Lake Macquarie City Council Asset Management Strategy and Asset Management Plans. Table of Contents

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1 Lake Macquarie City Council Asset Management Strategy and Asset Management Plans Table of Contents 1. Lake Macquarie Asset Management Strategy Version 3, April Roads and Infrastructure Asset Management Plan- Version 4, April Buildings Asset Management Plan- Version 4, April Parks and Reserves Asset Management Plan- Version 4, April Stormwater Asset Management Plan- Version 4, April Transportation Asset Management Plan- Version 4, April 2013

2 Lake Macquarie City Council Asset Management Strategy Part of Lake Macquarie City Council s Resourcing Strategy Revised April 2013 Version 3

3 Lake Macquarie City Council Asset Management Strategy V3 2 Introduction This is the third version of the Asset Management Strategy for Lake Macquarie City Council in accordance with Integrated Planning and Reporting Framework requirements. The original version of the Strategy was prepared for Council by Jeff Roorda and Associates in consultation with Council s asset management, corporate planning and governance staff following consultation with Council s Senior Management Team. Version 2 evolved using much of the original information and graphics, and was prepared by Council s Asset Management Steering Group. It took a long-term view of Council s assets and asset management systems. Version 3 recognises the work that has been completed since the previous version, and identifies specific actions and targets for managing Council s assets over the next four years. It also incorporates findings from a peer review conducted by Jeff Roorda and Associates. This strategy reflects our intentions at the time of publication. As with any plan or budget, the actual results may vary from that forecast. Lake Macquarie City Council April 2013

4 Contents Foreword Overview Key Supporting Strategies and Plans Goal Objectives Current Asset Management Capacity and Maturity Future Required Asset Management Capacity Steps to Achieve the Required Asset Management Capacity Key Strategies Background Legislative Requirements Asset Management Framework Key Areas of Asset Management Framework Asset Management Policy Benefits of Producing an Asset Management Policy Adopted Policy Asset Management Strategy Purpose of the Asset Management Strategy Asset Management Plans Purpose of the Asset Management Plans Preparation of Asset Management Plans Current Asset Base Management Systems Asset Management Maturity Model...18

5 Lake Macquarie City Council Asset Management Strategy V Maturity Audit Methodology Interviews Analysis and Current Maturity Scoring Current Maturity Core Maturity Advanced Maturity Maturity Audit Outcomes Asset Renewal Funding Gap Asset Management Improvement Plan Key Strategies Conclusion Appendices...33 Appendix 1 Terms used in the Strategy...34 Appendix 2 Asset Management Policy...42 Appendix 3 - Asset Management Improvement Plan (Updated April 2013)...45

6 Lake Macquarie City Council Asset Management Strategy V3 5 Document Control Document ID:Asset_Management_Strategy_V3.doc Rev No Date Revision Details Typist Author Verifier Approver /06/2010 Draft Strategy for Review AM, JR AM,JR JR JR,AW /6/2010 Version 1 AM, JR AM,JR JR JR,AW /04/2012 Version 2 MC, GW MC, GW JR GW /04/2013 Version 3 SS GW MC MC

7 Lake Macquarie City Council Asset Management Strategy V3 6 Foreword We are pleased to present an update of the Lake Macquarie City Council Asset Management Strategy. This is the third version of the Strategy prepared by Lake Macquarie City Council in accordance with the State Government s Integrated Planning and Reporting Framework requirements. Council is required to account for and plan for all existing assets under its control, and any new asset solutions in its Community Strategic Plan. Council is the custodian of approximately $2 Billion of community assets, which enable us to provide services to our community. These assets include roads, drains, footpaths, community facilities, recreational facilities, parks and reserves. Council has invested substantial resources into the maintenance of these assets over many years to service the needs and enhance the quality of life of the communities of Lake Macquarie. Version 1 of the Asset Management Strategy had a short-term focus to raise the maturity of Council s asset management practices. Subsequent versions have taken a longer-term view with the intention that the strategy will be reviewed and re-adopted every four years to coincide with the commencement of each new Council. Council submitted Version 1 of our Asset Management Strategy to the Division of Local Government in June 2010 and received positive feedback including: Council s asset management planning appears to support the Community Strategic Plan and Delivery Program and informs the Long-term Financial Plan. The risk assessment process along with the risk priority rating and associated action/treatment plans are well developed. The Asset Management Strategy and Plans include a range of actions, which would ensure or improve asset management capability. In addition, the Division of Local Government recommended that Council s Asset Management Strategy be improved by including a copy of our Asset Management Policy and the date when it was adopted by Council. This recommendation was incorporated into the second version of the Strategy. This Strategy is a living document that helps to guide the activities and decision making of the organisation into the future. The initiatives and actions identified in the strategy will be reviewed annually to ensure applicability in the changing environment and to incorporate community feedback. Brian Bell General Manager

