Our report Insights into local government: 2019 was presented to the House of Representatives today.

This report discusses several trends and developments in the local government sector in 2019 and gives some insights into how councils were managing risks before Covid-19.

We remain concerned that councils might not be adequately reinvesting in their critical assets. For some time, we have reported that annual renewals spending on assets has been less than the annual depreciation of assets. This is commonly referred to as the renewals gap. Without adequate reinvestment, there is an increasing risk of asset failures and service disruption. Strategic asset management is complex and needs a council-wide response based on good information. It requires asset managers to work closely with others, such as finance and strategic planning staff.

In the 2019 calendar year, 16 councils declared a climate emergency, and most councils focused on aspects of climate-related activity in their 2018/19 annual reports. Increased climate-related events pose significant risks to service delivery and solutions often come with significant costs. Major decisions to address the risks of climate change are required, and there is more to do to get better information to inform those decisions.

Our report also discusses councils’ use of audit and risk committees to support good governance. Audit and risk committees help councils better understand their strategic risks and what they can do to eliminate or mitigate them. Importantly, they can provide different and independent perspectives. Almost every council now has an audit and risk committee and more than half of councils have, or are planning to appoint, an independent chairperson.

The effects of Covid-19 will create financial stress for many in the community and for the councils that serve them. The full implications are still unclear. However, what is known is that many of the previous assumptions councils made about the future will no longer be reasonable. The costs, risks, and other effects from Covid-19 will be important considerations for councils now and for the future when preparing their 2021-31 long-term plans.

An epub and one-page summary are also available for this report.

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