Local Government legislative amendments: An update
Since its origin in the 2019 Reforming Local Government in South Australia Discussion Paper, Norman Waterhouse has closely followed the formulation, enactment and staged roll-out of the Statutes Amendment (Local Government Review) Act 2021 (the Amendment Act).
In our last update regarding the Amendment Act, we analysed the new provisions of the Local Government Act 1999 (the LG Act) concerning conduct and integrity of council members and employees.
Since that time, some further amendments have commenced operation. Other amendments will commence operation in the relatively near future. In light of this, we consider that it is timely to provide a further update.
LTFP ‘Funding Plan’
On 30 June 2023, the Amendment Act inserted a requirement into the LG Act that each council’s Long-Term Financial Plan (LTFP) must include a ‘funding plan’ which:
- outlines the council's approach to funding services and infrastructure of the council; and
- sets out the council's projected total revenue for the period to which the long-term financial plan relates; and
- outlines the intended sources of that total revenue (such as revenue from rates, grants and other fees and charges).
Any council which has not already reviewed its LTFP since 30 June 2023 and incorporated a funding plan into its LTFP should ensure that it undertakes a review (or further review) in the near future. Note, the LTFP must be reviewed on an annual basis and there are mandatory consultation requirements with respect to any review of an LTFP.
There is particular urgency for any council in the next ‘intake’ of the Essential Service Commission of South Australia (ESCOSA) advice scheme. Ideally those councils should have a funding plan in their LTFP before 30 September 2023 in order to satisfy the requirement in section 122(1e)(b) of the LG Act. Unlike the first intake of councils, the next intake will not have the benefit of the now-expired regulation 13 of the Local Government (Transitional Provisions) Regulations 2021.
All references to ‘site value’ (a type of land valuation which excludes buildings and certain other improvements) have been deleted. This change came into operation on 31 August 2023. The effect is that, in future financial years, councils may no longer impose rates based on site value.
Given that most councils rely upon capital value rather than site value, this amendment will not affect many councils.
Audit and risk committee
A raft of amendments will come into effect on 30 November 2023, all concerning the new concept of an ‘audit and risk committee’, which will replace a council’s audit committee.
An audit and risk committee is more than just a re-named audit committee. The work of the audit and risk committee will include the provision of independent advice to councils on accounting, financial management, internal controls, risk management and governance matters. Audit and risk committees must consist of a majority of independent members and councils will have the ability to form regional audit and risk committees, if they wish.
These amendments also introduce a concept whereby councils may have an ‘internal audit function’. It appears to be a matter of discretion as to whether a council will have such a function. Before assigning a person to be primarily responsible for a council’s internal audit function, there is will be a requirement for the chief executive officer to consult with the relevant audit and risk committee.
Audit and risk committees are to receive reports pertaining to the council’s internal audit processes, prepared either by the person primarily responsible for a council’s internal audit function (if there is one), or by the chief executive officer.
It will be necessary for councils to undertake considerable work to prepare for the commencement of these provisions. While we are aware that many councils are already significantly advanced with their preparation, advice should be sought promptly by those councils in need of assistance with respect to these matters.
Norman Waterhouse has the necessary experience and expertise to provide advice and assistance with respect to all aspects of the legislative reform brought about by the Amendment Act.
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