8 Lake Macquarie City Council Asset Management Strategy V Overview The quality and suitability of infrastructure assets within a community are vital to the economic, social and cultural vibrancy of the area. Councils are complex organisations providing a wide range of services to the community. Many of these services are supported by infrastructure assets that may contribute to one or more of the services provided. Lake Macquarie City Council recognises the importance of asset management planning to deliver agreed levels of service to the community. The review of this Asset Management Strategy is another step in providing guidance to Council on improving its asset management systems and practices, and ultimately the condition and suitability of our assets. 1.1 Key Supporting Strategies and Plans Lake Macquarie City Council has made significant progress in asset management over many years. Council has prepared Asset Management Plans for five of our key asset groups (Roads and Infrastructure, Transport and Traffic, Community Buildings, Parks and Reserves, and Stormwater) which have informed the preparation of the Long Term Financial Plan for the organisation. Significant progress has also been made on a sixth Asset Management Plan covering Natural Areas. There are many new requirements for asset management facing councils throughout Australia and these are being steered by the National Frameworks for Asset Management, and implemented in NSW via the Integrated Planning and Reporting framework. Council has a range of other strategic plans and service delivery models that inform our asset management practices including land-use strategies, developer contributions plans and associated documents, as well as specific strategies such as the Community Facilities Strategy, Public Toilet Strategy, Cycling Strategy and Sports Facilities Strategy. These strategies seek innovative and modern ways to ensure that Council s existing asset base is maintained to a standard suitable to meet the needs of today s community, while upgrading and rationalising assets that are no longer capable of meeting the needs of the community. 1.2 Goal The goal of the asset management strategy is to ensure that: assets are maintained in a cost effective manner services can be provided at an appropriate and agreed level through the creation, acquisition, maintenance, operation, rehabilitation and disposal of assets the impact of future assets is known at the time of deciding to provide them assets are maintained at a suitable level for present and future consumers long term needs are known and planned for, both technically and financially

9 Lake Macquarie City Council Asset Management Strategy V Objectives The overall objective of the Asset Management Strategy is to establish a framework to guide the planning, construction, maintenance, and operation of the infrastructure essential for Lake Macquarie City Council to provide services to the community. 1.4 Current Asset Management Capacity and Maturity The current level of asset management awareness within Lake Macquarie City Council is of a high standard and focuses on delivering Council s adopted programs. Each service area has developed good systems and processes to deliver the adopted programs of works. The next stage in developing the asset management maturity at Lake Macquarie City Council will require consolidating and improving corporate systems, developing internal asset management capacity and improving links between Council s long term planning and the service potential of our asset base. An independent Asset Management Maturity Audit (AMMA) was undertaken in 2011 and identified a number of areas of Lake Macquarie s asset management practices that were of a high standard. The audit also identified areas requiring attention. The results of the AMMA have informed the preparation of the subsequent versions of this strategy. A risk rating was attributed to all components of the AMMA requiring attention, and the Strategy was updated and the associated implementation plan prioritised with reference to the risks identified for each key area. 1.5 Future Required Asset Management Capacity Council s Asset Management Strategy has been developed to ensure that we are able to maintain the compliance requirements of NSW Legislation and achieve the targets set for the National Asset Management Frameworks. The AMMA has provided a benchmark to allow us to measure the maturity of our current practices and has identified where Council needs to focus our attention to ensure that we maintain a core level where it exists already and the key tasks we need to undertake to progress towards advanced level asset management. 1.6 Steps to Achieve the Required Asset Management Capacity To achieve the desired asset management capacity Lake Macquarie City Council will continue to implement business processes, systems and resources through: Providing the information required to assist in the management of the infrastructure which supports services to the community Implementing a life-cycle approach to the management of infrastructure assets Ensuring that service delivery needs form the basis of infrastructure asset management Providing a sustainable funding model that meets community needs Demonstrating environmental leadership and minimising the impact on the environment

10 Lake Macquarie City Council Asset Management Strategy V3 9 Ensuring compliance with NSW Legislation, Division of Local Government requirements, and the National Frameworks for Asset Management Providing training and professional development. 1.7 Key Strategies The following key strategies have been developed as a result the Asset Management Maturity Audit undertaken in They are not listed in order of priority. Further information is provided in section 5. Key Strategy 1 Maintain a current and up-to-date Asset Management Policy and Strategy Key Strategy 2 Continue to support the Asset Management Steering Group and provide resources to ensure the successful implementation of the Asset Management Strategy Key Strategy 3 Maintain current Asset Management Plans for the major asset groups Key Strategy 4 Prepare and maintain an up-to-date Asset Knowledge Management Plan Key Strategy 5 Maintain a framework for accurate financial reporting of asset condition and asset performance including sustainability indicators Key Strategy 6 Define the impact of service and planning decisions on Council s assets Key Strategy 7 Link new capital projects to service performance indicators in the Community Plan and risk indicators in the Asset Management Plans Key Strategy 8 Develop and maintain an accurate and integrated component asset register and financial asset register Key Strategy 9 Indentify and prioritise information technology improvements in line with Council s Information Technology and Information Management Strategic Plan Key Strategy 10 Further develop and maintain a Long-Term Financial Plan Key Strategy 11 Further develop levels of service for all asset classes in consultation with the community and stakeholders Key Strategy 12 Assess and further develop asset management knowledge, skills and abilities Key Strategy 13 Maintain an adopted population and demographic model for the City Key Strategy 14 Maintain adequate procedures and tools for maintenance and renewal planning 2. Background The majority of the Council s existing infrastructure stock was built when the provision of essential housing and infrastructure was the priority. During these past periods of infrastructure expansion, little or no analysis was done to determine a strategy to sustain the infrastructure by matching future maintenance and renewal expenditures with future income projections. Additionally, across Australia there has not been a good understanding of the long-term cumulative consequences of decisions to build infrastructure.

