Report snapshot: Local government 2025

This report presents key findings and recommendations from financial audits of local councils, joint organisations and county councils for the year ended 30 June 2025.

It also comments on the sector’s financial sustainability, internal controls and governance, major capital projects, artificial intelligence (AI) and cyber security.

Key findings

Unmodified audit opinions were issued for the financial statements of 125 councils, 8 county councils and 11 joint organisations. Three council audits were in progress at the time of this report.

Financial reporting quality has improved

The number and value of errors in the financial statements declined from the previous year, and fewer versions of financial statements were submitted for audit, indicating improving financial reporting processes.

Financial sustainability continues to be a concern for some councils

Seventeen councils reported operating losses this year and 19 had insufficient cash (not subject to external restrictions) to cover 3 months of general expenses. Six of the 19 councils identified as being the least liquid also incurred operating losses.

Appendix 2 lists 11 councils with heightened financial sustainability risk due to various combinations of operating losses, insufficient cash, declining populations and low capacity to generate own source revenue.

Water supply infrastructure needs $1 billion to ensure access to safe and secure water

Two regional and 13 rural councils that supply water made operating losses. Even when operating costs can be covered, it is unlikely they will recover enough, based on council estimates, to enable infrastructure upgrades to agreed service levels.

Councils held $5.4 billion in local infrastructure contributions (LIC), but spending was low for some

There were 14 councils that held more than half of LIC funds. Of these, 10 spent less than 20% of their balance in the 2024–25 financial year. Delays between collecting and spending LIC funds may indicate that infrastructure planning and delivery processes are not operating effectively. The current LIC system is particularly complex for councils experiencing significant population growth.

Capital project guidance is outdated and inadequate

Of the 29 major capital projects reviewed, 14 were delayed by more than 6 months, and 6 were more than 10% over budget. Current guidelines are more than 15 years old and do not reflect the complexity and risks of modern infrastructure delivery.

Internal controls and governance processes had deficiencies

Deficiencies in internal controls and governance were identified at most councils, mainly associated with asset management, information technology (IT) and fraud control.

Most councils lack AI strategy and governance

Councils are in the early stages of adopting AI. Fewer than half have a strategy or governance framework, limiting oversight and opportunities to leverage benefits and mitigate AI risks.

Significant cyber security control deficiencies exist

Councils have critical weaknesses in managing supply chain risks. Policies and processes for assessing the cyber security exposure of technology assets are inadequate, and monitoring of cyber security investments and their associated benefits is limited.

Recommendations

The report makes 5 recommendations (see Executive summary for full details).

Further information

Please contact Renee O'Kane, Chief of Staff, on 9275 7347 or by email.