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Local govts lack long-term plans: Auditor-General

Tuesday 24th August 2010 2 Comments

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Local governments’ long-term planning still too often lacks financial strategies to deliver desired outcomes, with total council debt forecast to double during the 2009-19 period covered by the latest clutch of long-term council community plans, says the Auditor-General.

Councils are required by law to prepare LTCCPs every three years to give a 10-year planning horizon, but the A-G says in a report tabled in Parliament today that “local authorities still need to improve their practices supporting long-term planning”.

In particular, many councils had responded to the economic recession by increasing their debt levels, because of the short-term threats to affordability of their near-term plans.

“The 2009-19 LTCCPs signal that debt will almost double during the 10 year period of the plans.”

This would increase debt servicing costs and “will also affect the local authorities’ ability to manage rates in the later years” of the decade the plan relates to.

Some seven local authorities received “adverse” audit opinions, with the authority responsible for the country’s top tourism destinations, Queenstown Lakes District Council, fingered for “lack of financial prudence” and a long term plan that is “financially unsustainable”.

A similar adverse report on Tauranga City Council was removed after Tauranga changed its plan.

“Local authorities could improve their practices in completing and integrating robust underlying information, such as asset management plans … and forecasting assumptions, and complementing long-term thinking by preparing appropriate financial strategies.”

Both these issues had been “challenges for the sector for some time,” the Auditor-General, Lyn Provost, said.

“Until local authorities have robust underlying information and appropriate financial strategies, the potential inherent in local authorities’ willingness to think long-term will not be fully realised.”

Other commonly raised issues were financial strategies that did not set revenues high enough to replace assets in the future; uncertainty about continued funding from central government; and risks relating to expected dividends from local authority businesses to reduce debt.

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Comments from our readers

On 24 August 2010 at 7:41 pm arty said:
The big Government machine is telling the little local Government machine it is spending too much. That’s a joke!! Why not entrench some pretty simple parameters into local body money management. Be an example to community - by spending within your earnings and saving a little for unforeseen R &M. The near highest debt in the OECD starts fairly and squarely at the top and filters down & down. Isn’t it ironic that the big machine is trying to think of ways to get the population saving, when the big and small machines cannot save themselves? The answer we are told is import people from overseas, who invariably end up working for the machines and screwing the hard working Kiwi savers amongst us so far we no longer recognise the way we were.
On 25 August 2010 at 8:50 am JP said:
The Auditor has hit it on the head. In many areas the problem is that there are too many small areas with their own council. I look at Taranaki, there are 3 Councils, New Plymouth, South Taranaki & Stratford, plus a regional council. (There is the same set up in Hawkes Bay, regional council then many little councils, for the various towns) The major problem is with the people themselves. They cannot see that by having one central council many cost could be saved. The parochial thought are that we must have our own council and if the office of the council (to cover all) was based in New Plymouth then the other areas would miss out. New Plymouth and South Taranaki have large investment funds returning average over the last 10 years of around 5%. These councils continue to borrow money at an average cost over the last 10 years of 6%. No prudent person would do this.
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