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Following a review in 1994 of the Local Government (Financial Assistance) Act 1986, the Federal Government enacted the replacement Local Government (Financial Assistance) Act 1995. The 1995 Act requires that the Minister report to Parliament 'as soon as practicable' after 30 June each year on the operation of the Act.

This annual report to Parliament must include an assessment of:

  • the extent to which the allocation of financial assistance grants has been made on a full horizontal equalisation basis;
  • the methods used by the Local Government Grants Commissions in making their recommendations; and
  • the performance by local governing bodies of their functions including:
    • their efficiency; and
    • services provided by them to Aboriginal and Torres Strait Islander communities.
Submitting an annual report to Parliament seeks to achieve two of the Federal Government's goals in relation to the arrangements under the Act. These goals are:
  • to increase transparency and accountability of the States in the allocation of the Federal Government's grants to local governing bodies; and
  • to promote consistency in the methods by which grants are allocated to achieve equitable levels of services by local governing bodies.
Reporting on the performance of local governing bodies helps to assess whether two of the purposes of the Act are being achieved. These purposes are:
  • to improve the efficiency and effectiveness of local government; and
  • to improve the provision by local governing bodies of services to Aboriginal and Torres Strait Islander communities.

The report covers all local governing bodies in receipt of grants under the Act. It fosters transparency and accountability by enabling an interstate and an intrastate comparison of the allocation of grants to local governing bodies. Chapter 2 of the Report outlines the history, process and principles of apportioning funding between the States and between local governing bodies within a State. Appendix D sets out the financial outcomes for all local governing bodies in receipt of the grants. The classification system used in Appendix D to group similar local governing bodies is described in Appendix F.

Consistency of method in allocating funding to local governing bodies is promoted under the National Principles, a copy of which is at Appendix A. The methodologies adopted by each of the States in allocating funding to local governing bodies are summarised in Appendix B. The grant outcomes for each council in 2001-02 are at Appendix D and the ranking of local governing bodies within a State on a relative needs basis is at Appendix E.

Efficiency and effectiveness of Local Governments continue to be challenging to assess. However, recent developments are outlined at Chapter 3. State reports on performance and reform are at Appendix G. The National Office of Local Government continues to promote improved performance of local governing bodies through the National Awards for Innovation. The 2002 Innovation Award winners are at Appendix I.

Chapter 4 addresses infrastructure issues and has a bearing on the efficiency and effectiveness aspects of Local Government performance.

A report on the gains that have been made in 2001-02 in the delivery of Local Government services to Aboriginal and Torres Strait Islander communities is in Chapter 5 and the reports from the States are at Appendix H.

The division of responsibilities and associated financial arrangements between Federal, State and Local Governments are fundamental to the future of Local Government. The Cost Shifting Inquiry, announced in May 2002, stands to have a significant impact on these. An overview of the purpose and nature of the Inquiry is provided at Chapter 6.

In recognition of the increasing level of participation of Area Consultative Committees (ACCs) in regional development, the State maps on the inside back cover of this report include ACC boundaries. The Accessibility/Remoteness Index for Australia has been retained on the map of Australia.

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