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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 - Summer 2018

Welcome

Welcome to the Summer 2018 Focus on Finance Newsletter, that is sent quarterly to keep 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
Clive Hempel
Anthony Amato
Ray Barnwell
Stephanie Juhas
Craig Mudge
Alex Oulianoff
Elizabeth Williams
Eion Williamson


President's Message

Clive Hempel

Hopefully everyone had an enjoyable break over the Christmas holiday period before returning to work in the new year. Once again we are approaching the annual tasks of reviewing our Long term Financial Plans and the preparation of the new financial year's budget. A new possible challenge for all of us could be the introduction of rate capping if the Liberal Party win the upcoming State Elections. This would then places rate capping with the Local Government Price Index as the basis for the rate cap. This situation would be extremely difficult for Councils that are not currently to a level of financial stainability, hopefully they would be successful in applying for a rate increase above the cap to ensure their existing assets will be renewed on a time basis without weakening their financial position.

As always our working groups are busy on annual duties and various once off projects. We have two groups that are now approaching milestones being the Fees & Charges Group that are soon expecting a class ruling on the GST of fees and charges and the Long Term Financial Plan Group that are currently negotiating with LG Solutions to provide a new Lite version of their LTFP model that will be used by South Australian Councils. I would like to thank all the members of the works groups (which are made up of FMG member and non FMG members) for their valuable time and effort that they give 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.

Prior to Christmas we held our annual two day Workshop and Conference "Smoke and Mirrors" at the International Wine Centre, Adelaide. I would like to thank all our sponsors that allow us to subsidise these events to an affordable level, our many presenters that volunteer their time and effort, and lastly the seminar committee that work in the background with Patricia Coonan our Events Coordinator/Secretariat to deliver consistently superb events.

Ensure that you don't miss out register now to our 16 March 2018 conference "Bulletproof" to be held at the Adelaide Convention Centre, with the keynote speaker Kristen Hansen. To review the program and book your place by clicking here now.

As previously mentioned, I would like to thank the support of our sponsors, as without them 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, in this way they will be able to continue their support of the FMG.

Clive Hempel
President SALGFMG

 

President's Message proudly sponsored by
Local Government Finance Authority

lgfa  


Key Dates

30 September – 31 May
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.

16 March
SALGFMG Conference "Bulletproof", Adelaide Convention Centre.

23 March
SALGFMG Meeting, 9:30 am, Campbelltown City Council.

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

27 April
SALGFMG Meeting, 9:30 am, Barossa Council.

21 May
Last day to lodge Fringe Benefit Tax returns.

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

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

22 June
SALGFMG Meeting, 9:30 am, City of Marion.

30 June
Review of internal controls completed for 2017/18

27 July
SALGFMG Meeting, 11:00 am, District Council of Mount Remarkable (please note later start time).

Early August
Grants Commission returns released for completion and return by end of November.

31 August
SALGFMG breakfast AGM, 7.30am, Adelaide Zoo Sanctuary.

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

31 August
Last date for declaring a general rate.

 

Key Dates proudly sponsored by
LG Solutions

LGsolutions  

Project / Work Group Updates

Seminars Group

Thanks to all the people that attended our "Smoke and Mirrors" annual workshop and conference on the 7 & 8 December at the International Wine Centre. Over the two days there was some great informative sessions and we had participants being dazzled with science during dinner by Deane Hutton.

Registrations are now open to our 16 March 2018 conference "Bulletproof" to be held at the Adelaide Convention Centre, with the keynote speaker Kristen Hansen. Don't hesitate, review the program and book your place now by clicking here now.

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

Long Term Financial Plan Group

Some of our members may be familiar with LG Solutions LTFP model existing model (Max version), which will be used as the basis for developing a Lite model for SA. The functionality of the Lite model will be the same as the Max in terms of reporting at a financial statements level, graphs, scenarios, and budget bids / new projects & initiatives. However, the Lite model will be scaled in terms of the level of information that is input to drive the model. The Max model goes to the account level of the Council's general ledger, whereas the Lite model will be set at the Model Financial Statements level, with some additional lines for areas where cost may be driven differently (e.g. Waste and Energy cost may be broken out from the "Materials, Contracts and Other Expenses"). By scaling the model in this way we are expecting that the model to be simple to use whilst providing appropriate information for a strategic review of a councils long term financial sustainability. The FMG believe that this is an appropriate next step to support the level of sophistication that many Councils are looking for in terms of their long term forecasting, and by partnering with LG Solutions we are able to provide a model that will stay up to date into the future.

We have negotiated tiered pricing from LG Solutions which is approximately half what is currently charged for the Max Version, which we hope makes it an affordable option for Councils to take this next step.

Given this decision the previous LTFP model provided some years ago by the FMG will not be updated for recent changes and will not be developed into the future by the FMG.

Development work will be commencing soon, and we are interested in your input into the project. If you are not on the working group and would like to be involved, please contact Kate George via email.

For further information please contact Kate George 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.

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 has commenced a draft version has been received by the working group and will check for changes to AASBs', the Local Government Act 1999 and other relevant legislative requirements.

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.

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

All of the development work for the creation of the DACO system has now been completed, with the software developers now focussed ironing out any bugs and fixes. It is important that each Council is working to ensure its animal registration data is ready for loading into the new system. A significant amount of resources may need to be dedicated to this task to ensure that details such as addresses, microchip numbers and the like meet the validation requirements of the new system.

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.

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 final newsletter for the calendar year, with our next edition scheduled for Autumn 2018. If you have ideas for future articles or areas of interest please contact me and we can see if we can arrange it to 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. 


Motor Vehicle Associate Leases

An associate lease is a lease between council and an associate of an employee in relation to the provision of a motor vehicle that will be used by that employee and the associate. The associate will typically be the wife/partner of the employee or it could be a family trust. The lease payments to the associate are part of a salary package of the employee.

You would know about novated leases but may not have heard about associate leases. This may be because the traditional packaged leasing companies that promote novated leases don't make much money out of associate leases and thus do not promote them.

Normally only the lease payments are packaged and the lease is a 'wet lease', the vehicle is owned by the associate and all the running costs of the vehicle are included in the fixed monthly lease payment which is paid into a bank account of the associate. There is no residual value and no adjustments at the end of the lease to divvy up expected running costs compared to actual. The associate wears the depreciation risk, normal and abnormal running and repair costs.

The associate should obtain an ABN but does not need to be registered for GST. They may choose to be registered if they wish.

The big news about associate leases is the potential ability to double dip. The running costs and depreciation of the vehicle are tax deductible to the associate and the running costs also reduce the taxable value of the fringe benefit so there is a double whammy from the running costs. The receipt of the lease payments is assessable income in the hands of the associate. However, the double dip doesn't happen if the associate's other income plus the lease payments is less than the tax threshold ($18,200); the associate does not save any tax from the depreciation and running costs as there is no tax to pay.

Even if the associate does not obtain a tax advantage from the running costs and depreciation tax is still saved by the effective diversion of income from the employee to the associate at little or no FBT cost. For example, if the taxable value of the vehicle using the statutory method was $8,000 and the GST inclusive running costs were $8,000 there would be no FBT payable, the running costs are regarded as a recipients payment and go to reduce the taxable value of the car fringe benefit. The associate is a recipient as the associate is one of the recipients of the fringe benefit. This is because the car is made available for use by the employee and the associate.

Associate leases are not restricted by the policies of fleet managers or ATO policy on minimum residual values. Buyers can purchase new or used vehicles of any age, either unencumbered or subject to finance. However the associate cannot make an abnormally high profit on the arrangement; the monthly lease fee should be commercially realistic compared to the value of the car.

