The Local Government Amendment (Governance and Planning) Bill 2016 (Bill) was introduced to the Legislative Assembly on 22 June 2016 by the Minister for Local Government, to amend the Local Government Act 1993 (LG Act) in a subtle but profound manner.

The introduction of the Bill follows recommendations made by the Independent Local Government Review Panel and the Local Government Act Taskforce for legislative change, the release by the Government of an explanatory paper in January this year, and an online survey regarding each of the proposed amendments – with more than 160 submissions received via the Office of Local Government’s website.

The Minister stated in the second reading speech that the Bill is ‘phase one of the Government’s broader reform of the Local Government Act 1993’ and ‘starts the journey away from process-focussed local governance towards principle-focused governance’ after the amalgamations of numerous councils around NSW in May.

A summary of some of the major changes proposed by the Bill are outlined below.

Purposes of the Act and principles for Councils

Any change to the purposes or objects of an Act is significant. That is because the purposes or objects help to explain an Act’s intended scope and focus, and are an important interpretative tool for a Court seeking to interpret a provision of that Act – s 33 of the Interpretation Act 1987 (NSW) requires that the construction of a provision of an Act that would promote the purpose or object of the Act is to be preferred to a construction that would not. The specified purposes of the LG Act also provide guidance to councils in their decision-making

The Bill seeks to change the existing ‘purposes’ of the LG Act, by making two subtle but important changes regarding the interaction between councils and both the local community and the environment:

  • Community participation: Under the Bill there is a shift in focus from a purpose of actively ‘encouraging and assisting’ community participation to more passively ‘facilitating’ community engagement and providing for a system of local government that is ‘accountable’ to the community.
  • Regard for the environment: One of the current purposes of the LG Act is to require councils, councillors and council employees to have regard to the principles of ecological sustainable development in carrying out their responsibilities. Under the Bill there is no reference to ecologically sustainable development or the environment in the purposes of the LG Act.

The Bill also removes the current ‘council’s charter’ in Chapter 3 of the LG Act, replacing it with principles to provide guidance to councils in carrying out their functions. Principles of sound financial management and the development of the integrated planning and reporting framework by local government are included within these new provisions.

Unlike the current charter, which must be pursued by council (s8(2)), the new principles for local government are not mandatory and each principle is expressed in terms of what a council should do.

Rather than requiring a Council to exercise its functions in a manner that is consistent with and promotes principles such as ecologically sustainable development and social justice, under the Bill such principles are only required to be ‘considered’ by councils when making decisions.

Council governance, wards, councillors and election matters

During consultation, the lack of clarity about the roles of mayors, general managers and councillors was identified as an area requiring change. The Bill establishes distinct roles and more prescriptive descriptions of the roles of councils, mayors and councillors, as well as the functions of general managers.

The recommendation by the Independent Local Government Review Panel, to increase the term of office of mayors elected by councillors from 1 to 2 years, has also been included in the Bill. The Minister has said that this change will ‘enhance political leadership’ and ‘generate significant returns in good governance’.

Once the proposed Act commences, councils will be able to apply to reduce councillor numbers, mandated meetings or change wards before the next council elections in 2017. Councillors will be required to take an oath or affirmation of office at or before the first council meeting after being elected to reinforce the serious nature of their role. They will also be encouraged to obtain and maintain the skills necessary to do the job through a new regulation-making power for induction and ongoing professional development.

Provisions in the LG Act relating to the integrated planning and reporting framework will be streamlined. Continuing the theme of reduced environmental prescription, councils will no longer be required to prepare a state of the environmental report. The regulations may impose environmental reporting requirements to be integrated into strategic business planning.

Delegation of council functions

The Bill enables councils to delegate the function of accepting tenders (other than for services currently provided by council staff members) and granting financial assistance in specified circumstances. The Minister noted during the second reading speech that ‘more routine tendering functions will be delegated to general managers, while ensuring that any major decision on outsourcing that might affect current council staff remains a decision for the councillors’. Presumably changes will follow to the requirement for a council resolution to accept or decline to accept all tenders under Part 7 of the Local Government (General) Regulation 2005.

One effect of this amendment will be to help facilitate the joint procurement of services by multiple councils. As acceptance of the tender cannot currently be delegated, each council must separately resolve to enter into a contract, resulting in a protracted process fraught with possible procedural errors. For example, if the price or other contractual term is dependent upon all of the councils in a group participating or a minimum number participating, it is not possible for any of the councils to know what they are voting to accept until all other councils have made their resolution. Under the changes proposed by the Bill, the authority to accept a tender could be delegated to, for example, a committee of the general managers from each participating council.

Finances and Auditing

New measures to support the financial transparency of councils in the future are also proposed by the Bill. Councils will no longer have to show the Chief Executive of the Office of Local Government any new expenses policy or any change to a policy. Rather, councils will be required to establish an internal audit function as a driver for improved council performance, with ‘Audit, Risk and Improvement Committees’ to be established as a mandatory good governance practice.

Councils will also become subject to oversight by the Auditor-General for their general audits and those of their subsidiary entitles. The Auditor-General will be free to engage accredited private sector auditors, to assist with these new responsibilities.

The Auditor-General is to communicate matters that are sufficiently significant to the Minister and is to report to Parliament annually on sector-wide issues arising from the exercise of the Auditor-General’s functions.

Additionally, the Bill empowers the Minister to appoint a financial controller to councils at financial risk, but only in circumstances where a performance improvement order has been issued. A council may not make a payment from any funds of the council unless payment is authorised by the financial controller.

Disciplinary matters and disclosure of pecuniary interests

Misconduct by councillors relating to disclosures of pecuniary interests is to be dealt with in the same way as other misconduct, with the Bill including disclosure requirements in mandatory code of conduct provisions and applying the same disciplinary provisions that apply to breaches of the code. Model code provisions relating to disclosure of pecuniary interests are also to be applied to members of council committees and other advisors, and exclusive jurisdiction is to be conferred on the NSW Civil and Administrative Tribunal for contraventions of pecuniary interests duties by persons other than councillors.

The Bill clarifies that the functions of an administrator appointed to a council after a public inquiry or after the council has been suspended, are to include all the functions of a councillor and the mayor, as well as the functions of the council. In circumstances where more than one administrator is appointed to a council, one administrator is to be designated to exercise the functions of the mayor.

Conclusion

The Bill introduces a number of necessary and important amendments to the current legal framework for Local Government, including delegation of functions, finances, auditing and the clarification of governance structures. These changes will ensure a more accountable and efficient system of local government after the recent amalgamations. However, the repeal of the current Purposes and Charter reflects a subtle but significant paradigm shift that radically reduces the importance of environmental responsibilities and ecologically sustainable development in the functioning of local councils.

The Bill is currently before the Legislative Assembly, with second reading debate adjourned for five days. A copy of the bill can be accessed here.