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Focus on Finance - Winter 2018

Focus on Finance Winter 2018

Welcome

Welcome to the Winter 2018 Focus on Finance Newsletter, that is sent quarterly to keep members informed on the current financial issues affecting local government.

> President's Message> Key Dates Period August - December> Are you ready for the changes to lease accounting?> Project / Working Groups Update> Smart cities start with smart councils> 2018 March Conference Summary> Improvements in Revenue recognition?

> Prudential Reviews – the importance of appointing a suitably qualified Reviewer> 2018 Breakfast AGM Preview> Members Profile – Leta Northcott> 2018 November Workshop & Conference Preview> Fraud> Local Government Finance Authority - Financial Market Conditions> It’s almost time to lodge - Taxable payments annual report

DISCLAIMERThe sole purpose of this newsletter is to provide information to members. The contents of the newsletter are limited to that purpose and should not be taken as advice on finance, management or the law. All material contained in the newsletter is subject to copyright of the various authors who contribute to it. Contents of this newsletter may be reproduced in whole or in part only with the prior permission of the South Australian Local Government Financial Management Group who will, where required, seek appropriate permissions from copyright owners or rights holders. The South Australian Local Government Financial Management Group accepts no liability or responsibility whatsoever for or in respect of any use of or reliance on the newsletter by any party. Information contained in this newsletter has partly been provided by third parties. The South Australian Local Government Financial Management Group does not guarantee the information. All interested parties should make their own enquiries to verify the information and to satisfy themselves in all respects.

Contributors

Clive Hempel

Anthony Amato

Ray Barnwell

Stephanie Juhas

Craig Mudge

Alex Oulianoff

Elizabeth Williams

Eion Williamson

President’s Message

Hopefully everyone has completed the process of public consultation on their respective Annual Business Plan and Budget. Next year’s process may be quite different if the State Government is successful with the introduction of the Local Government (Rate Oversight) Amendment Bill 2018. If passed, it will be another six months (31 December 2018) until we are advised of the capped standard rate for 2019/20 and possibly be given an insight of the drivers along with any efficiency or productivity component that have been used in the capping calculation. Any council wishing to change their rating methodology in 2019/20 relation to Section 148, 154 or 155 must advise ESCOSA before 31 October 2018 (refer to S187I(1)), but as we are in the lead up to an election year Council would need to make a decision prior to the commencement of the caretaker period being the 18 September 2018. Representatives of the SALGFMG have been in discussions with the Local Government Association (LGA) prior to the introduction of the Local Government (Rate Oversight) Amendment Bill 2018 and will continue to offer assistance and advice to the LGA on this matter.

As always, our working groups are busy on annual duties and the various one-off projects. The Financial Management Framework group has once again given their annual submission for the draft 2017/18 Model Financial Statements. The model statements have now been approved by the Minister. This group is also looking at providing supplementary information to Councils to clarify new Accounting Standards and other matters in relation to the Model Financial Statements. The Australian Taxation Office (ATO) are yet to provide rulings in regards to the GST treatment of fees and charges. Unfortunately, there is very little that we can do but wait for the ATO to process the multi rulings that have been lodged. An agreement has been drafted with LG Solutions in regards to the new Lite version of their LTFP model that will be used by South Australian Councils. The model is expected to be available later this calendar year. I would like to thank all the members of the work groups for their valuable time and effort in giving back to the Local Government sector. For a full update of our groups and their latest activities please refer to the “Projects / Work Groups Update” section of the newsletter. The Annual General Meeting is planned to be held on 31 August, 2018 at the Adelaide Zoo Sanctuary and the next Workshop and Conference is to be held on 29 and 30 November, 2018 at the Adelaide Oval. The two day Workshop and Conference has been brought forward from early December to late November due to feedback that has previously been received and will hopefully make it a more convenient time for members to attend. Please save these dates in your calendars. I would also like to mention that after 11 years of working as the SALGFMG Finance Officer, Maria Hocking has advised that she will be ceasing work from 30 June, 2018. I would like to thank Maria for her 11 years of service and for her offer to complete the work required for the 2017/18 annual financial statements. To all our sponsors, we thank you for your continual support. Without our sponsors we would not be able to provide our members the professional development and networking opportunities at our workshops and conferences. When requiring services for your organisation please ensure that you consider our sponsors as in this way they will be able to continue their support of the SALGFMG. Clive Hempel President SALGFMG

President's Message proudly sponsored by Local Government Finance Authority

Key Dates

10 August 2018 (Local Government Elections)Roll close 5pm 31 August 2018SALGFMG Breakfast AGM. Adelaide Zoo Sanctuary, Adelaide 2 September 2018 (Local Government Elections)Candidate nominations open for Local Government elections 18 September 2018 (Local Government Elections)Nominations Close for Local Government elections - 12 noonCommencement of Caretaker Period 30 September – 31 MayAt least twice, a council/ council subsidiary/regional subsidiary must consider a report showing a revised forecast of its operating and capital investment activities for the relevant financial year compared with the estimates for those activities set out in the budget presented in a manner consistent with the note in the Model Financial Statements entitled Uniform Presentation of Finances. 9 November 2018 – 5pm (Local Government Elections)Closure of votes for Local Government Elections – 5pm First ordinary Council meeting after periodic election (Local Government Elections)Date of effect for allowances for Council Members for the ensuing 12-month period. (Rate of allowances now set by Remuneration Tribunal – see http://www.remtribunal.sa.gov.au/determinations/local-government-allowances for latest determination) 29 & 30 November 2018SALGFMG Workshop and Conference. Adelaide Oval, Adelaide 30 NovemberLast date that audited financial statements must be submitted to the Minister and the SA Local Government Grants Commission. Deadline for Local Government Grants Commission returns. Last date for adoption of annual report for the preceding financial year. 31 DecemberLast date that a council, single council subsidiary or regional subsidiary must prepare and consider a report showing the audited financial results of the council, council subsidiary or regional subsidiary (as the case may be) for the previous financial year compared with the estimated financial results set out in the budget presented in a manner consistent with the Model Financial Statements Last date for a copy of the annual report to be submitted to both Houses of Parliament and the SA Local Government Grants Commission

Key Dates proudly sponsored byLG Solutions

Are you ready for the changes to lease accounting?

By Tim Muhlhausler

The way that Councils, in their capacity as lessees, account for leases is changing. The changes come into effect for the 2019-20 financial year – so why should you care about them now? The new standards completely change the way that lessees account for their leased assets. This means that having an understanding of what lease arrangements are in place, and ensuring that documentation exists to support them, is more important than ever. The new requirements in a nutshell The major changes under the new standard AASB 16 impact on the lessee only, not the lessor. Under existing standards, operating leases do not require the recognition of any asset or liability by lessees. A new requirement is being introduced for lessees to recognise a ‘right-of-use’ asset representing their right to use the underlying leased asset, and a corresponding lease liability representing their obligations to make lease payments. This requirement applies to all leases with a term of more than 12 months (subject to materiality). Additionally, when combined with income recognition requirements of new standard AASB 1058, any difference in value between the value of the right-of-use asset and the obligation to make lease repayments (liability) is recognised as income for leases with below-market terms (e.g. peppercorn leases). Accounting Entries In simple terms, the journal entries required will be: What do Council’s need to do to get ready? Lastly, keep your eyes open for the latest commentary in the Model Financial Statements – the finer details of required disclosures and transition method are still being determined, and will be detailed in future editions of the Model. The information in this article is general in nature - if you would like more information on the potential impacts for your Council, please do not hesitate to give Tim from Galpins a call on 8332 3433.

Project / Work Group Updates

Seminars Group Thanks to all the people that attended our "Bulletproof" conference on 16 March, 2018 at the Adelaide Convention Centre. The day was filled with great informative sessions with many participants giving us feedback that it was one of the best conferences that they had ever attended.Registrations will soon be open for our Annual General Meeting to be held on 31 August, 2018 at the Adelaide Zoo Sanctuary with guest speaker Andrew Leunig - Business Model Innovation Expert. Please also save the date in your diary for our Workshop and Conference to be held on 29 and 30 November, 2018 at the Adelaide Oval with our keynote speaker Craig Reucassel, best known for his work on The Chaser.Have you recently heard a great presenter or would like to hear about a particular topic at a future conference? If so, please contact me with your suggestion.For further information please contact Clive Hempel This email address is being protected from spambots. You need JavaScript enabled to view it.

Fees & Charges Group The work group are currently undertaking a GST review of Fees & Charges on behalf of all South Australian Councils in conjunction with BDO.The Class Ruling has been lodged on behalf of the Local Government Association (LGA) and will be for use by all South Australian Councils. This information will be consolidated into a comprehensive matrix to ensure that an ongoing accurate and compliant listing of GST treatment for fees and charges is available. The work group continue to liaise with BDO and the Australian Taxation Office to achieve the outcomes of this project.For further information please contact Elizabeth Williams This email address is being protected from spambots. You need JavaScript enabled to view it.

Financial Management Framework Group The annual review of the Model Financial Statements 2018 is complete and the final version of the 2018 Model Financial Statements have been approved by the Minister.The document is made available for South Australian users as a recommended format and presentation for the financial statements, notes and other information. It is intended use is a best practice model providing information on each of the required areas and for practical guidance includes some examples of the how, what, when, why and where.From time to time the group considers new and revised Accounting Standards where this joint review approach can benefit the wider LG sector for a suggested application. Currently AASB16, AASB15 and AASB1058 are being discussed, where relevant for the appropriate timing for recognition of grant income early adoption of these AASB’s may be required.For further information please contact Mark Lague This email address is being protected from spambots. You need JavaScript enabled to view it.

Dog & Cat Management By the time you are reading this, DACO (Dogs and Cats Online) should be up and running, allowing animal owners to register their dogs and cats over the internet. In May, data in relation to a total of 282,147 dogs and 4,632 cats were successfully loaded into the system in readiness for go live. Councils will still be required to take payments over the counter should animal owners wish to register in this way. This will require Councils to remit these funds to the Dog & Cat Management Board. The Board will be remitting Council’s net registration fees (ie excluding the contribution paid into the Dog and Cat Management Fund) on a regular basis throughout the year.The project group continues to meet on a fortnightly basis to update its members of the process of the project as well as to discuss any matters relating to the project.For further information please contact Simon Zbierski This email address is being protected from spambots. You need JavaScript enabled to view it.

Newsletter / Website Group This is our second newsletter for the calendar year, with our next edition scheduled for Spring 2018. If you have ideas for future articles or areas of interest please contact me and we can see if it can be written by one of our knowledgeable sponsors.For further information please contact Elizabeth Williams This email address is being protected from spambots. You need JavaScript enabled to view it.

Smart cities start with smart councils

As the world becomes increasingly entrenched in the digital age, the push for ‘smart cities’ continues to gather momentum.As a leading enterprise provider of enterprise software to councils, TechnologyOne understands this is of particular importance to the custodians of city and community service delivery – the local government authorities. Councils are responsible for using and applying technology to create the smart cities of our future.So what makes a smart city ‘smart’? We see smart as a broader mindset, not just a desire to get on board the technology train. It’s about improving the experience for our customers and taking a whole-of-council view.Every community has a unique landscape that determines what smart looks like. Intelligent parking systems may be the way forward in capital city centres, but there’s little need for them in rural and regional towns. In locations where residents are separated by hundreds of kilometres, smart may be as simple as providing reliable access to council services online.While each environment may be unique, there are always common goals that make smart communities a success:1. An enterprise approachThe whole really is greater than the sum of its parts. Where disparate systems deliver disparate data, an enterprise solution offers a single point of truth.2. A suitable technology platformAn underlying IT platform that supports mobile devices and delivers real-time access to council data is key to enabling smart communities.3. A focus on core competenciesSmart councils concentrate on delivering better outcomes for residents and ratepayers through improved efficiencies and ease of doing business, rather than on the technology itself. Making the switch To deliver a smart city or community, it’s essential to be a smart council. A council’s core information system, comprised of outdated and disparate applications, is a potential black hole of costs, creating its own set of inefficiencies and constraints. That’s why local government organisations are increasingly turning to TechnologyOne’s enterprise SaaS solution to help realise their smart strategies. Last year alone we signed 240 new deals across Australia, New Zealand and the United Kingdom. True enterprise SaaS offers a range of advantages including accessibility, reliability, scalability and superior security, all of which mean councils can comfortably focus on providing services to their community, while their technology is seamlessly updated to keep them ahead of the curve. By removing the burden of managing the technology environment, councils can focus on becoming 'smarter' and delivering better services to their community. About TechnologyOne TechnologyOne (ASX:TNE) is Australia's largest enterprise software company and one of Australia's top 200 ASX-listed companies, with offices across six countries. We create solutions that transform business and make life simple for our customers. We do this by providing powerful, deeply integrated enterprise software that is incredibly easy to use. Over 1,200 leading corporations, government departments and statutory authorities are powered by our software. We participate in only eight key markets: government, local government, financial services, education, health and community services, asset intensive industries, project intensive industries and corporates. For these markets we develop, market, sell, implement, support and run our preconfigured solutions, which reduce time, cost and risk for our customers. For 30 years, we have been providing our customers enterprise software that evolves and adapts to new and emerging technologies, allowing them to focus on their business and not technology. Today, our software is available on the TechnologyOne Cloud and across smart mobile devices.For further information please visit: TechnologyOneCorp.com Download images from TechnologyOne’s image library here: https://technologyonecorp.com/about-us/media/image-gallery

2018 March Conference Summary

Members of the South Australian Local Government Financial Management Group gathered at the Adelaide Convention Centre on Friday 16 March for its ‘Bulletproof’ conference. An excellent line up of speakers had been organised for the day, with the Executive Committee receiving an overwhelming amount of positive feedback with reports that this was the best yet. With Lisa McAskill once again providing MC duties, the morning commenced with now former LGA President Mayor Lorraine Rosenberg providing an overview of ‘What Every Finance Professional Needs to Know’, focusing on the importance of clearly and simply communicating financial information to Council and the community. Her presentation also covered current sector issues, including rate capping, financial sustainability, transparency and accountability. Justine Keenan and James Barden from the Australian Accounting Standards Board then discussed new accounting standard AASB 1058 Income for Not-for-Profit Entities, as well as other projects the AASB is focused on, including Conceptual Framework, Australian Financial Reporting Framework, Public Sector Licences, Fair Value Measurement and Insurance Contracts. Their presentation can be found here (you must be signed in to view): Justine Keenan and James Barden AASB Davin Lambert, Manager Financial Markets, Local Government Finance Authority, presented an LGFA and Market Update. The LGFA have been a Platinum Sponsor of the SALGFMG for over 25 years. Davin’s presentation can be found here: Davin Lambert LGFA John O’Connor, Manager, LG Solutions gave an overview and update on their products, including End of Financial Year Statements and Fees & Charges. National Australia Bank’s Head of Industry Analysis, Dean Pearson, gave an overview of NAB’s outlook for the economy, markets and the Local Government sector, focusing on South Australia in his presentation ‘What Can Human Behaviour (and NAB data) tell us about the Economy, Business, Consumers and Ourselves?’. Dean’s presentation can be found here: Dean Pearson NAB The Chair of the City of Marion’s Audit Committee, Greg Connor, discussed the perspective of independent Chairpersons on Council Audit Committees, and discussed the Local Government reform package which suggests making better use of Audit Committees to enhance both the quality of financial management and accountability to the community. Greg’s presentation can be found here: Greg Connor CoM Independent Chair Kevin Smith from the Australian Tax College provided an update to the ATO’s new approach to the treatment of private travel in the context of Fringe Benefits Tax. Kevin presented the key changes and illustrated how the approach in providing car fringe benefits may need to change. Kevin’s presentation can be found here: Kevin Smith ATC The keynote speaker was Kristen Hansen, founder of EnHansen Performance, on the topic ‘Neuroscience of Resilience’. Kristen’s discussion focused on how the brain works, peak mental performance and insights into problem solving, as well as how to regulate stress and emotions and the neuroscience of wellness. Kristen further demonstrated how using neuroscience can provide strategies to renew mental resources throughout the day while managing stress, motivation levels and information overloaded environments. Kristen’s presentation can be found here: Kristen Hansen EnHansen Performance The day concluded with a presentation from members of LGITSA, which over the past two and a half years has established itself as an independently funded group of IT and IM practitioners within Local Government. Chris James, President, gave an overview of LGITSA and its involvement with key initiatives, including DACO. Karin Mahoney, Vice President, demonstrated the crossover between IT strategy, asset management planning and finance, and Daniel Kiley, Senior Associate, HWL Ebsworth, provided an overview of cryptocurrencies and blockchain. These presentations can be found here: Chris James LGITSA Karin Mahoney LGITSA Daniel Kiley HWL Ebsworth The SALGFMG would like to sincerely thank all our sponsors for their continued support of the conferences, as once again it enabled a program full of high calibre speakers. Members can access their presentations on the SALGFMG website (login required for access). The next Workshop and Conference will be held on Thursday 29 and Friday 30 November at the Adelaide Oval, please see preview below for more information.

Improvements in Revenue recognition?Impact of the new standards

By David Papa

The upcoming standard changes will be some of the biggest we have seen since the international framework was adopted. With regards to revenue for the Local Government sector, there are two key areas that all Councils need to be aware of when applying the new accounting standards, AASB 15 Revenue from Contracts with Customers and AASB 1058 Income for Not for Profit Entities (both accounting standards should be considered together). The two areas we will focus on are: Treatment of grant revenues; and Recognition of volunteer services as revenue Impact of grant revenue changes For years there has been confusion over the treatment of revenue from sources other than annual services, typically grants and other special funding. With the the adoption of IFRS and the implementation of AASB 1004 Contributions, the old principals of matching revenue with expenditure was lost and the concept of recording all grant income upon receipt resulted in the distortion of annual results, especially when the money had not been spent in the period of receipt. Over this time the sector has needed to justify volatility in revenue and profits and constantly revise operating budgets for grant funded programs. The new accounting standards, AASB 15 Revenue from Contracts with Customers and AASB 1058 Income for Not for Profit Entities may provide some relief. Key points from AASB 1058 Income for Not for Profit Entities: Effective as of years beginning 1 January 2019, but can early adopt if early adopting AASB 15 Revenue from Contracts with Customers Replaces AASB 1004 Contributions The timing of income recognition depends on whether such a transaction gives rise to a liability or other performance obligation, Effectively, this allows NFP entities to account for some grants as ‘tied funding’. Key points from AASB 15 Revenue from Contracts with Customers: Replaces AASB 118 Revenue, AASB 118 Construction Contracts and some revenue related interpretations Aims to recognise revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Allows an entity to recognise revenue when (or as) a performance obligation is satisfied, i.e. when ‘control’ of the goods or services underlying the particular performance obligation is transferred to the customer. Effectively, the standard recognises revenue on a ‘milestone’ basis Application of the Standard: Specifically, the Standard introduces a 5 step approach to revenue recognition: Step 1: Identifying contract(s) with customers Step 2: Identify the performance obligations in the contract Step 3: Determine the transaction price Step 4: Allocate the transaction price to the performance obligations in the contract Step 5: Recognise revenue when (or as) the entity satisfies a performance obligation What does all this mean? Effectively funds that are received as “tied” to a set outcome or “performance obligation” can be carried as a liability on the balance sheet until the obligation is met. Say you receive a grant for the construction of a playground in a new development, Funds received are held on the balance sheet as revenue in advance (or similar) and recorded as revenue as the obligations for the grant are met. The requirements to be met should be clearly stated in the agreement and comply with the 5 steps above that are from the Standard. Is this for all grants? No. This relates to grants that meet the criteria above, funding that links to a defined and measurable performance obligation, such as grants for capital works. So, the Financial Assistance Grant will still be recognized on receipt as it is untied funding. How to prepare Conduct a review of all grants and consider the flowing: Recognition of Volunteer services as revenue AASB 1058 Income for Not for Profit Entities clearly states that: When an entity receives volunteer services and can reliably measure the fair value of those services, the entity may elect to recognise the services as an asset (provided the relevant asset recognition criteria are met) or an expense. Local governments, government departments, general government sectors (GGSs) and whole of governments are required to recognise volunteer services if they would have been purchased if not provided voluntarily and the fair value of those services can be measured reliably. Practically this means time, and therefore its value, captured under this standard is time that a Local Government would have to pay for if it was not volunteered. What about other revenue items? Most revenue items for the sector are annual or for service of only 12 months or less, therefore no real impact, or they are not material. Yes, there are some other revenue types that are impacted by the above Standards, such as up-front membership fees, up front license costs, phone costs when on a contract, but very none of these appear material within Local Government. With an application date of years beginning 1 January 2019, we do have some time to prepare. However, we suggest implementing systems to capture the right information so we are all prepared for the upcoming changes. The information above is our interpretation of the Standards and are of a general nature. You should discuss the specific impact of the upcoming standards with your accounting team and your auditor, and always feel free to contact David Papa at Bentleys on 8372 7900 to discuss further.

