Where are we now?

Together, the operational plan and budget identify the outputs and financial resources that will be directed towards achieving the outcome targets set in the corporate plan.

It is essential at this time for councils to ensure that their practices are compliant with the legislative requirements of the LGA and LGFS 2005.

Councils can also take action to improve their budget process and standardise the terminology used in their planning documents.

Key steps

• Step 1.1 Align the operational plan and budgets
  
  
• Step 1.1.1 Examine the budget process
• Step 1.1.2 Confirm timing and coordination
• Step 1.2 Apply standard terminology
• Step 1.3 Review budget compliance
  
  

Recommended resources

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Step 1.1 Align the operational plan and budgets

The Local Government Act 1993 (LGA) and the Local Government Finance Standard 2005 (LGFS) require that operational plans and budgets are linked. Apart from being a legislative requirement, this is sensible management practice and will assist to ensure that all activities undertaken by council are funded according to priorities that have been identified during the planning process.

The corporate plan is a key driver of the annual budget, financial planning processes and organisational activity.

It is useful to review the information presented in these Guidelines at Stage 2, Step 1.3 Examine council’s current planning framework to ensure the operational plan is prepared within the overall strategic planning context.

For practical examples of how council plans are linked to budgets, refer to Case Study 21 - Budget Linkages - Toowoomba City Council ( PDF 144 kB)and Case Study 22 - Operational plan and budget preparation - Gold Coast City Council. ( PDF 66 kB)

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Step 1.1.1 Examine the budget process

Checklist 33 - Improve the budget process

As these case studies illustrate, budget and approval process can be improved by ensuring:

• The mayor, councilors and senior council Officers work together and sign off on areas of responsibility
• Sufficient lead time is allowed to compete all tasks within a consultative framework and ensure decisions are made on priority activities before budget deliberations

A typical cycle of activities is illustrated in the following diagram¹:

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Step 1.1.2 Confirm timing and coordination

Councils require a coordinated approach to preparation of Operational Plans and budgets to meet the following requirements of the LGA:

To ensure the Operational Plan is implemented in conjunction with other activities such as preparation of revenue policy, annual budget, revenue statements and grants, refer to Template 10 - Corporate planning diary. ( PDF 127 kB)

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Step 1.2 Apply standard terminology

The LGFS 2005 requires that an Operational Plan prepared and adopted by a local government for a financial year starting on or after 1 July 2006 must state:

• what council aims to achieve as stated in the Corporate Plan (outcomes)
• how the outcomes will be achieved (strategies)
• what will be achieved in the financial year (outputs)
• how the outputs will be achieved (activities), and
• how achievement of the outputs will be assessed (performance measures).

The LGFS 2005 introduces standard terminology as it is considered desirable for Queensland councils to be consistent in their approach. In the transition provisions of the LGFS (s 96), councils may continue to use the terminology, jargon or terms that are currently contained in planning documentation and are familiar to Elected Members, council officers and the community.

However, the provisions of LGFS 2005 apply to a replacement Corporate Plan that is prepared by the local government after 1 July 2005. For consistency, the terminology introduced in the LGFS 2005 would also be expected to carry through to the Operational Plan for the financial year beginning 1 July 2006 and subsequent operational plans.

The terminology referred in the LGFS 2005 can be interpreted as follows:

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Step 1.3 Review budget compliance

The stipulations for a local government budget arising from the LGA and the LGFS 2005 are set out in these Guidelines in Section 2 - Know your legislation. Specifically, these are identified as follows:

LGA Section 2.1 - The budget
LGFS s54 - General requirements for budget
LGFS s55 - Other requirements for budget

The following interpretations may assist councils in their responses to these legislative requirements:

1. Adoption of budgets

   Each financial year a local government is required to adopt a budget for its operating fund by resolution of council - LGA s518 (1). The budget must be adopted between 1 June of the previous financial year and 31 August of the current financial year. The local government may apply to the Minister to fix a later date for the adoption of the budget - LGA s518 (2). If the budget is adopted after the start of the financial year, the local government must include in the budget, any spending incurred prior to the adoption of the budget - LGA s522.

