The Baird Government has moved to seize direct financial control of councils across New South Wales under sweeping new laws that hand ultimate power over local government spending to specially appointed “controllers”, with oversight duties handed to the State Auditor General.

Revealed in the immediate wake of this week’s NSW Budget, the new legislation — the Local Government Amendment (Governance and Planning) 2016 — proposes to impose the tightest controls yet on how elected representatives and council staff spend money and includes the right to shut out general managers from financial probes of expenditure and governance.

The new laws could also hand State Government appointed administrators the power to make ‘opt-in’ decisions on behalf of electors and elected representatives on controversial issues like the use of postal voting at merged councils thanks to the delay of polls until September 2017.

Rushed into the Legislative Assembly this week, the new controls won’t be debated until the August sitting of State Parliament but have already sent shockwaves across a sector still reeling from the sacking of 37 councils in May.

[quote]One of the legislative changes sure to raise hackles is a bid to “remove procedural requirements relating to the community strategic plan, community engagement strategy, resource ng strategy, delivery program and operational plan.”[/quote]

Local Government Minister Paul Toole is making no apologies and said the new laws make “important changes to ensure councils are always putting the interests of local communities first.”

That includes far greater powers for direct ministerial intervention.

“It will enable the Government to appoint a financial controller to councils that have a consistent record of poor financial performance and get those councils back on track,” Mr Toole said.

The hotly contested financial state and sustainability of local governments across NSW was the main trigger for forcing council amalgamations across the state, premised on the Independent Pricing and Regulatory Tribunal’s heavily disputed ‘Fit of the Future’ report card.

But many councils – amalgamated or otherwise – have attacked the financial assessments made of them in the run-up to mergers as flawed, particularly smaller and more buoyant local governments amalgamated with fiscally challenged neighbours.

Councils hit back

Local Government NSW (LGNSW), the peak representative body for councils in the state, is suspicious of the bid to parachute-in financial controllers as the Minister sees fit, cautioning some of the state government’s financial assessment methods simply lack credibility.

“Many of these moves seem designed to establish new avenues for central oversight and control, rather than recognising that local government is an autonomous, elected sphere of government,” said LGNSW President Keith Rhoades.

“There needs to be agreed parameters around the Government appointing a financial controller, and objective measures of “poorly performing” or “high financial sustainability risk” need to be established. Lack of specificity could allow the Government to apply the same discredited methods used to declare many NSW councils “not fit for the future,” Cllr Rhoades said.

City of Sydney Councillor Ed Mandla, a Liberal, also had reservations as the the efficacy of the new laws.

“Surely the best oversight for council books is the ballot box,” Cllr Mandla told Government News.

[quote]”The real problem for for Councillors is if they have a problem with the GM (general manager) they have to tell the mayor and if they have a problem with the mayor they have to tell the GM — what if they are in cahoots?”[/quote]

Questionable Timing

The latest laws are the second major tranche of legislation to hit this week, with another bill dealing with the donations and the pecuniary interests of councillors – the Local Government and Elections Legislation Amendment Integrity Bill – introduced on Budget night.

The timing of the new legislation prompted Labor Opposition Leader Luke Foley to accuse Mr Toole and Premier Baird of trying to sneak through the new laws and of reneging on a promise to introduce limits on donations, especially from property developers.

“Mr Baird has broken a clear and unequivocal commitment to introduce spending and donation caps for council elections,” Mr Foley said.

[quote]“Caps on donations are not much use without limits on election spending. Predatory interests will be able to spend as much as they like to capture control of a local council.”[/quote]

Shadow Local Government Minister Peter Primrose said while it was still too early to give a definitive assessment of the latest laws, people needed to remember that decisions at amalgamated councils – including ones that could flow from the new laws –were being made by government appointed administrators rather than councillors answerable to electors until September 2017.

Mr Primrose also questioned whether the Baird Government was really committed to ensuring integrity in council decisions given Budget cuts meted out to the Independent Commission Against Corruption (ICAC) that had persistently uncovered graft and dodgy decisions.

“The Premier who is behind this bill is also responsible for slashing staff at ICAC – one of the most important institutions that that maintains integrity in local government,” Mr Primrose told Parliament on Wednesday.

Referencing State Budget papers, Mr Primrose said ICAC’s “corruption prevention presentations will drop from 160 to 100” and that the average time to deal with complaints would rise from 30 days to 42 days.

“So much for promoting integrity measures,” Mr Primrose said.

Massive Audit Office Workload

While the new legislation is yet to pass, a clear intention of the new laws is to remove the ability of councillors to appoint their own auditors and hand oversight power to the directly Auditor General.

[quote]The changes mean that while the government will get a centralised and consistent view of local government finances, the Audit Office of NSW will need to compile literally hundreds of new council reports a year to perform its new duty.[/quote]

A spokesperson for Mr Toole said changes brought NSW “into line with most other Australian jurisdictions and New Zealand and will provide greater consistency and certainty across the sector.”

“It will also ensure that reliable financial information is available that can be used to assess councils’ performance and for benchmarking.

Mr Toole’s Office also confirmed that the Auditor-General will have powers to “conduct sector-wide performance audits to identify trends and opportunities for improvement across the sector” in line with similar powers in relation to state agencies.

The total cost of the audits – which are typically charged back to agencies – is still yet to be determined.

A state public service source suggested that putting councils under the watch of the Auditor General was “unquestionably” the right move, but one that may not work in Macquarie Street’s favour if ministers relied on rubbery numbers.

Premier Baird in February 2016 announced that Margaret Crawford,  who has been Deputy Secretary at the state’s Department of Family and Community Services, would become the new Auditor General of NSW.

Key changes as flagged by the Minister for Local Government

• Appoint the Auditor-General as the auditor of all councils;
• clarify roles and responsibilities of councillors, mayors, administrators and general managers;
• introduce new guiding principles for local government;
• improve governance of councils and professional development for councillors;
• consolidate the ethical conduct obligations of councillors;
• establish the framework for strategic business planning and reporting; and
• streamline council administrative processes.