Framework for Long Term Financial and Asset Management Planning for all Tasmanian Councils

Transcription

1 TASMANIAN STATE GOVERNMENT and LOCAL GOVERNMENT ASSOCIATION OF TASMANIA Framework for Long Term Financial and Asset Management Planning for all Tasmanian Councils FINAL REPORT September 2009

2 Document Control Document ID: LGAT Common Framework Final Report V3 Rev No Date Revision Details Typist Author Verifier Approver 2 27/07/09 First Draft JH JH JR, CC JH 3 20/8/09 Additions re frameworks edits JH JH JR, CC JH 4 11/9/09 Inclusion of comments on implementation plan JH JH JR JH 5 28/9/09 Recommendations reordered to align with Implementation Plan Report tasks JH JH JR JH Project Director Chris Champion, CEO IPWEA, Authors Jeff Roorda, John Howard, Jeff Roorda & Associates Institute of Public Works Engineering Australia Level 12, 447 Kent St. Sydney NSW

3 i Contents Executive Summary... iii Recommendations... vi 1. Introduction Project Scope Deliverables The common Framework for Tasmanian Councils The National Frameworks Australian Council of Local Governments Local Government and Planning Minister s Council Enhanced National Frameworks Framework 1 Assessing Local Government Financial Sustainability Use of indicators Indicators for a National Framework Framework 2 Asset Planning and Management Development of an Asset Management Policy Strategy and Planning Governance and Management Arrangements Defining Levels of Service Data and Systems Skills and Processes Evaluation Framework 3 Financial Planning and Reporting Strategic Longer Term Plan Budget Annual Report Applying the National Framework to Tasmania Financial Planning and Reporting Asset Management Regional Consultation Forums IPWEA NAMS.PLUS Maturity Model Prioritising the Asset Management Improvement Plan Benefits of implementing the common Framework for Tasmania Barriers to Implementing the common Framework for Tasmania Pilot Testing Asset Register Integrity Long Term Financial Plan Template NAMS.PLUS Maturity Model Measuring asset management improvement Evaluation of common Framework for Tasmanian Councils Financial Planning and Reporting Asset Planning and Management South Australian Long Term Financial Plan Template IIMM Asset Management Plan structure Summary of Evaluation of the common Framework Implementation of the Common Framework Tasmanian State Government... 34

4 ii Financial Sustainability Indicators State Guidelines Encouragement and Support for Councils Reporting on Progress State Government and LGAT Encouragement and Support for Councils Overcoming implementation Barriers Local Government Association of Tasmania Individual Councils Professional Bodies References Appendix A Councils attending Regional Consultation Forums Appendix B Pilot Testing Councils Appendix C IPWEA NAMS.PLUS Maturity Model Elements and Characteristics Appendix D Australian Infrastructure Financial Management Guidelines Financial Sustainability Indicators Tables Table 1: Financial Sustainability Indicators for a National Framework... 5 Table 2: NAMS.PLUS Maturity Model Practice Areas Table 3: Characteristics associated with NAMS.PLUS Maturity Model Practice Areas Table 4: Benefits of implementing the common Framework for Tasmanian councils Table 5: Barriers to implementing the common Framework for Tasmanian councils Table 6: NAMS.PLUS Maturity Model Key Performance Indicators Table 7: Pilot Councils evaluation of common Framework for Tasmanian councils Table 8: AIFMG Financial Sustainability Indicators Figures Figure 1: Average Maturity for 22 Responding Councils in Tasmania Figure 2: Example of Corporate Risk Scores for Asset Management Practice Areas... 19

5 iii Executive Summary The Tasmania State Government and Local Government Association of Tasmania have been working together to improve the financial sustainability of Tasmanian councils. The Premier s Local Government Council adopted four key areas for co operation between the State Government and Local Government in its program for The program will provide the opportunity to implement some of the recommendations proposed in the financial sustainability report commissioned by LGAT as well as the enhanced national frameworks for financial sustainability (criteria for assessing financial sustainability, asset management and planning, and financial management and reporting). This project forms one component of the broader Stronger Councils, Better Services program. This project is to evaluate the benefits and barriers to implementing a common Framework for longterm financial and asset management planning for all Tasmanian councils. The project scope has four parts. 1) Through consultation with all Tasmanian councils, determine the benefits and barriers to implementing a common specified framework for long term financial planning and strategic asset management planning in all councils in Tasmania. a. Specifically these are: The Enhanced National Frameworks on Financial Planning and Reporting and Asset Planning and Management, The South Australian Long Term Financial Plan Template, The IIMM Asset Management Plan Structure outlined in the International Infrastructure Management Manual. 2) To pilot full implementation of the frameworks in a number (no less than 4) of diverse councils and evaluate those frameworks in terms of ease of use, ability to deliver useful information and effectiveness in supporting quality governance with a view to enhanced financial sustainability. 3) To deliver a written report to LGAT articulating the outcomes of consultation and pilots and making recommendations in relation to ongoing use of the frameworks and related templates, including ongoing or initial training and development requirements. 4) The preferred provider will work with LGAT and the State Government through the Sustainable Business Working Group as well as other staff as required, to ensure the scope is achieved to the required standard. Regional consultation forums were held in three regional locations. 22 councils were represented at the forums. The forums identified benefits of and barriers to implementing the common Framework for Tasmanian councils.

6 iv Benefits of implementing the common Framework for Tasmanian Councils identified were: providing a mechanism for achieving the target set by the Local Government and Planning Ministers Council to implement the enhanced national frameworks for asset planning and management and financial planning and reporting by 31 December 2010, providing the opportunity to demonstrate that Tasmanian councils can achieve core competency in asset management and financial planning and deliver value for money services to their communities, provide an opportunity for councils to adopt a whole of council perspective to enable continuous improvement of their asset management and financial management practices and set targets for future improvement, provide a mechanism for Tasmanian councils to move from annual budgeting to long term financial planning based on consultation with the community on asset service levels and financial sustainability, provide the opportunity for councils to set and report on targets for demonstrating value for money service delivery to meet the agreed objectives for their community and State and Commonwealth Governments. Barriers to implementing the common Framework for Tasmanian Councils identified were: lack of awareness of importance of common framework to achieve financial sustainability for Tasmanian councils by elected members, council management and staff and the community, inability or unwillingness to allocate required resources to implement the common framework, lack of financial planning and asset management planning skills in councils, lack of leadership in good governance and long term asset management and financial planning. Pilot testing was carried out with six councils in four locations covering: assessment of asset register integrity, assessment of long term financial plan template, review of NAMS.PLUS maturity model used to assess council maturity as a continuous improvement methodology, evaluation of common Framework for Tasmanian councils in terms of: o ease of use o ability to deliver useful information, o supporting quality governance, and o enhancing financial sustainability. The pilot councils were generally supportive of the need to implement the common Framework for Tasmanian councils. The indicated a need for resources (people and guidelines) to assist in implementation and completing asset management and long term financial plans.

7 v Recommendations for each of the four stakeholders were developed to assist each stakeholder in successful implementation of the common Framework. Under the framework, the Tasmanian State Government is required to: provide State Guidelines and policy statements to support councils, and report on progress in implementation of the common Framework for Tasmanian councils to the Local Government and Planning Ministers Council. The State Government and Local Government Association can assist councils by addressing the four major barriers to implementation of the common Frameworks for Tasmanian Councils: lack of awareness of importance of common framework to achieve financial sustainability for Tasmanian councils by elected members, council management and staff and the community, inability or unwillingness to allocate required resources to implement the common framework, lack of financial planning and asset management planning skills in councils, lack of leadership in good governance and long term asset management and financial planning Councils have the major responsibility to allocate the necessary resources to do the work involved in implementing the common Framework for Tasmanian councils and develop asset management plans and long term financial plans by 31 December This is one of the best opportunities Councils will ever have to demonstrate that they are capable managers of infrastructure and can deliver value for money services to their communities. The professional bodies have skills and resources that can be made available to the Local Government Association and councils to assist in implementation of the common Framework for Tasmanian councils.

8 vi Recommendations RECOMMENDATION 1 The State Government review reporting structures in other States including the eight financial sustainability indicators recommended in the Australian Infrastructure Financial Management Guidelines and consider mechanisms for councils to report evidence of progress towards financial sustainability in council s Annual Reports. RECOMMENDATION 2 The State Government investigate the suitability of existing resources for an asset management policy statement, guidelines for asset management strategy and plans and defining levels of service in partnership with the LGAT with a view to adoption of existing available resources with a Tasmanian addendum if required. RECOMMENDATION 3 The State Government encourage and support councils to implement the common Framework for Tasmanian councils through: 1. publishing the use of guidelines and resources to assist councils implement the common Framework for Tasmanian councils, 2. recognising achievements made by councils in implementing the common Framework for Tasmanian councils. RECOMMENDATION 4 The State Government advocate for the development of nationally consistent common reporting indicators for status and improvement reporting to the Local Government and Planning Ministers Council on the State s commitment to implement the enhanced National Frameworks to cover: 1. actions taken by the Tasmanian State Government, 2. actions taken by the Local Government Association of Tasmania, 3. progress reports by councils including, o progress on completion of asset management plans, o progress on completion of sustainable (fully funded) long term financial plans, o progress of councils towards financial sustainability, o progress by councils on achieving core asset management maturity, o progress by councils on eliminating high level asset management risks. RECOMMENDATION 5 The State Government ensure that any data required for a progress reporting mechanism to report to the Local Government and Planning Ministers Council on the State s commitment to implement the enhanced National Frameworks is collected through a single State wide data collection system (such as the existing Tasmania Local Government KPI data collection system).

9 vii RECOMMENDATION 6 The State Government and LGAT increase awareness of the needs for and benefits of action to implement the common Framework for Tasmanian councils by: 1. promotion of the common Framework for Tasmania to councils and the guidelines and resources available to assist councils implement the common Framework, 2. developing a communication strategy to communicate the benefits of implementing the common Framework for Tasmania, 3. communicating the benefits of and progress in implementing the common framework to councils and the community, 4. promoting leaders in implementation of the common framework and providing their experiences and expertise as best practice to all councils. RECOMMENDATION 7 The State Government and LGAT encourage and support councils to implement the common Framework for Tasmania and seek funding to: 1. provide additional resources for councils to achieve a core asset management maturity, 2. develop the NAMS.PLUS maturity model to establish consistent and transparent asset management governance through a council corporate AM governance team reporting either to an internal or regional audit committee that reports audit opinions to each council or to the council, 3. develop the NAMS.PLUS maturity model to provide improvement task resource estimation and maturity improvement reporting capacity for use by councils as a whole of organisation best practice framework to provide councils with a continuous improvement management tool to improve their asset management practices and report on set targets for future improvement. RECOMMENDATION 8 The State Government and LGAT explore opportunities for use of existing skills and resources of professional bodies to assist councils implement the common Framework for Tasmanian councils. RECOMMENDATION 9 The LGAT develop and provide best practice guidance to councils for: 1. enhancing council Strategic Plans to meet the common Framework requirements, 2. enhancing Annual Plans and Budget to meet the common Framework requirements, 3. enhancing Annual Reports to meet the common Framework requirements, 4. improving the effectiveness and efficiency of community consultation processes in the development of Strategic Plans and Annual Plans and Budgets, 5. enhancing the usability and understandability of Annual Plans and Budgets for the community.

10 viii RECOMMENDATION 10 The LGAT further review the suitability of the SA Long Term Financial Plan template for use in Tasmania and as a nationally consistent long term financial planning model, with an expert group of finance professionals to test in greater detail, whether any modifications or detailed guidelines for use of the model is required or if there are any other suitable models that may be used with the aim of providing a suitable long term financial planning model for Tasmania and nationally at reasonable cost. RECOMMENDATION 11 The LGAT provide leadership to councils in implementing the common Framework for Tasmania by adopting a regional support network for councils led by a General Manager in each region and the existing regional professional support networks. RECOMMENDATION 12 The LGAT facilitate skills training for elected members, council management, asset management and financial management staff in conjunction with professional bodies. RECOMMENDATION 13 Councils accept the challenge to improve the asset management and financial planning capacity by agreeing to implement the common Framework for Tasmanian councils and develop asset management plans for major asset classes/categories and long term financial plans to meet the target date set by the Local Government Planning and Ministers Council of 31 December RECOMMENDATION 14 Councils implement a high level cross discipline oversight of the delivery of council s long term financial plan, asset management strategy and plan, achievement of continuous improvement targets and benchmarking with sector and peer councils using a corporate cross discipline asset management governance team and link to reporting requirements under the Local Government Act in council s Annual Report. RECOMMENDATION 15 Councils consider the use of an internal or regional audit committee to provide a high level oversight of council s long term financial plan, asset management strategy and plan, achievement of continuous improvement targets and benchmarking with sector and peer councils using a corporate cross discipline asset management governance team reporting to the internal or a regional audit committee that reports audit opinions to each council. RECOMMENDATION 16 Councils take a regional support approach to implementing the common Framework for Tasmanian councils and provide joint resources for regional project managers working under the General Managers regional network, supported by LGAT to facilitate and support councils implementing the common Framework.

11 [1] 1. Introduction The Local Government Association of Tasmania (LGAT) has undertaken a comprehensive analysis of the financial sustainability of Tasmanian councils resulting in a number of areas being identified for improvement or implementation. The Access Economics Report A Review of the Financial Sustainability of Local Government in Tasmania 1 highlighted the need for councils to move from annual to medium to long term service and financial planning periods. The report went further, indicating that quality long term financial plans needed to be supported by sound asset management plans documenting services to be provided and the funds required to provide the services. At its December 2007 meeting, the Premier s Local Government Council (PLGC) approved a new program for The program framework identifies four key areas for cooperation between the State Government and Local Government: Project A: Enhancing Council Financial Sustainability Project B: Innovation in Service Delivery Project C: Good Governance (Governing for the Community) Project D: The Future Role of the Local Government Board. The program will provide the opportunity to implement some of the recommendations proposed in the financial sustainability report commissioned by LGAT as well as the enhanced national frameworks for financial sustainability (criteria for assessing financial sustainability, asset management and planning, and financial management and reporting). This project forms one component of the broader Stronger Councils, Better Services program. 2. Project Scope The project scope comprises four parts. 1) Through guided consultation with all Tasmanian councils determine the benefits and barriers to implementing a common specified framework for long term financial planning and strategic asset management planning in all councils in Tasmania. a. Specifically these are: The Enhanced National Frameworks on Financial Planning and Reporting and Asset Planning and Management, The South Australian Long Term Financial Plan Template, The IIMM Asset Management Plan Structure outlined in the International Infrastructure Management Manual. b. Consultation to be implemented via three regional one day sessions (South, North, North West). 1 Access Economics, 2007.

