Asset management

Table of Contents

5.14 Strategies for Addressing Funding Gaps

Strategies for addressing funding gaps depend on the nature of the gap, i.e. whether it occurs in respect of existing or future services, as well as in operations, maintenance or renewal requirements (IPWEA 2015b). Some possible strategies are identified in Table 5.8.

Table 5.8: Strategies for addressing funding gaps

Area affected by funding gapPossible strategy/response
Operations
  • Consultation/communication with affected community in regard to change in operational service levels:
    • reduced hours of operation
    • deterioration in physical/aesthetic appearance
Maintenance
  • Introduce planned maintenance
  • Develop hierarchy of service levels and reallocate asset accordingly
Capital renewal
  • Review level of service of assets to identify possible areas of potential reduction, appropriateness and sustainability
  • Identify assets for disposal
  • Source additional funding from operational activities (e.g. increase income or reduce expenses through efficiencies where possible)
  • Responsibly increase net financial liabilities to finance asset renewal through additional borrowings or utilisation/liquidation of existing financial assets
  • Prioritise asset renewal over other activities such as upgrading or expansion or new assets by transferring capital upgrading/expansion funding to capital renewal

Source: IPWEA (2015b).

An example of guidelines used by local government in some states to assess and monitor their financial sustainability is provided in Case Study 2.

Case Study 2: State-specific Assessment and Monitoring of Financial Sustainability

A number of states have developed guidelines to assess financial sustainability of local government and regularly monitor this, most notably South Australia and Tasmania. Public inquiries into the issue have also been undertaken in South Australia, Queensland, New South Wales and Western Australia, while compilation of core FSI are also assessed in a number of states* as shown in Table 5.9.

* See review of published performance audits across selected jurisdictions later in this Part

Table 5.9: Financial sustainability indicators for local government across states

StateInquiryGuidelinesMonitoring
New South Wales Independent Inquiry into Financial Sustainability of NSW Local Government (LGI 2006) Are Local Councils Sustainable? (report)   Performance audit undertaken by Audit Office of NSW, included in Monitoring Local Government report
Victoria Performance audits undertaken by Victorian Auditor-General’s Office (VAGO) across Victoria DPCD: Local Government Performance Reporting Framework Directions Paper (DPCD 2012) Performance audits undertaken by Victorian Auditor-General’s Office (VAGO) (2012) Local government: result of the 2011–12 audit. Assessment of FSI across councils.
Queensland Local Government Association of Queensland (LGAQ) Size, Shape and Sustainability, Review (LGAQ 2005) Department of Infrastructure Local, Government and Planning (DILGP) Financial Management (Sustainability) Guideline 2013 – sets targets for FSI (DILGP 2013) Audits of local government financial statements, includes completion of six FSI set out in Local Government Act 2009
Western Australia Western Australian Local Government Association (WALGA) Systemic Sustainability Study: In Your Hands – Shaping the Future of Local Government in Western Australia (WALGA 2006)   Performance audits undertaken by Office of the Auditor General, included in annual report
South Australia Local Government Association of South Australia (LGASA) – Rising to the Challenge: Towards Financially Sustainable Local Government on South Australia (LGASA 2005) LGASA Financial Sustainability Program Local Government Finance Authority of South Australia. Department of Auditor-General, Government of South Australia (2011) Annual Report, Part B: Agency Audit Reports
Tasmania Department of Premier and Cabinet (DPAC) Local Government Division Local Government Sustainability Objectives and Indicators Consultation Paper (DPAC 2010) Tasmanian State Government and Local Government Association of Tasmania (TSGLGAT) Framework for all Tasmanian Councils (TSGLGAT 2009) Performance audit undertaken by Tasmanian Audit Office, included in Auditor General’s annual report (Tasmanian Audit Office 2015)

Source: Austroads (2014).