General Purpose Grants
General purpose grants are one of the two components of the general revenue assistance (along with local roads grants) provided by the Commonwealth Government to local government.
The Local Government (Financial Assistance) Act 1995 (PDF 51 KB) provides that the grants are untied; that is, the Victoria Grants Commission is unable to direct councils as to how the funds allocated are to be spent. General purpose grants are allocated between Australian states and territories on a population basis.
The Victoria Grants Commission’s methodology for allocating general purpose grants takes into account each council’s assessed relative expenditure needs and relative capacity to raise revenue.
For each council, a raw grant is obtained which is calculated by subtracting the council’s standardised revenue from its standardised expenditure.
The available general purpose grants pool is then allocated in proportion to each council’s raw grant, taking into account the requirement in the Commonwealth legislation and associated national distribution principles to provide a minimum grant to each council.
Under the Commission’s general purpose grants methodology, standardised expenditure is calculated for each council on the basis of nine expenditure functions. Between them, these expenditure functions include virtually all council recurrent expenditure
Nine Expenditure Functions are:
- Family & Community Services
- Aged & Disabled Services
- Recreation & Culture
- Waste Management
- Traffic & Street Management
- Environmental Protection Services
- Business & Economic Services
A key element of the general purpose grants methodology is a set of cost adjustors, which allow the Commission to take account of the characteristics of individual councils and the impact those characteristics have on the relative expenditure needs of councils.
A number of cost adjustors are used in various combinations against each function. These allow the Commission to take account of the particular characteristics of individual councils which impact on the cost of service provision on a comparable basis.
Information on each cost adjustor, and spreadsheets showing the calculation of each cost adjustor are provided below, as well as two general documents relating to cost adjustors.
- Cost Adjustors (Question & Answer) - Jan 2002 (PDF 10 KB)
- Application of Cost Adjustors - May 2006 (PDF 13 KB)
- Cost Adjustor - Aged Pensioners (PDF 35 KB)
- Cost Adjustor - English Proficiency (PDF 53 KB)
- Cost Adjustor - Environmental Risk (PDF 35 KB)
- Cost Adjustor - Indigenous Population (PDF 43 KB)
- Cost Adjustor - Kerbed Roads (PDF 36 KB)
- Cost Adjustor - Population Density (PDF 35 KB)
- Cost Adjustor - Population Dispersion (PDF 77 KB)
- Cost Adjustor - Population Growth (PDF 44 KB)
- Cost Adjustor - Population Under 6 Years (PDF 35 KB)
- Cost Adjustor - Regional Significance (PDF 49 KB)
- Cost Adjustor - Remoteness (PDF 46 KB)
- Cost Adjustor - Scale (PDF 49 KB)
- Cost Adjustor - Socio-Economic (PDF 43 KB)
- Cost Adjustor - Tourism (PDF 51 KB)
A councils standardised rate revenue, is calculated for each council by multiplying its valuation base by the average rate across all Victorian councils over three years. Revenue raising capacity is calculated separately for each of the three major property classes (residential, commercial/industrial/other and farm) using a three year average of valuation data. Revenue in lieu of rates received by some councils are included in the calculation.
A council’s relative capacity to raise revenue from user fees and charges, or standardised fees and charges revenue, also forms part of the calculation of standardised revenue.
A set of revenue adjustors is used in the formula and are designed to reflect differences between councils and take account of factors that impact on a council’s relative capacity to raise revenue from user fees and charges.
To find out more about revenue adjustors, the following documents are available:
- Revenue Adjustor – Household Income for persons over 60 (PDF 35 KB)
- Revenue Adjustor – Socio Economic (PDF 35 KB)
- Revenue Adjustor – Tourism (PDF 45 KB)
- Revenue Adjustor – Value of Developments (PDF 3 KB)
- Revenue Adjustor – Valuations (PDF 37 KB)
- Application of Revenue Adjustors (PDF 8 KB)
Additional information on the calculation of general purpose grants can be found in the latest Annual Report.