A National Financial Management and Asset Management Framework

A National Financial Management and Asset Management Framework for Local Government Ian Mann Jeff Roorda Representing the Project Development Team 1

Prime Minister’s address to ACLG “Councils that plan & manage their assets effectively are councils that can deliver value for money to communities“ “We need to know what we’ve got, what condition it is in, whether it needs to be repaired and how much it costs to maintain. This is the most basic level of information”. “The Commonwealth will also consider making its future infrastructure investments linked to the implementation of nationally consistent asset management systems” 2

National Sustainability Frameworks 3

National Sustainability Framework Genesis May 2006 – LGPMC meeting determined the a series of nationally consistent Frameworks on financial sustainability measures for Local Government would be developed Three Frameworks were subsequently developed 1. Assessing local government financial sustainability; 2. Asset Planning and Management 3. Financial Planning and Reporting. October 2006 – Consultation with Local Government and other relevant bodies March 2007 – LGPMC endorsed the national consistent frameworks May 2009 – LGPMC agreed to enhance the nationally consistent framework on Local Government asset and financial management frameworks and committed to an accelerated implementation. 4 Refer: www. lgpmc. gov. au

Enhanced National Sustainability Frameworks 1. Enhanced Asset Planning and Management 2. Enhanced Financial Planning and Reporting. 3. Criteria for assessing financial sustainability of local councils Refer: www. lgpmc. gov. au 5

National Approach to AM – 1. Enhanced Asset Planning & Management The 7 elements of the Enhanced National Framework on Asset Planning and Management are: 1. Development of an asset management policy 2. Strategy and planning 3. Governance and management arrangements 4. Defining levels of service 5. Data and systems 6. Skills and processes 7. Evaluation 6

National Approach to Financial Management 2. Enhanced Financial Planning & Reporting 1. Strategic longer term plan 2. Annual budget, and 3. Annual report 9

How it might work 10

General Principles One common set of assessment criteria Each State may adjust criteria to suit their needs however should be able to apply consistency to core criteria Councils could use assessment criteria to help prepare Asset Management Improvement Plans Councils would determine priority of improvements Recognise that different Councils be at different stages of development 11

Federal Government Local Government Planning Ministers Council State Government 3 National Frameworks $ Funding (AM Dependent) State Assoc & IPWEA State Legislation Report National Assessment Framework State Association Councils 12

National Assessment Framework 13

Working Group MAV John Hennessy CT Management Group Ian Mann Bruce Lorimer AECOM Gary Rykers IPWEA Peter Way Chris Champion Jeff Roorda & Associates Jeff Roorda John Howard 14

Maturity Assessment of a Council • Built around the asset management journey of a Council • Assesses where Council is on the Asset Management maturity curve • Two benchmark levels of Maturity – Core and Advanced (Advanced is not Best Practice) 15

National Asset Management and Financial Planning Assessment Framework Financial Sustainability Step 1 – Assessment of Maturity National Assessment based on Detailed Assessment Criteria · Built around a set of common questions · Focused on best appropriate practice · Each State may additional questions to align with their own “good practice” guidelines · Must be linked to and based upon the National Sustainability Framework · Core and Advanced maturity grading Step 2 – Audit or Assessment Assessor/Auditor Opinion One of three possible statements for each framework element plus an overall assessment • Unqualified ; • Qualified – reflects good practice except for ………. . (qualifications); or • Adverse Industry Support 16 Asset Management Sustainability State based Local Government Asset Management Capacity Building Programs · Each State and/or Local Government Association develops their own Local Government asset management capacity building program linked to the elements of the National Sustainability Framework (to suite each State’s circumstances) · In Victoria this is the MAV STEP program

Step 1 – Assessment of Maturity Two part questionnaire linked to National Framework Undertaken as a self assessment by the organisation Possible answer to each question “Compete”, “Partially Complete” and “Not Started” Independently overviewed 17 Maturity Level Total No of Questions Part 1 Core 76 Part 2 Advanced 145 (including the 76 Core – 67 additional)

