Financial management of local councils

We plan to assess whether councils effectively manage their financial resources to fulfil their responsibilities and enable continued financial sustainability.

Why this is important

Financial management is the practice of establishing, controlling and monitoring all financial resources of an organisation to achieve its strategic goals and objectives. 

Strong financial management is essential to councils’ long-term financial sustainability, delivery of its services and its compliance with regulations. It helps decision-makers manage and allocate their finances and make key decisions such as setting rates or purchasing assets. It also gives the public information which helps them choose who to elect and what projects they wish their council to pursue.

In a complex and changing environment, councils need modern and flexible approaches to financial management to produce reliable plans, budgets and forecasts. 

Our Results of 2021–22 Audits: Local Government shows that over the last 5 years, councils have consistently underspent and carried forward their capital budgets by almost $3.8 billion. While inflation and COVID-19 have compounded this problem, this consistent underspend also reflects issues with project delivery, budget and forecasting. 

Councils need to plan for the long-term. This is recognised in the Local Government Act 2020 which requires councils to prepare a 4-year budget and a 10-year financial plan.

This audit will provide key insights on how councils are tracking and performing against this requirement.

What we plan to examine

This is a reasonable assurance engagement.

We will assess the effectiveness of councils' financial management practices and whether this meets better practice and councils' legislative obligations. 

We will also look at whether these practices enable long-term financial sustainability.

Who we plan to examine

Monash City Council, Cardinia Shire Council, East Gippsland Shire Council, Greater Shepparton City Council and Yarra City Council

Timeframe

2023–24

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