11 Lake Macquarie City Council Asset Management Strategy V3 10 Past systems and processes focused on optimising the funds allocated in a given year (or the next 2-3 years) but did not analyse the long-term sustainability of managing the existing infrastructure stock. The pattern of infrastructure construction in the past points to a future peak in infrastructure renewal over and above maintenance activities. Under the Division of Local Government s Integrated Planning and Reporting Framework, agreed levels of service performance are required to have an accompanying long-term financial plan that aims to fully fund the capital, maintenance and operating costs needed to sustain the agreed service level targets. In order to achieve this, a number of service level scenarios and long-term cash flows are run to determine the optimum balance between environmental, economic, social and cultural objectives. Lake Macquarie City Council has been identifying long term funding requirements for infrastructure, for many years and has an established Asset Replacement Reserve (ARR), which is funded using an annual figure indicative of a percentage of cash funding depreciation. This practice means that there is a high level of organisational focus on providing sustainable infrastructure. Unfortunately, other cost pressures on Council, including rising utility prices, rate capping, cost shifting and rising construction costs have resulted in Council using this ARR to fund increasing operational expenses. Council acknowledges this practice is not sustainable or advisable and has developed a long-term financial plan, which seeks to recover the cash funding of depreciation to a sustainable level over the next several years. This Asset Management Strategy is a continuation of a process of improving asset management to ensure that Council is able to bring its infrastructure and asset management practices, processes and systems to a high level. This will be required if Council is to successfully implement the visions and strategies identified in Council s 10 Year Community Strategic Plan and 4 Year Delivery Program. The support of business and the community will also be essential in developing and implementing long-term strategies for Lake Macquarie City Council. In March 2008, the Local Government and Planning Ministers Council (LGPMC) identified that good planning by government is vital. Planning helps remove financial vulnerability and increases resilience to cope with unexpected challenges, such as climate change. It improves decision-making by the community and its leaders about investments in new infrastructure and the maintenance of existing assets. Transparent planning and reporting provide improved accountability and transparency hallmarks of good governance. Accordingly, the LGPMC, which was chaired by the Commonwealth Minister for Infrastructure, Transport, Regional Development and Local Government, agreed to accelerate the implementation of enhanced frameworks for asset management and financial planning. State and Territory governments committed to implementing these new frameworks in consultation with local government. The National Frameworks consists of three main frameworks: Framework 1 - Criteria For Assessing Financial Sustainability Framework 2 - Asset Planning and Management Framework 3 - Financial Planning and Reporting The Asset Planning and Management framework consists of seven elements as follows: 1. Development of an Asset Management Policy - Each state/territory is expected to develop an asset management policy, which provides high-level guidance to assist individual councils in developing their asset management policy;

12 Lake Macquarie City Council Asset Management Strategy V Strategy and Planning - Councils should be provided with guidance from the State on developing an asset management strategy, which is designed to support and implement its asset management policy; 3. Governance and Management Arrangements - Councils should be encouraged to apply and implement good governance and management arrangements which link asset management to service delivery and include assigning roles and responsibility for asset management between the CEO, the Council and senior managers; 4. Defining Levels of Service - Mechanisms should be established that include community consultation to define the levels of service councils are expected to provide from their asset base; 5. Data and Systems A framework for collection of asset management data should be established; 6. Skills and Processes The asset management framework should contain a continuous improvement program; 7. Evaluation The asset management framework should contain a mechanism to measure its effectiveness. 2.1 Legislative Requirements Under the Local Government Amendment (Planning and Reporting) Act 2009 No 67 Council must have a long-term Resourcing Strategy covering the provision of the resources required to implement the 10 year Community Strategic Plan. The Resourcing Strategy is to include asset management planning amongst other areas. Asset management planning requirements of this legislation include the development of an Asset Management Policy endorsed by Council for inclusion in an Asset Management Strategy. The Asset Management Strategy is required to support the Community Strategic Plan and Delivery Program and provide for a minimum timeframe of 10 years. Council also has a number of statutory responsibilities in relation to asset management under the Local Government Act 1993, which outlines Council s functions, responsibilities, and powers, including providing and maintaining community infrastructure. Under this legislation Section 8 of the Local Government Act 1993, which states in part that Council shall: have regard to the long term and cumulative effects of its decisions; bear in mind that it is the custodian and trustee of public assets and to effectively account for and manage the assets for which it is responsible. The Civil Liability Act 2002 also requires Council to minimise the risk to Council from public liability and address the reasonable expectations of the community in managing the risk to the public through the prudent management of Council s assets. 3. Asset Management Framework The following diagram represents Council s Asset Management Framework in the context of the broader Integrated Planning and Reporting Framework. Figure 3.1 Asset Management Framework

