Following a 2005 PricewaterhouseCoopers study conducted for the Australian Local Government Association, a backlog of $14.5 billion in infrastructure renewals was identified. The Commonwealth Government and a number of state governments, including Queensland, have taken that study on board. The Queensland Government also undertook its own assessment of the financial sustainability of local governments. It found the focus was largely short-term and that greater emphasis was required in order to plan for the sustained management of infrastructure over its useful life. As a result, Queensland's Local Government Act (the Act) was amended earlier this year to emphasise the importance of strategic planning.
Under the revised Act, councils in Queensland must now demonstrate long-term financial sustainability by meeting a set of developed criteria in financial forecasts and asset management plans. While some may see this as adding further pressure on already strained resources, if managed at an organisational level, there are a number of opportunities for councils to improve their overall efficiency.
The changes from the legislation will be almost immediate. Councils should introduce a more robust forward planning exercise and will need to ensure long-term planning is in place. The sustainability and reporting process for Queensland local governments incorporates an emphasis on sustainable communities and sustainable councils. The process requires councils to provide information periodically on specific areas associated with governance and accountability, planning, asset management and financial performance management. The existence of asset management plans for key assets is a necessary predecessor to councils having a complete long-term financial model that supports planning and decision making processes.
The Commonwealth Government has set a target to have all infrastructure asset classes managed by councils covered by asset management plans by December 2010. To help achieve this, the Queensland Department of Infrastructure and Planning has established the 'Asset Management Advancement Program 2009–10'. While some councils are in a position to adopt these changes, the majority do not have any formal asset management plans. Local governments will need to commit time to achieve these deadlines and, with already strained resources, this can be a challenging task.
Many of the issues faced here in Australia were encountered when similar legislation was introduced in New Zealand in 2002. In the lead up to the implementation of the New Zealand legislation, MWH assisted a significant number of the local government authorities and developed an approach that has since been adopted by more than 75 local authorities in New Zealand, as well as several other organisations worldwide. As learned through that process, the important element to remember is that councils remain service or activity-focused. Whether an individual or department is responsible for maintaining water infrastructure, roads or other assets, they must also strive to provide continuous and exemplary service to the customers.
By working in conjunction with external providers and developing a clear link between a community plan and the more detailed service delivery plan, councils are able to best manage their limited resources (see Figure 1). This helps councils identify the current state of affairs and provides them with a sound improvement plan to best manage their assets and services.
While it will require additional work, the Act is an undeniably excellent opportunity for councils. Far from being a 'tick and flick' situation, councils should instead consider how to use this requirement to ensure financial sustainability for local communities. Through its introduction, senior council members will be in a much stronger position to plan for the long-term by determining how much they are in a position to spend and where they will source this funding from. By establishing early on which areas require greatest attention, and where the opportunities for improving efficiencies lie, councils will find that they will likely be in an even stronger position than they are today.
Figure 1: By developing a clear link between a community plan and the more detailed service delivery plan, councils are able to best manage their limited resources and ensure that work carried out supports the overall strategy and service delivery targets.
Kevin Atkins has more than 30 years of experience and is MWH's Queensland-based Team Leader, Strategic Investment Planning.
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