ANNUAL REPORT
2007/08
Municipal Association of Victoria
The voice of Victorian
local government
CONTENTS
Published by
Municipal Association of Victoria
Level 12, 60 Collins Street
Melbourne VIC 3000
GPO Box 4326, Melbourne 3001
Telephone: 03 9667 5555
Facsimile: 03 9667 5550
Email: inquiries@mav.asn.au
Website: www.mav.asn.au
Editor
Imogen Kelly
Design
Frank Design Pty Ltd
Photography
Steven Diffey Photography
This report is produced on a combination of
elemental chlorine-free papers, sourced from
sustainably managed forests and 100% recycled
paper, and printed using vegetable based inks by
an environmentally responsible printer. This reflects
the Municipal Association of Victoria’s commitment
to environmental sustainability.
Purpose
To promote the efficient carrying
out of municipal government
throughout the state of Victoria
and to watch over and protect the
interests, rights and privileges of
municipal corporations.
2 Year in Review
4 President’s Report
6 MAV Board
8 CEO’s Report
10 Economics & Finance
12 Collaboration
14 Planning & Building
16 Human Services & Public
Health
18 Transport & Infrastructure
24 Community & Economic
Development
25 Workforce
46 Other Products
47 CMP Members
26 Governance & Councillor
Development
28 MAV Governance
49 Financial Overview
32 MAV Operations
34 MAV Team
36 Committees
38 MAV Insurance Chair’s Report
20 Environment
40 MAV Insurance Committee
22 Emergency Management
& Community Safety
42 Civic Mutual Plus
45 Municipal Officers’ Fidelity
Guarantee Fund
48 Fidelity Members
50 Guide to the Financial Report
52 Glossary
53 MAV Financial Report
81 MAV Insurance Financial
Report
YEAR IN REVIEW
$55 million
baby bonus
Water rights
unbungled
Cost analysis research and a sustained
advocacy campaign resulted in a $55
million injection of funds for maternal
and child health services.
Following two years of sustained advocacy
and extensive analysis, $18.1 million was
allocated over four years to assist eight
councils affected by the unbundling of water
rights from property values.
Councillors
win pay rise
Drought break
for sports grounds
A 30 per cent increase in councillor
allowances was achieved through an
evidence and data based approach
to a campaign to improve councillor
remuneration.
The MAV formed an alliance with 10 peak
sporting bodies attracting extensive statewide
media interest on the impact of drought on
community assets and achieving $12.9
million to assist councils and sporting clubs
to drought-proof sports grounds.
2> MAV ANNUAL REPORT 2007/08 YEAR IN REVIEW
Shock jock put
back in his box
Risk pays off to the
tune of $11.8 million
Truce called
on funding fights
A passionate rebuttal was printed in full in
the Herald Sun and the MAV President had
eight minutes on 3AW in reply to yet another
venomous attack on local government by
Neil Mitchell.
MAV Insurance took on an increased portion
of risk that will save $11.8 million,
benefitting members through reduced
insurance premiums going forward.
The MAV reached agreement with the
Victorian Government on processes for
negotiating the transfer of responsibilities
to local government including appropriate
funding.
A tender in time
saves forty-nine
Employees
propositioned by
local government
VCAT loses
its appeal
The MAV acted as the agent for 49 councils
in the tendering process for electoral services
saving tendering costs and duplicated effort
for participating councils.
Forty-eight councils contributed financially to
research that defined an employment brand
proposition for local government to address
critical staffing shortfalls.
Evidence of inconsistent policy application
by VCAT informed a five-point action plan
including proposed new residential zones
to restore local planning power.
Citizens urged
to take a stand
The MAV seized the opportunity created by
the alignment of council elections to develop
a statewide awareness campaign and online
resources to encourage nominations.
Libraries yield
Swift results
Intra-library loans increased 244 per cent
and more than 30 million transactions were
processed last year by the world’s largest
integrated library management system.
MAV ANNUAL REPORT 2007/08 YEAR IN REVIEW >3
PRESIDENT’S
REPORT
The MAV largely trades in an intangible
product. Its achievements are not always
immediately obvious and sometimes it’s
a case of not what did happen but what
could have happened. So I’ve taken it upon
my presidential role to champion the gains
for the sector, lest they are overlooked.
Presiding over a broad municipal church as I do, I know all too
well that it’s not always possible to be all things to all people.
But under the tenacious leadership of the now $117 Million
Man (2007 $21,000,000), aka Rob Spence, this modestly sized
organisation gives it a good nudge.
I stand by my claim earlier this year that I do not observe any
other peak body, association or pressure group, with the possible
exception of the RACV, that has anywhere like the traction and
credibility that the MAV has with the current Victorian Government.
I am unapologetically immodest about the MAV’s achievements.
From social policy to infrastructure management, there have
been some remarkable wins in 2007/08.
Another remarkable achievement in the past year is that I have
lost ten kilograms! So in the tradition of the weight loss industry,
I thought that I would couch this report in the ‘before’ and ‘after’
paradigm so beloved by the promoters of slimming scams.
4> MAV ANNUAL REPORT 2007/08 PRESIDENT’S REPORT
BEFORE: State Government funding for maternal and child
health falling short by $2 million per year and growing
AFTER: Additional $55 million over four years reinstates
funding levels to the agreed 50/50 ratio and deals with the
latest baby boom
BEFORE: Disquiet about councillor remuneration levels
AFTER: Thirty per cent increase in allowances reflecting the
growing time commitment and increasing skill base required
to fulfil the councillor role while being mindful of communities’
capacity to pay for increased remuneration
BEFORE: Over $6 million capital returned to MAV Insurance
members in 2007
AFTER: And the news keeps on getting better in 2008 . . .
shaving another $11.8 million off public liability and
professional indemnity insurance costs (a saving of 38 per
cent over the two years)
BEFORE: $4.7 million to pursue fanciful notions of resource
sharing and service collaboration
AFTER: A list of concrete proposals being worked through
to reduce councils’ material and contract costs and red tape
BEFORE: Six consecutive State Budget submissions call for
additional recurrent funding for public libraries and fall on deaf ears
AFTER: Thirty-five councils collaborating to wipe up to 28 per
cent off the bottom line of running public libraries in Victoria
through the MAV’s Swift Consortium
BEFORE: Victorian Government a signatory to a high level
intergovernmental agreement
AFTER: Signed agreement that puts the Victorian meat on the
national bones of the tripartite agreement by committing the
State Government to disclose cost shifting, consult councils
and negotiate appropriate funding arrangements
BEFORE: Pressure mounting in Victoria to follow other states
down the path of introducing expert planning panels
AFTER: Local representation preserved in eleventh hour
negotiations over the composition of committees to assess
proposals in designated priority areas for development in and
around Melbourne and Geelong. Local power strengthened
outside of these designated areas through a ministerial
statement on local policy and proposed new residential zones
It is on this last point that I save my most hearty congratulations
for the sector at large in Victoria. Three years ago we
commenced a journey that started with a brave decision to drive
our own kind of reform lest someone else impose a less
palatable regime from on high.
The result has been that numerous initiatives have sprouted
wings that are ameliorating, if not negating in some instances,
our reliance on hand outs from other levels of government.
BEFORE: Just assessing our role in averting climate change
That said, ministers and administrators reading this report need
not sigh with relief just yet, for we are far from out of the woods.
And Australia’s preeminent research and advisory body on
economic matters, the Productivity Commission, this year
confirmed that some municipalities will always be dependent on
government funding to meet their community infrastructure and
service obligations.
AFTER: Redressing local government emissions through
significant advances in sustainable public lighting and
considerable progress toward targets for resource recovery
and diversion from landfill
In closing I would like to thank my Board colleagues for their
unwavering support, Chief Executive Officer Rob Spence and his
extraordinary, dedicated and talented officers for another year
of astonishing contribution to the sector and all Victorians.
BEFORE: Unsubstantiated claims for federal assistance
Dick Gross
PRESIDENT
AFTER: Cogent argument for federal assistance to target
financially stressed rural and regional councils accepted
by the Productivity Commission and backed up by a growing
catalogue of self imposed efficiency gains
MAV ANNUAL REPORT 2007/08 PRESIDENT’S REPORT >5
MAV
BOARD
CR DICK GROSS
CR SAM ALESSI
CR DARRYL ARGALL
CR JOE CAPUTO
CR MARK CONROY
CR JENNY DALE
CR ROD FYFFE
Port Phillip City Council
Whittlesea City Council
Hindmarsh Shire Council
Moreland City Council
Frankston City Council
MAV PRESIDENT
MAV DEPUTY PRESIDENT (METROPOLITAN)
MAV DEPUTY PRESIDENT (RURAL)
Member, MAV Audit Committee
MAV Board Representative Interface Region
MAV BOARD REPRESENTATIVE
METROPOLITAN SOUTHERN REGION
Greater Bendigo City Council
MAV BOARD REPRESENTATIVE RURAL
NORTH CENTRAL REGION
Member, MAV Insurance Committee
Chair, MAV Transport and Infrastructure
Advisory Group
MAV Board Representative Rural North West
Region
MAV BOARD REPRESENTATIVE
METROPOLITAN CENTRAL REGION
Indigo Shire Council
MAV BOARD REPRESENTATIVE RURAL
NORTH EAST REGION
Member, MAV Professional Development
Reference Group
Member, MAV Strategic Environment
Advisory Group
Councillor, 1982 – 1989 (Brunswick)
2001 – present
Councillor 1997 – present
Member, Australian Local Government
Association Board
Chair, MAV Drought Taskforce
Councillor 1997 – present
Chair, MAV Strategic Environment Advisory Group
Mayor 1997 – 1998, 2000 – 2001,
2004 – 2005
Member, Australian Local Government
Association Board
Member, MAV/DOT Transport Working Party
Councillor 1997 – present
Member, Yarra Plenty Regional Library Services
Board
Mayor 1997 – 1999, 2004 – 2007
Chair, National Packaging Covenant Council
Trustee, Vision Super
Member, Interface Councils Group
Deputy Chair, Wimmera Catchment
Management Authority Board
Councillor 1996 – present
Mayor 1998 – 2000, 2004
Chair, Metropolitan Waste Management
Group
Member, Metropolitan Waste Management
Group
Member, North West Municipalities Association
Chair, Wimmera Regional Transport Group
Member, Victorian Local Sustainability Advisory
Committee
Mayor, 1985 – 1986 (Brunswick),
2002 – 2003
Deputy Mayor, 2003 – 2004, 2007 – 2008
Commissioner, Victorian Multicultural
Commission
Member, Network of Italian Mayors and
Councillors
Chair, Human Services Committee
Group
Member, Professional Development Reference
Chair, Economics and Finance Advisory Group
Member, MAV Insurance Committee
Councillor 1996 – present
Mayor 2000 – 2001
Councillor 1997 – present
Mayor 2003 – 2005
Deputy Mayor 1999
Mayor 1997 – 1999, 2003 – 2004
Member, Ministerial Advisory Council
on Libraries
Delegate, Mitcham-Frankston Freeway Steering Deputy Mayor 1999 – 2002, 2006
Committee
President, Australian Local Government
Delegate, Cities for Climate Protection
Women’s Association Victorian Branch
Delegate, International Council for Local
Government Initiative
Chair, Coburg 2020
Member, State Library Public Libraries Advisory
Committee
Member, La Trobe University Advisory Board
Councillor, La Trobe University
Member, Roads Corporation Advisory Board
CR GEOFF GOUGH
CR BRENDA HAMPSON
CR BILL MCARTHUR
CR CHRIS PAPAS
CR JANE ROWE
CR LUKE TOBIN
Manningham City Council
MAV BOARD REPRESENTATIVE
METROPOLITAN EAST REGION
Moyne Shire Council
MAV BOARD REPRESENTATIVE RURAL
SOUTH WEST REGION
Golden Plains Shire Council
MAV BOARD REPRESENTATIVE RURAL
SOUTH CENTRAL REGION
East Gippsland Shire Council
MAV BOARD REPRESENTATIVE RURAL
GIPPSLAND REGION
Boroondara City Council
MAV BOARD REPRESENTATIVE
METROPOLITAN SOUTH EAST REGION
Member, MAV Audit Committee
Member, MAV Transport and Infrastructure
Advisory Group
Chair, MAV Planning Advisory Group
Melton Shire Council
MAV BOARD REPRESENTATIVE
METROPOLITAN WEST REGION
FROM NOVEMBER 2007
Member, MAV Audit Committee
Councillor 2004 – present
Chair, MAV Professional Development
Reference Group
Councillor 2001 – present
Mayor 2006
Member, MAV Strategic Environment Advisory
Group
Councillor 1996 – present
Member, MAV Transport and Infrastructure
Advisory Group
Councillor 1997 – present
Councillor 1988 – 1994 (Mortlake),
1999 – present
Councillor 2003 – present
Mayor 2002 – 2005
Deputy Mayor 2002 – 2003
Mayor 2002 – 2003, 2007 – present
Mayor 2004, 2004 – 2005
Mayor 2004 – 2006
Trustee, Templestowe Cemetery
Member, Victorian Road Based Public
Transport Advisory Committee
Director, LeadWest Board
Member, MAV/VicRoads Liaison Committee
Member, Metropolitan Waste Management
Board
Deputy Mayor 2004, 2006 – present
Member, Victorian Local Sustainability Advisory
Committee
Chair, South West Regional Transport Taskforce
Member, Federal Blackspot Advisory
Committee
Member, MAV Water Taskforce
Member, East Gippsland Water Board
Member, Gorse Taskforce
Member, Regional Accessibility Committee
6> MAV ANNUAL REPORT 2007/08 MAV BOARD
MAV ANNUAL REPORT 2007/08 MAV BOARD >7
CEO’S
REPORT
Our strategy this year has been to reduce
the cost base for local government and
capitalise on the opportunities for the
sector arising from State Government
policy initiatives.
In December we restructured the organisation to create
three divisions, reflecting the increased focus on driving
down costs for local government through shared services
and procurement initiatives.
Paula Giles now heads up a sizeable team that is delivering
savings and process improvements in library services, food
safety, information technology, broadband services and
online transactions.
Considerable work was progressed this year to explore and define
further opportunities for shared services using some of the $4.7
million provided by the State Government last year. This development
work will inform the future work program for this division.
In a coup for the MAV and local government, a former Executive
Director at Regional Development Victoria, Kaye Owen was
recruited to head up the MAV’s Research and Policy Division.
This division was also restructured, streamlining our activities to
accord with the three core policy and service priorities of the
sector, being people, place and performance.
8> MAV ANNUAL REPORT 2007/08 CEO’S REPORT
The resources within the research and policy team were targeted
towards influencing the policy priorities of the State Government
under its new leadership.
Local government’s voice was represented at the table when key
decisions were made to deal with congestion, planning, public
transport, housing affordability, water and the sustainability of
rural communities.
While many of the Government’s initiatives in these priority
areas were received with mixed reaction by local government,
the MAV won some important concessions and the balance of
things that we can live with ultimately outweighed the things that
we can’t live with (or without).
Notably we had two significant wins from campaigns on
maternal and child health funding and compensation for
irrigation councils affected by the unbundling of water rights.
Leading into the alignment of council elections in November
2008, it has also been a big year for the Legal and Corporate
Division under the leadership of Alison Lyon. We’ve seen the
culmination of work that went into achieving more clarity
around election processes with legislative changes introduced to
the State Parliament in the dying stages of this year, including a
reduction in the length of the caretaker period.
Processes around tendering for electoral services were also
improved and costs reduced by the MAV acting as an agent for
more than half the sector and providing more councils with the
paperwork to use in conducting their own tender process.
With over 2000 candidates expected to stand for council in
November, these elections will be bigger in scale than both
the federal and state elections of the previous two years. This
event presented a unique opportunity for the MAV to undertake
the first statewide awareness campaign to encourage
nominations from quality candidates. The result is a website
that is receiving a steady stream of traffic even in the early
days of the marketing effort.
In closing I extend my thanks to our President, Cr Dick Gross
for his tireless efforts representing the MAV and the sector;
the MAV Board for the ongoing support they have provided
to the administration this year; the three Directors and our
very capable team of staff and contractors for another year
of dedication to improving conditions for Victorian councils
and the communities they serve.
Rob Spence
CHIEF EXECUTIVE OFFICER
MAV Insurance has required increased attention this year as
we’ve moved through the implementation phase of our strategy
for restructuring the business to deliver the most cost effective
model that will withstand fluctuating markets and provide the
necessary long-term protection for members.
We’ve converted the pressures of the softest year in insurance
markets for decades into tangible benefits for members while
retaining the essence of the group insurance model that has
served the sector well in tougher times and will continue to do
so when the market inevitably turns again.
MAV ANNUAL REPORT 2007/08 CEO’S REPORT >9
ECONOMICS AND FINANCE
Significant steps
were taken towards
improving the
financial position
of local government
Intergovernmental
Agreement
require additional financial
support to ensure they can
deliver high quality services and
Following a year of negotiation,
infrastructure to their
agreement was achieved with
communities. To assist councils’
the Victorian Government to
understanding of the financial
give local effect to the national
pressures facing their
intergovernmental agreement
municipalities, each council
established in 2006 as a result
was provided with its own results.
of the Hawker Inquiry into cost
Based on this analysis, and the
shifting. The MAV President
PricewaterhouseCoopers analysis
and the Victorian Minister for
of council financial sustainability
Local Government signed the
Victorian State-Local Government commissioned by the ALGA in
2006, the MAV supported a
Agreement (VSLGA) in May
2008. The agreement strengthens sector-wide federal election
campaign for improved
state-local government relations
assistance to councils through
and formally commits to
the creation of a $1 billion
principles and guidelines that
Community Infrastructure
will give greater clarity to roles,
Fund to support upgrades for
responsibilities and financial
existing community facilities.
arrangements. It provides
Despite positive signs in the
guidance for proposals to
election campaign, neither
devolve responsibilities to
major party committed to
local government and promotes
providing such a fund.
appropriate funding for
these functions.
Productivity Commission
Review
National Funding
The MAV successfully argued
In 2007/08 the MAV refined its
to the Productivity Commission
methodology for analysing
that councils facing the biggest
council finances to measure the
challenges to their long-term
extent of challenges facing
financial strength have the least
Victoria’s councils. The analysis
ability to raise further revenue.
suggested that up to 20 Victorian
The Productivity Commission’s
councils face considerable
review of local government’s
challenges, many of which
10> MAV ANNUAL REPORT 2007/08 ECONOMICS AND FINANCE
ability to increase its own
revenue was part of the Federal
Government’s response to the
Hawker inquiry into cost shifting.
The MAV’s focus on identifying
types of councils with limited
capacity to raise revenue and
high financial risks was accepted
as a credible position and echoed
in the Commission’s final report.
This report is an important
document in continuing to build
a case for further financial
support for Victoria’s councils.
Rates
The MAV expanded its successful
strategy to improve media
reporting of rates movements in
2007/08 by conducting a training
session for Leader journalists on
local government finances. The
methodology for calculating the
MAV Local Government Cost
Index was further refined this
year and released in May 2008
to help councils explain cost
pressures impacting budgets. In
addition, the MAV continued to
collect rates data for the sixth
year to ensure any comparisons
of rate information are made
with consistent data. This data
was released to the media with
a series of accompanying fact
sheets on rates and revaluation
processes and financial
challenges facing councils.
This strategy has resulted in
a steady improvement in the
accuracy of media reporting
on rates and revaluations.
Water Rights
Following two years of sustained
advocacy by the MAV, the State
Government allocated $18.1
million over four years to assist
eight councils affected by the
unbundling of water rights from
property values. Communities in
affected councils faced significant
redistribution of rates between
property owners as an unintended
consequence of water reforms.
The MAV worked with the affected
councils and the Department of
Sustainability and Environment
to model impacts on rates for
various scenarios and a final
report recommending the $18.1
million support package was
accepted by the State
Government. The package will
help provide transitional
arrangements for these
communities and ensure the
impacts are moderated over time.
MAV ANNUAL REPORT 2007/08 ECONOMICS AND FINANCE >11
COLLABORATION
Embracing the
spirit of innovation
and collaboration
began to yield
concrete results
Procurement
developed that covered topics as
broad as IT, asset management,
records management, planning,
environmental health, local laws,
In 2007/08 the MAV brokered
procurement deals for councils
in software, demographic data,
library services and materials and water and data collection.
Expressions of interest were
public lighting to deliver savings
sought from councils for each of
and better services for local
the projects on the list with a view
communities. Procurement has
to progressing scoping processes
been an increasing focus of the
for the most well supported ideas.
MAV and this year it
These projects will be considered
commissioned a best practice
for funding under the Councils
and literature review to examine
Reforming Business program.
different models and means
To further harness the sector’s
of building capability through
enthusiasm for greater
purchasing. The MAV works with
cooperation, the 2008 Future of
functional areas of councils to
identify procurement opportunities Local Government Summit
focussed on shared services.
that align to policy drivers.
Conference participants were
Opportunities are pursued where
presented with case studies,
it is identified that leveraging
heard how shared services
economies of scale within the
support the retention of local
sector will result in cheaper
autonomy, learnt about the
pricing, a simpler process and/or
critical success factors and
an improved outcome.
advantages of shared services,
Shared Services
and found out how their council
could get involved in local
One of the key outcomes of the
opportunities through the MAV’s
MAV’s process examining the
expression of interest process.
future of local government that
commenced in 2005 was the
Swift
opportunity for more widespread
The
Swift Project has developed
cooperation between councils. A
an integrated library management
series of regional meetings was
system which continues to go
conducted in 2007/08 to identify
shared services projects of interest from strength to strength. Fifteen
library organisations representing
to councils. A list of projects was
12> MAV ANNUAL REPORT 2007/08 COLLABORATION
35 councils are now part of the
consortium. In the past year, more
than 30 million transactions have
been processed and statistics
show a 244 per cent increase in
the number of intra-library loans.
The consortium operates as a
shared service using a single
library management system, with
members adopting common
global polices while still retaining
some local policies. It is the
largest of its kind anywhere
in the world and the MAV has
been approached by library
organisations in New South
Wales, South Australia, New
Zealand and the United Kingdom
to establish similar operations.
EasyBiz
Over 5000 EasyBiz forms were
downloaded in May alone for
transactions including planning
permits, registering animals,
footpath displays, advertising
permits and plans for food or
health businesses among others.
Assistance has been provided to
the 30 councils in the consortium
to load the forms and step-bystep guides for 22 standard
transactions on to their websites
and integrate these transactions
with the main council system.
While the initial objectives of the
project were to make regulatory
transactions easier for business,
EasyBiz also has the significant
potential of improving productivity
and efficiency for councils,
particularly for managing
citizen–council compliance
transactions. A business case has
been prepared to assess the costs
and benefits of extending EasyBiz
to all Victorian councils.
ICT Committee
In 2007/08 the MAV’s
Information and Communication
Technology (ICT) Committee
brokered an agreement with
Microsoft for the whole of local
government that resulted in
pricing equivalent to the Federal
Government arrangement,
greater choice, a high degree of
flexibility and other value-added
benefits for councils.
Approximately 75 per cent of
councils expressed interest in
participating in the agreement for
the supply of Microsoft products
and services from approved large
account resellers. Collaborative
procurement initiatives are an
ongoing objective for the
Committee. Another initiative this
year involved 22 councils led by
Greater Geelong City Council
taking advantage of a sector-wide
deal that reduces costs associated
with server infrastructure,
maintenance and support by
up to 45 per cent. The Committee
has become an important point
of reference and engagement
for representing local government
interests in State Government
IT initiatives.
Broadband
The MAV was successful in
obtaining funding for a project
officer and two projects to
promote the development of next
generation broadband networks
in regional Victoria. A process
has been commenced to identify
and develop projects that will
deliver significant benefits for
local government and users of
services through broadband
enabled service delivery or shared
services arrangements. Rural and
regional councils will be the focus
of these projects.
