Tips for Completing a Rate Variation Application

Financial Areas of Focus

Local council expert Jeff Webb from JNW Strategic Consulting, who assisted the Essential Service Commission (ESC) with the development of the rate capping framework and is assisting Frankston City Council develop a Service Planning Costing Methodology, recommends all applications needs to be clear on purpose and be financially congruent to both current and past financial data.  In relation to completing your variation application, some simple financial tips that could strengthen your variation application are detailed below:

  1. To support the reason a variation from the cap is required the ESC will be seeking an understanding of why the Council could not financially deliver its services with only a 2.5% rate increase.  This will require you to clarify the dramatic change from the prior year, for example expanded services, or new infrastructure.
  2. Your application will need to clearly identify what the additional funds will be used for, including the impact of not obtaining the extra revenue.  Consequently two financial models will need to be developed to provide transparency about the genuine need that will be addressed through the use of the variation monies.
  3. Ensure the rate variation requested is consistent with your Council’s revenue strategy and policy on funding and financing.  This will require you to demonstrate that the variation provides “value for money” by documenting how you have considered:
    1. Service priorities, i.e. the costs and benefits of delivering all the services you currently deliver has been evaluated.  The application should show you have assessed your service delivery productivity and factor in the value of identified efficiency improvements
    2. The question of “Should Council provide all the existing services?”  This evaluation should identify “discretionary” services and assess the savings and risks of not providing them
    3. Other funding options, i.e. the impact of leveraging and reprioritising funding from other services has been analysed.  Reasons for not proceeding should be included in your application
    4. The principles of “Best Value” such as output quality, responsiveness to community needs, service accessibility, effectiveness and efficiency of service delivery and how the major services you deliver provide “value for money”.  These factors should be clear in the cost of the services.
  4. To demonstrate “value for money” ideally the Council can provide service cost benchmarks against peers or private sector.   Councils may need to outline how service costs have been calculated, which may be require developing a Service Planning Costing Methodology that details the approach for allocating direct and indirect costs and revenues to each service benchmarked.
  5. The application needs to demonstrate that your service prioritisation and funding determination has taken account of ratepayers’ and communities’ views, including:
    1. Funding trade-offs have been transparently communicated, i.e. provide both with and without variation scenario’s/business cases outlining the operational and financial impacts and cost-benefit analysis
    2. Demonstrate the community feedback process and how their concerns have been addressed. Ideally, to address the recommended community engagement principles set down by the ESC the Council will develop a Community Engagement Strategy covering community feedback loops such as surveys of a sample of rate payers or people’s panel and leverage social media platforms.
  6. Integral to the application is that the financial and operational impacts of the variation amount requested be included in the Council’s long-term strategy.  As such, Council’s relevant planning instruments including the Strategic Resource Plan, Service Delivery Plans, Asset Management Plans and the Long Term Financial Plan should be updated to present the with and without variation numbers.
  7. As the ESC will compare your data against baseline data and available historic information, including data from the Local Government Performance Reporting Framework and Grants Commission, your application will need to be fully supported by financial data, ideally reconcilable back to either audited financial statements or Grants Commission figures.  Any unexplained data inconsistencies with the ESC baseline information may result in queries from the regulator.
  8. Ensure your information is auditable.  This means establishing governance procedures around record keeping, audit trails and independent review and formal application sign-off.

Should you require any further information or wish to discuss these tips, please do not hesitate to contact Jeff Webb on 0437 539 015.  The JNW Strategic Consulting team can assist Councils:

  • Create risk intelligent rate capping response frameworks
  • Develop service planning costing methodologies
  • Prepare rate cap variation applications
  • Conduct service delivery efficiency reviews or implement continuous improvement programs
  • Complete financial risk due diligence on potential new revenue streams
  • Reporting – new Council plan/Long Term Financial Plan/Service Driven Asset Management Plans.

For more information about our team and our council experience, please visit our website:

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