Council Financial Performance
Councils in Focus includes three key financial indicators that are often referenced to determine if a council is ‘financially sustainable’.
What is financial sustainability?
While financial sustainability can be interpreted a few different ways, a council’s long-term financial performance and position is considered sustainable where planned long-term service and infrastructure levels and standards are met without unplanned increases in rates or disruptive cuts to services.
A council could be considered ‘financially unsustainable’ if they have:
- an operating deficit for several years
- a relatively high net financial liabilities ratio
- no clear plan to address these matters in the council’s long-term financial plan.
The three indicators used by all councils to understand their financial sustainability are:
Operating Surplus Ratio
A council’s operating surplus ratio is the best measure of its financial sustainability.
Net Financial Liabilities Ratio
A council’s net financial liabilities represents the money it owes compared to money it holds, has invested, or is owed.
Asset Renewal Funding Ratio
The asset renewal funding ratio shows how councils invest in renewal and replacement of their assets, such as roads and buildings.
Getting involved
If you are concerned about your council's financial performance and position, contact your council to discuss your concerns.
You may also like to look at the council's long-term financial plan which puts information about these financial indicators into context, explains the council's financial strategies and also sets out the key conclusions which may be drawn.
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