MAV ANNUAL REPORT 2007/08 COLLABORATION >13
PLANNING AND BUILDING
Important
concessions were
won in the battle to
manage growth in
both metropolitan
and rural settings
Rural Zones
has supported a public
consultation process including
arranging an exclusive
information session for councils.
solutions for rural planning issues. received assurance from the Minister
for Planning that the council to
Case studies developed as part of
the MAV’s rural zones project were which an application pertains will
always have representation on the
presented at the forums to help
assessment committee.
identify outstanding transitional
issues and how these might be
Local Policy
resolved now that the direct
Strengthening
local policy was the
translation to new rural zones is
focus
of
advocacy
on planning
complete. Following advocacy by
reform
this
year.
The MAV
the MAV, the State Government
provided evidence about policy
allocated $500,000 in funding
development processes and
support for councils to undertake
examples of inconsistent
rural strategic planning work and
application of policy by VCAT as
$3.79 million over four years to
part of its role representing local
improve rural land use planning.
government interests on a
Melbourne 2030
working group to develop a
Ministerial Statement on Local
The first five-yearly review of the
Policy. The Minister accepted the
State Government’s Melbourne
Planning Audit
introduction of committees to assess
proposals in designated priority
Over 100 councillors and officers
areas for development in Melbourne
attended four forums for councils
and Geelong. The MAV sought and
to share concerns and find
2030 policy took place in 2007/08. recommendations of this working
The MAV provided early input to this group and responded by
process, calling for external expertise announcing a five-point action
plan that is anticipated to
to critique implementation which
significantly reduce the level of
was reflected in the Audit Expert
contention, cost and community
Group’s membership and terms of
concern about medium density
reference. A workshop was
development in Victoria. Central
conducted for over 90 councillors
to this action plan was the
and officers, and a detailed
development of new residential
submission outlining the key
concerns of councils was developed. zones. A discussion paper on the
proposed new zones was released
The Government’s response to the
in February 2008 and the MAV
review included the controversial
14> MAV ANNUAL REPORT 2007/08 PLANNING AND BUILDING
The MAV worked closely with the
Auditor-General in the lead up to
a performance audit of the State’s
planning framework. The audit
assessed the effectiveness,
economy and efficiency of
Victoria’s planning framework
for land use and development
at the whole-of-state and local
council levels, using a sample
of six councils. The audit
revealed mixed results for local
government processes and
performance. The MAV is working
with councils and the Department
to improve performance and
practice and looking to the
upcoming review of the Planning
and Environment Act as an
opportunity to further refine and
improve councils’ operating
environment and statutory
requirements.
Housing
E-planning
Sustainable Planning
Aboriginal Heritage Act
implementation
Growth Areas
The MAV protested the lack of
formal consultation with councils
before plans were announced
to fast-track rezoning of land for
homes in outer growth areas
MAV ANNUAL REPORT 2007/08 PLANNING AND BUILDING >15
HUMAN SERVICES AND PUBLIC HEALTH
Crucial wins were
achieved for early
years’ services and
infrastructure
Maternal and Child Health
Following an extensive campaign
by the MAV, funding for Maternal
and Child Health (MCH) services
will increase by $55 million, or
25 per cent, over four years. This
result is the culmination of cost
analysis research undertaken by
the MAV that found a shortfall in
State Government funding, and
sustained advocacy for a
substantial increase in funding,
particularly as the birth rate in
Victoria has increased by around
10,000 additional births per year.
The funding package will address
the anticipated births, realign and
improve funding for the enhanced
MCH service, and bring the
funding contribution of local and
state government to its agreed
50:50 ratio. This represents a
significant injection of funding
into MCH services and is a key
win for the MAV and the local
government sector.
Ageing
In the lead up to the federal
election, the MAV undertook
a campaign seeking urgent
improvements to inadequate
community care policies,
programs and funding. The new
Federal Government has since
instigated several review
16> MAV ANNUAL REPORT 2007/08 HUMAN SERVICES AND PUBLIC HEALTH
processes which will underpin the in Victoria. The MAV used its
development of a new policy and involvement in a joint project
accountability framework for
with the Department of Human
health and aged care services. Services to protect local
Achieving adequacy in the Home government interests in any
and Community Care funding operational adjustments required
indexation formula and unit
by the changes. As part of this
prices continues to be a focus project, a framework was
of the MAV’s advocacy with the commissioned for reporting
State and Federal governments. information collected by councils
Some improvement in funding while undertaking enforcement
was achieved through the State activities. Proposals were
Government providing an
developed for a new classification
additional $1.5 million to cover system for food businesses that
a shortfall in the Federal
protects consumers without
Government’s annual indexation overburdening food businesses
factor. In partnership with the
or councils. Options were also
Council on the Ageing, the MAV developed for a single registration
has continued to manage the database of mobile and
grants program to support
temporary food businesses that
councils develop local positive will reduce duplication of effort
ageing projects. The MAV also between councils across which
commissioned the Melbourne such businesses operate.
component of the World Health
Early Years
Organisation’s Age Friendly
Cities Project which produced a In an election year the MAV
checklist for local government on developed a unified local
what constitutes an age-friendly government position on federal
environment.
government support for children’s
services. This provided a useful
Food Safety
advocacy tool for addressing key
Developments in food safety took issues identified by councils
on new momentum in 2007/08 including early childhood services
following plans announced by the infrastructure, child care benefit,
State Government to make
funding for family day care and
changes to the food safety system investment in workforce training.
Commitments given by the ALP
addressed many of these
concerns. The MAV also
maintained a close involvement
in the State Government’s review
of children’s services regulations,
particularly with the extension
of regulations to family day
care and outside school hours
care, to ensure that adequate
consideration is given to any
additional responsibilities and
costs which may flow to local
government as a result of the
new regulations.
Kindergarten infrastructure
The MAV seized every opportunity
in 2007/08 to raise awareness to
the State Government about the
challenges confronting many
councils in renewing and
managing community assets
underpinning early years services.
The result achieved is the first ever
State Government funded
program for municipal-wide
infrastructure planning in the area
of children’s services. This
program is specifically aimed at
supporting councils to fully
evaluate their current
infrastructure and achieve their
longer-term goals for more
responsive, sustainable facilities
for families and children within
their municipality. Major and transport, the Disabled Persons’
minor capital funding for
Parking Scheme and the Equal
integrated children’s centres and Opportunity Act 1995. Other
refurbishment of kindergartens issues progressed through
was also increased.
representation on local
government, State Government
Library funding
and interagency committees
The MAV Library Working Party include accessible housing,
was re-convened this year to support for carers, accessible
scope a position paper and plan public transport, employment
a summit for local government for people with disabilities and
and key stakeholders as part of workforce issues within disability
a three- to five-year campaign services. The MAV also continued
to address escalating recurrent to work closely with councils on
library costs borne by councils. the development of local disability
Meanwhile, the MAV provided action plans. Literature was
direct input to the development produced and a number of
of a blueprint for the direction forums conducted to help
of libraries in Victoria that
councils interpret legislation and
emphasises the interconnectedness understand their obligations. As
of libraries and the benefits of a result, all councils now have at
resource and information sharing least a draft plan in place and
between libraries. This policy most have produced their second
direction was supported through or third plans.
the allocation of $380,000 per
year in the State Budget to fund Cultural diversity
recurrent costs associated with the The MAV’s Statement of
LibraryLink Victoria system that Commitment to Cultural
enables users to borrow materials Diversity was formally launched
from any public library in Victoria. in September 2007 at an expo for
councils to share good practice
Disability services provision for addressing diversity issues in
and advocacy
aged care services. At the same
In 2007/08 the MAV represented event the MAV also signed a
local government in reviews of public statement, initiated by
disability standards for public religious and community leaders
and supported by the Victorian
Government, which emphasises
respect for all ethnic, cultural,
religious and linguistic
communities. Another conference
attended by 180 local
government delegates and
stakeholders later in the year
provided the basis for a
framework for progressing
multicultural policy and programs
over the medium term.
MAV ANNUAL REPORT 2007/08 HUMAN SERVICES AND PUBLIC HEALTH >17
TRANSPORT AND INFRASTRUCTURE
Strong advocacy
underpinned gains
in transport policy
and support for
local infrastructure
Transport strategy
The MAV focussed this year on
influencing proposals for new
legislation to govern transport
in Victoria. Through its high level
involvement the MAV advocated
local government’s interests as
articulated in the MAV Sustainable
Transport Action Plan developed
in close consultation with councils
the previous year. Provisions for
cycling featured heavily in this
plan. In response to the advocacy
of transport groups, including the
MAV, the Government committed
$28.2 million over four years to
further develop the bicycle and
pedestrian network as part of the
State Government’s congestion
plan. In response to Sir Rod
Eddington’s East West Link Needs
Assessment, the MAV maintained
its line that the transport system
needs to foster economic
prosperity, support a healthy
lifestyle, embrace the principle
of environmental sustainability
and embody integrated planning
and governance, and encouraged
the State Government to consider
the wider transport needs for all
of Melbourne.
Trucks on local roads
Some quick advocacy work
averted an attempt by VicRoads
18> MAV ANNUAL REPORT 2007/08 TRANSPORT AND INFRASTRUCTURE
to change the process for declaring
local roads suitable for B-doubles
and other higher mass vehicles.
The changes posed serious
impacts for councils, including
significant increases in the costs
of maintaining and repairing local
roads and increased administrative
burden, not to mention impacts
on community safety, noise and
amenity. The changes had been
trialled in four north-western
councils, and were presumed to
be applicable to the rest of the
state without consultation with
councils or communities. The
MAV convened a meeting
attended by 60 councils where it
was overwhelmingly agreed that
VicRoads’ proposal to provide
blanket approval for trucks to
travel on local roads and identify
exceptions was unworkable.
Following the meeting and local
government’s position being
presented in the media, the
Minister overruled the change.
Truck freight is an increasing
concern for local government. To
this end the MAV has established
a working group involving
councils, VicRoads, the National
Transport Commission and the
Victorian Transport Association,
to identify issues arising from the
operations of large trucks.
Step Asset Management
Program
The focus of the MAV’s Step Asset
Management Program this year
was to improve the alignment of
asset management and long-term
financial planning processes by
helping councils integrate renewal
gaps into strategic plans from
2008/09. This is an important
progression for the program from
raising awareness of good asset
management practice within the
sector to the implementation
phase. Work also progressed
through the Advanced Step
Program to produce a simple
methodology for publicly
identifying service levels for all
council assets. Eight councils
were involved in a pilot to
develop the methodology for
reporting on the type and quality
of infrastructure being delivered
for communities, and to detail
future maintenance,
improvement, expansion or
renewal programs. The ‘star
rating’ system will improve
community understanding of the
asset management challenge and
empower citizens to have more
informed input into community
planning processes.
Statewide road register
The Government responded with
a $112.6 million package
involving the standardisation and
extension of clearways times,
expanded use of tow-away zones,
and various road network
improvements including cycling
infrastructure. The MAV cautiously
supported these measures on
the basis that they provide a
Councils with inaccurate road
data now face significant
exposure under requirements
of the Road Management Act
2004 to maintain a road register
and specify minimum levels of
service for maintaining roads in
their control. This year the MAV
has worked with three councils
with advanced methodologies for triple benefit including improved
traffic flows, faster trams and
maintaining road registers to
buses and additional access
develop a good practice model
for resolving inaccuracies in road routes for bikes and pedestrians.
In addition, the MAV called for
data. This model will provide the
a longer-term plan that provides
basis for establishing a single
for more efficient management
statewide register in partnership
of road space, including a
with the State Government. The
reduction of single occupant car
outcome of this initiative will be
usage. The MAV has consistently
to improve processes within
advocated for the reduction of
councils and improve overall
traffic congestion by enticing
road data quality across Victoria
people out of their cars and on
for use by stakeholders including
to public transport.
emergency services.
Congestion
At a cost of $2.6 billion every
year, traffic congestion was
high on the agenda this year.
The MAV participated in a
roundtable convened by the
Premier where short-term
measures were advocated to
improve the reliability and flow of
road-based public transport while
a long-term plan is developed.
Rail safety
Several fatal accidents at rail
crossings this year increased
scrutiny of Victoria’s rail network.
Local government has important
responsibilities for level crossing
safety under the Road
Management Act 2004.
The MAV secured funding from
the State Government to review
safety at crossings and provide
direct assistance to councils to Community Sport and Recreation
close remote crossings. Funding Program. This initiative has
was also negotiated to assist
already delivered a first round
councils implement a new
of funding to assist councils and
requirement under the Rail
sporting clubs maintain yearSafety Act 2006 to develop
round use of sports grounds.
agreements with rail infrastructure
Disabled Parking
managers to jointly manage
the risks of every crossing in
The State Government gave the
Victoria by July 2010.
strongest sign yet of responding
favourably to the MAV’s long
Sports grounds
advocacy campaign to reform
The MAV joined forces with 10 the Disabled Persons’ Parking
peak sporting bodies to launch Scheme. The Roads Minister
the Victorian Community Sports expressed interest in the
Surfaces Sustainability Alliance alternative operational model
(VCSSSA) in September 2007, developed by the MAV last year
attracting extensive statewide
and has ordered a review of the
media interest. A report prepared proposed new model.
by the group with support from Developments at the Federal
councils showed the vital
level to harmonise aspects of
contribution of sport to the health mobility parking schemes
and wellbeing of communities, throughout Australia have further
and highlighted the need for
highlighted the need to reform
more efficient long-term water Victoria’s scheme.
use strategies to maintain sports
facilities. It detailed an extensive
range of actions that sporting
clubs, councils, water authorities
and the State Government could
undertake to ensure the survival
of sporting surfaces in a dry
climate. In response to advocacy
by the MAV and the alliance, the
State Government established the
$12.9 million Drought Relief for
MAV ANNUAL REPORT 2007/08 TRANSPORT AND INFRASTRUCTURE >19
ENVIRONMENT
Influencing state
government policy
and demonstrating
leadership on climate
change was the focus
of activity this year
Climate Change
the MAV developed an issues
Councils’ concerns were surveyed paper on stormwater reuse and
quality and continued to work
and documented to achieve a
closely with Melbourne Water on
clear picture of local government
the development and roll out of
actions on climate change in
a leadership seminar program.
2007/08. This piece of work
guided subsequent engagement
Native vegetation
with the State Government and
In
2007/08 the MAV sought
provided the basis for local
to
address
councils’ now well
government input to the
development of statewide coastal documented challenges in native
vegetation management by
and biodiversity strategies. The
influencing the State
MAV participated in the State
Government’s White Paper
Government’s Climate Change
process on Land and Biodiversity
Summit where it sought to clarify
local government’s role in climate in a Time of Climate Change.
The MAV called on the State
change and align the actions
Government to ensure an
of both levels of government.
effective and efficient set of native
Water
vegetation controls. To this end
the MAV also initiated a study
As drought persisted through this
to assess the effectiveness of
year, the MAV was heavily
planning controls in meeting
engaged in representing local
local, regional, state and national
government views in the
native vegetation objectives.
development of water policies
This study included an analysis of
and strategies for Victoria.
the capacity of councils to apply
The MAV used its influence
these controls. A review of the
with the State Government on
new approach described by the
environmental matters to argue
Native Vegetation Management
that water policy needs to be
Framework has commenced.
linked to climate change policy,
and urgent and profound action
is needed to reduce greenhouse Public lighting
The first of new, more energy
gas emissions. In preparation
efficient public lighting
for the development of a
technologies was approved
statewide stormwater strategy
20> MAV ANNUAL REPORT 2007/08 ENVIRONMENT
this year following field trials in
a number of local government
areas. The MAV harnessed this
opportunity to reduce councils’
energy consumption and
greenhouse emissions by
brokering discussions between
electricity distribution companies
and 15 councils ready to
upgrade to the new fittings.
These negotiations resulted in
more transparent pricing for
fittings and labour to upgrade
public lighting that is informing
a plan being developed with the
State Government and electricity
distributors to roll out more
sustainable public lighting
across Victoria.
Sustainability
Councils will soon be able to
benchmark their performance
in environmental sustainability
through measures developed this
year to build the capacity of the
sector. The MAV worked with
Sustainability Victoria to establish
a framework for guiding
sustainability programs aimed at
local government and to develop
tools to help councils manage
and interpret various sources of
data for measuring environmental
performance. A website was also
developed by the MAV to share
information between councils bans showed that a small drop
and other stakeholders on
in butt litter was achieved in
sustainability in the built
metropolitan areas where the
environment, natural environment campaign was focused, while in
and council operations giving regional areas butt litter increased
effect to one of the commitments around 15 per cent. The survey
of the Sustainability Accord. results supported the campaign
evaluation which found that
Weed management
littering behaviours decreased
The fight on roadside weeds took where venues were involved,
another turn this year when
infrastructure provided and
responsibility for the issue shifted education and information given
within the State Government. to smokers. This year also marked
The MAV has vigorously opposed the beginning of a mid-term
any transfer of responsibility for review of the National Packaging
weed management on roadsides Covenant, which will test the
to local government without progress of the Covenant against
a costing model and funding
its targets and objectives. The
commitment that covers all
MAV represented local
associated costs. Negotiations government’s interests nationally
are ongoing in this matter.
to ensure the review is rigorous
and independent.
Waste management
Domestic Wastewater
The introduction of further
tobacco reforms on 1 July 2007 Management
posed increased problems
A program of training was offered
associated with cigarette butt to environmental health officers
litter. The MAV worked with
in 2007/08 to develop capacity
Sustainability Victoria on a
within local government for the
campaign that resulted in a
effective management of
halving of butt littering behaviour, domestic wastewater. Skills
with 66 per cent of smokers sessions focused on community
correctly disposing their butts, consultation and engagement,
up from 42 per cent prior to the funding opportunities, conflict
campaign. A survey conducted resolution, negotiation, and
before, during and after the new monitoring and evaluation.
Consultation sessions were used
to gather input from affected
councils to influence a regulatory
review of domestic wastewater
management.
MAV ANNUAL REPORT 2007/08 ENVIRONMENT >21
EMERGENCY MANAGEMENT AND COMMUNITY SAFETY
Concerted advocacy
and targeted
initiatives improved
the capacity of local
government to provide
for the peace and
order of Victorian
communities
Resource sharing
The MAV developed a protocol
to deal with instances where
councils require assistance from
other councils in an emergency.
The protocol describes a process
for initiating a request for
resources from another council
and clarifies associated
operational insurance and
reimbursement issues that may
arise through sharing
arrangements. To date 26
councils have signed up to
the protocol.
Drugs and alcohol
Attention focussed on licensed
premises to combat a surge in
binge drinking and alcohol
related assaults. The MAV
advocated greater integration of
local planning processes and
State Government liquor licensing
approvals to the State
Government’s Inner City
Entertainment Precinct Taskforce
and facilitated consultation with
affected councils. Through its
position on the Local Government
Drug Issues Forum the MAV
worked with the Victorian Safe
Communities Network to host
a forum examining key local
issues of alcohol consumption
and related harms, and the
22> MAV ANNUAL REPORT 2007/08 EMERGENCY MANAGEMENT AND COMMUNITY SAFETY
problems these cause in
entertainment precincts.
Reimbursement
The MAV sought and achieved
a review of the State
Government’s policy for
reimbursing council expenditure
for natural disaster emergency
operations in light of councils’
increased emergency
management responsibilities.
An options paper was developed
by the State Government to
determine if the current
arrangements are still relevant
in today’s emergency
management environment and
the MAV facilitated a sector-wide
response to the paper.
Pandemic Planning
The MAV endorsed a toolkit
to assist councils to plan for a
pandemic outbreak of influenza
on the condition that planning
at the municipal level is supported
with ongoing assistance from the
State Government. This resource
responds to ongoing advocacy
by the MAV to ease planning
requirements for councils and
highlight constraints on local
government’s capacity to respond
in the event of an influenza
pandemic. The MAV led
consultation with the sector on
the development of the toolkit
and a plan that addresses
community support and recovery
aspects of the higher level plan
released last year.
Drought
Funding was achieved for
20 officers to coordinate
government activities in support
of the most seriously drought
affected communities following
advocacy by the MAV. A further
call was made to fund
coordinators for all drought
declared communities through
the MAV’s submission to the State
Budget. The need for more
consistency and coordination
between state and federal
programs was highlighted by the
MAV as part of a review of State
Government drought initiatives.
Flood management
The MAV represented local
government interests in the
development of the Victoria
Flood Strategy, which reviewed
roles and responsibilities for
levee management, flood
warnings, planning controls
and food data collection.
Through this process the MAV
advocated a collaborative
approach to flood management infringement notices on retailers
and expert assistance for
selling spray paint cans to minors.
councils for flood planning.
The MAV raised concerns about
the administrative and financial
Gaming
implications for councils without a
In a year when Macedon Ranges transitional period, and following
Shire became the first council to advocacy by the MAV the
take on VCAT in the Supreme legislation was implemented
Court over a pokies decision and in two phases.
win, the MAV highlighted the
pressure on councils to prove the
negative impacts that gaming
machines have on communities in
its submission to a review of
gaming machine approvals. It
was argued that mechanisms for
community input should be
strengthened, and councils should
have the same access to data
available to the State Government
and the gaming industry in order
to make informed decisions on
gaming applications.
Graffiti
The MAV led consultation with the
sector on proposed legislation
that increased the powers and
responsibilities of councils for
preventing graffiti. Changes
included authority for councils to
remove graffiti on private property
with permission from the owner or
occupier if the graffiti is visible
from a public place and a
requirement for councils to serve
> MAV ANNUAL REPORT 2007/08 EMERGENCY MANAGEMENT AND COMMUNITY SAFETY 23
COMMUNITY AND ECONOMIC DEVELOPMENT
Direct support was
provided for councils
to strengthen
connections with their
business communities
Small Towns Victoria
program to support councils
Program
eager to partner with their
business community to retain and
The inaugural Small Towns
expand local businesses. The
Summit provided a unique
program provides training for
opportunity for councils to
community volunteers to visit
network with business, industry
local businesses and conduct a
and community leaders, to share
structured interview questionnaire,
knowledge, make decisions and
opening dialogue with owners
shape the future of rural Victoria.
and operators of local businesses
A series of workshops were
about what helps and hinders
conducted around the state to
their business activities, and ideas
demonstrate a Canadian
they may have to improve the
economic development program
local business environment.
for small towns and the
The information gathered through
methodology was piloted for
this process becomes the basis
the first time in Australia in the
for designing a community
townships of Yarram, Dimboola,
economic development strategy.
Myrtleford, Robinvale and
Participating councils receive
Macarthur. Research into the
ongoing support through a
economic development needs of
statewide network for exchanging
rural councils undertaken as part
of the MAV’s Small Towns Victoria knowledge and tools via forums
and newsletters.
Program informed a submission
to the State Budget and
Community Indicators
guidelines for a $510,000
The MAV participated in a review
Rural Economic Development
of Community Indicators Victoria
Opportunities Fund.
to determine current and future
Business Expansion
requirements for supporting
and Retention Program
community planning processes
undertaken by local government.
The expansion of existing
Community Indicators Victoria is
businesses is known to generate
an interactive web based resource
between 60 and 80 per cent of
which uses up to 80 indicators
all new jobs in a community. In
across a range of social,
2007/08, the MAV launched the
Business Expansion and Retention environmental, economic,
24> MAV ANNUAL REPORT 2007/08 COMMUNITY AND ECONOMIC DEVELOPMENT
WORKFORCE
cultural and political aspects to
measure community well-being.
Councils’ feedback to the review
was that the website has assisted
councils’ community planning,
improved understanding of local
challenges and contributed to
better allocation of resources
to meet community needs.
