The Minister for Local Government has announced that financial prudence regulations will be introduced for local government with the goal of tightening financial reporting, increasing transparency and encouraging excellence in local government.  The regulations will be made under the Local Government Act 2002.

Background material leading to the announcements (the Cabinet paper and regulatory impact statement) indicate that there will be seven benchmarks against which local government will be required to report.  These benchmarks will be organised into three financial prudence elements:

  • affordability (rates benchmark, debt benchmark);
  • sustainability (balanced budget benchmark, essential services benchmark, debt servicing benchmark); and
  • predictability (operations control benchmark, debt control benchmark).

There are two additional affordability indicators - rates indicator and debt indicator.  The Minister intends that local government will be required to disclose performance against these benchmarks in their 2013/2014 annual reports (due October 2014).  It is intended that both annual and long-term plans will contain disclosure and reporting against specified benchmarks.  The Auditor-General will then report on the completeness and accuracy of local authorities' reporting.

The regulations are one element of the Government's broad Better Local Government reform programme and, as such, seek to ensure continuous improvement of local government financial management.  Linked to this is the ability for the Minister to identify financial problems within local government.