Financial management

Integrating council financial systems will be one of the most urgent and complex tasks to be undertaken during the amalgamation transition process. It is important to establish a Financial Management working group at the earliest opportunity. This group will need to be closely integrated with the Information and Communications Technology (ICT) transition working group within the amalgamation project management framework. Finance and ICT underpin and enable all other functions of councils.

Stage 1 - Review

  • Establish a Finance working group within project management framework. Critical paths and/or timelines to be established.

Significant accounting policies and delegations

  • Collate and review existing policies and delegations to be used in preparation for the significant accounting policies manual and delegations manual for the new entity.
  • Ensure all existing policies are compliant with the Australian Accounting Standards (AAS), Local Government Act 1993, Local Government Code of Accounting Practices and Financial Reporting and the Local Government (General) Regulation.
  • Collate existing delegated authorities.

Accounting practices

  • Consider what practices are needed to support significant accounting policies and the financial operations of the new entity. See the Checklist Accounting Practices (PDF, 103KB) for supplementary information.
  • Identify and collate all current practices for review. Review the suitability of existing practices for the new entity.

Accounting standards

  • Review the current level of compliance and performance with the accounting standards.
  • Ensure compliance with the AAS and Local Government Code of Accounting Practices and Financial Reporting and the Local Government (General) Regulation.

Operational Plan 2016/17

  • Review the current processes for developing the annual budget, budget reviews and reporting.
  • Collate current processes that inform the annual budget in line with the IP&R Framework.
  • Summarise current reporting framework and reporting format.

Operational Plan 2015/16

  • To produce annual reports for each of the existing entities for the year ended 30 June 2016.
  • Document current process for the development of the Annual Report.

Audit and risk

  • Review results of internal audit reports for the past 2 years and ensure that any issues relevant to the new entity are addressed through improved processes / training.
  • Review current procedures, reporting and Terms of Reference (TOR) for audit and risk committee.

Banking and investment

  • Determine current state for banking requirements and investment portfolio.
  • Collate and review current systems and processes, policies, reporting and controls. See the Checklist Banking and Investment (PDF, 161KB) for supplementary information.

Loans and debt

  • Collate all systems, processes and policies and summarise current state including loans, self-supporting loans, debt ratios and reporting mechanisms

Business equity, ABN and GST

  • If a new entity is created, a new ABN and GST Registration is required. For FBT purposes a new TFN and FBT Registration is required.

Capital works

  • Collate and review capital management systems and software that exists in each entity. See the Checklist Capital Works (PDF, 98KB) for supplementary information.
  • Audit all works programs. Assess the prioritisation process for capital works and prioritised works.
  • Assess whether development plans are consistent with the relevant asset management plans.

Cash reserves

  • Collate and review cash reserves, and prepare an inventory.
  • Identify any project specific allocations.

Chart of Accounts (COA)

  • Review the database structure and functionality of existing financial management systems.
  • Review the reporting process and the extent of reporting.

Commercial Enterprises and major land transactions

  • Identify and review all business cases, approvals etc. for each commercial enterprise within the merging entities and review.

Creditors

  • Ensure database details are current.

Debtors

  • Identify current debtors and supporting processes and reporting requirements.
  • Review current debtors for doubtful and bad debts.
  • Ensure debtors module is reconciled to the general ledger.

Fees and charges

  • Maintain fees and charges schedule.
  • Review current fees and charges schedule.
  • Collate all relevant information / businesses cases / council resolutions supporting concessions, waivers and discounts from all merging entities.

Grants

  • Prepare inventory and background of grants, noting this does not refer to Financial Assistance Grants.
  • Audit the status of all grants administered to ensure that milestones and reporting conditions have been complied with. This should input into the due diligence process.

Long Term Financial Plan

  • Collate all the necessary documentation and informing material for the Long Term Financial Plan in preparation for consolidation, as well as all supporting information and strategies. For more information, consider the Long Term Financial Planning practice Note 6 (PDF, 3.07MB) by IPEWA and ACELG which has been developed to assist local government practitioners prepare long term financial plans.