Core Maturity Assessment Questions Partially Complete Not Started Assessment Opinion The Strategic Longer Term Plan incorporates priorities and performance measures and indicates Partially how they will be monitored and measured. Complete Council has a sustainable Long Term Financial Plan covering the period of the Strategic Longer Complete Term Plan (at least 5 year) supporting the implementation of its Long Term Plan. The Long Term Financial Plan has been prepared based on the resource requirements and strategic Partially objectives detailed in Council’s Long Term Plan and Asset Management Plans. Complete 2 3 0 Complete Partially Complete The Annual Budget aligns with Year 1 of the Long Term Financial Plan, and was adopted following Partially Complete community consultation Council’s Annual Budget includes resources to implement Strategic Longer Term Plan strategies. Complete Annual Budget Status Summary 2 2 0 Status Complete QUESTIONS Strategic Long Term Plan Council has a Strategic Longer Term Plan (planning horizon of at least 5 years) that incorporates a Complete vision, strategic outcomes, mission, values and service outcomes that Council wants to achieve. The development of the Strategic Longer Term Plan included community consultation and reflects Partially community needs. Complete Strategic Long Term Status Summary Annual Budget The Annual Budget contains estimates of revenue and expenditure with an explanation of the assumptions and methodologies underpinning the estimates, an explanation of the financial performance and position of the Council and has been prepared based on the resource requirements and strategic objectives detailed in Council’s Strategic Longer Term Plan, Asset Management Plans and Long Term Financial Plan. The Annual Budget reflects the Council's strategic objectives and contains a statement of how Council will meet the goals and objectives of its Strategic Longer Term Plan. 18

Core Maturity Assessment Results Total Items Complete Items Partially Complete 5 0 3 2 Annual Budget 4 0 2 2 Annual Report 5 0 2 3 Asset Management Policy 5 0 1 4 Asset Strategy 3 0 1 2 Asset Plans 22 0 6 16 Governance and Management 7 1 5 1 Levels of Service 4 2 2 0 Data & Systems 8 2 5 1 Skills & Processes 10 5 5 0 Evaluation 3 1 2 0 Total 76 11 34 31 Framework Element Strategic Planning 19 Items Not Started

Part 2 – Assessment/Audit Opinion National Frameworks Assessment and Reporting To be based on the audit opinion concept of a ‘true and fair’ view of the financial report. An audit opinion is expressed on audited statements. “When reporting, the auditor is required to express an opinion as to whether the financial report ‘gives a true and fair view’ or ‘presents fairly’, in all material respects, in accordance with an applicable financial reporting framework. ” For the National Frameworks Assessment, a similar audit/assessment approach would entail an internal or external auditor/assessor forming an opinion that each LGPMC Sustainability Framework Element had been followed 20

Assessment/Audit Opinion Assessment opinion Core Maturity (Unqualified) Intermediate (Qualified) Low Maturity (Not reached Core Maturity) 21 Opinion That the council’s asset management and financial practices meet the requirements of the LGPMC National Sustainability Frameworks Requirement All the elements within the National Assessment Framework have been met at a ‘core’ level, OR all except a small number of ‘core’ element items have been met and the assessor has reached the opinion that these omissions have a immaterial effect on and low risk of not achieving the LGPMC National Sustainability Framework’s desired outcomes That the council’s asset The majority of the ‘core’ element items management and financial within the National Assessment practices meet the requirements Framework have been met with a of the LGPMC National number of omissions having a material Sustainability Frameworks effect on and high risk of not achieving except for certain material and the LGPMC National Sustainability high risk exceptions Framework’s desired outcomes That the council’s asset The majority of the ‘core’ element items management and financial within the National Assessment practices do not meet the Framework have not been met requirements of the LGPMC National Sustainability Frameworks

