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.
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.
SALGFMG Executive Committee Meeting, 9.30 am, City of Port Adelaide Enfield.
29 and 30 November
SALGFMG Conference and Workshop “The Labyrinth”, Adelaide Oval.
Last 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 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.
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.
Christmas Day Public Holiday.
Proclamation Day Public Holiday.
Last 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.
New Years Day Public Holiday.
SALGFMG Executive Committee Meeting, 9.30 am, City of Onkaparinga.
Australia Day Public Holiday.
SALGFMG Executive Committee Meeting, 9.30 am, Adelaide Hills Council.
SALGFMG Conference, Adelaide Convention Centre.
SALGFMG Executive Committee Meeting, 9.30 am, Town of Walkerville.
End of Fringe Benefit Tax year, ensure that log books, declarations and other required documentation are completed by employees.
By Corinne Garrett
UHY 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?
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.
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.
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 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)
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.
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.
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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!
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.
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.
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.
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.
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.
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.
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”.
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.
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.
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.
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.
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.
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?
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.
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:
Phone 0411 607 808
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).
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 publications say - There is no withholding obligation in respect of the following supplies of new residential premises or potential residential land:
The ATO statement above is based on the following legislation:
13 14-250 Recipients of certain taxable supplies of real property must
14 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);
(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.
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)]”
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 Accounting
0416 099 911
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.
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:
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.
Director, Senior Valuer
Advisory and Consulting Services
08 8233 8825
0412 560 972
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.” 1
The 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. ”2
What 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>
Richard Ward can be contacted on 0466 746 751 or by email:
PO Box 172 Smithfield SA 5114
Tel: 0408 801 026