Vehicles can be passenger cars licensed to carry fewer than nine occupants, and goods carrying vehicles rated at less than a one-tonne payload.

The associate needs to substantiate the running costs to council in order for council to be able to justify its claim for a reduction in taxable value. This should be in the form of a copy of the receipts or invoices for running costs and to be cautious we would recommend substantiation of fuel and oil costs. A declaration should also be provided by the associate regarding the vehicle expenses incurred and this declaration must be obtained by the due date for lodgement of the FBT return.

The FBT Assessment Act also includes anti avoidance provisions and we have obtained an ATO ruling that confirms the anti avoidance rules do not apply to an associate lease arrangement structured as described above.

genesisPat McCarthy
Genesis Accounting


Conference Preview "Bulletproof" Friday 16 March 2018

Bulletproof smallThe March Conference will be held at the Adelaide Convention Centre, North Terrace, Adelaide on Friday 16 March 2018. The key note speaker will be Kristen Hansen the founder of EnHansen Performance providing managers with strategies to build leadership, resilience, adaptability, creativity, coaching, self-management and engagement skills.

Listed below are the main sessions of the conference.

What Every Finance Professional Needs to Know

Presenter: Mayor Lorraine Rosenberg, President, Local Government Association of SA

As Mayor of South Australia's largest Council, and President of the LGA of SA, Ms Rosenberg will present on the importance of clearly and simply communicating financial information to Council and community members. Her presentation will also cover current issues for the sector including rate capping, financial sustainability, transparency and accountability.

AASB Update and New Accounting Standards

Presenter: Justine Keenan, Project Manager, Australian Accounting Standards Board

The recent release of two new accounting standards bring big changes to not-for-profit accounting. The most controversial area of not-for-profit (NFP) accounting for many years has been the requirements relating to grant accounting, AASB 1058 Income for not for profit entities aims to bring financial reporting of NFP's closer to an economic reality. The other is AASB 16 Leases, which will bring most leases onto the balance sheet. The new standard considers Peppercorn arrangements which many Councils have. This session will provide an overview of the changes and the likely impact Councils need to be aware of in preparing their General Purpose Financial Statements. This session will also discuss revenue licences issued by public sector licensors, the Australian Reporting Framework, the Conceptual Framework and Fair Value Measurement.

What's the State of our Economy?

Presenter: Dean Pearson, Head of Industry Analysis, National Australia Bank

This session will discuss the National Australia Bank's outlook for the economy, markets and the Local Government Sector with a focus on South Australia.

The Value of Independent Audit Committees

Presenter: Greg Connor, Chairperson, City of Marion Audit Committee

This session will provide Greg's insights and best practice on the value of having an independent Chairperson on a Council Audit Committee. Does having an independent Chairperson increase effectiveness and how is the Committee perceived by having an independent Chairperson? Hear Greg's perspective on the challenges of an outsider looking into Local Government governance and what an independent Chairperson can do to enhance the value and strategic approach to a Council Audit Committee. The session will also discuss 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.

Has the ATO Flipped or Flopped on Exemptions for Vehicles?

Presenter: Kevin Smith, B.Comm (Accounting); LLM (Tax Law); LLM (Commercial Law), Australian Tax College

The ATO recently released two documents outlining their new approach to the treatment of private travel in the context of FBT. This session will introduce you to the key changes flowing from the new guidelines and illustrate how your approach in providing car fringe benefits might need to change. Specially, you will be introduced to brand new terms and concepts requiring your urgent attention.

Keynote Presenter: Neuroscience of Resilience

Presenter: Kristen Hansen, Founder EnHansen Performance

The Resilience keynote will offer an overview of how the brain works, peak mental performance and insights into problem solving. It will address how to regulate stress and emotions and will discuss the neuroscience of wellness. Additionally, the programme will assist participants to gain insights through neuroscience providing them with strategies to renew mental resources throughout the day, while managing stress, motivation levels and information overloaded environments. Participants will also learn how to overcome issues facing today's workforce and how to maintain peak performance at personal, team and organisational levels.

Getting to Know LGITSA, IT Strategy and AMPs, Cryptocurrency and Blockchain

Presenters: Chris James, President, LGITSA Karin Mahoney, Vice-President LGITSA Daniel Kiley, Senior Associate, HWL Ebsworth

Over the last two and a half years LGITSA has established itself as an independently funded group of Local Government IT and IM practitioners committed to adding value to Councils and communities across the state. During this presentation Chris will describe LGITSA and its' involvement in key initiatives such as DACO, Infobase and cyber security. Karin will address the crossover between IT strategy, asset management planning and finance. Daniel will provide a brief overview of cryptocurrencies and blockchain.

For further information and to register please click here.


Excellent Asset Management

Excellent asset management needs excellence in governance. Excellence in governance means that boards, councils and senior management have a deep understanding that:

  • Assets exist to provide services.
  • Service standards are negotiated with customers.
  • Assets that are simple to design, produce and maintain, are what is required to enhance the sustainability of service provision.
  • Asset management needs to be embedded in organisations in the same way that finance, human resources and IT services are.
  • An effective maintenance program is critical to ensuring that the organisation's capabilities to deliver services is sustainable.

How will this be achieved? Two ways - getting the right people onto boards, councils and into senior management and through education and the raising of awareness.

Getting the right people will require a combination of careful specification of the requirements and careful recruiting. This is more difficult to achieve at the political level but raising awareness in the broad community on how politicians can be effective in delivering services is a potential way forward.

Key players and activities in education and raising awareness will be provided by:

  • Peer to peer pressure - those who understand should help others to the same understanding.
  • Excellent asset managers contributing to professional bodies, conferences, seminars and educational institutions.
  • Those in governance seeking out best practice in asset management.

Why is this important? We have moved through two distinct phases in asset management. The first phase was catalysed by the introduction of accrual accounting in the mid-1990s. This saw a focus on data gathering about the assets that were owned or controlled by councils. To comply with the requirement to record all of the assets in the balance sheet it was necessary to answer a few basic questions:

  • What assets did council own? (Record of ownership)
  • Where were the assets located? (Physical location)
  • How old were they? (Date of acquisition or construction)
  • How long did they live? (Useful life, depreciation)
  • How would we measure them? (Physical attributes, manageable segments)
  • How would we record the details? (Asset register - engineering or accounting?)
  • What were they worth? (Valuation, revaluation)

The first phase involved a lot of effort and once the assets were recorded in the balance sheet there came an understanding that local government was asset intensive and that all the assets that local government had needed to be managed and, eventually, replaced. This led neatly into the second phase - a more strategic focus on asset management. This phase is characterised by:

  • Asset management plans;
  • Risk management plans;
  • Long-term financial plans;
  • Strategic asset management policies.

But we are now entering a third phase, perhaps the most important phase yet. The challenge now is to make better decisions about assets and their life cycle. We have now reached the stage where the past is not a good guide for the future. Making a decision to replace a coal-fired power station with another coal-fired power station is now untenable. For local government, which has a very diverse range of assets, there are many challenges ahead. Think about these questions, as a sample:

  • What will be the impact of electric cars on local government roads?
  • What will be the impact of water-free toilets on CWMS and recycled water?
  • What is/will be the impact of higher density development?

The answer to those questions, and many others, mean that different decisions will need to be made about infrastructure assets than those made in the past.

Excellence in asset management will be needed to ensure the sustainability of services for citizens now and into the future. The five dot points at the beginning of this article can be enhanced with two more:

  • Improved environmental scanning to both assess the impact of and to take advantage of emerging technologies.
  • Acquiring assets that are capable of multiple uses or of being repurposed in the future.