Prudential Reviews – the importance of appointing a suitably qualified Reviewer

By John Jovicevic

As all readers would be aware, the completion of a Section 48 Prudential Report is a statutory compliance requirement when stipulated parameters are met.The Prudential Report must address the mandated scope as prescribed by Section 48 of the Local Government Act 1999. Notwithstanding that a Prudential Review is a prescribed compliance requirement, there is often the opportunity for the Reviewer to add value beyond addressing the mandated scope.In my experience, a common misconception within local government is that a Prudential Report will give the reader the answer on whether a particular project ‘should or should not proceed’. Essentially, the Prudential Report is intended to inform Elected Members as to whether they have all of the necessary prescribed information to enable them to make a fully informed decision regarding the merits of the project in question. The appointment of the Prudential Reviewer should never be taken lightly – selecting an independent professional who has the necessary level of commercial and local government experience and who can readily identify and appreciate the risks a project is likely to encounter, is where added value can be realised.Engaging the Reviewer at an early stage of a project’s planning phase gives them the best opportunity to observe and make comment on the work being conducted by a council’s Administration and, importantly, provide constructive input. Appointing a suitably qualified Reviewer, and at an early stage, will ensure that effective channels of communication are put in place and maintained.Elected Members and the Administration can benefit from drawing on the Reviewer’s professional experience and getting their input on various aspects of the project from an early stage. More often than not, projects will inherently have numerous outstanding matters and risks - identified and yet to be identified. Engaging the Reviewer in a timely manner should result in addressing outstanding matters and risks well before the Prudential Report is to be considered by Elected Members. Engaging the Reviewer late in the project timeframe may result in a number of outstanding matters being identified that cannot be rectified in time before Elected Members are scheduled to consider the Prudential Report. In my experience, the prescribed consultation requirement raises many outstanding issues for the Reviewer. Given the complexity surrounding most projects, the nature and scope naturally evolves and variables such as financial considerations included in a Long Term Financial Plan, or the draft concept plan that was used for consultation purposes, often are not the same by the time the Prudential Report comes to consider the latest information available.Engaging the Reviewer early in the project’s life enables them to identify risks and concerns so they can be addressed in a timely manner. Often, there are a number of different council staff involved in the project. The Reviewer has the ability to uniquely collate all stakeholder information and assess whether there are any inconsistencies that the council itself may not be aware of. It is always prudent practice to have an independent ‘set of eyes’ cast over the processes which enables any issues to be addressed.Without doubt, in my view the key to getting the best value out of the Prudential Review process is to only appoint an experienced Reviewer with a proven commercial and local government track record, to engage early and to get the Reviewer involved with the evolution of the project.

2018 Breakfast AGM Preview The Annual General Meeting Breakfast will be held on Friday 31 August 2018 at the Adelaide Zoo Sanctuary.

The breakfast will include Special Guest Speaker Andrew Leunig who will discuss ‘Transforming Local Government: Technology & Business Model Innovation’. Andrew specialises in Business Model Innovation, working with corporates and fast growing companies. Andrew has helped hundreds of companies (large and small) review and refresh their Business Model. He is a Board Adviser to a number of technology and mid-sized companies, he works with early stage companies, is a mentor for a number of incubators and in 2013, the Adelaide Business Startup Community named him Mentor of the Year.Registrations and the flyer are now available on the website, go to: http://www.salgfmg.com.au/index.php/events/agm-2018 The breakfast will be followed by the formal Annual General Meeting, agenda papers will be available soon. Please consider nominating for the SALGFMG Executive Committee. The nominations form can be found on the website, go to: http://www.salgfmg.com.au/index.php/committee/executive-committee-nominations-now-open

Members Profile Leta Northcott I started working in local government approximately 14 years ago when I was fortunate enough to be given an opportunity to work at Adelaide City Council as a Management Accountant. While my time at Adelaide was relatively short, it was great insight into working in local government. After a year, I moved on to the role of Senior Accountant for The City of Unley. Now I am about to start a new chapter with being given an opportunity to take leave from the City of Unley and work at the City of Mitcham for a year as their Senior Systems Accountant.

My journey to get to local government included completing my Bachelor of Business (Accounting) degree through La Trobe University (Bendigo) and joining the wine industry in Mildura. While not necessarily noted for producing fabulous wine, it was a good introduction to the world of accounting. This led to working for a winery in the Barossa (much better quality wine!) and studying to achieve my CPA. I then did the somewhat usual accounting thing and headed over to the UK to have a working holiday. Upon my return I worked for a roller shutter manufacturer before being lured to ACC. One of the many reasons I have enjoyed working in local government is the sector provides services and infrastructure that make a real difference in people’s everyday lives, whether they are aware or not. I enjoy the variety that LG offers, there is never a dull moment, with something always going on. While we have the usual accounting cycle with end of month, budgets, end of financial year, etc, what happens in between is usually pretty eventful, with many different projects delivered whilst attending to many different and varied challenges. I have been a member of FMG for most of my time in Local Government and two years ago joined the Executive Committee. What I enjoy about being part of FMG is the ability to meet other finance professionals grappling with the same or similar issues, presenting the opportunity to communicate information with each other and share and learn from the conferences. Outside of work, I enjoy playing tennis and have somehow ended up not only being Treasurer for many years but now President of my Tennis Club. I get a lot of satisfaction facilitating the female members gain on court confidence through organising a night during the week where we have a social hit, a good laugh and hopefully provide encouragement. The most recent summer season was the Clubs most successful for at least 50 years, with 6 senior premierships won from 11 teams. All my family also plays tennis. My two children are now at the age where we can all play tennis together as a family and have fun. It is true what they say, tennis is a sport for all ages!

2018 November Workshop &Conference Preview

The annual Workshop and Conference will be held on Thursday and Friday 29 and 30 November 2018 at the Adelaide Oval. This workshop and conference has been scheduled a week earlier than usual, as an attempt to minimise the bustle of Christmas festivities and summer cricket.Set to be another informative event, we are very excited to confirm that Craig Reucassel will be the Keynote Speaker. Craig is best known for his work on ‘The Chaser’ and the ABC’s Logie Award winning ‘War on Waste’. The SALGFMG Seminar Workgroup is currently finalising the full program. Further details regarding the registration process and the program will be released closer to the date.

Fraud By Corinne Grant

Fraud is a scary word and not one you want to hear as a finance professional. However, it is a reality that fraud occurs in every type of organisation including Local Government. “BUT I have internal financial controls so I am ok?” Maybe not. Let’s explain and hope that you all don’t start looking at your colleagues with too much suspicion. Fraud is likely to occur when 3 elements coincide (the Fraud Triangle); Attitude/rationalisation Pressure Opportunity. Attitude/rationalisation An employee who pretends they are just ‘borrowing’ funds and will pay them back, or believe that their employer owes them, or has contempt for the organisation and colleagues, or thinks others are doing this so they should too, or are basically dishonest, or think it will be covered by insurance anyway, or believe rules are vague and it’s not their fault if they break them. A culture of not questioning senior executives has led to some very high-profile frauds. Pressure An employee who has personal financial problems, gambling or other addictions or wants to show their friends how well they are doing. Opportunity Weak internal controls create an opportunity to commit fraud. It can occur where an employee is trusted and not properly supervised, there are constantly changing people or processes or key employees have access to everything. Internal financial controls assist by reducing the opportunities available to commit fraud but don’t help much in improving attitude or reducing pressure. Fraudster So, what does a fraudster look like? 69% of fraudsters are male; 40% are aged between 35 and 45 years; 50% have been with their employer for more than 5 years; 50% have a university degree; 53% acted alone; 46% lived beyond their means; and 88% have never been charged with or convicted of a fraud-related offence. There are typical profiles of fraudsters: The Career fraudster: feels superior, are loners, feels talents are underrated; The Opportunist fraudster: once they have done it once and find it easy they keep going and are often very helpful during audits; The Bulletproof fraudster: fraud provides funds for addictions, start out small and then take more, usually detected by audit as not very well thought out; The Wolfpack fraudster: works with others to commit fraud, difficult to detect, strong loyalty to their group, socialise after work; The Royal fraudster: they have personal status from their position in an organisation, they feel they are owed due to their status, often management and don’t see rules about conflict of interest or gifts as relating to them; The Under-Pressure fraudster: under pressure by an organisation to meet goals, sees the goals as not achievable, misstates figures on statements to look better and often don’t gain personally from fraud; The Sanctioned fraudster: don’t see it as fraud but as bending rules, usually expense claims and misuse of assets such as motor vehicles, and supported by superiors. Red Flags There are some standard red flags about people that are often present when someone is committing fraud. Some are: an employee that doesn’t take leave; is at the office at times when others aren’t; avoids having work checked; works in isolation; is vague when asked about their work; and is defensive when questioned. Prevention Internal Financial Controls assist in reducing the likelihood of fraud in relation to opportunity but how can you improve attitudes and relieve pressure so that your Council is further protected? An integrity framework can assist. This involves developing and enforcing a culture from the top to the bottom of ethical behaviour. It includes the Code of Conduct but needs everyone in the organisation to know, understand and embrace that code. Accountability from the top to the bottom is important. Authorising activities are undertaken seriously not just signed off. Communication throughout the organisation occurs to explain changes in processes. Training is provided to employees on ethics, integrity and what the Code of Conduct means. Potential employees are screened and references and work history are checked. Performance reviews occur which cover performance against polices and processes. KPIs are realistic and make sense so employees are not tempted to take short cuts to achieve them. Detection Detecting fraud requires an openness to complaints. Allowing employees to voice concerns, having a process for them to report suspected issues and having a whistle-blower protection program increases the likelihood of suspicious activities being reported. A closed attitude where employees do not feel they can report something of concern results in a culture where a fraudulent person feels they might ‘get away with it’. Acknowledgement I would like to acknowledge the Institute of Internal Auditors for much of the material referenced in this article.

Local Government Finance Authority - Financial Market Conditions

Global financial markets saw some volatility over the past month due to political instability in Italy and renewed concerns about the state of the European Union.Recent Italian elections did not produce a clear winner with a complex structure of coalitions and alliances finally forming a government led by a former law professor and populist, Giuseppe Conte. During negations, Italian bond yields spiked around 1% when an anti-euro campaigner was nominated as the finance minister, however, retreated when his nomination was withdrawn. The moves in Italian Bonds saw a flight to quality with the yields on US Treasury and other high-quality bonds falling as a result. Market participants fear that the anti-establishment and right-wing mix of the new Italian government has renewed debate about the long-term prospects of the European Union and the single currency.Australian financial markets also experienced some volatility in May. Australian bond yields fell over the past month partially on the back of Italian and Euro concerns but also due to weaker internal dynamics. The bank Royal Commission currently being held in Melbourne has highlighted some of the poor lending practices by banks with many in the market speculating that the bank regulator APRA, will introduce stronger serviceability requirements, which could have negative implications for housing prices and economic growth. In mid-May Australia’s unemployment rate increased to 5.6% (from 5.5%) even though employment grew by 22,600. The Reserve Bank (RBA) met in early May and left the official cash rate unchanged at 1.5%. In the statement accompanying the decision, the RBA reiterated that strengths in the economy highlighted by strong business conditions and strong employment growth were being tempered by low inflation and low wage growth. In mid-May, highly regarded Australian economist Bill Evans, altered his interest rate forecasts by removing a rate hike originally scheduled for early next year and also adding that rates would be on hold for the 2019 calendar year. He altered his forecast due to recent decreases in housing prices having a negative wealth effect on Australian households and reduced likelihood of higher wage growth due to a deteriorating/stagnating employment market. Interest rate futures market pricing currently doesn’t have a rate hike factored in this year. Implied RBA Cash rate as at 31/05/2018:

It’s almost time to lodge -Taxable payments annual report

It’s almost time for government entities to lodge their first Taxable payments annual report for the 2017-18 financial year. The Taxable payments annual report is due by 28 August 2018. The information reported to the ATO will be used in the ATO’s pre-filling service, to make it easier for individual businesses to lodge their tax returns. It will also allow the ATO to identify businesses that haven’t lodged or included all of their income in their tax return, as well as check compliance with GST obligations. Who needs to report? From 1 July 2017, you need to report if you’re a government related entity. These include: Federal government departments Executive or statutory agencies or authorities State or territory government departments and agencies Local governing bodies established by or under state or territory law There are some classes of government related entities that have been exempt from reporting. A full list of these can be found at ato.gov.au/tparGov What you need to report From 1 July 2017, government entities at the federal, state, territory and local levels need to report total payments they make to entities for providing services each year. Federal, state and territory government entities will also need to report grants they pay to people or organisations with an Australian business number (ABN). Local government entities do not need to report grants. If you make any of these payments you need to report them in the Taxable payments annual report and lodge the report to the ATO by 28 August. How to lodge your report You can lodge the report online by creating your report using business software that can generate the Taxable payments annual report. You can then lodge it through the ATO’s Portal’s by selecting ‘File transfer facility’. You will need an AUSkey to login to the ATO’s Portal. You can find more information about the ATO’s online services on their website ato.gov.au/onlineservices Some government entities don’t need to lodge a Taxable payments annual report if they are exempt from reporting. To find out more visit ato.gov.au/tparGov If you did not make any payments for services or pay grants to recipients that have an ABN, there is no need to lodge an annual report. If you don’t need to lodge an annual report, you do need to let the ATO know by writing to them at This email address is being protected from spambots. You need JavaScript enabled to view it. Remember to include the: name and ABN of your government entity reason you don’t need to lodge contact details for an authorised representative should they need to discuss the matter further. Where to find more information: You can find more information on the ATO’s website: ato.gov.au/tparGov View a video tutorial on ‘How to lodge the Taxable payments annual report’ at: ato.gov.au/tpr

Read more: Focus on Finance - Winter 2018

Focus on Finance - Spring 2018

Focus on Finance Spring 2018

Welcome

Welcome to the Spring 2018 Focus on Finance Newsletter, that is sent quarterly to keep members informed on the current financial issues affecting local government.

> President's Message> Key Dates> Elections are Coming!> Local Government Finance Authority - Financial Market Conditions> Working Groups Update> TechnologyOne: Q&A with Paul Deb, CEO City of Burnside

> November Conference Preview> Public Private Property> GST Purchaser Withholding Rules Can Apply To Councils> Members Profile – Craig Mudge> How Well Do You Know Your Assets?> Compulsory Takata Airbag Recall

DISCLAIMERThe sole purpose of this newsletter is to provide information to members. The contents of the newsletter are limited to that purpose and should not be taken as advice on finance, management or the law. All material contained in the newsletter is subject to copyright of the various authors who contribute to it. Contents of this newsletter may be reproduced in whole or in part only with the prior permission of the South Australian Local Government Financial Management Group who will, where required, seek appropriate permissions from copyright owners or rights holders. The South Australian Local Government Financial Management Group accepts no liability or responsibility whatsoever for or in respect of any use of or reliance on the newsletter by any party. Information contained in this newsletter has partly been provided by third parties. The South Australian Local Government Financial Management Group does not guarantee the information. All interested parties should make their own enquiries to verify the information and to satisfy themselves in all respects.

Contributors

Alex Oulianoff

Anthony Amato

Clive Hempel

Craig Mudge

Elizabeth Williams

Ray Barnwell

President’s Message

Welcome to the first newsletter for the 2018/19 financial year, and my first as President. I would like to acknowledge and thank Clive Hempel, our outgoing President, for his tireless efforts over the past two years. I am very appreciative that Clive continues in the role of Secretary of the Executive Committee so as the organisation can continue to benefit from his extensive knowledge and considered approach.In August we held our AGM at the Adelaide Zoo Sanctuary with Andrew Leunig as our guest speaker. Andrew gave some really interesting perspectives on technological advancement and change, from the Farmbot which may see us growing veggies in our backyards like our grandparents to 3D printed houses which I wonder how Development Assessment teams would approach.

At the AGM there were changes to the Executive and I would like to thank the following members, who have decided not to renominate, for the contributions they have made: Ray Barnwell, Eion Williamson, Mick Wetherall, Anna-Lucia Draper and Diane Eckermann. I also wish to thank all the new Executive Committee members for their willingness to take on additional responsibility to support the sector.At the AGM Mick Wetherall was recognised for the tremendous contribution he has made to the FMG through awarding him with Honorary Membership. While Mick is now on extended leave and is retiring from the City of Port Adelaide Enfield this Honorary Membership will I hope ensure that we see him in the future.As in previous years the FMG will continue to have work groups which all members can join to pursue areas of interest and contribute to the sector. The following groups have been established for 2018/19: Asset Management; Costing Principles; Events; Fees & Charges; Financial Management Framework; Local Government Price Index; Long Term Financial Plan; Membership & Communication; and Rating & Valuation. If you are interested in joining any of these groups please make contact with our Secretariat, Patricia Coonan (This email address is being protected from spambots. You need JavaScript enabled to view it.) and she will establish contact with the relevant Chair.I look forward to seeing you at the upcoming workshop and conference ‘The Labyrinth’ on 29 & 30 November at Adelaide Oval, War Memorial Drive and also remember to also save 15 March 2019 in your diary for the FMG conference to be held at the Adelaide Convention Centre. I hope that your 2017/18 financial statements have been finalised, and you have consolidated the implementation of the related parties requirements introduced in 2016/17. You no doubt have already considered the implications of and are preparing for the changes required by AASB 15 Revenue from Contracts with Customers, AASB 16 Leases, and AASB 1058 Income of Not for Profit Entities with the Winter newsletter containing some excellent articles regarding these changes. In closing I wish to thank our loyal sponsors who enable us to provide such a strong advocacy role in the industry and enable valuable professional development for our members through our workshops and conferences. I encourage you to support them whenever you are in the market for goods or services which they provide.Kate GeorgePresident

President's Message proudly sponsored by Local Government Finance Authority

Key Dates

30 September – 31 MayA Council or subsidiary must at least twice consider a report showing a revised forecast of its operating and capital investment activities for the relevant financial year compared with the estimates for those activities set out in the budget in a manner consistent with the note in the Model Financial Statements entitled Uniform Presentation of Finances.23 NovemberSALGFMG Executive Committee Meeting, 9.30 am, City of Port Adelaide Enfield.29 and 30 NovemberSALGFMG Conference and Workshop “The Labyrinth”, Adelaide Oval.30 NovemberLast date that audited financial statements must be submitted to the Minister and the SA Local Government Grants Commission.ESCOSA reporting due.30 November to 15 MarchA Council or subsidiary must consider a report showing a revised forecast of each item shown in its budgeted financial statements for the relevant financial year compared with the estimates set out in the budget presented in a manner consistent with the Model Financial Statements.Must also include revised forecasts for the relevant financial year of the council’s operating surplus ratio, net financial liabilities ratio and asset sustainability ratio compared with estimates set out in the budget presented in a manner consistent with the note in the Model Financial Statements entitled Financial Indicators.25 DecemberChristmas Day Public Holiday.26 DecemberProclamation Day Public Holiday.31 DecemberLast date that a Council or subsidiary must prepare and consider a report showing the audited financial results of the Council or subsidiary for the previous financial year compared with the estimated financial results set out in the budget presented in a manner consistent with the Model Financial Statements.1 JanuaryNew Years Day Public Holiday.18 JanuarySALGFMG Executive Committee Meeting, 9.30 am, City of Onkaparinga.26 JanuaryAustralia Day.28 JanuaryAustralia Day Public Holiday.22 FebruarySALGFMG Executive Committee Meeting, 9.30 am, Adelaide Hills Council.15 MarchSALGFMG Conference, Adelaide Convention Centre.29 MarchSALGFMG Executive Committee Meeting, 9.30 am, Town of Walkerville.31 MarchEnd of Fringe Benefit Tax year, ensure that log books, declarations and other required documentation are completed by employees.