Effort was directed
at boosting the profile
of local government
as an employer
Compensation Review
relations. The MAV kept councils local government with a particular
informed of Labor’s industrial focus on high-demand, low
The MAV highlighted the massive
relations platform and
supply employees was developed
burden of workers’ compensation
represented
local
government
from
the research findings. The
premiums on council budgets as
interests
through
consultation
MAV
received
strong support for
part of a legislative review that
processes
on
the
development
of
its
strategy
to
reposition and
commenced in 2007/08. In its
national employment standards rebrand local government as
submission to the review the MAV
and transitional arrangements a preferred employer, including
argued that the scheme
soon after the new Government a financial contribution from
significantly affects the capacity
was installed. Along with its
48 councils.
of some councils to deliver
interstate counterparts the MAV is
services to their communities,
working through impacts for local Careers Expo
and is at real risk of becoming
government of aligning industrial For the second consecutive year,
financially unviable. Analysis
awards with the new standards. the sector was represented at the
presented showed that local
The MAV was also involved in two-day National Careers and
government’s contribution of
the introduction of pay equity
Employment Expo in a
$37.8 million in 2006/07
audits
that
will
allow
councils
collaborative
approach to
equated to approximately $1,400
to
undertake
further
analysis
promoting
careers
in local
of premium per equivalent
and identify actions to address government. Engaging with
full-time position in real terms.
any barriers to equal pay.
hundreds of job seekers, staff
In the context of an ageing
from the MAV and eight councils
workforce, skill shortages and
Employment brand
explained the range of options
other employment related issues,
This year the MAV embarked on available in councils and how
the MAV also expressed concern
rigorous research to solve critical working in local government can
that current arrangements act as
staff shortages in the sector.
help build a career in many fields
a real and significant disincentive
Qualitative
research
techniques
of study. Uniformed staff manned
for the employment of mature age
were used to investigate the
a large stand branded ‘Your
workers, people with pre-existing
employment
experience
at
five
Council. Your Career’,
injuries and disadvantaged groups
councils
selected
to
be
distributing
promotional items
including people with disabilities.
representative
of
metropolitan,
developed
specifically
for the
The Government’s response
rural, interface and regional city occasion. The expo was successful
is expected early next year.
councils. This was followed up by in raising awareness of councils
Industrial Relations
a survey of 2457 employees from as employers with school
over 40 councils. A positioning children, school leavers,
A flurry of activity ensued when
statement that identifies a unique graduates, job seekers and
the federal election was fought
mature age workers.
and won on the topic of industrial employment proposition for
MAV ANNUAL REPORT 2007/08 WORKFORCE >25
GOVERNANCE AND COUNCILLOR DEVELOPMENT
The ground work
was laid in
preparation for
council elections
Councillor Remuneration
for council, the MAV developed
a dedicated website for
prospective candidates and a
range of campaign activities to
A 30 per cent increase in
councillor allowances resulted
from the MAV’s campaign for
improved councillor remuneration. raise awareness of the elections
and drive traffic to the website.
Using an evidence and data
Every council received a kit of
based approach, the MAV
resources to support a statewide
successfully advocated for an
effort, including posters and
increase in allowances to reflect
postcards, template press
the growing time commitment
and increasing skill base required releases, artwork for
advertisements in council
to fulfil the councillor role. The
publications and a graphic for
MAV timed its campaign to take
creating a link to the website
full advantage of state and local
from council websites.
government election cycles and
was careful to take account of
Electoral Services Tender
communities’ capacity to pay for
Forty-nine councils benefitted
increased remuneration. Other
successful outcomes of the review from a single electoral services
tender saving considerable costs
were the clarification and
and reducing administrative
incorporation of superannuation
burden. The MAV provided a
entitlements in the allowance
standard suite of documentation
and the provision of a full suite
that included specification of
of councillor expenses. The new
core and additional electoral
remuneration structure will
services required, tenders and
commence after the November
contract terms and conditions.
2008 elections.
Participating councils were
Council elections
provided with an evaluation
of the tender and assistance in
The alignment of council
finalising the contract. This
elections in 2008 provided a
approach provided participating
unique opportunity to draw
councils with certainty around
attention to local democratic
the provision of electoral services
processes. To leverage this
in 2008.
opportunity and encourage
Victorians to consider standing
26> MAV ANNUAL REPORT 2007/08 GOVERNANCE AND COUNCILLOR DEVELOPMENT
Councillor Development
This year heralded the MAV’s
first dedicated program for
mayors. New mayors and their
partners were welcomed at a
cocktail reception at the
Melbourne Museum, followed
by three full day workshops and
two networking dinners. The MAV
also launched a new loyalty
program enabling councils to
pre-purchase credits for
councillors to take advantage of
learning opportunities offered
throughout the year at discount
rates. Thirty-four councils took
up the offer that delivered an
average saving of 10 per cent
off the normal price of attending
MAV workshops and events.
Top Teams
The forthcoming elections present
a significant change management
challenge for the local
government sector in Victoria.
Accordingly, the MAV has been
developing a program to
fast-track effective teamwork and
cooperation between councillors
and management based on the
successful UK ‘Top Teams’
program. The program will be
available to all Victorian councils
next year. Development work this
year included an intensive
three-day process involving
councillors, officers and MAV
staff to adapt the program for
Victorian councils, a statewide
forum and two pilots involving
Nillumbik Shire Council and
West Wimmera Shire Council.
Councillor support
The MAV’s experienced staff
provide expert advice to
councillors on a regular and
ongoing basis. This year the MAV
has assisted councillors with
confidential legal and governance
advice on contract negotiations
Legislative Reform
and performance reviews for chief
The State Government
executive officers, councillor
incorporated the MAV’s proposals conduct issues, dispute resolution
to provide a mechanism for
processes and conflicts of interest
dealing with problematic
among others.
councillor conduct in a
consultation paper on a range of
legislative reforms expected to be
introduced next financial year.
The MAV had advocated for the
introduction of councillor conduct
panels to settle unresolved
disputes since 2006. The Better
Local Governance consultation
paper also sought to provide
more certainty and clarity around
conflict of interest provisions.
This is an issue that the MAV has
been actively pursuing with Local
Government Victoria and the
Ombudsman Victoria. A further
reform achieved through the
consultation process was
a reduction in the caretaker
period from 57 to 32 days.
MAV ANNUAL REPORT 2007/08 GOVERNANCE AND COUNCILLOR DEVELOPMENT >27
MAV GOVERNANCE
Municipal Association Act 1907
The Municipal Association Act 1907 defines the purpose of the
MAV – to promote the efficient carrying out of municipal
government throughout the state of Victoria and watch over and
protect the interests, rights and privileges of municipal corporations.
It establishes the MAV as a corporation with perpetual succession
and requires it to provide a mutual liability insurance scheme for
local government and empowers it to provide fidelity insurance.
MAV Rules
The Act requires the MAV to set Rules for
> the management of the Association
> the regulation of proceedings
> fixing the annual subscription paid by each municipality
> fixing of contributions to the Municipal Officers’ Fidelity
Guarantee Fund
> other matters affecting the management of the Association.
The Rules require Governor-in-Council consent.
State Council
The Act provides that each member council may appoint a
councillor as its representative, and these representatives constitute
the Association. The representatives come together twice annually
to form State Council which sets the policy direction of the
Association and monitors its performance.
The State Council Annual General Meeting was held in November
2007 and received a report from the President on the activities and
financial affairs of the Association, considered proposals for the
Victorian State-Local Government Agreement and its implementation
and voted on 52 motions from member councils. In May 2008 the
State Council met and approved the Strategic Work Plan for the
MAV for 2008/09 and considered a further 59 motions from
member councils.
Board of Management
Twelve Board members are elected to the Board of Management
for a two-year term. Each Board member is elected to represent
a geographic grouping of councils. The representatives in that
grouping elect the regional Board member. The thirteenth member
of the Board is the President who is popularly elected by the
representatives of each member council. The Rules prescribe
the functions of the Board which include ensuring the directions
set by State Council are met, setting the budget and overseeing
the manner by which the MAV engages with its membership.
In August 2007 Cr Joe Cutri resigned from the MAV Board, and as
a councillor at Maribyrnong City Council. A by-election took place
by postal ballot on 9 November 2007 to fill the casual vacancy
in the metropolitan west region. Cr Chris Papas from Melton Shire
Council was elected as the regional representative replacing
Cr Cutri. Cr Cutri was first elected to the MAV Board in February
2005 and returned unopposed in February 2007. He also chaired
the MAV’s Human Services Portfolio Committee. The MAV Board
and management acknowledge Cr Cutri’s passionate contribution
to the local government sector and the leadership he demonstrated
in his time on the Board.
BOARD MEETING ATTENDANCE
JUL AUG SEP OCT NOV DEC FEB MAR
Sam Alessi X
–
–
JUN
–
–
–
–
June 2008 for expenses incurred in the 2007/08 year, details
of which will be reflected in the 2008/09 Annual Report.
In 2007/08 the annual allowance amounts were as follows:
The Board has established a number of advisory committees to
support and provide advice across a range of policy portfolios.
A Board member is appointed to chair each of these committees
and provide a conduit for feedback between the committee and
the Board. Current committees in place are:
· Human Services Portfolio Committee – Chair, Jenny Dale
> President $52,450.90
> Deputy President $10,811.60
> Board member $7,361.60
Annual
Allowance
Sam Alessi
10,811.60
Travel and
Accommodation
TOTAL
1,012.50
11,824.10
President Dick Gross was also provided with full private use of a
motor vehicle at a cost of $9,459.38 and mobile phone $4,129.33.
BOARD ADVISORY COMMITTEES
· Strategic Environment Advisory Group – Chair, Darryl Argall
· Planning Advisory Group – Chair, Bill McArthur
Darryl Argall
10,811.60
23,536.85
34,348.45
· Economics and Finance Advisory Group – Chair, Rod Fyffe
Joe Caputo
7,361.60
57.75
7,419.35
· Transport and Infrastructure Advisory Group – Chair, Sam Alessi
Mark Conroy
7,361.60
–
7,361.60
· Professional Development Reference Group – Chair, Bill McArthur
Joseph Cutri
1,840.40
–
1,840.40
· Drought Taskforce – Chair, Darryl Argall
Jenny Dale
7,361.60
13,039.62
20,401.22
For further detail on the role of each advisory committee, see p 36.
Rod Fyffe
Geoff Gough
Dick Gross
–
–
–
Jenny
Dale


X
Rod
Fyffe


X

Geoff Gough
X

X

Dick
Gross

X

28> MAV ANNUAL REPORT 2007/08 MAV GOVERNANCE
MAY
  
Darryl Argall     
Joe Caputo  X
 X X    

X X X
Mark Conroy
X X Bill McArthur
X
X Jane Rowe X X

Luke Tobin X X X X
Joseph Cutri
X
X
APR
BOARD ALLOWANCES
The Board Allowance and Expense Policy makes provision for
Board members to receive an annual allowance paid quarterly in
advance, and to claim out-of-pocket expenses for travel, parking,
accommodation and meals when undertaking duties as a Board
member. Board allowance amounts are adjusted by CPI each July.
Brenda
Hampson
Chris Papas –
–
–
–
– X
X X
X
7,361.60
7,563.60
14,925.20
7,361.60
1,361.28
8,722.88
52,450.90
3,981.50
56,432.40
Brenda Hampson
7,361.60
2,112.75
9,474.35
Bill McArthur
7,361.60
1,909.10
9,270.70
Chris Papas
4,768.30
–
4,768.30
Jane Rowe
7,361.60
5,311.85
12,673.45
Luke Tobin
7,361.60
262.40
7,624.00
The above amounts do not correlate to the allowance and expense
payments figures in the financial statements as they include some
payments made to Board members for expenses incurred in
2006/07 and claimed in 2007/08. Some expenses are also
charged to other areas in the MAV accounts.
Payments for expenses were made direct to Board members, to their
council for travel where they have utilised a council fleet vehicle, or
directly to the hotel for some accommodation expenses. It should
be noted that some Board members may lodge claims after 30
2008/09 STRATEGIC WORK PLAN
The MAV commenced its annual work plan review in February
2008 with a series of meetings for member councils in various rural
and metropolitan locations. The feedback was used to inform and
update the Strategic Work Plan 2008/09, which was approved in
draft form by the MAV Board and circulated to all councils for
review in April. The draft plan was then discussed and approved
at the May State Council. The Board is responsible for overseeing
delivery of the actions identified in that plan, and for determining,
when required, how those actions may be implemented. The MAV
Annual Report for 2008/09 will provide a summary of achievements
against the objectives and actions in that plan.
REGIONAL MEETING
In addition to undertaking regional meetings as part of the
development process for the Strategic Work Plan, the Board has
also committed to holding some Board meetings in regional
locations. The objective of this is to make the MAV more accessible
to rural councils and provide an opportunity for councils to meet
directly with the Board to discuss issues. A regional meeting was
held with Indigo Shire Council in September 2007.
MAV ANNUAL REPORT 2007/08 MAV GOVERNANCE >29
Deed of Establishment – Mutual Liability Insurance
Scheme
The Deed of Establishment sets out how the insurance scheme is
to operate as a mutual liability fund. It includes rules as to eligibility
and obligations of the participants. It requires the formation of
a management committee, and formalises authorities, duties and
powers of delegation by the committee and provides guidance
as to the day-to-day operation of the insurance business.
MAV Insurance Committee
The Board of Management has delegated authority and
responsibility for the operation of the MAV Insurance business (Civic
Mutual Plus and the Municipal Officers’ Fidelity Guarantee Fund)
to the MAV Insurance Committee (MAVIC). MAVIC has oversight
of the operation of the insurance schemes and monitors the MAV’s
compliance with its Australian Financial Services Licence (AFSL).
It comprises nine members – four independent insurance experts,
one council CEO, one MAV Board member, one representative of
the Local Government Association of Tasmania, and the President
and CEO of the MAV. The committee oversees the operations
of the MAV Insurance business.
MAVIC ATTENDANCE
AUG SEP* OCT DEC FEB APR* APR MAY* JUN
Ron Farrell
Rod Fyffe
X
X
X X
X
Allan Garcia X
X
X
X
X
X
X X
Dick Gross X
X
X
Michael Kennedy X
Anne Murphy X
Adrian Nye
X
X
X X
X
X
X
Rob Spence
John Warburton
*Indicates special meetings
MAVIC Sitting Fees
The MAV makes provision for independent committee members
to receive a sitting fee for each meeting attended. In 2007/08 the
sitting fee was:
> Chair: $800
Audit Committee
In addition to monitoring the financial and risk management
performance of the MAV and reviewing the annual work program
of the internal and the external auditors, in 2007/08 the MAV Audit
Committee received reports on the strategic review of MAV
Insurance, development of the EasyBiz project, sector development
programs and the internal information management project,
MAVIS. It also considered audit reports on controls over the receipt
of commissions by the general insurance broking business, payroll
and a review of MAV Insurance compliance with regulatory
obligations. The Audit Committee is an independent committee
established at the direction of the MAV Board of Management in
2004. The Committee comprises three independent members:
Hugh Parkes FCA CISA (Chair), Dean Newlan CPA and Elizabeth
Reeves CPA; two Board members, Cr Geoff Gough and Cr Jane
Rowe; and the MAV President, Cr Dick Gross. The primary objective
of the Committee is to assist MAV management in maintaining
good governance, compliant financial reporting, management
of risk, maintaining a reliable system of internal controls and
monitoring organisational performance. The Committee meets
quarterly and additional meetings are convened as required.
The Audit Committee met on six occasions during 2007/08.
Minutes of all Audit Committee meetings are provided to the
MAV Management Board.
Compliance
In addition to the requirements of the Municipal Association Act
1907 and MAV Rules, the MAV must comply with relevant
regulations and obligations applicable to statutory and public
bodies. The MAV is also required to comply with the provisions
of its Australian Financial Services Licence (AFSL). The MAV has
established a significant compliance and governance structure
to ensure it meets its obligations under the AFSL. This structure
includes a compliance and risk management strategy; compliance
and risk management plan; compliance and risk analysis table;
and disaster recovery and business continuity plan. An electronic
risk management and compliance system operates within MAV
Insurance to ensure compliance with its AFSL obligations.
Compliance with this system is audited by the MAV’s independent
internal auditor and findings are reported to both the MAV
Insurance Committee and the MAV Board of Management.
MAV REPRESENTATIVES
Council
Representative
Council
Representative
Alpine Shire Council
Cr Nino Mautone
Mansfield Shire Council
Cr Marg Attley
Ararat Rural City Council
Cr Fay Hull
Maribyrnong City Council
Cr Catherine Cumming
Ballarat City Council
Cr David Vendy
Maroondah City Council
Cr Tony Dib
Banyule City Council
Cr Jenny Mulholland
Melbourne City Council
Cr Brian Shanahan
Bass Coast Shire Council
Cr Neville Goodwin
Melton Shire Council
Cr Chris Papas
Baw Baw Shire Council
Cr Dick Van Leeuwen
Mildura Rural City Council
Bayside City Council
Cr James Long
Mitchell Shire Council
Benalla Rural City Council
Cr Pat Claridge
Moira Shire Council
Cr Frank Malcolm
Boroondara City Council
Cr Luke Tobin
Monash City Council
Cr Paul Klisaris
Brimbank City Council
Cr Anthony Abate
Moonee Valley City Council
Buloke Shire Council
Cr Peter Watts
Moorabool Shire Council
Cr Thomas Sullivan
Campaspe Shire Council
Cr John Elborough
Moreland City Council
Cr Joseph Caputo
Cardinia Shire Council
Cr Bill Ronald
Mornington Peninsula Shire Council Cr Bill Goodrem
Casey City Council
Cr Mick Morland
Mount Alexander Shire Council
Central Goldfields Shire Council
Cr Chris Meddows-Taylor
Moyne Shire Council
Colac Otway Shire Council
Cr Christopher Smith
Murrindindi Shire Council
Cr Lyn Gunter
Corangamite Shire Council
Cr Ruth Gstrein
Nillumbik Shire Council
Cr Warwick Leeson
Darebin City Council
Cr Peter Stephenson
Northern Grampians Shire Council
Cr Bryan Small
East Gippsland Shire Council
Cr Jane Rowe
Port Phillip City Council
Cr Dick Gross
Frankston City Council
Cr Mark Conroy
Pyrenees Shire Council
Cr Lester Harris
Gannawarra Shire Council
Cr Keith den Houting
Queenscliffe Borough Council
Cr Pat Semmens
Glen Eira City Council
Cr Jacquie Robilliard
South Gippsland Shire Council
Cr David Lewis
Glenelg Shire Council
Cr Frank Zeigler
Southern Grampians Shire Council
Cr Marcus Rentsch
Golden Plains Shire Council
Cr Bill McArthur
Stonnington City Council
Cr Claude Ullin
Greater Bendigo City Council
Cr Rod Fyffe
Strathbogie Shire Council
Cr Gregory Carlson
Greater Dandenong City Council
Cr Maria Sampey
Surf Coast Shire Council
Cr Beth Davidson
Greater Geelong City Council
Cr Jan Farrell
Swan Hill Rural City Council
Cr Gary Norton
Greater Shepparton City Council
Cr Bruce Wilson
Towong Shire Council
Cr Peter Joyce
Hepburn Shire Council
Cr Bill McClenaghan
Wangaratta Rural City Council
Cr Roberto Paino
Cr John Arnold
Cr Bob Humm
Cr Jan Chantry
Cr Philip Schier
Cr Ken Gale
Hindmarsh Shire Council
Cr Darryl Argall
Warrnambool City Council
Cr David Atkinson
> Independent Committee members: $550
Hobsons Bay City Council
Cr Bill Baarini
Wellington Shire Council
Cr Jeff Amos
In addition, an allowance of $1,100 was paid to the independent
committee members for attendance at other insurance-related
meetings.
Horsham Rural City Council
Cr Pam Clarke
West Wimmera Shire Council
Cr Warren Wait
Hume City Council
Cr Adem Atmaca
Whitehorse City Council
Cr Sharon Ellis
Indigo Shire Council
Cr Jenny Dale
Whittlesea City Council
Cr Sam Alessi
Kingston City Council
Cr Justin McKeegan
Wodonga City Council
Cr Rodney Wangman
Knox City Council
Cr Jim Penna
Wyndham City Council
Cr Leigh Barrett
Latrobe City Council
Cr Bruce Lougheed
Yarra City Council
Cr Jenny Farrar
Loddon Shire Council
Cr Allen Brownbill
Yarra Ranges Shire Council
Cr Tim Heenan
Macedon Ranges Shire Council
Cr Noel Harvey
Yarriambiack Shire Council
Cr Geoffrey Lovel
Manningham City Council
Cr Geoffrey Gough
30> MAV ANNUAL REPORT 2007/08 MAV GOVERNANCE
MAV ANNUAL REPORT 2007/08 MAV GOVERNANCE >31
MAV OPERATIONS
Human Resources
Knowledge management and information systems
The MAV retains a mix of staff and consultants to advocate the
interests of its 79 member councils, raise the sector’s profile,
provide advice and capacity building programs to support council
activities and supply insurance services to councils. In 2007/08 the
staffing profile of the MAV included:
> 30 staff (28 full-time and two part-time) funded from membership
subscriptions whose focus is on delivering the MAV Strategic
Work Plan ratified by State Council. These staff provide policy
support, advice to councils, capacity-building programs, and
support the representation of Victorian local government views
to State and Commonwealth Government and other key groups
> 11 staff (seven full-time and four part-time) funded from State
and Commonwealth grants or external organisations to deliver
specific projects and programs and support to Victorian councils
> Specialist consultants who supplement the skills of staff and
provide support in areas such as insurance, financial
management, and business development.
The MAV Intranet and Document Management System, known as
‘MAVIS’ has been successfully implemented to ensure documents
can be tracked and managed to meet business and legislative
requirements. The MAV is now better equipped to effectively
manage contacts with Association members and stakeholders
and to capture and share corporate knowledge. The continued
expansion of the MAV’s IT capabilities has resulted in the
outsourcing of the maintenance and security of the MAV network.
This will result in a secure and robust network able to handle the
increasingly sophisticated demands of the organisation.
During the year, 11 staff left the organisation – six grant-funded
positions and five MAV employees. These positions were filled
through recruitment or reorganisation.
Systems and structure improvements
In December 2007 the MAV underwent an internal restructure,
creating three operational divisions. Increased focus and activity
in collaboration and shared services led to the establishment of
a Commercial and Strategic Programs Division distinct from the
MAV’s research and policy activities and legal and corporate
functions. The Commercial and Strategic Programs Division is
headed by Paula Giles while Kaye Owen was recruited to head the
Research and Policy Division that brings together the key research
work and funded projects that drive policy development. Kaye
Owen was formerly Executive Director, Promotion and Development
in Regional Development Victoria where she was responsible for
policy and program development, marketing and communication,
and is a great addition to the MAV team. Within the Research and
Policy Division, staffing has been structured to better reflect the
three broad governing priorities of the MAV’s membership, being
people, place and performance. Alison Lyon continued to head the
Legal and Corporate Division.
32> MAV ANNUAL REPORT 2007/08 MAV OPERATIONS
Marketing and Communications
Council responses to a discussion paper outlining proposals for
repositioning the local government sector were mostly supportive
in principle. However, the level of financial support indicated by
councils fell short of what was needed to implement the Local
government Education and Awareness Program (LEAP).
Nevertheless, numerous elements that received broad endorsement
from councils have been pursued. LEAP initiatives implemented
in 2007/08 (as detailed in other sections of the Annual Report)
include:
> Launched the Stand for Council website and revised Citizen to
Councillor incorporating a campaigning guide for prospective
candidates
> Completed stage 1 (research) and commenced stage 2 (strategic
brand development) of the MAV employment branding strategy
involving 48 councils
> Coordinated a collaborative local government presence at the
National Careers and Employment Expo
> Hosted a workshop on local government finances for Leader
Newspaper journalists and created web resources for ongoing
use by other media outlets
> Collated council rates data and implemented a statewide media
campaign to improve the quality and consistency of reporting
> Released the annual MAV Local Government Cost Index as a
CPI-equivalent price movement for Victorian councils and the
annual assessment of councils’ long-term financial viability
> Continued work with the State Government to develop an agreed
model and process to establish a councillor conduct tribunal that
addresses behavioural matters not currently dealt with in legislation
> Conducted the MAV Annual Report Awards to recognise
excellence in the content, clarity and presentation of information
to communities and to encourage continuous improvement in
reporting by councils.
Media Coverage
In 2007/08 the MAV achieved statewide media coverage on key
issues and challenges for councils including council rate
movements and why local government costs increase faster than
the consumer price index; the financial viability of Victorian
councils; cost pressures including cost shifting, infrastructure
renewal and declining grants from other levels of government;
responsibility for managing roadside weeds; councillor
remuneration; the establishment of a vehicle to deal with councillor
conduct matters; and encouraging prospective councillors to stand
for council. Passionate rebuttals were issued by the MAV President
when local government was unfairly disparaged in the media,
including an extensive interview on 3AW with Neil Mitchell on the
important role of councils, as well as opinion editorials published
in the Herald Sun and Weekly Times newspapers.
