2021 Methodology Review

About the Financial Assistance Grant

All local governments in Australia receive a Financial Assistance Grant (FA Grant) allocation, as determined by state and territory grants commissions.

For 2021-22, the Federal Government allocated $2.7 billion for the FA Grant, of which Queensland received $532 million (a 19.7% share of the total pool). All of this funding is disbursed to local government. Any costs of administering Grants Commissions are borne by their state/territory.

There are two components to the FA Grant, the General Purpose Grant (GPG) component and the Identified Road Grant (IRG) component. Queensland’s 2021-22 FA Grant comprised of $377 million in GPG funding and $155 million in IRG funding.

All of the funding is completely untied and may be spent on any local council priorities.

Commission Role

The Commission is an independent statutory authority whose primary role is to make recommendations to the state and federal ministers for local government on the allocation of the FA Grant to all Queensland councils.

The Commission’s statutory powers come under both state and federal legislation.

Under the Federal legislation – Local Government (Financial Assistance) Act 1995 (s3) – the objective of the FA Grant funding is to assist councils to improve in five areas: financial capacity; capacity to provide equitable services; certainty of funding; efficiency and effectiveness; and services to ATSI communities.

The legislation includes a set of National Principles that state grants commissions must follow. The first principle establishes horizontal equalisation as a key concept for the FA Grant. This concept requires the funding to be allocated such that, to the extent possible, councils are able to deliver at least an average standard of services to the community.

More information about the Commission and the FA Grant can be found here ( 213.7 KB).

Discussion Paper

In June 2021, the Commission released a Discussion Paper, inviting input to the review from councils and other stakeholders. Download the 2021 Methodology review – discussion paper ( 553.6 KB).

Feedback on the Discussion Paper closed in July 2021. In total, the Commission received 31 submissions from a range of individual councils and Regional Organisations of Councils (ROC).

The Commission was very pleased with the high level of engagement on the discussion paper from councils. Through both the formal responses and attendance by Commissioners at a number of ROC meetings, the Commission is confident that the vast majority of councils have had their say.

Review Outcomes

Consultation Feedback

The formal submissions received represent a good cross-section of the various types and sizes of councils. Collectively, the submissions provided feedback on the questions posed in the discussion paper. The time and energy invested in the submissions was apparent and provides the Commission with valuable insight.

The feedback provided:

• demonstrated overall, that councils and stakeholders are supportive of a review of the FA Grant methodology.
• endorsed the objectives the Commission is using to guide the review, although the stable and equitable objectives should be prioritised.
• acknowledged the significant challenge in constructing a single model to allocate funding across Queensland’s 77 councils, given the diversity in this cohort.
• while not unanimous, supported an increase in the number of councils who receive the minimum grant. Councils were generally reluctant to identify specific councils or criteria for a minimum grant council. The feedback requested that the Commission’s decision making in this regard be transparent and well documented.
• identified a large number of factors that impact councils’ ability to provide services.

More information on the consultation here ( 270.7 KB).

About the new Methodology

The methodology review is complete and the commission will be implementing a new methodology from 2022-23.

The new methodology will establish a simpler, stable and transparent allocations approach.

Key features of the new model include:

• focusing on the difference between a council’s potential to raise revenue and its actual capacity to raise revenue in acknowledgement of the revenue raising challenge faced by many councils
• allowing for the difference in costs in providing services (on a per capita basis)
• including cost factors that better reflect an individual council’s operating environment (remoteness, dispersion and socio-economic conditions)
• reducing the sensitivity of the model to road network input data, which means road length and related information is not as influential in determining grant allocations.
• establishing four more councils as minimum grant councils given their higher revenue raising capacity when compared to other Queensland councils.

A more equitable funding distribution has been achieved with more funding to be distributed under the new model to councils with a greater need, predominantly small and indigenous councils.

• 57 councils (74%) out of 77 councils in Queensland will receive a greater funding allocation under the new FA Grant methodology in 2022-23.
• 26% of councils will receive a reduced allocation in 2022-23.  For these councils the average reduction is approximately 0.3% of operating revenue.

For more information and a visual representation of the new method, read the fact sheet ( 234.5 KB) and slides ( 572.1 KB).

Implementation

The new methodology represents a change from the past and the Commission recognises that councils need time to prepare for the new distribution approach. For this reason, changes to transition to the new FA Grant allocation model will be implemented over a three-year period, commencing from the 2022-23 financial year.