Key Dates proudly sponsored byLG Solutions

Elections are Coming!

By Corinne GarrettUHY Aspire Advisory, consulting subsidiary of UHY Haines Norton

A bit like ‘Winter is Coming’ as a cry against the unknown. Council elections mean you are likely to get some changes amongst your elected members. You could be faced with a few new members to maybe a full change. In any case you are likely to have some people who don’t know what you do, don’t understand financial reporting and will find the volume of information, graphs, numbers and reports that you diligently produce, completely bewildering. You may also get new members on your Audit Committee and unless they are confident in understanding your financial language they will have a lot to learn and may also find being on a committee with a number of independent experts very daunting. So how do you make life easier for them and consequently for you too? TRAINING Provide training early in their term. Ensure that it is clear and understandable Not too much information in one hit Continue information sessions and training ongoing throughout the term Make it interesting (I know you can if you try) Simplify it – what do they need to know now and in the next couple of months. Step 1 – Walk in their shoes Try to remember when none of this made sense to you either. You get the language but most people in the world don’t. Look at the information you are providing with different eyes – does it really make sense if you don’t have a financial background? If you consider your language, it might help the community understand your information better too. Step 2 – Keep it simple Keep away from acronyms and abbreviations for a while. Consider creating a definition list. Remember you aren’t writing an academic thesis. What you present to elected members is also going to the public. If the elected members don’t understand, neither will the public. Step 3 – What is the background? Your new members don’t know what happened in the past. Make sure that you provide them with the ‘back story’. Step 4 – A picture says a thousand words Can you present the information in a simpler way by using graphs and diagrams? Step 5 – What is really important? Do they really need to understand every note in the financials to start with? Concentrate on the most important information such as the Uniform Presentation of Finances, the Key Financial Indicators, the Long-Term Financial Plan and the impact of Asset Management. Step 6 – Plan out the workload Plan out what you are going to be presenting to them for the next 12 months. Provide them with this plan and consider having workshops prior to key reports so you can provide some information and training in what they are going to be looking at and what they will need to decide. TRAINING – DID I MENTION THAT Well I’ll mention it again What if they don’t want to do training? There will be some who don’t. Provide information and training to as many as you can. Consider providing one on one training for any Elected Member who would like it. A bit of effort in the early stages could go a long way to understanding in the chamber. SUCCESS – success is an Elected Member who feels confident in reading and contributing to discussion about financial matters. It is you who can make this difference.

Local Government Finance Authority - Financial Market Conditions

Global financial markets were relatively stable over the past month as emerging market contagion fears subsided. Fears of a broader emerging markets economic crisis dissipated over the past month after Turkey lifted its benchmark interest rate by 6.25% to 24%. While this move stabilised its currency the long-term prospects for the Turkish economy are not clear. During the month the US President announced a new 10% tariff on $200 Billion of Chinese goods. Many now feel that the trade dispute is not just about bringing US jobs back to America but is also about technology theft and intellectual property rights violations by China. Late in the month the US Federal Reserve raised the reserve rate for the third time this year, by 0.25%, now targeting a range of between 2-2.25%. US equity markets reacted favourably to this period of stability with the Dow Jones Industrial Index hitting new all-time highs. US 10 Year bond yields rose 0.2% over the past month and are currently trading above 3% for the first time since May. Australian financial markets were also relatively stable over the past month. In early September, Australian Gross Domestic Product (GDP) data impressed with the Australian Economy growing by 0.9% over the first quarter taking the year on year figure up to 3.4%, well ahead of market consensus of 2.8%. Mid-month employment data revealed that the Australian economy added 44,000 jobs in August, well above forecasts of an 18,000 gain. Despite this the unemployment rate remained static at 5.3% as overall participation levels edged higher. Preliminary findings of the bank royal commission have highlighted some dubious practices in the financial sector. Banks have already begun tightening lending standards in response to public pressure and these findings with many predicting this will place further pressure on Sydney and Melbourne’s house prices. The Australian dollar fell 0.04 USD over the past month and is currently trading at around $0.70 USD. The Reserve Bank (RBA) met in early October and left the official cash rate unchanged at 1.5%. The statement that accompanied the decision still paints a mostly positive view of economies around the globe as they are experiencing strong levels of economic growth during a period of low inflation, interest rates and unemployment. The Governor also highlighted that the Australian labour market remains positive and housing prices in Sydney and Melbourne have continued to ease. Current interest rate futures market pricing predicts that the cash rate will be on-hold for at least the next twelve months. Implied RBA Cash rate as at 30/09/2018:

Work Group Updates

EVENTS Thank you to all that attended our AGM.On 29 and 30 November 2018 our annual workshop and conference ‘The Labyrinth’ will be held at Adelaide Oval, War Memorial Drive, North Adelaide, with registrations opening soon. The key note speaker for the conference is Craig Reucassel, best known for his work on The Chaser and more recently The War on Waste, and entertainment for the dinner will be provided by stage hypnotist Isaac Lomman.The work group have also commenced preparing a draft program for the March conference, which will be held at the Adelaide Convention Centre on 15 March 2019. Once speakers have been confirmed more details will be made available to our Members.Have you recently heard a great presenter or would like to hear about a particular topic at a future conference? If so, please contact me with your suggestion.For further information please contact Kate George: This email address is being protected from spambots. You need JavaScript enabled to view it.

Fees & Charges The work group are currently undertaking a GST review of Fees & Charges on behalf of all South Australian Councils in conjunction with BDO.The Class Ruling has been lodged on behalf of the Local Government Association (LGA) and will be for use by all South Australian Councils. This information will be consolidated into a comprehensive matrix to ensure that an ongoing accurate and compliant listing of GST treatment for fees and charges is available. The work group continue to liaise with BDO and the Australian Taxation Office to achieve the outcomes of this project.For further information please contact Elizabeth Williams This email address is being protected from spambots. You need JavaScript enabled to view it.

LONG TERM FINANCIAL PLAN Work on the new Long Term Financial Plan (LTFP) model is well progressed, with members of the work group having a walk through with LG solutions late last month.The model is termed LTFP Lite, and combines the best elements of the current LG Solutions LTFP Max model with a desire to keep things simple. The model provides flexibility at each income and expenditure category, which enables the user to add their own income and expense categories to a standard set. There is also the capacity to set global and discrete indexation for all income and expenditure items and to detail new initiatives and associated financial impacts.The model even converts cash deficit to a Cash Advance Debenture and calculates interest, which when working with other models can prove to be a time consuming step.The model will be demonstrated at the SALGFMG Workshop in November and Councils wishing to implement the model can place orders directly with LG solutions now. Pricing is detailed below.*Note – Rollover is waived for Councils who purchase the Year End Templates (YET)For further information regarding the work group please contact Kate George: This email address is being protected from spambots. You need JavaScript enabled to view it. orders of the LTFP Lite model please contact Tony Pizzuto: This email address is being protected from spambots. You need JavaScript enabled to view it..

Rating & Valuation The Rating & Valuation work group met in October where an update was received from the Valuer-General in regards to their Revaluation Initiative. Cycle 1 of 3 the initiative is currently underway, focussing on the Town of Walkerville and City of Unley. Members of RPSA (Revenue Professionals of South Australia) provided an update on their September meeting, while FMG members provided the group with an update on a meeting held with ESCOSA on their Rate Oversight Bill consultation.Some Councils also provided an update on some of the projects they have been working on in relation to hardship, direct debits and SMS reminders for ratepayers.The next meeting is scheduled for 4 December 2018 at the Valuer-General’s Office.For further information please contact Simon Zbierski: This email address is being protected from spambots. You need JavaScript enabled to view it.

Membership & Communications At the September FMG Executive Committee Meeting it was agreed to combine the former Newsletter & Website work group with Membership & Communications.The Spring Newsletter is our last for 2018 with our next edition to come out in early 2019. If you have any suggestions or ideas for future articles or areas of interest please let me know.For further information please contact Craig Mudge: This email address is being protected from spambots. You need JavaScript enabled to view it.

Q&A with Paul Deb: “Our data is a hundred times better than we’ve ever had”

One of the biggest challenges facing executives is the pressure to match the demand for improved services, while reducing costs. Delivering more for less is a simple problem, but in local government it can be hard to deliver, given the vast array of services the sector provides. City of Burnside CEO Paul Deb discusses why digital innovation is key to unlocking long-term benefits and delivering better services to the community. Local Government authorities are constantly trying to strike a balance between increasing cost pressures and finding new ways to better serve the community. How would you describe the current landscape?The costs for providing services and maintaining infrastructure are increasing, as are resident and business expectations around service provision. The overall effect is that councils are expected to provide a wide range of services, whilst ensuring these are relevant to the community and delivered in the most efficient and effective manner possible.To meet these expectations, councils need to explore new models of service delivery. Technology plays a significant role in how citizens interact with councils, so it has become increasingly important for councils to look at how they can integrate digital services and social media throughout their organisation. This is critical, given community engagement and participatory decision making is at the forefront of everything they do. How are you driving digital transformation within City of Burnside?I find that the best way to drive digital transformation is to create a culture where staff are empowered to innovate. Fostering an atmosphere where different business units can collaboratively work together has been critical to our success, and has enabled us to transform our business operations and customer experience over the past couple of years. Alongside a culture of innovation, implementing solid and robust enterprise software has been a key enabler in our digital transformation journey. Up until June 2017, we still operated using largely paper-based processes and had to pay admin staff to double handle information and key data into our Customer Relationship Management (CRM). Not only was this a frustrating and time-consuming experience for our customers, it was impacting our operational efficiency.At the end of last year, we pioneered the latest TechnologyOne Asset Lifecycle Management software, Work Orders, which has digitised and streamlined this process. Every work order is integrated into our TechnologyOne Asset Management system, allowing us to track the time and resource used in maintaining our assets. Digitising manual processes has transformed our organisation. We now have data that is a hundred times better than we’ve ever had, meaning we have very powerful business intelligence and can leverage this for evidence-based decision-making in the future. We have also launched an ‘Action Burnside’ portal, where customers can see the status of their requests, as well as a map of other requests in their neighbourhood. It’s super intuitive and easy to use, seamlessly integrates with our CRM Work Orders software, and makes for a much better customer experience. Looking further ahead, optimising our software to further streamline operations will remain a key focus. We are currently working on upgrading our software to TechnologyOne’s Ci Anywhere platform, which will essentially offer greater flexibility to our workforce by enabling them to work on any device, anywhere in the world at any time.What was the biggest challenge you experienced on your journey to digital transformation?It’s sometimes challenging to convince some elected members and members of the community that an investment in technology is key to longer-term efficiencies and improved asset management. Anything that does not provide a visible service improvement such as footpaths, roads or playgrounds can be a lot more difficult to gain support for. There is always a dilemma where people find councils to be a bit antiquated, yet any substantial investment in modernising digital services or costs related to creating more efficient shared service models with other councils is often criticised. We have found that when a transformation project provides a visible benefit for the community and receives positive feedback, such as the Urban Forest interactive website we recently implemented, it reassures us that we are headed in the right direction and creates an appetite for further innovation.What should other executives look for in a technology partner?We rely heavily on technology to deliver some of our core services, so having a healthy and positive relationship with our technology vendor has been key to ensuring these services are delivered effectively. Burnside has used TechnologyOne for a very long time because it understands the needs of our council and has developed cost-effective solutions that support our tightly-funded projects. My advice to other executives looking for a technology partner is to select a vendor whose product roadmap aligns with your vision and digital strategy; one that can meet the current and future requirements of your business. Alongside this, choosing a vendor that provides a high level of support is crucial in order to maintain business continuity during periods of change, and ensure the technology you implement is flexible enough to customise your user experience. Looking further ahead, what are your key priorities for the future?Smart City outcomes are on our horizon and a key theme in our Corporate Plan. We are currently working with the University of Adelaide, The City of Prospect, The City of Campbelltown, The City of Port Adelaide-Enfield and the City of Playford to deliver a ‘Connected Places’ program, which is a linked series of sensors that will provide useful data from a major swathe of Adelaide’s metropolitan area. This will provide de-identified pedestrian data that is reliable, timely and provides usage data for Council assets and business areas.To read previous episodes or to subscribe to The Exec Files, please click here.

‘The Labyrinth’ Workshop and Conference Preview – 29 & 30 November 2018

The annual Workshop and Conference will be held on Thursday and Friday 29 and 30 November 2018 at the Adelaide Oval, War Memorial Drive, North Adelaide.We are very excited to announce that Craig Reucassel will be our Keynote Speaker for the Conference! Craig is an Australian writer and comedian who is best known for his work with The Chaser. Over the years Craig has written and appeared in a swathe of TV programs including The Election Chaser, CNNNN, The Chaser’s War on Everything, Yes We Canberra, The Hamster Wheel, The Unbelievable Truth, Balls of Steel, The Chaser’s Media Circus and The Chaser’s Election Desk. Most recently he’s appeared on ABC in the satirical consumer affairs show The Checkout and as the host of The War on Waste.This workshop and conference has been scheduled a week earlier than usual, as an attempt to minimise the bustle of Christmas festivities and summer cricket.The official program and accommodation information is available on the event page (CLICK HERE). We look forward to seeing you there!

Workshop – Thursday 29 November 2018 Long Term Financial Plan Model Update & Demonstration Presenter:  Kate George, President SALGFMG and Manuel Schuldt, Manager, LG Solutions. The SALGFMG has been working together with our Gold Sponsor LG Solutions to develop a new LTFP for SA Councils, which has been made possible through LGR&DS funding from the LGA. The model is termed ‘LTFP Lite’, and combines the best elements of the current LG Solutions ‘LTFP Max’ model with a desire to keep things simple. The model provides flexibility at each income and expenditure category, allows global and discrete level indexations, enables new initiatives to be detailed with financial results if they are included, and even converts cash deficits to a Cash Advance Debentures and calculates interest. The model will be demonstrated so that you can walk away with a real appreciation of what is on offer. LTFP’s and AMP’s - What You Can Achieve When Engineers and Accountants Manage to Communicate Presenters:  Corinne Garrett, Manager Government Consulting, UHY Haines Norton and Ashay Prahbhu, Co-Founder, Director, Assetic. This session will discuss Asset Management Plans and Long Term Financial Plans and how to make the LTFP a ‘live’ document that helps with decision making. Councils can save considerable amounts of money compared to their previous projections by defining their AMP and LTFP. Council case studies will be included. Panel Session - Model Financial Statements Facilitator:  Lisa McAskill, MC Panelists:  Tim Muhlhausler, Partner, Galpins Andrew Tickle, Director Audit, BDO Samantha Creten, Partner and Dean Newbery & Partners. This session will provide an opportunity to provide feedback or ask questions on the Model Financial Statements and your Council’s Audit. Working Examples of New Income Accounting Standard Presenters:  David Papa, Partner Risk & Assurance Services, Bentleys SA and David Francis, Partner Audit & Assurance, Bentleys SA. This session will provide a look into the requirements of AASB 15 and AASB 1058 (the new revenue standards), their technical requirements, a practical application for Local Government, application dates and the type of information you will need to collect. Contractors vs Employees Presenter:  Lincoln Smith, Principal, Norman Waterhouse Lawyers. This session will provide an understanding of employees vs contractors and the consequences of getting it wrong. The correct legal tests and how to apply them will be explored and recent case examples analysed. Various legislation which deem contractors to be employees in certain situations, such as superannuation, PAYG and workcover, will be analysed. Finally some practical tips to ensure compliance will be offered. Don’t Waste Your Time, Do a Risk Assessment Presenter:  Adrian Hollins, Product Manager, ControlTrack and Lida Cataldi, Principle Risk Management Officer, City of Unley. This session will use the ControlTrack application to conduct a Risk Based internal controls self-assessment. Use of Debt Presenter:  Davin Lambert, Manager Treasury, Local Government Finance Authority. Why is our sector adverse to the use of debt? This session will discuss how debt supports intergenerational equity and the recently released paper “A guide to the responsible use of debt”. Dinner Entertainment Special Guest Performer:  Isaac Lomman. Isaac Lomman is a Comedy Stage Hypnotist, a unique entertainer who fuses the power of hypnosis with hilarious routines to create stars out of members of the audience. Providing a clean show for everyone to enjoy, Isaac creates this hilarity from volunteers only that join him on stage to experience this powerful mental state of focus and imagination.

Conference – Friday 30 November 2018 Shared Resources Presenters:  Paul Sutton, CEO, City of Charles Sturt and Adrian Skull, CEO, City of Marion. The cities of Charles Sturt, Marion and Port Adelaide Enfield are working in close partnership on a program seeking out opportunities to work collaboratively and gain efficiencies by eliminating duplication. The three Councils have hired a shared resource for a 3 year period who works with them to compare and contrast the operations and facilitate the identification of opportunities across the three organisations. Highlighting areas where savings for residents can be realised. Paul and Adrian will share with you their experiences, warts and all. Empirical Evidence – Rate Capping (The Most Trusted Tier of Government) Presenter:  Professor Roberta Ryan, University of Technology in Sydney. State Governments around Australia are increasingly adopting policies pegging increases in the property rates local Councils charge to the annual rate of inflation. These ‘rate capping’ policies are intended to drive efficiency by forcing Local Government to do ‘more with less’, deliver value for money services and infrastructure, and meet community expectations of financial prudency. This session looks at why rate capping exists, the theoretical arguments for and against, the limited evidence on its effectiveness, and its implications in the Australian context. A series of alternatives to rate capping are proposed before outlining a research agenda to address uncertainty over the fiscal impacts of rate capping, its effectiveness, and the relationship between community expectations, property rates, and local service and infrastructure delivery. Through the Looking Glass… where is Local Government heading? Presenter:  Lisa Teburea, Executive Director of Public Affairs, Local Government Association of SA. During this session the LGA will provide an update on the Local Government reforms that are currently on the table, what they mean for Councils and how the sector is responding. The Benefits of Mutuality Presenter: Adam Jones, Account Manager, Local Government Risk Services. The management and mitigation of transferrable risks is something that all South Australian Councils should be focussed on to appropriately protect themselves and the communities they serve. This session will highlight a range of emerging risks that have affected Local Government in recent times, by using case studies and identifying programs available to help Councils work their way through the risk mitigation process. Keynote Presenter: Who pays for the War on Waste? Presenter:  Craig Reucassel Councils are at the forefront of dealing with the problems of waste and recycling. But who else needs to get involved if we are to reduce waste and increase recycling? Should producers be taking responsibility for the waste they create? What is the Federal Government’s role and who will pay for it? Efficiency, Economy and Effectiveness Audits – What happens if you get the call? Presenters:  Andrew Richardson, Auditor-General and Andrew Corrigan, Assistant Auditor-General (Specialist Reviews and Analytics), Auditor-General’s Department. What happens if you get the call….don’t panic!! This session will focus on the role of the Auditor-General’s Department in examining the Local Government sector and what happens if your Council is selected in the department’s examination scope. This includes outlining the process relating to the initial engagement, evidence gathering, confidentiality, natural justice of draft findings and Parliamentary reporting.

