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Western Australian Regional Development Trust Review of the Royalties for Regions Country Local Government Fund January 2012 This material is available on request in appropriate alternative formats For Further information please contact: Western Australian Regional Development Trust PO Box 1143 West Perth WA 6872 Tel: (08) 6552 4498 Fax: (08) 6552 4417 Web: www.rdl.wa.gov.au Statement of Compliance Hon Brendon Grylls MLA Minister for Regional Development; Lands Dear Minister On the 28 June 2011 the Minister for Regional Development; Lands (Minister) referred a review of the Country Local Government Fund (CLGF) to the Western Australian Regional Development Trust (Trust) pursuant to section 12(b) of the Royalties for Regions Act 2009 (Act). The Minister advised the Trust that he considered it an appropriate time to conduct an independent, evidence-based review of the CLGF, particularly given that it will be completed prior to the program’s fourth year of operation. The Minister provided the Trust with terms of reference, and required the results of the Trust’s review of the CLGF to be presented to the Minister by the end of January 2012. The Trust advises the Minister that it has taken evidence, undertaken consultation, and examined the issues in accordance with the terms of reference. The evidence, findings, conclusions and recommendations of the Trust on the CLGF are presented herein for the Minister’s consideration. Andrew Murray Chair 31 January 2012 i Acronyms and Abbreviations Acronyms AASB Australian Accounting Standards Board LGMA Local Government Managers Association ABS Australian Bureau of Statistics LGRP Local Government Reform Program ALGA Australian Local Government Association MoU Memorandum of Understanding CEO Chief Executive Officer OAG Office of the Auditor General CLG Country Local Government OSS Office of Shared Services CLGF Country Local Government Fund PRC Pilbara Regional Council CME The Chamber of Minerals and Energy of PTS Project Tracking System Western Australia RCG Regional Collaborative Group CRCs Community Resource Centres RDA Regional Development Australia DIA Department of Indigenous Affairs RDC Regional Development Commission DIDO Drive in Drive Out RDCo Regional Development Council DLG Department of Local Government RDL Department of Regional Development DLGRD (Former) Department of Local and Lands Government and Regional Development R2R Roads to Recovery DoP Department of Planning RforR Royalties for Regions DoT Department of Treasury RIHF (RforR) Regional Infrastructure and DTF Former Department of Treasury and Headworks Fund Finance ROCs Regional Organisation of Councils EAC Economic Audit Committee RPIF Regional Planning and Infrastructure FAA Financial Assistance Agreement Framework FCWP Forward Capital Works Plan RTG Regional Transition Group FIFO Fly in Fly Out SEARTG South East Avon Regional Transition Group FOI Freedom of Information SEAVROC South East Avon Voluntary Regional FTE Full Time Equivalent (person/s employed) Organisation of Councils GFC Global Financial Crisis SSS Systemic Sustainability Study GVROC Goldfields Voluntary Regional UIG Urgent Issues Group Organisation of Councils VROC Voluntary Regional Organisation of IPF (DLG) Integrated Planning Framework Councils IT Information Technology WA Western Australia KPI Key Performance Indicator WALGA Western Australian Local Government LGA Local Government Authority Association LGAM Local Government Accounting Manual WAPC Western Australian Planning Commission LGGC Western Australian Local Government WEROC Wheatbelt East Regional Organisation of Grants Commission Councils ii Abbreviations Act Royalties for Regions Act 2009 Fund Royalties for Regions Fund Groups Regional groupings of country local governments Minister Minister for Regional Development Review The review of the Royalties for Regions Country Local Government Fund Trust Western Australian Regional Development Trust iii THIS PAGE HAS BEEN LEFT BLANK INTENTIONALLY iv Table of Contents Statement of Compliance i Acronyms ii Abbreviations iii Table of Contents v List of figures, tables and maps ix Chapter 1: The Review 1 1.1 Chair’s introduction 2 1.2 Terms of reference extract 3 1.3 Members of the CLGF review 5 1.4 Methodology, conflicts of interest and acknowledgements 6 Chapter 2: Summary and recommendations 9 2.1 Executive Summary 10 2.2 Recommendations 25 Chapter 3: CLGF history and program 31 3.1 Before the Act 32 3.1.1 The SSS report and the CLGF 33 3.1.2 The formula, the guidelines and governance 36 3.1.3 CLGF 2008-09 37 3.2 After the Act 39 3.2.1 The Act and the policy 39 3.2.2 The formula, the guidelines and governance 41 3.2.3 CLGF 2009-10 to 2011-12 43 3.3 Four year summary 47 3.3.1 Intended and actual outcomes 47 3.3.2 Issues and concerns 51 