3.1 Local Government Act 1974 Part VIIa (as amended by the Local Government Amendment Act 1996)
The Local Government Amendment Act (LGAA) came into force in July 1996 and provides a statutory regime for the financial management of local authorities.
The general purpose of LGAA is to promote prudent, effective and efficient financial management by local authorities. It prescribes the following three-step approach for determining how expenditure needs are to be funded:
Step 1 Allocation of costs to groups or individuals, having consideration for:
- Recovering costs at the time of benefit
- Benefits to the wider community
- Benefits received by individuals or identifiable categories of people
- Contributions by individuals or groups to the need for the service.
Step 2 Modification of the cost allocation to take in to consideration:
- Interests of residents and ratepayers
- Fairness and equity
- Promotion of Council policies
- Avoidance of adjustment difficulties due to sudden and significant changes in cost.
Step 3 Consideration of the practicalities and efficiency of funding expenditure in a way that achieves the desired cost allocation having regard for:
- The funding mechanisms available
- The efficiency of those funding mechanisms
- The efficiency of implementing new systems as opposed to the use of existing mechanisms
- The transparency of funding mechanisms in terms of allowing clear identification of the links between costs allocated and expenditure needs to which they relate.
LGA recognises that decisions on funding policy are inherently subjective and complex. Elected representatives have to make judgements on an informed basis and following the process required in the LGA. The LGA provides that the process of formulating decisions is not exact, Council may use discretion, Council must act reasonably and Council must consult.
Council has prepared a Funding Policy in accordance with the requirements of the LGAA. Council’s Funding Policy for Project Watershed is set out in section 16 of this document.