13 Lake Macquarie City Council Asset Management Strategy V3 12 Figure 3.1 shows how the key elements of the strategy are being implemented. The Asset Management Strategy is used to improve the bottom two tiers shown. Knowledge to understand the present and plan for the future arises from Asset Management and Risk Management Plans linked to Financial Plans. These should be informed by sound data derived from an integrated asset decision support system. Additional direction is derived through the development of asset specific strategies and plans such as Service Delivery Models, Open Space and Recreation Strategies and Community Facilities Strategies. 3.1 Key Areas of Asset Management Framework Our Asset Management Framework follows key areas of asset management and guides the direction for future systems, processes and planning. 1 Sustainable Environmental Performance - All aspects of the management of the council s assets will include criteria to achieve sustainable environmental performance 2 Life-Cycle Asset Management Principles - A whole of life methodology for managing infrastructure assets will be applied, including:

14 Lake Macquarie City Council Asset Management Strategy V3 13 Planning Acquisition/creation Operation Maintenance Renewal and Disposal 3 Best Value - The Council will balance financial, environmental and social aspects to achieve best value for the community 4 Decision Support Systems and Knowledge The Council s systems will be a corporate resource integrated with core packages and will include the measurement, monitoring, evaluation, and reporting on the performance of assets to enable better and more informed decisions 5 Service Levels Asset service levels will be clearly defined and reflect the needs of the community, meet corporate policy objectives, and balance capital investment, operational safety and costs. 6 Long Term Financial Plan (LTFP) Asset practices, plans, and systems will enable the development of long term financial plans for asset classes 7 Asset Planning Strategies The Council is committed to integrating long-term sustainability objectives into asset planning and project delivery. The Council recognises the need to strategically plan to meet the service delivery needs of stake holders. 8 Asset Management Practices The Council will adopt a consistent and standard methodology to the management of all infrastructure asset groups including the development of infrastructure asset and risk management plans for all asset groups. 9 Responsibility The responsibility for all individual aspects of the management and use of the council s assets will be clearly defined by means of a responsibility matrix or decision chart. Asset management aims to optimise services to the community at a cost and risk that is acceptable. To assist in undertaking this we have and are developing various sustainability planning tools, the primary being Community Strategic Plans, Asset and Risk Management Plans along with the Long Term Financial Plan. The implementation is guided by the Asset Management Strategy within the context of the Asset Management Policy.

15 Lake Macquarie City Council Asset Management Strategy V3 14 Figure Financial Sustainability Tools ASSET MANAGEMENT PLAN Services required, how provided & funds required LONG TERM FINANCIAL PLAN How services are to be funded FINANCIAL SUSTAINABILITY TOOLS Community expectations of services are determined and documented in a wide variety of ways, which include strategies, plans of management, operational plans, and the 10 year community plan. Lake Macquarie specific documents include: Lifestyle 2020 and draft Lifestyle year Community Plan Sports Facilities Strategy Community Facilities Strategy Public Toilet Strategy Pool Service Delivery Model Library Service Delivery Model Ageing and Disability Plan Plans of Management for Community Land Developer Contributions Plans Cycling Strategy Draft Footpath Strategy

16 Lake Macquarie City Council Asset Management Strategy V Asset Management Policy Benefits of Producing an Asset Management Policy The Lake Macquarie City Council s Asset Management Policy provides the guiding principles for: How the Asset Management Strategy and Asset Management Plans connect with other planning documents; The time horizon for financial and service planning; Compliance with mandatory requirements; Ensuring asset provisions meet current policies but also emerging and rapidly changing circumstances and competitive global environments. The Asset Management Policy includes: Council s overall vision and goals for supporting asset management The organisational context and importance of asset management Strategic goals, key performance measures, asset management responsibilities and relationships how asset management will integrate into Council s business processes audit and review procedures Adopted Policy Version 2 of Lake Macquarie City Council s Asset Management Policy was adopted on 28 November The policy was reviewed by Council staff in April 2013 with only minor formatting changes required. The policy is reproduced in Appendix Asset Management Strategy Purpose of the Asset Management Strategy The Asset Management Strategy provides strategic direction for implementing the Asset Management Policy. It guides the management, planning, construction, maintenance and operation of the infrastructure to meet the objectives in the 10 Year Community Plan. The Asset Management Strategy will continue to evolve as the strategic objectives of Council develop and change. The key steps in this process include reviewing the strategic trends, assessing potential impacts on the asset stock, and assessing gaps in the asset knowledge required to prepare the Asset Management Plan and Asset Management Improvement Plan Asset Management Plans Purpose of the Asset Management Plans The Asset Management Plans (AMPs) provide a long-term assessment of the activities and actions required to deliver services related to infrastructure assets. The AMPs document the levels of service currently provided, future demands on assets, as well as planned improvements. They take a whole of life approach to managing infrastructure assets.