Rates and rate setting

  • Collate all current rating information in readiness for review with merging partners, including: methodology of valuation, rate categories and differential rating, and purpose, locally determined rate concessions and exemptions, special area rating, e waste charges, instalment charges, debt recovery, collection, data and systems, processes.
  • NOTE: The NSW Government’s policy is to freeze existing rate paths Rating paths and structures are frozen for 4 years for any new council which may be created. IPART is currently reviewing the Local Government rating system which will inform how rates are levied in merged councils.

Financial reporting

  • Collate all financial reports, and associated processes and systems.

Inventory and stores

  • Identify and review existing inventory controls.
  • Determine whether inventory and stock control is centralised or decentralised.

Trust funds

  • Collate and review trust funds held, processes and reporting requirements in each entity.

Stage 2 - Plan

Significant accounting policies and delegations

  • Prepare for the development of the consolidated Operational Plan 2015/16 if required and the review and development of a single set of policy, delegations, procedural manuals in line with the AAS and compliance requirements for the new entity.
  • Compare the policies of the merging entities and consider how they can be aligned and transitioned into policies and delegations for the new entity. Identify accounting policies that may not be applied consistently. This can include: Asset classes, depreciation rates, materiality, capitalisation thresholds, valuation of assets, register of portable and attractive items, methodology for valuing employee entitlements.
  • Draft policies for the new entity. Consider adopting model policies to assist with compliance to the Australian Accounting Standards.
  • Liaise with auditors to ensure that the draft policies, procedures and reporting are consistent with the Australian accounting standards including goods and services tax, cash requirements, trade and other receivables, inventories, fixed assets, financial instruments, impairment trade and other payables, employees benefits, borrowings investments, grants and other contributions and current and non-current classifications.
  • Document all delegations in a delegation register.
  • Create an exercise of delegated authority form to document all delegations.

Accounting practices

  • Compare and analyse the existing procedure manuals for each of the merging entities.
  • Consider opportunities to design better practice into the existing approach.
  • Commence review and development of revised accounting practices.

Accounting standards

  • Compare and analyse the existing practices in place to support compliance with the standards.
  • Consider opportunities to design better practice into the existing approach.
  • Commence development of new practices to ensure mitigation of compliance breaches.

Operational Plan 2016/ 17

  • Commence mapping and development of the Operational Plan 2016/17.
  • Prepare an Operational Plan based on the Delivery Program and associated informing strategies of the existing entities.
  • Create a project team from the staff of the merging entities to drive the development of the consolidated Operational Plan 2016/17, and the review and development of a single set of policy, delegations, procedural manuals in line with the AAS and compliance requirements for the new entity.
  • Analyse implications for the financial assistance grant for the merging entities.
  • Establish a governance and integrity process for the Operational Plan that includes General Managers and Directors/Senior Management.
  • Establish a working team with the ICT business unit to assess the financial reporting and system needs.
  • Develop a model that will achieve the consolidation of the merging partners budgets (this will vary across councils due to the new entity model. Consider compiling separate budgets extracted from the data of the merging councils, and from there, consolidate into an inaugural budget for the new entity.
  • Consider all requirements of the IPR framework.

Audit and risk

  • Develop an audit project plan to determine priorities and ensure the audit requirements for the existing entities and the new entity are met within the legislated timeframes.
  • Prepare a process for reviewing the current auditor contract.
  • Review the current audit and risk frameworks across the amalgamating councils.

Banking and investment

  • Compare current state of each council.
  • Review and consider investment strategies in line with the Long Term Financial Plan.
  • Advise current financial institutions of impending changes.
  • Identify the impact of amalgamation on the investment loan portfolio.
  • Review investment opportunities and interest rates.
  • Determine banking solutions for the new entity.