12 [2] 2) To pilot full implementation of the frameworks in a number (no less than 4) of diverse councils and evaluate those frameworks in terms of ease of use, ability to deliver useful information and effectiveness in supporting quality governance with a view to enhanced financial sustainability. a. Pilot councils to be identified by LGAT and represent at a minimum a city, smaller urban, and rural council. b. Piloting would entail working through the frameworks in a detailed fashion with relevant staff and aiding in developing systems for data identification and transfer. 3) To deliver a written report to LGAT articulating the outcomes of consultation and pilots and making recommendations in relation to ongoing use of the frameworks and related templates, including ongoing or initial training and development requirements. a. Interim report to be provided by 24 July 2009 b. Final report to be provided by 20 August ) The preferred provider will work with LGAT and the State Government through the Sustainable Business Working Group as well as other staff as required, to ensure the scope is achieved to the required standard. 3. Deliverables The deliverables of the project is a written report to LGAT articulating the outcomes of consultation and pilots and making recommendations in relation to ongoing use of the frameworks and related templates, including ongoing or initial training and development requirements. An interim report is to be provided by 24 July 2009 and the final report to be provided by 20 August The common Framework for Tasmanian Councils The common specified framework for long term financial and strategic asset management planning in all councils in Tasmania are: The Enhanced National Frameworks on Financial Planning and Reporting and Asset Planning and Management, The South Australian Long Term Financial Plan template, The International Infrastructure Management Manual Asset Management Plan structure outlined in Appendix A of the Manual.

13 [3] 5. The National Frameworks 5.1 Australian Council of Local Governments Prime Minister Hon. Kevin Rudd, MP outlined three purposes for the inaugural meeting of the Australian Council of Local Government held on 18 November 2008 to: establish a stronger relationship between the federal and local spheres of government, receive input on the government s commitment to constitutional recognition of local government, begin work on a planning reform to improve infrastructure and services delivery across Australia. His address to the meeting included further statements on the government s desired policy outcomes for Australian local governments. We must improve asset management and financial management. Councils that plan and manage their assets effectively are councils that can deliver value for money to their 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. The Commonwealth will also consider making its future infrastructure investments linked to the implementation of nationally consistent asset management systems Local Government and Planning Minister s Council The Local Government and Planning Ministers Council (LGPMC) at their meeting on 26 March 2007 endorsed three nationally consistent frameworks for assessing financial sustainability, asset planning and management and financial planning and reporting and agreed that each State and Territory governments apply the frameworks in the context of their relationships with their local government sectors 3. The three frameworks are: Assessing local government financial sustainability Asset planning and management, and Financial planning and reporting. 4 This framework provides tools for all local government authorities that are consistent across the areas of financial sustainability, asset planning and management, and financial planning and reporting. The guiding principles of the national framework include a nationally consistent approach to financial planning and reporting which is not limiting and allows implementation of other elements in accordance with local state and local contexts. 2 Prime Minister s address at Australian Council of Local Governments Meeting, 18 November LGMPC, 26 March 2007, 4 LGMPC, 26 March 2007,

14 [4] 5.3 Enhanced National Frameworks The May 2009 meeting of the Local Government and Planning Ministers Council agreed to the enhancement of existing nationally consistent frameworks on local government asset and financial management frameworks to assist councils improve their asset and financial management and planning. They also committed to the acceleration of the implementation of the frameworks. State and Territory governments have committed to implementing these new frameworks in consultation with local government with a target date of 31 December Framework 1 Assessing Local Government Financial Sustainability The first National Framework covers Criteria for Assessing Financial Sustainability and includes two elements: 1. Use of indicators, and 2. Indicators for a national framework Use of indicators The framework states that indicators are signals used to convey evidence of certain directions being taken by a council and to assess whether or not desired outcomes are being achieved. To be effective, indicators should: measure factors which define financial sustainability, be relatively few in numbers, and be based on information that is readily available and reliable, Indicators are measures of outputs or outcomes, individually and without associated explanations, they can only ever tell part of the story. It is important to put indicator results in context and to understand that they only give an indication of where to start looking for the reasons behind differences. The usefulness of indicators is not in the numbers themselves but in the analysis of what is driving the indicator Indicators for a National Framework The framework contains four indicators of financial sustainability and characteristics that may indicate a need for closer examination of the indicators. These are shown in Table 1. 5 ACLG, 2009, Information Paper Asset Management and Financial Planning. 6 LGPMC, 2007, Framework 1, Criteria for Assessing Financial Sustainability, p 3.

15 [5] Table 1: Financial Sustainability Indicators for a National Framework Indicator Indicator Component Characteristics indicating need for closer examination I. Income generating Rates Substantial fluctuations in adopted rate increases effects Rate levels are considerably different to the group median of comparable councils, particularly where councils indicate a long term inability to maintain and renew asses, have persistent underlying operating deficits and significant debt Other own source Lack of transparency in determining pricing of services revenue Operating costs Significant and continuous annual increases in operating costs per assessment Operating results Occurrence of consistent operating deficits Adopted resource plan does not make adequate provision to rectify the situation II. III. IV. Efficiently delivered services appropriate to need Short and long term financial sustainability Ability to maintain, renew and upgrade assets Service levels and costs Absence of robust community engagement process to determine appropriate service levels Liquidity Difficulty in meeting short term financial obligations being experienced No prospect of improvement is evident Debt Councils may be considered less sustainable where: Debt limits capacity to fund essential needs and negatively impacts on capacity to provide operational services Future generations face an unmanageable bill for service provided for current ratepayers The level of net interest costs associated with debt cannot be met conformably from a council s operating revenue Asset renewal Spending is considerably less on capital works compared to depreciation expense; or (preferably) Renewal levels as stipulated in the asset management plan as not being met, ie a renewal gap is not being addressed

16 5.5 Framework 2 Asset Planning and Management The enhanced National Framework for asset planning and management identifies seven elements. [6] 1. Development of a State Government Asset Management Policy/Statement providing high level guidance to councils. 2. All councils to have strategic asset management plans addressing current holdings, forecasts, alignment to strategic plans, defined levels of services and information on assets and subject to performance review. 3. Councils to assign roles and responsibilities for asset management between CEO, Council and senior managers to improve governance and ensure high level oversight and accountability. 4. States and Territories to develop mechanisms to ensure councils define the levels of service they expect to provide from their asset base 5. Enhance collection of asset management data to enable the identification of infrastructure gaps and allow for benchmarking within the sector and council groups 6. Provision (to councils) of a best practice framework to enable continuous improvement of asset management practices, including help in target setting, training, tools and guides 7. The Asset Management framework is to contain an evaluation component Development of an Asset Management Policy Element 1 requires States and Territories to develop an asset management policy statement setting out the policy framework for local government asset management and provides high level guidance to assist councils to develop their own asset management policy. The policy/statement shall encourage councils to develop their own asset management policy which: establishes the objectives for asset management providing a platform for service delivery, integrates asset management with council corporate and financial planning, assigns accountability and responsibility for service delivery together with asset management, broadly takes account of whole of life costing, service levels and financing options, and requires the adoption of an asset management plan informed by community consultation and local government financial reporting, and which is supported by training in financial and asset management.

17 [7] Strategy and Planning Under the strategy and planning element, Councils should be provided with guidance from the State on developing an asset management strategy and plans, the assumptions of which should be independently reviewed. Council s asset management strategy should support and implement its asset management policy. The development of an asset management strategy by councils will enable councils to show how their asset portfolio will meet the service delivery needs of their communities into the future, enable councils asset management policies to be achieved and ensure the integration of councils asset management with their long term strategic plans. The Asset Management Strategy/Strategic Plans will address the following: what assets do we currently have? what is the current situation with regard to council s assets and their management including current & forecast future needs and adequacy of funding? where do we want to be, including fit with goals and objectives of the council plan? how will we get there including a comparison between the current situation and the proposed future to highlight where strategies will need to be developed to cater for any changes? The Asset Management Plans will: include all assets on an asset register, provide information about assets, including particular actions required to provide a defined level of service in the most cost effective manner, incorporate risk management strategies, include financial information such as capital expenditure for renewing, upgrading and extending assets, include consideration of non asset service delivery solutions (leasing, private/public partnerships), recognise changes in service potential of assets, be subject to a performance review, outline an improvement program, and have clear linkages to other council strategic documents Governance and Management Arrangements The enhanced asset management framework will ensure councils apply and effect good governance and management arrangements which link asset management to service delivery. Evidence of good corporate governance in asset management would include councils: assigning roles and responsibilities for asset management between the CEO, the Council and senior managers/ asset managers, and having a mechanism in place to provide high level oversight of the delivery of council s asset management strategy and plan, and maintaining accountability mechanisms to ensure that council resources are appropriately utilised to address councils strategic plans and priorities.

18 [8] Defining Levels of Service States and Territories will develop mechanisms that ensure councils define the levels of service they expect to provide from their asset base. This would include ensuring that councils: establish service delivery needs and define service levels in consultation with the community, establish quality and cost standards for services to be delivered from assets, and regularly review their services in consultation with the community to determine the financial impact of a reduction, maintenance or increase in service Data and Systems The enhanced framework provides for the collection of asset management data to: enable the State and/or councils to measure asset management performance over time, identify infrastructure funding gaps, and enable councils to benchmark within the sector and council groups within their State and across Australia. Councils should also continually work to improve the consistency of the financial data they produce, particularly in relation to capital expenditure and the allocations between maintenance, renewal and upgrade Skills and Processes The enhanced asset management framework contains a continuous improvement program, which includes: providing councils with a whole of organisation perspective and a best practice framework to enable continuous improvement of their asset management practices. This would include helping councils to set targets for future improvement, developing and providing ongoing training programs for councillors, council management and officers on key asset management topics in partnership with peak bodies and agencies, and providing the sector with best practice guides on key asset management topics to improve condition assessment, valuation of assets and accounting treatment Evaluation An asset management framework should contain a mechanism which measures its effectiveness including the asset management programs and initiatives implemented. 7 7 LGPMC, May 2009, Framework 2, Asset Planning and Management, pp 3 5

19 5.6 Framework 3 Financial Planning and Reporting The Planning and Reporting National framework should be given effect through three elements: strategic longer term plan, annual budget, and annual report. [9] These documents provide a framework that covers the council s direction setting, monitoring and resource allocation Strategic Longer Term Plan The strategic longer term plan is to be for a fixed period. As a minimum it covers the term of office of the councillors as well as reflecting the needs of the community for the foreseeable future. The plan brings together the detailed requirements in the council s longer term plans such as the asset management plan and the longer term financial plan and details what council expects to do in the longer term. It also demonstrates how council intends to resource the plan. Public consultation with communities should be central to the development of strategic, longer term planning by councils. The plan should include: where the council is at that point in time current position, where it wants to get to vision and strategic objectives of the council, how it is going to get there strategies for achieving those objectives, mechanisms for monitoring the achievement of the objectives, and how the plan will be resourced Budget Councils prepare a budget for each financial year. The budget should include: estimates of revenue and expenditure with an explanation of the assumptions and methodologies underpinning the estimates, explanation of how revenue will be applied, connection to the strategic objectives, and explanation of the financial performance and position of the council. Information contained in the budget should be presented in a way which is usable and understandable by the community and which can be compared with the audited financial statements. Consultation with communities should be central to the development of the budget. Councils should leave sufficient time to include the outcomes of their community consultation process in preparing their budget.

20 [10] Annual Report Councils prepare an annual report in respect of each financial year. The annual report should be publically available within a reasonable time after the end of the financial year and include: a report on the council s operations during the financial year, audited financial statements for the financial year, an explanation to the community on variations between the budget and the actual results, and the impact on longer term strategic plan of such variances. The report of the council s operations (in the annual report) needs to include a broad range of information, particularly: reviews on the performance of the council against strategic objectives, information on a range of other matters such as major works undertaken, the range of activities undertaken, major policy initiatives and major changes in the council s functions or structures, and details about the council, including information about the councillors, the chief executive officer, senior officers and the organisational structure. Financial statements compiled on an accruals basis in accordance with Australian Accounting Standards and are independently audited, complete the annual report Applying the National Framework to Tasmania The Local Government Association of Tasmania (LGAT) has assessed the implications of implementing the National Frameworks for Tasmanian councils. A summary is shown below Financial Planning and Reporting The National Framework refers to strategic (longer term) plans. Tasmanian legislation requires the preparation of a 5 year strategic plan, prepared in consultation with the community and an Annual Plan which is consistent with the strategic plan. However there is no legislative requirement to link resourcing with the strategic plan and this is a key feature of the National Framework. The National Frameworks do not specifically refer to long term financial plans. However, in 2007 Access Economics recommended that Tasmanian councils adopt a multi year budgeting framework, with a council s budgetary forward estimates being the first three to five years of a long term (10 year) financial plan. 9 Long term financial planning is not a requirement of current Tasmanian legislation or Australian Accounting Standards. However, some State Governments have introduced or are considering legislation requiring Local Government to develop and maintain long term financial plans (at least 10 years) based on sound asset management plans. Generally it is not the intent that legislation is prescriptive about how plans are prepared. The focus is on requiring councils to demonstrate to their communities and other stakeholders, that they are financially sustainable into the future. 8 LGPMC, May 2009, Framework 3, Financial Planning and Reporting, pp Access Economics, 2007, A Review of the Financial Sustainability of Local Government in Tasmania, p 55

21 [11] Long term financial planning is an iterative process and takes considerable effort to get it right. Plans need to be discussed, reviewed and fine tuned in response to such issues as interest rates and inputs from the community on expected service standards. The process of long term financial planning ideally draws together the various objectives, strategies and outcomes from a council s strategic plan and translates them into dollar amounts and performance measures that can be monitored. Specific matters that need to be considered to ensure the financial planning process is effective include assumptions around planning (i.e. inflation, interest rates, demography, business and individual incomes, demand for services); revenue forecasts (i.e. capacity to tax, user pays, grants and subsidies, borrowings, cash reserves); expenditure forecasts (i.e. recurrent and new) and sensitivity analysis that details the various assumptions underpinning the planning process. While templates have been developed in other jurisdictions, there is a need to adapt these to the Tasmanian environment and then provide the appropriate training and capacity building to key council personnel to develop these plans. A legislative framework is likely the most effective tool to drive the reform but it must be underpinned by mechanisms that support councils in the initial period and in ongoing development of these plans. It is anticipated that long term financial plans will eventually be auditable documents. The South Australia Local Government Association published a recommended format for the long term financial plans produced by councils in that State 10. Initial research by LGAT on the utility of this framework in Tasmania indicated this was a suitable form which could be further developed, with clear, meaningful layout that could be further developed if necessary. Although, this commentary was often with the proviso that the completion that provision of information did not place additional onerous and time consuming responsibilities in relation to compliance. Areas identified in the research which may need further development or consideration include: community support contract work avoiding accounting jargon and making them easily understood need to understand interpretations/definitions behind broad headings Asset Management The 2007 report by Access Economics, Financial Sustainability Review noted that in Tasmania, a formal and more rigorous approach to managing infrastructure is necessary, and this must involve the establishment of long term asset management plans. Without accounting for the formal long term asset management needs, a long term financial plan will only be of limited value LGASA, 2007, Financial Sustainability Info Paper 8 Long Term Financial Plans 11 Access Economics, 2007, p 63.