Penny Burns has spent a career in strategic asset management, writing a great newsletter and providing advice to governments around the world. Penny has now established a non-profit organisation called Talking Infrastructure and it has an insightful blog on emerging issues for infrastructure asset decision making. The blog is available at http://talkinginfrastructure.com/ . Visit the website. It will be worth your time!

David Hope, Principal Consultant,
Skilmar Systems Pty Ltd


"Smoke & Mirrors" - Conference Review

A successful 'Smoke and Mirrors' SALGFMG Conference was held on Thursday 7 and Friday 8 December 2017 at the National Wine Centre, Corner of Botanic and Hackney Road, Adelaide. The Conference committee had a wonderful line up of speakers who covered various topics which were both enlightening and entertaining.

The Financial Management Group would like to thank our sponsors for their continued support of the conferences as they have enabled a program with high calibre speakers. A number of speakers have been generous in allowing their presentation to be available to our members. Click Here (Membership login to the website is first required for the link to function).

DAY 1 - Workshop

Model Financial Statements
Review of model financial statements 2017, in preparation for the update for June 2018.
David Maxwell, Coalface Software Solutions (presentation on website)

An Auditor's Perspective of the 2016/17 Financial Statements
Further update and "hot topics" covered from the SA Local Government Auditors Group, following 2016/17 round of audits.
Tim Muhlhausler, Galpins

Panel Session - Model Financial Statements
Session to provide feedback and raise questions regarding the Model Financial Statements and Councils Audit.
Tim Muhlhausler, Galpins (facilitator)
David Papa, Bentlys SA
Andrew Tickle, BDO
Dario Nazzari, UHY Hains Norton
Steven Russo, PKF Kennedy
David Maxwell, Coalface Software Solutions

Dogs and Casts Online (DACO) Update
Discussion on progress and process of dog and cat registrations, having a centralised online system that all South Australian Councils will utilise.
Steph Jeuken, DACO Project Manager (presentation on website)

Elections - Caretaker Mode
Covering the legislative requirements for the upcoming Local Government elections in November 2018.
Chris Alexandrides, Norman Waterhouse
Ganesh Krishnan, Norman Waterhouse (presentation on website)

Internal Financial Controls and GST Review on Fees and Charges
The session focused on two significant items: GST Review on Fees and Charges project - update as to where this project was at; and Better Practice Model for Internal Controls.
Annette Martin, City of Charles Sturt (presentation on website)
Tim Muhlhausler, Galpins (presentation on website)
Stephen Nisbet, BDO

Collaborating for Effect
Sharing achievements and work on how Council's can collaborate for effect and learn from each other.
Erika Comrie, Council Solutions

DINNER

To cap the end of the first day, events started with pre-dinner drinks. Dinner was followed with presentation of Predicting the Future from futurist Deane Hutton. Evenings events capped off with a DJ.

DAY 2 - Conference

Land Services Commercialisation and Revaluation Initiative
Session provided overview of Land Services Commercialisation project in South Australia.
Delfina Lanzilli, State Valuation Office

Explorer Mindset: A New Approach to Innovation, Engagement and Organisational Performance
Thought provoking session that highlighted benefits and findings of utilising an explorer mindset, as opposed to a more traditional soldier mindset.
Anna Lee, Leed Consulting (presentation on website)

Platinum Sponsor - LGFA
Annual economic update based on world events.
Davin Lambert, LGFA (presentation on website)

Rate Capping: in Victoria - A Regulator's Perspective
Session covered rate-capping framework in Victoria, identifying key issues and challenges. Provision of likely impacts on the Councils based on first two years of this regime.
Andrew Chow, Essential Services Commission of Victoria (presentation on website)

Financial Management and Sustainability Challenges in the SA Local Government Sector
Financial management and sustainability challenges facing Local Government focused on an exploration of the Metropolitan Vs Regional environments.
Michael Sedgman, Rural City of Murray Bridge (presentation on website)

Keynote Presenter: Aftershock
Practical session, with audience engagement focusing on behaviour. As every behaviour, from each individual, sends a ripple effect through an organisation that affects its culture.
Dr Adam Fraser (presentation on website)

Introduction to the Psychology of Dishonesty
Thought provoking session that examines how people can engage in dishonest behaviour without seeing themselves as unethical or damaging a positive sense of self.
Adam Harrison, Independent Commissioner Against Corruption

Audience
Members of the audience.

  Delfina Lanzilli
Delfina Lanzilli.
Anna Lee
Anna Lee.

  Dr Adam Fraser
Dr Adam Fraser.
Dr Adam Fraser 2
Dr Adam Fraser.
  Panel Session
Panel Session.

Demystifying FBT Private Use of Vehicles

31st March is coming! - the end of the FBT year. The ATO has released a DRAFT Practical Compliance Guideline in relation to private use of vehicles. These guidelines will assist you to prepare a compliant FBT return. Once the guidelines are finalised they will relate to your returns for the year ending on 31st March 2018. You can see the Draft Practical Compliance Guideline at; https://www.ato.gov.au/law/view/document?DocID=COG/PCG201714/NAT/ATO/00001 

One of the most confusing parts of FBT is to work out if a vehicle is exempt from FBT. This only applies to some vehicles as shown in the diagram below. There are more examples in the Draft Guideline.

Once the guidelines are updated we will update members via the SALGFMG.

As always, we are here to help you if you need further clarification or assistance in drafting policies, calculating FBT private kilometres or completing your FBT return.

cartype

uhyCorinne Garrett
UHY Haines Norton


How does your internal controls program stack up?

A lot has happened in the world of internal financial controls in recent years - the introduction of an external audit opinion, development of the better practice model and implementation of CSA systems such as ControlTrack. And now that the initial teething period has passed, and with a revitalised Better Practice Model officially in use and upgraded ControlTrack tool available, we've been thinking - how has the approach to internal controls evolved over the years, and what does a best practice framework look like?

We decided the best way to answer this question was to hop in the car and undertake some research, meet with some Councils and find out how they manage their Internal Controls Program (ICP).

We met with 13 Councils across metro and regional areas and discussed 4 main themes:

  • Evolution of internal controls across the Council
  • Internal controls ownership and responsibility
  • Internal controls testing and validation
  • Council effort applied to internal controls.

The table below summarises the key approaches taken by Councils:

Galpins key

These results highlight the following:

  • There is no 'one-size fits all' approach to ICP
  • The Finance function has primary responsibility for the ICP in most councils
  • Finance teams typically undertake the majority of work in assessing controls, with varying degrees of input from other areas of the councils
  • Risk assessments are not undertaken in a consistent way, and there is no clear most popular approach to risk assessment
  • More than half the councils surveyed are still assessing all or the majority of controls from the BPM.

Additionally, we have drawn the following insights from our research which we feel are worth sharing:

  • All Councils interviewed commented on the positive value being achieved from the ICP and control self-assessment process.
  • Councils with a risk-based approach to their ICP were able to reduce the number of controls included in their control self-assessments without compromising their internal controls environment, or the outcome of their internal control audits.
  • Different ICP approaches may be appropriate at different maturity stages of the Council. The approach taken should be reviewed periodically to ensure it is meeting the Council's needs, and is conducted as efficiently and effectively as possible.
  • Where the ICP was disseminated across the council and supported by training, greater levels of understanding and stakeholder buy-in for the ICP were achieved.
  • The level of resourcing applied to the ICP was not seen as excessive by most councils, however there was often a desire for the resources to be better targeted especially during the conduct of control self-assessments.
  • Challenges faced by councils typically included resistance to change and lack of acceptance for the process, and prioritising the completion of control assessments.