Public Private Property

Thanks to the wonderful support we have received from so many Councils, Public Private Property (‘PPP’) is now well and truly established. We have successfully delivered our first round of asset revaluations and are currently gearing up for FY2019!For those not familiar with PPP, we are a specialist valuation practice providing asset revaluation services to the public sector. Councils that work with us will discover that we invest a solid amount of time at the front end of projects to establish client expectations and run through test modelling and pilot studies. We also believe in going ‘all in’ when it comes to AASB 13 disclosure requirements. Councils and auditors can, therefore, expect to see what we believe is a refreshing new way of reporting.Councils can also be assured that our insurance valuations are treated with equal care when they form part of the scope in an asset revaluation. We take the time to understand policy wording and basis of settlement to ensure commercially satisfactory and timely claims.Local Government is a great sector to be involved in, and we very much look forward to continuing to expand our relationships with individual Councils in the coming months and years. We believe that specialisation is the way to go in today’s environment. There is no other way to keep up!For further details, contact Andrea Carolan: Email This email address is being protected from spambots. You need JavaScript enabled to view it. 0411 607 808

GST Purchaser Withholding Rules Can Apply To Councils

From 1 July 2018 all sales of eligible property being new residential premises or “potential residential land” require purchasers to withhold an amount from the purchase price if the property is being bought by a purchaser who is not registered for GST, typically a mum and dad sale. The property must fit within the definition of new residential premises (pretty obvious, it’s a new house or apartment) or potential residential land (not so obvious, see definition below). Sales to GST registered businesses The exception is in cases where the eligible property is sold to a GST registered buyer who will use the land in their business e.g. home builder. ATO reference ATO publications say - There is no withholding obligation in respect of the following supplies of new residential premises or potential residential land: new commercial residential premises (for example hotels and motels) existing premises that have been substantially renovated potential residential land that contains a building that is currently in use for a commercial purpose – for example, a factory or shop being operated in an area where local zoning permits mixed use potential residential land supplied to a GST registered entity for a creditable purpose Legislation The ATO statement above is based on the following legislation: 13   14-250 Recipients of certain taxable supplies of real property must14   pay amounts to Commissioner Liability to pay an amount(1) You must pay to the Commissioner an amount if:(b) in a case where the supply is a supply of *potential residential land—either:(i) you are not registered (within the meaning of that Act);or(ii) you do not acquire the thing supplied for a *creditable purpose. If council sells potential residential land to a sole trader plumber who is registered for GST but he buys the land to build his personal home, he is GST registered but is not buying the land to use in his plumbing business. What is potential residential land The ATO say – “Potential residential land is land that it is permissible to be used for residential purposes but does not contain any buildings that are residential premises (for example houses and strata units). Local government zoning may permit a mixture of residential or commercial use but that is still considered potential residential land.” This ATO description is a bit too broad, it is better to look at the legislation: (2) This subsection applies to a supply, by way of sale or long-term lease (within the meaning of the GST Act), of:(a) new residential premises that:(i) have not been created through substantial renovations of a building; and(ii) are not commercial residential premises; or(b) potential residential land that:(i) is included in a property subdivision plan; and(ii) does not contain any building that is in use for a commercial purpose; Property subdivision plan is also defined in legislation:"property subdivision plan" means a plan:   (a) for the division of real property; and   (b) that is registered (however described) under an * Australian law. Note: Examples are strata title plans and plans to subdivide land. In the Explanatory Memorandum (EM) to the new legislation the following explanation of the government’s intent is clear: “Schedule 5 to this Bill amends the TAA 1953, ITAA 1997 and the GST Act to require purchasers of new residential premises and new subdivisions of potential residential land to make a payment of part of the purchase price to the ATO. “The application of the measure to subdivisions of potential residential land, other than in a business to business transaction, is intended to cover house and land packages, where a purchaser may receive a taxable supply of a vacant block of land which is the subject of a property subdivision plan. [Schedule 5, item 1, paragraph 14-250(2)(b)]” Conclusion Councils could be caught up in this new withholding process if they sell closed roads to adjoining neighbours and as part of that there is a plan of subdivision. The other obvious case is where council subdivides land for housing development and sells the subdivided blocks to mums and dads. For further information please contact:Pat McCarthy, Director, Genesis Accounting0416 099 This email address is being protected from spambots. You need JavaScript enabled to view it. 

Members Profile Craig Mudge Completing his schooling at Jamestown Community School in 2001, Craig didn’t have much idea of what exactly he wanted to do. After working as a lifeguard and swimming instructor for a couple of years, Craig successfully applied for a Government Administration Traineeship where he was based at a Community Passenger Network coordinating transport across five regional Council areas. After completing the traineeship in mid-2005 Craig then commenced working with an agricultural machinery dealership based in Booleroo Centre, working within various areas of the business.

At the start of 2007 Craig joined the District Council of Mount Remarkable initially as the Finance Officer, predominantly doing Creditors, Debtors and Payroll. Over time the role had additional jobs added and changed, before the commencement of a new CEO at the start of 2013 saw an organisational restructure with Craig becoming the Senior Finance Officer with the focus on all things financial management, as well as insurance, payroll, Freedom of Information and Internal Coordinator for Workers Compensation among them.As anyone who works at a regional Council can attest, the need to be multiskilled and adaptable are key essentials, along with the need to be involved with a wide variety of departments. During his time at Council, Craig has had the opportunity to be involved with a variety of other projects, including the Local Government elections, Rural Property Addressing and team leading the changeover of the Council’s corporate software to name a few. Craig has been a member of the SA Local Government Financial Management Group (FMG) since he commenced with the Council in 2007. It wasn’t until late 2013 when his CEO encouraged him to become involved with the FMG that he started attending their events. In 2016 Craig joined the FMG Executive Committee and is involved with several work groups. Craig has recently become Chairperson of the Membership & Communications work group, which now also incorporates the former Newsletter & Website work group.Craig immensely enjoys his involvement with the FMG, particularly the opportunity to network with and learn from so many experienced finance professionals. The FMG is extremely fortunate to have so many members willing to pass on their advice and knowledge. Away from work, Craig loves attending different sporting events, in particular Adelaide Crows matches, cricket matches and the Australian Open tennis. Until late 2017, Craig had been a lifelong resident of Jamestown until he moved to his property nestled in the farming plains between Melrose and Booleroo Centre. He is a member of both the Melrose and Booleroo Centre Community Development Associations, as well as the Mount Remarkable Agricultural Society.

How Well Do You Know Your Assets?

As service providers to the majority of the local government organisations in South Australia, we develop a familiarity with Council’s property data and the systems used to capture assets. We quite often see a disconnect between the various Council departments and end-users of property information that make it difficult for staff to access asset data efficiently and accurately. Ideally, Council would hold a comprehensive database providing: Full legal identifiers relating to all land under Council’s ownership or care and control; Details of all depreciable assets located upon the land inclusive of buildings, structures and site improvements and linked to the land parcel by asset id; Community land classifications for all properties enabling an extract of the master register to act as Council’s Community Land Register as required by the Local Government Act 1999; Details of all leases and licences relating to any Council property including expiration dates and rental figures; GIS integration to enable a user to visually locate each and every asset; Recent electronic photographs of every depreciable asset and up-to-date aerial photography of every land parcel. Establishment of a master database is the first step but ongoing maintenance of the data is of equal importance. Council staff should be alerted when a lease or licence has reached its expiration date, when a certificate of title is cancelled and a new title issues, when a land division occurs, and the list goes on. A well-developed asset database will provide a dynamic foundation for Council’s daily operational needs, lease and licence renewals and negotiations, asset valuation projects for financial reporting, insurance valuation projects and more. Creation and maintenance of this information will assist you in achieving your objectives efficiently and with assurance that your data is both detailed and accurate. We welcome the opportunity to discuss your requirements and develop a plan to assist. AASB16 Leases – are you ready?   The Australian Accounting Standards Board has published the new leases standard AASB 16 Leases. The standard must be implemented by the 2019/20 financial year and will have implications for any organisation that leases assets.   The new lease standard will introduce significant processes for public sector entities requiring the implementation of new systems and controls to ensure efficient management. The collation, analysis, presentation and management of lease data will be crucial to faithful accounting.   To ensure your financial statements comply with AASB 1049, you will be required to elect the AASB 116 revaluation model option for the right-of-use asset and apply it to all classes of property, plant and equipment.   Our local government clients are encouraged to consider the practical implications of the leasing standards to ensure you are ready, potential issues are resolved and compliance risk is averted. JLL is represented on the Fair Value Project Advisory Panel and we are available to assist you with any questions you may have with regard to the new accounting standard and what can be done to prepare. Peta MantzarapisDirector, Senior ValuerAdvisory and Consulting Services08 8233 88250412 560 This email address is being protected from spambots. You need JavaScript enabled to view it. 

Compulsory Takata Airbag Recall

Did you know that selling a vehicle with an airbag subject to the Compulsory Takata Airbag recall could potentially lead to a $1,000,000 fine from the ACCC?As a council, if you are handling the sale of your own fleet or “abandoned” vehicles and you are not totally aware and compliant with your obligations under the Compulsory Takata Airbag recall, you could be exposing your council to unnecessary risk and liability. Pickles strongest recommendation would be to stop what you are doing immediately and contact us. The Compulsory Takata Airbag recall is the biggest issue to impact the sale of second hand vehicles in recent history. The process can be confusing and lead to vehicles with affected airbags being sold to unwitting customers. Vehicles subject to recall can be on “Active Recall” or “Future Recall”. There are some quite onerous requirements and obligations on sellers of affected motor vehicles that fall within these categories and Local Councils are no exception. To put it in perspective, currently in Australia, 1.8 million vehicles are still affected by the Compulsory Takata Airbag recall. This figure will increase daily as more vehicles are identified by manufacturers. “The ACCC says one year since the ACCC started overseeing the Takata airbag recall, 1.8 million potentially deadly airbags still need replacing as part of a compulsory recall that will run until 2020.” 1The bottom line from a Council’s perspective is that if you sell any vehicle that is subject to an “Active” or “Future” recall and do not strictly comply with your obligations, you risk exposing your organisation to substantial liabilities. Furthermore, you may face the liability to anyone who purchased a vehicle from you, which is under a recall notice, who is subsequently killed or injured by the faulty airbag, if the vehicle was not sold according to the correct procedure.Of significant importance is that the obligations with respect to dealing with affected vehicles includes every category of vehicle including fleet, abandoned, salvage, accident damaged or written off - even burnt out vehicles are not exempt. The sale price is irrelevant. Councils should not be complacent by thinking that low value assets are excluded from the ambit of the Recall notice.What is all the fuss about?In short, the fuss is about the potential for Takata airbags to deploy and subsequently injure or even kill drivers and passengers, as has already occurred in Australia and overseas. The Deputy Chair of the ACCC, Delia Rickard recently stated: “Our greatest concern remains around the alpha airbags, which can still be found in almost 20,000 cars. Make no mistake, these airbags can kill and our advice is for consumers to check our website to see if there car is affected by this recall. If your car contains an alpha airbag, it should not be driven. ”2What is Pickles doing to manage this issue for their clients?As potentially the biggest marketplace of motor vehicles in Australia, Pickles sells approximately 5,000 vehicles through our 22 branch network on a weekly basis. As the agent for the seller of those motor vehicles, Pickles must ensure that both we and our vendors are compliant with the Takata Recall Notice in relation to every vehicle sold. Pickles have a dedicated team of 4 in our head office handling the monitoring of stock and checking VIN’s with the manufacturers to identify affected vehicles as they arrive. We also have representatives in every one of our 22 branches Australia wide ensuring that vehicles affected by the Compulsory Takata Airbag Recall are being actioned and processed. Every Pickles branch is sent a daily list of vehicles affected by the Takata recall to action. Pickles ensure that no vehicle that is under a “Active Recall” is put to sale, until the obligations of that recall are met. This includes isolating the vehicle, contacting the vendor to alert them to the situation, contacting the respective franchise dealership and organising the removal and /or replacement of the affected airbag.A further complication is the transition of vehicles which are under “Future Recall” to “Active Recall”. Over the next 18 months, motor vehicle manufacturers are required to ensure that all their affected vehicles are brought under “Active Recall” to ensure the airbags in affected vehicles are removed and replaced. A vehicle may not be on the “Active recall” list today and you may think you can proceed with the sale. However, the vehicle may be put on an “Active recall” list by the manufacturer tomorrow and the fact that you did not check the status of the vehicle again will be no defence if you are found to have sold an affected vehicle under the “Active recall”. Branch Manager for Pickles in Adelaide, Richard Ward, advises all councils to be extremely vigilant in this area. “With fines of up to $1,000,000 through the ACCC for selling an affected vehicle under “Active recall”, this is a major risk for councils. If you are not sure of your obligations under the Compulsory Takata Airbag Recall and still handling the sale of vehicles “in house”, I would strongly suggest you cease doing it immediately and speak to your council’s legal advisor or contact Pickles. As experts and leaders in the industry, we are in frequent discussions with all the stakeholders and are constantly keeping abreast with developments in this area.” _____________________________________1 “Almost two million deadly Takata airbags still in Australian cars.” 2 August 2018 Sourced at < https://www.accc.gov.au/media-release/almost-two-million-deadly-takata-airbags-still-in-australian-cars> 2IbidRichard Ward can be contacted on 0466 746 751 or by email:This email address is being protected from spambots. You need JavaScript enabled to view it.

Read more: Focus on Finance - Spring 2018

Focus on Finance - Winter 2019

Focus on Finance
Winter 2019

Welcome

Welcome to the Winter 2019 Focus on Finance Newsletter, keeping our members informed on the current financial issues affecting Local Government.

DISCLAIMER
The sole purpose of this newsletter is to provide information to members. The contents of the newsletter are limited to that purpose and should not be taken as advice on finance, management or the law. All material contained in the newsletter is subject to copyright of the various authors who contribute to it. Contents of this newsletter may be reproduced in whole or in part only with the prior permission of the South Australian Local Government Financial Management Group who will, where required, seek appropriate permissions from copyright owners or rights holders. The South Australian Local Government Financial Management Group accepts no liability or responsibility whatsoever for or in respect of any use of or reliance on the newsletter by any party. Information contained in this newsletter has partly been provided by third parties. The South Australian Local Government Financial Management Group does not guarantee the information. All interested parties should make their own enquiries to verify the information and to satisfy themselves in all respects.

Contributors

  • Anthony Amato

    Anthony Amato

  • Clive Hempel

    Kate George

  • Craig Mudge

    Craig Mudge

President’s Message

Kate GeorgeIt has been a challenging budget process for many of us with supporting new elected members and late changes to the budget from the State Government’s Waste Levy, so I hope everyone has been able to take stock or maybe even had some time off before focusing on year end and the Annual Financial Statements.

Our next event is the AGM, and is free for all members to attend. It is being held at the Stamford Plaza, Adelaide on 30 August 2019. The speaker is Justice Stephen Pallaras QC, who will draw on his diverse experience and speak about courage in decision making, being true to yourself, and other “Lessons from a Life of Crime”.

You will also have received an email from SALGFMG about nominations for the Executive Committee. I would encourage any of our members to consider joining the Executive Committee as it is an excellent way to strengthen your local government networks and to learn from others. One of the best things about the SALGFMG is being able to “steal with pride”, which decreases the time taken to make changes in your own organisation, making your organisation more efficient and effective, and benefits the community.

Members would be aware that there is an Inquiry into Local Government Costs and Efficiency being undertaken by the South Australian Productivity Commission. The FMG made a submission on the methodology being used for the enquiry, which addressed a number of technical aspects that we hope will be a support to the work being undertaken by the Commission. This submission was circulated to members for reference. The SAPC website provides further information about the inquiry including the timeframe being a draft report in August and submissions on the draft report in September. I would encourage members to keep abreast of the progress of this inquiry and take the opportunity to provide a submission on the final report to ensure that your individual Councils concerns and unique circumstances are highlighted.

Also, a discussion paper has been released by the State Government’s Office of Local Government regarding Local Government Reform. The paper covers four streams and is available on their website, with feedback closing 1 November. Following consideration of feedback on the reform proposals contained in the discussion paper, the Government will develop a draft Local Government Reform Bill for release in early 2020.

As always I wish to thank our sponsors for their support of the FMG, enabling our group to be proactive in the industry and to enable us to provide valuable professional development for our members through our workshops and conferences. When you require services for your organisation, I encourage you to consider our sponsors.

I hope to see you all at the AGM on 30 August, and at our upcoming two day workshop and conference to be held Thursday and Friday 5 & 6 December.

Kate George
President

President's Message proudly sponsored by
Local Government Finance Authority
lgfa

Key Dates

30 August
SALGFMG Annual General Meeting. Please refer to our website or see information in this newsletter.

Last date a Council can adopt an Annual Business Plan and Budget for that financial year.

13 September
Last date that financial statements, notes and other financial material must be prepared by a Council.

The Chief Executive Officer and Presiding Member of a Council audit committee to provide certificates of independence with the financial statements.

27 September
SALGFMG Executive Committee Meeting, 9.30 am, City of Salisbury.

30 September – 31 May
A Council must at least twice consider a report showing a revised forecast of its operating and capital investment activities for the relevant financial year compared with the estimates for those activities set out in the budget in a manner consistent with the note in the Model Financial Statements entitled Uniform Presentation of Finances.

25 October
SALGFMG Executive Committee Meeting, 9.30 am, location determined at September meeting.

29 November
SALGFMG Executive Committee Meeting, 9.30 am, location determined at September meeting.

30 November
Last date that audited financial statements must be submitted to the Minister and the SA Local Government Grants Commission.

30 November – 15 March
A Council must consider a report showing a revised forecast of each item shown in its budgeted financial statements for the relevant financial year compared with the estimates set out in the budget presented in a manner consistent with the Model Financial Statements.

Must also include revised forecasts for the relevant financial year of the Council’s operating surplus ratio, net financial liabilities ratio and asset sustainability ratio compared with estimates set out in the budget presented in a manner consistent with the note in the Model Financial Statements entitled Financial Indicators.

5 & 6 December
SALGFMG Conference and Workshop, Adelaide Oval. Information to be released to members closer to the date.

31 December
Last date that a Council must prepare and consider a report showing the audited financial results of the Council for the previous financial year compared with the estimated financial results set out in the budget presented in a manner consistent with the Model Financial Statements.

Further information for many of the key dates can be sourced via the LGA website: www.lga.sa.gov.au. You will need a members login to access the key dates calendar. Further information can also be sourced from the Local Government (Financial Management) Regulations 2011.

Key Dates proudly sponsored by
LG Solutions
LGsolutions

Dealing with Debt –
A Solution for Councils

normanwaterhousesince

In our recent experience, a letter written on a Norman Waterhouse Lawyers letterhead has resulted in approximately 94%1 of debts being collected in various industries outside of local government, without the need for legal action to be taken. Norman Waterhouse Lawyers offer the service of a ‘free’ letter of demand for simple debt recovery (such as recovery of council rates and debts owing pursuant to invoices).

In November 2018, the Advertiser reported that Councils are currently carrying $345 million in debts owed to the sector.

The timely payment of rates is critical for the effective operation of councils. The delay in payments of rates affects the Councils’ ability to deliver essential services to the community which is a vital function of the council. The non-recovery of income through anticipated and budgeted cash flow also has a dramatic effect on the Councils’ ability to service its operating and project costs, which in turn affects the borrowing capacity of the Council. Debt is becoming the new political focus.


We understand that a large majority of ratepayers pay their rates as and when they fall due, however, when circumstances affect their ability to pay, or they do not want to pay, it is important for Councils to take action as soon as possible to collect the outstanding rates. Such action ensures that the respective communities are not prejudiced and so that the Councils comply with their obligations to all ratepayers.

Having said that, some ratepayers experience financial hardship and have difficulty in paying their council rates on time. Councils obviously have to assess each matter on its merits as to what action they take in enforcing rights, however, this should not preclude the Council with taking action to recover monies against those who are simply taking advantage of the system. Councils should consider the development of a Hardship Policy, similar to those required by regulated entities, to determine and distinguish an appropriate approach, management and support of those ratepayers in true financial hardship.

What can Councils do to recover outstanding rates, if a letter of demand does not work and the debt is less than 3 years in arrears?