3.3.3 Funding and data snapshot 53 3.3.4 Forward capital works plans analysis 57 Chapter 4: Overall terms of reference 61 The need for the CLGF 4.1 Is there a continuing need for the CLGF? 62 4.2 In what form should the CLGF be? 63 4.3 What budget parameters should the CLGF have? 64 4.4 What purpose should the CLGF have? 65 4.5 Trust comment 66 v Chapter 5: Terms of reference 1 67 The extent to which the stated aims of the CLGF are being met 5.1 Have the objectives of the CLGF been materially achieved 68 5.1.1 Evidence 68 5.1.2 Trust comment 69 5.2 The infrastructure backlog and capacity-building 69 5.2.1 Core business 69 5.2.2 Evidence 70 5.2.3 Trust comment 74 5.3 Financial sustainability and asset management 75 5.3.1 Evidence 75 5.3.2 Trust comment 79 5.4 Voluntary amalgamation 79 5.4.1 Evidence 79 5.4.2 Trust comment 82 5.5 Groups and large-scale infrastructure 84 5.5.1 The regional framework 84 5.5.2 Evidence 85 5.5.3 Trust comment 89 5.6 The effect or impact of the CLGF 91 5.6.1 Evidence 91 5.6.2 Trust comment 93 Chapter 6: Terms of reference 2 99 Whether CLGs or RDL experienced difficulties with projects 6.1 The process and RDL evidence 100 6.2 CLG and other evidence 102 6.3 Trust comment 113 Chapter 7: Terms of reference 3 117 The efficacy of the current formula 7.1 The formula 118 7.2 Evidence 119 7.3 Trust comment 124 Chapter 8: Terms of reference 4 129 The appropriate proportional allocation of funding 8.1 Evidence 130 8.2 Trust comment 138 Chapter 9: Terms of reference 5 143 The scope of initiatives that should be funded 9.1 Evidence 144 9.2 Trust comment 148 vi Chapter 10: Terms of reference 6 151 Improving the CLGF 10.1 CLG and other evidence 152 10.2 RDL evidence 156 10.3 Trust comment 157 Chapter 11: Terms of reference 7 159 Any other relevant matters 11.1 Engaging with the regions 160 11.1.1 Evidence 160 11.1.2 Trust comment 162 11.2 Accounting standards and systems 163 11.2.1 Accounting standards and systems in local government 163 11.2.2 Evidence 166 11.2.3 Trust comment 170 11.3 Audit matters 172 11.3.1 Evidence 172 11.3.2 Trust comment 177 11.4 The role of the RDCs 178 11.4.1 Evidence 178 11.4.2 Trust comment 179 Chapter 12: Trust views and conclusions 181 12.1 Introduction 182 12.2 What is the purpose of the CLGF 184 12.2.1 Purpose is determined by the Act 184 12.2.2 Other policies can be part of purpose 189 12.2.3 Conclusion 189 12.3 What should be funded? 194 12.4 How much money is needed? 199 12.5 Who should be funded? 201 12.6 How should they be funded? 206 12.7 Who makes decisions on what basis? 212 12.7.1 Decision makers 212 12.7.2 Risk management 212 12.7.3 Prospects 216 12.8 What will deliver the best outcomes? 222 12.8.1 An outcomes-based approach 222 12.8.2 Engaging with the regions 229 12.8.3 Communications 231 12.9 Capacity-building 236 12.9.1 Accounting systems and standards 236 12.9.2 Audit matters 238 vii Appendices 1. The full Terms of Reference 249 2. The Review Issues Paper 253 3. The 2011-12 Guidelines 281 4. List of correspondence, submissions and consultations 301 5. CLGF statistical data 311 6. Department of Local Government: Strategic policy and structural reform expenditure report for RforR and CLGF grants for 2009-10, 2010-11, 2011-12 317 7. Department of Local Government: Capability Index 2010-11 323 8. Local government performance measurement framework: rural baseline survey results 2011 327 viii List of Figures, Tables and Maps Tables Table 1: 2008-09 Breakdown 38 Table 2: 2009-10 Breakdown 43 Table 3: 2010-11 Individual component Breakdown 45 Table 4: 2010-11 Groups Breakdown 45 Table 5: Forward Capital Works Plans Analysis 58 Table 6: 2010-11 Budget Allocation of CLGF by Region 120 Table 7: 2020 Global Audit – CLGF Section Report 177 Table 8: A Possible Risk / Prospects Matrix 220 Table 9: WA Local Government Act 1995 & Local Government (Audit) Regulation 1996 v Corporations Act 2001 240 Figures Figure 1: Infrastructure – Total CLGF 53 Figure 2: Individual Local Governments – By infrastructure: 2008-09 54 Figure 3: Individual Local Governments – By infrastructure: 2010-11 54 Figure 4: Individual Local Governments – By infrastructure: Total 54 Figure 5: Individual Local Governments – By project: 2008-09 55 Figure 6: Individual Local Governments – By project: 2010-11 55 Figure 7: Individual Local Governments – By project: Total 55 Figure 8: Individual Local Governments – By asset type 56 Figure 9: Regional Groupings of Country Local Governments – By infrastructure Type: 2010-11 56 Figure 10: Regional Groupings of Country Local Governments – By project type: 2010-11 56 Figure 11: Regional Groupings of Country Local Governments – By asset type: 2010-11 57 Figure 12: Capacity Building Budget 57 Figure 13: Population Allocation v Budget: 2010-12 120 Figure 14: Changing
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