Events
The MAV conducts a wide range of events each year to support
the ongoing professional development of councillors and senior
officers. Major events staged this year included the MAV Annual
Conference, Asset Management Conference, Councillor
Development Weekend, Peak Oil Conference and Shared Services
Conference. Many more smaller seminars and forums were also
conducted. Sponsorship subsidises events, keeping registration
costs low for a range of conferences and other professional
development opportunities on offer to members. Sponsorship
generally takes the form of direct financial contributions but may
also involve discounted or in-kind services or products provided to
the MAV. The MAV is careful to select corporate partners who are
socially and environmentally engaged, ideally providing products
or services at significant cost savings or efficiencies for the sector.
MAV ANNUAL REPORT 2007/08 MAV OPERATIONS >33
1
MAV
TEAM
7
2
8
9
3
4
5
6
10
11
15
16
17
18
19
20
21
22
24
25
26
12
MAV BOARD
Gavin Mahoney
Christine Jones
Rob Spence
John Hennessy
Trevor Koops
Senior Project
Officer
Executive
Assistant
Chief
Executive
Officer
Sector
Development
Consultant
Senior Economist
6
Alison Lyon
General Counsel
Corporate
Secretary
7
Kimberley
Stillwell
Legal & Corporate
Support Officer
Kaye Owen
Research &
Policy Director
16
36
10
Allan Holmes
Finance &
Insurance
Consultant
Alison Standish
Corporate
Services
Manager
Owen
Harvey-Beavis
Economic Data &
Policy Development
Manager
29
Clare
Hargreaves
Social Policy
Manager
Andrew Rowe
Councillor
Development
Officer
Imogen Kelly
Communications
Adviser
Emma
Fitzclarence
Policy Adviser
Jan Bruce
Positive Ageing
Project
19
32
3
28
40
3
34
9
Bernadette Foley Tony Gibbs
Broadband Project
Events
Coordinator
Kirsty Morieson
Aboriginal
Heritage
Project
23
35
Helen Rowe
MCH Project
1
Ben Morris
Energy & Waste
Project
18
17
Luke Murphy
Natural Resource
Management
Project
Derryn Wilson
HACC Project
5
34> MAV ANNUAL REPORT 2007/08 MAV TEAM
Maxine Morrison
Small Towns
Project
21
Brendan
O'Loughlin
LGICT Committee
14
Katherine
Wositzky
HACC Project
Emma Wilkinson
VicLink
Grant funded
part time
27
28
29
30
31
32
33
34
35
36
37
38
39
31
4
20
Grant funded
full time
23
25
Geoff Pawsey
Workforce & Risk
Manager
12
Contractor
full time
13
Rosemary
Hancock
Policy Adviser
38
27
John Ryan
Corporate
Administrative
Officer
Ann Tok
Events
Coordinator
Nicola Wood Simone Stuckey
Disability Access Assoc. of Bayside
& Inclusion Project Municipalities &
Timber Towns
11 Victoria
30
2
Julie Jackson
Corporate
Administrative
Officer
Anne Farrow
Food Safety
Coordination
Project
15
Con Pagonis
Multicultural
Project
24
May Yin
Posarnig
Accounts Officer
Lloyd Brady
Swift Project
Jodie Delaney
Events
Coordinator
26
Pablo Brait
Policy Adviser
Rod Mummery
IT Coordinator
Part time staff
Naree Atkinson
Policy Adviser
14
8
Daniel Hogan
Marketing &
Sponsorship
Manager
39
22
37
Simon Morgan
Finance &
Insurance Officer
Full time staff
Liz Johnstone
Acting Natural &
Built Environment
Manager
Skye Holcolmbe Sally Everitt
Amy McDonald
Policy Adviser
Early Years Project Rural Zones
Project
Debbie Smith
Senior
Communications
Adviser
13
Paula Giles
Strategic
Programs &
Commercial
Director
Grant funded
contractor
full time
40
COMMITTEES
MAV Board Advisory Committees
Other MAV Committees
The MAV Board has established a number of advisory committees
to provide advice in the following areas:
The MAV has also established and supported several other
committees across major policy areas and projects, including:
MAV ECONOMICS AND FINANCE ADVISORY GROUP
Provides advice to the MAV Board and support to achieve
objectives relating to financial sustainability for local government,
including the development of campaigns, submissions and analysis
of issues.
MAV INFORMATION AND COMMUNICATION TECHNOLOGY
COMMITTEE
Plans, co-ordinates and supports information and communication
technology initiatives that deliver better council services and
reduce costs.
MAV HUMAN SERVICES PORTFOLIO COMMITTEE
MAV/VICROADS LIAISON GROUP
Provides advice to the MAV Board on social policy and human
services issues, particularly on intergovernmental relations. The
committee also facilitates consultation with regional groupings
of councils on current statewide issues.
Facilitates regular consultation between the MAV and VicRoads
at executive level.
MAV PLANNING ADVISORY GROUP
Provides advice to the MAV Board on strategic and statutory
planning issues affecting local government and guides MAV
policy and position development on planning related issues.
MAV PROFESSIONAL DEVELOPMENT REFERENCE GROUP
Provides advice on the MAV’s professional development program
for councillors, identifies ongoing areas of need within the sector
to be addressed, and encourages participation of colleagues
in the MAV professional development program.
MAV STRATEGIC ENVIRONMENT ADVISORY GROUP
Provides advice to the MAV Board on environmental issues
of importance to local government and the needs and issues
of members for delivery of environmental outcomes.
MAV TRANSPORT AND INFRASTRUCTURE ADVISORY GROUP
Provides advice to the MAV Board on infrastructure and transport
issues affecting local government and assists the MAV Board to
carry forward key policies and campaigns in this area.
MAV DROUGHT TASKFORCE
Provides advice to the MAV Board on existing and emerging
concerns for local government arising from drought conditions
in order to inform advocacy to the State Government.
MAV VICTORIAN LOCAL SUSTAINABILITY NETWORK
Brings together councils and stakeholders actively pursuing local
sustainability approaches.
MAV LOCAL GOVERNMENT INDIGENOUS NETWORK
Brings councils together to share ideas and information for
improving relations with Victoria’s Indigenous communities.
MAV WATER TASKFORCE
Advises the MAV on priority water issues affecting the sector and
assists in the development of key water policy positions.
MAV WORKFORCE PLANNING AND SERVICES ADVISORY
GROUPS
Advises on initiatives to address key strategic and operational issues
affecting the sector in workforce planning.
MAV WASTE REFERENCE GROUP
Informs and guides MAV policy and position development on waste
and resource recovery related issues.
MAV DISABILITY INCLUSION STRATEGY GROUP
Guides the MAV on issues relating to disability access and inclusion
policies and programs.
MAV/DOT PUBLIC TRANSPORT LIAISON GROUP
Facilitates regular discussion on public transport related matters
of mutual interest to the MAV and Department of Transport at
executive level.
MAV EARLY YEARS ADVISORY GROUP
Guides the MAV on issues relating to early years policy and
service provision and planning.
MAV ECOLOGICALLY SUSTAINABLE DEVELOPMENT ADVOCACY
GROUP
Advises the MAV and shares information on reducing the
environmental impacts of the built environment.
MAV MELBOURNE 2030 LOCAL GOVERNMENT REFERENCE
GROUP
Advises the MAV on matters relating to the implementation
of the Melbourne 2030 policy framework.
MAV HACC AND AGEING ADVISORY GROUP
Guides the MAV on issues relating to governments’ ageing policies,
Home and Community Care and related aged programs, and
positive ageing issues.
MAV RURAL PLANNING PROJECT STEERING COMMITTEE
Ministerial Advisory Council on Public Libraries
Ministerial Planning Roundtable
Ministerial Utilities Infrastructure Reference Panel
Ministers Statement on Local Planning Policy Working Group
Municipal Emergency Management Enhancement Group
Municipal Emergency Management Plan Audit Committee
Provides advice on strategic land use and statutory planning issues
identified through the rural zones planning project.
National Electronic Development Assessment Program Committee
National Packaging Covenant Council
National Parks Advisory Council
MAV SWIFT CONSORTIUM MANAGEMENT GROUP
North East Environment Network
Northern Biodiversity Network
Manages the ongoing implementation of shared library services
contracts and policies.
External Committees
As the peak body for local government, the MAV is regularly invited
by the Victorian and Federal governments and various agencies to
represent the sector on a range of committees. In 2007/08, these
committees included:
Accessible Built Environment Working Group
Animal Welfare Advisory Committee
Asbestos Waste Working Party
Association of Bayside Municipalities
Association of Regional Waste Management Groups
Better Bays and Waterways Steering Committee
Broiler Code Committee
Building Regulation Advisory Committee
Bus Service Review Reference Group
Business Skills Victoria Board
Catchment Management Authority Local Government Coordinators Network
Central Region Sustainable Water Strategy Consultative Committee
Clearwater Steering Committee
Commonwealth Community Care Advisory Committee
Community Safety Month Reference Group
Community Services and Health Industry Training Board
Country Fire Authority Board
Customer Consultative Committee, Essential Service Commission
Development Assessment Committee Technical Working Group
Development Assessment Forum
DHS Human Services Partnership Implementation Committee
DPI Drought Reference Group
DOT Maintaining Mobility Steering Group
Domestic Animal Management Implementation Committee
Emergency Management Manual Victoria – Strategy Group
E-planning Council
Flood Warning Consultative Committee Victoria
Future Coasts: Preparing Victoria’s Coasts for Climate Change Steering
Committee
Greenfleet Victoria’s Greenhouse Forests Project Steering Committee
Illegal Dumping Consultative Committee
Infringements Standing Advisory Committee
Intelligent Freight Transport Systems Partner Reference Group
Intergovernmental Tobacco Reforms and Amenity Working Group
Land and Biodiversity Stakeholders Reference Group
Local Government Drug Issues Forum
Local Government Natural Resource Management Facilitator Network
Local Government Working Group on Gambling
MAV/DEECD MCH Services Improvement Implementation Advisory Group
MAV/DHS Food Safety Coordination Project Steering Committee
Metropolitan Fire and Emergency Services Board
Metropolitan Local Government Waste Forum
Office for Children Early Childhood Development Advisory Group
Public Transport Access Committee
Railway Crossing Project Delivery Committee
Railway Crossing Technical Group Committee
Regional Greenhouse Alliance and Stakeholders Network
Ride to School Steering Committee
Road Safety Reference Group
Road Safety Conference Committee
Road Transport Advisory Committee
Roundtable on Inclusive Arts, Tourism, Sport and Recreation for People with
a Disability
Rural Workforce Agency Victoria
Saferoads Partnership
South West (Corangamite) Environment Network
Standing Committee on Local Government and Cultural Diversity
State Emergency Mitigation Committee
State Emergency Recovery Planning Committee
State Emergency Relief Sub-committee
State Fire Management Planning Committee
State Flood Policy Committee
State Flood Strategy Committee
State Library Advisory Committee on Public Libraries
State Social, Health and Community Recovery Committee
Streamlining the Planning Process Working Groups
Sustainability in Local Government Framework Consultative Committee
Timber Towns Victoria
VicRoads Board (Roads Corporation Advisory Board)
Victorian Childcare Industry Liaison Group
Victorian Children’s Council
Victorian Emergency Management Council
Victorian Food Safety Council
Victorian Jurisdictional Projects Group for the National Packaging Covenant
Victorian Litter Action Alliance Advisory Group
Victorian Local Government Disability Planners’ Network
Victorian Local Government Multicultural Issues Network
Victorian Local Sustainability Accord Committee
Victoria Multicultural Commission
Victoria Rail Crossing Safety Steering Committee
Victorian Rail Freight Network Review Committee
Victorian Rail Industry Environmental Forum
Victorian Road Based Public Transport Advisory Committee
Victorian Road Freight Advisory Council
Victorian Settlement Planning Committee
Victorian Spatial Council
Victorian Speed Limit Advisory Group
Victorian Community Sports Surfaces Sustainability Alliance
Victorian Statewide Natural Resource Management Facilitator Network
Victorian Sustainable Public Lighting Action Group
White Paper for Land and Biodiversity Stakeholders Reference Group
Women’s Participation in Local Government Coalition
Metropolitan Transport Forum
36> MAV ANNUAL REPORT 2007/08 COMMITTEES
MAV ANNUAL REPORT 2007/08 COMMITTEES >37
MAV
INSURANCE
CHAIR’S
REPORT
The 2008 financial year has been one
of great change for MAV Insurance.
Ernst and Young and Norwegian
municipal insurers KLP were engaged
to undertake a strategic and structural
review of the business with the aim
of achieving a world’s best practice
business model.
The ongoing restructuring of Civic Mutual Plus and the review
of general insurance activities has already begun to provide
significant financial and operational benefits to members.
A number of other projects commenced in 2008 that will
ensure our members obtain the best, most effective and cost
efficient insurance over the long term. This work included
reviewing insurance limits and modelling maximum possible
loss scenarios; investigating the impacts of climate change
on members’ risk profiles; identification of risks associated
with third party outsourcing and a review of claims
management processes.
Civic Mutual Plus performed strongly with an improving claims
environment and stable reinsurance market.
38> MAV ANNUAL REPORT 2007/08 CHAIR’S REPORT
This year saw a levelling off in the number of claims and a
change in claims patterns from public liability to professional
indemnity. This trend is cause for concern as professional
indemnity claims generally take longer to be notified and longer
to resolve and result in higher payouts.
We also saw the first returns from performance arrangements
negotiated with our main reinsurers in 2003. Under these
arrangements a payment of $3.9 million was received on
30 June 2008 and was incorporated in our reserve.
The reported results for Civic Mutual Plus this year was
$8,175,121 (2007 $2,474,744) and the accumulated surplus
at 30 June 2008 was $15,383,786 (2007 $7,208,665)
after the receipt of the first year of the performance contribution
from reinsurers.
The results reflect the continuing reduction in claims. The
underlying performance of the business continued to improve
and 2008 can be judged as another very successful year.
The performance of the Municipal Officers’ Fidelity Guarantee
Fund was slightly down against budget due to several claims
during the year.
A number of claims clearly indicate a lack of internal controls
around purchasing processes and issuing cheques. We intend
to address this issue more intensively during 2009.
The reported results for this year is a deficit of $53,274 (2007
surplus $156,652) and the accumulated surplus at 30 June
2008, $415,075 (2007 $468,349).
The results were impacted by an increase in claims during
the year, resulting in increased reinsurance costs for the
2009 financial year. The underlying performance of the
fidelity business is sound with adequate capital holdings
against future claims.
The public liability offering to community groups via our
arrangement with QBE is meeting an important need for our
members and their communities and we keep a watching brief
over this product to ensure that our communities are being offered
appropriate public liability coverage at competitive pricing.
I whole heartily support the view that the mutuality of the
insurance schemes offered by the MAV enables members to
achieve significant benefits from their combined size and
strength of purpose.
In closing, I again acknowledge the very strong and enthusiastic
support of my fellow members of the MAV Insurance
Committee; the work of MAV staff, particularly Chief Executive
Officer Rob Spence, General Counsel and Corporate Secretary
Alison Lyon and Contract Manager Allan Holmes; and the
contribution of Jardine Lloyd Thompson, actuaries and other
professional advisers.
John Warburton
CHAIR MAV INSURANCE
During 2008 the MAV took on a more active role in the general
insurance business that is licensed to Jardine Lloyd Thompson.
A committee was established to oversee the general insurance
products and opportunities for improvement were identified that
are being worked through and will be implemented next year.
We had high hopes for launching a new workers compensation
arrangement for the sector this year. A significant financial
investment is required before we can implement our plans.
We are still exploring our funding options and working on
achieving the desired outcome with the support of the State
Government as there is no doubt that the self insurance
model will deliver significant operational and financial
benefits for members.
MAV ANNUAL REPORT 2007/08 CHAIR’S REPORT >39
MAV
INSURANCE
COMMITTEE
JOHN WARBURTON
RON FARRELL
CR ROD FYFFE
ALLAN GARCIA
CR DICK GROSS
DR MICHAEL KENNEDY
APPOINTED 1995
Committee Chairman
August 2005 – present
APPOINTED 2001
APPOINTED 2004
APPOINTED 2003
APPOINTED 2005
APPOINTED 1995
Chairman, Australian Wealth Management
Limited
Insurance Authority
Councillor Greater Bendigo City Council LGAT representative
Association
General Manager, Australian Eagle
Mayor Greater Bendigo City Council
2000, 2004
Health
Insurance Co Ltd
2005
ADRIAN NYE
ROB SPENCE
Director, Lend Lease Real Estate
Investments Limited
Trustee, Melbourne Exhibition and
Convention Centre Trust
Chairman, Port of Hastings Corporation
1997 – 2007
Director, Vision Super (formerly Local
Authorities Super) 1997 – June 2007
Deputy Chair, Victorian Managed Insurance
Authority 1996 – 2000
Chair, Claims and Technical Commit ee
MAV Board Representative for Rural North CEO Local Government Association MAV President
CEO, Mornington Peninsula Shire Council
Central Region
of Tasmania (LGAT)
Chairman, Inner East Community
2003 –
Chairman and Non Executive Director,
Association Board
Utilities Insurance Co Pty Ltd
Non Executive Director,
Management Group
connect.com.au Pty Ltd
Non Executive Director, Metropolitan Fire
and Emergency Services Board
ANNE MURPHY OAM
APPOINTED 1993
APPOINTED 2004
Committee Chairman 1993 – August 2005 Company Director and Management
Consultant
Past President, MAV
APPOINTED 1997
CEO, MAV
CEO, Brimbank City Council 1994 – 1997
Principal, Anne Murphy Strategy and
Facilitation
Chairman, Victorian Managed Insurance
Authority
Board member, KYM Employment
Services Inc
President, Metropolitan Fire Brigade
Director of Municipal Operations,
Department of Local Government
Director, Victorian WorkCover Authority
Trustee, Vision Super
Director, Smartimbers Pty Ltd
Member, Victorian Children’s Council
CEO, City of Footscray 1992 – 1994
Associate, HLB Mann Judd
Member, Broadmeadows Schools
Regeneration Project Board
Fellow, CPA Australia
Member, Institute of Company Directors
40> MAV ANNUAL REPORT 2007/08 INSURANCE COMMITTEE
MAV ANNUAL REPORT 2007/08 INSURANCE COMMITTEE >41
INSURANCE
Non-Executive Director, Victorian Managed
Councillor Port Phillip City Council
Deputy Chairman, Victorian Healthcare
Mayor Port Phillip City Council 1998 –
Member, Australian Local Government
Director, LifeSaving Victoria
Chairperson, Metropolitan Waste
CEO, Boroondara City Council
1995 – 1999
CEO, Shire of Hastings 1993 – 1994
CIVIC MUTUAL PLUS
Results
Capital Requirements
Indemnity and Insurance Clauses
Audit 2007/08
The financial result for 2008 improved on the previous year due
to falling claims costs and receipt of a performance bonus from
reinsurers. The claims costs for 2008 were impacted by the
continuing affect of tort reform resulting in reduced cost of claims
compared to previous years. The operating surplus for the 2008
financial year was $8,175,121 (2007 $2,474,744). This result
increased the net asset (equity) position of the Scheme from
$7.2 million in 2007 to $15.4 million at the end of the 2008
financial year.
The MAV increased the capital requirement for Civic Mutual Plus on
the advice of the independent actuary. A new target to be achieved
during the 2009 financial year is a total asset position in excess of
120 per cent of the total liabilities, bringing Civic Mutual Plus in
line with other like government sponsored organisations such as the
Victorian Workcover Authority and the Transport Accident
Commission. Maintaining a proper capital base is important to
protect Civic Mutual Plus and its members from both reinsurer
failure and difficult market conditions.
Claims Trends
Reinsurance
The Civic Mutual Plus claims experience continued to benefit from
tort reforms and better risk management practices of members in
2007/08. The number of public liability claims has reduced
dramatically and the frequency of claims has diminished. The size
of claims is now the biggest factor impacting the Scheme’s
performance. This is directly proportional to the magnitude of the
result caused by a member’s negligence. The improved claims
experience has resulted in substantial discounts in reinsurance costs
while retaining adequate protection against catastrophic events.
A small shift in claims patterns was observed from public liability
to professional indemnity. If this trend continues it will be cause for
concern in the future as professional indemnity claims generally
take longer to be notified and longer to resolve and result in
higher payouts.
A new reinsurance program was successfully negotiated. Taking
effect from 1 July 2008, the new program builds on the previous
three-year program that delivered performance bonuses to ensure
members received a share of the benefits derived from tort reform.
Even greater savings will be achieved under the newly negotiated
arrangements whereby the Scheme will take on an increased
portion of risk under the scrutiny of actuaries. The number of
reinsurers is also expected to increase under the new program from
14 to 20 in order to further dilute the concentration of risk to the
Scheme posed by the failure of reinsurers. The failure of a reinsurer
is the single biggest risk posed to the Scheme. The MAV Insurance
Committee has processes in place to constantly monitor the financial
risk rating of each and every insurer that has participated in the
reinsurance program since commencement of the Scheme in 1993.
This year the MAV worked with Local Government Victoria on a
template funding contract to give effect to the agreement reached
with the State Government’s insurers several years ago that the
clients of each would not require indemnity or insurance clauses in
agreements or contracts between them. Despite this agreement
being reached, it had not been applied in practice across the
board. The removal of insurance and indemnity clauses from the
new template will significantly reduce the time taken to negotiate
funding arrangements and liability will default under common law
to the party at fault. The template will be provided to all state
government departments and authorities for use when funding
councils for projects, services or works. The MAV continues to
advocate for arrangements that are drafted in plain English and
which are not unnecessarily burdensome from an administrative
perspective.
The audit questionnaire was reviewed at the start of this year in
response to findings by the Auditor-General on food safety and the
introduction of new legislative measures for working with children.
The revised questionnaire included two new sections on food safety
and working with children, and the organisational risk management
section was redesigned to align with national standards and
provide a more applied examination of members’ risk management
practices. Audits were completed for every council member using
the new questionnaire. Each council received a report on its
performance and a final ranking. Summary statistics and themes
were presented to members through a series of best practice forums
that focussed on areas for improvement including compliance with
road management plans, compliance of signage at swimming
pools and embedding risk management in organisational culture.
This process assists members to recognise their strengths and
weaknesses in risk management, and provides an opportunity for
sharing information.
Contributions
The ongoing review and restructure of MAV’s insurance activities
included the Scheme taking on a small proportion of risk at a level
where claims patterns have remained relatively stable and
reinsurance premiums have for some time outweighed the cost of
claims. This action accords with actuarial advice and, with an
increased reserve, provides a conservative and appropriate
approach for both the immediate and the long-term position of the
Scheme and its members. This resulted in a reduction in the level
of contributions from members in 2008/09 of $11.8 million.
42> MAV ANNUAL REPORT 2007/08 CIVIC MUTUAL PLUS
Re-entry Proposal
MAV Insurance investigated the application of penalties for
members wishing to re-enter Civic Mutual Plus when market
conditions harden following concerns expressed by members that
have remained in the scheme when the market is soft and insurance
is easy to obtain. While the MAV is required to provide insurance
cover under the Municipal Association Act 1907 it reserves the right
on a case-by-case basis to consider the length of time a member
has been out of the Scheme, its potential claims history while out
of the Scheme and the impact on risk management practices and
processes from not being a member when it considers the level
of contributions for any member wishing to re-enter the Scheme.
The MAV accepts that from time to time some members will not see
the benefits of participating in a whole of local government group
product but prefer to be in the open market and subjected to the
vagaries of that market.
New Audit Process
Extensive research and consultation led to the development of a
new audit process that will commence operation next year. The new
model involves two-yearly audits for all councils, with targeted risk
appraisals, progress reviews and training workshops for councils
depending on each council’s ranking. This enhanced process
provides assistance in a more proactive manner and strives to assist
those councils who need it most. Key peak bodies and industry
groups with interests in environmental health, planning, building,
playgrounds, volunteers and swimming pools were consulted on the
new model. The new process will be reviewed after the initial
two-year cycle has been completed.
