Financial Management for Councillors and Executives
By John Curran, Training Consultant, Peak Training
Auditor-General’s Focus on Local Government Challenges
Financial sustainability, governance, risk management and asset management have, once again, been raised by Queensland Auditor-General Brendan Worrall as key issues that continue to challenge many Queensland local governments. While the Auditor-General notes some improvement across a number of these areas, more effort is required.
In relation to financial sustainability, for example, the report notes that 70 percent of councils recorded operating deficits. While issues such as uncertainty of funding, depreciation and costs related to COVID-19 had an impact on their operating performance, a continuation of operating deficits will reduce the financial capacity and flexibility of these local governments going forward.
The aphorism, often attributed to Einstein, “the definition of insanity is doing the same thing over and over again and expecting different results” would suggest that, rather than continuing to wait for someone else to ride in and save the day, local governments should look to contribute positively to making change.
Certainly, an external focused approach is worth pursuing (as noted by the Auditor-General) such as seeking to influence State and Federal governments in relation to providing increased certainty regarding future funding.
However, this should be further enhanced through consideration of organisational level actions to address and improve the situation facing each local council. The question then is what are these self-assist initiatives?
For many the first step here is to recognise and acknowledge the situation and then focus on getting your house in order by gathering information and seeking to understand and address, for example, the issues raised in respect of your council in the Auditor-General’s report.
For example, the report notes that more than one-third of councils in Queensland face a higher risk of not meeting their corporate and operational objectives, as they lack appropriate risk management processes. While all councils manage numerous risks across their business, the lack of an appropriate risk management framework exposes them to increased financial and reputational risk. How would rate your council’s risk management processes? What improvements do you need to make?
The Auditor-General notes local government information systems show weakness in key areas and as such are vulnerable to inappropriate and unauthorised access. This may lead to significant business disruption and ability to delivery services to the community. How would you rate the security of your council’s information systems? What improvements do you need to make?
Asset management processes and practices is another area of concern raised by the Auditor-General, with particular recommendations focusing on improvement to asset valuation processes and matching asset management and financial data to ensure completeness and reliability. Frustratingly, asset management is another long-running issue that still requires further attention. How would you rate your council’s asset management practices? What improvements do you need to make?
Moving forward, the first step is recognising that improvement is required – and resolving to make change.
Peak Services can assist local governments navigate a number of these challenges. In particular, Peak offers a number of courses and workshops that can bolster understanding of the issues involved and raise the level of awareness across your business, councillors and staff. A number of these courses are outlined below.
This course is for local government elected officials and staff, particularly those without an accounting and finance background, who are looking to improve their knowledge and understanding of local government finance. Commencing with an overview of the legislative requirements for Queensland local government accounting and finance, this course will then consider the budget process and the financial reporting process, with particular focus on the three major financial reporting statements, i.e. financial position, comprehensive income and cash flows. Financial performance is considered, with the introduction of financial ratio analysis techniques and consideration of council financial data.
This workshop will provide participants with an understanding of risk management frameworks and processes in a local government context. Outcomes from this workshop include enhanced understanding and knowledge of key legislative requirements, the risk management framework, processes, and enterprise-wide risk management, which will be considered in relation to the Risk Standard ISO 31000:2018. To enhance the learning experience, participants will work through risk assessment for a project.
This one-day course considers the topics of governance, ethics and leadership within a local government context. The course is suited to councillors and staff who are seeking to develop their knowledge and understanding of organisational governance.
The course will introduce and consider legislative requirements, governance theories, the internal control environment, policies and procedures and will explore these through consideration of a number of case studies. Participants will also develop an ethical framework that will assist their ability to navigate many of the challenges they might encounter in local government.