22 [12] A number of recommendations were made in relation to asset management. These included: that LGAT further develop its Asset Management Improvement Program, perhaps in partnership with the Institute of Public Works Engineers and the State Government s Local Government Division, with a view to achieving full participation by all Councils and crating templates to assist councils in preparing their asset management plans. that each council work towards establishing a comprehensive 10 year asset management plan addressing the issues of infrastructure renewal, upgrade and replacement that is integrated within their long term (10 year) financial plan. 12 A survey of councils asset management practices was conducted by LGAT in January 08. From that survey it is evident that: there is a great deal of variation in the level of activity, approaches, timeframes and resourcing of asset management planning across Tasmanian councils, it is clear that some councils are struggling and could potentially benefit from clear tools and guidelines, resourcing is a critical issue, particularly for smaller councils, particular in relation to maintaining asset registers and monitoring the infrastructure backlog and renewals gap, this means there are likely key data gaps in relation to the development of asset management plans that are future looking, the variation in areas like asset valuation and costings means it is difficult to have good comparability between councils. Strategic Asset Management Plans (SAMPs) are not currently required in Tasmania under the Local Government Act 1993 (the Act). However legislated requirements include: a five year (minimum) strategic plan for the municipality developed through community consultation (Section 66), annual plans for each financial year that are aligned with the strategic plan and which summarise major strategies (Section 71), the preparation of estimates of revenue and expenditure for the financial year (Section 82, and records of assets and liabilities (Section 83). A legislated requirement that links the asset management regime to the previously outlined financial planning process is a key consideration in this process, as is the expectation that there will be some auditable components in the long term. The International Infrastructure Management Manual (IIMM) outlines internationally accepted best practice in Asset Management. Section A.1 outlines an Asset Management Plan Structure. 12 Access Economics, 2007, p 84.

23 [13] Broadly, the key elements of asset management, as outlined in the IIMM are: taking a lifecycle approach, use the best current information and random condition/performance sampling, developing cost effective management strategies for the long term, providing a defined level of services and monitoring performance, understanding and meeting the impact of growth through demand management and infrastructure investment, managing risks association with asset failures, sustainable use of physical resources, continuous improvement in asset management practices. 13 These clearly align with the National Framework. Financial and asset management plans must be linked to the strategic plan and each other. IPWEA suggest there is merit in quickly developing an Asset Management plan which initially meets the minimum functionality/requirements rather than waiting until more information becomes available or improved systems and processes are in place. Such first plans should clearly articulate assumptions and the intended program of improvement planning. IPWEA have developed the NAMS.PLUS 14 tools for asset management (this was recommended for use in Tasmania by Access Economics) using the IIMM as the foundation. However there are other tools and guidelines in the market which would also comply with the broad framework. It is proposed that adherence to the IIMM be used by all councils but that councils can choose whether to opt into the IPWEA training. There is a need to identify what support is required to assist councils to achieve the desired outcomes. 6. Regional Consultation Forums LGAT invited all Tasmanian councils to participate in three regional consultation forums located in the South (Hobart), North (Launceston) and North West (Devonport) Regions. 22 Councils attended the regional forums. One of the pilot councils (Kentish) was unable to attend the North West forum and the consultants briefed their representatives at a site meeting on 19 July. Details of councils attending the regional consultation forums are shown in Appendix A. The program for the regional consultation forums was: 1. Welcome and introduction 2. The common Framework for Tasmania 3. IPWEA NAMS.PLUS Maturity Model 4. Assessing the benefits group discussions 5. Assessing the barriers group discussions 6. Summary and close 13 IPWEA, 2006, International Infrastructure Management Manual, Sec 1.1.3, p IPWEA, 2007, NAMS.PLUS Asset Management

24 [14] The forums commenced with an outline of the project objectives and the common framework selected for Tasmania being the: the Enhanced National Frameworks on Financial Planning and Reporting and Asset Planning and Management, the South Australian Long Term Financial Plan template, the International Infrastructure Management Manual Asset Management Plan structure outlined in Appendix A of the Manual. The enhanced national frameworks set the direction for Tasmanian councils and the long term financial plan template and asset management plan template provide the tools to prepare long term financial plan and asset management plans. 6.1 IPWEA NAMS.PLUS Maturity Model The IPWEA NAMS.PLUS Maturity Model is an enhancement of the NAMS.PLUS Gap Analysis Asset Management Performance and Capacity used by the IPWEA to promote consistency in development of asset management plans. The NAMS.PLUS maturity model is based on the International Infrastructure Management Manual 15 and was developed in partnership with Gold Coast City Council (Qld) and will be added to the IPWEA NAMS.PLUS suite of templates and tools to assist practitioners write their asset management plans. The maturity model has been further developed to align with the enhanced national frameworks for financial planning and reporting and asset planning and management. The maturity model: fits the national objectives for improved asset management, is usable by council staff to undertake an objective (measurable) self assessment, allows an internal/external auditor to assess and confirm the council internal assessment findings, 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 the council understands asset management and has a sound basis for driving improvement. The maturity model comprises 35 practice areas covering the key functions of financial planning and reporting and asset planning and management as applied across the council organisation. 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. An outline of the practice areas in the maturity model together with their framework and element is shown in Table 2. Each of the 35 practice areas comprises several characteristics grouped to describe level of maturity within the organisation. The maturity characteristics associated with the Strategic Longer Term Plan practice area are shown in Table 3. Achieving a maturity level requires the attainment of all characteristics within the maturity level. Core maturity is assessed at a maturity score of IPWEA, 2006.

25 [15] Table 2: NAMS.PLUS Maturity Model Practice Areas Ref No Framework Framework Element AM Practice Area Capability 1.1 Financial Planning & Reporting Strategic Longer-Term Plan Strategic Longer-Term Plan Governance Financial Planning & Reporting Strategic Longer-Term Plan Services Plan Governance Financial Planning & Reporting Strategic Longer-Term Plan Long-Term Financial Plan Governance 1.2 Financial Planning & Reporting Budget Annual Budget Governance 1.3 Financial Planning & Reporting Budget Annual Report Governance Financial Planning & Reporting Annual Report Financial Reporting Framework Governance Financial Planning & Reporting Annual Report Sustainability Reporting Governance 2.1 Asset Planning and Management AM Policy AM Policy Governance Asset Planning and Management Strategy & Planning Strategy & Planning Process Asset Planning and Management Strategy & Planning AM Plans Process Asset Planning and Management Governance & Management AM Roles & Practices Governance Asset Planning and Management Governance & Management AM Steering Governance Asset Planning and Management Governance & Management AM Improvement Governance Asset Planning and Management Governance & Management Capital Investment Decisions Process 2.4 Asset Planning and Management Service Levels & Costs Service Levels & Costs Process Asset Planning and Management Data & Systems AM Performance Data Governance Asset Planning and Management Data & Systems AM Data Integrity Data Asset Planning and Management Data & Systems Asset Register Functionality Technology Asset Planning and Management Data & Systems Financial Reporting Functionality Technology Asset Planning and Management Data & Systems Renewals Planning Functionality Technology Asset Planning and Management Data & Systems Condition & Performance Functionality Technology Asset Planning and Management Data & Systems Risk Management Functionality Technology Asset Planning and Management Data & Systems Operations & Maintenance Functionality Technology Asset Planning and Management Data & Systems Unit Rates Process Asset Planning and Management Data & Systems Asset Handover Process Asset Planning and Management Data & Systems Condition & Performance Monitoring Process Asset Planning and Management Data & Systems Condition & Defect Data Data Asset Planning and Management Data & Systems Risk Analysis & Monitoring Process Asset Planning and Management Data & Systems Maintenance & Renewal Planning Process Asset Planning and Management Data & Systems New & Upgrade Planning Process Asset Planning and Management Data & Systems Population & Demographic Model Process Asset Planning and Management Skills & Processes Data Management Skills People Asset Planning and Management Skills & Processes Data Management Framework Governance Asset Planning and Management Skills & Processes Asset Management Planning Skills People Asset Planning and Management Skills & Processes Financial Reporting Skills People

26 [16] Table 3: Characteristics associated with NAMS.PLUS Maturity Model Practice Areas Maturity Score Result Characteristic Plan covers 20 year period Plan covers 10 year period Plan covers 5 year term Plan includes input from long term financial plan and AMPs Plan includes current position statementt and discussion Plan preparation includes community consultation Plan includes strategies for achieving objectives Plan details how plan is resourced Plan details how achievement of strategic objectives is to be measured Plan covers 4 year term of council Draft plan is advertised for public comment Plan reflects needs of community for foreseeable period Plan includes vision and strategic objectives Plan details what council intends to do in period of plan Plan covers 1 year period The questionnaire relating to maturity assessment of all the 35 NAMS.PLUS Maturity Model practice areas is shown in Appendix C. Persons attending the regional consultation forums were requested to complete the maturity model questionnaire to determine their council maturity using their existing knowledge within one hour. The maturity model includes an assessment of risk for each practice areas; however this was not undertaken at the regional consultation forums. The results of the maturity assessment for the average maturity score of the 22 councils attending the regional consultation forums are shown in Figure 1. Framework for Long Term Financial and Asset Management Planning for all Tasmanian Councils

27 [17] Maturity Gap Figure 1: Average Maturity for 22 Responding Councils in Tasmania

28 [18] Figure 1 shows the current maturity of the average Tasmanian council compared to a core maturity. The maturity gap is the difference between current maturity and core maturity for each practice area. Achieving a core maturity requires completion of the characteristics (tasks) that are required for each of the practice area maturities that current practice is below a core maturity (score of 3). The listing of characteristics or tasks to achieve core maturity then becomes the council s asset management improvement plan. Auditing of maturity level is facilitated by the auditor requesting substantiation and justification that the various characteristics are in place within the council. 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 to implement the National Frameworks for asset planning and management and financial planning and reporting and completion of asset management plans and long term financial plans. A score of 3 represents the core maturity level at the recommended minimum level of asset management for the organisation. The characteristics required to achieve the core maturity were developed from the IIMM in partnership with Gold Coast City Council (Qld) and tested with Wollongong City Council (NSW) and Gosford City Council (NSW). 6.2 Prioritising the Asset Management Improvement Plan The NAMS.PLUS Maturity Model includes a risk assessment methodology. Users are requested to estimate the current risk associated with the current level of maturity and the level of risk that is acceptable to the council. This is carried out using the likelihood and consequences methodology outlined in the Australian Risk Management Standard NZ/AS 4360 Risk Management. The risk scores are calculated over a risk score of to generate a comparable risk rating. The tasks to achieve core maturity may then be prioritised using the risk scores and cost/benefit to reduce the risk for each task High Risk Medium Risk 0 44 Low risk The current and target risk scores for each practice generated by the maturity model are shown in Figure 2.

29 [19] High Risk Practice Area Figure 2: Example of Corporate Risk Scores for Asset Management Practice Areas

30 [20] 7. Benefits of implementing the common Framework for Tasmania The benefits of implementing the common Frameworks for Tasmanian councils were discussed at the Regional Consultation Forums held on 30 June 2 July Discussion groups were established and invited to identify benefits of implementation of the common Frameworks. The benefits are summarised in Table 4. Table 4: Benefits of implementing the common Framework for Tasmanian councils Theme Benefit Accountability Benchmarking of council by Federal/State governments and individual councils Governance Improved allocation of resources More informed decisions Improved accountability Provides mechanism for continuous improvement through best practice Improve transparency in service delivery and allocation of resources Consistency in methodologies and reporting Improved engagement with communities on matching service levels and costs to match service levels with affordability Align community expectations with affordability Assist funding business case preparation Assist borrowings business case preparation Legislation will force use of frameworks Achieve sustainability Improved reporting to stakeholders Improved risk management Smooth annual revenue demands Improved assessment of and implementation of new services Improved strategic planning Improved long term budgeting Better value for money for ratepayers Increased focus on looking after what we already have Whole of council focus on sustainable delivery of services Reduce politics in service delivery Assist councils achieve improve long term sustainability in regard to asset and financial planning Competence Assist councils to achieve minimum core competence across the State True understanding of funding gaps Assist councils demonstrate competence in management, accountability and transparency Demonstrates confidence that asset management practices are appropriate practice Improve quantity and quality of data and knowledge available to LGAT on State of Local Government in Tasmania

31 [21] Financial Reporting Improve consistency in financial reporting for LGAT and State for Grants Commission, Information sharing and resource sharing Simplify auditing process through adoption of common approach Standardise useful life definitions Service delivery Resource sharing opportunities to reduce gaps Improve adequacy of funding for community assets Service levels to be agreed and match to affordability through community engagement Identify common problems and share ideas Sharing costs and resources Achieve regional service delivery Ability to cope with peaks in service renewal Proactive approach rather than reactive Community alliances and involvement Skills Building local government skill set Improved skills leading to resource use efficiencies Portability of skill sets Standardise training requirements for councillors and staff More aware elected members and staff Development of best practice in asset management Knowledge transfer for staff between councils Systems Definitions agreed so we can get on with the task Common methodologies for assumptions Processes Common language and definitions Standard condition assessments The benefits of implementing the common framework can be summarised as providing: a mechanism for achieving the target set by the Local Government and Planning Ministers Council to implement the enhanced national frameworks for asset planning and management and financial planning and reporting by 31 December 2010, the opportunity to demonstrate that Tasmanian councils can achieve core competency in asset management and financial planning and deliver value for money services to their communities, an opportunity for councils to adopt a whole of council perspective to enable continuous improvement of their asset management and financial management practices and set targets for future improvement, a mechanism for Tasmanian councils to move from annual budgeting to long term financial planning based on consultation with the community on asset service levels and financial sustainability, the opportunity for councils to set and report on targets for demonstrating value for money service delivery to meet the agreed objectives for their community and State and Commonwealth Governments.

32 [22] 8. Barriers to Implementing the common Framework for Tasmania The barriers to implementing the common Framework for Tasmanian councils were also discussed at the Regional Consultation Forums held on 30 June 2 July Discussion groups were established and invited to identify barriers to implementation of the common Frameworks. The barriers are summarised in Table 5. Table 5: Barriers to implementing the common Framework for Tasmanian councils Theme Barriers Accountability Benchmarking of council by Federal/State governments and individual councils Governance Resources (skills, knowledge and staff time priorities) Lack of a champion to promote the benefits Will and acceptance by elected members and staff (What s in it for me) and competing priorities Desire to keep rates affordable Emotive decision making Politics and influence for new things League tables fear Short term thinking Laziness Willingness to change Effort required to make it happen human nature to retain status quo Commitment from senior management what do we give up? Will to continue process after initial take up Political influences Federal/State elections and policy changes impacts Pressure from ratepayers to keep rates low May be seen as restricting discretionary spending in election cycles Lack of awareness on long term financial planning and asset management planning is improving Commitment of resources for implement and maintain framework Resistance from some councils Public perception of expenditure renewal is less noticeable Less freedom for councils in spending of government grants Politics and parochialism Lack of broad based participation Cost needs to be realistic Financial incentive to go further than present position and improve maturity Competence Perception of asset management being too hard a black box Lack of long term focus Reactive nature of councils Complexity of implementation differing level of maturity in councils, matching systems to suit and funding of implementation Size of councils

33 [23] Financial reporting Hiding of financial sustainability to avoid amalgamation Service delivery Ability to demonstrate benefits Extent of community consultation/engagement required Perception of service level changes Difference in service levels getting agreement and narrowing the diversity of local demands Skills Skills availability Completion between councils for skilled people Election cycle and education of elected members Understanding of concept by councillors, staff and community Education need to avoid big brother is watching apparent position Education o for newly elected members and ongoing for all members o connecting engineering with finance o community why important for them o costing and rating level using the real story Systems Existing data/technology /software limitations System capacity Agreeing on the right model internal approval from council, agreed appropriate KPIs Councils being adverse to being locked into systems Difference in current financial and asset management processes between councils Lack of consistency in systems and interpretations Data/knowledge Awareness not knowing what you don t know Common datasets/definitions Processes Asset management is an art rather than a science Integration/comparability between finance and engineering Different standards Ten year framework too long local government environment subject to frequent changes eg global financial crisis, water & sewerage community service obligations, etc All council departments must agree on beat practice Other Priority status of asset management not sexy The barriers to implementation of the common frameworks for Tasmanian Councils can be summarised as: lack of awareness of importance of common framework to achieve financial sustainability for Tasmanian councils by elected members, council management and staff and the community, inability or unwillingness to allocate required resources to implement the common framework, lack of financial planning and asset management planning skills in councils, lack of leadership in good governance and long term asset management and financial planning.

