A blistering audit of Queensland’s councils has found many don’t have up-to-date asset management plans, fail to keep accurate asset registers and lack confidence in their own financial forecasts.

The Queensland Audit Office’s report into the long-term financial sustainability of the state’s 77 councils paints a concerning picture.

The report states that most councils do not understand how much they need to spend now and into the future to maintain their assets at a level acceptable to their communities.

“Most councils plan poorly for the long-term. Their long-term financial forecasts and asset management plans (AMPs) lack substance and rigour,” the report states.

Tabled in State Parliament earlier this month, the audit involved surveying all Queensland councils; interviews with seven councils, the Department of Infrastructure, Local Government and Planning, and Queensland Treasury Corporation; analysing five councils’ financial planning and forecasting documents and asset registers; and analysing all councils’ 2014–15 financial statements, budgets and 10-year forecasts.

The audit office selected five local governments for deeper analysis:

• Cook Shire Council
• Lockyer Valley Regional Council
• Paroo Shire Council
• Redland City Council
• Southern Downs Regional Council

The audit found 51 out of 77 councils have either not linked their AMPs to their long-term forecasts, or have out of date AMPs.

The upshot of this, the authors say, is that these councils aren’t able to demonstrate how they estimate capital and maintenance expenses.

“Forecasts are rolled over from previous year's estimates (for renewals, upgrades, and additions) and maintenance and operating costs, rather than forecasting requirements based on asset condition or what is actually required. This can result in councils not appropriately maintaining assets and services being interrupted,” the report states.

It found "some councils also used the frequency and impact of natural disasters and other unforeseen events as their reasons for not investing significant time or resources in trying to forecast better".

Legislation introduced in 2012 removed the requirement for councils to prepare the community and long-term financial plans.

The audit report also found 67 councils did not prepare a 2015-24 long-term financial plan because they were not required to and did not have adequate plans or resources to do so.

The report acknowledged that in hindsight, the winding back of the regulatory requirements for financial planning was “premature”.

The report was scathing in its analysis of councils’ ability to plan for the future, and says the findings indicate many councils treat long-term financial planning simply as a “compliance exercise”.

In addition, the report found almost half of the councils are in deficit, with 24 forecasting deficits for the next decade.

“Quality forecasts require investment of time and appropriately skilled resources, which some councils either cannot afford or view as unnecessary overhead. This means they are not well-placed to understand the important relationship between future net operating revenues, asset spend and debt, and how these affect their sustainability,” the report reads.

“Many councils are approaching the point where their expenditure on asset renewals is outstripped by the rate at which the assets are depreciating. This will leave a proportionally larger burden on future generations to fund renewals.”

According to the report’s authors, the reason AMPs are not linked to long-term forecasts is because many councils do not trust their own asset condition data.

None of the five councils the audit office visited had complete or accurate asset condition data.

Responding to the report, Local Government Association of Queensland spokesman Greg Hallam told the ABC it was a major concern as funds had been slashed by $1 billion over the past four years with cuts by both state and federal governments.

"We can only go to two places to fix the problem," Hallam says.

"Put rates up substantially or fundamentally cut most other services other than infrastructure.

"That's a very difficult thing to do in the short term."

Hallam says many of the struggling councils are in rural and regional areas, with low numbers of ratepayers.

"We understand the challenge but the community clearly doesn't want to pay higher rates so it's either cut out a lot of services, see infrastructure slip back slowly or put the rates up," he says.

"It's not a simple or easy solution."

Victoria’s better practice guide

Queensland is by no means unique – although improvements in asset management have been made across Australasia, many councils are still struggling to plan for the long-term. 

In 2014, the Victorian Auditor-General’s report Asset Management and Maintenance by Councils, based on a sample of five representative Victorian councils, found that significant deficiencies remained in areas such as asset renewal planning and practice, the quality of asset management plans, linking of service levels to these plans, the development of asset management information systems and in monitoring, evaluation and reporting on asset management.

In 2015, Local Government Victoria and IPWEA released the Local Government Asset Management Better Practice Guide. Providing guidance to both councilors and executive management, as well as asset managers and staff, the guide encouraged the use of IPWEA’s NAMS.PLUS resource kit.

IPWEA CEO Robert Fuller says the QAO’s report shows just how vital good asset management is to the long-term sustainability of our councils.

"Robust and up-to-date AMPs should be the foundation of a council's long-term planning – but as this report has shown, many local government organisations are struggling to make this a reality,” he says.

“IPWEA’s suite of best practice asset management products – including the International Infrastructure Management Manual, the Australian Infrastructure Financial Management Manual, NAMS.PLUS and a suite of asset management practice notes – have been recognised as the industry standard, and I encourage any council who wants to improve their asset management to contact us about how these resources can be of assistance.

“Aligning decision making with the ISO 55000 suite of asset management standards is vital. Without robust and effective AMPs, local governments are fettered in their ability to deliver sustainable services and infrastructure to their communities now and into the future.”

Recommendations

The QOA made a series of nine recommendations, suggesting councils maintain complete and accurate asset condition data and asset management plans, engage directly with their communities on future service levels and develop financial plans to explain their financial forecasts.

A number of suggestions also related to the Department of Infrastructure, Local Government and Planning. It was suggested the department’s governance role be strengthened, including analysing councils' long-term planning documents.

Read the full report and list of recommendations here.