Agreements to pay off debt
A Council can enter into an agreement with a ratepayer regarding their outstanding rates2. Such agreements can be a useful strategy in supporting ratepayers who have encountered financial difficulty or financial hardship. The power under s184(4)(b) of the Act is a discretionary power and, therefore, it is important that Councils have a clear policy and procedures on when the discretion should be exercised to ensure that Councils work with ratepayers in a uniform manner and in accordance with best practice governance standards. Importantly, once an agreement is reached with the ratepayer, it should be reduced to writing and the Council’s financial records (and if applicable, subsequent rates notices) are amended to reflect the arrangement.

It is important Councils have an overdue rate collection policy, endorsed at the Elected Member level to ensure political ownership and buy in, which outlines clear expectations for Council staff that are responsible for monitoring compliance with payment obligations and instructing an external debt collection agency. Such actions provide the relevant officer with guidance on decision making, which allows them to make decisions on applications for extensions in an effective manner. Further, as it is a discretionary power, it is important that councils have a very clear policy on when the discretion should be exercised to ensure that councils work with ratepayers in a uniform manner.

Commencing proceedings
If a suitable arrangement cannot be reached, then one option available is to commence an action in the Magistrates Court of South Australia to recover the outstanding rates as a debt3. Such an action is commenced by filing a claim that will seek an Order that the ratepayer pays the Council the outstanding rates.

If judgement is obtained, the Council can take the following, amongst other, further action against the ratepayer to enforce the judgement:

  • request that the Court issue an investigation summons, which requires the ratepayer to attend court and provide evidence as to their financial circumstances. If the Court is satisfied the ratepayer has the capacity to make a contribution towards reducing their outstanding rates, the Court will make an Order that requires the ratepayer to pay a specific amount at certain intervals.
  • If the above order is not complied with, the Council can take further enforcement action such as making an application to the Court to have the subject property sold by the Sherriff.

What can Councils do to recover outstanding rates, if a letter of demand does not work and the debt is more than 3 years in arrears?

The most effective and efficient process available is to exercise the power vested in the Council under section 184 of the Act and sell the property by way of public auction. There are a number of procedural steps, such as serving certain notices, that the Council must undertake before the property can be auctioned. During this process, it is very common that ratepayers once faced with the imminent threat of the sale of their property, will likely pay the outstanding rates. It is imperative that the Council, at the Elected Member level endorses a clear policy position on the way in which it will manage sale of property for the non-payment of rates.

Final views

Norman Waterhouse Lawyers have close to 100 years experience in successfully recovering debts for Councils in South Australia.

In our experience, Councils are often perceived as being ‘slow’ in taking recovery action than other commercial creditors. It is for this reason that ratepayers who are experiencing financial hardship may prioritise payment to other, more aggressive creditors, leaving the Council last on the list of creditors paid.

Councils are often at the frontline of providing services to those suffering financial hardship and are exposed to the difficulties that some ratepayers face on a daily basis. It is for this reason that it is preferable for Councils to work with, rather than against, ratepayers to assist them in meeting their obligations, while at the same time ensuring that it is complying with its broader obligations to its community.

Norman Waterhouse and NW Credit Management understand the sensitivities facing councils regarding debt recovery, ensuring efficient and tangible outcomes are achieved for both councils and their community.

For more specific information on any of the material contained in this article, or the services that Norman Waterhouse or NW Credit Management offers, please contact Vas Marinos on 08 8210 1283 or This email address is being protected from spambots. You need JavaScript enabled to view it. or Thomas Burke on 08 8210 1276.


1 This recovery percentage includes payment arrangements entered into by the respective parties
2 Section 184(4)(b) of the Local Government Act 1999 (SA) (Act). Noting s.182(1) of the Act also provides councils with the opportunity to take a flexible approach to the collection of rates.
3 Section 178(3) of the Act

Work Group Updates

Work Groups are formed to assist the Executive Committee to work on specific issues that are of interest or are topical to finance staff in Councils.

All members are welcome to join any work group that may be of interest to them at any time. If you would like further information on one of our work groups, please contact the Chairperson of the relevant work group (details listed below) or contact Patricia Coonan, Secretariat: This email address is being protected from spambots. You need JavaScript enabled to view it..

Further information on the work groups is available from the Executive Committee minutes where updates are provided each meeting.

Asset Management
Katy Bone, Town of Walkerville: This email address is being protected from spambots. You need JavaScript enabled to view it.

Costing Principles
Alex Oulianoff, Mount Barker District Council: This email address is being protected from spambots. You need JavaScript enabled to view it.

Events
Kate George, City of Salisbury: This email address is being protected from spambots. You need JavaScript enabled to view it.

Fees & Charges
Elizabeth Williams, Alexandrina Council: This email address is being protected from spambots. You need JavaScript enabled to view it.

Financial Management Framework
Mark Lague, The Barossa Council: This email address is being protected from spambots. You need JavaScript enabled to view it.

Local Government Price Index
Chris Birch, City of Prospect: This email address is being protected from spambots. You need JavaScript enabled to view it.

Local Government Reform
Kate George, City of Salisbury: This email address is being protected from spambots. You need JavaScript enabled to view it.

Long Term Financial Plan
Kate George, City of Salisbury: This email address is being protected from spambots. You need JavaScript enabled to view it..

Membership & Communications
Craig Mudge, District Council of Mount Remarkable: This email address is being protected from spambots. You need JavaScript enabled to view it.

Rating & Valuation
Simon Zbierski, Campbelltown City Council: This email address is being protected from spambots. You need JavaScript enabled to view it.

March Conference Review -
Great Expectations

great expectations

Members of the South Australian Local Government Financial Management Group gathered at the Adelaide Convention Centre on 15th March 2019 for its ‘Great Expectations’ conference. An excellent line up of speakers had been organised for the event.

After a welcome from President Kate George, the day commenced with David Powell, Managing Director, Powell & Co, presenting on what makes audit committees effective. David discussed the characteristics of audit committees that not only meet its term of reference, but actually adding value to Councils.

Pat McCarthy, Director, Genesis Accounting, then provided an insight into GST and FBT changes, with a focus on tips, tricks and traps for Local Government finance staff.

Davin Lambert from the LGFA and John O’Connor from LG Solutions then gave a sponsors update to members.

Sarah Gibson, PwC Director, Data Assurance, presented on the key findings of participating SA Councils on the Australasian LG Performance Excellence Program. The session then highlighted how collection and transformation of data can be used to tell an insightful story about a Council when it comes to operational effectiveness.

Matthew Strahan, Security Strategist, Content Security, provided members an insight into how hackers think, and showed how a hacker will target Councils, with the tools and techniques they might use and what they could do if they succeed.

Dr Fiona Kerr, Industry Professor, Neural and Systems Complexity, Adelaide University, was the keynote speaker of the conference. Dr Kerr gave an insightful presentation to leading a resilient organisation, how true leaders differ in the way they identify and process relevant information, make complex decisions and deal with ambiguity and complexity.

Following the keynote presentation, Felicity Emmett, Senior Economist, ANZ Research, presented an economic outlook for Australia in 2019. The session focused on the outlook for employment, weak wage growth, Australia’s high household debt and falling house prices.

Our MC Lisa McAskill finished the day with an insight into how the media works and looked at ways that Councils can use the media to better manage public perceptions and to educate and inform previously unengaged residents about the role of Councils and topical issues like rate capping. Lisa also presented tips to help Finance Managers communicate their budgets more effectively.

The SALGFMG would like to sincerely thank all our sponsors for their continued support of the conferences, as once again it enabled a program full of high calibre speakers. Members can access their presentations on the SALGFMG website (login required for access).

We would also like to thank Lisa McAskill for another superb job in providing MC duties.

The annual two-day Conference and Workshop will be held at Adelaide Oval on Thursday 5th and Friday 6th December 2019. Information will be provided to members closer to the date.

katybMembers Profile

KATY BONE

I started working in Local Government at the Town of Walkerville as Group Manager Corporate Services in 2018 after working in State Government for 16 years in various Departments such as Health, Water, Treasury and Finance.

Working for the smallest metro Council has its challenges, with limited resources, has meant that I have had to be multi-skilled. I have found it very beneficial being part of the FMG (which I became a member of in 2018) for this reason.

I am also the Chair of the Assets Management working group. Working with councils interested in making a difference on how asset management plans are developed and implemented, understanding all that goes with that.

I enjoy being on the FMG committee, the topics discussed are relevant and give opportunity to find out what other Councils are doing with issues that we may be facing. It also is a place to network and learn from each other.

Outside of work I am busy with my five beautiful children with my oldest being 17 and youngest being 11 years old. One of my biggest achievements was completing True Grit three years in a row.

Should Councils be Maintaining a Petty Cash System?

uhy

Petty cash has been around forever. However, is it still an appropriate method of procurement in our modern day? This article weighs up the risk vs reward of petty cash. Maybe it is time to end the dinosaur of accounting for Councils. Many businesses have already left Petty Cash far behind.

The Risks of Petty Cash

Petty cash is usually considered to be low in value and, therefore, not considered a high-risk area for internal audit. However, there are several risks involved in Petty Cash systems.

Theft – Cash is easy to steal.

  • Controls such as locking the petty cash tin and keeping it in a secured place and limiting access to it alleviate the likelihood of cash being stolen.
  • Reducing the float level, and the amount that employees can seek for reimbursement lessens the consequence levels.

Error

Petty Cash management tends to be very manual, with handwritten dockets and basic spreadsheets or book used for tracking and balancing petty cash. This type of system is prone to error.

Waste of Resources

This is the typical workflow involved in a Petty Cash System:

  • Employee incurs a reimbursable cost;
  • The employee fills in a Petty Cash Claim docket, fills out details of claim and cost code;
  • The employee goes to the supervisor to get the Petty Cash Claim Docket authorised;
  • The employee goes to Petty Cash Custodian to submit the claim docket and receipt;
  • The Petty Cash Custodian interrupts their regular work to get the secured petty cash tin and check the docket for correct authorisation and that there is a cost code, check the receipt against the docket and issue the exact amount of cash;
  • When Petty Cash gets low, the Petty Cash Custodian has to manually or spreadsheet tally all the costs reimbursed and reconciled against dockets and cash on hand;
  • Petty Cash Custodian fills in a form for reimbursement of the petty cash tin up to the maximum float level. The form has to include all the cost codes and appropriate costs;
  • Petty Cash Custodian submits the form for reimbursement with the breakup of how cash is required;
  • Accounts Payable processes reimbursement as a cheque for cash;
  • An Employee goes to the bank (maybe part of normal banking process) to submit the cash cheque to receive the cash;
  • Cash is provided to the Petty Cash Custodian who must check the cash and sign as having received the money and place into petty cash tin and enter into the manual petty cash book or spreadsheet that $xxx was received and now there is a $xxx balance in the till.

Fraud

Fraud can occur when opportunity exists. Receipts used to claim petty cash are often very simple, from easily purchased receipt book by small retailers. If an employee purchased their own receipt book, filled in receipts for small amounts and intermittently submitted these claims, they would likely easily go through, even at the authorisation stage as they are of low value. In this situation, a pattern could be difficult to identify.

The Reward of Petty Cash

When really considered there are limited rewards in using Petty Cash:

  • Petty cash is deemed to be easy. The discussion in ‘Waste of Resources’ earlier, would indicate that a petty cash system is not as easy as it first appears;
  • Employees can get their reimbursements quickly.

Do we need Petty Cash at all?

Councils have several purchasing methods:

  • Store accounts for local stores for purchasing items such as milk, tea, coffee, etc;
  • Accounts with standard suppliers that produce a monthly bill or statement for payment;
  • Fuel cards held in Council pool vehicles for purchasing fuel.

An analysis of the typical claims made through petty cash should determine the type of supplies that are getting reimbursed and whether there is already another system such as those above that should be used or whether there is another local supplier where a corporate store account needs to be considered.

Employee Expense Claim System

Many businesses are acknowledging the risks of petty cash but more importantly recognising the waste of resources involved in managing a petty cash system.

A monthly claim form by employees would have the following workflow:

  • The employee incurs a reimbursable cost;
  • The employee keeps the receipt/s;
  • At the end of the month, the employee compiles all receipts and fills in a reimbursement form which details the cost, purpose and cost allocation for the purchase/s;
  • Supervisor signs the reimbursement form;
  • Reimbursement Form submitted to Accounts Payable;
  • Accounts Payable processes Reimbursement Form along with Supplier invoices in regular payment runs and processes payments through EFT system;
  • The employee receives reimbursement straight into their bank account.

Advantages

  • Less work involved than petty cash for everyone involved;
  • Patterns of potential fraud more easily detected;
  • No cash and no risk of cash being stolen;
  • Encourages employees to use purchasing systems already in place.

Disadvantage

  • Employees are out of pocket until the next payment run.

So, are you ready to make the change and have one less thing for your internal auditors to audit?

Annual General Meeting

The Boulevard Room 375

The Annual General Meeting of the South Australian Local Government Financial Managers Group Inc will be held on Friday 30th August 2019 in the Boulevard Room of the Stamford Plaza, Adelaide.

Commencing at 7.45 am for breakfast, the morning will be highlighted with Stephen Pallaras QC as Guest Speaker. Stephen has enjoyed a 40-year career in courtrooms across the country and across the world, and was the Director of Public Prosecutions in South Australia between 2005 and 2012.

For further information and for registrations, please click here: http://www.salgfmg.com.au/index.php/2019-agm

Registrations close on Friday 23rd August 2019. The event is free for members.

 

Executive Committee Nominations Open!

The SALGFMG Executive Committee comprises of up to 26 members elected from the membership every year at the Annual General Meeting.

We are now calling for nominations for Executive Committee members for 2019/2020. Meetings are generally held on the last Friday of every month at various Council locations across the state.

The Office Bearers of the Group shall be the President, Vice President, Secretary and Treasurer who shall be elected by the Members at the Annual General Meeting prior to the election of the remainder of the Executive Committee Members. The Office Bearers shall have at least 12 months standing as a Member of the Executive Committee and Executive Committee Members must have been a Member of the Group for at least 12 months.

It is important to note that if you are an existing Executive Committee Member, you must re-nominate if you are wanting to be re-elected to the Executive Committee.

Nominations are now open and close at 5.00 pm on Tuesday 20th August 2019. For further information on the Executive Committee and to nominate, please click here: http://www.salgfmg.com.au/index.php/committee/executive-committee-nominations-now-open

LGFA Financial Markets Update – Financial Market Conditions

lgfa

Global financial markets experienced some volatility over the past month as markets continued to grapple with the US-China trade dispute and concerns about lower Global economic growth as a result of the dispute.

The US-China trade dispute saw no meaningful steps towards resolution in June. Many were hoping that a scheduled meeting between US President Trump and Chinese President Xi at the G20 in Japan would see an end to the dispute but it seems that neither side were willing to yield ground. Late in the month US gross domestic production data (GDP) showed that the US economy grew by a healthy 3.1% over the first three months of this year, however, economist noted that most of the growth was driven by government spending. The US Federal Reserve met late in the month and noted that they may need to cut rates even as early as July to counteract the effects of the US-China trade dispute, a view reflected by US interest rate futures pricing. The prospect of a lower cash rate in the US saw long term bond yields fall and a flight to equity markets around the globe, highlighted by the US Dow Jones Industrial Average rising by around 7% over the past month.

2019 Final Winter Newsletter 17

Australian financial market also experienced some volatility over the past month, however, most of the volatility was driven by external factors. The Australian equity markets saw large gains over the past month which most commentators attributed to investors chasing yield in the current low interest rate environment. Property markets in Sydney and Melbourne saw some stabilisation in both clearance rates and price over the past month as looser prudential lending controls by APRA, lower interest rates and the recent Federal election result provided more certainty to property markets. The Australian unemployment rate remained steady at 5.2% in June despite the economy adding an extra 42,000 jobs. Despite the RBA cutting the cash rate by 0.5% over the past 2 months the Australian Dollar has been extremely resilient and is currently trading at around $0.70 USD.

On the 2nd of July the RBA cut the official cash rate by 0.25% to a record low of 1%. In the accompanying statement the RBA stated that they cut the cash rate to help make further inroads into spare capacity within the economy. This move was already factored into market pricing and many commentators are now predicting that the RBA will continue to cut rates if they don’t see lower unemployment and higher wage growth over the next year. Interest rate futures market pricing currently predicts that the official cash rate is likely to cut the cash rate by another 0.25% at the RBA’s December meeting.

Implied RBA Cash rate as at 28/06/2019:

2019 Final Winter Newsletter 18

Read more: Focus on Finance - Winter 2019

Focus on Finance - Autumn 2019

Focus on Finance
Autumn 2019

Welcome

Welcome to the Autumn 2019 Focus on Finance Newsletter, keeping our members informed on the current financial issues affecting Local Government.

DISCLAIMER
The sole purpose of this newsletter is to provide information to members. The contents of the newsletter are limited to that purpose and should not be taken as advice on finance, management or the law. All material contained in the newsletter is subject to copyright of the various authors who contribute to it. Contents of this newsletter may be reproduced in whole or in part only with the prior permission of the South Australian Local Government Financial Management Group who will, where required, seek appropriate permissions from copyright owners or rights holders. The South Australian Local Government Financial Management Group accepts no liability or responsibility whatsoever for or in respect of any use of or reliance on the newsletter by any party. Information contained in this newsletter has partly been provided by third parties. The South Australian Local Government Financial Management Group does not guarantee the information. All interested parties should make their own enquiries to verify the information and to satisfy themselves in all respects.

Contributors

  • Anthony Amato

    Anthony Amato

  • Clive Hempel

    Clive Hempel

  • Craig Mudge

    Craig Mudge
  • Diane Eckermann

    Diane Eckermann

  • Elizabeth Williams

    Elizabeth Williams

President’s Message

Kate GeorgeI hope everyone had a beautiful summer break to recharge and reconnect with family and friends, as I am sure most of us are in the thick of the budget process already, and summer holidays seem like a distant memory! This is a hectic time of year, and with the council elections resulting in a high proportion of change in many chambers, supporting new elected members in contributing to the budget process will be a focus for many of us.

Our working groups are driving a range of activities, with the Asset Management Work Group issuing a survey to gather information to inform the work agenda over the coming year; the Financial Framework Group having completed their review of the draft 2018/19 Model Financial Statements, and are now commencing review of the LGA Financial Sustainability papers; and importantly the Membership and Communication Work Group keeps us connected and provide valuable information to support us in our roles and in managing changes in our sector. For a full update of our groups and their latest activities please refer to the "Projects / Work Groups Update" section of the newsletter.

In late November we held our annual two day Workshop and Conference "The Labyrinth" at Adelaide Oval, which was well attended and we have had a high level of positive feedback. The quality of our events is due in no small part to our sponsors that enable our events to be affordable for our members, Also, the personal contributions of so many of our presenters who volunteer their time and finally the efforts of the seminar committee which is so well supported by Patricia Coonan.

I look forward to seeing you at the upcoming conference “Great Expectations” on the 15 March 2019 to be held at the Adelaide Convention Centre, Registrations are now open – please click here.

Kate George
President

President's Message proudly sponsored by
Local Government Finance Authority
lgfa

Key Dates

15 March
SALGFMG Conference “Great Expectations”, Adelaide Convention Centre.

29 March
SALGFMG Executive Committee Meeting, 9.30 am, Town of Walkerville.

31 March
End of Fringe Benefit Tax year, ensure that log books, declarations and other required documentation are completed by employees.

19 April
Good Friday Public Holiday.

22 April
Easter Monday Public Holiday.

25 April
Anzac Day Public Holiday.

3 May
SALGFMG Executive Committee Meeting, 9.30 am, Mount Barker District Council.

21 May
Fringe Benefits Tax Lodgement Due.

31 May
SALGFMG Executive Committee Meeting, 9.30 am, City of Playford.

1 June
Earliest date a Council can adopt an Annual Business Plan and Budget for the ensuing financial year.

10 June
Queen’s Birthday Public Holiday.

21 June
SALGFMG Executive Committee Meeting, 9.30 am, Alexandrina Council.

30 June
End of Financial Year.

26 July
SALGFMG Executive Committee Meeting, 9.30 am, City of Burnside.

30 August
SALGFMG Annual General Meeting. Please keep an eye on our website for further information closer to the date.

Last date a Council can adopt an Annual Business Plan and Budget for that financial year.

