LG Sustainability Stage one and two Towards a sustainable future

LG Sustainability - Background MAV and VAGO assessments Differing assessments of financial risk 2010- 20 Councils facing risk One is extremely high risk, four very high risk and fifteen are high risk MAV - E and H risk Councils require external funding assistance

LG Sustainability Is information to assess Council’s financial sustainability credible? What strategies does Council have to maintain a financially sustainable position? What assistance does Council need from government?

LG Sustainability - Project outcome To determine, in partnership with the Council: whether all management responses to its financial sustainability position have been exhausted and; ultimately and legitimately requires assistance from State /Federal Government

LG Sustainability – Pilot Councils 2008/09 Central Goldfields Hepburn Horsham Ararat Gannawarra Corangamite Yarriambiack Towong Loddon West Wimmera

LG Sustainability (2) – 2009/10 Baw Baw Colac Otway East Gippsland Glenelg Hindmarsh Hume City Indigo Kingston Macedon Ranges Maroondah Moira Shire Council Moorabool Moyne Southern Grampians Strathbogie Wellington Wodonga City

LG Sustainability - Self Assessment Self Assessment - 8 key success factors: Understanding Financial Sustainability Corporate Governance Service and Asset Management Plans Financial Reporting Annual Planning ,Budgeting and Rating Long Term Financial plans Service provision Skill Development

LG Sustainability – Gap Analysis WOMBAT SHIRE COUNCIL GAP ANALYSIS CHART

Benchmark results KSA’s

Financial Ratios

Renewal Gap

LG Sustainability – Findings Understanding financial sustainability SRP’s – Policies and financial strategies No substantial LTFP’s Disparate /incomplete Asset Registers Condition Data/Intervention levels Depreciation charges not related to condition Short term Capital Works program

LG Sustainability - Findings Balance Sheet versus Moloney Whole of life costing –not practiced. Community consultation/LOS. Budget in service level terms/SAMP’s Performance reporting – Audit Committee Rating strategy – future funding

LG Sustainability – Pilot findings 8 of the 10 Councils are rating below average 9 of the 10 Councils have underlying operating deficits 2 of the 10 Councils have lower than average depreciation charges 4 of the 10 Councils have overstated depreciation charges 2 of the 10 Councils are over funding renewal gap. Inconsistency in renewal valuation rates; All Brownfield valuations on Balance Sheet

LG Sustainability Pilot - CAPITAL Total Capital expenditure $62 million Renewal Demand $48 million Renewal investment $ 34 million Unexpended CAPEX $7.8 million 71 % of renewal demand funded 55 % of total CAPEX was renewal 45 % of CAPEX was new and upgrade 12.5 % of budgeted CAPEX was not delivered.

LG Sustainability (2) - CAPITAL Total Capital exp $222.76 million Renewal Demand $160.40 million Renewal investment $109.44 million Unexpended CAPEX $56.96 million 68 % of renewal demand funded 49 % of total CAPEX was renewal 29 % of CAPEX was upgrade 22% of CAPEX was new 26 % of Budgeted CAPEX was not delivered.

LG Sustainability – Outcomes Need robust Strategic Resource Plan Long Term Financial Plan Financial policies/ target ratios 10 year CAPEX programme – R,U,N Rating and revenue raising Council engaged/report performance – Audit Committee Review of Asset Management Strategy and practices Asset Registers/Condition Assessments/Intervention levels Renewal Valuations Document management strategies – LOS/Rationalisation Whole of organisation approach Training

LG Sustainability :Strategic Resource Plan Grants and Fees Notional Reserve Funds Asset Management Strategies Operational Expenses (service levels) Revenue Raising (rating) strategy Capital Works projects and funding Debt Strategy STRATEGIC RESOURCE PLAN

LG Sustainability - LTFP SRP – provided policy parameters for LTFP Councils have increased rates significantly 10 year Capital works program Escalation factors Financial Ratios Charts Financial Statements Renewal Demand versus renewal annuity Rating options

LG Sustainability- LTFP

LG Sustainability – LTFP

LG Sustainability - Conclusion Focus on determining issues impacting on sustainability Self Assessment Framework Data Review Improvement Plan/cross functional team Tools and techniques Strategic Resource Plan Long Term Financial Plan Sustainable future