Loans and debt

  • Compare and review current state of entities
  • Address all asset and loan related implications associated with the amalgamation.
  • Review debt ratios.
  • Contact all stakeholders (lenders and self-supporting loan debtors) to advise of changes.
  • Develop a new Lending Strategy in line with the draft Long Term Financial Plan and Delivery Program.

Business equity, ABN and GST

  • Complete all new business entity requirements where required and in line with new business entity model. This may include applying for a new ABN and GST registration with Australian Taxation Office, a Tax File Number (for FBT purposes) and FBT Registration, Deductible Gift Recipient (DGR) number, Payroll tax number and new common seal.

Capital works

  • Develop the new draft Delivery Program based on the asset management plans and other informing plans within the merging councils' integrated planning and reporting frameworks.
  • Identify the impact of amalgamation on the capital works plan and address accordingly.
  • Evaluate and recommend capital management systems and software.
  • Develop better practice systems and prioritisation processes for capital works planning and delivery.

Cash reserves

  • Identify the impact of amalgamation on the reserves and address accordingly.
  • Review merging entities’ cash reserves collectively and commence alignment of cash reserves. In doing so: Identify values, types and sources of reserves, objectives and legislation.
  • Review the purpose of reserves in order to consolidate.
  • Analyse options to combine objectives and funds.
  • Consider location based reserves.

Chart of Accounts (COA)

  • Commence development of a COA for the new entity. In doing so:
  • Compare the existing COA to determine suitability for the new entity. Consider whether the existing COA’s can be merged or whether a completely new COA should be developed.
  • Consult with end users and managers to determine function and capability i.e. controls, reporting requirements, overheads, activity based costing.
  • Review ICT requirements with regard to better practice structures for COA. Determine preferred solution and cost implications. Progress approvals as per normal course of business and exploration of procurement and existing contractual obligations.

Commercial Enterprises and major land transactions

  • Obtain business cases, approvals etc. for each commercial enterprise / transaction within the merging entities, and review.
  • Develop strategies to ensure the reform process does not have an adverse impact on these activities.
  • Review risk strategies and determine any residual issues.

Creditors

  • Commence consolidation of creditors.
  • Collate and review existing suppliers. Check for duplicates, payment methods, ABN registration and age.
  • Ensure supplier statements are up to date and reconciled.
  • Review payment terms and options (EFT preferred) and contractual payment dates.
  • Review the process for processing invoices (i.e.: manual approvals vs. automated/work flow approvals, officer dollar approval limits), and the payment process.
  • Determine and register the number of account signatories (Primary and Secondary) within the financial system and banking requirements.
  • Advise suppliers of new changes to process or payment methods.

Debtors

  • Collate and compare all relevant information / business cases supporting concessions, waivers and discounts from all merging entities.

Fees and charges

  • Prepare draft fees and charges schedule for the new entity.
  • Compare and consolidate current fees and charges schedule. Review large anomalies.
  • Sort by category and amount. Review for GST compliance.
  • Determine any changes / additions as a result of the interim service delivery model and service provision.
  • Consider changes to fees and charges in line with actual cost recovery.

Grants

  • Audit the status of all grants administered by the merging councils to ensure that milestones and reporting conditions have been complied with.
  • Identify and escalate the impact of amalgamations on the grants portfolio. Address all implications.
  • Contact the grant provider/s to advise of the changes in regard to the new entity and if this will impact on the terms and conditions of any grants.
  • Review all grants administration processes including council reporting and acquittals.
  • Develop a revised grants framework for grants administration process.

Long Term Financial Plan

  • Working with the merging entities, commence mapping the requirements of the Long Term Financial Plan from the Community Strategic Plan, Delivery Program, asset management plans, Operational Plans, rate setting strategy, revenue and debt strategy etc.
  • Review current processes and establish draft processes for the new entity regarding the review and development of the Long Term Financial Plan in the context of the IPR Framework.
  • Review and update asset registers. Commence consolidation of Registers in line with changes made as a result of boundary changes / amalgamations.

