Wednesday, 1 April 2026

 Bev McARTHUR (Western Victoria) (17:45): This week the Victorian Auditor-General’s Office tabled its report into the latest round of local government financial audits. While VAGO, the Victorian Auditor-General’s Office, issued 179 clear audit opinions, the detailed findings of the report are deeply concerning. They are in fact a total indictment of the Allan Labor government, a government that loves to interfere with the internal politics of council chambers but abandons the sector when it comes to their finances. For anyone who cares to read this report, you will observe deteriorating financial performance, you will see mounting audit risks and you will notice concerning reporting practices by some councils. The minister will no doubt point out the headline result, a combined sector surplus of $2.9 billion, but strip out the federal assistance grants paid in advance and nearly 20 per cent would have reported a loss this year. Even more shockingly, only 13 per cent of councils can generate a surplus from their ordinary operations.

For those who are not particularly interested in the accounting, I can tell you that this has a tangible impact on ratepayers. Without strong revenue, our councils cannot fund the infrastructure they rely on. In 2024–25 the sector underspent its capital budget by $820 million, nearly 20 per cent below what councils themselves committed to spend. This is a five-year pattern. That means roads and bridges deteriorate. That means sporting facilities and libraries close down. VAGO has again recommended that councils review their capital budgeting processes, but ultimately the government needs to address the root cause: chronic underinvestment. Rural councils are bearing the sharpest end of these pressures. For some small shires, government grants represent a significant proportion of total revenue. Their ratepayer base is simply too small to carry their cost base. Expenses across the sector have grown faster than the rate cap every single year for the past five years. That gap between what councils can raise and what they must spend does not close itself. It requires serious reform. I always call on councils to ensure that the services they provide deliver measurable, specific and positive outcomes, but without sustained support from the state, small councils face genuine questions about long-term financial sustainability.

On governance and reporting quality, the report again raises serious concerns. More than half of all councils failed to submit their draft financial reports on time. Fourteen councils did not meet their legal obligation to present a compliant annual report at an open public meeting. Audit adjustments increased by 37 per cent compared to the prior year and errors in performance statements more than doubled. Perhaps most troubling is the persistence of unresolved audit findings. High- and moderate-risk issues raised in previous years remain open across dozens of councils. Left unaddressed, these risks could become major problems in the future, problems that could cost councils both financially and reputationally. When it comes to the financial sustainability of the sector, when it comes to the growing gap between council revenues and costs and to the guidance and support that councils need to meet their obligations, the government has been totally absent. Ratepayers deserve better, and this Parliament demands better. This is an indictment on the Allan Labor government. This report into council sustainability by VAGO is a very telling piece of work.