recipientpurpose value (gst exclusive) australian capital territorydevelopment of an asset and...

Municipal Association of Victoria

Local Government Reform Projects

2012 International Local Government and Asset Management Conference

Ian MannCT Management Group

Recipient Purpose Value (GST Exclusive)

Australian Capital Territory Development of an asset and financial management planning framework

$437,000

New South Wales Government Local government asset management and financial management project

$3,250,000

Northern Territory Government and the Local Government Association of the NT

Local government capacity building project $1,350,000

Queensland Government and Local Government Association of Qld

Advancing asset management in local government $2,695,000

South Australian Government and Local Government Association of SA

Improving SA councils’ asset and financial management practicesAdelaide integrated design strategy

$1,650,000

$1,000,000Local Government Association of Tasmania

Long term asset and financial management planning for all Tasmanian councils

$870,000

Southern Tasmanian Councils Authority Independent review of structures for local governance and service delivery in southern Tasmania

$150,000

Tasmanian Government and Southern Tasmanian Councils Authority

Future-proofing Tasmania’s councils: a regional and land use based approach to climate change adaptation

$400,000

Victorian Government and the Municipal Association of Victoria

Local government sustainability projectLocal government regional asset management services project

$964,000$1,404,000

Western Australian Government Integrated strategic planning, financial management and asset management in local government

$2,351,000

Local Government Reform Projects

Objectives

◦maximise the financial sustainability of Victoria’s regional councils to support continued provision of services to their communities over the long term by increasing collaboration between them; and

◦ increase councils’ ability to effectively manage their assets using more collaborative and efficient delivery models and improved asset management practices.

Regional Asset Management Services Program

Council visits

Regional workshops◦ Support each Council◦ Develop solutions – tools and templates

Web site◦ Collect and disseminate information

4,900 hours of program delivery

Program Delivery

Asset Management Policy Asset Management Strategy Terms of Reference for an Asset Management Steering Committee Asset Management Roles and Responsibilities Matrix Asset Management Skills Matrix Capitalisation and Valuation Policies (Work in progress) Asset Management Plan Templates Long Term Financial Plan asset forecasting criteria Capital Works Evaluation Framework Asset Categorisation Hierarchy Asset Handover Process Levels of Service Framework (Work in progress) Community Consultation Guidelines (Work in progress)

Tools & Templates

Council Improvement

Benchmark Improvement

Region Average Asset Management Improvement

North East 22.52%

North West 24.32%

South West 17.54%

Gippsland 10.37%

Central 19.80%

Overall Average 19.57%

Asset Management Improvement

Renewal Gap – All Councils

Cumulative Renewal Gap – All Councils

Objectives

◦maximise councils’ financial sustainability to support continued provision of services to their communities over the long term; and

◦ increase councils’ ability to effectively manage their current and future performance using a consistent ‘whole of council’ perspective which brings together their financial and asset management operations for reporting and management purposes.

Local Government Sustainability

Strategic Analysis◦ Council visits◦ Self Assessment◦ Assessment Report

Strategic Review◦ Financial Analysis - Historical◦ Strategic Report◦ Long Term Financial Plan assistance

LGS - Program Delivery

Analysis - Self Assessment

Benchmarking – All Councils

If a Council consistently achieves a modest positive operating surplus, and has soundly based projections showing that it can continue to do so in future, having regard to asset management and its community’s service level needs, then it is financially sustainable.

Review - Underlying Operating Result

◦ (Underlying Operating Position/Underlying Revenue)

51 of the 76 Councils (67%) have averaged negative ratios with respect to their underlying operating position over the last 4 years.

10 of these Councils averaging below - 10 percent.

Taking account of their projections a high proportion of Councils’ positions are worsening over the 10 year forecast period.

Review - Underlying Operating Ratio

Councils are the custodians of over $28.2 billion of infrastructure and other assets.

Accounting Standards ◦ define depreciation as ‘the systematic allocation of the

depreciable amount of an asset over its useful life’-(AASB 116). ◦ require that depreciation methods reflect “the pattern in which

the asset’s future economic benefits are expected to be consumed.”

For most Councils, depreciation is amongst the largest expenditure item.

Review - Depreciation

Average Depreciation Rate◦ 3 Councils less than 1.5 percent◦ 11 Councils less than 2 percent◦ 45 Councils between 2 and 3 percent◦ 20 Councils greater than 3 percent◦ 2 Councils above 4.2 percent

Review - Depreciation

Employee Costs /Total Adjusted Expenditure◦ Small Rural: 36 percent◦ Large Rural 37 percent◦ Regional Cities 40 percent◦ Inner Metro 45 percent◦ Outer Metro 40 percent

Review – Employee Costs

Working Capital Ratio (Current Assets/Current Liabilities)◦ Small Rural 280 percent ◦ Large rural 240 percent◦ Regional Cities 245 percent◦ Inner Metro 180 percent◦ Outer Metro 255 percent

Review – Working Capital Ratio

SRP & Long Term Financial Plan

-

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

2009 2011 2013 2015 2017 2019 2021

Capital Works Statement ($'000)

Renewal Investment

Upgrade Investment

Expansion/New Investment

-500

1,000 1,500 2,000 2,500 3,000 3,500 4,000 4,500

2009 2011 2013 2015 2017 2019 2021

Borrowings ($'000)

Current Interest Bearing Liabilities

Total Interest Bearing Loans and Borrowings

-2,000 4,000 6,000 8,000

10,000 12,000 14,000 16,000 18,000

2009 2011 2013 2015 2017 2019 2021

Renewal Investment ($'000)

Renewal Investment

Flexed Renewal demand

31%

44%

54%

65% 65%

49%

38%

56%

37% 36%

0%

10%

20%

30%

40%

50%

60%

70%

-

1,000

2,000

3,000

4,000

5,000

6,000

7,000

2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

$' 0

00

Roads

Renewal Investment - RoadsUpgrade Investment - RoadsExpansion/New Investment - RoadsRenewal Expenditure/Renewal Demand - Works in Progress

1. Underlying Operating Positiona) In many Councils the underlying operating position is in decline with

growing deficits or minimal change. b) Operating deficits are creating the need to defer and under spend on

renewal of infrastructure creating additional renewal backlog

2. Working Capitala) High correlation between Councils with high working capital

levels and low delivery of the annual capital works program

LGS - Findings

1. Renewal Fundinga) The projected renewal demand in the next 15 years, in most of the

Councils in Victoria is increasing. b) The renewal gap in most instances, is also increasing due to deferral

of renewal investment. c) With the estimated renewal gap at $2.3 billion over the next 15

years and a lowering of Councils capacity to fund in the same period the sector is heading for real decline in service levels.

LGS - Findings

End

Ian MannDirectorCT Management GroupMob: 0429 941 435Email: ianm@ctman.com.au

CT Management Group152 Lt Malop StreetPO Box 1374Geelong 3220Ph: (03) 5221 2566