2024/25 Financial Assistance Grant (FAGs)

To add a secondary blow, the grant payment has decreased by an estimated $600,600.   This loss of grant funding will directly and negatively impact the council operational deficit and service delivery.  South Burnett Regional Council urgently calls on the State and Commonwealth Governments to review the FAGs methodology for a fair and equitable distribution of funding to our region.

South Burnett Regional Council has called on all other levels of Government and the State Grants Commission for clarity regarding the 2024/25 Financial Assistance Grant (FAGs) payments after last minute announcements and confusing messaging.

The FAGs are 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 to councils in the financial year prior to its due payment.  This payment was 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 and in the 2022/23 year the advance payment become 100% of the grant.

This changed for the 2024/25 financial year with 85% of the grant paid in the year that is meant for no early payment.  The outcome is that there is now a significant financial discrepancy for Councils in the 2023/24 financial year that will affect our statements and will make that year’s trading look particularly bad.

Council must, under the accounting standards, reconcile this payment in the financial statements of the year it is received, which distorts the level of income received, or in this case not received, in any one financial year.  This issue was exacerbated by the 75% payment and the subsequent 100% payment in previous financial years.

The Australian Local Government Association lists as its No. 1 Priority to restore Financial Assistance Grants to at least one percent of Commonwealth taxation revenue and provide councils with an additional once-off payment of $3 billion to address the practice of bringing forward FAGs payments.   South Burnett Regional Council strongly supports this advocacy, as does all Councils at the recent ALGA National Program.  The call for consistent and regular payment of the FAGs was loud and clear.

The recent Federal Government announcement to bring forward payment of 85% of the 2024-25 allocation of the Financial Assistance Grant into the 2023-24 financial year was made two (2) days before the end of the financial year.  This payment was not received until 2 July and in the 2024/25 financial year.

This will impact the financial statements of all Councils in Australia.  The Australian government must stop moving the payments from one financial year to another.

Whilst 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 again move between $3 m to $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 percentage of total Commonwealth Government revenue. 

We again 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 2023/24 financial year is based on the events of last financial year, and Councils’ financial position will be finalised when all the payments are received or in this case not received by 30 June 2024. 

For further information contact Council on 4189 9100 or email info@sbrc.qld.gov.au.