2. Requirements of budgets

   Budget requirements are set out in s519 of the LGA. Adoption of a budget or amendment that does not comply with s519 is void - LGA s519 (1). Budgets must be consistent with the local government's Corporate Plan and Operational Plan, to the extent that they are clearly linked with matters specified in those plans - LGA s5519 (2).

   The budget is to be prepared on an accrual basis - LGFS 2005 - s54 (a).

   The budget is required to show for the financial year and the following four financial years² that the local government is able to satisfy its liabilities. It also needs to show that the capital base is not being consumed at such a rate that service potential is adversely affected, and that sufficient funding is available for planned asset replacement - LGFS 2005 s55 (a) (b) (c).

   The budget is required to show that planned borrowing is only for capital expenditure, short-term working capital, genuine emergency or hardship, and/or to establish a commercial debt structure for a commercial business unit or a corporatised corporation. Any borrowing for short-term working capital is to be repaid in the financial year when borrowed or in the next financial year - LGFS 2005 s55 (d) (e).

   There is only one circumstance when spending that is not authorised by the budget can be made - this is for the purpose of genuine emergency or hardship - LGA s519 (4).

   The budget can be amended at any time during the financial year to which it applies. The amendment is to be adopted by resolution of council - LGA s519 (3).

3. Content of operating fund budgets

   The budget is required to specify estimated costs for each of the local government’s significant activities as well as in total. The sources of funds to meet these costs must be specified and the local government’s revenue policy disclosed - LGA s520 (1).

   Significant activities include significant business activities for which the local government has resolved to implement full cost pricing under Chapter 8, Part 5 of the LGA, activities of commercial business units under Chapter 8, Part 6 of the LGA, and certain water and sewerage activities under Chapter 10 of the LGA. For details, refer to LGA s520 (4).

   This content is also to be included in the budget in general terms for the next two financial years - LGA s520 (2).

   The budget is the underlying basis on which rates are made and levied for that financial year - LGA s520 (3).

4. Financial information to be presented at budget meetings

   At the local government’s budget meeting for a financial year the Chief Executive Officer (CEO) is required to present a document about the local government’s financial operations and financial position for the previous financial year - LGA s521 (1).

   If the budget meeting for a financial year is held in June just prior to the financial year, the document must be compiled to the latest date possible and include an estimate for the remainder of the previous financial year - LGA s521 (2).

   The document must be prepared on an accrual basis and include a statement of the estimated revenue and expenses in the budget for the financial year, the actual revenue and expenses for the financial year, or if the budget meeting is held before the end of the financial year, the anticipated actual revenue and expenses. If there is a significant difference between the estimated and actual figures, an explanation and a statement of any affect on the budget for the later year is also required - LGFS 2005 s57.

5. Councillors’ liability for disbursements

   If a disbursement that is not provided for in the adopted budget is made from an operating fund, councillors may be liable - LGA s523 (1). The only exception to this is in the case of a disbursement made for the purpose of genuine emergency and hardship - LGA 523 (3).

   Councillors who knowingly agree to the disbursement are jointly and severally liable to repay the amount of the disbursement plus interest, which is calculated daily at the rate at which interest accrues on overdue rates - LGA s523 (2). The local government, a person appointed by the Minister for the purpose, or an elector or ratepayer may recover the debt - LGA s523 (4). When a person other than the local government recovers the debt, the amount recovered is required to be paid immediately to the local government - LGA s523 (5).

6. Availability of budgets for inspection and purchase

   The budget must be printed and kept open for inspection. A reasonable number of copies must be made. These are to be available for purchase at the local government’s public office with the price set to merely recover the cost of producing a copy and postage if applicable - LGA s524.

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Footnotes

¹ Based on Toowoomba City Council

² This requirement applies to a financial year starting on 1 July 2006 or later

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