Core Maturity Assessment Opinion Partially Complete Not Started Assessment Opinion Complete Partially Complete Council has a sustainable Long Term Financial Plan covering the period of the Strategic Longer Complete Term Plan (at least 5 year) supporting the implementation of its Long Term Plan. The Long Term Financial Plan has been prepared based on the resource requirements and Partially strategic objectives detailed in Council’s Long Term Plan and Asset Management Plans. Complete 2 3 0 Intermediate 2 2 0 Intermediate Status Complete QUESTIONS Strategic Long Term Plan Council has a Strategic Longer Term Plan (planning horizon of at least 5 years) that incorporates a vision, strategic outcomes, mission, values and service outcomes that Council wants to achieve. The development of the Strategic Longer Term Plan included community consultation and reflects community needs. The Strategic Longer Term Plan incorporates priorities and performance measures and indicates how they will be monitored and measured. Strategic Long Term Status Summary Annual Budget The Annual Budget contains estimates of revenue and expenditure with an explanation of the Complete assumptions and methodologies underpinning the estimates, an explanation of the financial performance and position of the Council and has been prepared based on the resource requirements and strategic objectives detailed in Council’s Strategic Longer Term Plan, Asset Management Plans and Long Term Financial Plan. The Annual Budget reflects the Council's strategic objectives and contains a statement of how Partially Complete Council will meet the goals and objectives of its Strategic Longer Term Plan. Partially The Annual Budget aligns with Year 1 of the Long Term Financial Plan, and was adopted Complete following community consultation Council’s Annual Budget includes resources to implement Strategic Longer Term Plan strategies. Complete Annual Budget Status Summary 22

Council Core Maturity Assessment 23 Total Items Complete Items Partially Complete Items Not Started Assessment Opinion Strategic Planning 5 2 3 0 Intermediate Annual Budget 4 2 2 0 Intermediate Annual Report 5 5 0 0 Core Maturity Asset Management Policy 5 0 1 4 Low Maturity Asset Strategy 3 0 1 2 Low Maturity Asset Plans 22 0 6 16 Low Maturity Governance and Management 7 1 5 1 Low Maturity Levels of Service 4 4 0 0 Core Maturity Data & Systems 8 2 5 1 Low Maturity Skills & Processes 10 5 5 0 Low Maturity Evaluation 3 1 2 0 Low Maturity Total 76 11 34 31 Low Maturity

24 er n tio ua al Ev s es ss ce m ce vi te Sy s ro P & Sk ills & a at t ns en em f S o ls ve D Le ag la P AM gy te y ic ol P t or t ge ep S tra an M . & ov G AM ud R al AM nu An B an Pl c gi al nu An te ra St Council Results – Core Maturity 120% 100% 80% Complete 60% Partially Complete 40% Not Started 20% 0%

National Results State/Territory 25 No councils Assessment Opinion Core Maturity Intermediate Low Maturity Management report by councils * NSW (Inc ACT) Qld 153 62 50 41 40 of 91 (44%) 73 40 20 13 25 of 33 (76%) Vic 79 65 13 1 13 of 14 (93%) SA 68 40 20 8 20 of 28 (71%) WA 141 50 50 41 60 of 91 (66%) Tas 29 15 10 4 8 of 14 (57%) NT 16 5 2 9 6 of 11 (55%) Total 559 277 165 117 172 of 282 (61%)

National Results National Asset and Financial Managment Frameworks Core Compentency Assessment Core Maturity Intermediate Low Maturity 100% 90% % of Councils 80% 70% 60% 50% 40% 30% 20% 10% 0% NSW (Inc ACT) 26 Qld Vic SA WA Tas NT

National Improvement Measures Assessment Opinion (No. of Councils) Core Maturity Intermediate Year 27 Low Maturity Improvement Dec 2010 117 165 277 0 Dec 2011 209 170 180 Yes Dec 2012 399 80 80 Yes

National Improvement Measures National Asset and Financial Management Frameworks Core Competency Assessment Core Maturity Intermediate Low Maturity 100% 90% 80% % of Councils 70% 60% 50% 40% 30% 20% 10% 0% Dec 2010 28 Dec 2011 Dec 2012

Questions 29