34 [24] 9. Pilot Testing The Common Frameworks for Tasmania was tested with pilot councils on July. Following a request from the LGAT for councils to nominate as pilot councils, five councils were nominated by LGAT and a sixth volunteered to join the pilot testing at the regional consultation forums. Details of the councils participating in pilot testing are shown in Appendix 2. The project brief required the consultants to pilot full implementation of the frameworks in a number (no less than 4) of diverse councils and evaluate those frameworks in terms of: ease of use, ability to deliver useful information, and effectiveness in supporting quality governance with a view to enhanced financial sustainability. The program for pilot testing comprised four items. 1. Assessment of asset register integrity 2. Assessment of long term financial plan template 3. Review of NAMS.PLUS maturity model 4. Evaluation of common framework 9.1 Asset Register Integrity The pilot council were requested to assess the integrity of their asset register by developing capital renewal expenditure projections for a long term financial plan. The instructions were to select the two major asset classes (roads, drainage, recreation or buildings) and: 1. Set budget projections for Asset Maintenance, Renewal, New and upgrade based on current budget levels, 2. Now calculate forward expenditure requirements. Using financial asset register (at asset level of detail) a. Sort assets by remaining life 0 10 years, b. Sum the Depreciable Amount (current replacement cost less residual) per asset category per year, c. This is the renewal required per asset category per year 0 10 years, d. This is scenario 1 target expenditure to sustain current service levels, e. Compare with 1. (budget projections), f. Adjust as needed by deferring renewal (by adding an adjusted remaining life and rerunning the model). This is work that should be done but not affordable unless priorities and/or funding changes, g. This is scenario 2 budget expenditure reduced service levels (or maintain current service levels), 3. Brief statement (asset management plan) of a few paragraphs (and pictures) of the impact of scenario 2 on risk / service level projections for next 10 yrs. i.e. what are the observations and implications of deferring the work to get from scenario 1 to scenario 2, 4. A few paragraphs on alternatives with supporting figures/estimates/pictures, 5. 3 and 4 are the executive summary of the asset management plan and the core content that informs the asset management policy and strategy.

35 [25] The test was to see if the council s asset register is a reflection of budget settings in their long term financial plan. Two councils attempted this task and developed a ten year capital renewal expenditure projection for their road assets. Council A s target expenditure for 10 years was $37.4M compared to the projected current budget levels of $29.9M, leaving a renewals funding gap of $7.5M or $750,000 per annum. Council B s unfunded renewals value over the 10 years was $2.29M or $229,000 per annum. This was due to road surface assets (seals) being depreciated over an 18 year useful life but current funding levels only allowed a 22 year resurfacing cycle. Both councils are currently depreciating their road assets over a shorter useful life than the useful life that the assets are providing service. The workshop considered that this will result in an increase in: road surface and pavement failures with users experiencing a lower level of service than the level planned by the council, operating and maintenance costs, and risks associated with providing services from road assets. If the current useful life of Council B s road surface assets was changed from 18 years to recognise the current service levels associated with a 22 year resurfacing cycle, it would eliminate the renewals funding gap and more accurately represent the level of service the council is currently providing. Council A should undertake a review of the service levels being provided and adjust the useful lives of its assets to represent the current service levels. Other pilot councils had not attempted this task but reported that they could see no problems in testing the integrity of their asset registers using the methodology proposed. 9.2 Long Term Financial Plan Template The pilot council were requested to test the availability of data for input into and ease of use of long term financial plan for the seven input templates for: Assumptions, Revenue build, Expenses build How do capital renewal expenses fit into template? Current Assets build, Capital build, Reserves, Financing, The pilot councils were requested to trial a simple spreadsheet to develop expenditure categories based on current percentages for three major expenditure categories for Wages, Materials and Contractors, for capital renewal expenditures.

36 [26] Comments on use of the templates include: too many revenue and expenditure input categories could include contract payments with materials, the template would be improved if it provided separate input sheets and projections for major programs/service activities, details required for treatment of overheads, details required for treatment of internal plant hire charges, provide for options for CPI index, LGAT Council Cost index or other index as expenditure index factor, provide options for use of variations outside of CPI + factor, provide for recording of GL account codes used for template input. One council provided specific comments on their review of the long term financial plan template as follows: assumptions used in LTFP template for expenditure requires modification for; o deletion of TVSP increases and NRM levy items (specific to SA), o addition of items for consultancies, contributions (donation and grants) land tax memberships and rates discounts, o additions of notes for Other Financial Charges for (interest, and borrowing cost), o current asset assumptions would be difficult to complete o current liability assumptions would be difficult to complete, revenue build template; o special rates item may not be applicable for Tasmania, o add note for Statutory Charges for (Planning, Building, Animal Control, etc), o query need for New initiatives User Charges Revenue in template o add item for Disposal of Assets (net) prior to Other Revenue item, expenses build template o add items under Employee Costs for On Cost (inside staff) after Salaries (inside staff) and for On Cost (outside staff) after Wages (outside staff), o delete item for TVSPs (may be specific for SA), o query need for items for waste management, domestic recycling, dumping costs and collection costs under materials contractors, o modify Utilities Water item to include Sewerage o change NRM levy to Regional Waste Levy o include rate discounts in Rate Expenses item o estimating productivity savings for employee costs, materials and contractual service and other expenses may be difficult in advance. current assets template o query need for opening, purchase, disposal and closing Investment Securities items in Current Assets Items, o query on Community Group Principal item within Non Current Assets Items, capital built template

37 [27] o o add note after Amounts Specifically for New/Upgraded Assets for (Grants/Contributions) within Capital Receipts query whether Sale of Replaced Assets, Sale of Surplus Assets, Sale of Investment Property and Sale of Real Estate Developments items duplicate items in operating revenue. The comments on the SA long term financial plan model data input templates suggest that the suitability of the model be subject to further review by an expert group of local government finance professionals to test in greater detail, whether any modifications or detailed guidance for use of the model is required or if there are any other models that could be used. The aim should be to provide a model and guidelines for use of the model suitable for all Tasmanian councils at reasonable cost. A nationally developed consistent long term financial plan model would be a desirable outcome. 9.3 NAMS.PLUS Maturity Model The pilot councils were requested to consider use and functionality of the NAMS.PLUS maturity model to audit their council s asset management maturity in four themes for discussion with the consultants: annual value for money service delivery audit to test applicability for demonstrating Councils value for money as a service provider (If Commonwealth gave Council $1M, how could you demonstrate that Council can provide value for money for the Commonwealth investment). Please have your maturity model survey forms available, overview of model, applicability & use for councils, self audit capacity. Comments on the maturity model were very supportive and included: easy to use, can be used in organisations to, o show current maturity, o identify tasks for improvement plan, o record improvement in AM maturity by self audit, agreement required on minimum core AM maturity scores Measuring asset management improvement The pilot testing workshops considered methodology to measure improvement in financial planning and reporting and considered that the maturity model may be an appropriate tool to do this, where the : asset management maturity level was audited for individual councils by their corporate asset management team, tasks required to achieve a core maturity for each practice area were identified and the cost to complete and maintain the tasks over a 3 year period estimated, tasks required to reduce all high level risk to an acceptable risk levels (minimum of medium risk level) were identified and the costs to complete and maintain the tasks over a 1 year period estimated, estimated costs required to achieve a core maturity and reduce risks to an acceptable level can then be compared to funding provided for these tasks. This would then give an indicator of

38 [28] maturity working towards a mature organisation where the tasks to achieve and maintain core maturity and manage risks are fully funded in councils budgets and long term financial plans, asset management maturity levels audit was reported annually to a council internal (or regional) audit committee who would report a maturity level opinion to council, tasks identified to achieve core maturity in 3 years and reduce high level risks in 1 year are prioritised, funded and programmed into the council s continuous improvement program and staff performance plans and progress towards the targets reported to council regularly, The Devonport pilot council workshop identified four key performance indicators of maturity covering areas of financial sustainability and council maturity. These are detailed in Table 6. The first two indicators are financial indicators. Indicator 2 aligns with financial indicators proposed in the Australian Infrastructure Financial Guidelines. Indicators 3 and 4 relate to management of service delivery and risks. The workshops discussed how the maturity model key performance indicators could be subject to audit review to ensure Councils could demonstrate value for money service delivery and transparent governance of community assets. The NAMS.PLUS maturity model is designed to be auditable with evidence of achievement of relevant characteristics within each practice area. Options for auditing of council maturity using the maturity model identified by the workshops are: external audit by competent persons, internal audit by competent council staff member reporting to the General Manager, internal audit by competent council asset management team reporting to the General Manager, internal audit by a council's competent asset management governance team reporting to an audit committee, with the audit committee reporting to council. The audit committee could be an internal council audit committee or a regional audit committee covering several councils with half of their membership trained in use of the maturity model for financial planning and reporting and asset planning and management. The workshops indicated a preference for a review of any maturity level audit by an internal audit committee or external group whose members are competent to review the maturity model audit.

39 [29] Table 6: NAMS.PLUS Maturity Model Key Performance Indicators No. Title Description Calculation Example Target 1 Revenue Consumption Ratio NA 2 Asset Renewal Funding Ratio 3 AM Risk Maturity Ratio Long term forward indicator (>10 yrs). Measure of relationship between depreciation (long term average annual asset consumption) and what is needed in next 10 years. This is an indicator of whether long term average consumption is likely to be more or less than the 10 year optimum projection of what needs to be spent in next 10 years. 10 year indicator. Measure of capacity to withstand financial shocks. Measure of capacity to maintain current service levels with current revenues over the next 10 years without cutting services or increasing risk. Ratio of NPV of optimal 10 year renewals funding to NPV of 10 year renewals expenditure. Measure of capacity to manage and control risks associated with infrastructure based services. Ratio of funding allocated in LTFP to reduce high risk AM & FM practice areas divided by funds required to eliminate high risk practice areas Annual depreciation / optimal 10 year renewals expenditure / 10. Optimal renewal sustains the current level of service at lowest life cycle service cost at acceptable levels of risk. (NPV of 10 year renewals funding funded in 10 year long term financial plan ) / (NPV of optimum 10 year renewal expenditure). Funding allocated to AM & FM practice areas in LTFP to complete tasks required to reduce high risk practice areas to medium risk in 1 year divided by estimated funding to complete tasks required to eliminate high risk practice areas in 1 year. Depreciation expense $9M per year Optimal 10 yr renewals exp $120M for next 10 years Revenue Capacity = 75% ($9M / ($120M /10)) NPV of optimal 10 yr renewals exp $86.9M 10 yr renewals funding in LTFP $59.6M Asset renewal funding ratio = 69% ($59.6M/$86.9M) Supporting evidence List and estimates of renewals that will not be done in next 10 years Funding allocated in LTFP for AM & FM practice areas to eliminate high risk practice areas in 1 year $2M pa Funding required to eliminate high risk practice areas in 1 year $5M pa AM Risk Maturity = 40% ($2M / $5M) Supporting evidence List and estimates of tasks required to reduce high risk practice areas to medium risk 100% 100%

40 [30] 4 AM Capacity Maturity Ratio Measure of capacity and capability to achieve and report on core asset management custodial responsibilities with resources allocated in long term financial plan. Ratio of funding allocated in LTFP for AM & FM practice areas to achieve core maturity levels over 3 years divided by funding required to achieve core maturity level over 3 years Funding allocated to AM & FM practice areas in LTFP to complete tasks required to achieve core maturity levels over 3 years divided by estimated funding to complete tasks required to achieve core maturity levels over 3 years Funding allocated in LTFP for AM & FM practice areas to achieve core maturity over 3 years $10M Est. exp to achieve core maturity in 3 years $12M AM Capacity Maturity = 83% ($10M / $12M) Supporting evidence List and estimates of tasks required to bring current maturity to core maturity 100%

41 [31] 9.4 Evaluation of common Framework for Tasmanian Councils The regional consultation forums and pilot council testing discussed the extent of work that councils would have to comply with the common Framework for Tasmanian councils. This is summarised below Financial Planning and Reporting Strategic longer term plan Councils may need to enhance their existing strategic plans to include: mechanisms for monitoring the achievement of strategies for achieving the strategic objectives of the council, and show how the plan will be resourced. Budget Enhancement of existing Council s Annual Plan and budgets may be required to include: explanation of the assumptions and methodologies underpinning the estimates, connection to strategic objectives, explanation of the financial performance and position of the council, presentation of the information contained in the budget in a way which is usable and understandable by the community. Annual Report an explanation to the community on variations between the budget and actual results, the impact on longer term strategic plan of such variances review of the performance of the council against strategic objectives in the report on council s operations. The framework requires consultation with communities to be central to the development of strategic longer term plans and budgets Asset Planning and Management The framework requires an improvement in asset management performance by local governments. This includes the: development of an Asset Management Policy, development of Asset Management Strategy and Plans, good governance and management arrangements for; o assignment of roles between General Manager, the Council, senior managers/asset mangers, o high level oversight of the delivery of council s asset management strategy and plan, and o maintaining accountability mechanisms to ensure council resources are appropriately used to address council s strategic plans and priorities, defining of levels of service expected to be provided from assets, collection of asset management data to; o enable measure asset management performance over time, o identify infrastructure funding gaps, and

42 [32] o enable councils to benchmark by sector, council groups, within their state and across Australia, a continuous improvement program for skills and processes covering; o a whole of organisation perspective with targets set for future improvement, o training for councillors, council management and officers, and o providing best practice guides to improve condition assessment, valuation of assets and accounting treatments. The survey of councils asset management practices conducted by LGAT in January 08 and reported in Section indicated that the asset management capacity of Tasmanian councils was well below the desired capacity set out in the Framework for Asset Planning and Management. The maturity model survey completed by councils at the regional consultation forms and reported in Section 6.1 supported this position with the average Tasmania councils being below a core maturity level. In this case the average position is represented by the average of maturity scores reported by councils represented at the regional consultation forums. Due to the short timeframe in which the maturity survey was completed, the scores are not completely accurate but give an indicative maturity position for the Tasmanian local government sector. The Local Government and Planning Ministers Councils have set a target date of 31 December 2010 for implementing the frameworks in consultation with local governments. 16 The project brief requires the consultants to evaluate the common framework for Tasmanian councils with the pilot councils in terms of: ease of use, ability to deliver useful information, effectiveness in supporting quality governance with a view to enhanced financial sustainability South Australian Long Term Financial Plan Template The comments on the SA long term financial plan model data input templates, detailed in Section 9.2 suggest that the suitability of the model be subject to further review by an expert group of local government finance professionals to test in greater detail, whether any modifications or detailed guidance for use of the model is required or if there are any other models that could be used. The aim should be to provide a model and guidelines for use of the model suitable for all Tasmanian councils at reasonable cost. It would be desirable that a nationally consistent long term financial planning model, templates and guidelines be developed and make available to all Australian councils IIMM Asset Management Plan structure The pilot councils indicated that they were using the format for asset management plans set out in Appendix A of the IPWEA International Infrastructure Management Manual. The plan format was reported as very usable and easy to use. This format forms the basis for the IPWEA NAMS.PLUS Asset Management, which provides national consistent templates and modelling tools to assist organisations write their asset management plans. 50% of Tasmanian councils are currently using NAMS.PLUS. 16 ACLG, 2009, Information Paper Asset Management and Financial Planning.