Rates and rate setting

  • Commence rates modelling.
  • Examine current differential rates and objectives. Assess the relevance to the new entity.
  • Review methodology for residential refuse charges.
  • Carry out an audit of all properties in the rate schedule to ensure valuations are up to date.
  • Review the rates billing processes, debt collection, management of databases and compliance levels.
  • NOTE: The NSW Government’s policy is to freeze existing rate paths Rating paths and structures are frozen for 4 years for any new council which may be created. IPART is currently reviewing the Local Government rating system which will inform how rates are levied in merged councils.

Financial reporting

  • Compare all financial reports, processes and systems.
  • Consult with merging partners and staff and refer to industry standards.
  • Develop a draft reporting framework including the monthly activity statement. Strive for a better practice reporting framework.
  • Integrate reporting with the IPR Framework and reporting requirements.

Inventory and stores

  • Examine opportunities for efficiency and savings i.e. removal of duplication of stock / obsolete stock / introduce just in time strategies.

Trust funds

  • Advise current financial institutions of impending changes.
  • Determine banking solutions and tailor investment strategies for the new entity.
  • Develop new trust register.
  • Review audit of trust accounts for existing entities.

Stage 3 - Mobilise

Significant accounting policies and delegations

  • Finalise the significant accounting policies and delegations for the new entity.

Accounting practices

  • Finalise the accounting practices and compile the draft manual for the new entity.
  • Consult with staff.

Accounting standards

  • Finalise the accounting standards procedures and compile the final suite of standards.
  • Consult with staff.

Operational Plan 2016/17

  • Finalise and prepare budget for adoption.
  • Establish and communicate the changes to the new reporting framework.
  • Clearly articulate how the rate model addresses the difference in rating regimes.
  • Consolidate insurances and premiums.
  • Calculate the salaries and wages budget based on the interim organisational structure, workforce plan and interim service delivery model requirements.
  • Calculate the Forward Capital Works Plan and asset management requirements in line with the IPR framework.
  • Ensure accounting policies are applied consistently.
  • Ensure changes in relation to assets and liabilities as a result of boundary changes are communicated in the annual budget.

Annual Report

  • Produce annual reports for each of the existing entities for the year ended 30 June 2016.
  • Commence preparation for each individual council's Annual Report. Audit and risk
  • Establish new terms of reference for the audit and risk committee.
  • Confirm the new entity’s auditor, and associated contractual arrangements.
  • Prepare audit and risk material for adoption.
  • Finalise and communicate the new audit framework and reporting requirements.
  • Develop a compliance calendar and checklists to ensure policies, delegations, standards and practices are implemented in accordance with all regulatory and statutory requirements.

Audit and risk

  • Commence consolidation of audit and risk frameworks.

Banking and investment

  • Develop a new investment strategy in line with the Long Term Financial Plan, Delivery Program and Community Strategic Plan.
  • Finalise and prepare all banking and investment arrangements for the new entity, including:
  • Establish EFTPOS and other payment receipting facilities, BPAY, Bpoint etc.
  • Establish opening balances (determine initial cash flow requirements)
  • Register of account/cheque signatories – internal register and authorisations lodged with financial institutions
  • Audit bank, trust and reserve accounts for existing entities.
  • Prepare policy and procedures (if applicable).

Loans and debt

  • Develop a new debt management and Lending Strategy in line with the Long Term Financial Plan, Delivery Program and Community Strategic Plan.
  • Review policy and procedures. Address any deficiencies.
  • Update debtors and creditor records.
  • Create a loan repayment program for 10+ years.

Business equity, ABN and GST

  • Prepare and/or amend all necessary documentation and systems for implementation.
  • Close off old ABN and GST number once final audit outcomes are ratified.
  • Ensure creditors and debtors are notified of changes.

Capital works

  • Finalise draft capital works plan, ensuring alignment with asset management plans, and incorporation into the draft Long Term Financial Plan and the draft Operational Plan.

