The Auditor-General Act 2009 (A-G Act) prescribes that the Auditor-General must, for each financial year, audit the State's public finances and all public sector entities.
The definition of a public sector entity includes a controlled entity. An entity is a controlled entity if it is subject to the control of one or more local governments, or another entity that is subject to the control of one or more local governments.
For the purposes of the A-G Act, control means the capacity of an entity to dominate decision making, directly or indirectly, in relation to the financial and operating policies of another entity so as to enable the other entity to operate with it in pursuing the objectives of the controlling entity.
Control over an entity is presumed to exist when one entity has direct or indirect ownership of more than half the voting power of the other entity. However control can be gained in a variety of ways, including acquiring the assets of another entity or controlling the management of the entity.
Whether or not control exists can be subjective. Determination of the existence of control may require professional judgement.
Establishing or abolishing a controlled entity
Section 33 of the A-G Act requires the Minister for Local Government to advise the Treasurer and the Auditor-General of a notifiable event, that is:
- when a public sector entity is established or abolished; or
- an entity becomes a public sector entity or ceases to be a public sector entity.
Please note that before a local government creates a controlled entity, the Treasurer's approval may first be required under section 60A of the Statutory Bodies Financial Arrangements Act 1982 (SBFA Act). This section deals with type 1 financial arrangements including:
- entering into a joint venture, partnership or trust;
- forming, or participating in forming, a corporation; and
- acquiring or disposing shares in a corporation.
SBFA Act implications and control must be considered as part of a local government's due diligence process and determined prior to the establishment of an entity.
The Auditor-General’s most recent report to Parliament on the results of financial audits of local government entities lists the current controlled entities.
For further guidance on establishing a corporation, please refer to Bulletin 08/13 Approvals required for the establishment of a company.
Section 213A of the Local Government Regulation 2012 (section 203A of the City of Brisbane Regulation 2012) requires that local governments must within 14 days after a notifiable event happens, give the Minister for Local Government:
- a notice stating the name of the controlled entity, a description of the notifiable event, and when the notifiable event happened; and
- any documents, including governing documents, that the local government considers to be relevant to the notifiable event.
Examples of governing documents include the constitution of the controlled entity and statement of corporate intent.
In addition, if a governing document of a controlled entity changes, the local government must, within 14 days of the change happening, give the Minister for Local Government a notice stating the details of the change and a copy of the governing document as amended.
Local governments can provide the required notification by completing the Notification of Local Government Controlled Entities form (PDF, 115KB) and attaching the relevant governing documents.
Financial statements of controlled entities
Section 213B of the Local Government Regulation 2012 (section 203B of the City of Brisbane Regulation 2012) requires that:
- the local government must obtain a copy of the audited financial statements of the controlled entity.
- the mayor must present the copy of the audited financial statements at the next ordinary meeting of the local government.
- within 14 days after the copy of the audited financial statements is presented at the meeting, the copy, or a link to the copy, is published on the local government’s website.
Any further enquiries on this matter should be addressed to:
Finance and Funding
Local Government Division
(07) 3452 6720
Last updated: 21 Oct 2021