43 [33] Summary of Evaluation of the common Framework Discussion from the pilot council testing on each evaluation area is summarised in Table 7. Table 7: Pilot Councils evaluation of common Framework for Tasmanian councils Common Framework Item Ease of Use Deliver useful Information Supporting quality Governance Enhance financial sustainability Financial Planning & Reporting Framework E1. Strategic Yes Yes Yes Yes Planning E2. Budget Yes Yes Yes Yes E3. Annual Yes, Annual Plan adds Yes Yes Yes Report commentary to budget estimates Asset Planning & Management E1. AM Policy Yes Yes Yes Yes E2. Strategy & Yes, examples would Yes Yes Yes Plans assist, training required E3. Governance & Management Yes, high level oversight guidance would assist Yes Yes Yes E4. Levels of Service E5. Data & Systems E6. Skills & Process May need further guidelines and training, examples are available in NAMS.PLUS Data should be collected through enhanced KPI data collection Yes, NAMS.PLUS maturity model would assist in continuous improvement program E7. Evaluation Yes, NAMS.PLUS maturity model could be used SA LTFP Template See comments in Section 9.2 IIMM format for AMPs Yes, recognised internationally. Yes Yes, especially if linked to budget funding decisions Yes Yes, consistency in data and definitions required Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes

44 10. Implementation of the Common Framework Implementation of the common Frameworks in Tasmania involves several stakeholders including the Tasmanian State Government, Local Government Association of Tasmania, individual councils and professional bodies. A suggested role for each stakeholder to achieve the LGPMC s target for implementation of the Framework by 31 December 2010 is proposed and described below. [34] 10.1 Tasmanian State Government The State Government has responsibility for providing State guidelines and policy statements, encouraging and supporting councils with their implementation tasks and reporting on progress on implementation of the common Framework for Tasmania to the Local Government and Planning Ministers Council and to the Tasmanian local government Sector Financial Sustainability Indicators National Framework 1 Assessing Local Government Financial Sustainability recommends the use of indicators of financial sustainability. The IPWEA Australian Infrastructure Financial Management Guidelines 17 (AIFMG) recommends eight indicators of financial sustainability shown in Table 8. The indicators are developed as a set of nationally consistent best practice financial sustainability indicators. An extract from the guidelines covering financial sustainability indicators is attached as Appendix D. Table 8: AIFMG Financial Sustainability Indicators Indicator Description 1. Operating Surplus The operating surplus (deficit) before amounts received specifically for new or upgraded assets and physical resources received free of charge 2. Operating Surplus Ratio A. The percentage by which the major controllable income source (eg rate income) varies from day to day expenses (ie operating expenses B. The percentage by which the major controllable income source plus predictable operating grants varies from day to day expenses 3. Net Financial Liabilities What is owed to others, less moneys held, invested or owed to the entity 4. Net Financial Liabilities The significance of net amount owed compared with the period s income Ratio 5. Interest Cover Ratio The proportion of day to day income (ie operating income) used to pay interest on loans net of interest income 6. Asset Sustainability The ratio of asset replacement expenditure relative to depreciation for a Ratio period. It measures whether assets being replaced at the rate they are wearing out 7. Asset Consumption The average proportion of as new condition left in assets Ratio 8. Asset Renewal Funding Ratio The ratio of the net present value of asset replacement funding accommodated over a 10 year period in a long term financial plan relative to the net present value of projected capital renewal expenditures identified in an asset management plan for the same period. It assesses the entity s financial capacity to fund asset renewal. Reporting on a set of nationally consistent financial sustainability indicators will provide Tasmanian councils and the State Government with evidence of progress towards financial sustainability. 17 IPWEA, 2009, pp

45 [35] RECOMMENDATION 1 The State Government review reporting structures in other States including the eight financial sustainability indicators recommended in the Australian Infrastructure Financial Management Guidelines and consider mechanisms for councils to report evidence of progress towards financial sustainability in council s Annual Reports State Guidelines The common Framework provides for States/Territories to: develop an asset management policy statement setting out the policy framework for local government asset management and provides high level guidance to assist councils develop their own asset management policy, provide guidance on developing an asset management strategy and asset management plans, develop mechanisms that ensure councils define the levels of service they expect to provide from their asset base. There are existing guidelines available from the Victoria Department of Planning and Community Development covering the first two items: Sustaining Local Assets, Local Government Asset Management Policy Statement, 18 Guidelines for developing an Asset Management Policy, Strategy and Plan. 19 Levels of service are required to be defined within Section 3 of an Asset Management Plan in the International Infrastructure Management Manual format. IPWEA NAMS.PLUS uses the IIMM format for asset management plans and defines service levels in two parts: community levels of service how the customer perceives the service, and technical levels of service how the organisation provides the service using technical terms. The NAMS.PLUS training program contains a level of service section and includes group exercises to develop community and technical level of service. The NAMS.PLUS guidelines contain 30 pages of examples of levels of service developed at training workshops. The IPWEA National Asset Management Strategy committee (NAMS.AU) has identified the need to prepare a national guide to defining and measuring service levels and will consider this as a project for the NAMS.AU 2009/ /13 Business Plan. It is suggested that the State Government investigate the suitability of existing tools/resources in conjunction with the Local Government Association with a view to adoption of existing tools/resources with a Tasmanian addendum if considered necessary. RECOMMENDATION 2 The State Government investigate the suitability of existing resources for an asset management policy statement, guidelines for asset management strategy and plans and defining levels of service in partnership with the LGAT with a view to adoption of existing available resources with a Tasmanian addendum if considered necessary. 18 DPCD, DPCD, 2004,

46 Encouragement and Support for Councils The State Government can encourage and support councils implement the common Framework for Tasmania through: [36] publishing and promoting the use of guidelines and resources to assist councils implement the common Framework for Tasmanian councils in a visible manner, recognising achievements made by councils in implementing the common Framework for Tasmanian councils. RECOMMENDATION 3 The State Government encourage and support councils to implement the common Framework for Tasmania through: 1. publishing and promoting the use of guidelines and resources to assist councils implement the common Framework for Tasmanian councils, 2. recognising achievements made by councils in implementing the common Framework for Tasmanian councils Reporting on Progress State and Territory governments have committed to implementing the enhanced National Frameworks on Asset Planning and Management and Financial Planning and Reporting in consultation with local governments with a target date of 31 December. These progress reports are be made to the Local Government and Planning Ministers Council on the State s commitment to implement the enhanced National Frameworks. The progress report could include: actions taken by the Tasmanian State Government, actions taken by the Local Government Association of Tasmania, progress reports by councils including, o progress on completion of asset management plans, o progress on completion of sustainable (fully funded) long term financial plans, o progress of councils towards financial sustainability, o progress by councils on achieving core asset management maturity, o progress by councils on reducing high level asset management risks. The NAMS.PLUS Maturity Model Key Performance Indicators outlined in Table 6 provide data for progress towards financial sustainability (Indicators 1 and 2), achieving core maturity (indicator 3) and reducing high asset management risks (indicator 4). Any data required for reporting progress in implementing the enhanced National Frameworks should be collected through a single State wide data collection system such as the existing Tasmania Local Government KPI data collection system.

47 [37] RECOMMENDATION 4 The State Government advocate for the development of nationally consistent common reporting indicators for status and improvement reporting to the Local Government and Planning Ministers Council on the State s commitment to implement the enhanced National Frameworks to cover: 1. actions taken by the Tasmanian Government, 2. actions taken by the Local Government Association of Tasmania, 3. progress reports by councils including, o progress on completion of asset management plans, o progress on completion of sustainable (fully funded) long term financial plans, o progress of councils towards financial sustainability, o progress by councils on achieving core asset management maturity, o progress by councils on eliminating high level asset management risks. RECOMMENDATION 5 The State Government ensure that any data required for a progress reporting mechanism to report to the Local Government and Planning Ministers Council on the State s commitment to implement the enhanced National Frameworks is collected through a single State wide data collection system (such as the existing Tasmania Local Government KPI data collection system) State Government and LGAT Encouragement and Support for Councils The State Government and LGAT can encourage and support councils in implementing the common Framework for Tasmania through: developing and implementing a communications strategy to promote the benefits of the common Framework for Tasmanian councils, seek funding to provide additional resources for councils to achieve a core asset management maturity, seek funding to develop the NAMS.PLUS maturity model to improve its self audit capacity, task resources estimation and maturity improvement reporting capacity for use by councils as a whole of organisation best practice framework to provide councils with a continuous improvement management tool to improve their asset management practices, set targets for and report on future improvement performance Overcoming implementation Barriers The State Government and LGAT can continue their lead role by addressing the four major barriers to implementing the common Framework for Tasmanian councils identified in Section 8: lack of awareness of importance of common framework to achieve financial sustainability for Tasmanian councils by elected members, council management and staff and the community, inability or unwillingness to allocate required resources to implement the common framework, lack of financial planning and asset management planning skills in councils, lack of leadership in good governance and long term asset management and financial planning

48 [38] Awareness promotion of the common Framework for Tasmania to councils and the community, communicating the benefits of and progress in implementing the common framework to councils and the community, promoting leaders in implementation of the common framework and providing their experiences and expertise to all councils, Resources providing best practice guidance to councils for, o enhancing council Strategic Plan to meet the common Framework requirements, o enhancing Annual Plans and Budget to meet the common Framework requirements, o enhancing Annual Reports to meet the common Framework requirements, o improving the effectiveness and efficiency of community consultation processes in the development of Strategic Plans and Annual Plans and Budgets, o enhancing the usability and understandability of Annual Plans and Budgets for the community, developing the NAMS.PLUS maturity model into a self audit, task resource estimation, and maturity improvement reporting capacity for use by councils as a whole of organisation best practice framework to provide councils with a continuous improvement management tool to improve their asset management practices and set targets for future improvement, seeking Federal funding to assist councils implement the common framework for Tasmanian councils and complete asset management plans and long term financial plans by 31 December Skills facilitating skills training for elected members, council management, asset management and financial management staff, Leadership developing a leadership team of key General Managers representing the three regions to promote a regional approach to implementation of the common Framework. RECOMMENDATION 6 The State Government and LGAT increase awareness of the needs for and benefits of action to implement the common Framework for Tasmanian councils by: 1. promotion of the common Framework for Tasmania to councils and the guidelines and resources available to assist councils implement the common Framework, 2. developing a communication strategy to communicate the benefits of implementing the common Framework for Tasmania, 3. communicating the benefits of and progress in implementing the common framework to councils and the community, 4. promoting leaders in implementation of the common framework and providing their experiences and expertise as best practice to all councils.

49 [39] RECOMMENDATION 7 The State Government and LGAT encourage and support councils to implement the common Framework for Tasmania and seek funding to: 1. provide additional resources for councils to achieve a core asset management maturity, 2. develop the NAMS.PLUS maturity model to establish consistent and transparent asset management governance through a council corporate AM governance team reporting either to an internal or regional audit committee that reports audit opinions to each council or to the council, 3. develop the NAMS.PLUS maturity model to provide improvement task resource estimation and maturity improvement reporting capacity for use by councils as a whole of organisation best practice framework to provide councils with a continuous improvement management tool to improve their asset management practices and report on set targets for future improvement. RECOMMENDATION 8 The State Government and LGAT explore opportunities for use of existing skills and resources of professional bodies to assist councils implement the common Framework for Tasmanian councils.

50 10.3 Local Government Association of Tasmania The Local Government Association of Tasmania is the representative body for local government in Tasmania. The Association s role includes to: [40] promote efficient administration and operation of local government in Tasmania, protect the interests, rights and privileges of councils, foster and promote relationships between local government with the governments of Tasmanian and Australia, represent the interests of member councils, and provide support services to member councils. The Association has taken a lead role in addressing the financial sustainability of Tasmanian councils through its Report A Review of the Financial Sustainability of Local Government in Tasmania 20, and working with the Tasmanian Government through the Premier s Local Government Council (PLGC) and the Stronger Council s Better Services program. RECOMMENDATION 9 The LGAT develop and provide best practice guidance to councils for: 1. enhancing council Strategic Plans to meet the common Framework requirements, 2. enhancing Annual Plans and Budget to meet the common Framework requirements, 3. enhancing Annual Reports to meet the common Framework requirements, 4. improving the effectiveness and efficiency of community consultation processes in the development of Strategic Plans and Annual Plans and Budgets, 5. enhancing the usability and understandability of Annual Plans and Budgets for the community. RECOMMENDATION 10 The Local Government Association of Tasmania further review the suitability of the SA Long Term Financial Plan template for use in Tasmania and as a nationally consistent long term financial planning model, with an expert group of finance professionals to test in greater detail, whether any modifications or detailed guidelines for use of the model is required or if there are any other suitable models that may be used with the aim of providing a suitable long term financial planning model for Tasmania and nationally at reasonable cost. RECOMMENDATION 11 The LGAT provide leadership to councils in implementing the common Framework for Tasmania by adopting a regional support network for councils led by a General Manager in each region and the existing regional professional support networks, RECOMMENDATION 12 The LGAT facilitate skills training for elected members, council management, asset management and financial management staff in conjunction with professional bodies. 20 Access Economics, 2007.

