Local government controlled entities
This bulletin is to remind local governments that the Minister for Local Government is required to advise both the Treasurer and the Auditor-General of Queensland when a controlled entity is established or abolished.
In order for the Minister to fulfil this obligation, local governments are required to advise the Department of Local Government, Community Recovery and Resilience of any new or discontinued controlled entities.
The Auditor-General Act 2009 (A-G Act) prescribes that the Auditor-General must, for each financial year, audit the state's public finances and all public sector entities.
The definition of a public sector entity includes a controlled entity. An entity is a controlled entity if it is subject to the control of one or more local governments, or another entity that is subject to the control of one or more local governments.
For the purposes of the A-G Act, control means the capacity of an entity to dominate decision making, directly or indirectly, in relation to the financial and operating policies of another entity so as to enable the other entity to operate with it in pursuing the objectives of the controlling entity.
Control over an entity is presumed to exist when one entity has direct or indirect ownership of more than half the voting power of the other entity. However control can be gained in a variety of ways, including acquiring the assets of another entity or controlling the management of the entity.
Whether or not control exists can be subjective. Determination of the existence of control may require professional judgement.
Establishing or abolishing a controlled entity
Section 33 of the A-G Act requires the Minister to advise the Treasurer and the Auditor-General of a notifiable event, that is:
- when a public sector entity is established or abolished; or
- an entity becomes a public sector entity or ceases to be a public sector entity.
Please note that before a local government creates a controlled entity, the Treasurer's approval may first be required under section 60A of the Statutory Bodies Financial Arrangements Act 1982 (SBFA Act). This section deals with type 1 financial arrangements including:
- entering into a joint venture, partnership or trust;
- forming, or participating in forming, a corporation; and
- acquiring or disposing shares in a corporation.
For further guidance on establishing a corporation, please refer to Bulletin 08/13 Approvals required for the establishment of a company.
Following the 2011 natural disasters, a number of local governments supported or established appeal funds to raise and distribute monies to members of their communities who had been adversely affected. Many of these funds were established in a way which made these arrangements controlled entities, and therefore subject to audit by the Auditor-General.
For further guidance on this issue, please refer to Bulletin 26/11 Circumstances where the establishment of Disaster/Community funds create a controlled entity.
The following lists show the local government controlled entities that have been previously advised to the department:
- Attachment 1 ( 24 KB) - lists the entities which are controlled by one local government only.
- Attachment 2 ( 14 KB) - lists the entities which are controlled by two or more local governments, or by a local government(s) and another public sector entity or entities.
Local governments are requested to review these attachments, and to advise the Minister of:
- any entity that they are associated with that satisfies the definition of a public sector entity that is not shown on either Attachment; and
- an entity that is listed on either Attachment that is no longer a public sector entity.
Local governments can provide the above requested information by completing the notification of local government controlled entities form ( 103 KB).
Please note that SBFA Act implications and control must be considered as part of a local government's due diligence process, and determined prior to the establishment of an entity.
Where there are several local governments jointly controlling an entity, for example, a regional organisation of councils or local government association, determination should also be made as to which local government has the responsibility of informing the Minister.
Any further enquiries on this matter should be addressed to:
Ms Lynne Marlow
Principal Project Officer
Finance and Funding Services
Phone: (07) 3227 8176