Cash reserves

  • Finalise alignment of cash reserves for the new entity.
  • Prepare new objectives / purpose of reserves if applicable and incorporate in the budget adoption process.
  • Communicate cash reserve changes.
  • Align reserves with Long Term Financial Plan requirements.

Chart of Accounts (COA)

  • Finalise the COA and reporting to meet the needs of the new entity and financial management framework.
  • Load a test version of the chart of accounts. Migrate test data and test run reports and functionality.
  • Develop a training package for employees, responsible officers and management.

Commercial Enterprises and major land transactions

  • Finalise and document strategies to address all commercial enterprises and major land transactions.
  • Implement strategies to ensure the reform process does not have an adverse impact on these activities.
  • Review risk strategies and determine any residual issues. Address all legal requirements.
  • Prepare a briefing paper for the Local Transition Committee, Council and Interim General Manager on all major land transactions and major trading undertakings. Include in due diligence reporting undertaken by leaders of the amalgamation.

Creditors

  • Finalise creditor system and processes, and prepare for implementation.
  • Document the revised system and supporting processes for creditors and implement training where required.
  • Communicate new processes, including advising suppliers of new changes to process or payment methods.
  • Payout existing creditors from each entity.

Debtors

  • Finalise debtor system, supporting processes and reporting requirements.
  • Collate all aged debtors ready for migration.
  • Review and amend policy. Prepare for adoption.
  • Finalise new delegated authority for writing off debts. Write off any debts where applicable.

Fees and charges

  • Prepare draft fees and charges schedule for adoption with Operational Plan budget.
  • Determine any changes / additions as a result of the interim service delivery model and service provision.

Grants

  • Finalise and include the schedule of grants in the long term financial plan and Operational Plan.
  • Note that the rollover and refund of any unspent grant funding to the ensuing financial year has implications for reporting purposes and must be taken into account in the preparation of the annual financial report.

Long Term Financial Plan

  • Finalise preparation of the draft Long Term Financial Plan.
  • Capture all financial implications from the interim service delivery model, new entity and staffing structure, and lending and investment strategy.

Rates and rate setting

  • Finalise the new entity’s rating capacity and prepare rate models which consider the previous rating regimes.
  • Continue the assessment of business systems and future requirements.
  • Confirm the differential rating strategy.
  • Review non-rateable properties and concessions.
  • Update databases and electoral roll.
  • NOTE: The NSW Government’s policy is to freeze existing rate paths Rating paths and structures are frozen for 4 years for any new council which may be created. IPART is currently reviewing the Local Government rating system which will inform how rates are levied in merged councils.

Financial reporting

  • Finalise draft reporting framework.
  • Develop new processes to support the framework and address any business systems issues.
  • Develop a training program for all users.
  • Integrate the reporting into the governance structure including audit and risk.

Inventory and Stores

  • Where possible, dispose of obsolete stock prior to Commencement Day of the new entity.
  • Reconcile, document and transfer inventory records to new entity.

Trust funds

  • Finalise arrangements and make provisions for new process.
  • Maintain sufficient funds to process uncleared cheques and EFTs made from existing accounts.
  • Transfer balances (post audit) to new entity (allow provision for uncleared cheques and EFTs).

Stage 4 - Implement

Significant accounting policies and delegations

  • Update the new policy manual and delegations manual. Finalise and implement supporting processes.
  • Update the Operational Plan documentation to reflect changes and annual financial statement templates.
  • Communicate the new policies and procedures to stakeholders. Implement staff training / information sessions.

Accounting practices

  • Implement new practices. Ensure accessibility of new procedures, and implement training if required.

Accounting standards

  • Implement new standards. Ensure accessibility of new procedures and implement training if required.

Operational Plan 2016/17

  • Adopt budget and implement.
  • Implement training program.
  • Implement communications plan to socialise new budget.
  • Establish reporting framework.
  • Ensure all reporting officers are trained in budget and reporting requirements.