17 Lake Macquarie City Council Asset Management Strategy V3 16 Expenditure projections and funding requirements are identified for the next 20 years, allowing for projected cost increases and growth in assets. This includes planning, creation, operation, maintenance, renewal, and disposal. The AMPs detail the methods Council uses to operate and maintain the infrastructure asset network to achieve the following objectives: Ensure the assets are maintained at a safe and functional standard Ensure that all future asset financial commitments are identified and planned for in future operating budgets Ensure that all assets are assessed, maintained, and serviced to the highest possible standard. Ensure that service levels are matched as closely as possible to the Council s ability to fund the service in a sustainable way. Develop cost-effective asset management strategies for the long term Preparation of Asset Management Plans Preparation of AMPs to provide input into Council s Long Term Financial Plan is an important requirement of the NSW Integrated Planning and Reporting Framework and associated legislation. Guidelines for AMPs are shown in the IPWEA International Infrastructure Management Manual (IIMM). The Institute of Public Works Engineering, Australia undertakes workshops specifically to assist councils with preparing AMPs (NAMS.PLUS). Lake Macquarie City Council is part of this program and has access to the templates produced by NAMS.PLUS and these greatly assist Council in preparing and updating these AMPs. Preparation of an AMP is a staged process. The optimum AMP will only be achieved after many stages of development and knowledge improvement. The first step in preparing an AMP is to document existing knowledge and processes, and build up to a comprehensive plan through a process of continuous improvement over time. Council is working towards mature 20-year AMPs covering all infrastructure assets and a 10- year financial plan which is directly linked to these plans. Council has developed AMPs for our five key classes of infrastructure: Roads and Infrastructure Stormwater Parks and Reserves Buildings Traffic and Transportation It is also developing AMPs for Natural Areas and Holiday Parks. All plans will require regular updates to ensure that they remain aligned with the funding provided and with Council s strategic directions. Separate AMPs have also been prepared for Council s commercial property portfolio. This portfolio comprises investment and trading properties retained for income generating purposes.

18 Lake Macquarie City Council Asset Management Strategy V3 17 The properties are not retained to provide core Council services to the community and therefore do not form part of the Council s infrastructure assets. AMPs have been developed for each building that are reviewed regularly in line with expected returns. 3.5 Current Asset Base Council s infrastructure assets are valued at $2.2 Billion, as reported in Special Schedule 7 of the Financial Statements at 30 June This portfolio consists of: a. Roads and associated infrastructure including car parks, bridges and kerb and gutter b. Transportation and Traffic infrastructure including bus shelters, cycleways, and footpaths and street furniture c. Parks and Reserves infrastructure including sports fields, park land, playgrounds, fences, floodlights, jetties, boat ramps, BMX tracks, skate parks, netball courts and tennis courts d. Community Buildings including public toilets, libraries, swimming pools, community centres, child care centres and multi-purpose centres e. Stormwater infrastructure including SQIDS, swales, and drains f. Natural Areas g. Caravan Parks h. Corporate Facilities including the administration centre and car park, depot buildings and associated areas i. Assets held for strategic or commercial reasons. Council s assets have been acquired over many years through a range of measures including by purchase, contract, construction by Council staff, and by donation of assets constructed by developers. 3.6 Management Systems Council has a range of systems and tools for managing the infrastructure assets, including Asset Works Management (AWM), SMEC Pavement Management System (PMS) and Strategic Asset Management (SAM). AWM contains a register of maintainable assets including records of maintenance works and costs. Work orders raised capture material, labour, plant and contract costs. AWM also has the ability to schedule asset maintenance/inspections and perform internal and external job charging. AWM integrates with the financial asset register. PMS is an asset management system designed to store information relating to roads and related infrastructure. This tool is used to model pavement and surface deterioration due to the effects of traffic and environmental factors. It can be used to determine long-term maintenance funding requirements and to examine the consequences on network condition if insufficient funding is available. The PMS is capable of producing accounting reports for asset replacement costs, current written down valuation, and depreciation.

