Financial Management (Sustainability) Guideline 2013
This bulletin is to advise local governments that the Department of Local Government, Community Recovery and Resilience (the department) has released its Financial Management (Sustainability) Guideline 2013 (the Guideline 2013) ( 279 KB). This guideline explains the concept of sustainability, summarises disclosure requirements and provides illustrative guidance for calculating the relevant measures of financial sustainability specified in the Local Government Regulation 2012 and City of Brisbane Regulation 2012 (the Regulations).
The Guideline 2013 will supersede the Financial Management (Sustainability) Guideline 2011 and be applicable to 2013-14 year annual budgets and 2012-13 financial statements and annual reports.
The Regulations specify that all Queensland local governments must report on the following three relevant measures of financial sustainability:
- Asset Sustainability Ratio
- Net Financial Liabilities Ratio
- Operating Surplus Ratio
Under the Local Government Act 2009 and City of Brisbane Act 2010 (the Acts) and the Regulations, local governments are required to calculate and disclose the relevant measures of financial sustainability in:
- budget documents; and
- annual reports (including current year and long-term financial sustainability statements).
To assist with these requirements, the department has prepared the Guideline 2013, which includes illustrative examples using extracts from the department's 2012-13 Tropical Illustrative Financial Statements (Tropical 2012-13) ( 663 KB). In accordance with Section 169(5) of the Local Government Regulation 2012 and Section 160(5) of the City of Brisbane Regulation 2012, the definitions and formulae outlined in the 2013 Guideline must be followed when calculating the relevant measures of financial sustainability.
The Guideline 2013 also includes a summary of key sustainability requirements contained in the Acts and the Regulations.
City of Brisbane Act 2010
City of Brisbane Regulation 2012
Local Government Act 2009
Local Government Regulation 2012
Changes since the Financial Management (Sustainability) Guideline 2011 was issued
In the interests of streamlining the Sustainability and Reporting process and reducing red tape, the Department has:
- reviewed the financial sustainability provisions in the Acts and the Regulations
- reduced the number of relevant financial sustainability measures to three key ratios by removing the Working Capital Ratio, Interest Coverage Ratio and Asset Consumption Ratio as measures
- integrated calculations and sample disclosures required for the relevant financial sustainability measures into the Department's 2012-13 Tropical Council Illustrative Financial Statements
- established a working group with Queensland Treasury Corporation (QTC), and agreed upon a set of key measures (including names, calculation methods, definitions and target ranges) to be used by each party for assessing financial sustainability in Queensland. In addition to these agreed measures, QTC will continue to utilise its own set of credit metrics when undertaking QTC Credit Reviews and may supplement the agreed measures when undertaking their Financial Sustainability Reviews.
Annual Report Sustainability disclosures
With the introduction of the Local Government Regulation 2012 and City of Brisbane Regulation 2012 (the Regulations), local governments are now required to prepare the following statements, which become part of the Annual Report:
- current-year financial sustainability statement
- long-term financial sustainability statement.
Guidance on the preparation of these sustainability statements can be found in the department's 2012-13 Tropical Illustrative Financial Statements ( 663 KB). Both statements must be given to the Auditor-General (AG) at the same time as the local government's general purpose financial statements. The current-year financial sustainability statement will be audited by the AG and his report on that statement must also be included in the annual report.
Extracts from Tropical 2012-13 were used in the Guideline 2013 to provide worked examples and guidance on the calculation of the relevant measures of financial sustainability.
Although the Acts and Regulations require local governments to provide a current-year sustainability statement (based on the current year financial statements) and a long-term sustainability statement together with the relevant financial statements, they are not required to release the forward projections upon which the long-term sustainability statement is prepared.
- Financial Management (Sustainability) Guideline 2013 ( 279 KB)
- 2012-13 Tropical Illustrative Financial Statements ( 663 KB)
Any further enquiries on this matter should be addressed to:
Mr Bill Gilmore
Department of Local Government, Community Recovery and Resilience
PO Box 15009
Brisbane QLD 4002