2023/24 Financial Assistance Grant Payments

The FAGs is provided by the Commonwealth under the Local Government (Financial Assistance) Act 1995 (Commonwealth) and is distributed annually to 77 local governing bodies within Queensland.  Since the 2009/10 financial year, initial payment of a portion of the Financial Assistance Grant has been made by the Commonwealth Government.  This payment has been traditionally 50% of the grant in the first instance, with the balance paid over four quarterly payments, however in the 2021/22 this initial payment became 75% of the overall sum. 

“Council must reconcile this payment in the financial statements of the year it is received, which distorts the level of income received in any one financial year.  This issue was exacerbated by the 75% payment, and the uncertainty surrounding this financial year’s payments. Based on the current methodology, council originally budgeted on a 75% payment. In the second quarter review, council moved that financial projection to an advance payment of 50%, reflective of previous practices,” Mr Pitt said.

The recent Federal Budget 2022-23, released 29 March, again provided for an advance payment of the estimated 2023-24 payment. This advance represents approximately 75% of the entitlement, however this payment will not be made until the 2023/24 financial year has commenced, while this will impact the financial statements of all Councils in Australia.   Since this announcement, the Prime Minister has now announced that 100% payment of the FAGs will occur in advance in this current financial year.  The payment of this grant and its accounting treatment must be finalised and be made consistent. 

Mr Pitt said, “The timing of the payment of this grant has no material impact on our Council’s financial position, which is strong.  What it does impact is our financial statements.  Dependant on the percentage payment and the timing of this payment. South Burnett’s deficit this year will move between $3 m to $6.3m or $10m dependant on these factors, meaning that the financial indicators which measure financial performance based on a deficit is meaningless.” The payment of this grant and its accounting treatment must be finalised and be made consistent as anything else makes any discussion of local government financial sustainability a moot and irrelevant point.

Councils across Queensland are measured for their financial sustainability and need to have budgets that forecast up to 10 years into the future, yet this payment, which is local governments share of the Australian Taxation income has been declining as a % of total Commonwealth Government revenue.  Mr Pitt noted “that now we find ourselves in a position to budget for a total payment, yet we do not know the amount being paid for a different financial year to when its due.  The next logical question when we unravel the current payment, is what happens next year?”

It is important to note that South Burnett Regional Council has managed its finances in such a way that the timing of the FAGs payment will not have a detrimental impact to Council service delivery and council remains in an extremely strong position to withstand such a financial shock as is Council’s cash position.

However, the FAGs payment will have a significant impact on our financial statements. Council’s estimated financial position for the 2022/23 financial year is based on the events of last financial year, and Councils’ financial position will be finalised when all the payments are received by 30 June 2023.