Operational Plan 2015/16

  • Adopt the Operational Plans for each of the existing entities for the year ended 2016.
  • Prepare for the production of the annual report for the new entity following 2016.
  • Finalise the Operational Plan for the individual councils.
  • Compare Operational Plan production processes across the merging entities.
  • Identify better practice. Commence the development of a framework for the new entity.

Audit and risk

  • Ensure all statutory requirements are met at the inaugural meeting of the new entity.
  • Implement the new audit and risk framework.
  • Appoint the auditor.
  • Establish the new audit and risk committee.
  • Ensure any training needs are identified and addressed for employees and Councillors/Administrator.

Banking and investment

  • Adopt and implement policy.
  • Communicate and implement processes.
  • Transfer balances (post audit) to new entity (allow provision for uncleared cheques and EFTs).
  • Report all changes to the investment portfolio in the inaugural meeting of the new entity.

Loans and debt

  • Finalise, adopt and implement the new Lending Strategy.
  • Communicate and implement processes consultation.

Capital works

  • Adopt the new development plan (via adoption of the Operational Plan 2016/17).
  • Communicate and implement new processes.
  • Ensure business systems are populated with the new schedule of works.
  • Ensure reporting officers are well informed of new schedules, procedures and reporting requirements.
  • Distribute works schedules and ensure all affected employees are inducted and orientated into their work environment (some may be relocated).
  • Ensure all training needs are identified and addressed.
  • Ensure adequate plant and equipment is available.
  • Ideally adopt better practice with WHS policy, practices and reporting from Commencement Day.

Cash reserves

  • Adopt new cash reserves strategy (via adoption of the Operational Plan 2016/17).
  • Communicate and implement new processes.
  • Align reserves with Long Term Financial Plan requirements and capital works schedule.
  • Document and clearly communicate the consolidation process. Establish an audit trail for reporting and auditing purposes.

Chart of Accounts (COA)

  • Communicate and implement new COA and processes.
  • Consult with users and managers to determine capability i.e. controls, reporting requirements, overheads, activity based costing.
  • Continue to review ICT requirements with regard to better practice structures for COA. Prepare business case (if applicable).
  • Implement training package for employees, reporting officers and management. Provide resources to support users until they are proficient in the use of the new chart of accounts.

Commercial Enterprises and major land transactions

  • Ensure all legal, financial and property matters are managed in accordance with legislative requirements.

Creditors and debtors

  • Adopt, communicate and implement new processes and policy.
  • Ensure staff training requirements are identified and met.

Fees and charges

  • Adopt draft fees and charges schedule for the new entity (via the Operational Plan 2016/17) and update internal systems
  • Inform internal and external stakeholders of new fees and charges (new fees and charges schedule to be advertised in accordance with statutory requirements).
  • Ensure front line customer service officers are aware of changes.

Grants

  • Implement the new grants administration system and processes. Provide training where required.
  • Communicate acquittal process to all affected.

Long Term Financial Plan

  • Adopt the Long Term Financial Plan and socialise this with all tiers of management, Council, the Local Transition Committee and Interim General Manager.
  • Conduct information and training sessions for relevant staff.

Rates and rate setting

  • Finalise rate model and prepare rate setting statement for adoption.
  • In consultation with staff, develop and implement processes including dispatch of rates, instalment notices etc.
  • NOTE: The NSW Government’s policy is to freeze existing rate paths Rating paths and structures are frozen for 4 years for any new council which may be created. IPART is currently reviewing the Local Government rating system which will inform how rates are levied in merged councils..

Financial reporting

  • Implement new process and financial reporting framework.
  • Develop and implement a new training package for management, reporting officers and employees as appropriate.

Inventory and stores

  • Finalise and implement new stock and inventory processes.
  • Undertake stock takes, including quantities, value, location etc. Reconcile against end of year audits.
  • Implement staff training immediately.

Trust funds

  • Establish new banking arrangements and implement new processes.
  • Arrange closure of accounts no longer required and transfer of funds to new entity.
  • Undertake a review of any unclaimed money.