19 Lake Macquarie City Council Asset Management Strategy V3 18 SAM is an asset modelling tool to guide the future capital expenditure needs and has the ability to model the impact of the capital programs on the asset condition and performance. SAM can make assessments based on risk. Council has been implementing this system for non-road related assets. Asset data has been mapped within Council s Geographic Information System (GIS), and further work is underway to validate mapping data to represent the full suite of assets within the AWM and PMS registers. Further improvements to our asset management systems are proposed under Council s Information Technology Strategy. 4. Asset Management Maturity Model The Asset Management Maturity Model is a key tool for measuring, monitoring and reporting on organisational capacity and maturity in accordance with the National Framework for Asset Management. Council engaged an external specialist to conduct an Asset Management Maturity Audit (AMMA) in The audit identified the areas where Council s asset management systems and processes were strong, and prioritised areas for further development and investment. The outcomes of the maturity audit informed revisions of the Asset Management Policy, Asset Management Strategy and Asset Management Plans. The model used for the audit was an enhanced version of the NAMS.PLUS maturity model that was further developed at Gold Coast City Council and Wollongong City Council. This model was preferred because of its alignment with the Advanced National Framework, International Infrastructure Management Manual (IIMM). The model was developed to ensure that it: Supports Lake Macquarie City Council s objectives for asset management Is usable by Lake Macquarie City Council personnel to undertake self-assessment Allows an external auditor to assess and confirm Council s findings Allows compatibility with the International Infrastructure Management Manual (IIMM) Allows repeatability so that subsequent assessments give progressive change in maturity Is applicable at various levels of management and the results can be aggregated to provide a corporate level assessment of asset management maturity Allows identification of opportunities for improvement Satisfies stakeholders that Council understands asset management and has a sound basis for driving improvement. The model consists of 35 Practice Areas that cover the key functions of asset management as applied across the organisation. The practice area level has been the principal basis on which the maturity assessments have been conducted. The practice areas have been grouped into nine Asset Management Themes that represent common areas of focus and enable a level of aggregation of the maturity findings. Each practice area has been assigned a capability category, being the dominant capability associated with that area from the categories of governance, people, processes, technology and data.

20 Lake Macquarie City Council Asset Management Strategy V Maturity Audit Methodology Interviews Key staff were interviewed to ensure a comprehensive assessment of the current maturity and capability. The nature of the interviews broadly cover the management areas of: Technical Asset Custodians Finance Corporate Planning Analysis and Current Maturity Scoring One of the significant strengths of the applied Maturity Model is that each Practice Area has been defined by a series of tailored characteristics (or statements) that are ranked to represent varying organisational maturity levels across a scoring range of 0 to 5. Each characteristic description provides the basis for assessing whether the Council has reached that level of maturity. Based on information provided and evidence determined through the interviews and from review of background information made available, the Council s current level of maturity was assessed for each practice area. 4.2 Current Maturity For each of the 35 practice areas the following information was collated: the current assessed maturity level key observations on the current maturity level implications of the assessed current maturity level an assessed risk score, based on the corporate risk framework a confidence indicator (H/M/L) reflecting the extent of evidence on which the assessment has been based recommendations on the actions required to be taken to reach a minimum or core level of maturity Core Maturity The core target maturity is based on core custodial responsibilities identified in IIMM, and comprises the proposed minimum requirements for Council as custodian of community assets to carry out the following activities: Record and report on the state of all assets to the community Meet current statutory reporting requirements Ensure community safety Provide management information to guide decisions by council on the cumulating impact of decisions The core maturity level also aligns with the expected requirements, and underlying necessary organisational capability, of the pending State Government legislation around Financial Sustainability Reporting, including Asset Management Plans and Long Term Financial Plans. A score of three represents the core maturity level at the recommended minimum level of asset management for the organisation.

21 Lake Macquarie City Council Asset Management Strategy V Advanced Maturity A proposed advanced maturity target for asset management has also been included in the practice area reporting. Projects or initiatives to move to an advanced maturity level of capability in a specific area will be considered under Council's Asset Management Improvement Program. Movement to an advanced level in selected areas would provide the capability to: Understand optimum levels of asset management capacity needed to support and deliver Lake Macquarie City Council s Asset Management goals, objectives and implementation strategies. Run scenarios to understand optimum asset life cycle costs for varying service level options and the link between each scenario and Lake Macquarie City Council s goals. Run scenarios to provide target levels of service at the lowest cost while controlling exposure to risk and loss. 4.3 Maturity Audit Outcomes In addition to the comments and information on the current assessment level, each of the practice area sheets also depicts core and proposed advanced target levels and the associated risk scores. The outcomes from the Maturity Audit are detailed in a separate report and summarised graphically below. Fig Maturity Model Capacity Area Priorities

