Good Local Government. What is it?

Commentary, Larry Mitchell, Local Government

As the first of a series on local government, a good place to start this dialogue is to define—or better, just discuss what makes for good local government.

One feature of municipalities the world over is that they all reflect their own local community-driven identities demonstrating these differences within their chosen policies and priorities.

However, what all of local governments should have in common is an operational environment, a framework common to all that results in achieving best practices at all levels.

In other words, you get what you ask for within an unsatisfactory municipal performance framework. This invariably amounts to sub-optimal local government performance at every level when the performance bar is set too low. Best practice is often the first casualty of an inferior performance framework and good local government will not be and cannot be achieved.

Let’s come to the detail of the framework later. To start, consider local government entities as creatures of statute, that is, organizations set within a radius of actions as determined by the law. There are many aspects of good local government law; however, the one overarching objective of local government empowering legislation must be to comprehensively define what is good (“best practice”) local government and then enshrine this within the legislation.

The emphasis on good law which then determines good local government performance could hardly be otherwise if proper thought and care is brought to the drafting of such law. The merit of such an emphasis is closely allied to the huge importance of the role of local government both at a local community and national economic level.

In New Zealand (from whence the author hails) the “Purpose” clause of an earlier Local Government Act (1989) merely required municipalities to pursue “good” local government. How this was to be achieved was left unsaid.

Not any more, for the current Act, the Local Government Act 2002 is more prescriptive. It demands:

• Certain principles to be followed including the conduct of “open, transparent and accountable” local government and

• ”Purposes”, i.e, to “enable democratic local decision-making and to promote four broad objectives, the social, economic, environmental and cultural well-being of local communities.” In New Zealand, this has come to be known as the “quadruple bottom line” outcomes.

In addition, where best practice includes use of generally accepted accounting practice, this is a requirement to be followed. Even more importantly, where GAAP practices are found to be deficient or are not covered in a best practice management context, they are then specified within the law. This even extends to good asset (facilities) management practice with full asset maintenance funding being mandated for example.

Local communities are then encouraged to determine the specifics as to how these legal and other principles will play out for their municipality in practice. Thus, in New Zealand local government, certain non-negotiable operational practices are mandated in order to achieve good local government, or by another name—best practice.

Another aspect of good local government relates to the key word “accountable” in the legislation quoted above. On this one word hang literally dozens of other clauses of the Act in support of these transparency and accountability concepts. In general, the Act provides the framework for New Zealand municipalities to be fully accountable and to reach high standards of best practice.

One accountability best practice example in the Act is entitled “Planning decision-making and accountability.” This section’s clauses (there are 47) lead to non-negotiable modern managerial best practice. Some examples include:

• 10-year fully integrated and audited long term financial plans;

• A balanced budget requirement coupled with a detailed performance regime that includes the specific identification and reporting of outcomes (“quadruple bottom line” outcomes) and;

• Rigorous funding requirements including taxation and other funding mandated and of an amount sufficient to annually provide for the full economic maintenance of municipal infrastructure.

Furthermore, the audit provisions that cover this framework are extensive, demanding and are non-negotiable. Accounting and audit standards are very high. They are based on applying generally accepted accounting practice (including IFRS— International Financial Reporting Standards) supplemented by other best practice provisions.

Few if any concessions are made within this common framework merely because a unit of local government is small, or that it is a public sector entity. In New Zealand, there is little perceptible difference between the application of private and public sector accounting and audit standards. For example, all municipal audits must be completed within five months of balance dates and if not, these failures are reported to Parliament. The Auditor General (an oversight office of central government) ensures that quality local government performance and accountability standards are maintained.

Perhaps Canadian readers may, from their own knowledge, contrast this framework with that of their local governments and provincial legislation as regards the same. Which jurisdiction is better is less at issue, as local conditions differ. However, what is crucial is the use of a framework that promotes good local government in all jurisdictions.

In practice, the New Zealand local government sector is growing in confidence and competence within the shelter and nurture of its excellent performance based framework. Better future performance and compliance actions are planned. Modifications are proposed for the framework. However, as a basis for the conduct of good local government, it is a far cry now from 1989 when, for example, a full accruals accounting regime was first introduced. In contrast, Canadian municipalities have labored under legislation and operational conditions that fall far short of accepted international local government best practice.

For instance, to date, municipalities have only adopted a partial accruals management accounting approach. Another related problem is a major omission, a failure to insist upon actual funding for the full economic costs of infrastructural assets maintenance.

The existing Canadian empowering Provincial legislation has not yet attempted to base codes of local government behavior upon comprehensive best practice. When they do, that best practice should include (as one example) provisions that fill out the mandated funding of infrastructural asset depreciation. Given these omissions in Canada, it should come as no surprise to read Canadian newspapers and discover daunting levels of municipal infrastructure backlogs in maintenance.

Later contributions to this dialogue will follow up on this important particular funding issue thread. Without robust legislation similar to New Zealand, Canada’s municipalities are not achieving results consistent with best practice standards around the world.

This is the second of a series of articles relating to local government. All comments, feedback or direct contact on the subject of this contribution and other local government topics are warmly welcomed.