Some key reflections that councils should consider are:

  • Using a risk based approach
    • Undertaking a risk based approach to the ICP leads to a more tailored and targeted ICP without increasing the risk of an adverse audit opinion over internal controls
    • Tailoring the assessment process reduces the burden and effort required by council staff performing assessments whilst still achieving appropriate comfort over the effectiveness of the council's internal control environment
    • Better targeting of efforts is likely to improve buy-in from stakeholders performing the reviews, as their time spent on reviews is seen as more relevant and productive
  • Involving staff from across Council functions
    • Disseminating the ICP to more staff across the Council and supporting this with training leads to greater understanding and engagement in the process.

If you would like to talk to someone about your Council's control program, and how these insights can help you maximise the value of your program, please do not hesitate to give Pascal (Ph. 0401 786 031) or Tim ( Ph. 0430 812 662) from Galpins a call.

galpins newPascal and Tim 
Galpins


LGFA Financial Markets Update

Financial markets were relatively stable over the past month with the only significant movement of note being the rise of long-term bond yields around the globe.

Strong economic data out of the US drove the direction of global financial markets over the past month. The US unemployment rate for December held steady at 4.1% and later in the month, year on year US inflation remained steady at 2.1%. This data along with general optimism around US tax reform has seen strong confidence readings from individuals and corporations alike.

Most market commentators are now predicting further rate hikes in the US this calendar year. Due to this more hawkish view and general optimism around the US economy, 10-year US Treasury Bond yields moved 0.3% higher in January. In Australia, 10-year Treasury Bonds moved 0.1% higher over the past month and we are now in an unusual position where US & Australian 10-year bond rates are almost identical.

US 10-year bonds v Australian 10-year bonds:

LGFAmarket1

Recent strong economic data around the globe has seen many Central Banks signal their intention to divest financial assets accumulated since the GFC. The sale of these assets could force long term yields higher, however, recent history has shown us that this can be a rocky path.

Australian economic data released in January was mixed. Early in the month the Australian unemployment rate unexpectedly rose to 5.5% (from 5.4%) however further analysis suggested seasonal adjusting by the ABS was the main reason for the rise. Late in the month, consumer price index data saw prices rise 0.6% over the December quarter, taking the year on year figure up to 1.9% (from 1.8%), however this figure was below market expectations. In January, the Australian Dollar broke through the $0.80 USD barrier for the first time since September 2017 and is still currently trading at around $0.80 USD.

The Reserve Bank (RBA) did not meet in January, as per past practice. Most economists and commentators believe the RBA will commence its first tightening cycle since 2010, later this year. This view is reflected in current futures market pricing.

Implied RBA Cash rate as at 31/01/2018:

LGFAmarket2

lgfa 

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 2016

Welcome

Welcome to the Summer 2016 Focus on Finance eNewsletter, that is sent quarterly to keep 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
Clive Hempel
Anthony Amato
Ray Barnwell
Stephanie Juhas
Craig Mudge
Ben Rasigatale
Elizabeth Williams
Eion Williamson


President's Message

SimonWelcome to our latest e-newsletter and first for 2016. Can you believe we are over half way through the financial year? For most of us, preparation for the 2016/2017 budget is well underway.

Since my last President’s Message, we have held our December Workshop and Conference, In the Trenches, at the National Wine Centre. Across the two days we had over 220 attendees, which was great to see. There was a range of relevant topics presented covering the Model Financial Statements, internal controls, budget processes, corporate reporting and continuous improvement, as well as engaging presentations from the Mayor of Ipswich, Paul Pisasale and Victoria Cross recipient, Mark Donaldson VC.

In regards to the grants that the FMG have received through the LGA’s Research and Development Scheme, tenders are currently being considered for the review of the Better Practice Model for Internal Financial Controls and the treatment of GST on Local Government Fees and Charges. The working groups are looking forward to seeing the positive outcomes that these projects will provide to our industry once completed.

Since our last e-newsletter, the FMG’s work groups have continued to work on a variety of topics, including:

  • Feedback provided to the LGA on Information Paper 17 ‘Depreciation and Related Issues’
  • Completion of review stage of the existing internal financial controls. These along with the update to the front section of the Better Practice Model will be presented for consultation in the coming months, so make sure you keep an eye out for that. It is expected that the revised framework and controls will streamline and improve the process for all users
  • Assessment of survey responses on the Long Term Financial Plan.

Our March conference is just around the corner, with our program now locked in. The Adelaide Convention Centre will play host to this event on 11 March 2016. Our keynote speaker is Australia’s first ever Winter Olympic gold medallist, Stephen Bradbury. We will also hear from the new LGA CEO, Matt Pinnegar, as well as other interesting topics. It should be a great event, so book your spot today!

The Group is always discussing and involved in a range of topics relevant to our industry. To keep up to date with what we are involved in, please take the time to read the minutes from our monthly Executive Committee meetings. Another great option is to attend one of our meetings and listen to the conversations first hand. It is a great way to meet others performing similar roles to you and build up your own network. To see where these meetings are being held, please click here. Hopefully we will see you there.

Until next time,

Simon Zbierski
President SALGFMG

 

President's Message proudly sponsored by
Local Government Finance Authority

lgfa  


Key Dates

30 September – 31 May
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 – 15 March
A 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. This must also include revised forecasts for the relevant financial year of the Council’s operating surplus ratio, net financial liabilities ratio and the 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.

26 February
SALGFMG Meeting, 9.30 am, City of Playford.

11 March
SALGFMG Conference, “Silver Linings”, Adelaide Convention Centre. Please click here to view the Program and to register for this event.

14 March
Adelaide Cup Public Holiday.

18 March
SALGFMG Meeting, 9.30 am, Coorong District Council.

25 March
Good Friday.

27 March
Easter Sunday.

28 March
Easter Monday.

31 March
End of Fringe Benefits Tax Year.

25 April
Anzac Day.

29 April
SALGFMG Meeting, 9.30 am, University of Adelaide.

21 May
Fringe Benefits Tax Lodgement Due.

27 May
SALGFMG Meeting, 9.30 am, City of Charles Sturt.

31 May
Ensure current Fees and Charges have been reviewed in preparation for ensuing financial year (best practice).

Ensure that External Auditors have conducted (or are booked in for) their interim visit (best practice).

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

  • except in a case involving extraordinary administrative difficulty must be adopted prior to 31 August for the financial year.
  • annual business plan must be adopted before budget.
  • Council must review its long term financial plan and any other elements of its strategic management plans prescribed by regulation as soon as practicable after adopting the Council’s annual business plan for a particular financial year.

Earliest date for a subsidiary to adopt a budget for the ensuing financial year.

Earliest date for declaration of a general rate – provided it is after adoption of the annual business plan and budget, noting:

  • except in a case involving extraordinary administrative difficulty must be adopted prior to 31 August for the financial year.

Earliest date which a separate rate may be declared (unless it has previously been declared for more than one year) for the ensuing financial year.

13 June
Queen’s Birthday Public Holiday.

24 June
SALGFMG Meeting, 9.30 am, Campbelltown City Council.

30 June
End of Financial Year. 

 

Key Dates proudly sponsored by
Fuji Xerox

fujixerox  

Project / Working Groups Update

Long Term Financial Plan Group

The Long Term Financial Plan Subcommittee was established to focus on the Long Term Financial Plan model being used by Councils which was developed several years ago. A survey was completed by members late last year to evaluate current practices and requirements. The survey is currently being used to inform the group on the requirements and design of either upgrading our current model or re-scoping for a new model.

Any new members to the group are welcome, please contact Anna-Lucia Draper This email address is being protected from spambots. You need JavaScript enabled to view it.