22 Lake Macquarie City Council Asset Management Strategy V3 21 Fig Maturity Model Risk Priorities

23 Lake Macquarie City Council Asset Management Strategy V Asset Renewal Funding Gap Infrastructure assets have a useful economic life after which renewal should occur to ensure continued service and cost effective maintenance and repairs. The asset management plans indicate that infrastructure asset renewals have the largest impact on the sustainability of Council s asset-related services. Therefore, an important performance indicator relating to asset management is the cumulative renewal funding gap. The cumulative renewal funding gap is assessed by first identifying projected (or required) renewal expenditures, based on a range of factors, including asset condition, age and remaining life. The projected renewal expenditures are then compared to planned (or funded) renewal expenditures over the planning period. This identifies the funding gap between projected and planned renewals. Providing services in a sustainable manner requires this gap to be minimised over the long term through a range of measures such as adjusting services and service levels, rationalising assets and increasing revenue. Figure 5.1 below shows the projected (required) asset renewal expenditure over the next 10 Years for all infrastructure assets. This figure indicates significant variability in projected asset renewals from year to year. The variability can be attributed to historical variability in the value of assets built and dedicated to Council. This reflects the typical boom bust cycle in land development and housing construction markets. It would be difficult for Council to apply the same level of variability to its resources, such as labour, plant and equipment. To enable effective management of Council s workforce and plant, some future renewals are brought forward a year or two. Similarly, where a minimum level of serviceability remains, some renewals are delayed slightly. This creates a smoother renewals works plan, allowing pragmatic management of resources like plant and labour from year to year. Figure 5.1 presents the projected Capital Renewal Funding Gap over the same period. The Capital Renewal Funding Gap was reported at $93,648,000 in Council s 2011/12 financial statements. One of the primary reasons for the current renewal funding gap is that infrastructure costs had been increasing faster than Council s income. Council has progressed towards addressing this through a recent IPART rate variation process. Council will continue to explore a range of measures to manage the funding gap over the long term, including: Improving asset knowledge (performance, condition & remaining life) Improving maintenance to extend asset lives and defer projected renewal Improving efficiency in delivery of maintenance and renewal Developing and using low cost renewal methods Rationalising (disposing) of unnecessary and low-use assets Lower service levels Increasing renewal funding by reducing funding for other services Combinations of all these options.

24 Lake Macquarie City Council Asset Management Strategy V3 23 Asset Renewal Funding Gap $120,000 $100,000 $80,000 $60,000 Required Asset Renew al funding Planned Asset Renew al funding Cumulative Gap $40,000 $20,000 $0 2013/ / / / / / / / / /23 Figure 5.1 Asset Renewal Funding Gap 6. Asset Management Improvement Plan An Asset Management Improvement Plan has been developed based on the findings of the AMMA. It identifies 14 key strategies, each with a number of actions assigned to each strategy to ensure that Council s asset management maturity continues to evolve. The actions have been assigned timeframes depending on the risk rating determined during the AMMA, and responsibilities for completing those actions within the designated timeframes have also been assigned. Performance against the improvement plan is monitored through Council s Asset Management Steering Group. This Group was formed in 2010 to oversee the implementation of the Asset Management Strategy. It has representatives from eight Council departments, which demonstrates our organisation-wide approach to asset management. The group meets bimonthly and its progress reported to Council annually. The key strategies are discussed below and the full Asset Management Improvement Plan is presented in Appendix Key Strategies Key Strategy 1 Maintain a current and up-to-date Asset Management Policy and Strategy Council s Asset Management Policy and Strategy will be reviewed every 4 years as a minimum to coincide with a new Council being elected. Each new Council will be briefed on Council s Asset Management Policy, Strategy and Asset Management Plans, and the reviewed

25 Lake Macquarie City Council Asset Management Strategy V3 24 documents will be reported to Council for formal adoption as part of our Resourcing Strategy by 30 June of the year following each election. Each Strategy will have a 10-year focus, accompanied by a 4-year action plan. The current version of the Asset Management Policy was adopted by the Council on 28 November The contents of this policy are included in Appendix 2. The Asset Management Strategy will continue to evolve as the strategic objectives of Council develop and change. The key steps in this process include reviewing the strategic trends, assessing potential impacts on the asset stock, and assessing gaps in the asset knowledge. Key Strategy 2 Continue to support the Asset Management Steering Group and provide resources to ensure the successful implementation of the Asset Management Strategy It is essential to recognise that asset management is a corporate, not a technical responsibility. The key components of a sound asset management approach can not be achieved within the individual operational areas of Council alone. Key areas where a corporate approach can be demonstrated include: Sound information and systems; Comprehensive asset management planning; Community involvement in establishing service standards; Rigor in financial assessments; and Performance measurement of asset management. The Asset Management Steering Group is an internal group of Council staff from across the organisation with responsibilities for the implementation of the Asset Management Strategy. The continuing role of this group is important in implementing, monitoring and reporting on the corporate approach to asset management. The Executive team supports the group, and resources are provided to ensure that the Strategy as adopted can be implemented. The group undertakes detailed assessments of the resources required to implement this Asset Management Strategy and program, and monitor improvement tasks and milestones. The role of this group is to oversee: Implementing and monitoring the Asset Management Improvement Plan Ensuring that the responsibility for all asset management activities is assigned within the organisation, and that skill levels are sufficient to achieve the required results Coordinating a consistent corporate approach to the preparation of Asset Management Plans Ensuring that the information flow for Financial Planning and Reporting is in place Reporting to Senior Executive on progress Key Strategy 3 Maintain current Asset Management Plans for the major asset groups

