Local Government Financial Assistance Grants funded by the Commonwealth Government are distributed among 137 local governments in Western Australia each year. The grants are the State's entitlement for financial assistance from the Commonwealth Government, paid in equal quarterly instalments for a financial year, under the Australian law,
Local Government (Financial Assistance) Act 1995. The distribution of Financial Assistance Grants is for local government purposes, to achieve equitable levels of services by reasonable effort.
Western Australia's share of Commonwealth funding for 2017-18 is $287,355,527, which equals 12.14 per cent of the national allocation of $2.367 billion. The allocation has increased from $280.0m last year but after adjustments for last year’s overpayment to the State it is only marginally more at $280.8m. The funding is untied; there are no conditions on how the funds should be spent. The amount is divided into two parts, a general purpose component and a local roads component.
WA Local Government Grants Commission (grants commission) is responsible for making recommendations to the Minister for Local Government on the allocations of Financial Assistance Grants.
Provision of funding to local governments
The funding provided to local governments is allocated on the basis of horizontal equalisation to ensure that each local government in the State is able to function at a standard not lower than the average standard of other local governments. All local governments are entitled to receive at least the minimum grant. That minimum grant cannot be less than 30 per cent of what the local government would receive if all grants were allocated on a per capita basis.
The balanced budget approach has been used to calculate General Purpose Grants since 1994. The grants commission calculates the equalisation requirement of each local government by assessing the revenue raising capacity and expenditure need of each local government. Five categories (called standards) have been used to calculate revenue raising ability and six categories have been used to establish expenditure need.
The equalisation requirement is the difference between the assessed expenditure need and the assessed revenue raising capacity of each local government. A range of costadjustors have been developed by the grants commission (for example: location, population dispersion and socio-economic disadvantage) and are included in the calculation of the standards to recognise the additional costs a local government faces due to its physical or demographic characteristics.
The 2017/18 balanced budget spreadsheet will be available in due course.
Asset preservation model
The grants commission uses an asset preservation model for local road funding. This model is used to assess the cost of maintaining a local government’s road network and takes into account annual and recurrent maintenance costs and the costs of reconstruction at the end of a road’s useful life.
The grants commission is required to keep up with the changing face of local government to ensure that its methods reflect the operations of the industry. As part of this process, it visits about 30 local governments each year to hold public hearings that provide an opportunity for local governments to inform the grants commission of the issues they are facing. The grants commission also receives submissions from local governments seeking modifications to the grant determination process so that it will reflect their needs more effectively
The Department of Local Government and Communities requires all local governments to complete the
Information Return to facilitate the processes for allocation of Financial Assistance Grants. The
Information Return will be made available through the Department’s SmartHub in 2017 and can be submitted on the same site.