01 July 2010 Issue 105
Second wave accountability amendments come into force today
The second wave of changes to the Local Government Act 1999 (SA) (the Act) this year, which substantially alter the responsibilities of councils, come into operation today.
The Local Government (Accountability Framework) Amendment Act 2009 (SA), which was approved by State Parliament in December last year, is being phased into operation. The first group of amendments took effect on 8 April 2010. See our April Briefly for more information.
Summarised below are the amendments that come into force today, which affect councils’ audit and rating processes, and council powers to assign names to roads and numbers to premises.
Section 4 – Interpretation
The definition of supported accommodation now includes accommodation provided by housing associations registered under the South Australian Co-operative and Community Housing Act 1991 (SA).
Implications for councils:
If you have such properties located within your council area, your council may now be liable for additional rate rebates under the Act.
Details of registered Associations are available online at the Department for Families and Communities’ website (www.communityhousing.sa.gov.au).
Section 129 – Conduct of audit
Council auditors must now audit:
- the council’s financial statements within a reasonable time after the statements are referred to the auditor for the audit (unless there is good reason for a longer period, this is within 2 months after the referral); and,
- the controls exercised by the council for the receipt, expenditure and investment of money, the acquisition and disposal of property, and the incurring of liabilities.
The auditor must provide to the council an audit opinion on:
- the financial statements; and,
- whether the council’s controls are sufficient to provide reasonable assurance that council’s financial transactions have been conducted properly and in accordance with the law.
This section now also sets the basis upon which the auditor shall provide the written advice to the council, the structure of that advice, and it includes a requirement that the principal member place the written advice on the council agenda following its receipt, for consideration by the council.
The auditor’s report may be the subject of a special meeting of the council and may be kept confidential until the relevant meeting. The advice may be kept confidential for a specified period of time (up to 60 days) after the date of the relevant meeting.
The matters that the auditor must report to the Minister for State/Local Government Relations are now extended to include:
- any substantial irregular, or unauthorised, act or omission in the receipt, expenditure or investment of money, the acquisition or disposal of property, or the incurring of liabilities;
- the reasons for an adverse audit opinion and any recommendations;
- the reasons for any qualification or limitation to the audit opinion;
- any other matter that the auditor thinks ought to be reported to the Minister; and
- any other matters prescribed by the regulations (there are none at the time of writing).
The auditor’s opinion on the council’s financial statements must now accompany the financial statements of the council.
These provisions may be further affected by the transitional provisions that allow for the obligations falling upon the external auditor to be phased into operation. Please see the related section of Schedule 1 and the explanation that follows it.
Implications for councils:
These amendments increase the reporting requirements on the council’s auditor and ensure that the auditor’s report is provided to the council, through a meeting agenda, as well as being provided to the council’s audit committee.
The auditor has greater obligations to advise the Minister for State/Local Government Relations about substantial irregularities in the council’s financial management practices.
Section 151 – Basis of rating
From today, councils cannot seek to raise more than 50 per cent of their general rate revenue from fixed charges in any financial year.
However, a fixed charge levied by a council will not be rendered invalid by reason that the fixed charges raised more than the 50 per cent proportion set by the amendment.
Implications for councils:
Previous changes to the Act have prevented councils from recouping all general rate revenue by use of a fixed charge alone. This new amendment now extends that limitation to prevent councils from using fixed charges to raise more than 50 per cent of general revenue.
The amendment will restrict the way councils use fixed charges to collect annual rate revenue and, for some councils, may require significant modifications to rating structures and a lowering of fixed charges previously imposed.
The restriction applies to fixed charges which are part of general rates, and not to fixed charges which the council may set as part of a separate rate declaration.
Section 152 – General rates
The amendment provides that a fixed charge cannot be imposed against:
- each site in a caravan park; or
- each site in a residential park within the meaning of the Residential Parks Act 2007.
Implications for councils:
The amendment further limits a council’s ability to impose fixed charges under the Act.
The same limitations now apply equally in relation to minimum amounts fixed under Section 158 of the Act.
Section 155 – Service rates and service charges
A service rate or annual service charge may include depreciation of assets.
Further, any amounts held in a ‘reserve’ established in connection with the operation of a service rate or annual service charge for a prescribed service (including the treatment or provision of water, treatment or disposal of waste, and provision of television services) must be used for purposes associated with improving or replacing the council assets required for the provision of the relevant prescribed service.
Where a service is, or is to be, discontinued, surplus funds may be expended for another purpose specifically identified in the council’s annual business plan as being the purpose for which the funds will now be applied.
Implications for councils:
The amendment imposes restrictions on the use of funds collected by way of service rates and annual service charges, but also enables exceptions in certain defined circumstances. Councils are now able to take into account any asset depreciation in order to determine the level of a service rate or service charge.
Where the prescribed service is discontinued, councils are able to utilise any excess amount collected (after taking into account any expenses) and hold it in reserve for another purpose which must be specifically identified in the council’s annual business plan.
Section 158 – Minimum rates and special adjustments for specified values
The list of matters against which a council cannot impose a minimum rate is expanded to include each site of a caravan or residential park within the meaning of the Residential Parks Act 2007 (SA).
