As councils are responsible for the prudent management of community resources, it is important that as part of a council’s normal planning process, councils undertake a Capital Expenditure Review before committing to any major capital project. The Office of Local Government has prepared Capital Expenditure Guidelines to assist councils.

Purpose and Scope of Guidelines

These Guidelines have been developed to assist NSW councils prepare Capital Expenditure Reviews. Capital expenditure is incurred when a council spends money to buy, construct, renovate or acquire an asset.

The Guidelines have been designed to:

• encourage councils to evaluate major capital expenditure by means of a consistent methodology
• improve the quality of council’s analysis performed in supporting all forms of project funding and capital expenditure
• enable the financial impact of projects on a council to be quantified, identified and controlled.

The Guidelines aim to ensure that a council’s evaluation of the proposed capital expenditure is consistent and rigorous, the merits of projects can be compared and resource allocation can be made on an informed basis. It is important that the evaluation of the project is carried out in a clear, transparent and systematic way. The process of evaluation and reporting methods outlined in these Guidelines will enhance the transparency and rigour of capital expenditure project evaluation.

Capital Expenditure Review is a necessary part of a council’s capital budgeting process and as such should be undertaken as part of the Integrated Planning and Reporting requirements in the preparation of the Community Strategic Plan and Resourcing Strategy.

For information about guidelines and capital expenditure relating to projects valued over $1million (excl GST), please see the following resources:

• Capital Expenditure Guidelines – 2010
• Council Circular 10-34 – Capital Expenditure Guidelines

See also – Tendering and Procurement.