13 September
Last date that financial statements, notes and other financial material must be prepared by a Council.

The Chief Executive Officer and Presiding Member of a Council audit committee to provide certificates of independence with the financial statements.

27 September
SALGFMG Executive Committee Meeting, 9.30 am, City of Salisbury.

30 September – 31 May
A Council must at least twice consider a report showing a revised forecast of its operating and capital investment activities for the relevant financial year compared with the estimates for those activities set out in the budget in a manner consistent with the note in the Model Financial Statements entitled Uniform Presentation of Finances.

Further information for many of the key dates can be sourced via the LGA website: www.lga.sa.gov.au. You will need a members login to access the key dates calendar.

Key Dates proudly sponsored by
LG Solutions
LGsolutions

How Local Government can pave the way to a smarter future

technologyone

As members of the public sector, you’re no doubt hearing the terms ‘smart’ and ‘intelligent’ more often these days — particularly when referencing government’s ability to deliver improved services in an increasingly digital world.

Although the phrases ‘Smart City’ and ‘Smart Community’ conjure up all manner of whiz-bang technologies that will present an intelligent and connected environment, many councils will plan steps toward a smarter future — some even conducting successful pilot programs — without fully understanding the foundational requirements.

Smart initiatives depend on the use of technologies that capture and analyse data from different sources. While the advent of the Internet of Things (IoT) is undeniably creating new opportunities to better serve the community, if the underlying structure to gather and process information is cumbersome or otherwise inefficient, that pathway to ‘smart’ may not be as smooth as envisaged.

'Smart' plans rely on digital transformation

Councils are complex organisations, providing manifold services that require interaction with a broad range of community members. With that complexity comes a range of disparate systems, which are used — to varying degrees of success — to meet the needs of the public and of the council itself.

Over the years, many Local Government departments will have invested heavily in hardware and software —often a multitude of point systems and standalone products —as well as dedicated in-house IT resources, pouring funds into infrastructure and solutions designed to streamline processes and workflows.

This scenario has probably served the needs of the internal environment and the wider community, so it is common to find an attitude of ‘if it ain’t broke, don’t fix it’, when it comes to making future plans.

This raises a crucial point, and one that many Local Government entities will fail to recognise; a smart city or smart community plan is a multi-year journey that is also an exercise in evolution and business transformation. Today’s actions will have a marked influence on the eventual success — or failure — of any potential ‘smart’ initiatives.

Running an assortment of standalone applications brings immediate challenges. It often means working with several vendors and, as each application incorporates its own technology and database, and requires specific skill sets (either deployed in-house or outsourced) to implement system modifications or improvements. You’ll also need those systems to talk to one another, most commonly achieved by creating an elaborate integration layer, usually with significant cost overhead.

In trying to simplify the system, this approach effectively adds a layer of complexity that requires additional resources to manage. Even when pilot tests appear outwardly successful, it can be difficult to replicate that success when scaling to a real-world scenario. To realise ’smart community’ ambitions, the underlying technology and architecture must be appropriate and enabling. As a result, the journey must start with digital transformation and a SaaS-enabled environment.
Smart councils realise this, appreciating that by simplifying their IT layer, they can remove the need for dedicated in-house resources, reduce capital expenditure and be free to focus on business outcomes.

Opening the door

The thing about planning for the future is you can never be entirely sure what it holds. IoT, augmented and virtual reality, wearables and a host of other technologies are poised to change the way we interact within our world…and who knows what other new transformative technologies are around the corner?

This makes a reliance on old, outdated technology even more problematic, as legacy systems are often closed and proprietary. Even with an integration layer built across the top, these applications are unlikely to meet tomorrow’s demands. Building on a ten-year-old system will quickly surpass the point of diminishing returns, making today’s ‘investment’ nothing more than a sunk cost. Implementing a solution that employs an open protocol architecture means there won’t be a requirement for complex re-engineering to support transformative technologies as they are developed in the years ahead.

Shifting the mindset

The vision for a Smart City should be fundamentally constructed around the needs of a community and its residents. As individuals, people adapt to new ways of communicating and consuming relatively easy, but it generally takes a shift in our mindset to achieve this. Not so long ago, for example, we purchased CDs and DVDs and had physical confirmation that we ‘owned’ the music we listened to and movies we watched.

The advent of smart phones, tablets, the cloud and increasingly fast internet access has changed the landscape entirely. We stream movies, TV and music and no longer feel attached to a physical representation of something, because we have the world at our fingertips. We can access anything we need to, from any device, anywhere in the world.

This shift raises two key points for Local Governments with Smart City or Smart Community ambitions:

  1. General expectation has changed — and it is redefining how councils must think and act to better service customers and community members. An underlying architecture that facilitates a simple process for communication and doing business is imperative.
  2. ‘Ownership’ is no longer confined to the tangible – moving from disparate on premise applications to a Software as a Service (SaaS) enterprise solution is the most logical choice. It frees up resources, saves on capital expenditure and provides a better path to a smarter future.

With digital transformation key to Local Governments realising their smart ambitions, councils are increasingly looking for a reliable and robust solution only a SaaS enabled environment can offer. TechnologyOne’s deep understanding of the Local Government sector has enabled it to develop a truly integrated OneCouncil solution specifically for councils. Its solution has empowered more than 300 councils across Australia to significantly reduce the time, cost and risk associated with large-scale enterprise-wide software implementations, setting them on the path to a smarter future.

If becoming a Smart Council is on your radar, the time to embrace your digital transformation has well and truly arrived. This eBook to help you devise effective strategies for realising smart future goals.
http://info.technologyonecorp.com/Smart_Cities_Start_With_Smart_Foundations.html?utm_source=3rd_party&utm_medium=email&utm_campaign=SALGFMG_Sponsorship&utm_content=SmartCityeBook 

Work Group Updates

Asset Management

As a result of the Financial Indicators report September 2018 which reported 46 councils for which data on an asset sustainability ratio is available, 78 per cent of councils had a ratio higher than 60 per cent. This indicator is a measure of whether a council is accommodating asset renewal and replacement in an optimal and cost effective way from a timing perspective, relative to the risk it is prepared to accept and the service levels it wishes to maintain.

A survey has been designed by the Asset Management work group to gather information on how Councils currently use their IAMP and provide better understanding of any constraints and opportunities for improvements. This will inform discussions going forward regarding the use of IAMP and how the asset sustainability ratio is used including if it is an appropriate form of asset renewal measurement.

For further information please contact Katy Bone, Town of Walkerville: This email address is being protected from spambots. You need JavaScript enabled to view it.

EVENTS

There was an excellent turnout and great feedback about the annual workshop and conference “The Labyrinth” held late November 2018, which featured Craig Reucassel from the Chaser and The War on Waste. Thank you to everyone who came along, and to the Events Group in making this such a successful event.

Friday 15 March we will be holding our one day conference, “Great Expectations”, at the Adelaide Convention Centre, with registrations open now. The program contains a good mix of technical topics, and broader local government considerations. Our key note speaker, Dr Fiona Kerr, will be speaking about how good leaders build adaptive organisation, and as we reshape our brains constantly what does this mean for us in developing our own leadership skills and behaviours.

The work group have also commenced preparing a draft program for the November conference, so it you have recently heard a great presenter or would like to hear about a particular topic, please contact me with your suggestion.

For further information please contact Kate George: This email address is being protected from spambots. You need JavaScript enabled to view it.

Financial Management Framework

The annual review of the draft Model Financial Statements (MFS) 2019 as prepared by Coalface Software Solutions, commenced in February checking for changes or newly introduced – financial statements, AASBs’, appropriate presentation of disclosures, the Local Government Act 1999, other legislation and other requirements. We appreciate the comments and feedback we have received from our members to improve the usability and presentation of this model. The document is made available for South Australian users as a recommended format and presentation for the financial statements, notes and other information. It is intended use is a best practice model providing information on each of the required areas and for practical guidance includes some examples of the how, what, when, why and where.

The working group also review new and amended accounting standards, recently reviewing draft decision trees for inclusion in the draft MFS 2019, as provided by Coalface Software Solutions on AASB15, AASB16 & AASB1058.

During 2019 the LGA is embarking on a review of its Financial Sustainability Information Papers with the last review back in 2015, this working group will be actively involved providing input, suggestions for improvement and comments during this review process.

For further information please contact Mark Lague, The Barossa Council: This email address is being protected from spambots. You need JavaScript enabled to view it.

Long Term Financial Plan

Work on the new LTFP lite model has been finalised and was presented at the November FMG Workshop.

The model has been well received with a number of Councils in the process of implementation. The model combines the best elements of the current LG Solutions LTFP Max model with a desire to keep things simple. The model provides flexibility at each income and expenditure category, which enables the user to add their own income and expense categories to a standard set. There is also the capacity to set global and discrete indexation for all income and expenditure items and to detail new initiatives and associated financial impacts. The model even converts cash deficit to a Cash Advance Debenture and calculates interest, which when working with other models can prove to be a time consuming step.

To support users of the model draft instructions have been developed which are near sign off.

Pricing of the model is detailed below:

spring2018 4
*Note – Rollover is waived for Councils who purchase the Year End Templates (YET)

For further information regarding the work group please contact Kate George: This email address is being protected from spambots. You need JavaScript enabled to view it..

For orders of the LTFP Lite model please contact Tony Pizzuto: This email address is being protected from spambots. You need JavaScript enabled to view it..

Membership & Communications

In 2017 the FMG Executive Committee launched the Buddy Program, an initiative developed to connect with Finance professionals in our rural and regional Councils. The concept is to connect two of the Executive Committee members with each rural Council, effectively allowing the finance professionals in the rural areas a ‘Buddy’ to contact to discuss any issues or ideas they may have.

As both Executive Committee members and rural finance professionals have changed since the launch, the work group is in the process of updating the Buddy list.

The program has had a varied level of success with some being in regular contact with each other, and others contacting their Buddy when the need arises. We would love to receive any feedback you have regarding the program.

With regard to the FMG website, we are continually updating the content to ensure the latest relevant information is available for our members. The presentations from the November conference ‘The Labyrinth’ are now on the website available for members to peruse.

For further information please contact Craig Mudge, District Council of Mount Remarkable: This email address is being protected from spambots. You need JavaScript enabled to view it.

Rating & Valuation

For further information please contact Simon Zbierski, Campbelltown City Council: This email address is being protected from spambots. You need JavaScript enabled to view it.

 

Local Government Price Index

For further information please contact Chris Birch, City of Prospect: This email address is being protected from spambots. You need JavaScript enabled to view it.

 

Fees & Charges

For further information please contact Elizabeth Williams This email address is being protected from spambots. You need JavaScript enabled to view it.

 

Costing Principles

For further information please contact Alex Oulianoff, Mount Barker District Council: This email address is being protected from spambots. You need JavaScript enabled to view it.

Lessons from a fallen unicorn

BentleysDavid Francis,
Bentleys SA Pty Ltd

Elizabeth Holmes was Silicon Valley’s first female billionaire entrepreneur, controlling a company worth an estimated US $9 billion, on paper at least.

Holmes dropped out of Stanford College to pursue an idea to develop a revolutionary blood testing machine that could conduct sophisticated blood tests from just a finger prick. Her company, Theranos raised about US $700 million from well-known and successful venture capitalists, including Rupert Murdoch. Holmes was feted as the next Steve Jobs and her face adorned magazine covers.
However, the technology that Holmes was trying to develop did not work. Holmes would not budge from her idea that the machine should be small, portable and should only use blood obtained from a finger prick. These parameters proved impossible for engineering teams that were employed to create and test the machine. The tests were unreliable because the blood had to be diluted so much.

Spectacular rise and fall

Holmes lied about the technology and the results of the blood tests. She lied to her employees, company board, investors, customers and regulators. It wasn’t until Wall Street Journalist, John Carreyrou, received a tip-off about the concerns from ex-employees when investigations started. Carreyrou’s task was made difficult due to Theranos hiring America’s top lawyers. Holmes even reached out to major investor, Rupert Murdoch, whose News Corp owned the Wall Street Journal, to stop the story.

However, Carreyou received the backing of his editor and employer, therefore the investigative story which questioned Theranos’ claims was published, and the web of lies that had been woven started to fall apart. By September 2018, Theranos was being wound up and federal prosecutors had filed criminal charges against Holmes.

Warning signs

If employees questioned the technology, they were fired immediately. Ex-employees raising concerns on social media received law suits and threatened. Holmes would not allow research teams to collaborate with one another, all teams communicated through Homes as the CEO.

Board members did not have the knowledge to understand the technology and question the results. If a director questioned or showed any doubt over the claimed progress, they were removed from the board and forced to sign a confidentiality agreement. Holmes was allowed to force through a resolution that gave her 100 votes for every share she owned, giving her 99 per cent of the voting rights.

Lack of due diligence and governance

Holmes and Theranos thrived during the years when there was an investor frenzy within Silicon Valley. Start-ups such as Uber and Spotify were raising significant private capital and Holmes convinced influential investors that Theranos was the next big thing.

Some believe entrepreneurs need freedom to follow their instinct and make quick decisions, without the need to burden them with a bureaucratic governance process. However, it was this “fake it until you make it” mentality that enabled Holmes to sell the story in the hope that technology would catch up. Truth is, you need to give entrepreneurs enough slack to be entrepreneurial, but a governance process that keeps them accountable.

Regulators did not act sufficiently on raised concerns. Health regulators did not follow up promised test results and eventually made concessions. It is unknown if there was any financial regulatory oversight or if there was a financial audit ever completed. The revenue and profit projections provided to potential investors were wildly exaggerated and should have raised doubts.
Lessons for entrepreneurs

  • Exponential innovation is unusual. Most innovation, in IT and other disciplines, is incremental. An advancement that works is far more valuable than blue sky promises of transformation.
  • Accepting responsibility, sharing information and being accountable are clearly fundamental requirements of good leaders.
  • Good governance is paramount. Boards must have suitable skill sets, in order to fully understand the company’s position and to help guide it forward. Board members must ask questions to be suitably informed and to be able to protect the company. If they cannot act bona fide in the interests of the company, act for a proper purpose, and exercise independent judgement, they should step aside. The days of Boards rubber stamping executive strategies are gone.
  • Embrace a positive corporate culture – encouraging diversity of thought, collaboration, constructive dissent and transparency – is vital to a company’s success.

‘The Labyrinth’ Workshop and Conference Review – 29 & 30 November 2018

Labyrinth

Members of the South Australian Local Government Financial Management Group gathered at Adelaide Oval on the 29th & 30th November 2018 for its ‘Labyrinth’ conference and workshop. An excellent line up of speakers had been organised for the two-day event.

With Lisa McAskill again at the helm providing MC duties, day one commenced with our very own President Kate George giving members an update on the development of a new Long Term Financial Plan model for SA Councils, through funding received from the LGA Research and Development Scheme. Manuel Schuldt, LG Solutions, then gave a demonstration of the new model which gave members an overview of the capabilities of the model.

Corinne Garrett, UHY Haines Norton, and Ashay Prahbhu, Assetic, then presented on Asset Management Plans and Long Term Financial Plans, and how to best make the LTFP a ‘live’ document to assist with decision making. This presentation included case studies from Councils to show how up-to-date plans assist with day-to-day functionality.

Tim Muhlhausler, Galpins, Andrew Tickle, BDO and Samantha Creten, Dean Newbery & Partners, then joined forces on a panel to discuss the Model Financial Statements and fielded questions from the audience regarding Council audits.

David Papa and David Francis from Bentleys SA presented on new revenue standards AASB 15 and AASB 1058, their technical requirements, application dates and the type of information needed to collect.

Lincoln Smith, Norman Waterhouse Lawyers, provided an understanding of employees vs contractors and the consequences of getting it wrong. Lincoln provided some practical tips to ensure compliance of getting it right.

Adrian Hollins, Control Track, and Lida Cataldi, City of Unley, then showed the new Control Track application to conduct a risk based internal controls self-assessment.

Davin Lambert from the LGFA concluded the days presentations with a Use of Debt discussion, showing scenarios of how debt supports intergenerational equity and further discussing the responsible use of debt.

Following the conclusion of the presentations, the event sponsors provided a cocktail party for all attendees, before attention then turned to dinner with the entertainment led by hypnotist Isaac Lomman and some willing (and not-so-willing) audience participation. An excellent evening was enjoyed by all, but as President Kate said the next morning, what happens at dinner stays at dinner!!

Day two was opened by Paul Sutton, City of Charles Sturt, and Adrian Skull, City of Marion, discussing how their Councils, as well as the City of Port Adelaide Enfield, are working in close partnership to seek out opportunities to work collaboratively and gain efficiencies by eliminating duplication.

Unfortunately our next presenter was unable to attend, however Dr Joseph Drew from the University of Technology in Sydney stepped in at last minute via Skype to present an evidence based discussion on Rate Capping. The presentation discussed the reasoning of why rate capping exists, the arguments for and against, and evidence of its effectiveness.

Lisa Teburea from the LGA then presented an update of Local Government reforms currently on the agenda, what they mean for all Councils and how the sector is responding.

Adam Jones, Local Government Risk Services, highlighted a range of emerging risks that have affected Local Government is recent times, and provided case studies and identified programs available to help Councils work through their risk mitigation process.

Craig Reucassel of ‘The Chaser’ fame was our keynote speaker. Following from his series ‘The War on Waste’, Craig highlighted how Councils contribute significantly to dealing with the problems of waste and recycling, but about getting contributors further involved with taking responsibility.

Andrew Richardson and Andrew Corrigan, Auditor-General’s Department, discussed the role of the Auditor-General’s Department in examining the Local Government sector and the processes involved once a Council is selected for further examination.

The SALGFMG would like to sincerely thank all our sponsors for their continued support of the conferences, as once again it enabled a program full of high calibre speakers. Members can access their presentations on the SALGFMG website (login required for access).

The next Conference will be held on Friday 15th March 2019 at the Adelaide Convention Centre, please keep an eye on our website for more information.

AngelaPMembers Profile

Angela Papatheodorakis

I started working in Local Government at the City of Playford as Accounts Payable Officer in 1998. After 8 years of Accounts Payable, I was ready for a new challenge, and in 2006 I applied for a Finance Officer role in the Finance Department. This is when I decided to go to Uni to study a Bachelor of Commerce. I completed this while working full time in 2010 (I had no life during this time!). I commenced my CPA course after graduating.

In 2011, I moved to City of Prospect as a Senior Finance Officer. I really enjoyed working in a small Council environment and I learnt a lot from my Manager at the time. I then moved to City of Port Adelaide Enfield (PAE) in 2013 as a Financial Accountant and have been here ever since. Since starting at PAE, my role has changed a little in that I am now also the Team Leader of the Accounts Payable function, responsible for the Long Term Financial Plan, end of year Financial Statements, creating reports and many other tasks. PAE is a great organisation to work for and I really enjoy working with the Finance Team here.

I enjoy working in Local Government and find that I am always learning new things. Even though my work is a little repetitive, there are many things that pop up which involves problem solving and thinking of ways to do things differently and more efficiently. Councils also do so many different things for the community and its great knowing that even though I am not directly involved in providing these services, I am helping the officers that do provide them. Also, what I love about Local Government is that it doesn’t matter which council you work for, if you need advice or assistance, other councils are always there to help.

I became a member of FMG when I moved into Finance in 2006. In 2018 I joined as a committee member after my manager, who had been a committee member for many years, resigned from Council. I wanted to represent PAE on the committee as I saw a great benefit in being involved. I enjoy being on the committee as the topics discussed are issues that we may be dealing with at the time and it’s interesting hearing how other councils deal with them. I’m finding that I’m learning a lot being on the committee.

I like to spend my spare time with family and friends and really enjoy gardening.