Also, if more than one piece of rateable land within the council area constitutes a single farm enterprise, a minimum rate may be imposed against one of the pieces of land only.
Councils may not apply section 158 to affect or alter a separate rate that would normally be payable under section 154 for more than 35% of the number of total properties in the council area that would normally be the subject of that separate rate.
Under the amendments, a council may not utilise section 158 for a general rate or a separate rate if the council has already included a fixed charge as a component of that rate.
Implications for councils:
The amendment achieves consistency of the types of limitations imposed on a council in applying fixed charges as a component of general rates.
The 35% threshold recognises that the same number of properties that may be affected by a minimum rate amount may also be affected by a separate rate.
The amendments reflect the fact that a minimum rate adjustment or special rate adjustment occurs on a rate-by-rate basis. The amendment also recognises the fact that the use of a minimum amount for a general or separate rate is only restricted where there is a fixed charge component of the same rate.
Section 161 – Rebate of rates - community services
This is a minor amendment to provide that rates rebates apply to land being used for service delivery, administration or both.
Implications for councils:
The amendment provides welcomed clarification ensuring that section 161 is consistent with section 160. The provision provides that a rebate is now available for land that is predominately used for service delivery, or for administration, or both. Depending on the interpretation previously adopted by councils, additional rate rebates may now be available.
As set out earlier in this Briefly, rebates are now available for registered Housing Associations. The rebates are subject to transitional provisions which will allow for their optional phase-in over the next two years.
Section 219 – Power to assign a name or change the name of a road or public place
Councils are now required to assign a name to a public road created by land division after the introduction of this amendment. A public notice must now be given whenever assigning or changing a name, rather than upon the resolution to assign or change a name.
The power to assign or change the name of a road may now be delegated by the council and councils must now adopt a policy about the assigning of street names.
Section 220 – Numbering of premises and allotments
Councils must assign a number to all buildings or allotments adjoining a public road created by land division. Any assignment must occur within 30 days of the issue of the certificate of title to the relevant land division, and in accordance with any requirements prescribed by regulations made for the purposes of the amendment.
The power to adopt, alter or substitute a numbering system may now be delegated by the council.
Implications to councils:
The amendment to these sections will ensure that all residences within new land divisions have a unique property address.
The requirement to develop a policy in relation to assignment of names may create some additional workload for councils, but should promote consistency in approach to street naming. It may be that many councils already have such a policy in place. The LGA has also developed a model policy for use by councils.
Schedule 2 – Provisions applicable to subsidiaries
The internal audit provisions for councils and regional subsidiaries have now been amended to reflect changes in approach that have developed since the commencement of the Act.
Councils can no longer exempt a council subsidiary from the requirement to establish an audit committee. Therefore, all council subsidiaries now must establish an audit committee. Members of a subsidiary’s audit committee may also be members of the constituent council’s audit committee.
Regional subsidiaries may have been exempted from being required to establish an audit committee, by virtue of their charters. Regional subsidiaries will now only be exempted from this requirement by regulation. Members of a regional subsidiary’s audit committee may also be members of a constituent council’s audit committee.
Implications for councils:
The amendment demands additional resources of councils and regional subsidiaries.
The ability for the same members to sit on council and subsidiary audit committees should enable the committees to make use of the same persons with the appropriate technical skills.
Schedule 1 – Transitional provisions
Part 2 – Audit opinions
The section sets out transitional provisions that apply to the various new auditing arrangements imposed by the amendments to section 129 of the Act. The transitional provisions allow for the new obligations upon council’s external auditor to be phased.
The requirement to undertake audits of council’s controls for receipt/expenditure/investment of money, the acquisition/disposal of property and the incurring of liabilities, will commence operation on a staged basis.
The new audit requirements will be put into effect at the beginning of the 2012/13 financial year for ‘prescribed councils’ (the 17 metropolitan councils listed in Clause 3 of Schedule 1) and in the 2015/16 financial year for all other South Australian councils.
Implications for councils:
The staged approach to the implementation of new audit requirements should lessen the administrative burden on councils but ensure that, over time, all South Australian councils are governed by the same audit arrangements.
There is nothing preventing councils from adopting the new audit arrangements sooner than prescribed, so long as they also remain compliant with their pre-amendment obligations under the Act.
Part 3 – Rebate of rates
This transitional provision provides that, for the prescribed financial years, the rebate on land predominantly used for supported accommodation (that consists of accommodation for persons provided by housing associations registered under the South Australian Co-operative and Community Housing Act 1991 (SA)), will be as follows:
- 2010/11 – 25% (or, at the council’s discretion, a higher rebate);
- 2011/12 – 50% (or, at the council’s discretion, a higher rebate).
For further information on any of the material contained in this Briefly or to discuss the other scheduled amendments to the Local Government Act 1999 (SA) contained in the Local Government (Accountability Framework) Amendment Act 2009 (SA) please contact Felice D’Agostino on 8210 1202 or by email fdagostino@normans.com.au or George Karzis on 8210 1217 or gkarzis@normans.com.au.
If you find the information in this article useful, please feel free to forward it to someone at your council.
Team Members:
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