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Glossary

ABS
Australian Bureau of Statistics

ACLG
Australian Classification of Local Government

ATSIC
Aboriginal and Torres Strait Islander Commission

balanced budget approach
A method of general purpose grant assessment whereby gross expenditure needs and revenue capacity for each council are assessed with the difference between the expenditure and revenue assessments being the equalisation need.

capping
Capping, for the purposes of this report, is the stabilising of component factors to bring a council's grant to within a set range of that council's grant in a previous year.

CGC
Community Government Council

COAG
Council of Australian Governments

Commonwealth Grants Commission
A statutory authority established by the Commonwealth Grants Commission Act 1973 whose main task is to recommend to the Australian Government, for consideration by the Ministerial Council for Commonwealth-State Financial Relations, the shares for each State and Territory of the pool of funds that includes GST revenue.

cost adjustors
See 'disability factor'

cost relativity indexes
See 'disability factor'

CRI
cost relativity index

direct assessment approach
A method of grant assessment whereby a positive or negative assessment of expenditure need or revenue capacity is made for each council relative to a standard assessment. The sum of positive and negative assessments is the equalisation need.

disability factor
A measure of underlying influences that would lead a council to spend more (or less) per capita than the State average, expressed as an adjusting ratio of the State average. In some States, these are called 'cost adjustors' and 'cost relativity indexes'.

effort neutral or neutrality
The assessment of a financial assistance grant is effort neutral when it neither rewards nor penalises a council where expenditure or revenue-raising patterns vary from the State average because of policy differences, differences in efficiency or levels of self help.

escalation factor
The ratio by which the level of financial assistance grant nationally is adjusted, and which the Treasurer determines according to the requirements of the Act.

estimated factor
This is the escalation factor, as determined by the Treasurer at the start of the financial year, to determine the levels of grant payments, according to the requirements of the Act which will be paid to local government for that year.

final factor
This is the escalation factor, as determined by the Treasurer at the end of the financial year, according to the requirements of the Act. It will determine the final entitlement payable for local government financial assistance for that year. Determination of the final factor will (usually) require adjustments to be made to the actual payments, which were based on the estimated factor at the beginning of the year.

financial assistance grants
These are 'untied' funds (not tied to a specific purpose) the Australian Government grants to local governments under the Act through the State governments.
Financial assistance grants to local government are supplied to States as 'tied' (for a specific purpose) but once distributed to local government are 'untied'. They comprise two components: 'general purpose' and 'local road'.

full horizontal equalisation
Distribution of general purpose grants to local government, with the objective of ensuring each council is able to function, by reasonable effort, at a standard not lower than the average standard in the State and takes account of differences in expenditure required in performing its functions and in the capacity to raise revenue (s. 6.3(a) and s. 6.3(b) Local Government (Financial Assistance) Act 1995).

general purpose grant
This is one of two components (the local road grant being the other) of the financial assistance grants to local government. The objective is to strengthen local government by addressing the vertical fiscal imbalance caused by local government's narrow tax base. General purpose grants promote equity between councils and certainty of funding. They are distributed between States on a per capita basis and within States on a horizontal equalisation basis in accordance with the National Principles.

GST
goods and services tax

inclusion approach
The inclusion, in calculating a council's general purpose grant, of all assessed expenditure and grants, including that related to Commonwealth and State specific-purpose funding.

KPMG
Klumzeld Peat Marwick Goerdeler (Chartered Accountants and Management Consultants)

Local Government Grants Commissions
In each State and the Northern Territory, local government grants commissions have been established under State and Territory law. Their primary role is to make recommendations to the State or Territory minister on distributing available financial assistance grants to councils in that State or Territory.

local road grant
This is one of two components (the other being the general purpose grant) of the financial assistance grant to local government. It was formerly provided as a tied grant and became 'untied' from 1 July 1991. It continues to be identified and distributed according to the former tied grant arrangements. It is distributed between States on the basis of historical shares and within States on the basis of road expenditure needs.

minimum grant entitlement
Every council is entitled to receive a minimum grant which is not less than the amount it would receive if 30 per cent of the available general purpose grant for that State were distributed on a per capita basis.

National Competition Policy
A series of reforms to encourage competition and discourage anti-competitive behaviour, set out in three intergovernmental agreements (the Competition Principles Agreement, the Conduct Code Agreement and Agreement to Implement the Competition Policy and Related Reforms), which emanated from the Report of the Independent National Competition Policy Review Committee (Hilmer Report).

negative allowances
Allowances which equalise the financial capacity of 'advantaged' councils to that of the average level for that State, by accordingly reducing the level of the financial assistance grant. Councils assessed as being 'advantaged' may, for example, enjoy high values per property.

OECD
Organization for Economic Cooperation and Development

operational subsidy
Grant provided to councils that do not have access to significant other revenue, such as that from rates.

positive allowances
Allowances which equalise the financial capacity of 'disadvantaged' councils to that of the average level for that State, by accordingly increasing the level of the financial assistance grant. Councils assessed as being 'disadvantaged' may, for example, suffer low values per property.

public trading enterprise
Public trading enterprises are resident public enterprises, such as Telstra or Australia Post, mainly engaged in producing goods and services for sale in the market place at prices which aim to recover most of the costs involved.

rate capacity
A measure of a council's capacity to raise revenue from rateable property, having regard to activities on that property, such as agriculture or mining.

rate pegging
Action by State governments to limit any variation in rates levied by councils, usually by ceiling or allowable limit on the percentage increase from year to year.

revenue allowances
Revenue allowances compensate councils for their relative lack of revenue-raising capacity. Property values are the basis for assessing revenue-raising capacity because rates, based on property values, are the principal source of councils' income. Property values, to some extent, are an indicator of the relative economic wealth of local areas.

ROC
Regional Organisations of Councils - Partnerships between groups of local governments that agree to collaborate on matters of common interest.

specific purpose grant
Payments made by Commonwealth or State or Territory governments to a council for a specific purpose. Such grants usually require a council to meet certain conditional arrangements.

standardised revenue and expenditure
The assessed (as distinct from actual) revenue and expenditure for each council, determined by its local government grants commission as required for horizontal equalisation purposes, which takes into account each council's expenditure needs, revenue-raising capacity and disabilities.

structural reform
A change to the external relationships between councils including boundary changes and amalgamation of councils, cooperative service provision, major resource sharing initiatives and joint service delivery.

the Act
For the purposes of this Report, the Act refers to the Local Government (Financial Assistance) Act 1995.

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