Seminars Group

Following the December 2015 workshop and conference, the seminar working group has reviewed the feedback received to improve future events. The program for the upcoming conference, Silver Linings, at the Adelaide Convention Centre on 11 March 2016 has been finalised. The working group will now be focussing on the August AGM (Adelaide Zoo) and 2 day workshop and conference (Adelaide Oval).

Should any members have any topics they would like to hear at future events, please email your suggestions to Simon Zbierski This email address is being protected from spambots. You need JavaScript enabled to view it..

Internal Financial Controls Group

The working group’s objective is to complete a review of the Better Practice Model – Financial Internal Controls for S.A. Councils (BPM). The group has now reviewed all financial risks and associated core and additional controls with the focus on identifying the critical controls to mitigate the risks identified. This process, using the learnings from council’s going through the internal controls review has largely resulted in removing duplicate controls and changes to ensure consistent wording to avoid misunderstandings in interpretation.

The results of the review are now being updated into a revision of the BPM document. With the support from the LGA Research and Development scheme a tender has been called for the rewrite of the introduction in the BPM. Ensuring that it will provide a clear blueprint or roadmap for a council and your auditor in determining the steps required in developing a robust internal control environment. The next step is to evaluate the tenders and once the revision is completed a period of consultation will be undertaken with all stakeholders of the new BPM document. For further information please contact Annette Martin This email address is being protected from spambots. You need JavaScript enabled to view it.

Asset Management Group

The group is currently working through issues surrounding the use of residual values by some Councils on infrastructure assets and the requirements to cease this approach following the confirmed interpretation of residual value being applicable to the amount obtainable from the sale of assets at the end of its life. This change requires Council’s to componentise their infrastructure assets to isolate short and long-lived components and to depreciate accordingly.

Feedback from the group is currently being sought following a session with three Council’s (Barossa, Campbelltown and Adelaide), Finance Managers and Engineers on how the changes impact roads, including depreciation and useful life. The desired outcome is to arrive at a principles based approach Councils can apply on their roads and other infrastructure assets that result in appropriate depreciation. More on this topic to come.

Future topics:
Issue – Some buildings are valued at zero as the land and improvements value is only equal to the land value.
The group will develop a Paper that considers how specialised buildings should be treated for revaluation purposes and to address the above issue.

Should any member have a specific topic they want the Asset Management Group to discuss, please email Pep Piscioneri This email address is being protected from spambots. You need JavaScript enabled to view it.

Newsletter / Website Group

The newsletter group is once again aiming to have three editions of the newsletter this financial year. Several years ago each member was send an invitation to complete an on-line survey, it is planned shortly to send another survey, and your participation would be appreciated to enable us to enhance our organisation. If you have any suggestions to improve the newsletter or website please email Clive Hempel with your suggestions This email address is being protected from spambots. You need JavaScript enabled to view it.

FINANCIAL MANAGEMENT FRAMEWORK

The group’s regular activity each year is to review the Model Financial Statements, the 2016 review is already underway with a meeting in February to discuss the current draft document. Recommendations are presented to the FMG Executive Committee, that then are discussed and is used to provide feedback to the LGA contracted preparer of the Model Financial Statements.

The Group also assist in the review of the LGA information papers, the most recent review was for the Information Paper No. 17 Depreciation and Related Issues. The Group also provide feedback to the AASB and the LGA for LG application of Australian Accounting Standards and relevant legislation changes and guidance papers as/when required, the most recent for accounting standard AASB13 - Fair Value Measure. For further information please contact Mark Lague This email address is being protected from spambots. You need JavaScript enabled to view it. 

COSTING PRINCIPALS

The group provides guidance to Council staff engaged in the preparation and presentation of financial information. The principal reason for gathering costing information is to make decisions about the functions, activities and services provided by Council.

This group allows Council with similar services to share information and costing methodologies, to ensure a consistent approach in preparing and presenting Financial Information. A paper Costing Principals for Local Government has been published by the LGA and is available on our website. For further information please contact Marcus Smith This email address is being protected from spambots. You need JavaScript enabled to view it. 

 

Project / Working Groups proudly sponsored by
LG Solutions

LGsolutions  

LGFA Market Update

Global financial markets haven’t had a great start to the year with the Chinese equity market falling by around 24% and the Australian equity market falling by around 6%. Economic data released in January showed that the Chinese economy grew by 6.9% last year, which was slower than most economists expected and its lowest level in over 25 years.

On the 2nd of February the Reserve Bank of Australia left the official cash rate on hold at 2%. This non-event was widely anticipated by Financial Markets. The accompanying statement gives the RBA scope to cut rates but many feel they are reluctant to cut while the job market is improving, even if ever so slightly.

The last month of Global volatility made financial markets reassess Australia’s future economic growth prospects and as a result longer term interest rates have fallen between 0.10% - 0.25% depending on the duration of the borrowing.

4 LGFA Graph

So while it is always very hard to pick the bottom of the market, and even considering rates may well go lower in the short to medium term, the LGFA still believe it is an excellent time to borrow on a long term fixed basis.

If you would like to know more please feel free to contact Robert Hardy on 8223 8555 or Davin Lambert on 8223 8543.

lgfa 


Closing The Digital Divide

The digitisation of Australia’s public service: where it is, where it’s going, and where Australians want it to be.

THE DIGITAL REALITY

‘e-Government’ has been a buzz word for years, but there is a gap between Australia’s current e-Government capabilities and many of its global economic peers, particularly within Europe. This has resulted in growing urgency for a comprehensive, secure and cross-functional government presence online – a situation further compounded by deepening fiscal challenges confronting Australia’s public service.

WHAT DOES IT MEAN?

To better understand the scope and implications of Australia’s e-government journey, Fuji Xerox commissioned an independent study through JWS Research in May 2014 to explore the digital consumption habits and expectations of Australians when liaising with all levels of government including a significant sample of existing Centrelink customers.

Known as the Digital Citizens Survey the study culminated in several key insights:

INSIGHT: SAVVY-DIGITAL CITIZENS

With the analogue world increasingly consigned to the history books, there can be little doubt Australians have embraced digitised services. As our collective digital knowledge and confidence continues to mature, so do consumer expectations from providers in both the private and public sector.

A strong and reliable digital presence for businesses is no longer so much a way to succeed, but a way to survive.

INSIGHT: INVESTING IN THE FUTURE

Although it involves an upfront cost, digitisation ultimately has the potential to alleviate fiscal duress. At a time when government agencies in Australia continue to be downsized, merged and – in some cases – abolished altogether in the quest to streamline public services, it is essential to view digitisation as an investment, rather than an expense.

“We need smarter, more effective communication between citizens and the authorities. Digital channels of communication are not just an alternative to traditional paperwork; they should replace them.”
- Danish eGovernment Strategy Paper, 2011-15.

INSIGHT: MORE THAN COST SAVINGS

One of the most obvious benefits of digitised service delivery is economic. But it’s far from the only motivator. Digital technology can facilitate better outcomes and solutions in virtually every facet of our lives. This makes it essential that e-Government is viewed not simply as embracing digital technology, but rather embracing superior work processes that provide easier and more effective interaction between Australians and their government agencies.

INSIGHT: SECURITY & PRIVACY

Information security is a priority for the majority of digital users. The onus is on the government to ensure the technology framework and vendor selection criteria for public services meets (and ideally exceeds) public expectations for privacy and security, and that these standards are communicated to the media and wider community.

INSIGHT: FEAR OF CHANGE

For some, change is exciting. For others, it is more likely to cause considerable anxiety. Fortunately, whilst inertia is a powerful force, it is rarely an immovable one.

The Australian Prime Minister, Malcolm Turnbull, has suggested that perhaps the primary challenge in the transition to a fully integrated and transparent e-Government capability lay not in technology, but in culture, vision and a relentless desire to make things better by creating a dynamic for change.