MAV ANNUAL REPORT 2007/08 CIVIC MUTUAL PLUS >43
CIVIC MUTUAL PLUS
FIDELITY
Bicycle Taskforce
Swimming Pools
Audit
Premium setting
A coronial inquest in 2007/08 again highlighted the serious public
safety risks and significant exposure for public land managers
associated with the increasing popularity of cycling. The MAV
called on the State Government to establish an intergovernmental
taskforce to look at questions of ownership and responsibility;
guidance on constructing, maintaining, auditing and retrofitting
paths; funding arrangements for maintenance and upgrades; and
appropriate protection for people injured in accidents on paths.
The Government agreed to establish a taskforce that will report to
the Government through the Victorian Bicycle Advisory Committee.
The taskforce will include appropriate representation by relevant
bodies including the MAV.
Improving the safety of council swimming pools continued to be
a focus of risk management activities. Signage at swimming pools
continued to be monitored for compliance with photographic
evidence requested to ensure accurate reporting of compliance
where discrepancies had previously been identified. Mock trials
based on an actual claim where a minor was rendered paraplegic
after diving into a swimming pool were conducted in Victoria and
Tasmania. A further series of workshops provided opportunities for
councils to learn from the findings of swimming pool audits
performed last year, and a summary of the key findings and claims
examples was also made available to councils.
Premium levels for the Fidelity Fund will benefit from the same
structural changes impacting Civic Mutual Plus. Reflecting the size
of the Fund relative to Civic Mutual Plus, a more modest saving of
$35,000 has been achieved. This gain will underpin contributions
in 2008/09 and going forward.
Child Protection
The format of the Risk Management Awards was reviewed to reduce
the administrative burden of preparing applications and to identify
the best performing member within each regional groupings to
encourage information sharing and peer learning.
While audit committees are taking an increased interest in, and
control over the internal audit processes being applied within
member organisations, the audit results indicate that measures to
protect members against fraud still require substantial improvement.
Audit results over time show that a lack of separation in duties can
be identified in relation to every recorded incident of major fraud.
Fraud not only causes financial loss to members but also impacts
staff morale, heightens reputational and political risk and leads to
significant additional financial loss beyond just the direct financial
loss associated with the fraudulent activity. Strong internal control
processes are essential to protecting the assets of members. A
program of training has been planned to raise attention to internal
control processes in an effort to encourage improvement in this area.
Civic Mutual Plus received several claims in 2007/08 involving
sexual abuse of children perpetrated by family members of family
day care providers. While carers are not employed by councils,
councils are responsible for their screening, selection and
supervision. Failure to monitor the interaction between family
members of family day care providers and clients, or scrutinise
providers’ homes to ensure adequate safety measures and fully
document these activities is leaving councils that participate in
family day care schemes exposed to claims. The MAV advocated
the introduction of regulation that sets out agreed standards and
provides clearer guidance to assist providers of family day care,
including carers and local government, manage the risks
associated with delivering these services. A review of the Children’s
Services Regulations is underway and is expected to result in family
day care being regulated for the first time in Victoria.
Risk Management Awards
Top performers in 2007/08 were:
> Eastern Metropolitan – Glen Eira City Council
Claims
Results
The deficit for 2008 of $53,274 (2007 surplus $156,652) was a
satisfactory result. There were several claims made during the year
and this had a detrimental effect on the Fund. The provision for
future claims remains at $108,000 and appears adequate. The
capital of the fund at the end of the 2008 financial year was
$415,075 (2007 $468,349). The increase in claims during this
year will result in higher reinsurance premiums going forward.
The Fidelity Fund incurred several claims mostly involving cheque
issuing and purchasing processes. These highlight the importance
of internal controls. Failures in the internal control of segregating
duties appear always to be a factor in the larger claims.
> North West Metropolitan – Moonee Valley City Council
> Eastern Rural – Baw Baw Shire Council and Latrobe City Council
> North Central Rural – Wodonga City Council
> South West Rural – Warrnambool City Council
> North West Rural – Mildura Rural City Council
> Southern Tasmania – Clarence City Council
> Northern Tasmania – Meander Valley Council
> Tasmanian Water Authority – Hobart Water
> Victorian Water Authority – East Gippsland Water
Most improved:
> Victoria – Moyne Shire Council
> Tasmania – Kingborough Council
44> MAV ANNUAL REPORT 2007/08 CIVIC MUTUAL PLUS
MAV ANNUAL REPORT 2007/08 FIDELITY >45
OTHER PRODUCTS
CMP MEMBERS
Civic Workers’ Plus
General Insurance Agreement
Alpine Shire Council
Golden Plains Shire Council
Mount Alexander Shire Council
Efforts to establish a self-insurance workers compensation scheme
for local government were frustrated this year. The case for a
self-insurance model has been well established and the project is
now at the point of consolidating membership, developing an
establishment agreement and determining the operating structure,
including risk management and claims management systems and
performance measures. This development work requires a
significant financial investment to proceed. The MAV has spent this
year exploring its funding options for progressing this product.
In 2008, the MAV received $1,450,585 (2007 $1,427,914)
through an arrangement whereby it licenses its insurance broking
business to Jardine Lloyd Thompson. In accordance with an
agreement executed in 1987 fees are paid to the MAV in return for
access to information and the opportunity to receive brokerage on
insurance products for clients introduced by the MAV. The share of
revenue is calculated at the rate of 22.5 per cent per annum of all
fees payable to Jardine Lloyd Thompson by underwriters, insurers,
clients introduced by the MAV and all local government bodies, as
well as 22.5 per cent of related investment income.
Ararat Rural City Council
Goulburn Murray Rural Water Corporation
Moyne Shire Council
Ballarat City Council
Goulburn Valley Region Water Corporation
Municipal Association of Victoria
Banyule City Council
Goulburn Valley Regional Library
Corporation
Grampians Wimmera Mallee Water
Corporation
Greater Bendigo City Council
Murrindindi Shire Council
Bass Coast Shire Council
Baw Baw Shire Council
Bayside City Council
Benalla Rural City Council
Boroondara City Council
Break O’Day Council
Brighton Council
Brimbank City Council
Buloke Shire Council
Burnie City Council
Campaspe Shire Council
Cardinia Shire Council
Casey City Council
Central Coast Council
Central Gippsland Region Water
Corporation
Central Goldfields Shire Council
Greater Shepparton City Council
Hepburn Shire Council
Hindmarsh Shire Council
Hobart City Council
Hobart Regional Water Authority
Hobsons Bay City Council
Horsham Rural City Council
Hume City Council
Huon Valley Council
Indigo Shire Council
Kentish Council
King Island Council
North Central Goldfields Library Service
North East Region Water Corporation
Northern Grampians Shire Council
Northern Midlands Council
Port Phillip City Council
Pyrenees Shire Council
Queenscliffe Borough Council
Rivers and Water Supply Commission
Sorell Council
South Gippsland Region Water Corporation
South Gippsland Shire Council
Southern Grampians Shire Council
Southern Midlands Council
Southern Rural Water Corporation
Strathbogie Shire Council
Surf Coast Shire Council
Central Highlands Council
Kingborough Council
Central Highlands Region Water
Corporation
Circular Head Council
Kingston City Council
Clarence City Council
Latrobe Council
Colac Otway Shire Council
Launceston City Council
Wangaratta Rural City Council
Coliban Region Water Corporation
Local Government Association of Tasmania
Wannon Region Water Corporation
Corangamite Shire Council
Loddon Shire Council
Waratah-Wynyard Council
Cradle Coast Water Authority
Warrnambool City Council
Derwent Valley Council
Lower Murray Urban and Rural Water
Corporation
Macedon Ranges Shire Council
Devonport City Council
Manningham City Council
West Gippsland Regional Library Service
Dorset Council
Mansfield Shire Council
West Tamar Council
East Gippsland Region Water Corporation
Maribyrnong City Council
West Wimmera Shire Council
East Gippsland Shire Council
Maroondah City Council
Western Region Water Corporation
Eastern Regional Libraries Corporation
Meander Valley Council
Westernport Region Water Corporation
Esk Water Authority
Melbourne City Council
Whitehorse City Council
First Mildura Irrigation Trust
Melton Shire Council
Flinders Council
Mildura Rural City Council
Whitehorse Manningham Regional Library
Corporation
Frankston City Council
Mitchell Shire Council
Whittlesea City Council
Gannawarra Shire Council
Moira Shire Council
Wodonga City Council
George Town Council
Monash City Council
Wyndham City Council
Glamorgan/Spring Bay Council
Moonee Valley City Council
Yarra City Council
Glen Eira City Council
Moorabool Shire Council
Yarra Plenty Regional Library Service
Glenelg Shire Council
Moreland City Council
Yarra Ranges Shire Council
Glenorchy City Council
Mornington Peninsula Shire Council
Yarriambiack Shire Council
Darebin City Council
46> MAV ANNUAL REPORT 2007/08 OTHER PRODUCTS
Greater Geelong City Council
Nillumbik Shire Council
Knox City Council
Latrobe City Council
Swan Hill Rural City Council
Tasman Council
Towong Shire Council
Victorian Water Industry Association Inc.
Wellington Shire Council
West Coast Council
MAV ANNUAL REPORT 2007/08 CMP MEMBERS >47
FIDELITY MEMBERS
FINANCIAL OVERVIEW
Alpine Shire Council
Hobsons Bay City Council
Surf Coast Shire Council
Financial results for the year ended 30 June 2008
Ararat Rural City Council
Horsham Rural City Council
Swan Hill Rural City Council
Ballarat City Council
Hume City Council
Banyule City Council
Indigo Shire Council
Bass Coast Shire Council
Kingston City Council
Tanjil Bren Water Cooperative Limited and
Committee of Management – Recreation
Reserve
Baw Baw Shire Council
Knox City Council
Bayside City Council
Latrobe City Council
Benalla Rural City Council
Loddon Shire Council
In accordance with the requirements of the Municipal Association
Act 1907, and applicable accounting standards, the economic
activity of the Municipal Association of Victoria, the Municipal
Officers’ Fidelity Guarantee Fund and Local Government Mutual
Liability Insurance Scheme (Civic Mutual Plus) is reported to the
members as an economic entity within the annual accounts. The
combined activities are shown as the consolidated accounts and
the Municipal Association of Victoria, being the parent entity, is
shown separately as the MAV General Fund.
Bendigo Cemeteries Trust
Boroondara City Council
Lower Murray Urban and Rural Water
Corporation
Brimbank City Council
Macedon Ranges Shire Council
Buloke Shire Council
Manningham City Council
Cardinia Shire Council
Mansfield Shire Council
Casey City Council
Maribyrnong City Council
Central Goldfields Shire Council
Maroondah City Council
Central Highlands Water Corporation
Melbourne City Council
Citywide Service Solutions Pty Ltd
Melbourne Wholesale Fish Market
Colac-Otway Shire Council
Melton Shire Council
Coliban Region Water Corporation
Mildura Rural City Council
Corangamite Regional Library Corporation
Mitchell Shire Council
Corangamite Shire Council
Moira Shire Council
Crowlands Water Supply Co-operative
Monash City Council
Darebin City Council
Moonee Valley City Council
East Gippsland Region Water Corporation
Moorabool Shire Council
East Gippsland Shire Council
Moreland City Council
Eastern Regional Libraries
Mornington Peninsula Shire Council
First Mildura Irrigation Trust
Mount Alexander Shire Council
Frankston City Council
Moyne Shire Council
Gannawarra Shire Council
Municipal Association of Victoria
Geelong Cemeteries Trust
Murrindindi Shire Council
Geelong Regional Library Corporation
Nillumbik Shire Council
Glen Eira City Council
North East Region Water Corporation
Glenelg Shire Council
Northern Grampians Shire Council
Golden Plains Shire Council
Port Phillip City Council
Goulburn Valley Region Water Corporation
Pyrenees Shire Council
Grampians Wimmera Mallee Water
Corporation
Queen Victoria Market
Greater Bendigo City Council
South Gippsland Region Water Corporation
Greater Dandenong City Council
South Gippsland Shire Council
Greater Geelong City Council
Southern Grampians Shire Council
Greater Shepparton City Council
Southern Rural Water Corporation
Hepburn Shire Council
Stonnington City Council
Hindmarsh Shire Council
Strathbogie Shire Council
48> MAV ANNUAL REPORT 2007/08 FIDELITY MEMBERS
Towong Shire Council
Wangaratta Rural City Council
Wannon Region Water Corporation
Warrnambool City Council
Wellington Shire Council
West Gippsland Regional Library
Corporation
West Wimmera Shire Council
Western Region Water Corporation
Westernport Region Water Corporation
Whitehorse City Council
Whittlesea City Council
Wodonga City Council
Wyndham City Council
Yarra City Council
Yarra Ranges Shire Council
Yarriambiack Shire Council
The Association represents local government in Victoria. One of the
activities of the MAV is that it seeks out, applies for, and administers
grant funds for, and on behalf of, its members, for the benefit of
both local government and the Victorian community. This activity of
the Association has been accounted for as a segment and included
at note 25 in the financial statements.
The MAV financial statements also include the activities of its
insurance business, MAV Insurance, which operates the Municipal
Officers’ Fidelity Guarantee Fund and the Local Government
Mutual Liability Insurance Scheme (Civic Mutual Plus) for the benefit
of councils and other local authorities. Both insurance activities are
non-discretionary mutual funds and are subject to the oversight of
the Association’s Board of Management, which acts through a
committee of management constituted by the board, the MAV
Insurance Committee of Management (MAVIC).
MAVIC carries out oversight and management of the operational
activities of both the Municipal Officers’ Fidelity Guarantee Fund
and Civic Mutual Plus. Jardine Lloyd Thompson Pty. Ltd provides
claims and risk management services to the MAV.
governments and funds contributed from its members. These grants
and contributions are managed by the MAV for the betterment of
the local government sector and Victorian communities. The surplus
relating to grant activities was $2.297 million for the year ended 30
June 2008 as compared to a surplus in 2007 of $649,749.
Consequently, as at 30 June 2008, the MAV had a commitment to
expend $5.58 million (2007 $3.33 million) of grant funds on
projects for the betterment of local government and Victorian
communities. 2007/08 was again a year of project delivery and
firm cost control. The operating surplus of the consolidated entity
was $10.48 million (2007 $3.307 million). This had the affect of
increasing the net assets of the Association from $12.2 million in
2007 to $22.7 million this year. Revenue increased in 2008 due
to increases in both grants received and reinsurance recoveries.
Expenditure increased due to increased claims costs as against the
2007 year. The 2007 year costs for claims and insurance recoveries
was considerably lower than the norm. This also resulted in a fall
in the 2008 claims provision as compared to the 2007 year.
MAV Insurance
The MAV Insurance business consists of Civic Mutual Plus and the
Municipal Officers’ Fidelity Guarantee Fund. The Association is
required under the Municipal Association Act 1907 to provide a
mutual liability and fidelity insurance to local government and other
statutory authorities. The MAV holds an Australian Financial
Services Licence (AFSL No 27143). The MAV and MAV Insurance
have AFSL-compliant processes and activities in place to maintain
the highest standards of governance, provide operational efficiency
and enhance the future viability of the MAV Insurance business.
The combined surplus for 2008 was $8.12 million (2007 $2.631
million). The net asset position at 30 June 2008 was $15.8 million
(2007 $7.67 million).
MAV
The financial result for the MAV in 2008 has again been solid,
achieving a small surplus for the year of $60,613 (2007 $26,208).
The result inclusive of grants received and expended for the 2008
year was a surplus of $2,357,812 (2007 $675,958), with net
assets increasing to $6.916 million (2007 $4.558 million). In 2008
the MAV received a further $7.645 million (2007 $5.59 million) in
grants from both Federal and Victorian governments. The MAV
delivered on several significant projects during the year that have
been funded by grants from both Federal and Victorian
Queenscliffe Borough Council
MAV ANNUAL REPORT 2007/08 FINANCIAL OVERVIEW >49
GUIDE TO THE FINANCIAL REPORT
Introduction
The financial report is a key part of the MAV’s Annual Report.
It shows how the MAV performed financially during the 2007/08
financial year and the position at the end of the financial year (30
June 2008).
2008, and the results of the various business operations and cash
flows for the year ended 30 June 2008, in accordance with
accounting standards and other mandatory professional report
requirements.
2.2CURRENT AND NON-CURRENT LIABILITIES
Bank overdraft indicates the amount the Association owes its
bankers on its daily operating account.
Notes To The Financial Statements
Financial Statements
Payables are monies owed by the Association to its suppliers as
at 30 June.
The financial report is presented in accordance with the Australian
Accounting Standards and the recommendations of the Urgent
Issues Group.
1. INCOME STATEMENT
The income statement shows:
Premiums in advance are insurance premiums relating to the next
financial year billed to members of the insurance fund before 30 June.
To enable the reader to understand the basis on which the values
shown in the statements are established it is necessary to provide
details of the Association’s accounting policies. These are described
in note 2. Apart from the accounting policies, the notes also give
details behind many of the summary figures contained in the
statements. The note numbers are shown beside the relevant items in
the income statement, balance sheet and the statement of cash flows.
> the MAV’s revenue from its various activities
The MAV is a not-for-profit association that represents its members
who are the 79 local government authorities around Victoria. The
MAV also runs the MAV Insurance business. This business consists of
two entities, Civic Mutual Plus (public liability and professional
indemnity insurer) and the Municipal Officers’ Fidelity Guarantee
Fund. The MAV also manages grants received from Federal and
State governments for and on behalf of the local government sector.
> the expenses incurred in running the MAV and its business
activities.
Provision for employee entitlements is the accounting term for annual
leave, long service leave and staff retirement gratuities owed to staff.
Where the Association wishes to disclose information which cannot
be incorporated into the statements, this is shown in the notes.
Provision for claims outstanding represents insurance claims
reported by members together with an estimate of claims incurred
but not yet reported including an estimate of the costs of settlement
for these claims.
The notes should be read at the same time as the financial
statements in order to get a full and clear picture of the financial
statements.
2.3NET ASSETS
Statements by Directors
This term describes the difference between total assets and total
liabilities. It represents the net worth of the Association as at 30 June.
The statement by directors is made by two directors on behalf of the
Board of the Municipal Association of Victoria. The statement states
that in the opinion of the Board the financial statements present a
true and fair view of the operations of the Association and that the
Association can pay its debts as and when they fall due.
All these different interests are accounted for separately and then
consolidated into the MAV Financial Report.
The MAV is committed to accountability in all of its operations. It is
with this in mind that this plain English guide has been developed
to assist readers understand and analyse the financial report.
Components of the Financial Report
The financial report contains three main sections: the financial
statements, the notes to the financial statements and the statements
by the directors and auditor.
The financial statements consist of three main statements: income
statement, balance sheet and statement of cash flows.
The notes to the financial statements detail the Association’s
accounting policies and set out the detailed values that are carried
into the financial statements.
The statements by directors and auditor provide the views
of the directors of the MAV and the independent auditor on
the financial report. The statement by directors confirms the view
of the directors that the financial report provides a true and fair
view of the financial performance, financial position and solvency
of the Association. The audit report by the independent auditor
expresses the auditor’s opinion on whether the financial statements
present fairly the financial position of the Association as at 30 June
50> MAV ANNUAL REPORT 2007/08 GUIDE TO THE FINANCIAL REPORT
These expenses relate only to the business operations and do not
include costs associated with the purchase of assets. The expense
item ‘depreciation’ spreads the cost of the assets over the estimated
life of the assets.
The most important figure is the surplus for the year. Where it is
positive, this means that revenues were greater than expenses.
2. BALANCE SHEET
The balance sheet shows the assets the Association owns and the
liabilities it owes at 30 June.
The balance sheet separates the assets and liabilities into current
and non-current. Current means those assets or liabilities that will
be either collected or that fall due within the next 12 months.
The components of the balance sheet are:
2.1CURRENT AND NON-CURRENT ASSETS
Cash assets include cash held in the bank, petty cash, cash deposits
and cash investments.
Receivables are monies owed to the Association.
Prepayments are payments made in the current financial year which
relate to the next financial year. For example, annual subscriptions etc.
Property, plant and equipment represents the value of the
equipment, furniture and fittings, computers, web site and intranet
and motor vehicles owned by the Association.
Intangible assets are trademarks, educational programs and other
intellectual property owned by the Association.
Other financial assets represent the value of shares held by the
Association in the Co-operative Purchasing Scheme.
3. STATEMENT OF CASH FLOWS
The statement of cash flows summarises cash payments and cash
receipts for the year. The values may differ from those shown in the
income statement because the income statement is prepared on an
accrual basis.
Cash is derived from, and is used in, two main areas:
3.1CASH FLOWS FROM OPERATING ACTIVITIES:
Receipts relate to all cash received into the Association’s bank
account from members and others who owed money to the
Association in the form of fees or premiums. Receipts also include
interest earned from the Association’s cash investments. It does not
include receipts from the sale of assets.
Independent Audit Report
This report is the independent auditor’s opinion on the financial
statements. It provides the reader of the financial statements a
completely independent opinion of the financial statements of the
Association. The opinion covers all statutory and accounting
standards compliance requirements as well as providing a view on
the truth and fairness of the financial statements.
Payments relate to all cash paid out of the Association’s bank
account to staff, creditors and others. It does not include cash paid
for the purchase of assets.
3.2CASH FLOWS FROM INVESTING ACTIVITIES
This relates to cash receipts and cash payments resulting from
either the sale or purchase of property, plant and equipment.
The statement of cash flows concludes with cash at end of year
which indicates the cash the Association has at 30 June to meets
its debts and liabilities.