51 [41] 10.4 Individual Councils Individual council have the responsibility to implement the common Framework for Tasmanian Councils within their organisation and allocate the required resources to do so. Councils should have a high level oversight of the delivery of council s strategic plan, asset management policy, strategy and plan including achieving of continuous improvement plan targets, benchmarking with sector and peer councils. This may be achieved by creating a corporate asset management governance team reporting to an internal/regional audit committee that reports their audit opinion to each council. RECOMMENDATION 13 Councils accept the challenge to improve the asset management and financial planning capacity by agreeing to implement the common Framework for Tasmanian councils and develop asset management plans for major asset classes/categories and long term financial plans to meet the target date set by the Local Government Planning and Ministers Council of 31 December RECOMMENDATION 14 Councils implement a high level cross discipline oversight of the delivery of council s long term financial plan, asset management strategy and plan, achievement of continuous improvement targets and benchmarking with sector and peer councils using a corporate cross discipline asset management governance team and link to reporting requirements under the Local Government Act in council s Annual Report. RECOMMENDATION 15 Councils consider the use of an internal or regional audit committee to provide a high level oversight of council s long term financial plan, asset management strategy and plan, achievement of continuous improvement targets and benchmarking with sector and peer councils using a corporate cross discipline asset management governance team reporting to the internal or a regional audit committee that reports audit opinions to each council. RECOMMENDATION 16 Councils take a regional support approach to implementing the common Framework for Tasmanian council and provide joint resources for regional project managers working under the General Managers regional network, supported by LGAT to facilitate and support councils implementing the common Framework.

52 [42] 10.5 Professional Bodies Professional bodies such as Local Government Managers Associations (LGMA) and the Institute of public Works Engineering Australia (IPWEA) have training and other resources and staff networks than can be used to assist the stakeholders implement the common Framework. For example the IPWEA has considerable asset management resources developed through its National Asset Management Strategy Committee (NAMS.AU). LGMA and IPWEA are partners in the Australian Centre of Excellence for Local Government. The objective of the Centre is to enhance professionalism and skills, showcase innovation and best practice, and facilitate a better informed policy debate. The new Centre was announced by the Prime Minister at the inaugural Australian Council of Local Government meeting on 18 November The aim of the Centre s Organisation Capacity Building Program is to build the capacity of local government to work as an effective partner in the Australian system of government. Over the initial 5 years of operations, this will require initiatives across a wide range of national agendas. The early focus will be on the two most pressing issues currently faced by local government nationally, these being the planning, maintenance and renewal of public assets and infrastructure, and the long term financial sustainability of local councils. In this regard, the program will draw heavily on the expertise, experience and participation of our practitioner partners to provide national guidance in identifying, developing and promoting the adoption of successful models of asset management and financial planning. 21 The State Government and LGAT would be served by continuing existing partnerships and working arrangements with professional bodies to use their existing and future resources to assist councils in implementing the common Framework for Tasmanian councils. 21 ACELG, 2009,

53 [43] References Access Economics, 2007, A Review of the Financial Sustainability of Local Government in Tasmania, Report for the Local Government Association of Tasmania, Hobart. ACLG, 2009, Information Paper Asset Management and Financial Planning, Australian Council of Local Government, Canberra, ACLG, 2009, Summary of Outcomes, Second meeting of the Australian Council of Local Government, Australian Council of Local Government, Canberra DPCD, 2003, Sustaining Local Assets: Local Government Asset Management Policy Statement, Department for Planning and Community Development, Local Government Victoria, Melbourne, 738E00019F4B?OpenDocument. DPCD, 2004, Guidelines for Developing an Asset Management Policy, Strategy and Plan, Department for Planning and Community Development, Local Government Victoria, Melbourne, 738E00019F4B?OpenDocument. IPWEA, 2006, International Infrastructure Management Manual, Institute of Public Works Engineering Australia, Sydney, IPWEA, 2007, NAMS.PLUS Asset Management, Institute of Public Works Engineering Australia, Sydney, IPWEA, 2009, Australian Infrastructure Financial Management Guidelines, Institute of Public Works Engineering Australia, Sydney, LGASA, 2007, Long term Financial Plans, Financial Sustainability Info Paper 8, Local Government Association of South Australia, Adelaide, LGASA, 2008, Long term Financial Plan A Model Format for Financial Information, Financial Sustainability Info Paper 16, Adelaide, LGMPC, 2007, Framework 1 Criteria for Assessing Financial Sustainability, Local Government Financial Sustainability National Consistent Frameworks, Local Government and Planning Ministers Council, Canberra, LGMPC, 2009, Framework 2 Asset Planning and Management, Local Government Financial Sustainability National Consistent Frameworks, Local Government and Planning Ministers Council, Canberra, ent.pdf.

54 [44] LGMPC, 2009, Framework 3 Financial Planning and Reporting, Local Government Financial Sustainability National Consistent Frameworks, Local Government and Planning Ministers Council, Canberra, ting.pdf.

55 [45] Appendix A Councils attending Regional Consultation Forums Forum Location South (Hobart) Tuesday 30 June North (Launceston) Wednesday 1 July North West (Devonport) Thursday 2 July Councils represented at Forum Brighton Council Central Highlands Council Clarence City Council Derwent Valley Council Flinders Island Council Glenorchy City Council Hobart City Council Kingsborough Council Southern Midlands Council Tasman Council Break O Day Council Dorset Council Launceston City Council Meander Valley Council Northern Midlands Council West Tamar Council Burnie City Council Central Coast Council Circular Head Council Devonport City Council Latrobe Council Waratah Wynyard Council Kentish Council was unable to attend the regional forum and consultation was arranged through a visit to the Council offices on Friday 3 July.

56 [46] Appendix B Pilot Testing Councils The councils nominated by LGAT for pilot testing of the frameworks were: Latrobe Council Devonport City Council Waratah Wynyard and Circular Head Council Kentish Council At the North West Regional Consultation Forum, Central Coast Council volunteered to be a pilot council. The pilot testing program was: Wednesday 15 July 9.00 am Devonport City and Central Coast Councils at Devonport Thursday 16 July 9.30 am Waratah Wynyard and Circular Head Councils at Smithton Friday 17 July 9.00 am Kentish Council at Sheffield 1.30 pm Latrobe Council at Latrobe

57 [47] Appendix C IPWEA NAMS.PLUS Maturity Model Elements and Characteristics NAMS.PLUS Maturity Model Framework Financial Planning & Reporting Inherent Risk Current Risk Element Practice Area Strategic Longer Term Plan Strategic Longer Term Plan UID 1.1 Current Score Confidence Level LMH: Target Score Target Adv: Capability Governance Question Does your council have a strategic longer term plan? Core Target Risk Maturity Score Result Characteristic Plan covers 20 year period Plan covers 10 year period Plan covers 5 year term Plan includes input from long term financial plan and AMPs Plan includes current position statement and discussion Plan preparation includes community consultation Plan includes strategies for achieving objectives Plan details how plan is resourced Plan details how achievement of strategic objectives is to be measured Plan covers 4 year term of council Draft plan is advertised for public comment Plan reflects needs of community for foreseeablee period Plan includes vision and strategic objectives Plan details what council intends to do in period of plan Plan covers 1 year period Framework for Long Term Financial and Asset Management Planning for all Tasmanian Councils

58 [48] NAMS.PLUS Maturity Model Framework Financial Planning & Reporting Inherent Risk Current Risk Element Practice Area Strategic Longer Term Plan Services Plan UID Current Score Confidence Level LMH: Target Score Target Adv: Capability Governance Question Does your Council have an adopted strategic plan for the provision of infrastructure and land based services to the community? Risk Level Core Target Risk Maturity Score Result Characteristic Documented feedback on long term cumulative impacts of decisions on service levels Optimum life cycle costs known and supported by high levels of data, information and knowledge in all key areas. Political decisions informed by multiple service level / cost / funding model data, information and knowledge on tradeoffs for economic, social, cultural and environmental consequences Service performance and utilisation targets included Developed via an integrated planning process with: Community & Corporate Plans Long term financial plan AMPs Service profiles included Total cost of services included Service issues and risks included Strategic plan adopted by Council LTCIP Current plan with regular updates on service delivery performance against targets LTCIP Strategic plan covers a period of at least ten years LTCIP done Current and target levels of service included Overall LTCIP done but not adopted by Council Draft Long Term Community Infrastructure Plan (LTCIP) in some areas. Framework for Long Term Financial and Asset Management Planning for all Tasmanian Councils

59 [49] NAMS.PLUS Maturity Model Framework Financial Planning & Reporting Inherent Risk Element Practice Area Strategic Longer Term Plan Long Term Financial Plan UID Current Score Confidence Level LMH: Target Score Target Adv: Capability Governance Question Does your council have a comprehensivee long term financial plan? Current Risk Core Target Risk Risk Level Maturity Score Result Characteristic Optimum life cycle costs known and supported by high levels of data, information and knowledge in all key areas. Political decisions informed by multiple service level / cost / funding model data, information and knowledge on tradeoffs for economic, social, cultural and environmental consequences Documented feedback on long term cumulative impacts of decisions on service levels The long term asset management plan is the forward programme of all asset operational, maintenance, renewal, expansion and upgrade costs needed to deliver the levels of service set out in the Long Term Community Infrastructure Plan. The Asset Management Plan must match the levels of funding set out in the Long Term Financial Plan Long Term Financial plan adopted by Council Long Term Financial plan directly aligned with service provision strategic plan Long Term Financial plans covers a period of at least ten years Financial plan cashflow forecasts based on AMPs for infrastructure and land based services Financial plan separates maintenance and operations OPEX Financial plan structure separates renewal and new & upgrade CAPEX Financial plan structure aligned with services provided by Council Revenues and Costs consistent across all servicee areas 10 year costs balanced to 10 year funding model Revenues and Costs not consistent across all service areas and costs prepared as budget bids Long Term financial plan is based on SA LTFP model or equivalent Revenue projection only Framework for Long Term Financial and Asset Management Planning for all Tasmanian Councils

60 [50] NAMS.PLUS Maturity Model Framework Financial Planning & Reporting Inherent Risk Element Practice Area Budget Budget UID 1.2 Current Score Confidence Level LMH: Target Score Target Adv: Capability Governance Question Does your council prepare an annual budget? Current Risk Core Target Risk Risk Level Maturity Score Result Characteristic Budget contains indicators of achieving council's strategic objectives Budget is linked to achieving the council's strategic objectives AMPs and LTFP are updated for budget decisionss after adoption of budget Budget is prepared in accordance with AMPs and long term financial plan Budget is presented in a way that is usable and understandable by the community Budget can be compared to audited financial statements Budget contains explanations of assumption and methodologies underpinning estimates Budget contains explanations of how revenue will be applied Budget is adopted after specific community consultation Budget is publically available and readily accessible to all interested readers Budget contains estimates of revenue and expenditure for year Budget connects to the council's strategic objectives and contains statement of how council will meet the goals and objectives of the strategic plan Budget includes an explanation of the council's financial position and performance Budget is adopted after public advertising and consideration of comments received Annual budget is available to those who ask Framework for Long Term Financial and Asset Management Planning for all Tasmanian Councils

61 [51] NAMS.PLUS Maturity Model Framework Financial Planning & Reporting Inherent Risk Element Practice Area Annual Report Annual Report UID 1.3 Current Score Confidence Level LMH: Target Score Target Adv: Capability Governance Question Does your Council publish an annual report? Current Risk Core Target Risk Risk Level Maturity Score Result Characteristic Annual report includes results of Value for Money audit Annual report includes State of the Assets report Annual report is published by Oct 30 each year Annual report reviews the performance of the council against strategic objectives Annual report contains information on major works and major policy initiatives Annual report contains information on major changes in council's functions or structures Annual report reports on impact of budget/actual result variances on longer term strategic plan Annual report contains details of councillors, CEO & senior officers Budget performance reports and audited financial statements are presented in common format Annual report includes short and long term sustainability indicators Annual report contains audited financial statements Annual report is published by Nov 30 each year Annual report is widely available to the general public Annual report reports on council's operations for the year in terms of goals and objectives for preceding year Annual report contains explanation on variations between budget and actual results Annual report is published each year Framework for Long Term Financial and Asset Management Planning for all Tasmanian Councils

62 [52] NAMS.PLUS Maturity Model Framework Financial Planning & Reporting Inherent Risk Element Practice Area Annual Report Financial Reporting Framework UID Current Score Confidence Level LMH: Target Score Target Adv: Capability Governance Question Does your council have a framework for asset financial reporting? Current Risk Core Target Risk Risk Level Maturity Score Result Characteristic Annual review to ensure framework is optimal for compliance full documentation and review of consistent approach Full asset accounting policy documented compliance reviewed by internal audit Documented procedures for financial processing of asset additions Documented procedures for financial processing of asset disposals Documented guidelines for asset valuations, including revaluation interval Asset valuation template defined Annual asset financial reporting status monitoring and reporting in place Co ordinated and consistent approach no documented framework Asset financial reporting and/or asset accounting policy developed and adopted Valuations are undertaken by external valuers, council staff or council staff with external checking Reactive no framework Individual fragmented processes no co ordinated approach Framework for Long Term Financial and Asset Management Planning for all Tasmanian Councils

63 [53] NAMS.PLUS Maturity Model Framework Financial Planning & Reporting Inherent Risk Element Practice Area Annual Report Sustainability Reporting UID Current Score Confidence Level LMH: Target Score Target Adv: Capability Governance Question Does your council report externally on financial sustainability? Current Risk Core Target Risk Risk Level Maturity Score Result Characteristic Annual report on service level scenarios and corresponding funding models with adopted scenario and funding model showing tradeoffs between risk, TBL service outcomes, service value Service levels and costs reported to the community Annual performance evaluation by Council on service performance (outcomes) against targets Sustainability reporting on: rating & other revenue sources (including changes) liquidity debt operational expenditure (including changes) maintenance expenditure (including changes) renewal expenditure (including comparison to depreciation and AMPs renewal programs) new & upgrade expenditure (including comparison to AMP new & upgrade programs) Audited Compliance Report audit check of supporting data to ensure outputs materially correct Minimum compliance report not audited Framework for Long Term Financial and Asset Management Planning for all Tasmanian Councils

64 [54] NAMS.PLUS Maturity Model Framework Asset Planning and Management Inherent Risk Element Practice Area AM Policy AM Policy UID 2.1 Current Score Confidence Level LMH: Target Score Target Adv: Capability Governance Question Does your council have an adopted asset management policy? Current Risk Core Target Risk Risk Level Maturity Score Result Characteristic Policy guides informed political decisions informed by data, information and knowledge on tradeoffs for economic, social, cultural and environmental consequences Policy provides a reasonable basis for long term integrated decision making by the councils and for participation decision making by the community and subsequent accountability to the community about the activities of the council Policy establishes objectives for AM providing platform for service delivery Policy integrates AM with council corporate and financial planning Policy assigns accountability and responsibility for service delivery with AM Policy takes account of whole of life costing, service levels and financing options Policy required adoption of AMPs informed by community consultation and LG financial reporting Policy requires training in financial and asset management for councillors and staff Policy is aligned with AM improvement program Policy adopted by council Policy in Place but not adoptedd by Council OR some awareness by Council of asset management policy elements and asset management principles Framework for Long Term Financial and Asset Management Planning for all Tasmanian Councils