26 Lake Macquarie City Council Asset Management Strategy V3 25 Asset management plans (AMPs) are reviewed annually in order to inform Council s annual budget process and to determine the risks associated with available funding levels. All Asset Management Plans contain Risk Management Plans and it is intended that these will be integrated with Council s corporate risk register. Additionally each AMP contains an improvement plan that forms the basis of the systems improvement program for each section within asset management. These actions are cascaded into the annual departmental business plan. Asset Management Plans have been prepared for the following asset groups; Parks and Reserves Community Buildings Roads and Infrastructure Stormwater Transportation Asset Management Plans are currently being prepared for the remaining 4 asset groups; Natural Areas Corporate Assets Caravan Parks Investment and Strategic Assets Council s asset management plans are prepared using the NAMS-PLUS template and include; Levels of Service Future Demand Lifecycle Management Plan Financial Statements and Projections Asset Group specific Improvement Plan Asset Group specific Risk Register Key Strategy 4 Prepare and maintain an up to date Asset Knowledge Management Plan Lake Macquarie City Council requires considerable knowledge of assets to provide services to the community in an effective and efficient manner. The asset knowledge needed to achieve asset management improvement currently exists in core corporate systems as well as in standalone databases, spreadsheets, documents, specialist systems and local knowledge. For data and information under Council s control, the primary operational objective is to ensure that the right decision support information is provided and maintained at lowest possible overall cost whilst controlling exposure to risk and loss. To carry out these functions and deliver the strategy, Council needs a decision support system that can answer both policy and operational questions for asset management.

27 Lake Macquarie City Council Asset Management Strategy V3 26 The decision support system is a combination of technology, operational and policy processes and corporate knowledge of the past current and future information relevant to decision options before Council. The key functions of the decision support system are to: Measure the effectiveness and efficiency of current strategies used to achieve the corporate plan objectives and provide external and internal reporting that reflects the true financial and operational position of Council; Measure and predict the likely results of past policy decisions and current policy options; Measure and report on the operational performance of service providers; Support operational areas using software applications under the control of system owners by providing integrated and current information on all aspects of Councils operation; Provide an information platform for measuring the performance of the current strategies and tactics used for service delivery. The knowledge management plan will bring together the existing asset knowledge, which is currently held in various corporate applications, each being managed by separate system owners (e.g. finance, property, records, service requests, works management) Substantial progress has been made at Lake Macquarie City Council with respect to developing a single asset register that is used for both financial and technical reporting. This level of progress has not been achieved in many councils, and allows Lake Macquarie City Council to now consider the next step of integrating all knowledge systems relating to infrastructure assets. Figure 6.1 Knowledge Management Plan Framework

28 Lake Macquarie City Council Asset Management Strategy V3 27 The Asset Knowledge Management Plan will provide the direction to obtain views of the corporate knowledge base that not only satisfy statutory and operational requirements, but also give a consistent account of future expenditures and management decisions necessary to deliver the Management/Corporate Plan aims. Key Strategy 5 Maintain a framework for accurate financial reporting of asset condition and asset performance including sustainability indicators The efficiency of Council s financial reporting and processing of asset related information is critical. Council has a long history of strong financial reporting for both general finances and asset related finances, however it has historically been undertaken manually and the asset management data and the financial fixed asset data have not yet been integrated making the task onerous with a high potential for error. With the evolution of asset management as a key discipline for local governments there is an opportunity for Council to review our financial policies, procedures and processes in relation to asset management information to ensure that we have integrated systems across the organisation that provide accurate and timely financial statements and reports. Key Strategy 6 Define the impact of service and planning decisions on Council s assets Council not only maintains and replaces assets. We also upgrade existing assets and construct new assets each year as identified in our community plan, community facility strategies and our developer contribution plans. In addition, we receive assets through transfer or donation, most commonly from developers who have been required to construct assets (roads, stormwater devices, footpaths etc.) as part of a sub-division or development approval. It is critical to Council s long-term sustainability that the impact of these upgraded and new assets on Council s maintenance budget and asset replacement responsibilities are known and can be addressed. Key Strategy 7 Link new capital projects to service performance indicators in the Community Plan and risk indicators in the Asset Management Plans As well as understanding the whole-of-life costs associated with new infrastructure it is important for Council to be able to demonstrate that new and upgrade projects are consistent with Council s Community Plan and/or corporate risk registers. Each AMP has an asset group specific risk register, and Council is currently redeveloping an organisational wide risk register. It is critical that these two registers are integrated to ensure that decisions to undertake new capital projects or upgrade works are taken with a clear view of the associated risks of undertaking or not undertaking the project.

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