MAV ANNUAL REPORT 2007/08 GUIDE TO THE FINANCIAL REPORT >51
GLOSSARY
AFSL – Australian Financial Services Licence
AIFRS – Australian equivalents to International Financial Reporting
Standards
ALGA – Australian Local Government Association
ALP – Australian Labor Party
APRA – Australian Prudential Regulation Authority
ASIC – Australian Securities and Investment Commission
CMP – Civic Mutual Plus
CPI – Consumer Price Index
CWP – Civic Workers’ Plus
DHS – Department of Human Services
DOT – Department of Transport
DSE – Department of Sustainability and Environment
HACC – Home and Community Care
ICT – Information and Communication Technology
IFRS – International Financial Reporting Standards
JLT – Jardine Lloyd Thompson
KLP – Kommunal Landspensjonskasse
LEAP – Local government Education and Awareness Program
LGAT – Local Government Association of Tasmania
MAV – Municipal Association of Victoria
MAVIC – Municipal Association of Victoria Insurance Committee
MAVIS – Municipal Association of Victoria intranet and document
management system
MCH – Maternal and Child Health
TUIC – The Underwriting Insurance Company
VCAT – Victorian Civil and Administrative Tribunal
VCSSSA – Victorian Community Sports Surfaces Sustainability
Alliance
VEC – Victorian Electoral Commission
VSLGA – Victorian State-Local Government Agreement
52> MAV ANNUAL REPORT 2007/08 GLOSSARY
FINANCIAL REPORT
2007/08
MAV FINANCIAL REPORT 2007/08 >53
INCOME STATEMENT
STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 JUNE 2008
FOR THE YEAR ENDED 30 JUNE 2008
COMBINED
NOTE
REVENUE
4
2008
2007
$
61,365,803
COMBINED
MAV - GENERAL FUND
$
46,846,705
2008
$
13,645,647
2007
NOTE
$
50,886,143
43,539,352
11,287,835
10,482,285
3
10,479,660
3,307,353
2,357,812
675,958
COMBINED
NOTE
2008
12,235,276
14,427,923
-
$
$
4,558,268
3,882,310
(5,500,000)
-
-
10,479,660
3,307,353
2,357,812
675,958
BALANCE AT END OF YEAR
22,714,936
12,235,276
6,916,080
4,558,268
$
$
2008
$
COMBINED
2007
NOTE
$
2008
$
MAV - GENERAL FUND
2007
2008
$
$
2007
$
CASH FLOW FROM OPERATING ACTIVITIES
9(a)
26,922,735
26,372,954
7,321,524
4,489,475
RECEIPTS
10,2(q)
35,223,935
36,822,332
871,945
1,253,407
Subscriptions, grants and fees
120,106
52,280
120,106
52,280
62,266,776
63,247,566
8,313,575
5,795,162
39,249,555
43,598,526
Prepayments
TOTAL CURRENT ASSETS
Investment income
Reinsurance and other recoveries
NON-CURRENT ASSETS
41,908,220
42,688,873
15,734,169
9,799,311
864,406
1,479,841
287,954
265,204
16,103,200
12,954,093
-
-
PAYMENTS
Suppliers
(42,110,794) (43,476,230) (13,073,156)
Property, plant and equipment
12,2(f)
509,994
611,421
509,994
611,421
Claim payments
(16,098,333) (12,014,216)
Intangibles
10,2(q)
13,2(f)
252,209
230,502
252,209
230,502
NET CASH (USED IN)/PROVIDED BY
OPERATING ACTIVITIES
Other financial assets
10
TOTAL NON-CURRENT ASSETS
40,011,768
TOTAL ASSETS
10
44,440,459
102,278,544 107,688,025
-
10
-
10
762,212
841,933
9,075,787
6,637,095
9(b)
CURRENT LIABILITIES
Payables
2,926,195
4,127,102
Premiums in advance
11
18,880,563
30,024,265
Provision for employee entitlements
17
527,649
486,678
14(a)
1,103,428
1,055,260
-
527,649
2,948,967
826,079
241,399
150,690
241,399
150,690
Payments for fixed assets and intangibles
(358,317)
(550,299)
(358,317)
(550,299)
NET CASH USED IN INVESTING ACTIVITIES
(116,918)
(399,609)
(116,918)
(399,609)
NET (DECREASE)/INCREASE IN CASH HELD
486,678
15,593,966
253,973
253,823
253,973
253,823
40,117,398
50,485,834
1,885,050
1,795,761
156,903
142,194
156,903
142,194
39,147,056
44,683,853
142,251
140,868
TOTAL NON-CURRENT LIABILITIES
39,446,210
44,966,915
274,657
283,066
TOTAL LIABILITIES
79,563,608
95,452,749
2,159,707
2,078,827
NET ASSETS
22,714,936
12,235,276
6,916,080
4,558,268
EQUITY
22,714,936
12,235,276
6,916,080
4,558,268
TOTAL CURRENT LIABILITIES
1,632,361
-
-
17,529,018
Other current liabilities
666,699
(9,238,436)
-
CASH FLOW FROM INVESTING ACTIVITIES
Proceeds from sale of fixed assets
Provision for claims outstanding
2007
Surplus from ordinary activities
MAV - GENERAL FUND
2007
CURRENT ASSETS
Receivables
$
FOR THE YEAR ENDED 30 JUNE 2008
AS AT 30 JUNE 2008
Receivables
2008
COMBINED STATEMENT OF CASH FLOWS
BALANCE SHEET
Cash and cash equivalents
$
Capital return to members
5(b)
NET SURPLUS/(DEFICIT)
MAV - GENERAL FUND
2007
RETAINED EARNINGS
11,158,243
Balance at beginning of year
EXPENSES
2008
-
-
Cash at beginning of year
CASH AT END OF YEAR
9(a)
549,781
1,232,752
2,832,049
426,470
26,372,954
25,140,202
4,489,475
4,063,005
26,922,735
26,372,954
7,321,524
4,489,475
The accompanying notes form an integral part of these statements.
NON-CURRENT LIABILITIES
Provision for employee entitlements
Provision for claims outstanding
17
14(a),2(p)
Other non-current liabilities
117,754
140,872
The accompanying notes form an integral part of these statements.
54> MAV FINANCIAL REPORT 2007/08
MAV FINANCIAL REPORT 2007/08 >55
NOTES TO AND FORMING PART OF THE
FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2008
1. CORPORATE INFORMATION
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2008
(f) Property, plant, equipment, trademarks and intellectual property
The combined financial report of Municipal Association of Victoria for the year ended 30 June 2008 was authorised for issue in accordance with
a resolution of the directors on the date shown on the attached Statement by Directors.
Plant and equipment, trademarks and intellectual property are carried at cost, less where applicable, any accumulated depreciation or
amortisation and any impairment value.
The Municipal Association of Victoria is an association incorporated by an Act of the Parliament of Victoria, Australia, known as the Municipal
Association Act 1907.
On disposal of an item of property, plant, equipment, trademarks and intellectual property the difference between the sales proceeds and the
carrying amount of the asset is recognised as a gain or loss.
The nature of the operations and principal activities of Municipal Association of Victoria are:
The depreciable amount of all fixed assets including buildings and capitalised leased assets are depreciated/amortised on a straight line basis
over their estimated useful lives to the entity commencing from the time the asset is held ready for use. Leasehold improvements are depreciated
over the shorter of either the unexpired period of the lease or the estimated useful lives of the improvements.
-
to provide a public liability insurance scheme for local government
-
to provide fidelity insurance for local government
-
to promote the efficient carrying out of municipal government throughout the State of Victoria and watch over and protect the interests,
rights and privileges of municipal corporations
THE FOLLOWING DEPRECIATION RATES ARE IN USE:
to serve the interests of the Victorian community.
Leasehold improvements at cost
20%
Furniture and equipment at cost
20 - 33%
-
ANNUAL RATE
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Motor vehicles at cost
20%
(a) Basis of preparation
Interactive communications system at cost
33%
The financial report is a general purpose financial report which has been drawn up in accordance with Australian Accounting Standards,
Mandatory Professional Reporting Requirements (Urgent Issues Group Interpretations) and other relevant requirements.
The principal accounting policies adopted in preparing the financial report are stated to assist in a general understanding of the financial report.
Accounting policies have been consistently applied unless otherwise indicated.
The financial report is presented in Australian dollars.
The accounts have been prepared on the accruals basis using historical costs and, except where stated, do not take into account current
valuations of assets.
(b) Statement of compliance
The financial report complies with Australian accounting standards, which include Australian equivalents to International Financial Reporting
Standard (AIFRS). Compliance with AIFRS ensures that the financial report, comprising the financial statements and notes thereto, complies with
International Financial Reporting Standards (IFRS).
(c) Adoption of new accounting standard
The Association has adopted AASB 7 Financial Instruments; Disclosures and all consequential amendments which became applicable on 1
January 2007. The adoption of this standard has only affected the disclosure in these financial statements. There has been no effect on profit
and loss or the financial position of the Association or any of its Divisions.
(d) Principles of the Combined Entity
The economic entity comprises the financial report of Municipal Association of Victoria and its controlled entities the Local Government Mutual
Liability Insurance Scheme (trading as Civic Mutual Plus, - CMP), and Municipal Officers’ Fidelity Guarantee Fund.
A controlled entity is any entity controlled by Municipal Association of Victoria (Incorporated under the Municipal Association Act 1907).
Control exists where Municipal Association of Victoria has the capacity to dominate the decision-making in relation to the financial and
operating policies of another entity so that the other entity operates with Municipal Association of Victoria to achieve the objectives of Municipal
Association of Victoria.
The effects of all transactions between entities in the combined entity have been eliminated.
The financial statements of the divisions are prepared for the same reporting period as the Municipal Association of Victoria, using consistent
accounting policies.
All interdivisional balances and transactions, including unrealised profits arising from intra-divisional transactions, have been eliminated in full.
Unrealised losses are eliminated unless costs cannot be recovered.
The equity in the insurance businesses of Civic Mutual Plus and the Municipal Officers Fidelity Guarantee Fund represent the assets of the
members of each of the insurance mutuals and are not available to the members of the Association.
(e) Income Tax
The Association is exempt from income tax, in accordance with sections 50-10 and 50-25 of the Income Tax Assessment Act 1997.
INTANGIBLE ASSETS
Intangible assets (computer software, trademarks and intellectual property) acquired separately or in a business combination are initially
measured at cost. The cost of an intangible asset acquired in a business combination is its fair value as at the date of acquisition. Following
initial recognition, intangible assets are carried at cost less any accumulated amortisation and any accumulated impairment losses. Internally
generated intangible assets, excluding capitalised development costs, are not capitalised and expenditure is recognised in profit or loss in the
year in which the expenditure is incurred.
The useful lives of intangible assets are assessed to be either finite or indefinite. Intangible assets with finite lives are amortised over the useful
life and tested for impairment whenever there is an indication that the intangible assets may be impaired. The amortisation period and the
amortisation method for an intangible asset with a finite life are reviewed at least at each financial year-end. Changes in the expected useful
life or the expected pattern of consumption of future economic benefits embodied in the asset are accounted for prospectively by changing the
amortisation period or method, as appropriate, which is a change in the accounting estimate. The amortisation expense on intangible assets with
finite lives is recognised in profit or loss in the expense category ‘Amortisation.’
The Association does not have any intangible assets with indefinite useful lives.
IMPAIRMENT
The carrying amount of property, plant, equipment, trademarks and intellectual property is reviewed annually by directors to ensure it is not in
excess of the recoverable amount from those assets. The recoverable amount is assessed on the basis of the expected net cash flows that will
be received from the assets’ employment and subsequent disposal. The expected net cash flows have not been discounted to present values in
determining the recoverable amounts.
(g) Leases
A distinction is made between finance leases which, effectively transfer from the lessor to the lessee substantially all the risks and benefits
incidental to ownership of the leased property, without transferring the legal ownership, and operating leases under which the lessor effectively
retains substantially all the risks and benefits.
Where assets are acquired by means of finance leases, the present value of minimum lease payments is established as an asset at the beginning
of the lease term and amortised on a straight line basis over the expected economic life. A corresponding liability is also established and each
lease payment is allocated between such liability and interest expense.
Operating lease payments are charged to expense on a basis which is representative of the pattern of benefits derived from the leased property.
Lease incentives received under operating leases are recognised as a liability.
(h) Employee entitlements
The following liabilities arising in respect of employee entitlements (note 17) are measured at their nominal amounts: wages and salaries, annual
leave and sick leave regardless of whether they are expected to be settled within twelve months of balance date.
Other employee entitlements are expected to be settled within twelve months of balance date.
All other employee entitlements, including long service leave, are measured at the present value of the estimated future cash outflows in respect
of services provided up to balance date. Liabilities are determined after taking into consideration estimated future increase in wages and salaries
and past experience regarding staff departures. Related on-costs are included.
Contributions made to an employee superannuation fund are charged as expenses when incurred.
56> MAV FINANCIAL REPORT 2007/08
MAV FINANCIAL REPORT 2007/08 >57
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2008
(i) Revenue recognition
Interest Revenue - Interest revenue is recognised on a time-proportionate basis that takes into account the effective yield on the financial asset.
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2008
(p) Reinsurance and other recoveries receivable
Grant Revenue - Grants are recognised as revenue when the Association obtains control over the assets comprising the contribution. Control
over the grants is normally obtained upon their receipt or upon prior notification that a grant has been secured.
Reinsurance and other recoveries receivable on paid claims, reported claims not paid, claims incurred but not reported and unexpired risk
liabilities are recognised as revenue. Recoveries receivable are assessed in a manner similar to the assessment of outstanding claims. Recoveries
are measured as the present value of the expected future receipts, calculated on the same basis as the liability for outstanding claims.
Subscriptions and Sponsorships - Subscriptions and sponsorships are recognised on an accrual basis.
Reinsurance recoveries are reduced from the prior year due to a reduction in claims caused by:
(j) Investment income
Investment income consists of interest which is recognised on a time-proportionate basis that takes into account the effective yield on the
financial asset and movement in unit values in cash and fixed interest funds which are carried at fair value through the income statement.
(k) Other financial assets
Investments are valued at net market value at balance sheet date.
(l) Comparative figures
Where necessary, comparative figures have been adjusted to conform with changes in presentation in the current year.
(m) Cash flows
For the purposes of the statement of cash flows, cash includes cash on hand and deposits held at call with banks and investments in cash
backed unit trusts net of outstanding bank overdrafts.
(i) improved risk management practices by members, and
(ii) reform to the law of tort.
(r) Revenue Recognition
Revenue is recognised to the extent that it is probable that the economic benefit will flow to the entity and the revenue can be reliably measured.
The following specific recognition criteria must also be met before revenue is recognised.
(i) Premiums – recognised in the period the fund is at risk.
(ii) Future reinsurance and other recoveries – on an accruals basis.
(iii) Investment Income – on an accruals basis including adjustments to bring values of cash backed unit trusts to account as investment income.
(s) Catastrophe Insurance
Catastrophe insurance relates to insurance premiums paid to reinsurers in accordance with the established reinsurance strategy of the entity and in
order to protect the Insurance businesses from catastrophic and unforseen claims.
SUMMARY OF ACCOUNTING POLICIES RELATING TO INSURANCE ACTIVITIES
(n) Premiums
Premiums comprise amounts charged to members of the Schemes for policy cover, net of amounts returned to members as bonuses.
The earned portion of premiums received is recognised as revenue. Premiums are treated as earned from date of attachment of risk.
The pattern of recognition over the policy is based on time, which is considered to closely approximate the pattern of risks undertaken.
(o) Premiums receivable
During the month of June each year, the Schemes issue premium notices to Scheme Members. The risk attaches to the premiums in the next
accounting period and accordingly the revenue is recognised each following year commencing 1 July. Prior to each balance date members have
committed to participate in both the scheme and the fund for the ensuing year and accordingly the premiums are disclosed in the balance sheet
as ‘contributions receivable’ with an offsetting liability described as ‘contributions billed in advance.’
(p) Claims
Claims-incurred expense and liability for outstanding claims are recognised in respect of direct business. The liability covers claims incurred but
not yet paid, incurred but not yet reported claims, and the anticipated direct and indirect costs of settling those claims. Claims outstanding are
assessed by reviewing individual claim files and estimating claims not notified and settlement costs using statistical and actuarial techniques.
The liability for outstanding claims is measured as the present value of the expected future payments, reflecting the fact that all the claims do
not have to be paid out in the immediate future. The expected future payments are estimated on the basis of the ultimate cost of settling claims,
which is affected by factors arising during the period to settlement such as normal inflation and ‘superimposed inflation.’ Advice from the MAV’s
actuary has estimated normal and superimposed inflation to be 2% (2007 2%) and the discount rate at 6.7% (2007 6.45%)
Superimposed inflation refers to factors such as trends in court awards, for example increases in the level and period of compensation for
injury. The expected future payments are then discounted to a present value at the reporting date using discount rates based on the investment
opportunities available to the organisation on the amounts of funds sufficient to meet claims as they became payable.
Details of rates applied are disclosed in note 22.
Claims-incurred expense has reduced from the prior year due to the impact of:
(i) improved risk management practices by members, and
(ii) reform to the law of tort.
58> MAV FINANCIAL REPORT 2007/08
MAV FINANCIAL REPORT 2007/08 >59
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2008
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2008
COMBINED
NOTE
2008
COMBINED
2007
$
2008
$
$
Premium income
29,561,562
26
31,697,332
3,911,250
-
2(s) (21,536,371) (24,034,727)
NET INCOME BEFORE CLAIMS
11,936,441
7,662,605
Claims expense
5(a) (13,517,161)
(4,779,785)
Reinsurance and other recoveries
2(q) 14,323,078
3,436,297
NET CLAIMS EXPENSE
805,917
UNDERWRITING RESULT
Investment income
Administration and general expenses
12,742,358
6,319,117
583,816
1,211,599
(4,899,320)
INSURANCE ACTIVITY OPERATING SURPLUS
8,121,848
2,631,396
MAV SURPLUS
2,357,812
675,957
10,479,660
3,307,353
OPERATING SURPLUS
$
13,517,161
4,779,785
-
-
21,536,371
24,034,727
-
-
1,826,241
2,058,605
-
-
274,126
94,922
-
-
Salary and payroll costs
3,005,888
2,664,288
3,005,888
2,664,288
Grants, projects and legal
4,600,562
4,192,711
4,600,562
4,192,711
Administration
1,936,697
1,686,192
1,399,248
1,273,222
317,144
312,243
317,144
312,243
248,138
Operating lease rental expense
Superannuation contributions
2007
$
Claims expense
General scheme expenses
COMBINED
2008
$
248,138
229,948
Scheme management fee
1,570,812
1,676,058
Meetings and seminars
1,021,785
877,577
1,021,785
45,020
46,762
45,020
46,762
Depreciation furniture and equipment
85,653
92,384
85,653
92,384
MAV - GENERAL FUND
Depreciation motor vehicles
67,179
84,385
67,179
84,385
2008
Amortisation of website, educational programs and trademarks
72,727
34,017
72,727
34,017
Board of management expenses
224,755
199,579
224,755
199,579
ALGA membership
343,944
330,961
343,944
330,961
50,886,143
43,539,352
11,287,835
10,482,285
$
2007
$
TOTAL EXPENDITURE
2(q)
Brokerage and management fees income
26
31,691,543
33,710,973
14,323,078
3,436,297
1,450,585
1,427,914
2,150,174
2,087,547
-
1,450,585
3,911,250
-
1,213,725
REVENUES FROM OPERATING ACTIVITIES
Subscriptions/premiums
229,948
-
Depreciation leasehold improvements
4. REVENUE
Performance bonus
2007
$
Catastrophe insurance expense
Stamp duty
(1,343,488)
(5,204,326)
Reinsurance and other recoveries
2008
$
The following items have been recognised
in the operating surplus:
CONTRIBUTION FROM INSURANCE ACTIVITIES
Catastrophe insurance
2007
5(b)OPERATING EXPENSES
3. CONTRIBUTION TO OPERATING SURPLUS
Performance bonus
MAV - GENERAL FUND
-
1,427,914
-
-
6. LEASING COMMITMENTS
Operating lease commitments, being for lease
of new OCE and OCE colour copiers
Seminars and sale of publications
840,730
889,934
840,730
889,934
Not later than one year
29,216
29,216
29,216
29,216
Project, sponsorship, management and rental income
618,010
305,754
1,257,366
888,614
Later than one year but not later than five years
73,040
102,256
73,040
102,256
102,256
131,472
102,256
131,472
Grant income
TOTAL REVENUE FROM OPERATING ACTIVITIES
7,644,899
5,590,668
7,644,899
5,590,668
60,480,095
45,361,540
13,343,754
10,884,677
Operating lease commitments, being for lease
of leasehold premises:
REVENUES FROM NON-OPERATING ACTIVITIES
Investment income
880,854
1,472,330
297,039
260,731
Gain on disposal of non-current assets
4,854
12,835
4,854
12,835
TOTAL REVENUE FROM OUTSIDE THE
OPERATING ACTIVITIES
885,708
1,485,165
301,893
273,566
61,365,803
46,846,705
13,645,647
11,158,243
REVENUE
NOTE
2008
$
2007
$
Paid
14(a)
Outstanding claims at beginning of financial year
60> MAV FINANCIAL REPORT 2007/08
418,244
276,485
287,544
276,485
Later than one year but not later than five years
3,258,815
1,557,433
1,500,048
1,557,433
Later than five years
1,639,251
230,159
TOTAL LEASE COMMITMENT
5,316,310
2,064,077
1,787,592
115,212
24,226
-
230,159
2,064,077
Amounts received or due and receivable for audit services:
Audit services
117,239
Tax Compliance
5(a) CLAIMS EXPENSES
TOTAL CLAIMS EXPENSES
Not later than one year
7. AUDITOR’S REMUNERATION
COMBINED
Outstanding claims at end of financial year
TOTAL LEASE COMMITMENT
17,118,906
12,989,535
56,676,074
60,277,819
117,239
11,440
126,652
35,882
-
24,226
35,882
(60,277,819) (68,487,569)
2(p)
13,517,161
4,779,785
MAV FINANCIAL REPORT 2007/08 >61
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2008
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2008
COMBINED
NOTE
2008
COMBINED
2007
$
8. SCHEME MANAGEMENT FEES
Future reinsurance and other recoveries receivable
2(q)
Discount to present value
1,570,812
1,676,058
Claims management (included in claims expenses)
1,285,210
1,371,320
Less doubtful debts
TOTAL SCHEME MANAGEMENT FEES
2,856,022
3,047,378
Premiums receivable
5(b)
$
2(o)
2008
$
$
Cash
13,503,883
8,091,856
Other financial assets
13,418,852
18,281,098
TOTAL CASH AND CASH EQUIVALENTS
26,922,735
26,372,954
2008
$
7,321,524
57,290,731
(1,148,000)
(1,161,750)
18,946,413
20,989,701
1,253,407
871,945
1,253,407
CURRENT
35,223,935
36,822,332
871,945
NON-CURRENT
39,249,555
43,598,526
74,473,490
80,420,858
1,253,407
-
871,945
-
1,253,407
Reinsurance recoveries are due from reinsurers with Standard and Poor’s ratings of AA+, AA-, A+ and A. Other recoveries are due from
unrated local authorities based in Victoria and Tasmania.
2007
$
4,489,475
-
7,321,524
55,764,919
871,945
TOTAL
MAV - GENERAL FUND
2007
68,925,699
3,302,176
Represented by:
COMBINED
64,964,029
80,420,858
(a) Cash and cash equivalents at balance date as
shown in the Statement of Cash Flows are held
in Standard and Poor’s rated AA and AAf cash
deposits and reconciled to the related items
in the Balance Sheet as follows:
-
The ageing analysis of trade receivables are as follows:
4,489,475
Total
<30
days
31-60
days
61-90
days
>90
days
2008
(b) Reconciliation of net cash used in operating
activities to operating surplus
Combined
Surplus for year
10,479,660
Capital return to members
3,307,353
-
Depreciation and amortisation
270,578
(Surplus)/deficit on disposal of assets
(4,854)
2,357,812
(5,500,000)
675,958
-
MAV General Fund
257,547
270,578
257,547
2007
(12,835)
(4,854)
(12,835)
Combined
MAV General Fund
2(q)
(Increase)/decrease in prepayments
Increase/(decrease) in accounts payable
Increase /(decrease) in provision for employee entitlements
2(p)
6,216,208
8,275,754
(173,999)
(659,557)
(67,826)
168,595
(67,826)
168,595
326,278
577,710
232,207
55,680
46,378
55,680
46,378
(3,315,417)
(8,209,750)
-
(12,325,119)
2,995,263
-
(66,134)
CASH FLOWS FROM OPERATIONS
666,699
(22,222)
1,632,362
(66,134)
2,948,967
19,429,458
24,141
-
776
777,880
543,480
233,624
-
776
23,162,887
23,086,261
41,530
160
34,916
1,181,767
1,105,161
41,530
160
34,916
COMBINED
(576,077)
Increase/(decrease) in other liabilities
19,454,373
-
Changes in assets and liabilities
NOTE
140,008
(22,222)
826,079
2008
$
MAV - GENERAL FUND
2007
$
2008
$
2007
$
11. PREMIUMS IN ADVANCE
Contributions billed in advance
18,880,563
30,024,265
-
-
Leasehold improvements - at cost
616,101
598,123
616,101
598,123
Less accumulated depreciation
471,437
426,417
471,437
426,417
144,664
171,706
144,664
171,706
Furniture and equipment - at cost
546,232
484,637
546,232
484,637
Less accumulated depreciation
465,600
441,885
465,600
441,885
80,632
42,752
80,632
42,752
310,932
411,310
310,932
411,310
74,524
94,720
74,524
94,720
12. PROPERTY, PLANT AND EQUIPMENT
Motor vehicles - at cost
Less accumulated depreciation
236,408
316,590
236,408
316,590
Information technology equipment- at cost
470,515
446,127
470,515
446,127
Less accumulated depreciation
422,225
365,754
422,225
365,754
48,290
80,373
48,290
80,373
509,994
611,421
509,994
611,421
TOTAL PROPERTY, PLANT AND EQUIPMENT
62> MAV FINANCIAL REPORT 2007/08
2007
$
74,473,490
TOTAL RECEIVABLES
Increase/(decrease) in accrued revenue
2008
910,158
9. NOTES TO STATEMENT OF CASH FLOWS
Increase/(decrease) in outstanding claims
$
(9,199,110) (11,634,968)
Other receivables
(Increase)/decrease in accounts receivable
2007
$
10. RECEIVABLES
Scheme management fees are paid to the Scheme
Manager for:
Risk management and administrative services
2008
NOTE
$
MAV - GENERAL FUND
MAV FINANCIAL REPORT 2007/08 >63
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2008
COMBINED
2008
$
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2008
MAV - GENERAL FUND
2007
$
2008
$
COMBINED
2007
2008
$
12. PROPERTY, PLANT AND EQUIPMENT (continued)
2008
230,502
91,823
230,502
91,823
94,434
176,428
94,434
176,428
$
$
2007
$
13. INTANGIBLE ASSETS (continued)
Reconciliation of the carrying amounts of intangible
assets at the beginning and end of the financial year
LEASEHOLD IMPROVEMENTS
Movement during the year
INTANGIBLE ASSETS
Movements during the year
Additions
2007
$
Reconciliations of the carrying amounts of property,
plant and equipment at the beginning and end of
the financial year.
