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> Members Profile – Leta Northcott
> 2018 November Workshop & Conference Preview
> Local Government Finance Authority - Financial Market Conditions
> It’s almost time to lodge - Taxable payments annual report
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.
10 August 2018 (Local Government Elections)
Roll close 5pm
31 August 2018
SALGFMG 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 noon
Commencement of Caretaker Period
30 September – 31 May
At 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 2018
SALGFMG Workshop and Conference. Adelaide Oval, Adelaide
Last 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.
Last 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
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 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).
In simple terms, the journal entries required will be:
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.
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.
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.
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 approach
The 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 platform
An 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 competencies
Smart councils concentrate on delivering better outcomes for residents and ratepayers through improved efficiencies and ease of doing business, rather than on the technology itself.
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.
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
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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.
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:
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:
Key points from AASB 15 Revenue from Contracts with Customers:
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.
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.
Conduct a review of all grants and consider the flowing:
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.
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!
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);
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.
An employee who has personal financial problems, gambling or other addictions or wants to show their friends how well they are doing.
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.
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:
There are some standard red flags about people that are often present when someone is committing fraud. Some are:
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?
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’.
I would like to acknowledge the Institute of Internal Auditors for much of the material referenced in this article.
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.
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.
From 1 July 2017, you need to report if you’re a government related entity. These include:
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
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.
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
Remember to include the:
PO Box 172 Smithfield SA 5114
Tel: 0408 801 026