“The Australia of the future has to be a nation that is agile, that is innovative, that is creative. We can't be defensive, we can't futureproof ourselves. We have to recognise that the disruption that we see driven by technology, the volatility in change is our friend if we are agile and smart enough to take advantage of it.”
- Malcolm Turnbull, Australian Prime Minister, 2015

ONWARD MARCH

The transition to a fully integrated and digitised public service is necessary, but far from simple. The Australian consumer is keen to embrace a digital platform, but failure to meet their expectations with regards to user experience, security and privacy may reduce consumer confidence in the Government’s ability to protect their information. Australian Government agencies should continue to leverage and learn from the experiences of the private sector, and carefully consider their supplier and partner networks in order to swiftly but carefully close the digital gap.

AUTHOR:
Kaija Balodis
Industry Marketing Manager – Government, Education & Health

To find out more about the path to a digital government contact Anna Wilson on (08) 8203 8229 or This email address is being protected from spambots. You need JavaScript enabled to view it..

fujixerox

Condensed white paper: ‘Closing the Digital Divide: Fuji Xerox Australia: August 2014’.


Australian Asset Management: Time For A Change

The National State of the Assets 2015 (NSoA) report presents a solid base of evidence concerning the current state of Australia’s local government assets, and identifies likely challenges for their future management. Its message is clear: Australian asset management needs to significantly improve, and fast, if local, state and federal governments are to meet the needs of a changing nation.

Taking stock of Australia’s assets
The research results, compiled in the NSoA report, are sobering. 11 per cent of Australia’s local government assets – worth approximately $47 billion – are in ‘poor condition’. Moreover, seven per cent are ‘poor functioning’ – meaning they offer insufficient capacity or usefulness.

“Our research confirmed that the way local government assets are currently managed in Australia is unsustainable,” says Mr Roorda.

“As assets in poor condition reach the end of their lives, we’ll need a coherent strategy in place to manage their replacement or retirement. We’ll also need a better way of dealing with underperforming assets.”

The challenge in the data
The NSoA report identified three challenges that all levels of Australian government must address to ensure reliable access to appropriate and well-maintained assets.

First, infrastructure ownership is concentrated in local government, which places a large number of public assets under financial pressure. And while asset management plans cover 80 per cent of local government assets, these plans have been poorly integrated with state and federal initiatives.

Second, infrastructure needs are changing fast. For example, national freight loads are expected to triple over the next 15 years and electric vehicles will be more widely adopted. This will require new road infrastructure and traffic management systems. The coming decades will also see the introduction of new legislation mandating the removal of any obstacles to full community participation for people with a disability or who lack mobility. This means new infrastructure will have to be designed with accessibility in mind.

Third, the report highlighted the importance of regional variation. For example, asset management challenges will be different in a small rural community with timber bridges and flooding hazards than in a larger, metropolitan community in a temperate area with poor public transport services. Any long-term, national plans will need to account for such differences in population, climate and topography.

The solution in the data
Though the NSoA report contains worrying data on the state of Australia’s assets, it also identifies several steps local government bodies can take to improve long-term asset management.

For example, it implicitly suggests a hierarchy of priorities, with the 7 percent of assets characterised by ‘poor function’ and ‘poor condition’ most urgently in need of maintenance or upgrade. These assets alone are worth some $31 billion.

The report also acknowledges the potential for Infrastructure Australia (IA), a federal body established in 2008 to coordinate the funding and completion of infrastructure projects, to bring some much-needed coherence to the nation’s asset management processes. By improving its distribution formulae based on new evidence, IA can ensure that project funding accounts for the regional variations described above.

Finally, the NSoA report contains an outline of a national infrastructure strategy that will ensure the short- and long-term health of Australia’s assets.

“The three levels of government need to work together with the private sector to develop a consistent approach to asset management,” says Mr Roorda. “They must get better at collecting the data they’ll need to monitor their progress towards the implementation of an improved asset management strategy.”

Where to from here?
Local governments must act now to improve their data and systems, to prepare for integration with a national infrastructure strategy supported by a strong evidence base. With technology having allowed us to create that evidence-base, local governments can begin their journey towards the adoption of a common platform that allows them to collaborate on the development of improved asset management systems and processes.

“Decisions can only be as good as the evidence supporting them,” says Mr Roorda. “That’s why our report is so valuable – it provides the starting point that asset managers need to make well-informed decisions about the future of Australian infrastructure. Now it remains for them to act decisively, and act soon.”

Contact us on (08) 8373 8500 to find out more about how TechnologyOne can help you act now and improve your data and systems, in preparation for a national infrastructure strategy.

Please visit http://alga.asn.au/site/misc/alga/downloads/publications/ALGA_State_Of_The_Assets_Report_2015.pdf to read the National State of the Assets 2015 report.

technologyone 


"In The Trenches" - Conference Review

The very successful ‘In the Trenches' SALGFMG Workshop and Conference was held on Thursday 3 and Friday 4 December 2015 with great attendance at the National Wine Centre, Adelaide. The Conference committee outdid themselves again with a great line up of speakers who covered various topics which were both enlightening and entertaining.

The Financial Management Group would like to thank our sponsors for their continued support of the conferences as they have enabled us to have such a high calibre speakers. A number of speakers have been generous in allowing their presentation to be available to our members. Click Here (Membership login to the website is required for the link to function).

Dean Pearson

Mayor Paul Pisasale

Mark Donaldson VC

DAY 1 - Workshop

Model Financial Statements 2016
Review of model financial statements 2015, in preparation for the update for June 2016.
David Maxwell, Coalface Software Solutions (presentation on website)

An Auditor’s Perspective of the 2014/15 Financial Statements
Further feedback and “hot topics” were covered from the SA Local Government Auditor's Group, following 2014/15 round of audits.
Tim Muhlhausler, Partner, Galpins

Q & A – Model Financial Statements
Open floor to raise questions on topical issues regarding Model Financial Statements and Council’s Audit.
Tim Muhlhausler, Partner, Galpins
David Maxwell, Coalface Software Solutions

Internal Controls Implementation – A Regional and Metro Perspective
Shared learnings from Internal Controls Implementation (Better Practice Model).
Mark Lague, Manager Financial Services, The Barossa Council
Gary Long, Finance Manager, City of Burnside (presentation on website)

Automating the Budget Bid Process with PPM
Project and Portfolio Management (PPM) is an approach to centralising processes, methodologies and technologies to manage projects.
Aly McGregor, Project Manager Information Services, City of Charles Sturt
Luke Fleming, Industry Manager – Project Intensive Industries, Technology One (presentation on website)

MAGIQ Performance – Delivering a Single Corporate Reporting Tool Across the Organisation
Showcase of MAGIQ Software’s single corporate reporting tool across the organisation.
John Dimitrieski, Account Manager, MAGIQ Software Pty Ltd

DAY 2 - Conference

Under the ICAC Magnifying Glass
Discussion on fraud and corruption prevention, with key operational goals and expectations communicated from SA ICAC.
Michael Riches, Senior Legal Officer, Office of the Independent Commission against Corruption (presentation on website)

Latest Developments in Standard-setting
Latest standard-setting developments at the AASB and the IASB.
Evelyn Ling, Senior Project Manager, Australian Accounting Standards Board
Joanna Spencer, Project Manager, Australian Accounting Standards Board (presentation on website)

The Continuous Improvement Journey
Emphasis on delivering continuous improvement, with focus on activities that are efficient, effective and value for money.
Nicola Tinning, Manager Business Improvement, City of Unley
Robyn Cusick, Continuous Improvement Officer, District Council of Loxton Waikerie (presentation on website)

Effectively Communicating Financial Messages
Focused on challenges that Local Government finance professionals face in communicating within their organisations.
Patrick Flemming, Sector Director – Local Government, Queensland Audit Office (presentation on website)

Opportunities and Challenges for the Australian Economy – an SA Perspective
Economic update, exploring both risks and opportunities, with an South Australian perspective.
Dean Pearson, Head of Behavioural & Industry Economics, National Australia Bank

Ipswich Intelligent Community of 2015
Sharing of how the community of Ipswich has grown, even during times of national adversity, with clear planning that is consistent with its cultural identity.
Mayor Paul Pisasale, Ipswich City Council

Special Keynote Speaker: Mark Donaldson VC
Sharing of experiences, motivations and lessons implemented with change, resilience and personal effectiveness born from not only combat situations yet life itself.
Mark Donaldson VC


Effective Collection of Outstanding Council Rates

The timely payment of rates is critical for the effective operation of councils. Councils simply cannot deliver essential services to the community if rates are not paid on time.

