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A first tranche of regulatory amendments to enable the Model Financial Statements, the Local Government Regulations Amendment (Financial Management and Audit) Regulations 2022 (the Regulations), have come into effect.

The Regulations amend the Local Government (Financial Management) Regulations 1996 (Finance Regulations) and Local Government (Audit) Regulations 1996 (Audit Regulations).

These amendments require local governments to present operating expenses and revenue in ‘nature or type’ format in their annual budget, monthly statement of financial activity and annual financial report, from 1 July 2022.

The amendments mean that local governments must adopt a Rate Setting Statement in ‘nature or type’ format as part of their 2022-23 annual budget.

Other changes to the Finance Regulations and Audit Regulations reduce local government reporting requirements and the scope of audit reports from 1 July 2022.

More specifically, the changes remove the requirement for an annual financial report by a local government to include:

• financial ratios; and
• an auditor’s opinion on financial ratios; significant adverse trends and indications of non-compliance.

It is important for local governments to note that:

• The Auditor General is required to comply with the Australian Auditing Standards when conducting local government audits, and those standards contain comprehensive guidance in relation to reporting non-compliance with legislation and going concern matters. Therefore relevant authorities will continue to respond to potential or identified non-compliance in the local government sector, as appropriate.
• Under the Local Government Grants Act 1978, the Local Government Grants Commission will continue to require financial information to be provided by ‘program’. Therefore local governments should record relevant transactions by ‘program’ and ‘nature or type’ in their financial systems.

The department is working on a second tranche of regulatory amendments to underpin the Model Financial Statements which will be introduced to the local government sector before the end of 2022 and available for use by April 2023.

If you have any queries, please email the department’s Local Government Accounting Support Line at: LG.accounting@dlgsc.wa.gov.au

For further information, please see a copy of the regulation and the explanatory notes below.

Explanatory notes

1 Citation

This provision sets out the citation title of the instrument: Local Government Regulations Amendment (Financial Management and Audit) Regulations 2022 (the regulations). 

2 Commencement

The regulations comes into operation:

• Part 1 — on the day on which these regulations are published in the Government Gazette.
• The rest of the regulations — on 1 July 2022.

3 Regulations amended 

This regulation provides that these regulations amend the Local Government (Audit) Regulations 1996 (Audit Regulations).

4 Amends regulation 10 of the Audit Regulations

This regulation deletes current regulation 10(3) and (4A) and inserts an updated regulation. As a result, an auditor is no longer required to:

• form an opinion on significant adverse trends or indications of non-compliance with written laws
• include details of whether information and explanations were obtained by the auditor 

• form an opinion on the ratios regarding asset consumption or asset renewal funding for a financial year commencing on or after 1 July 2021.

These changes apply to audit reports for the 2021-22 financial year and future financial years.

5 Transitional provisions 

It is understood that some 2020–21 audits are still in train. In the interests of consistency and comparability, an auditor is required to include information on matters provided for in the former regulation 10(3) and (4A) in their report on 2020-21 audits that are still to be completed.

6 Regulations amended

This regulation provides that these regulations amend the Local Government (Financial Management) Regulations 1996 (Finance Regulations).

7 Amends regulation 14 of the Finance Regulations 

This regulation amends regulation 14 such that a local government is required to present operating revenue or expenses by nature or type classification, as set out in Part 2 of Schedule 1 of the Finance Regulations, in the annual budgets and annual financial reports by the local government.

8 Amends regulation 34(3) of the Finance Regulations

Consistent with the regulation above, this regulation amends current regulation 34(3) such that, from 1 July 2022, a local government is required to present operating revenue or expenses by nature or type classification, as set out in Part 2 of Schedule 1, in the monthly statement of financial activity by the local government.

9 Amends regulation 36(1)(f) of the Finance Regulations

Consistent with the regulation below, this regulation amends regulation 36(1)(f) to delete the reference to regulation 50 and insert an update to the text.

10 Deletes regulation 50 of the Finance Regulations

This regulation deletes the current regulation 50. As a result, from 1 July 2022, financial ratios are not required to be included in the annual financial reports by a local government.

This change applies for upcoming annual financial reports for the 2021-22 financial year and future financial years

11 Transitional provisions

It is understood that some annual financial reports for 2020–21 are not yet considered complete because the corresponding audit report is still in train. In the interests of consistency and comparability, the previous provisions of regulations 14, 36(1)(f) and 50 continue to apply for the annual financial reports that are still to be completed.