Audit Success Starts Now!

asseticRebecca Alcott
Assetic

Thanks to all SALGFMG Members and Board for so warmly welcoming Assetic into your fraternity. It is an exciting time in SA local government, as the effects of mandated asset management plans become a reality, and we have a very-real opportunity to shape our industry for the better.

As we embark on a new year, I wanted to reflect on this with you as members. So, let me ask you….

Have your auditors ever asked you questions like these?

audit 1

And does it make you wonder why they didn’t ask you these?

audit 2

Australia is truly a leader in strategic asset management, which is something we should be very proud of. However, we have a further opportunity to progress beyond valuations and accounting and turn it into a true blend of Accounting and Engineering – Accountneering.

Our finance teams understand the need for demonstrating council’s financial sustainability for audit, yet struggle to balance the financial reporting requirements against actual engineering performance and planning. Our asset managers have all the data required for very solid asset management planning, yet get inefficiently bogged down for months trying to reconcile financial figures – and then stress out trying to satisfy audit.

It’s time for collaboration and the blending of these two disciples. What we now refer to as Accountneering.

I will be personally getting involved this year, meeting audit offices to collaborate in the science of audit… to ensure audits are meaningful, consistent and ask the real questions which impact councils’ futures – not just reconcile numbers.

At Assetic we will also continue to help our clients move forward with this philosophy of collaborating with the auditors prior to the final audit. Many did exactly that last year and the results were outstanding; year-end was satisfied with a lot less pain than in previous years.

A fresh new calendar year is upon us, which means it is already time to look forward to another EoFY… optimistically. To ensure our clients and the industry are better prepared than ever before, we have begun preparing an Audit Checklist which will be used to assist the EoFY process and satisfy audit compliance. To celebrate joining your community we would be happy to share this with you as SALGFMG members, simply complete this short form or email This email address is being protected from spambots. You need JavaScript enabled to view it.. Let’s kick off 2019 right!

March Conference Preview

great expectationsThe next FMG conference ‘Great Expectations’ will be held at the Adelaide Convention Centre on Friday 15 March 2019.

There will be many informative topics discussed, including what makes audit committees effective, GST and FBT updates and Council’s communicating through the media.

Dr Fiona Kerr is the keynote speaker, discussing the neuroscience of leading a resilient organisation. Dr Kerr has over 30 years’ experience in the areas of complex organisational strategy and transformation across the public, private and tertiary sectors and within various industries.

For more information please click here: http://www.salgfmg.com.au/index.php/great-expectations

Members Profile

dave harmanDave Harman

I started in Local Government in 2011, having come from the retail automotive industry as a Dealership Financial Controller.

My first local government role was at the City of Marion – where I still am – as their Financial Accountant. My current role is Unit Manager of Statutory Finance and Payroll (a title so long even the Payroll system can’t cope with it), where I oversee financial reporting, asset accounting, payroll and accounts.

For me, the best part of working in Local Government is the variety of the work – there is always something new (sometimes it’s even exciting!!) – coming up.

I have been a member of the FMG since I started at Marion and was involved in the Internal Controls working group early on however this is my first year as a committee member. There is a lot of benefit in being involved in the working groups as you get to discuss different approaches and get fresh perspectives from the other members.

Outside of work I enjoy spending time camping with my family (my partner, son who just turned one and our dog), working on/driving/racing cars (space and time are the biggest issue for this), gardening (we have about 10 fruit trees and a variety of herbs and veggies), barbecue, renovating and many other things that are too numerous to list.

Documenting Procedures

uhyCorinne Garrett
UHY Aspire Advisory,
consulting subsidiary of UHY Haines Norton

When I work with Councils and discuss Internal Financial Controls, the discussion inevitably gets around to DOCUMENTATION. Everyone thinks it is boring to do and easy to put off and you find you never get around to it.

I’m going to say once again; is that procedure documented? Do your staff have access to the documentation? And have they read and understood it?

So in case you need convincing or you need to convince someone else I thought I’d set out some basics.

Why do you need to document procedures?

Loss of knowledge: Councils in South Australia have had a 12% turnover of staff averaged over all Councils over the years 2012 to 2017. With a minimum of 0% and a maximum of 79%! Losing even a few staff in a small Council can result in considerable loss of knowledge in many procedures. Documentation can help a new staff member get on top of their new role, especially if the previous incumbent isn’t around anymore.

Consistency: Documentation assists in staff completing a procedure the same way each time, every time.

Prove it: In the case where there is a problem, it might help if you can prove that your staff did the task correctly and according to the procedure. If they didn’t, then you might really have a problem. So it is important to not only have the procedure documented, but train staff and ensure that they are following the documentation.

Not forgotten: Many procedures can be quite complex, documentation ensures that all tasks within a procedure are completed and not forgotten.

Internal Controls: An important part of controlling financial risks of error and fraud is to have documentation, that staff are trained in, that is kept up to date and checked.

Where do you start?

A picture tells a thousand words: It is easier to start if you draw flowcharts of what has to happen, in what order. Then put in the descriptions.

Policies: Make sure that the procedures support and fit with the relevant policies.

Is it understandable: Can your staff read and understand the procedure, test it – maybe on someone new?

Calendars: If there are a group of procedures that relate together, include a calendar showing when each procedure is to be undertaken.

Checklists: Part of the ‘prove it’, a checklist of procedures can prove that the procedure is being undertaken and remind staff to do it.

Keeping it updated and relevant

Use it: Encourage staff to use the procedure, if something is not right – fix it. Some staff will continually ask how to do something – point them to the procedure. Memory is great, except when it’s wrong. Discourage ‘work arounds’ – fixing the procedure will save time in the long run.

Update it: If something changes, update the procedure, but also ensure key staff know that it has changed.

So have I convinced you? No excuse, it’s a new year after all, this could be your ‘late’ New Year’s resolution to get those procedures documented.

Cyber Threat Insights for the Public Sector

BDONick Kervin
BDO

The public sector has historically always been a prime target for cyber-attacks, and over the past few years we have seen an escalation in both the number and severity of attacks, threats, and malicious actors targeting the industry.
The Q4 2018 BDO Cyber Threats Insights Report, released January 2019, examines the unique challenges and issues facing the public sector internationally, as well as key emerging trends around attacks, and potential mitigating factors. In addition, we analyse the cyber security practices of the public sector in four different countries - Australia, Germany, Israel and the United States.
If you would like to discuss any of these issues further, don’t hesitate to get in touch with Nick Kervin: This email address is being protected from spambots. You need JavaScript enabled to view it. or 08 7324 6145.
> Read report

LGFA Financial Markets Update – Financial Market Conditions

lgfa

Financial markets remained volatile over the past month as the US Federal Government shutdown, the ongoing US-China trade dispute and issues around legislating Brexit created uncertainty around the globe.

The US Federal Government shutdown in January after the democrat-controlled congress failed to pass federal funding legislation because it contained funding for President Trump’s US-Mexico border wall. The issue remains unresolved and despite government workers not being paid during the shutdown many economists feel it made little difference to US economic output. There has been no resolution to the US China trade dispute and if a compromise is not reached by the 1st of March the US have threatened to raise tariffs on Chinese goods from 10% to 25%.

The UK parliament has not accepted the deal negotiated with the European Union by Prime Minister May. If no compromise is reached, the British could enact a no deal ‘hard’ Brexit on the 29th of May this year.

In January, global equity markets recovered some of the losses experienced in December with the US S&P 500 index rising 7.7%, the UK FTSE rising 3.5%, the German DAX index rising 5.6% and the Japanese Nikki index rising 6.2%.

autumn 2019 graph

Global bond yields did not experience the same volatility over the past month highlighted by the US 10-year Treasury bond yield which remained relatively steady closing the month 0.01% higher at 2.63%.

The Australian equity market also experienced a rebound in January with the ASX 200 index rising 5.5%. Australian unemployment fell from 5.1% to 5% in December to its lowest level since June 2011. Despite this strong data, falling housing prices and a sharp reduction to business conditions in December points to a challenging economic environment in 2019. The Australian dollar recovered some of the losses experienced in December and is currently trading at around $0.71 USD.

The Reserve Bank (RBA) met in early February and left the official cash rate unchanged at 1.5%. The statement remained relatively unchanged noting that the labour market remained strong while inflation remained low. In early February Governor Lowe spoke at the Nation Press Club in Canberra about the year ahead. During his speech he spoke about the accumulation of downside risk within the global economy and recent housing price declines, especially in Sydney and Melbourne. The governor also stated that future changes to monetary policy was more evenly balanced than what it was a few months ago and that the RBA has the flexibility to cut rates if required. The market took this as a more dovish tone and increased the probability of a cut to the official cash rate in the future.

Implied RBA Cash rate as at 31/01/2019:

autumn 2019 cashrate

Read more: Focus on Finance - Autumn 2019

Focus on Finance - Summer 2019

Focus on Finance
Summer 2019

Welcome

Welcome to the Summer 2019 Focus on Finance Newsletter, keeping our members informed on the current financial issues affecting Local Government.

DISCLAIMER
The sole purpose of this newsletter is to provide information to members. The contents of the newsletter are limited to that purpose and should not be taken as advice on finance, management or the law. All material contained in the newsletter is subject to copyright of the various authors who contribute to it. Contents of this newsletter may be reproduced in whole or in part only with the prior permission of the South Australian Local Government Financial Management Group who will, where required, seek appropriate permissions from copyright owners or rights holders. The South Australian Local Government Financial Management Group accepts no liability or responsibility whatsoever for or in respect of any use of or reliance on the newsletter by any party. Information contained in this newsletter has partly been provided by third parties. The South Australian Local Government Financial Management Group does not guarantee the information. All interested parties should make their own enquiries to verify the information and to satisfy themselves in all respects.

Contributors

  • Anthony Amato

    Anthony Amato

  • Clive Hempel

    Kate George

  • Craig Mudge

    Craig Mudge
  • Elizabeth Williams

    Elizabeth Williams

  • Karishma Reynolds

    Karishma Reynolds

  • Alex Oulianoff

    Alex Oulianoff

President’s Message

Kate GeorgeWelcome to the first newsletter for the 2019/20 financial year. It has been a busy period with end of financial year, and I hope you have all had the audit successfully completed, and are on track to lodging your grant commission returns. The newsletter is full of updates and useful information, so please make a coffee and take a few minutes out of your day to read it.

In August we held our AGM at the Stamford Plaza with Justice Stephen Pallaras QC as our guest speaker. Stephen articulated so eloquently the qualities of courage leadership in action, and being values driven especially in the face of tough situations that he had the audience completely enthralled. At the AGM there were changes to the Executive Committee and I thank the following outgoing members for the contributions they have made: Craig Mudge, Angela Papatheodorakis, Grace Pelle, Leta Northcott, Pep Piscioneri and Sarah Taylor. I also wish to thank all the new Executive Committee members for their willingness to take on additional responsibility to support the sector. At the AGM Clive Hempel was recognised for the significant contribution that he has made to the FMG by being awarded Honorary Membership, and I personally have very much appreciated Clive’s support over the past year; the first year of my presidency.

As in previous years the FMG will continue to have work groups which all members can join to pursue areas of interest and contribute to the sector. The following groups have been established for 2019/20:

Asset Management
Costing Principles
Events
Fees & Charges
Financial Management Framework
Local Government Price Index
Long Term Financial Plan
Membership & Communication
Rating & Valuation
Local Government Reform
DACO Update

If you are interested in joining any of these groups please make contact with our Secretariat, Patricia Coonan (This email address is being protected from spambots. You need JavaScript enabled to view it.) and she will establish contact with the relevant Chair.

The South Australian Productivity Commission released their draft report ‘Inquiry into Local Government Costs and Efficiency’ in September, and the SALGFMG have provided a further submission, which has been circulated to all members. The submission focused on a limited number of the information requests, those that are of a policy nature or have broad implications through potential legislative changes. My understanding is that the final report will be presented to State Government late November and will become publicly available in the New Year.

The SALGFMG has also prepared a submission in response to the discussion paper released by the State Government’s Office of Local Government regarding Local Government Reform Area 2 Lower Costs and Enhanced Financial Accountability. This submission has also been circulated to all members, and provided a response to all proposed reforms. Following consideration of feedback on the reform proposals contained in the discussion paper, the Government will develop a draft Local Government Reform Bill for release in early 2020.

I look forward to seeing you at the upcoming workshop and conference ‘Back to the Future’ on 5 & 6 December at the Adelaide Convention Centre, which will also be an opportunity to celebrate FMG’s 30th birthday. We have also decided to change the timing of our 1 day conference from March to May which we hope will make it easier for members to juggle budget workloads which typically peak in March and April, so please save 15 May 2020 in your diary.

In closing I wish to thank our loyal sponsors who enable us to provide such a strong advocacy role in the industry and enable valuable professional development for our members through our workshops and conferences. I am excited to advise that the LGFA have provided additional financial support to enable more representatives from regional councils to attend the 2 day event. I encourage you to support them whenever you are in the market for goods or services which they provide.

Kate George
President

President's Message proudly sponsored by
Local Government Finance Authority
lgfa

Key Dates

30 September 2019 – 31 May 2020
A Council or subsidiary must at least twice consider a report showing a revised forecast of its operating and capital investment activities for the relevant financial year compared with the estimates for those activities set out in the budget in a manner consistent with the note in the Model Financial Statements entitled Uniform Presentation of Finances.

30 November 2019
Last date that audited financial statements must be submitted to the Minister and the SA Local Government Grants Commission.

30 November 2019 – 15 March 2020
A Council must consider a report showing a revised forecast of each item shown in its budgeted financial statements for the relevant financial year compared with the estimates set out in the budget presented in a manner consistent with the Model Financial Statements.

Must also include revised forecasts for the relevant financial year of the Council’s operating surplus ratio, net financial liabilities ratio and asset sustainability ratio compared with estimates set out in the budget presented in a manner consistent with the note in the Model Financial Statements entitled Financial Indicators.

31 December 2019
Last date that a Council must prepare and consider a report showing the audited financial results of the Council for the previous financial year compared with the estimated financial results set out in the budget presented in a manner consistent with the Model Financial Statements.

31 January 2020
SALGFMG Meeting, 9:30 am, City of Port Adelaide Enfield.

28 February 2020
SALGFMG Meeting, 9:30 am, City of Burnside.

27 March 2020
SALGFMG Meeting, 9:30 am, City of Mitcham.

31 March 2020
End of Fringe Benefit Tax year, ensure that log books, declarations and other required documentation are completed by employees.

24 April 2020
SALGFMG Meeting, 9:30 am, Town of Walkerville.

15 May 2020
SALGFMG Conference, Adelaide Convention Centre.

21 May 2020
Last day to lodge Fringe Benefit Tax returns.

29 May 2020
SALGFMG Meeting, 9:30 am, City of Charles Sturt.

1 June 2020
Earliest date for a Council to adopt an annual business plan and a budget which must be adopted for the ensuing financial year.

26 June 2020
SALGFMG Meeting, 9:30 am, City of Prospect.

30 June 2020
Review of internal controls completed for 2019/20.

31 July 2020
SALGFMG Meeting, 9:30 am, Mount Barker District Council.

Early August 2020
Grants Commission returns released for completion and return by 30 November.

28 August 2020
SALGFMG breakfast AGM, 7.30am, Adelaide Zoo Sanctuary (to be confirmed).

30 August 2020
Last day for adoption of an annual business plan and budget.

31 August 2020
Last date for declaring a general rate.

11 September 2020
Last date that financial statements, notes and other financial material must be prepared by a Council. The Chief Executive Officer and Presiding Member of a Council audit committee to provide certificates of independence with the financial statements.

25 September 2020
SALGFMG Meeting, 9:30 am, Alexandrina Council.

Further information for many of the key dates can be sourced via the LGA website: www.lga.sa.gov.au. You will need a members login to access the key dates calendar. Further information can also be sourced from the Local Government (Financial Management) Regulations 2011.

Key Dates proudly sponsored by
LG Solutions
LGsolutions

Internal controls within your Business Systems

noble logo

Internal control requirements are contained within Section 125 of the Local Government Act 1999 and associated regulations. In accordance with these regulations, members will have an obligation to demonstrate an effective system of internal controls.

You will almost certainly be working with several experts (including external audit, internal audit, audit committee and governance persons) to ensure that your internal control framework is appropriate for your local government organisation.

Today we ask you to consider what internal controls are appropriate for local government? Can your finance and business systems apply an internal control framework to reduce your risk of fraud to an appropriate level?

We list below some risks and questions associated with managing the finances of a council. You may ask yourself if the controls incorporated in your current financial processes are adequate. In most cases solutions to these problems can be provided by effective application of tools within your core business and finance systems.

Risk: Proper approval of expenditure in accordance with your procurement policies / Segregation of duties

Do you have processes in place to ensure appropriate segregation of duties? Is the same person who created the purchase order able to approve it? Does your council have appropriate controls to ensure that all requests for expenditure are handled by more than one person? Are all your purchases approved in accordance with the Financial Delegation assigned to your employees?

Risk: Correct Authorisation of General ledger Journals

Do you have processes to ensure that all general ledger journals are properly authorised using workflow?

Risk: Accuracy of Budgets

Are budgets recorded accurately in the Financial Systems? Do you have a process that enables divisional managers to input into the budget process?

Risk: Approval of New Projects

Do you run a Budget Bid system to track the approval of new projects and initiatives? Have you discussed how other councils use their business systems to track their Budget Bid approval processes?

Risk: Fixed Assets

Do you maintain a fixed asset register in your financial system? Is there a process to automatically reconcile your fixed asset movements to your general ledger?

Risk: Statutory Reporting

Are you able to create your Financial Statements directly from your business systems? Avoiding the manual transcription of values into spreadsheets significantly reduces the risk of misstatement of balances. Is there segregation of the preparation of the statutory financial reports and the review and approval?

Risk: Management Reporting

Does your month end process include management reports to track variances between approved budgets and actual results? Is there segregation of the preparation and review and approval of management reports? Do you have adequate processes to identify and record explanations for significant variances?

Risk: Suppliers

Do you have a significant number of suppliers with updated vendor details? Have you flagged vendors that have not been used in the past 2 years as inactive so that they do not get used by mistake?

Noble Business Systems Consulting is uniquely positioned to assist you. We understand and regularly work with local government clients. We are Chartered Accountants and understand what an effective control framework looks like. We are also experts in Technology One software so we understand how to apply the tools within your software to implement internal controls.

We would be happy to work with you to support and improve your internal control framework within your existing financial system. Please feel free to contact us for a chat.

Noble Business Systems Consulting
Stuart Noble
Tel: 0405 029 105
Email: This email address is being protected from spambots. You need JavaScript enabled to view it.
Website: www.noblebsc.com.au 

Noble Business Systems Consulting provide support and consulting services to assist users of the Technology One Core Enterprise Suite. We provide an independent advice and can assist without the conflict of being associated with a software vendor.

Noble Business Systems Consulting is an independent consulting firm and is not affiliated with Technology One Limited. Technology One is a registered trademark of Technology One Limited.

Work Group Updates

Work Groups are formed to assist the Executive Committee to work on specific issues that are of interest or are topical to finance staff in Councils.

All members are welcome to join any work group that may be of interest to them at any time. If you would like further information on one of our work groups, please contact the Chairperson of the relevant work group (details listed below) or contact Patricia Coonan, Secretariat: This email address is being protected from spambots. You need JavaScript enabled to view it..

Further information on the work groups is available from the Executive Committee minutes where updates are provided each meeting.

Asset Management

The Asset Management workgroup has been given the opportunity to provide comments on the AASB13 Fair Value Measurement for Not for Profit exposure draft. The exposure draft is designed to make it easier to understand AASB13 and to provide more working examples. This will see, among other things, land being valued using a cost approach with no discount at highest and best use. At this stage, it is unclear when the exposure draft will be adopted. However, Councils will have two years to implement changes once it has been approved.