65 [55] NAMS.PLUS Maturity Model Framework Asset Planning and Management Inherent Risk Element Practice Area Strategy & Planning AM Strategy UID Current Score Target Score Target Adv: Confidence Level LMH: Capability Process Question Does your council have an asset management strategy? Current Risk Core Target Risk Risk Level Maturity Score Result Characteristic Strategy includes analysis of cost/benefit options for service delivery Strategy drives asset management planning and service delivery Strategy shows how asset portfolio will meet service delivery needs of community in the future Strategy integrates council's AM with long term strategic plans Strategy supports and implements council's AM policy Strategy shows the current situation on assets and their management inc forecast future needs and adequacy of funding Strategy details where the councils wants to be Strategy details out how the councils get to where it wants to be including comparison with current situation and proposed future to highlight where strategies will need to be developed to cater for any changes Strategy shows what assets the council has Strategy fits with the council strategic plans Strategy in place but not adopted by council Framework for Long Term Financial and Asset Management Planning for all Tasmanian Councils

66 [56] NAMS.PLUS Maturity Model Framework Asset Planning and Management Inherent Risk Element Practice Area Strategy & Planning AM Plans UID Current Score Target Score Target Adv: Confidence Level LMH: Capability Process Question Does your council have adopted asset management plans? Current Risk Core Target Risk Risk Level Maturity Score Result Characteristic AM Strategy & AMP provide optimum value for defined service using scenarios to inform service performance. Multiple scenarios to show best value options Planning for new and upgraded assets driven by Asset Management Strategy and AMP. Highly responsivee to policy direction AMP includes: asset life, condition, risk and criticality profiles current and target levels of service and costs of services demand management plans renewal, new & upgrade, maintenance and operations forward programs and cashflow forecasts rationalisation and disposal programs and cashflow forecasts asset performance & utilisation measures and targets risk management strategies consideration of non asset solutions (eg leasing or PPPs) AMPs use IIMM Appendix A format AMPs show clear linkage to other council strategic documents AMPs prepared with community consultation AMPs recognise changes in service potential of assets AMPs adopted by Council AMPs cover a period of at least ten years Separate AMP's for each asset group high level overall framework but not consistent AMPs in place but not regularly reviewed or adopted Framework for Long Term Financial and Asset Management Planning for all Tasmanian Councils

67 [57] 1 AMPs include all assets on asset register AMPs Include an improvement plan Reactive and fragmented Framework for Long Term Financial and Asset Management Planning for all Tasmanian Councils

68 [58] NAMS.PLUS Maturity Model Framework Asset Planning and Management Inherent Risk Element Practice Area Governance & Management AM Roles & Practices UID Current Score Confidence Level LMH: Target Score Target Adv: Capability Governance Question Does your council have good management practices linking AM to service delivery? Current Risk Core Target Risk Risk Level Maturity Score Result Characteristic Common purpose and focus on service delivery with agreed nexus between funding and service outcomes Bottom up and top down feedback on performance with defined measures for service delivery and governance Roles and responsibilities for AM are reviewed within term of council Roles and responsibilities performance for council, GM and senior officers is reviewed annually Accountabilities linked to service delivery and governance performance measures Audit committee has minimumm competency training on asset management maturity audits Roles and responsibilities for AM are defined for the council, GM and senior managers Council has a formal process for high levels oversight of delivery of AM Strategy and plans Council annually reviews whether the use of resources to address council's strategic plans and priorities is appropriate Organisational structure and manager's position statements clearly define accountabilities All assets have a defined asset custodian/owner Staff performance reviews include assessment of AM roles and accountabilities (eg KPIs) Accountabilities defined in matrix or policy (approved by CEO or council) for assets Asset management improvement plan tasks incorporated into staff plans and performance reviews Asset management roles and responsibilities defined in staff position statements Documented agreements (eg SLAs) where responsibilities are devolved to others Asset management roles defined at operation level mainly reactivee to current issues Ad hoc and reactive Framework for Long Term Financial and Asset Management Planning for all Tasmanian Councils

69 [59] NAMS.PLUS Maturity Model Framework Asset Planning and Management Inherent Risk Element Practice Area Governance & Management AM Steering UID Current Score Confidence Level LMH: Target Score Target Adv: Capability Governance Question Does your council have a multi disciplinary AM steering committee? Current Risk Core Target Risk Risk Level Maturity Score Result Characteristic Steering committee provides progress feedback on optimum scenarios and TBL trends Steering committee provides progress reports on state of the assetss and service delivery against targets Documented meeting schedule, agendas and minutes Quarterly or half year reporting to executive on improvement issuess and progress Annual reporting to audit committee on improvement issues and progress Steering committee regularly reviews improvement program direction and progress Multi discipline representationn Documented terms of reference/charter Steering committee in place Framework for Long Term Financial and Asset Management Planning for all Tasmanian Councils

70 [60] NAMS.PLUS Maturity Model Framework Asset Planning and Management Inherent Risk Element Practice Area Governance & Management AM Improvement UID Current Score Confidence Level LMH: Target Score Target Adv: Capability Governance Question Does your council have an AM improvement program approved by the executive? Current Risk Core Target Risk Risk Level Maturity Score Result Characteristic Annual capability audit on capacity needed to deliver corporate plan with linked service delivery plan and capacity Aligned with AM policy AM capability building direction (eg. vision, objectives and outcomes) approved by executive Annual or bi annual audit of improvement progress has been scheduled Improvement initiatives prioritised based on cost and benefit (incl. risk) Detailed resource requirements documented for each initiative Indicative resource estimates for each initiative compiled Each improvement initiative has a project manager assigned Long term financial plan includes approved AM improvement resource requirements Defined target maturity levels for AM practice areas Council has a training program for councillors, council management and officers on key AM topics Council uses best practice guides for condition assessment Council uses best practice guides for valuation of assets Council uses best practice guides for accounting treatments for assets Audit completed to determinee current maturity levels for AM practice areas Documented improvement program approved by executive but not regularly reviewed or monitored Fragmented Improvement Programme not whole of organisation Internal awareness raising (communication plan) for improvement program Framework for Long Term Financial and Asset Management Planning for all Tasmanian Councils

71 [61] NAMS.PLUS Maturity Model Framework Asset Planning and Management Inherent Risk Element Practice Area Governance & Management Capital Investment Decisions UID Current Score Target Score Target Adv: Confidence Level LMH: Capability Process Question Does your Council have a defined process for making capital investment decisions? Current Risk Core Target Risk Risk Level Maturity Score Result Characteristic Documented feedback on long term cumulative impacts of decisions on service levels Optimum life cycle costs known and supported by high levels of data, information and knowledge in all key areas. Political decisions informed by data, information and knowledge on tradeoffs for economic, social, cultural and environmental consequences Asset capital investment principles adopted by Council using value management principles Risk of not making/making investment considered for: environmental impact damage to property and/or reputation public liability and litigation direct and/or indirect costs Documented asset capital investment business cases that consider: whole of life costs service, project and asset risks benefits Longer term capital investment information and processes in some areas and is fragmented and focussed on short term growth Reactive and annual Framework for Long Term Financial and Asset Management Planning for all Tasmanian Councils

72 [62] NAMS.PLUS Maturity Model Framework Asset Planning and Management Inherent Risk Current Risk Element Practice Area Service Levels & Costss Service Levels & Costs UID 2.4 Current Score Target Score Target Adv: Confidence Level LMH: Capability Process Question Does your Council have a defined process for determining current and target levels of service and costs? Core Target Risk Risk Level Maturity Score Result Characteristic Optimum life cycle costs known and supported by high levels of data, information and knowledge in all key areas. Political decisions informed by data, information and knowledge on tradeoffs for economic, social, cultural and environmental consequences Documented feedback on long term cumulative impacts of decisions on service levels Documented outcomes of customer/stakeholderr consultation (eg. community survey) Trend analysis of service request history Monitor and report to Council on changing customer/stakeholder expectations Target levels of service defined, taking into consideration: technical and/or legislative equirements community consultation population and demographic change projections Current levels of service defined Service profiles defined Service inputs, outputs and outcomes defined Service issues and risks defined Cost of services defined (overhead costs includedd in service costs) Defined process to adjust levels of service based on outcomes of annual budgets Defined relationship between levels of service with cost of service Service levels in some areas fragmented Service levels not set Framework for Long Term Financial and Asset Management Planning for all Tasmanian Councils

73 [63] NAMS.PLUS Maturity Model Framework Asset Planning and Management Inherent Risk Element Practice Area Data & Systems AM Performance Data UID Current Score Confidence Level LMH: Target Score Target Adv: Capability Governance Question Is council's data suitable for measuring AM performance over time? Current Risk Core Target Risk Risk Level Maturity Score Result Characteristic Audit committee reports to council annually on AM maturity and improvement performance Council benchmarks its infrastructure funding gap against State and National indicators Council benchmarks its AM performance improvement against State and National indicators Council reports annually on its AM improvement performance against set targets Council reports annually on its infrastructure funding gap, trends and reasons for any change Capital works program budget reports clearly identify capital renewal and upgrade/ /new expenditures Council' s capital threshold policy defines allocations between maintenance, capital renewal and upgrade/new expenditures Council' s costing system consistently allocates expenditure to maintenance, capital renewal and capital upgrade/new Council benchmarks its performance against State KPIs Framework for Long Term Financial and Asset Management Planning for all Tasmanian Councils

74 [64] NAMS.PLUS Maturity Model Framework Asset Planning and Management Inherent Risk Element Practice Area Data & Systems AM Data Integrity UID Current Score Target Score Target Adv: Confidence Level LMH: Capability Data Question What is the integrity of core component data in Council's asset registers? Current Risk Core Target Risk Risk Level Maturity Score Result Characteristic Data is of the required level accuracy to support service level analysis (utilisation, performance) Data is complete (i.e. all core attribute data, as per the core/minimum data set, is recorded) and supportss advanced AM decision making No assets are recorded with a remaining life less than zero All assets with remaining life of less than 2 years are reviewed against forward works programs and useful/remaining life adjusted to recognisee projected remaining life No assets are recorded with a Depreciated Replacement Cost of negative value, zero or equal to residual value Reviews of useful life, residual method and depreciation method are carried out and documented annually Data integrity audits have been undertaken Data is current (i.e. up to date) Assets are recorded in the register at component level (eg. For valuation and depreciation purposes) Component data is reconciled to the financial asset register Component data driven by short term operations and statutory reporting needs with statutory reporting consistent Component data driven by short term operations needs Framework for Long Term Financial and Asset Management Planning for all Tasmanian Councils

75 [65] NAMS.PLUS Maturity Model Framework Asset Planning and Management Inherent Risk Element Practice Area Data & Systems Asset Register Functionality UID Current Score Confidence Level LMH: Target Score Target Adv: Capability Technology Question Does your Council have a consolidated asset register with the required functionality? Current Risk Core Target Risk Risk Level Maturity Score Result Characteristic Asset register linked to finance and service delivery needs shows history and driven by asset knowledge management strategy Asset register supports financial service delivery needs full audit trail. Linked to knowledge management strategy Asset register for component data is integrated with the financial asset register Other AM applications/modules access core component data from the asset register Single (i.e. consolidated) organisation wide asset register for component data Asset register functionality available for: access and security controls (eg limited use of free text, mandatory fields must have data), user defined multiple hierarchies (eg. asset category, location, service, parent/child), user defined data sets assigned by asset category, maintain audit trails of changes to core component data, enter, edit and view data spatial and non spatial data via map based graphical user interface, Fragmented and incomplete asset register driven by short term financial reporting and operations needs. Finance register centralised Fragmented and incomplete asset register driven by short term financial reporting. Minimal operations or component register Framework for Long Term Financial and Asset Management Planning for all Tasmanian Councils

76 [66] NAMS.PLUS Maturity Model Framework Asset Planning and Management Inherent Risk Element Practice Area Current Score Data & Systems Financial Reporting Functionality Target Score UID Target Adv: Confidence Level LMH: Capability Technology Question What asset financial reporting functionality is available in your Council's AM applications? Current Risk Core Target Risk Maturity Score Result Characteristic Financial reporting supports multiple scenarios and developing optimised life cycle costs and short with short/med/long term costs for each scenario Financial reporting shows historical trends and current position for operational / maintenance / renewal / upgrade / expansion costs AM applications have the functionality available to: maintain audit trails of changes in asset values assign assets as non depreciable (eg. land parcels, earthworks, etc) calculate depreciation based on straight line or consumption curves calculate asset valuations based on unit rate tables assign assets for financial reporting based on criteria (eg. thresholds, asset type, etc) process and report on asset additions and disposals System reports based on cost control and audit reporting Spreadsheet based reporting only Framework for Long Term Financial and Asset Management Planning for all Tasmanian Councils

77 [67] NAMS.PLUS Maturity Model Framework Asset Planning and Management Inherent Risk Current Risk Element Practice Area Current Score Data & Systems Renewals Planning Functionality Target Score UID Target Adv: Confidence Level LMH: Capability Technology Question What asset maintenance & renewals planning functionality is available in your Council's AM applications? Core Target Risk Maturity Score Result Characteristic AM applications are integrated with asset register in accordance with asset knowledgee management strategy and support long term asset management plans and long term financial plans Scenarios planning used to determine optimum life cycle costs and inform value for money trade offs Maintenance and renewal planning functionality are driven by asset management knowledge strategy with specialised functionality for each service areaa AM applications have the functionality available to: rationalise operations, maintenance and renewals programs based on available budget, perform scenario and cost/benefit analysis of treatment options, forecast operations, maintenance and renewal costs, generate maintenance and renewals programs Maintenance and renewal planning functionality fragmented and driven by supporting budget bids Minimum functionality for reactive maintenance and delivering annual budget Framework for Long Term Financial and Asset Management Planning for all Tasmanian Councils

78 [68] NAMS.PLUS Maturity Model Framework Asset Planning and Management Inherent Risk Current Risk Core Target Risk Element Practice Area Data & Systems Condition & Perf. Functionality UID Current Score Confidence Level LMH: Target Score Target Adv: Capability Technology Risk Level Question What asset condition assessment, defect identification and performance monitoring functionality is available in your Council's AM applications? Maturity Score Result Characteristic AM applications are integrated with asset register in accordance with asset knowledgee management strategy and support long term asset management plans and long term financial plans Scenarios planning used to measure and report on service performance Mobile computing used to manage condition and performance functionality. Mobile computing using GIS to link condition and performance of assets to best value service delivery Condition and performance functionality are driven by asset knowledge management strategy with specialised functionality for each service area AM applications are driven by asset knowledge management strategy with specialised applications for each service area AM applications have the functionality available to: predict asset life based on: condition; deterioration rate; material; utilisation; maintenance frequency and age compare actual deterioration rate with predictive model Condition and performance assessment functionality fragmented and driven by supporting risk management Minimum functionality for reactive maintenance and delivering annual budget Framework for Long Term Financial and Asset Management Planning for all Tasmanian Councils

