Queensland’s remote Indigenous councils are facing huge financial sustainability challenges, with the councils typically running large operating deficits, averaging nearly 20 percent of revenue, and running down their asset base to survive (see figure below), according to the Queensland Audit Office’s financial audit report for Councils released last Thursday (also see this Brisbane Times article Qld Council’s are more than $5 billion in debt).
While the Indigenous councils have negative net financial liabilities (i.e. they have net financial assets), this may be because of previous grant money they have received from the federal and state governments, which the councils are running down over several years. The councils appear to be strongly reliant on grants to fund their operations and to avoid accumulating massive debts.
The large majority of councils that were assessed by QAO as being of higher relative financial risk are Indigenous councils (figure below). Nine Indigenous councils are in the higher relative risk category, seven are in the moderate relative risk category, and only one, Hope Vale, is assessed as lower risk.
The Indigenous councils at higher relative risk are located in Far North and North West Queensland, mostly in Cape York (Map below). Their remoteness adds to the challenges they face. The QAO provided the following concise summary of the challenges facing Indigenous councils (p. 4):
Indigenous councils have a higher risk of becoming unsustainable compared to the other council segments. This is due to their inability to raise their own revenue and their reliance on grant funding. Costs of living in these council areas are also higher due to the remoteness of their locations.
The inability to raise revenue is related obviously to limited economic development in remote Indigenous communities. Unfortunately, government policies to promote Indigenous economic development and well being have been largely unsuccessful, partly related to a lack of critical evaluation and reflection on policy initiatives, as argued by Sara Hudson from the Centre for Independent Studies in Mapping the Indigenous Program and Funding Maze.
Finally, I should note the QAO report shows that many Queensland councils appear to be performing reasonably well financially: 45 out of 77 councils ran operating surpluses and had net financial liabilities below 60 percent of revenue, the QAO’s recommended limit. Queensland councils appear very averse to debt, and it is mostly larger councils, namely Brisbane, Ipswich and Townsville, that have net financial liabilities in excess of the QAO’s recommended limit of 60 percent (see chart below).