The NSW government has announced a review of the financial model for local government.

Draft terms of reference ask IPART to review the financial and operational performance of councils, and whether the current funding system delivers value for money and can sustainably support community needs.

The pricing regulator will also consider how better planning and reporting systems can improve long term budget performance, transparency and accountability.

The review will help address rising cost pressures facing councils across the state, local government minister Ron Hoenig says.

“The government has asked the Independent Pricing and Regulatory Tribunal to examine the financial model for councils and key factors impacting councils’ financial sustainability,” he said in a statement on Tuesday.

“There needs to be a closer examination so that the solution to financial challenges is not increasing revenue through raising council rates or seeking financial support from the state government.”

The review will look at resources currently available to councils, as well as their capacity to cover ongoing expenses and fund core services and infrastructure, he says.

It will also try to find ways to improve budgetary performance and accountability within the sector.

IPART will consider and recommend improvements on matters including:

• The visibility of councillors and the community over the financial and operational performance of their councils

• Whether the current budget and financial processes of councils are delivering value for money

• Whether the current funding model can sustainably support the needs of communities

• Whether councillors and council staff have the financial to meet current and future needs of communities

• How better planning and reporting systems can improve long-term budget performance, transparency and accountability

Submissions will be accepted until March 15, with a report due to government 12 months later.

The  announcement follows changes to the IPART rate peg methodology announced last year, so it now takes into account factors like employee cost increases, forecast inflation, council-specific changes in Emergency Services Levy contributions and population growth, and have been endorsed by LGNSW.