In our experience the overwhelming majority of ratepayers pay their rates as and when they fall due, however when circumstances arise which mean they either cannot pay on time, or they do not want to pay, it is important for councils to take action as soon as possible to collect the outstanding rates.

Early Intervention

In our experience, the longer and larger the outstanding rates are, the harder it is to reduce the outstanding balance quickly. The most effective approach that councils can adopt is to take action as early as possible and work with the ratepayer to manage their outstanding liability. The longer the council takes to pursue the outstanding debt, the more difficult it is to work with the ratepayer to reduce their outstanding liability which ultimately results in the council having to wait longer for its debt to be repaid.

Are councils able to enter into arrangements for the repayment of overdue debts?

Yes, section 184(4)(b) of the Local Government Act 1999 (SA) (Act) specifically enables a council to reach agreement with a ratepayer regarding their outstanding rates. Such arrangements can be a useful strategy in managing ratepayers who have encountered financial difficulty. 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 and in accordance with best practice governance standards. It is also important that once an agreement is reached with the ratepayer that it is recorded in writing and the council’s financial records (and if applicable, subsequent rates notices) are amended to reflect the arrangement.

How can councils recover rates that have been outstanding for less than 3 years?

If a council is not able to reach an acceptable arrangement with the ratepayer, then one option available is to commence an action in the Magistrates Court of South Australia to recover the outstanding rates as a debt pursuant to section 178(3) of the Act. The action is commenced by filing a claim that will seek an order that the ratepayer pay the council the outstanding rates. Once the claim is filed it must be served on the ratepayer.

As soon as the council has obtained a judgement, it can take action against the ratepayer to enforce the Court’s judgement. Ordinarily the first enforcement process is to request the Court to 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 set amount at certain intervals (such as weekly or fortnightly to reduce their liability to the council). If that 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 collect rates that have been outstanding for more than 3 years?

The quickest and most efficient method available to the council is to exercise the power vested in it pursuant to 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 pay their outstanding rates.

NW Credit Management, a division of Norman Waterhouse Lawyers, is a specialised debt collection practice which provides services exclusively to South Australian councils. NW Credit Management provides the full suite of debt collection services from initial communication with ratepayers, right through to the sale of properties to enforce judgements, creating a seamless process for councils. The NW Credit Management team enjoys the support of market leading local government solicitors. We understand the sensitivities facing councils in the area of debt recovery and ensure tangible outcomes are achieved for both councils and their stakeholders in the wider community. For more specific information on any of the material contained in this article, or the services that NW Credit Management offers, please contact Paul Kelly on +61 8 8210 1248 or This email address is being protected from spambots. You need JavaScript enabled to view it..

nwc logo nwl logo

Members Profile – Clive Hempel

Clive HempelWith little idea of what job Clive wanted after completing his secondary education he took advice from his uncle to join one of the pastoral houses that serviced the rural industry. In the next twelve years this would involve him working for Dalgety Farmers at seven different locations throughout South Australia in various positions, initially starting as a junior clerk to his final position (after studying part-time) to be an IT Internal Auditor for the parent company Dalgety Australia. With a pending takeover by Westfarmers and having the choice of a transfer to Sydney or becoming redundant, it was decided that it was time for a career change.

Finding himself redundant he registered with several agencies and for five months felt the waves of floods and droughts with either several short term casual contract positions being offered at once to continually checking that his mobile phone was still working. It was decided to target a job in Local Government and in the following nine years he then worked at the following Councils of Hawker, Lameroo, Victor Harbor and finally at Gawler as Manager of Financial Services. While working at each Council he was involved in either implementing new corporate systems or additional modules.

While working at the Town of Gawler he married his wife Angie and immediately experienced the steep education of helping raise Angie’s two teenage children Renae and Luke. Renae would continually ask when she was going to have a sister and she was correct with the family soon having an addition with the birth of their daughter Nadia.

Clive was surprised when he was headhunted by a new company to South Australia called IT Vision that had recently taken over Local Government software which was previously marketed by Fujitsu. The job involved a mixture of computers and accounting, the challenge was too inviting for Clive not to take it up. During the next seven years he became their senior financial consultant and was involved in help desk support, demonstrations, site implementations and general consultation work for numerous Councils around Australia. This involved interstate travel including visiting many remote locations such as Tom Price and the Tiwi Islands. For the last seven years Clive has enjoyed working back in Local Government with the Wakefield Regional Council as their Accountant.

“Working in a variety of different job positions has given me a great experience in the areas of accountancy and information technology, mastering additional skills such as the ability to extract data or write my own reports, making available an expertise that would not normally be present at many of the smaller Councils. I still enjoy the involvement with managing the Council’s computer systems, but unfortunately the down side is that you find yourself having to stop your work immediately when someone has a serious computer related issue.....”

Clive has been a general member of the South Australian Financial Management Group for most of his years with Local Government and has been a member of the Executive Committee for the past seven, with the past two years as Vice President. He is also a fellow of the Institute of Public Accountants.

“Being a member of the Executive Committee has been a great experience that gives the unique benefit of being able to discuss and have an influence (at times) in areas of local government financial legislation. The networking at general membership level has been of great assistance to me personally, with the ability to discuss common issues and various different possible solutions with other members.”

In his spare time Clive enjoys fishing, walking, gardening and is not shy in taking on some large DIY projects around the house and the yard. His wife has a rather interesting career starting her own business called “Tropical Scene” approximately eleven years ago. She is a registered importer and sources her own goods from Bali and sells online through ebay and her own website. Suspicions are that this was only to guarantee her at least one overseas trip a year! Clive enjoys the annual sourcing trip to Bali but after all these years once again finds himself only holding the position of junior clerk. The whole family is brought together with an annual week long trip to the Murray, which is attended by the children, their partners and the seven grandchildren. 

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Current Issues in Local Government Recoveries

The past 12 months at NCML and Hudson Lawyers has seen strong investment in our South Australian operations through the recruitment of additional staff and development of our new online portal due for release in March 2016. Two new faces at Hudson Lawyers and NCML are Marissa Mackie, Managing Solicitor (SA) of Hudson Lawyers and NCML’s Head of Portfolio Services and Adelaide Leader, Paul Stredwick. With collectively over 35 years of expertise in the credit and debt recovery industry, in both the private and public sector, Marissa and Paul are working together to further develop our people and business in SA. They are supported by a passionate, high calibre team who strive to deliver results and improve client experience. In the 2015 Australian Institute of Credit Management Awards, 5 NCML employees were among the 8 finalists in South Australia with Tate O’Connor going on to win the National Young Credit Professional of the Year Award. Tate’s work in Analytics enables us to drive collection strategies for optimal results for our clients.