As a result of a survey completed earlier in the year, a grant was sought through the Local Government Research and Development Scheme. As a result, funding has been approved for a project to assist Councils to better understand their Asset Management Plan requirements and to improve the sector’s asset sustainability ratio. The project will be managed by the LGA Secretariat to produce:

  • a sector-wide asset management and financial planning ‘Maturity Assessment Report’; and
  • Model Infrastructure and Asset Management Plan with model templates.

Katy Bone, Town of Walkerville: This email address is being protected from spambots. You need JavaScript enabled to view it.

Costing Principles

Alex Oulianoff, Mount Barker District Council:
This email address is being protected from spambots. You need JavaScript enabled to view it.

Events

Kate George, City of Salisbury:
This email address is being protected from spambots. You need JavaScript enabled to view it.

Fees & Charges

In October 2019, the ATO released the first GST class ruling for Local Government in SA, CR 2019-61. The Class Ruling can now be relied upon by all SA Councils to ensure the correct GST treatment is applied to fees and charges.

The Fees and Charges workgroup continue to work with BDO to progress the second class ruling which will cover the remaining fees and charges.

Elizabeth Williams, Alexandrina Council:
This email address is being protected from spambots. You need JavaScript enabled to view it.

Financial Management Framework

As part of the Financial Sustainability Program, the LGA provides a series of information papers to assist Councils, Elected Members, staff and a resource for the general public and students of Local Government. A regular review is required to ensure alignment with current legislation and best practice. Over the last few months, the LGA and Financial Management Group Committee members reviewed and updated 9 information papers. Another 8 are re-drafted and are scheduled to be finalised in early 2020. The remaining 4 papers have been held back due to their subject matter being related to the State Government Local Government reform(s) currently underway. See link: www.lga.sa.gov.au/fsp 

Early in 2020, the workgroup will be reviewing the 2019/20 draft Model Financial Statements. All suggestions for improvement and feedback on the document are welcome as its usefulness increases with our collective input. The review will also consider the application of accounting standards as relevant for this year.

Mark Lague, The Barossa Council:
This email address is being protected from spambots. You need JavaScript enabled to view it.

Local Government Price Index

Chris Birch, City of Prospect:
This email address is being protected from spambots. You need JavaScript enabled to view it.

Local Government Reform

Kate George, City of Salisbury:
This email address is being protected from spambots. You need JavaScript enabled to view it.

Long Term Financial Plan

Kate George, City of Salisbury:
This email address is being protected from spambots. You need JavaScript enabled to view it..

Membership & Communications

Anthony Amato, Town of Gawler: This email address is being protected from spambots. You need JavaScript enabled to view it.

Rating & Valuation

This Group has focussed on revisiting the Memorandum of Understanding between the LGA and the Value-General. Feedback has been compiled from the group with representatives for the LGA, RPSA and FMG scheduled to meet in January 2020 to formalise a response to the Valuer-General with a view to update the agreement early in the 2020 calendar year. The Group has also provided feedback to the LGA in relation to its recently developed Hardship Policy Guidelines.

Simon Zbierski, Campbelltown City Council: This email address is being protected from spambots. You need JavaScript enabled to view it.

DACO Update

The User Group has focussed on testing and understanding what is scheduled for future releases. In regards to the finance related area, the scheduled updates are:

  • February 2020 release:
    • consistency in receipt look and feel across all payment types;
    • invoices to be sent to generic Council email address.
  • April 2020 release:
    • Payment method to appear on refund screens to make it easier to identify transactions to be corrected;
    • Search fields for RCTI to be shown (currently hidden);
    • Date ranges shown on invoices updated to ensure payments are allocated to correct period.

Simon Zbierski, Campbelltown City Council: This email address is being protected from spambots. You need JavaScript enabled to view it.

Yass Valley Council selects MAGIQ Software

magiq

Yass Valley Council, located in the beautiful southern tablelands of New South Wales and bordering Canberra - the national capital, has chosen to implement the MAGIQ Enterprise Council management system to achieve greater efficiency and productivity, and to deliver better outcomes for its community.

Yass Valley is around 280 kilometres south-west of Sydney and 60 kilometres from Canberra. Yass Valley is renowned for its production of fine merino wool and many new agricultural industries have emerged in the region including wine, alpaca studs, olives and berries.

MAGIQ Enterprise is a fully web-based, cloud deliverable suite of financial administration and council management systems. The product suite features comprehensive Finance, Pay, Regulatory & Compliance, Revenue & Property, Community Engagement and Human Resources systems.

Council’s decision to implement new business systems was driven by dissatisfaction with the customer service and product development provided by its existing vendor; leading to a lack of confidence in the vendor’s ability to meet Council’s future business needs.

“As an organisation, we’ve recognised that we need to be progressive and embrace change to achieve best practice and meet our community’s increasingly high service expectations,” said Sharon Hutch, Director of Finance and Corporate, Yass Valley Council.

“In selecting a business systems vendor, we were looking for a similar commitment to best practice and innovation. We’re confident MAGIQ Software is the right vendor for Yass Valley.”

Yass Valley Council used the MAGIQ Documents software suite for several years and staff were impressed with MAGIQ Software’s customer service and commitment to delivering continual improvements to the product.

This positive experience provided the motivation for Council to consider extending their business relationship with MAGIQ Software and to exploring MAGIQ Enterprise as a viable system alternative.

“We were looking for a vendor who could demonstrate a real commitment to our industry and who also understood the challenges faced by smaller councils,” said Sharon.

“As part of our evaluation process, we had conversations with several councils that have implemented MAGIQ Enterprise and we could see a clear alignment between our customer service expectations and the service culture that MAGIQ has developed within its business.”

The Yass Valley community has shown great interest in engaging with Council. The region has a higher than average level of education and civic awareness, a factor of its proximity to Canberra, presenting Council with the challenge of meeting a high demand for service and information.

“We have a commitment to being transparent with our community so we need to be able to easily access accurate and up-to-date information. Achieving that level of accountability and transparency requires us to have effective business systems, and we believe MAGIQ will help us to achieve this.”

“There has been a real lack of viable alternative system options available and we see MAGIQ Software presenting an enormous opportunity for the local government industry, particularly for smaller councils like Yass Valley,” said Sharon.

Council will also implement the MAGIQ Performance Suite of Budgeting, Reporting and Analytics and Strategic Planning software and Sharon sees this as an exciting initiative that will improve the efficiency of Council’s strategic, operational and statutory reporting processes.

Sharon points to the NSW Integrated Planning and Reporting (IPR) framework as an example of where she can see clear efficiency and productivity gains.

“It’s imperative that Council comply with these requirements, however again it comes back to our available resources. I’m looking forward to exploring how we can use MAGIQ Performance to help us improve business efficiency in this area and I can see real potential for other councils to benefit from what Yass Valley achieves with MAGIQ.”

“At the end of the day it’s all about resources,” says Sharon. “For smaller councils our resources are limited. However, we still need to meet the legislative and compliance requirements of our industry. We need to work smarter and we’re confident MAGIQ is going to help us achieve that.”

With offices in New Zealand, Australia and the USA, MAGIQ Software Ltd provides Cloud Public Administration Platform software for the Public Sector and supplies software services to more than 550 customers.

We deliver appropriate software for each customer’s business size, capabilities and available resources, allowing our customers to accelerate their business efficiency, simply.

Annual General Meeting

The Boulevard Room 375

The Annual General Meeting of the South Australian Local Government Financial Management Group Inc was held on Friday 30th August 2019 in the Boulevard Room of the Stamford Plaza, Adelaide.

Commencing at 7.45 am for breakfast, the morning was highlighted with Stephen Pallaras QC as Guest Speaker. Stephen has enjoyed a 40-year career in courtrooms across the country and across the world, and was the Director of Public Prosecutions in South Australia between 2005 and 2012.

This annual event is free for members.

Public Private Property

ppp

Public Private Property is a specialist valuation practice providing asset revaluation services to the public sector. Councils that work with us will discover that we invest a solid amount of time at the front end of projects to establish client expectations and run through test modelling and pilot studies. We also believe in going all in when it comes to AASB 13 disclosure requirements. Councils and auditors can therefore expect to see what we believe is a refreshing new way of reporting.

Councils can also be assured that our insurance valuations are treated with equal care when they form part of the scope in an asset revaluation. We take the time to understand policy wording and basis of settlement to ensure commercially satisfactory and timely claims.

Local Government is a great sector to be involved in, and we very much look forward to continuing to expand our relationships with individual Councils in the coming months and years. We believe that specialisation is the way to go in today’s environment. There is no other way to keep up!

For further details please contact:
Andrea Carolan
Email This email address is being protected from spambots. You need JavaScript enabled to view it.
Phone 0411 607 808

Make Your Service Review a Success

Ben Haigh, Bee Squared Consultants

beesquaredlogo

Having completed a dozen successful Service Reviews with various councils during the past two years, I can safely say that no two  reviews are the same. Even when reviews may appear to be the same at first glance (e.g. Street Sweeping service reviews across two different councils) each council has its own service definition, financial structure, Elected Member preferences and community expectations. While Service Reviews cannot follow a strict formula, there are three common factors that can lead to a successful review:

  1. Set clear context and purpose
    • Service Reviews without a specific context and purpose are a rudderless ship
    • Have a clear outcome in mind – what type of recommendations are you seeking?
    • However, be open to changing direction if the evidence leads that way

  2. Be holistic AND laser focussed
    • Understand the service outcomes, not the outputs, wherever possible
    • Be broad and start with the system as a whole
      • Cover all aspects in 'just enough' detail to confirm whether they are or are not a critical pain point
    • Quickly identify the critical pain points and focus on those
      • Don't get caught up in irrelevant details
    • Invest most of the time on solutions that will make a noticeable impact

  3. Tell a believable story – Trust is essential to gaining an outcome post review
    • Uncover the reality
      • Uncover incorrect perceptions and reinforce correct perceptions
      • All assertions must be supported by data
      • Look for evidence in multiple places
    • Bring the audience with you, but don’t make things up
      • Use visual depictions of the information rather than excessive words
      • Draw clear and logical conclusions
    • Anticipate 'objection points' regarding the analysis and respond to these

If you want to boil all this down even more, it would be this:

Be thorough in your research but concise in the recommendations and storytelling

  • Focus on a small number of key themes - don't overwhelm the audience
  • Base everything on evidence
  • Present information clearly
  • Use pictures

‘Back to the Future’ Workshop and Conference Review – 5 & 6 December 2019

Members of the South Australian Local Government Financial Management Group gathered at the Adelaide Convention Centre on 5th & 6th December 2019 for its ‘Back to the Future’ conference and workshop. This conference celebrated the 30 year anniversary for the SALGFMG and all members who attended an event in 2019/20 received a commemorative keep cup. Again, an excellent line up of speakers had been organised for the two-day event.

With Lisa McAskill again at the helm providing MC duties, day one commenced with our very own President Kate George giving members an introductory welcome as well as an overview of key activities since the last conference.

Carmen Ridley then led the way by discussing the new standards and, in particular, the new leasing standard, its implications for Local Government and how it can be practically implemented in the real world.

Dr Matthew Butlin, Commissioner, South Australian Productivity Commission, provided an update on the South Australian Productivity Commission’s inquiry into Local Government cost and efficiency.

Tim Muhlhausler, Partner - Galpins, Samantha Creten, Partner - Dean Newbery & Partners, Corinne Garrett, Director - UHY Haines Norton and David Papa, Partner Risk & Assurance Services - Bentleys SA then joined forces on a panel to discuss the Model Financial Statements and fielded questions from the audience regarding Council audits.

Pat McCarthy, Director - Genesis Accounting, discussed the new SA GST Class Ruling on fees and charges. The Ruling was analysed with a discussion on the categories of fees covered by the first Ruling.

Clive Hempel, Director of Corporate and Financial Services - Mid Murray Council, then gave his personal insights into the trials and tribulations regarding Internal Controls and LTFPs.

Corinne Garrett, Director - UHY Haines Norton and Michael Koukourou, Managing Director - Control Z, discussed who have access to your information systems, cyber security and emerging risks and how you can feel safe again.

David Francis, Partner Audit & Assurance - Bentleys SA/NT, gave a synopsis of two corporate frauds (Theranos and Bernie Madoff) and how they were allowed to occur as well as lessons that can be learned from them.

Day 1 concluded with pre-dinner drinks and dinner which was highlighted by the keynote speaker and entertainer, Henry Olonga.

Day two was opened again by our President Kate George giving members an introductory welcome & overview.

Lisa Teburea, Executive Director Public Affairs - Local Government Association of SA, then discussed opportunities for sensible and effective changes that will benefit communities as well as the state of reform in South Australia.

John Morgan, Executive Manager Finance & Business Services - Construction Industry Training Board, provided background on the Construction Industry Training Board, how levies are collected and how levies are paid back to the building and construction industry.

Davin Lambert, Senior Manager Treasury - Local Government Finance Authority of South Australia discussed contemporary treasury management and how various approaches can be implemented by the South Australian Local Government sector.

Suzanne Hopkins, Strategic Risk Client Advisory Services - Pacific, Jardine Lloyd Thompson Pty Ltd discussed the ‘Pub Test’ and how to better understand community expectations and moral values of the “ordinary” Australian without a loosely veiled test of the average person.

Following lunch, the keynote presentation was given by Paul Barry, one of Australia’s top journalists, who has spent his career exposing white-collar criminals. The future of the Australian media was also considered.

To conclude Day 2, James Arnold, Associate Director, Corporate Interest Rates, Institutional Banking and Markets - Commonwealth Bank of Australia, presented an economic update by providing a global and domestic snapshot of the financial markets.

The SALGFMG would like to sincerely thank all of our sponsors for their continued support of the conferences as, once again, it enabled a program full of high calibre speakers. Members can access their presentations on the SALGFMG website (login required for access).

The next Conference will be held on Friday 15th May 2020 at the Adelaide Convention Centre. Please keep an eye on our website for more information.

Do you have your leave liability right? 

uhy

Council employees tend to have large levels of untaken leave. Whether this is because everyone works so hard in local government, everyone is indispensable or no-one has a life outside of work – you still want to know that in case you want to take that leave, it is there and that you know how much you have.

It is quite a sizable liability for the council and so important to get right.

We rely on the knowledge of our payroll officers and our software to keep track of the leave system. But is everything working the way it should be?

We have done a number of reviews of payroll and leave systems and we are finding the following issues coming up;

  • Payroll staff that are not fully aware of:
    • Awards
    • Enterprise Bargaining Agreements
    • Fair Work legislation
    • Long Service Leave legislation
  • Payroll software that has trouble applying the correct leave accruals for part-time and casual staff

Some of the typical pitfalls are:

  • Sick leave that is accrued on the employee’s anniversary date for the year ahead:
    • Easy to set up for full time staff – if your software can do that
    • Harder for part time staff that have varying hours
  • The Long Service Leave Act requiring a 3 year averaging of leave liability:
    • OK for full time staff
    • More difficult for staff that are full time and move to part time.
    • Or staff that were part time and move to full time
  • The wrong leave balances on payslips

Employees don’t always understand these issues either and might have different expectations of their leave balances.

So how do you avoid these issues?

  • Is the payroll officer that does the transactional work the best person to be trying to interpret the Awards, EBs and legislation? Would the HR department be better placed to undertake this work (if you have a HR department)? Or someone more senior setting up the leave parameters for the payroll officer to do the payroll processing?
  • Ensuring whoever has the role of interpreting and applying leave rules, has adequate and ongoing training.
  • Regularly review the software system’s ‘rules’ and calculation of leave accruals to ensure that it is being done correctly – especially for part time staff.
  • Regularly reviewing leave balances to ensure that accrual has occurred correctly, particularly for part time staff.
  • Regularly review the balances showing on the payslips are correct.
  • Ensuring that any issues are fixed as early as possible. Having to go back years to fix issues and recalculate leave is no fun.

We recommend that reviewing your leave balances becomes part of your internal audit program.

UHY Haines Norton
Corinne Garrett

LGFA Financial Market Update – November 2019

lgfa

Global financial markets saw some volatility over the past month as doubts about a US-China trade deal resurfaced.

Positive sentiments around a US-China trade deal faded in November as Chinese negotiators stated that the removal of existing tariffs and not just planned tariffs needed to be part of the deal. The US is poised to impose an additional 15% tariff on around $150 billion USD of Chinese products on 15 December and are yet to comment on this demand.

In the UK, elections scheduled before Christmas are likely to see a close result with the pro Brexit Tory Party currently ahead of the Labour Party, but with neither currently predicted to hold an absolute majority, the UK could once again experience a hung parliament. In Europe, recently elected European Central Bank President, Christine Lagarde, expressed in her maiden speech, that ongoing trade tensions and geopolitical uncertainty are continuing a slowdown in world trade growth which is supported by recent OECD data which showed that EU exports contracted by 1.8% in the third quarter of 2019.

Doubts about the likelihood of a US-China trade created volatility in bond markets over the past month highlighted by the US 10-year bond yield trading between 1.73% – 1.93% over the course of the month, with these bonds currently trading at the low end of this range at 1.77%.

Australian financial markets also experienced some volatility over the past month which was driven by a combination of global and local events. ABS data released in mid-November, showed that the Australian unemployment rate rose from 5.2% to 5.3% in October with 19,000 jobs being lost over the month. CoreLogic data released in early November revealed that the home value index increased 1.7% nationally in October taking the index to a small annual rise of 0.1%. The main drivers of the increase in housing prices has been attributed to the 0.75% of rate cuts delivered since June and a loosening of loan serviceability standards by the bank regulator APRA. The Australian Dollar depreciated around $0.01 USD over the past month and is currently trading at around $0.68 USD.

On 5 November 2019, the RBA left the official cash rate on hold at an all-time low of 0.75%. In the accompanying statement, RBA Governor Lowe stated that they have been easing monetary policy since June in effort to support employment and income growth within the economy. Late in the month, Governor Lowe delivered a speech titled Unconventional Monetary Policy where he spoke about bond buying programs and placed the probable floor on the cash rate of 0.25%. Interest rate futures markets reacted to the dovish tones of this speech and increased the probability of additional rate cuts over the next year.

Five Minutes on the Financial Future with Asset Management Specialist, Ashay Prabhu

lgfa

Financial prudence has become truly critical in South Australia given the mandates around asset management plans, and a growing trend from Auditors to seek robust asset management plans during the end of financial year audit.

This is not new news.

There are over 60 billion dollars in infrastructure under local government custodianship in the state of South Australia, consuming annually at a rate of approximately $1.2 billion dollars per year, which is a staggering $2,283 per minute.

“It's a privilege in South Australia to be witnessing the change as more and more councils move towards more solid long-term financial planning, as opposed to simply chasing a depreciation figure for the Auditors at the end of the year,” Assetic Co-Founder Ashay Prabhu said.

“Auditors are actively looking for 10-year long-term financial planning actually feeding the long-term budgets as opposed to the other way around. This means, from a Strategic Asset Management perspective, councils are in a game-changing position where they need to articulate what the future levels of service might be.”

Councils must transparently answer:

assetic SALGFMG 1

These parameters are the backbone of a strong, robust, community-based, and equitable long-term financial plan. South Australia is now heading in the correct direction by defining sustainability as a function of its asset management performance, as opposed to purely a function of the financial depreciation.

At Assetic we specialise in solving this with councils, enabling them to:

assetic SALGFMG 2

“Done right, this approach means the reality is that the end of financial year audit – which is all around the valuations and the depreciation of the assets – simply falls out of the box,” Ashay continued. “All the metrics around asset lives, asset components, rate of consumption, what it costs in terms of modern equivalent to replace that asset – is all part of the long-term asset management plan.”

This becomes a truly integrated process where long-term financial planning guides the long-term budgets, not the other way around.

“It’s time to move away from long-term budgets guiding the asset management plan, which is literally putting the cart before the horse.

“It is the absolutely critical time for local government finance professionals in South Australian to pick up the game, lift the game, and help its constituents change the game for the future,” concluded Ashay.

Learn more at www.assetic.com or This email address is being protected from spambots. You need JavaScript enabled to view it.

Read more: Focus on Finance - Summer 2019

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PO Box 172 Smithfield SA 5114 
Tel: 0408 801 026 
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