government service provision:

  • Performance measurement is best linked to service outcome objectives directly.
  • It is important to develop a framework for outcome indicators.
  • The performance measurement process is likely to work more effectively when it:
    • tackles data issues iteratively
    • makes any assumptions and qualifications transparent
    • is managed independently of service providers but takes advice from them.
  • The context in which services are delivered needs to be taken into account in interpreting reported performance.
  • Performance measurement does not obviate the need for sound judgement that takes account of the local conditions and preferences, when assessing the level of performance.3

    3 Industry Commission 1997, op. cit., p. 39.

The approaches the States have adopted for developing comparative indicators for Local Government do not appear to have accepted much of the Commission's advice.

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Other State developments

In addition to NCP reforms and the development of performance indicators for Local Government, States report on other activities they have instituted in support of improving Local Government performance. Details of these activities are provided in Appendix G. Some examples follow.

Best value - Victoria

In December 1999, the Victorian Government introduced a 'best value' approach that enables councils to review a service so that they may determine the most effective means of providing that service to the community. All councils are required to apply best value principles to their services by December 2005.

The six best value principles are:

  • There must be quality and cost standards set for all services that a council provides to the community.
  • All services provided by a council must be responsive to the needs of the community.
  • Each service provided by a council must be accessible to those members of the community for whom the service is intended.
  • A council must achieve continuous improvement when providing services to the community.
  • A council must develop a program of regular consultation with its community in relation to the services it provides.
  • A council must report regularly to its community on its achievements in relation to the best value principles.

In December 2000, a Local Government Best Value Commission was established. The Commission is an advisory body comprised three independent experts who will advise the Minister on the implementation of best value in Victoria. The Commission will not focus on the performance of individual councils.

Legislative Review - Victoria

Victoria reported on the review of the State's Local Government Act. In response to the review, amendments to the Local Government Act 1989 and the Constitution Act 1975 are planned to formalise the place of Local Government in the Victorian Constitution, ensure greater public accountability and transparency, reform electoral procedures and improve the functioning of Local Government.

Strategic management plans - South Australia

In South Australia, all councils were required to develop and adopt strategic management plans by 1 July 2002. The intention is that these plans articulate the council's goals and objectives and its vision for the community. The plans should also complement the State's planning strategy.

These plans form part of an accountability cycle and management framework. Councils are required to:

  • link strategic plans with operational plans and council policies designed to achieve the objectives that have been identified
  • set out ways of monitoring whether their activities are achieving their objectives
  • report on these in their annual reports.

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Federal activities to support Local Government performance improvement

National Awards for Local Government

The National Awards for Local Government foster and acknowledge innovation and excellence in Local Government. The awards identify and reward Local Government bodies, associations and other collaborating organisations who are developing and implementing innovative, resourceful practices that improve Local Government outcomes and help build sustainable Australian communities.

For 2002, national awards categories were:

  • business and regional development
  • community services
  • engineering and infrastructure, planning and urban design
  • environment, natural resource management, partnerships for biodiversity conservation
  • environment: sustaining local communities - Local Agenda 21
  • financial management
  • health services and aged care
  • information technology
  • organisational practices
  • youth services
  • a special award for strengthening Indigenous communities.

Summaries of all entries for the 2002 National Awards for Local Government are included in the publication Leading Practice in Local Government Guide Book 2002. The guide book was circulated to all local governing bodies in November 2002. It is available on the Internet at Leading Practice in Local Government.

For full details of winning projects and category awards, see Appendix I.

Leading Practice Seminar Series

The Leading Practice Seminar Series is a Department of Transport and Regional Services initiative started in 2000 as a means of providing entrants for the National Awards for Local Government the opportunity to share their experiences with other councils around Australia.

The seminar series, which is managed in partnership with councils, regional organisations of councils and Local Government Associations, provides an opportunity for councils to meet and exchange information with the Award winners. The award winners that attend a seminar are selected by the councils involved in the seminar. The seminar series also allows councils to hear about project case studies from their colleagues and to discuss how those case studies might apply in their particular situation.

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