79 [69] NAMS.PLUS Maturity Model Framework Asset Planning and Management Inherent Risk Element Practice Area Data & Systems Risk Management Functionality UID Current Score Confidence Level LMH: Target Score Target Adv: Capability Technology Question What asset risk management functionality is available in your Council's AM applications? Current Risk Core Target Risk Risk Level Maturity Score Result Characteristic Scenarios planning used to measure and report on service performance and risk tradeoffs Risk and service delivery cost tradeoff known and managed in accordance with asset knowledge management strategy and support long term asset management plans and long term financial plans Risk management functionality driven by asset knowledge management strategy with specialised functionality for each service area to monitor failure modes AM applications have the functionality available to: predict asset criticality based on various criteria, analyse risk based on consequence and likelihood of failure, record risk assessments and link to assets in the asset register, record risk treatments and costs and link to assets in the asset register, record residual risk and risk cost on completion of risk treatment Risk Management fragmented across functions initial risk registerss in place Minimal paper or spreadsheet risk register of known risks Framework for Long Term Financial and Asset Management Planning for all Tasmanian Councils

80 [70] NAMS.PLUS Maturity Model Framework Asset Planning and Management Inherent Risk Element Practice Area Current Score Data & Systems Operations & Maint. Functionality Target Score UID Target Adv: Confidence Level LMH: Capability Technology Question What asset operations & maintenance functionality is available in your Council's AM applications? Current Risk Core Target Risk Risk Level Maturity Score Result Characteristic Scenarios planning used to measure and report on service performance and risk tradeoffs Mobile computing used to monitor and report on asset service delivery performance outcomes and inform better value service delivery Risk and service delivery cost tradeoff known and managed in accordance with asset knowledge management strategy and support long term asset management plans and long term financial plans Operations and maintenance functionality driven by asset knowledge management strategy with specialised functionality for each service areaa to monitor operations and maintenance costs and trends Mobile computing used to manage reactive service requests, inspections and job despatch /work orders. Mobile computing used scheduled asset inspections and data capture AM applications have the functionality available to: generate work orders base on schedules, intervention levels and customer requests bulk generate work orders based for particular maintenance activities or locations link work orders to customer requests (i.e. integration with customer application) link work orders to assets in the asset register assign work completion targets and monitor completion monitor asset usage perform facilities management functions Operations and Management Functionality fragmented across functions no overall trends Reactive to control risk and deliver budget Framework for Long Term Financial and Asset Management Planning for all Tasmanian Councils

81 [71] NAMS.PLUS Maturity Model Framework Asset Planning and Management Inherent Risk Element Practice Area Data & Systems Unit Rates UID Current Score Target Score Target Adv: Confidence Level LMH: Capability Process Question Does your Council have defined processes for determining asset unit rates? Current Risk Core Target Risk Risk Level Maturity Score Result Characteristic Unit rates allow service level scenarios for varying options of materials and asset lives and supported by statistical analysis of asset behaviour Unit rates allow different service levels and supported by statistical analysis of actual costs Unit rates include analysis for residual values Unit rates maintained in database Documented process for annual review of unit rates verified against actual costs Construction cost indices review documented and substantiated (eg for interim revaluations) Annual reviews of constructionn costs indices verified against actual costs undertaken Unit rates benchmarked against: other Councils; industry reference publications; etc Unit rates review documentedd and substantiated (eg. for full revaluations) Common use of unit rates (with adjustments as required) for: valuations development infrastructure charges and development bonds maintenance and renewal planning new & upgrade planning Unit rates for each network asset class fragmented across asset classes with no feedback Minimal and fragmented Framework for Long Term Financial and Asset Management Planning for all Tasmanian Councils

82 [72] NAMS.PLUS Maturity Model Framework Element Practice Area Current Score Asset Planning and Management Data & Systems Asset Handover Target Score UID Target Adv: Inherent Risk Confidence Level LMH: Capability Process Question Does your Council have formal processess for the handover of assets to asset custodians/owners? Current Risk Core Target Risk Risk Level Maturity Score Result Characteristic Handover process includes performance review with feedback into AMP and LTFP Whole of life cashflow projections provided for non standard developer contributed assets Handover process includes performance review Defined processes for the handover and acceptance of assets: from internal construction sections (i.e. day labour) to asset custodians/owners from external construction contractors (i.e. external contract works) to asset custodians/owners from the development section (i.e. contributed assets) to asset custodians/owners Controls in place that ensuree as constructed data is provided at or prior to asset handover Process include documentedd asset inspections during constructionn Separate process for each network asset class fragmented acrosss asset classes with no feedback Minimal and fragmented Framework for Long Term Financial and Asset Management Planning for all Tasmanian Councils

83 [73] NAMS.PLUS Maturity Model Framework Asset Planning and Management Inherent Risk Current Risk Element Practice Area Data & Systems Condition & Perf. Monitoring UID Current Score Target Score Target Adv: Confidence Level LMH: Capability Process Question Does your Council have defined processes for asset condition assessment, defect identification and performance monitoring? Core Target Risk Risk Level Maturity Score Result Characteristic Performance measured and reported for adopted scenario in AMP. Process and information driven by asset knowledge management strategy and linked to AMP, LTFP and RMP Performance measures defined and measured Conditionn assessments use consistent rating approach across Council (eg 0 5, 0 10) and can be reported in an aggregate (1 very good 5 unserviceable) council position Documented condition assessment & defect identification procedures Documented condition assessment & defect identification programs Inspectionn schedule prioritisation based on asset risk profile (i.e. age, utilisation, criticality, etc) Documented reporting of asset condition profiles Conditionn assessment & defect identification (i.e. inspection) schedules in place and followed Separate process for each network asset class fragmented acrosss asset classes with no feedback Minimal and fragmented Framework for Long Term Financial and Asset Management Planning for all Tasmanian Councils

84 [74] NAMS.PLUS Maturity Model Framework Asset Planning and Management Inherent Risk Element Practice Area Data & Systems Condition & Defect Data UID Current Score Target Score Target Adv: Confidence Level LMH: Capability Data Question Does your Council have asset condition data? Current Risk Core Target Risk Risk Level Maturity Score Result Characteristic Data is available and accessible to enable performance measurement and reporting for adopted scenario in AMP. Process and information driven by asset knowledge management strategy and linked to AMP, LTFP and RMP Service Performance measures defined and measured. Condition data uses multivariable criteria linked to service and performance standards. Shift in emphasis from asset condition to service performance and value Condition and defect data current and appropriate Cost benefit analysis for appropriate condition & defect assessments Data is minimal and fragmented and driven by financial reporting requirements rather than service level reporting. Consistent approach acrosss council Separate process for each network asset class fragmented across asset classes with no feedback No condition or defect data Framework for Long Term Financial and Asset Management Planning for all Tasmanian Councils

85 [75] NAMS.PLUS Maturity Model Framework Asset Planning and Management Inherent Risk Element Practice Area Data & Systems Risk Analysis & Monitoring UID Current Score Target Score Target Adv: Confidence Level LMH: Capability Process Question Does your Council have defined processes for asset risk analysis and monitoring? Current Risk Core Target Risk Risk Level Maturity Score Result Characteristic RMP & AMP provide optimumm value for defined service using scenarios to inform service performance Risk Management Plan linked to AMP Documented options to manage risk Asset risks identified Asset criticality defined Operational risk management suitable for asset class Documented asset risk profiles Asset risk assessments undertaken (based on corporate approach and templates) Asset risk treatments identified Asset risks and risk treatments linked to maintenance and renewal programs Asset risk treatments are assigned an accountable officer Asset risks monitored (eg scheduled asset risk reviews) Asset risk information can be consolidated for corporate level risk analysis and reporting Corporate level risk defined for assets Defined process for each asset group high level overall framework Reactive and fragmented Framework for Long Term Financial and Asset Management Planning for all Tasmanian Councils

86 [76] NAMS.PLUS Maturity Model Framework Asset Planning and Management Inherent Risk Current Risk Element Practice Area Current Score Data & Systems Maintenance & Renewal Planning Target Score UID Target Adv: Confidence Level LMH: Capability Process Question Does your Council have defined processes for maintenance and renewal planning for existing assets? Core Target Risk Risk Level Maturity Score Result Characteristic RMP, AMP provide optimum value for defined service using scenarios to inform servicee performance Maintenance and Renewal Planning linked to AMP and asset management strategy Failure model analysis undertaken that includes technical, legislative, functional, capacity Documented defect rectification programs produced Treatment option and cost evaluation completed Trend analysis of maintenancee and renewals history undertaken Renewal, maintenance and operations forward programs and cashflow forecasts produced Forward programs and cashflow forecasts based on demand analysis and target LOS Rationalisation and disposal considered Defined process to review maintenance and renewal invention levels Consideration of factors that effect asset useful lives incl material, construction, environment, functionality, etc Documented process for annual review of asset useful lives Asset useful lives review documented and substantiated (eg. for fulll revaluations) Common use of asset useful lives for: renewal planning valuations new & upgrade planning Annual review of asset lives. Defined process for each asset group high level overall framework driven by annual budget Reactive and fragmented Framework for Long Term Financial and Asset Management Planning for all Tasmanian Councils

87 [77] NAMS.PLUS Maturity Model Framework Asset Planning and Management Inherent Risk Element Practice Area Data & Systems New & Upgrade Planning UID Current Score Target Score Target Adv: Confidence Level LMH: Capability Process Question Does your Council have defined processes for planning of new and upgraded assets? Current Risk Core Target Risk Risk Level Maturity Score Result Characteristic AM Strategy & AMP provide optimum value for defined service using scenarios to inform service performance Benefit/cost analysis used to develop service level scenarios Planning for new and upgraded assets driven by Asset Management Strategy and AMP. Highly responsivee to policy direction Demand analysis predicts changes in utilisation Planning for new & upgraded assets includes analysis of whole of life costs (incl OPEX) Impacts of new & upgraded assets on existing assets and asset networks considered Documented and approved infrastructure plans and charges for growth Demand analysis based on population & demographic model Defined process for each asset group high levell overall framework driven by annual budget Reactive and fragmented Framework for Long Term Financial and Asset Management Planning for all Tasmanian Councils

88 [78] NAMS.PLUS Maturity Model Framework Asset Planning and Management Inherent Risk Element Practice Area Current Score Data & Systems Population & Demographic Model Target Score UID Target Adv: Confidence Level LMH: Capability Process Question Does your Council have an adopted population and demographic model? Current Risk Core Target Risk Risk Level Maturity Score Result Characteristic Projections inform a range of service provision scenarios and costss with adopted scenario incorporated into AMP, LTFP, LTCIP with annual review in line with legislativee requirements and policy papers issued by State Government Population and demographic used for service level and funding scenario projections adopted by Council Population and demographic change projections cover a combined period of at least 15 years and used to plan service levels (AMP) and matching funding (LTFP) Population and demographic projections incorporated in AMP & LTFP Projections reviewed regularly (annual) Same population and demographic projections used across Council for planning in consistent templates that can be aggregated for state of the assets reporting linked to service level outcomes Population projections in line with State Government projections Documented population and demographic change assumptions Population and demographic change projections developed for incremental time periods eg short (0 4) medium (4 10) long (>10) Documented population and demographic change projections (incl data and analysis) used in AMPS. (10 years) Population and Demographic projects done in some areas. Not used for whole of Council service planning. No demographic analysis used in asset management projections Framework for Long Term Financial and Asset Management Planning for all Tasmanian Councils

89 [79] NAMS.PLUS Maturity Model Framework Asset Planning and Management Inherent Risk Element Practice Area Skills & Processes Data Management Skills UID Current Score Target Score Target Adv: Confidence Level LMH: Capability People Question Does council have the skills & knowledgee to perform asset data management activities? Current Risk Core Target Risk Risk Level Maturity Score Result Characteristic Annual skills and knowledge audit on capacity and capacity needed to deliver corporate plan with linked service provision plan Annual or bi annual audit of skills & knowledge needs with reporting on linkage to forward programme Defined approach to build internal capability or use external resources for key activities Training program completed for internal capability building approach Contingency plans in place to ensure continuity of activities when staff turnover occurs Documented training program for internal capability building approach Skill & knowledge requirements determined Audit completed to determinee current skill & knowledge levels Ad hoc and fragmented approach to data management driven by current projects Framework for Long Term Financial and Asset Management Planning for all Tasmanian Councils

90 [80] NAMS.PLUS Maturity Model Framework Asset Planning and Management Inherent Risk Element Practice Area Skills & Processes Data Management Framework UID Current Score Confidence Level LMH: Target Score Target Adv: Capability Governance Question Does your Council have a framework for asset data management? Current Risk Core Target Risk Risk Level Maturity Score Result Characteristic Asset data is integrated and responds to required decision support information neededd for optimised service delivery Asset Knowledge Management Strategy identifies data framework requirements Data managers / custodians formally assigned. Complete asset data schema ncluding metadata requirements. Core data fields defined / minimum data set defined Asset data hierarchies definedd eg: Type, Parent/Child/Location/Service Documented asset data management procedures 'As constructed' data requirements defined Framework for Long Term Financial and Asset Management Planning for all Tasmanian Councils

91 [81] NAMS.PLUS Maturity Model Framework Asset Planning and Management Inherent Risk Element Practice Area Skills & Processes AM Planning Skills UID Current Score Target Score Target Adv: Confidence Level LMH: Capability People Question Does Council have the skills & knowledge to develop asset management plans? Current Risk Core Target Risk Risk Level Maturity Score Result Characteristic Annual skills and knowledge audit on capability and performance needed to deliver corporate plan with linked service delivery Linked AM Strategy and AMP resource plan. Skills and knowledge in place to report on trends on TBL/QBL service trends and accompanying financial sustainability Documented training program for internal capability building approach Skill & knowledge requirements determined Defined approach to build internal capability or use external resources for key activities Training program completed for internal capability building approach Annual or bi annual audit of skills & knowledge scheduled Audit completed to determine current skill & knowledge levels Contingency plans in place to ensure continuity of activities when staff turnover occurs Separate skill set for each asset group high level overall framework but not consistent Reactive and fragmented Framework for Long Term Financial and Asset Management Planning for all Tasmanian Councils

92 [82] NAMS.PLUS Maturity Model Framework Asset Planning and Management Inherent Risk Element Practice Area Skills & Processes Financial Reporting Skills UID Current Score Target Score Target Adv: Confidence Level LMH: Capability People Question Does Council have the skills & knowledgee to perform asset financial reporting activities? Current Risk Core Target Risk Risk Level Maturity Score Result Characteristic Optimum level of resources determined and reviewed annually Defined approach to build internal capability or use external resources for key activities resource plan in place Training program completed for internal capability building approach Annual or bi annual audit of skills & knowledgee scheduled Contingency plans in place to ensure continuity of activities when staff turnover occurs Documented training program for internal capability building approach Skill & knowledge requirements determined Audit completed to determine current skill & knowledge levels Peak workloads at end of financial year and/or pre external audit Fragmented across organisation no consistentt approach Reactive processes Framework for Long Term Financial and Asset Management Planning for all Tasmanian Councils

93 [83] Appendix D Australian Infrastructure Financial Management Guidelines Financial Sustainability Indicators

94 [84]

95 [85]

96 [86]

97 [87]

98 [88]

99 [89]

100 [90]

101 [91]

102 [92]

103 [93]