Beginning of year
MAV - GENERAL FUND
Beginning of year
171,706
24,353
171,706
24,353
Additions
17,978
194,115
17,978
194,115
Amortisation
(72,727)
(37,749)
(72,727)
(37,749)
Depreciation
(45,020)
(46,762)
(45,020)
(46,762)
End of year
252,209
230,502
252,209
230,502
End of year
144,664
171,706
144,664
171,706
FURNITURE AND EQUIPMENT
Movements during the year
Beginning of year
42,752
68,140
42,752
68,140
Additions
67,062
15,995
67,062
15,995
Depreciation
(29,182)
(41,383)
(29,182)
(41,383)
End of year
80,632
42,752
80,632
42,752
DESCRIPTION OF INTANGIBLE ASSETS
Computer software, trademark and intellectual property costs are carried at cost less accumulated amortisation. These intangible assets have
been assessed as having a finite life and are amortised using the straight line method over a period of three to ten years. The amortisation has
been recognised in the income statement in the line item ‘Amortisation.’ If an impairment indication arises, the recoverable amount is estimated
and an impairment loss is recognised to the extent that the recoverable amount is lower than the carrying amount.
14(a)OUTSTANDING CLAIMS
COMBINED
2008
$
2007
$
MOTOR VEHICLES
Central estimate
61,703,251
Movements during the year
Discount to present value
(8,679,823) (11,339,489)
Beginning of year
316,590
398,195
316,590
398,195
Additions
174,494
140,633
174,494
140,633
Disposals
Depreciation
End of year
Current
17,529,018
15,593,966
Non-current
39,147,056
44,683,853
56,676,074
60,277,819
(84,385)
TOTAL OUTSTANDING CLAIMS
316,590
Comprising:
316,590
236,408
TOTAL CLAIMS PROVISION
80,373
104,515
80,373
14(b)
2(p)
104,515
24,388
23,126
24,388
23,126
(47,268)
(56,471)
(47,268)
End of year
48,290
80,373
48,290
80,373
502,163
407,730
502,163
407,730
(249,954)
(177,228)
(249,954)
(177,228)
252,209
230,502
252,209
230,502
13. INTANGIBLE ASSETS
64> MAV FINANCIAL REPORT 2007/08
60,277,819
(137,853)
(67,179)
(56,471)
Less accumulated amortisation
56,676,074
(187,497)
(84,385)
Depreciation
Trademarks and intellectual property
1,474,444
(137,853)
Movements during the year
Additions
2,694,341
1,188,116
Risk margin
(67,179)
236,408
56,109,034
2,464,530
(187,497)
INFORMATION TECHNOLOGY EQUIPMENT
Beginning of year
53,023,428
Claims handling costs
67,448,523
14(b)RISK MARGIN - PROCESS FOR DETERMINING RISK MARGIN
Figures for private insurers published by APRA in October 2006 showed an average risk margin of 15.7% for public and product liability
outstanding claims, and 11.3% for professional indemnity. Based on these averages, and on three actuarial publications, Cumpston Sarjeant
Pty Ltd recommended that risk margins be adopted intended to give an overall risk margin of 15% for outstanding claims, in the absence of
reinsurance.
After allowing for the extent of reinsurance for each year, Cumpston Sarjeant calculated risk margins for each year, in total being 1.8% of gross
outstanding claims. They recommended a risk margin of 20% for the net unexpired risk liability.
These risk margins are likely to give a probability of about 75% that the provisions including the risk margins will prove adequate to meet the
relevant liabilities.
MAV FINANCIAL REPORT 2007/08 >65
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2008
2008
GROSS
$
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2008
2007
REINSURANCE
$
NET
$
GROSS
$
REINSURANCE
$
16. CLAIMS DEVELOPMENT TABLE
NET
$
14(c)RECONCILIATION OF MOVEMENT
IN DISCOUNTED OUTSTANDING
CLAIMS LIABILITY
60,277,819
56,128,981
4,148,838
68,487,569
65,276,866
3,210,703
Changes in assumptions
15,358,718
15,816,289
(457,571)
10,886,709
12,570,678
(1,683,969)
Incurred claims recognised in
income statement
(3,315,417)
(1,512,062)
(1,803,355)
12,043,301
14,304,227
(2,260,926)
$
(7,566,894)
3,319,815
(9,147,885)
3,422,793
1,580,991
(102,978)
At end year of accident
2005
$
2006
$
2007
$
20,602,497
18,375,690
19,426,057
12,918,950
One year later
18,799,966
17,546,887
14,414,065
10,750,452
Two years later
16,772,897
17,554,596
13,972,302
Three years later
15,229,343
14,652,975
Four years later
14,728,229
Current estimate of cumulative claims cost
Claim payments/recoveries during the year (15,645,046) (15,816,289)
Outstanding claims carried forward
2004
2008
$
56,676,074
54,616,919
171,244 (11,529,565) (12,570,678)
2,059,155
60,277,819
56,128,981
1,041,113
Cumulative payments
4,148,838
Outstanding claims - undiscounted
14,728,229
(8,660,378)
6,067,851
14,652,975
13,972,302
10,750,452
(4,682,885)
(2,249,407)
(1,083,872)
11,722,894
9,666,580
9,970,090
11,438,398
65,542,356
(310,434)
11,127,964
CURRENT YEAR
$
PRIOR YEAR
$
2007
TOTAL
$
CURRENT YEAR
$
PRIOR YEAR
$
(9,004,265)
INSURANCE
12,912,258
Discount
(1,885,258)
4,544,924
Gross claims and related expenses discounted
11,027,000
2,490,161 13,517,161
Reinsurance and other recoveries discounted
NET CLAIMS INCURRED
(9,120,578)
264,547
(8,856,031)
2,170,969
(2,054,763)
10,857,495
2,659,666
14,387,239 (11,270,089)
3,117,150
(2,777,861)
4,448,815
1,670,954
(6,821,274)
4,788,104
11,609,378
(1,879,609) (11,000,187) (10,828,628)
11,440,165
611,537
(3,587,438) (3,322,891)
1,428,183
(5,476,017)
(4,047,834)
(5,467,047) (14,323,078)
(9,400,445)
5,964,148
(3,436,297)
2,208,933
(857,127)
(2,976,886)
(805,917)
1,942,215
2003 and prior
15,074,745
TOTAL GROSS OUTSTANDING CLAIMS
- CIVIC MUTUAL PLUS
56,568,074
TOTAL
$
15. NET CLAIMS INCURRED
Gross claims and related expenses undiscounted
(16,986,977)
48,555,379
Claims handling expense
2008
Discount
$
11,438,398
Discount
Reinsurance and other recoveries undiscounted
TOTAL
GROSS ESTIMATE OF ULTIMATE CLAIMS COST
- CIVIC MUTUAL PLUS
Outstanding claims brought forward
Increase in claims incurred/
recoveries anticipated
ACCIDENT YEAR
1,351,807
TOTAL GROSS OUTSTANDING CLAIMS
- MUNICIPAL OFFICERS’ FIDELITY GUARANTEE FUND
108,000
COMBINED GROSS OUTSTANDING CLAIMS
refer note 14(a)
56,676,074
ACCIDENT YEAR
2004
2005
$
$
2006
$
2007
$
2008
TOTAL
$
$
NET ESTIMATE OF ULTIMATE CLAIMS COST
- CIVIC MUTUAL PLUS
At end year of accident
One year later
Two years later
Three years later
3,048,847
2,431,922
1,245,405
1,280,196
Four years later
879,003
Current estimate of cumulative claims cost
879,003
2,125,606
2,182,437
2,103,826
1,847,897
2,104,523
1,723,493
2,191,811
1,832,851
2,336,670
1,605,025
1,605,025
1,832,851
1,723,493
2,336,670
Cumulative payments
(91,224)
(502,323)
(391,838)
(269,083)
(158,001)
Outstanding claims - undiscounted
787,779
1,102,701
1,441,013
1,454,410
2,178,669
8,377,043
(1,412,469)
6,964,573
Discount
(4,550,235)
Claims handling expense
278,583
2003 and prior
(741,766)
TOTAL NET OUTSTANDING CLAIMS
- CIVIC MUTUAL PLUS
1,951,155
TOTAL NET OUTSTANDING CLAIMS
- MUNICIPAL OFFICERS’ FIDELITY GUARANTEE FUND
COMBINED NET OUTSTANDING CLAIMS
refer note 14(c)
108,000
2,059,155
These tables show the trend in the balance of outstanding claims.
66> MAV FINANCIAL REPORT 2007/08
MAV FINANCIAL REPORT 2007/08 >67
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2008
COMBINED
2008
NOTE
MAV - GENERAL FUND
2007
$
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2008
2008
$
20. FINANCIAL RISK MANAGEMENT POLICIES AND OBJECTIVES
2007
$
$
The Group’s exposure to interest rate risk and the effective average interest rate for the classes of financial assets is set out below:
COMBINED
17. PROVISIONS FOR EMPLOYEE ENTITLEMENTS
Noninterest
earning
The aggregate amount of employee entitlement
liability is comprised of:
Provisions (current)
527,649
486,678
527,649
486,678
Provisions (non-current)
156,903
142,194
156,903
142,194
TOTAL EMPLOYEE ENTITLEMENTS
684,552
628,872
684,552
628,872
Meets AIFRS requirements
EMPLOYEE ENTITLEMENTS
Floating
interest
rate
$
$
$
$
Bank
-
13,503,883
-
Cash investments
-
13,418,852
-
Receivables
74,473,490
TOTAL FINANCIAL ASSETS
74,473,490
-
7,321,524
-
871,945
26,922,735
-
871,945
7,321,524
3.3%
5.1%
FINANCIAL LIABILITIES
628,872
582,494
628,872
582,494
55,680
46,378
55,680
46,378
684,552
628,872
684,552
628,872
Additions
Outstanding claims
56,676,074
-
Unearned premiums/subscriptions
18,880,563
-
2,926,195
-
1,103,428
-
1,103,428
Accounts payable
TOTAL FINANCIAL LIABILITIES
18. SUPERANNUATION CONTRIBUTION
78,482,832
Weighted average interest rate
The Municipal Association of Victoria contributes in respect of its employees to both the Vision Super Superannuation Fund’s Accumulation Fund
and the Defined Benefits Fund.
Contributions to the Defined Benefits Fund are determined by the Scheme’s actuary. The Funds liability for accrued benefits for defined benefit
and defined contribution members was determined in the 31 December 2005 actuarial investigation carried out by Local Authorities Super
pursuant to the requirements of Australian Accounting Standard AASB 2005-13. The actuarial investigation calculated that the Defined Benefits
Superannuation Fund was in surplus.
The Association receives grant monies from various Federal and State government departments on behalf of local government. Grant monies
received have been accounted for as income in accordance with Australian Accounting Standard 1004. At the end of the financial year the
Association had commitments to expend grants totalling approximately $5,578,025 (2007 $3,333,891) after deducting an estimate of costs
of administering the grants.
COMBINED
2008
$
MAV - GENERAL FUND
2007
$
2008
$
2007
$
7,644,899
The Association does not receive any other government assistance.
5,590,668
7,644,899
5,590,668
-
0%
COMBINED
MAV - GENERAL FUND
Floating
NonInterest
Earning
Non-
Interest
Rate
Interest
Earning
Floating
Interest
Rate
2007
$
$
$
$
FINANCIAL ASSETS
Bank
119,926
7,971,926
-
Receivables
80,420,858
TOTAL FINANCIAL ASSETS
80,540,784
119,926
18,281,098
4,369,549
-
26,253,024
Weighted average interest rate
-
1,253,407
-
1,373,333
4,369,549
5.74%
6.22%
FINANCIAL LIABILITIES
Outstanding claims
60,277,819
-
-
Unearned premiums/subscriptions
30,024,265
-
-
Accounts payable
RECOGNISED IN INCOME STATEMENT
-
The carrying amounts of financial assets and financial liabilities represent their approximate net fair value.
Cash investments
19. GOVERNMENT GRANTS
-
0%
The amount of superannuation contributions paid by the Municipal Association of Victoria to the Vision Super Accumulation Fund and the
Defined Benefits Fund during the reporting period was $248,138 (2007 $229,948). The Municipal Association of Victoria contributes to the
Accumulation Fund based on a fixed percentage of employee earnings in accordance with the Superannuation Guarantee Legislation, 9% in
2008 and 9% in 2007. No further liability accrues to the employer as the superannuation benefits accruing to employees are represented by
their share of the net assets of the Fund.
Grant income
Noninterest
earning
2008
Weighted average interest rate
Movement during the year
End of year
Floating
interest
rate
FINANCIAL ASSETS
2(b)
Reconciliation of the carrying amounts of provision
for employee entitlements at the beginning and
end of the financial year
Beginning of year
MAV - GENERAL FUND
TOTAL FINANCIAL LIABILITIES
Weighted average interest rate
4,127,098
-
94,429,182
1,055,260
1,055,260
0%
0%
The carrying amounts of financial assets and financial liabilities represent their approximate net fair value.
All maturity dates are within twelve months.
68> MAV FINANCIAL REPORT 2007/08
MAV FINANCIAL REPORT 2007/08 >69
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2008
20. FINANCIAL RISK MANAGEMENT POLICIES AND OBJECTIVES (continued)
20. FINANCIAL RISK MANAGEMENT POLICIES AND OBJECTIVES (continued)
The table below reflects all contractually fixed pay-offs and receivables for settlement, repayments and interest resulting from recognised financial
assets and liabilities as at 30 June 2008. Cash flows for financial assets and liabilities without fixed amount or timing are based on conditions
existing at 30 June 2008.
The remaining contractual maturities of the financial liabilities are:
CONSOLIDATED
2008
$
MAV - GENERAL FUND
2007
$
2008
$
2007
$
3 months or less
26,357,315
38,352,821
1,103,424
1,055,260
3-12 months
13,760,087
13,024,218
781,622
740,501
1-5 years
35,699,075
36,156,972
274,657
283,066
3,777,131
7,918,742
79,563,608
95,452,753
Over 5 years
2,159,703
2,078,827
The risk implied from the values in the table below, reflects a balanced view of cash inflows and outflows. These liabilities originate from
insurance contracts and other financial assets used in the ongoing operations of the business. These assets are considered in the Association’s
overall liquidity risk. To monitor existing financial assets and liabilities as well as to enable effective controlling of future risks, the Association
has established a comprehensive risk reporting covering its insurance business that reflects the expectations of the management of expected
settlement of financial assets and liabilities.
3-12
$
1-5 years
months
$
>5 years
$
Total
$
$
FINANCIAL ASSETS
Cash and cash equivalents
26,922,735
Receivables
23,926,935
11,297,000
34,687,555
4,562,000
50,849,670
11,297,000
34,687,555
4,562,000 101,396,225
-
-
-
Accounts payable
4,550,553
12,978,465
35,369,925
18,880,567
3,777,131
-
2,926,195
Other liabilities
-
781,622
299,150
35,669,075
TOTAL FINANCIAL LIABILITIES
26,357,315
13,760,087
NET MATURITY
24,492,355
(2,463,087)
Receivables
Terms and conditions of membership
The Scheme operates in Victoria and Tasmania. Should a claim be accepted the Scheme provides indemnity to the member in respect of their
civil liabilities for $500 million public / products Liability and $300 million for professional indemnity insurance, subject to any excess, for any
claim incurred anywhere throughout the world.
56,676,074
18,880,567
-
-
2,926,195
The key insurance risks that affect the Scheme are contribution risk, and claims experience risk.
-
1,080,772
Contribution risk is the risk that the Scheme does not charge contributions appropriate for the indemnity cover it provides. The Scheme partially
manages contribution risk through its proactive approach to risk management that addresses all material risks both financial and non-financial.
There are no specific terms and conditions that are expected to have a material impact on the financial statements.
(981,520)
3,777,131
79,563,608
784,869
21,832,617
-
-
7,321,524
871,945
-
-
-
871,945
8,193,469
-
-
-
8,193,469
-
-
1,103,428
-
Management of risks
-
-
1,103,428
Operating surpluses arise from the total contributions charged to members less the amounts paid to cover claims and the expenses incurred
by the Scheme.
-
7,321,524
Other Liabilities
781,622
274,657
1,056,279
Total Financial Liabilities
1,103,428
781,622
274,657
2,159,707
Net maturity
7,090,041
(781,622)
(274,657)
6,033,762
70> MAV FINANCIAL REPORT 2007/08
The Scheme adopts a conservative approach towards management of risk and does this by utilising various risk transfer options. The MAV
Insurance Committee determines the level of risk, which is appropriate for the Scheme having regards to ordinary concepts of prudence
and regulatory constraints. The risk transfer arrangements adopted by the Scheme include the utilisation of commercial reinsurance / excess
arrangements. These arrangements include constant review of both reinsurers’ financial strength, and ensuring spread of risk among reinsurers
who meet the requirements of the MAV insurance policies. These risk transfer arrangements assist the Scheme to limit exposures to large single
claims and catastrophic events. These programs are reviewed each year to ensure that they continue to meet the risk needs of the Scheme.
Product features
PARENT
FINANCIAL LIABILITIES
Accounts payable
Reinsurance strategy
74,473,490
PARENT
FINANCIAL ASSETS
Cash and cash equivalents
The Scheme has an objective to control insurance risk thereby reducing the volatility of its operating surplus. In addition to the inherent
uncertainty of civil liability risks, which can lead to variability in the loss experience, operating surpluses can also be affected by external factors,
such as competition and movements in asset values.
26,922,735
COMBINED
FINANCIAL LIABILITIES
Unearned premiums/subscriptions
Objectives in managing risk arising from insurance and policies for mitigating those risks
Membership to the Scheme is offered to eligible bodies and renewed annually on 30th June. Payment of the annual contribution confirms
continuation of membership. Termination of membership is subject to at least 90 days written notice of intention as laid out by the Scheme Rules.
COMBINED
Outstanding claims
Actuarial models, using information from the Scheme’s management information systems are used to confirm contributions and monitor claim
patterns. Past experience and statistical methods are used as part of the process.
The Scheme relies on a strong relationship with its members and actively encourages them to adopt practices of risk management that reduce
the incidence of claims to the Scheme.
Maturity analysis of financial assets and liabilities based on management’s expectation.
<3 months
The Association’s local government mutual liability scheme (trading as Civic Mutual Plus) is established by legislation contained in the Municipal
Association Act 1907. Membership is available to local councils and prescribed bodies. The Scheme operates in Victoria and Tasmania to
provide services to members in respect of their potential and actual liabilities. A member may seek indemnity from the Scheme in respect of
a claim.
The principal risk is that the frequency and severity of claims is greater than expected. Civil liability risk events are, by their nature, random, and
the actual number and size of events during any one-year may vary from those estimated using established statistical techniques.
LIQUIDITY RISK
Year Ended 30 June 2008
Risk management objectives and policies for mitigating insurance risk
Claims experience risk is managed through the non-financial risk assessment and risk management and reinsurance management process.
Claims experience is monitored on an ongoing basis to ensure that any adverse trending is addressed. The Scheme is able to reduce the claims
experience risk of severe losses through the reinsurance program, and by managing the concentration of insurance risks.
Concentration of insurance risks
Insurance risk is managed by taking a long term approach to setting the annual contribution rates that eliminates price fluctuations, through
appropriate investment strategy, reinsurance and by maintaining an active state-wide risk management profile. It is vital that the Scheme keeps
abreast of changes in the general economic, legal and commercial environment in which it operates. It is vital that the Scheme spreads its risk
of reinsurance failure by ensuring reinsurers are of high financial quality and can meet their commitments to the Association. The Association
maintains policies and strategies and receives advice from an independent actuary on at least an annual basis in order to determine the
concentration and amount of risk exposure. The Association keeps abreast of changes in the general economic, legal and commercial
environment in which it operates.
MAV FINANCIAL REPORT 2007/08 >71
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2008
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2008
20. FINANCIAL RISK MANAGEMENT POLICIES AND OBJECTIVES (continued)
21. ACCOUNTING ESTIMATES AND JUDGEMENTS
CREDIT RATING
AAA
+/$m
A
+/$m
BBB
$m
SPECULATIVE
GRADE
$m
NOT
RATED
$m
TOTAL
$m
The Scheme makes estimates and judgements in respect of certain key assets and liabilities. Estimates and judgements are continually reviewed
and are based on past experience and other factors, including expectations of future events that are believed to be reasonable under the
circumstances. The key areas in which critical estimates and judgements are applied are described below.
a) Estimation of outstanding claims liability
Reinsurance and other
recoveries on outstanding
claims
2008
Reinsurance and other
recoveries on paid claims
AA
+/$m
Provision is made at the year-end for the estimated cost of claims incurred but not settled at the balance sheet date, including the cost of claims
incurred but not yet reported (‘IBNR’) to the Scheme.
-
17.79
9.98
-
-
2.13
29.90
2007
-
18.93
9.50
-
-
2.73
31.16
The Scheme takes all reasonable steps to ensure that it has appropriate information regarding its claims exposure. However, given the
uncertainty in establishing claims provisions, it is likely that the final outcome may be different from the original liability established.
2008
-
3.88
0.43
-
-
1.42
5.73
2007
-
3.43
0.37
-
-
1.80
5.60
Provisions are calculated gross of all recoveries. A separate estimate is made of the amounts that will be recoverable from reinsurers and any
third party.
The determination of an appropriate outstanding claims provision involves:
(i) Establishing a case estimate for each reported claim at year-end taking into account legal advice where appropriate on larger claims;
PAST DUE BUT NOT IMPAIRED
NEITHER PAST
DUE NOR IMPAIRED
$’000
Reinsurance and other
recoveries on paid claims
LESS THAN
3 MONTHS
$’000
3 TO 6
MONTHS
$’000
6 MONTHS
TO 1 YEAR
$’000
GREATER
THAN 1 YEAR
$’000
IMPAIRED
TOTAL
(ii) A development allowance of 25% on the net outstanding balance of reported claims and confirmed as appropriate by the Actuary;
$’000
$’000
(iii) Allowance for incurred but not reported claims as confirmed by the actuarial review on 30 June 2008;
(iv) An allowance of 4% for claim settlement expenses, as assumed by the Actuary;
2008
-
2.21
0.55
0.99
0.61
1.37
5.73
(v) Allowances for discount at 6.7%, as assumed by the Actuary;
2007
-
1.39
1.02
0.56
0.89
1.74
5.60
(vi) A risk margin of 20% of net outstanding claims after the effect of reinsurance has been applied, as assumed by the Actuary.
Details of specific actuarial assumptions used in deriving the outstanding claims liability at year-end are detailed in note 22.
b) Assets arising from reinsurance contracts
Interest rate risk
The reinsurance indemnity contracts contain no clauses that expose the Scheme, directly to interest rate risk. The reinsurance contracts are long
term arrangements, reviewed and payable annually.
Assets arising from reinsurance contracts were estimated for each accident year, from the payments to date and estimated outstanding claims
history at 30 June 2008, taking into account the reinsurance terms applying to that accident year. In calculating the present value of reinsurance
recoveries, allowance was made for an average recovery delay of 3.5 months, as assumed by the Actuary.
In accordance with the Actuarial recommendations an allowance was made for non-recoveries from relevant insurers.
