Focus on Finance
Summer 2019

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

Kate George

Craig Mudge

Elizabeth Williams

Karishma Reynolds

Alex Oulianoff

President’s Message

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

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

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

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

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

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

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

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

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

Kate George
President

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

Key Dates

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

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

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

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

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

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

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

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

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

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

15 May 2020
SALGFMG Conference, Adelaide Convention Centre.

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

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

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

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

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

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

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

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

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

31 August 2020
Last date for declaring a general rate.

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

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

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

Key Dates proudly sponsored by
LG Solutions
LGsolutions

Internal controls within your Business Systems

noble logo

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

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

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

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

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

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

Risk: Correct Authorisation of General ledger Journals

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

Risk: Accuracy of Budgets

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

Risk: Approval of New Projects

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

Risk: Fixed Assets

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

Risk: Statutory Reporting

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

Risk: Management Reporting

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

Risk: Suppliers

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

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

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

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

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

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

Work Group Updates

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

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

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

Asset Management

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

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

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

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

Costing Principles

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

Events

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

Fees & Charges

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

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

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

Financial Management Framework

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

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

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

Local Government Price Index

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

Local Government Reform

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

Long Term Financial Plan

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

Membership & Communications

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

Rating & Valuation

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

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

DACO Update

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

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

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

Yass Valley Council selects MAGIQ Software

magiq

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Annual General Meeting

The Boulevard Room 375

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

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

This annual event is free for members.

Public Private Property

ppp

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

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

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

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

Make Your Service Review a Success

Ben Haigh, Bee Squared Consultants

beesquaredlogo

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Do you have your leave liability right? 

uhy

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

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

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

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

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

Some of the typical pitfalls are:

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

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

So how do you avoid these issues?

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

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

UHY Haines Norton
Corinne Garrett

LGFA Financial Market Update – November 2019

lgfa

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

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

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

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

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

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

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

lgfa

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

This is not new news.

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

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

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

Councils must transparently answer:

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

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

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

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

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

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

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PO Box 172 Smithfield SA 5114 
Tel: 0408 801 026 
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