Representing 18 councils across South Australia (including some of the largest), we are acutely aware of trends emerging in debt recovery that affect local government in collecting rates and other debts in South Australia.

Some of the more recent themes emerging include:

Liability for Rates

Whilst the provisions of the Local Government Act 1999 (the Act) clearly articulate who is liable to pay rates, many ratepayers are still unaware of their obligations under the Act. This is often the case where an occupier, for example under a commercial lease, has been listed on the assessment record as the principal ratepayer. Notwithstanding the principal ratepayer’s liability, the owner of a property still remains liable should the rates not be paid. It is a matter for them to pursue the occupier separately.

Educating registered proprietors as early as possible is key and, if not already done, consideration should be given to having owners sign an acknowledgement of their liability when listing another party as the principal ratepayer.

Liability disputes in court, whilst often resulting in a successful outcome for council, can unnecessarily protract legal proceedings and add significant time and cost for all parties involved. In these cases it is always best to get back to basics and refer back to the relevant provisions of the Act as it is often easy to be distracted by the arguments raised. Whilst legal representation is generally not permitted, we have been able to assist our clients in preparing correspondence and negotiating with ratepayers promoting a better understanding of the provisions and encouraging early resolution.

Rental Demands

Rental Demands are an under-utilised mechanism to recover rates in instances where a property is tenanted and can avoid the need for court proceedings. A council may serve a notice on tenants requiring that rent payable to the landlord/owner be paid directly to council to reduce the rates arrears. Obligations are also imposed on the proprietor of the property to forward any payments received and may result in additional penalties.

Council are also entitled to charge an additional 5% of the amount of arrears if a rental demand is issued, which can offset the cost of preparing the notice in part or full depending on the balance.

Phoenix Companies

All too often creditors face difficulties in recovering non-rates debts from companies as a result of phoenix activity whereby a company will accrue significant liabilities then transfer its assets (if any) to another entity and liquidate the company leaving creditors out of pocket. This has been prevalent in labour hire companies and in the case of ‘one off’ events such as music festivals.

Whilst the practice is illegal and there are sanctions for directors, it is often difficult to enforce. Local government bodies can minimise their risk through carefully worded contracts, requiring payment up front and giving consideration to requiring directors’ guarantees in their agreements.

Should you wish to discuss these or any other legal or collections issues please contact us on the details below.

Marissa   E: This email address is being protected from spambots. You need JavaScript enabled to view it.    P: 08 8273 8027
Paul E: This email address is being protected from spambots. You need JavaScript enabled to view it. P: 08 8273 8049

 

hudson ncm

Review of 2015 Annual Financial Statements & Changes to 2016

The following is a brief precis of the presentation given by David Maxwell to the FMG Workshop on 3 December 2015.

Overall there was continued improvement in the standard of preparation of 2015 Annual Financial Statements, although there are some areas that continue to cause problems, notably the unwinding of present value discounts.

A more general movement developing in the accounting profession for the simplification and de-cluttering of annual financial statements, and the concentration on items likely to have a material influence on their interpretation. KPMG encourages organisations to reduce clutter by

  • Removing immaterial or irrelevant financial report disclosures that have built up over time
  • Re-ordering and re-labelling accounting policies and detailed notes so they better reflect the key financial measures and focus on areas of most relevance
  • Re-writing technical wording into plain English, whilst still fully complying with relevant accounting standards and regulatory requirements.

Points to watch

  • Try to achieve a consistent type size (particularly Note 7).
  • Remove irrelevancies – a number of upcoming standards will not take effect until the 2018/19 year – is this too far ahead to have a material effect on the interpretation of the 2015/16 reports?
  • No need to show nil notes or sections.
  • Do need to show the actual date of authorisation for issue of the statements in Note 1.

Land – operational land (generally fair value level 2) and community land (generally fair value level 3) should be split in Note 7.
FAGs Grants – the game begins again.

Upcoming Standards

AASB 9 – Financial Instruments & AASB 7 – Financial Instruments – Disclosures - do not apply until the 2018/19 financial year, and for Councils whose investments are solely with LGFA will not involve any changes to the amounts to be disclosed.

AASB 15 – Revenue from Contracts with Customers – does not apply until the 2018/19 financial year (and there is the possibility that it may be further delayed) and is unlikely to have any effect on the amounts disclosed by most Councils.

ED 180 / ED 260 – Income from Transactions for Not-for-Profit Entities – affects accounting for special purpose grants, and the AASB is currently re-deliberating following responses to the second exposure draft. The target date for issue is in the second half of 2016, and is likely to take effect at the same time as AASB 15.

Leases – the IASB has released this standard as IFRS 16 – Leases in January 2016 for commencement 1 January 2019 (i.e. 2019/20 reports). The IASB expects that this change will impact an estimated USD 3.3 trillion leasing commitments of listed entities, so there must be potential for slippage in the commencement date. The AASB will consider adopting this standard as AASB 16 at its February meeting. Whether there will also be specific clauses for NFPs and peppercorn rentals is not known.

AASB 2014-10 - Sale or Contribution of Assets between an Investor and its Associate or Joint Venture and AASB 2014-3 - Accounting for Acquisitions of Interests in Joint Operations – both first apply to the 2016/17 reports, but their application would be exceedingly rare in local government situations.

Depreciated replacement cost as a measure of value in use
Service concession arrangements: grantor
Reporting service performance information
)
)
)
New standards expected
in 2016 – all of
very limited application

AASB 116 Issues

The AASB has now determined that the definition of residual value requires an actual sale, which therefore excludes the salvage value of the predecessor asset. The staff paper promised for September 2015 has so far not materialised, so we do not know how the Board envisages that an asset (component) can be further componentised into long-life and short-life components when they are homogenous.

The previous support in the Model Statements for the inclusion of salvage value in residual value will be removed and each Council will need to discuss their approach with their Auditors.

Investigations have continued into the reasons for the mandatory use of the revaluation procedure in clause 35(a) – the “grossing up” method – this was introduced as a mandatory procedure Australia-wide on the introduction of AAS 27 in 1993. However, it may be some time before resolution.

AASB 13 Issues

Following the introduction of AASB 13, the AASB reviewed disclosure requirements for NFP entities, with the result that the level of disclosure is now explicitly reduced to the level that the Model Statements Editorial Committee considered to be implicit in the Standards. In the result, no changes were or will be required to the guidance given in the 2015 Model Statements.

In the meantime, there are a few points to note:

  • The fair value hierarchy level MUST be reported for ALL valuations.
  • IPP&E can NEVER be FVL 1.
  • Land, buildings and the like will almost always be a mix of FVLs 2 & 3.
  • “Highest and best use” in AASB 13 is expressed in absolute terms. Council assets are only “highest and best use” in relation to the role and functions of local government, and the qualification must be expressed.

Other Changes in the 2016 Model Statements

Financial Indicators

Following the release of the revised Information Paper 9 – Financial Indicators – the Model Statements will be adjusted to reflect the newly revised indicators.

Related Party Disclosures

Although Councils have previously been exempt from the application of AASB 124 – Related Party Disclosures, AASB 2015-6 terminated that exemption from 1 July 2016. Although the actual disclosures will not be required until the 2016/17 statements, comparative figures will need to be shown, so That Councils will need to be ready to assemble the relevant data as from 1 July 2015.

The key terms are “related party”, “control, “joint control”, “significant influence”, "key management personnel”, and “close members of a family or person”. Disclosures are required of relationships, transactions and outstanding balances, including “commitments”.

This standard has been applicable to for-profit entities for many years, so your Auditors will be fully familiar with the definitions and required disclosures, and the available training courses will cover the subject fully.

David Maxwell

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