Local Government Authority Sustainability Model
The Western Australian Treasury Corporation (WATC) has developed a Local Government Authority Sustainability Model to help local governments evaluate their solvency and sustainability.
The financial Model provides local government with the ability to assess how adjustments to the following might impact their financial position over a future 10-year period:
- current rating structures
- borrowing
- usage of reserves
- planned capital expenditure programs.
The model takes the long-term financial plan (LTFP) and actual financial data of a local government — provided to WATC as part of regular accounting and reporting — as a starting point to provide a 10-year forecast of financial performance.
The model then provides the Local Government Authority (LGA) with the capability to adjust key financial 'levers' and consider a range of scenarios, in order to assess long term outcomes, solvency and sustainability.
Three elements combine to gauge the effective financial sustainability of an LGA:
A central tenant for an LGA’s long term sustainability is the need to ensure that:
- Cash inflows (primarily supported by property rates income) are sufficient to fund operating expenses, capital expenditure programs and scheduled debt service obligations; and
- Its planned capital expenditure is adequate to fund the scheduled renewal of its asset base (for which depreciation can be used as a proxy).
For more information download the PowerPoint on the Local Government Authority Sustainability Model.