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Finance regulations 'needless' mayor says

Last updated 05:00 01/04/2014

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New rules aimed at making council finances easier to understand are a waste of time, mayor Len Brown says.

The Local Government (Financial Reporting and Prudence) Regulations come into force on May 1.

They set out seven benchmarks which can be explained in simple graphs to show whether a council has met its goals.

But Brown says they are unnecessary and the government should implement those changes for its own books.

"If they applied the same transparency regulations to their own budgets, we might actually get somewhere in this country.

"We are subject to constant oversight by the auditor-general; we have monthly reportings on the state of our budget to our committee structure in open session that anyone in the community can come and observe."

The seven goals are: rates affordability, debt affordability, balanced budget, essential services, debt servicing, debt control and operations control.

Most of the guidelines simply show whether a council has met its budget goals.

The debt servicing goal gives a specific target - a council with a population growing faster than the national average needs to spend less than 15 per cent of its revenue paying back interest on debt.

Auckland Council's debt is expected to reach $6.7 billion by the end of the financial year, leading to an interest bill of $351 million.

The interest payment is 12 per cent of the council's $2.91b of revenue, excluding development contributions.

The Department of Internal Affairs says a major problem is that under the Local Government Act councils have to manage their finances "prudently and in a manner that promotes the current and future interests of the community" but there was no structured way of measuring whether they were meeting that obligation.

Councils are required to present financial information even if it is too complex for some users to understand without help.

Assistant local government minister Sam Lotu-Iiga says the new rules will provide insight and and improve decision making at a local level.

"Local authorities will report against these benchmarks through graphs in their planning and reporting documents.

"This will mean both the current position of a council and the past and projected trends in its financial management will be more transparent to ratepayers."

Councils will have to include the benchmark graphs in their reports for the 2013-14 financial year by October 31.

Local Government New Zealand was consulted on the regulations and will work with the government to find the best way to publish and analyse the results.

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Its president Lawrence Yule says clearly outlining the financial situation of councils will strengthen accountability and improve transparency.

"It is vital the measures be supported with relevant contextual comments so the information is correctly understood."

- Manukau Courier

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