IMPACT OF CHANGES IN INTEREST RATES
Variable
Current Rate
%
Change
variable
to
%
Operating
surplus at
30 June 2008
$
Operating
surplus at
30 June 2013
$
Total accumulated
funds after the impact
of applying variable
22. ACTUARIAL ASSUMPTIONS AND METHODS
Actuarial assumptions
The following assumptions have been made in determining the outstanding claims liabilities:
$
2008
MAV
Base value at 30 June 2008
Interest rate pa
6.7%
11,789,060
6,916,080
KEY ACTUARIAL ASSUMPTIONS
7.7%
2,431,027
11,862,275
6,989,295
Case estimate development
25%
25%
5.7%
2,284,597
11,715,845
6,842,865
Wage inflation
4.5%
4%
Claim administration expense
4%
4%
8,175,121
41,465,000
15,383,000
Superimposed inflation
2%
2%
7.7%
8,111,121
44,053,000
15,319,000
Discount rate
6.7%
6.45%
5.7%
8,244,121
38,938,000
15,451,000
Risk margin
20%
20%
CIVIC MUTUAL PLUS
Base value at 30 June 2008
Interest Rate pa
6.7%
2007
2,357,812
Credit risk
The Scheme is exposed to credit risk on insurance contracts as a result of exposure to reinsurers. The credit risk to reinsurers is managed through
the Scheme’s Reinsurance Management Strategy and policies that includes regularly monitoring both the financial rating of the reinsurers both
prior to and during the reinsurance program and the flow of payments coming from the reinsurers. With regard to the investments in cash and
cash equivalents at balance date as shown in the Statement of Cash Flows are held in Standard and Poor’s rated AA and AAf rated cash deposits.
Price risk
Investments held are not subject to price risk. Investments are cash deposits held in Australian banks.
72> MAV FINANCIAL REPORT 2007/08
MAV FINANCIAL REPORT 2007/08 >73
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2008
22. ACTUARIAL ASSUMPTIONS AND METHODS (continued)
Process used to determine actuarial assumptions
Civic Mutual Plus has provided public and professional indemnity insurance to local government bodies in Victoria and Tasmania and other
bodies constituted under any Act for any public or local governing purpose since 30 September 1993. The Actuary was supplied aggregate
data on claims from each years cover at each balance date, together with details for each claim at various dates, including 30 June 2008
The individual claim payments and case estimates reconciled closely with totals in Civic Mutual Plus’s financial statements for each year of
cover. The actuary made estimates of gross outstanding claims with 4 differential actuarial methods – payments per person incurred, developed
claims incurred, and developed case estimates plus estimated claim incurred but not reported. The actuary selected the last of these methods,
including a 25% allowance for case estimate development, for use in estimating outstanding claims. Payments were projected with a payment
pattern, based on past experience, assuming an average delay of 4.6 years from the middle of the accident year. Estimates of outstanding non
reinsurance recoveries were made by a recoveries per person insured method.
During the 2001 financial year three of the participants in the Scheme’s reinsurance program FAI, HIH and Independent were placed into the
hands of liquidators. These companies were part of the reinsurance programs in fund years from 1994 to 1998. The MAV Insurance Committee
continues to constantly monitor the position with a view to ensuring that the Scheme takes all reasonable steps to protect its position and to
maximise potential recoveries. In accordance with the Committee’s prudent approach to reserving within the actuarial calculation of the central
estimate of reinsurance recoveries, the estimated future recoveries from FAI, HIH and Independent is assumed to be zero. The MAV is currently
in negotiation with The Underwriting Insurance Company of the UK, a company under management runoff, regarding its reinsurance obligations
to Civic Mutual Plus and about their ability to meet their liabilities to Civic Mutual Plus. At the date of this report there has been no resolution
to this issue. Within the actuarial calculation of the central estimate of reinsurance, the estimated future recoveries from TUIC were assumed
to be 75% of the debt due.
Estimates of reinsurance recoveries were made from projected gross payments and non reinsurance recoveries, allowing for the different
insurance treaties applying to each year and assuming an average 4 months delay in the receipt of reinsurance recoveries. Recoveries from
FAI, HIH and Independent have been assumed to be zero. Recoveries from TUIC were assumed to be 75% of those due. Based on the yields
of medium term Commonwealth bonds at 30 June 2008 the discount rate was assumed to be 6.7% pa. Based on the actual expense rates
of Civic Mutual Plus, claim administration expenses were assumed to be 4% of the net claim payments.
IMPACT OF CHANGES IN KEY VARIABLES - CIVIC MUTUAL PLUS
Variable
Current Rate
%
Change
variable
to
%
TUIC Recovery
4.5%
75.0%
$
Operating
surplus at
30 June 2013
$
Total accumulated
funds after the impact
of applying variable
$
8,175,121
41,465,000
15,383,000
5.5%
8,157,121
40,866,000
15,365,000
3.5%
8,192,121
42,042,000
15,400,000
100.0%
9,844,121
43,293,000
17,051,000
50.0%
6,649,121
39,650,000
13,877,000
Base value at 30 June 2008
Inflation Rate pa
Operating
surplus at
30 June 2008
23. RENT-FREE PERIOD
During the 2004 financial year the Association negotiated a new ten-year lease over the property at Level 12, 60 Collins Street Melbourne with
the Reserve Bank of Australia. The lease commenced on 1 March 2004 and included a 15 months rent free period up to 31 May 2005.
During the 2008 financial year the Association negotiated a new ten-year lease over the property at Level 11, 60 Collins Street Melbourne with
the Reserve Bank of Australia for and on behalf of Civic Mutual Plus. The lease commenced on 1 June 2008 and included an 8 months rent
free period up to 31 January 2009.
In accordance with ‘Lessee Accounting for Surplus Leased Space Under Non-Cancellable Operating Lease,’ lease incentives received
have been recognised as a liability. This liability recognised in respect of the lease incentive will be reduced by allocating lease rental payments
between rental expense and reduction of the liability.
Based on averages for private insurers by APRA, and on three actuarial publications the actuary recommended that risk margins be adopted
intended to give an overall risk margin of 15% for outstanding claims, in the absence of reinsurance. After allowing for the extent of reinsurance
for each year the actuary calculated risk margins for each year, in total being 1.8% of gross outstanding claims liabilities. The actuary considered
that these risk margins are likely to give a probability of about 75% that the provisions including the risk margins will prove adequate to meet
the relevant liabilities. Unexpired risk liabilities were estimated by bringing gross claim incurred estimates for each of the 10 years to 30 June
2003 to 2008/09 values using Victorian average weekly earnings adjusting for membership changes and fitting a trend line to the 10 years.
The trend value for 2002/03 was projected to 2008/09, assuming a 20% drop due to tort reform, superimposed inflation at 2% pa and
population growth at 1% pa. After allowing for reinsurance costs and a risk margin of 20%, no premium deficiency was apparent.
VARIABLE
IMPACT OF MOVEMENT IN VARIABLE
Wage inflation
Expected future payments are inflated to take account of inflationary increases. An increase or
decrease in the assumed levels of economic inflation would have a corresponding impact on claims
expense, with particular reference to longer tail claims.
Superimposed inflation
In addition to the general economic inflation rate an amount is superimposed to take account of
non-economic inflationary factors, such as increases in court awards. Such rates of superimposed
inflation are specific to the model adopted. An increase or decrease in the assumed levels of
superimposed inflation would have a corresponding impact on claims expense, with particular
reference to longer tail claims.
Discount rate
The outstanding claims liability is calculated by reference to expected future payments. These
payments are discounted to adjust for the time value of money. An increase or decrease in the
assumed discount rate will have an opposing impact on total claims expense.
Case estimate development
Case estimates are initially established in accordance with established guidelines and by reference
to the known facts. Where new information becomes available the initial case estimate will change.
This development movement is applied to open claims and will have a corresponding impact on
claims expense.
74> MAV FINANCIAL REPORT 2007/08
MAV FINANCIAL REPORT 2007/08 >75
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2008
SEGMENT
TYPES OF PRODUCTS AND SERVICES
2007
2007
$
46,846,704
3,307,353
46,846,704
3,307,353
COMBINED
2008
$
61,365,802
61,365,802
- 10,479,600
10,479,600
95,452,745
95,452,745
550,299
(504,135) 102,278,544 107,688,021
ELIMINATIONS
2008
1,894,521
2007
$
1,894,521
4,915,564
2,083,610
ASSOCIATION
2008
$
5,276,696
2,083,610
-
1,820,615
(993,518)
378,355
257,547
102,278,544 107,688,021
-
270,578
(504,135) 79,563,608
-
-
79,563,608
-
6,736,179
2,549,728
(993,518)
26,208
1,150,813
550,019
242,591
Insurance including public liability, professional liability, product liability and fidelity
guarantee.
Federal and State government grants and expends these grants on projects for the betterment of both local government and the community in
Obtains
GRANTS
2007
5,659,818
2,063,416
7,340,112
60,613
3,046,320
376,803
268,679
1,586,793
LOCAL GOVERNMENT
2008
7,729,595
5,659,818
649,749
4,388,891
1,229,544
280
14,956
Victoria.
government association that represents and provides support to local government and its communities in
Local
Victoria.
2007
$
36,271,322
7,729,595
73,906
36,345,228
2,297,199
6,766,920
1,310,372
1,552
1,899
2,631,396
93,576,523
INSURANCE
2008
$
48,359,511
20,194
48,379,705
8,121,848
93,458,822 101,253,537
77,659,961
-
-
24. SEGMENT INFORMATION – PRIMARY SEGMENT
Insurance
Grants
Association
BUSINESS SEGMENTS
OPERATING REVENUE
Sales to customers outside the
group
Inter-segment
sales
TOTAL SEGMENT REVENUE
TOTAL COMBINED REVENUE
SEGMENT
RESULT
COMBINED ENTITY SURPLUS
FROM ORDINARY
ACTIVITIES
ASSET
S
Segment
assets
TOTAL
ASSETS
LIABILITI
ES
Segment
liabilities
TOTAL
LIABILITIES
OTHER SEGMENT INFORMATION
Acquisition of property, plant
and
and other non-current
equipment
assets
Depreciatio
n
GEOGRAPHICAL SEGMENTS
All of the Association’s business segments operate only in the geographical area of
Australia.
76> MAV FINANCIAL REPORT 2007/08
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2008
25. CAPITAL MANAGEMENT OBJECTIVES
The Association is specifically excluded from the provisions of the Insurance Act and from APRA regulation. There is no externally imposed capital
requirement on the Association. The Association’s capital management philosophy is focused on capital efficiency and effective risk management
to support a progressive business model for the benefit of members of both CMP and the Municipal Officers’ Fidelity Guarantee Fund.
The independent actuary provides advice on the target capital holding on at least an annual basis. The target capital holding is to be at a level
that provides operational flexibility, avoids sudden increases in contribution levels in response to fluctuations in surplus and ensures solvency in
the event of the maximum likely adverse event. Both CMP and the Municipal Officers’ Fidelity Guarantee Fund are non discretionary mutual
funds and have as a last resort an ability to claim against its members to protect its capital holdings. The independent actuary has advised that
a sufficient capital holding at 30 June 2008 would amount to $14 million. The actual capital holding as at 30 June 2008 was $15.4 million.
26. CONTINGENT ASSET –REINSURANCE PERFORMANCE BONUS
CMP, in conjunction with similar local government self insured mutual liability schemes around Australia has entered into a profit sharing
arrangement with its primary reinsurers, based on the national local government claims experience. The arrangement enables any surplus per
each year over the five-year reinsurance period to be shared between the various Schemes and the reinsurers on a proportional basis.
The actuary has calculated the potential value of the CMP Scheme’s performance bonus for the remaining period of the five-year program, at
balance date, to be $13.4 million (2007 $11.4 million). Performance bonus totalling $3.911 million became due and receivable on 30 June
2008 and has been received at the date of this report. There is significant potential for future events to impact the profit share receivable and a
number of variable factors involved in the final determination of the Scheme’s profit share. Accordingly the directors are not satisfied at 30 June
2008 that the potential benefit is an asset that is probable of receipt and reliably measurable. The financial statements do not include any value
attributable to the share of profit. The position will be monitored on an annual basis.
27. REMUNERATION OF KEY MANAGEMENT PERSONNEL
The MAV employed five key management personnel and provided these personnel with short term employee benefits and post employment
benefits.
COMBINED
2008
2007
2008
2007
856,138
715,939
833,895
702,079
41,932
46,912
41,932
46,912
$
Short-term employment benefits
Post-employment benefits
MAV - GENERAL FUND
$
$
$
Loans to directors
No loans were made to or are payable by directors.
Other transactions
There were no other material transactions with directors.
Insurance
The activities of the MAV board members are covered by the MAV directors’ and officers’ indemnity insurance policy effected by the Municipal
Association of Victoria
28. RELATED PARTIES
The Municipal Association of Victoria is a body corporate established under the Municipal Association Act 1907 to provide services for and
represent local government authorities in Victoria. The Association and its wholly owned controlled entities trade with its members in the normal
course of business and on an arm’s length basis. The Deed of Establishment provides for the MAV to appoint a Committee of Management
(MAVIC) to be responsible for the administration of the Scheme. Mr A. Nye is the Chairman of the Victorian Managed Insurance Authority
(VMIA) and President of the Metropolitan Fire and Emergency Services Board, and Mr R. Farrell was a Board Director of VMIA up to 28
February 2008. The MAV and the VMIA from time to time have conflicting interests in insurance claims matters. Any such claims were settled on
commercial terms without the involvement of these Committee members. The discreet nature of these transactions is not material. There were no
material related party transactions during the year.
29. SUBSEQUENT EVENTS
Civic Mutual Plus has certain reinsurance arrangements with AIG UK Limited a wholly owned subsidiary of American International Group Inc
(AIG). On Tuesday 16 September 2008 AIG sought bankruptcy protection under Chapter 11 (United States Bankruptcy Code). On Wed nesday
17 September 2008 the Federal Reserve Board and the Federal Reserve Bank of New York developed a rescue package for AIG which resulted
in a capital injection of USD 85 billion and the US Government taking a 79.9% equity interest in AIG. At this point in time the Directors and
management of MAV are monitoring the financial position of AIG and its potential impact, if any, on existing and future reinsurance recoveries.
At the date of this report the financial impact of this event, if any, is not known.
MAV FINANCIAL REPORT 2007/08 >77
STATEMENT BY DIRECTORS
COMBINED FINANCIAL REPORTS
INDEPENDENT AUDIT REPORT
In the opinion of the Directors of the Municipal Association of Victoria:
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF MUNICIPAL ASSOCIATION OF VICTORIA
(a) the accompanying Income Statement is drawn up so as to give a true and fair view of the surplus of the Association for the year ended
30 June 2008;
(b) the accompanying Balance Sheet is drawn up so as to give a true and fair view of the state of affairs of the Association as at that date;
(c) at the date of this statement there are reasonable grounds to believe that the Association will be able to pay its debts as and when they fall
due; and
We have audited the accompanying financial report of Municipal Association of Victoria, which comprises the balance sheet as at 30 June
2008, and the income statement, statement of changes in equity and cash flow statement for the year ended on that date, a summary of
significant accounting policies, other explanatory notes and the directors declaration.
(d) the accompanying Combined Financial Statements give a true and fair view of the matters with which they deal.
The Directors Responsibility for the Financial Report
The financial statements and combined financial statements have been made out in accordance with applicable accounting standards and other
mandatory professional reporting requirements.
The Association’s Directors are responsible for the preparation and fair presentation of the financial report in accordance with Australian
Accounting Standards (including the Australian Accounting Interpretations) and with the Municipal Association Act 1907 and the Corporations
Act 2001. This responsibility includes establishing and maintaining internal controls relevant to the preparation and fair presentation of the
financial report that is free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies;
and making accounting estimates that are reasonable in the circumstances.
Signed in accordance with the resolution of directors.
In Note 2b, the directors also state that the financial report, comprising the financial statements and notes, complies with International Financial
Reporting Standards as issued by the International Accounting Standards Board.
Auditor’s Responsibility
Richard Gross President
Geoff Gough Director
Our responsibility is to express an opinion on the financial report based on our audit. We conducted our audit in accordance with Australian
Auditing Standards. These Auditing Standards require that we comply with relevant ethical requirements relating to audit engagements and plan
and perform the audit to obtain reasonable assurance whether the financial report is free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial report. The procedures
selected depend on our judgment, including the assessment of the risks of material misstatement of the financial report, whether due to fraud
or error. In making those risk assessments, we consider internal controls relevant to the entity’s preparation and fair presentation of the financial
report in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on
the effectiveness of the entity’s internal controls. An audit also includes evaluating the appropriateness of accounting policies used and the
reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial report.
Melbourne
3 October 2008
AUDITOR’S INDEPENDENCE DECLARATION
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
TO THE DIRECTORS OF MUNICIPAL ASSOCIATION OF VICTORIA
Independence
In relation to our audit of the financial report of Municipal Association of Victoria for the financial year ended 30 June 2008, to the best of
my knowledge and belief, there have been no contraventions of the auditor independence requirements of the Corporations Act 2001 or any
applicable code of professional conduct.
In conducting our audit we have complied with the independence requirements of the Australian professional accounting bodies.
Auditor’s Opinion
In our opinion:
1. the financial report of Municipal Association of Victoria is in accordance with:
(a) the Municipal Association Act 1907 and the Corporations Act 2001, including:
T.M. Dring
Partner
Ernst & Young
(i) giving a true and fair view of the financial position of the Municipal Association of Victoria at 30 June 2008 and of its performance for
the year ended on that date; and
(ii) complying with Australian Accounting Standards (including the Australian Accounting Interpretations); and
(b) other mandatory financial reporting requirements in Australia.
Melbourne
3 October 2008
2. the financial report also complies with International Financial Reporting Standards as issued by the International Accounting Standards Board.
T.M. Dring
Ernst & Young
Partner
Melbourne
3 October 2008
78> MAV FINANCIAL REPORT 2007/08
MAV FINANCIAL REPORT 2007/08 >79
OTHER INFORMATION
Legal Form
The Municipal Association of Victoria is an association incorporated by the Municipal Association Act 1907.
Domicile:
Melbourne, Australia
Address of Registered Office and Principal Place of Business:
Level 12, 60 Collins Street, Melbourne, 3000, Victoria, Australia
Nature of the operation and principal activities:
The Municipal Association of Victoria represents, promotes and supports the interest of Victorian local government and their communities.
Employees
Average number of equivalent full-time employees during the year is 39.5 EFT.
80> MAV FINANCIAL REPORT 2007/08
INSURANCE
FINANCIAL REPORT
2007/08
MAV INSURANCE FINANCIAL REPORT 2007/08 >81
INCOME STATEMENT
STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 JUNE 2008
FOR THE YEAR ENDED 30 JUNE 2008
COMBINED
2008
NOTE
Premium Revenue
3
Performance Bonus
3
Catastrophe Insurance Expense
2007
$
2008
$
2007
$
$
29,561,562 31,697,332 28,937,693 30,979,972
3,911,250
-
3,911,250
623,869
-
11,936,441 7,662,606 11,723,524 7,355,301
4(a) (13,517,161) (4,779,785)(13,328,511) (4,691,135)
Reinsurance and other
recoveries
3
NET CLAIMS EXPENSE
12
UNDERWRITING RESULT
14,323,078
12,742,358
Investment Income
583,815
3
Administration and General
Expenses
4(b)
OPERATING SURPLUS
(DEFICIT)
3,436,297 14,304,228
805,917 (1,343,488)
3,422,793
975,717 (1,268,342)
2007
NOTE
$
Balance at beginning of year
717,360
-
(410,055)
307,305
(188,650)
(88,650)
BALANCE AT END OF YEAR
13,504
(75,146)
43,117
232,159
1,169,521
37,009
42,078
(133,400)
(117,585)
(53,274)
156,652
8,121,847 2,631,396 8,175,121 2,474,744
8,121,847
15,798,861
$
311,697
- (5,500,000)
-
-
2,631,396 8,175,121
2,474,744
(53,274)
156,652
7,677,014 15,383,786
7,208,665
415,075
468,349
2008
CIVIC MUTUAL PLUS
2007
$
$
2008
2007
$
MUNICIPAL OFFICERS’
FIDELITY GUARANTEE FUND
2008
$
$
23,760,056 32,889,560 22,939,666 32,108,656
Performance bonus
TOTAL CURRENT ASSETS
468,349
2007
2007
$
RECEIPTS
Premiums and fees
9
$
CASH FLOW FROM
OPERATING ACTIVITIES
CURRENT ASSETS
Receivables
2008
$
7,208,665 10,233,921
COMBINED
NOTE
AS AT 30 JUNE 2008
8(a)
2007
$
FOR THE YEAR ENDED 30 JUNE 2008
BALANCE SHEET
Cash Assets
2008
$
MUNICIPAL OFFICERS’
FIDELITY GUARANTEE FUND
CASH FLOW STATEMENT
6,086,959
1,211,599
(5,204,326) (4,899,321) (5,070,926) (4,781,736)
2007
$
- (5,500,000)
212,917
18,850
CIVIC MUTUAL PLUS
7,677,014 10,545,618
(410,952)
(169,800)
2008
Capital return to members
Surplus/(deficit) from ordinary
activities
6,319,118 12,699,241
546,806
COMBINED
MUNICIPAL OFFICERS’
FIDELITY GUARANTEE FUND
2008
$
(21,536,371) (24,034,726)(21,125,419) (23,624,671)
NET INCOME BEFORE CLAIMS
Claims Expense
CIVIC MUTUAL PLUS
19,601,211 21,883,474 19,072,463 21,310,431
528,748
573,043
Investment income
Reinsurance and other recoveries
34,608,056 35,771,537 34,604,443 35,346,695
3,613
424,842
54,209,267 57,655,011 53,676,906 56,657,126
532,361
997,885
3,911,250
-
576,452 1,214,637
820,390
3,911,250
-
542,168 1,169,989
16,103,200 12,954,093 16,084,350 12,940,589
780,904
-
-
34,284
44,648
18,850
13,504
PAYMENTS
NON-CURRENT ASSETS
Suppliers
(30,534,888) (34,237,795)(29,717,069) (33,557,143)
(817,819)
(680,652)
Receivables
Claim payments
(16,098,333) (12,014,216)(15,998,333) (12,014,216)
(100,000)
-
9
39,249,555 43,598,526 39,249,555 43,598,526
-
-
TOTAL NON-CURRENT
ASSETS
39,249,555 43,598,526 39,249,555 43,598,526
-
-
TOTAL ASSETS
93,458,822 101,253,537 92,926,461 100,255,652
532,361
997,885
CURRENT LIABILITIES
Payables
2,078,831
Premiums in advance
Provision for claims
Outstanding
3,274,439
2,069,545
3,237,329
9,286
8(b)
(2,282,263)
806,279 (2,237,968)
647,875
(44,295)
158,404
(44,295)
158,404
NET INCREASE/
(DECREASE) IN CASH HELD
(2,282,263)
Cash at beginning of year
21,883,474 21,077,195 21,310,431 20,662,556
573,043
414,639
19,601,211 21,883,474 19,072,463 21,310,431
528,748
573,043
806,279 (2,237,968)
647,875
37,110
10
18,880,563 30,024,265 18,880,563 29,639,839
11(a)
17,529,018 15,593,966 17,421,018 15,485,966
108,000
108,000
38,488,412 48,892,670 38,371,126 48,363,134
117,286
529,536
TOTAL CURRENT LIABILITIES
NET CASH PROVIDED BY/
(USED IN) OPERATING
ACTIVITIES
-
384,426
CASH AT END OF YEAR
8(a)
The accompanying notes form an integral part of these statements.
NON-CURRENT LIABILITIES
Lease Accumulation
-
-
39,147,056 44,683,853 39,147,056 44,683,853
-
-
TOTAL NON-CURRENT
LIABILITIES
39,171,549 44,683,853 39,171,549 44,683,853
-
-
TOTAL LIABILITIES
77,659,961 93,576,523 77,542,675 93,046,987
117,286
529,536
NET ASSETS
15,798,861
7,667,014 15,383,786
7,208,665
415,075
468,349
EQUITY
15,798,861
7,667,014 15,383,786
7,208,665
415,075
468,349
Provision for claims
outstanding
24,493
11(a)
-
24,493
-
The accompanying notes form an integral part of these statements.
82> MAV INSURANCE FINANCIAL REPORT 2007/08
MAV INSURANCE FINANCIAL REPORT 2007/08 >83
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2008
1. CORPORATE INFORMATION
The combined financial report of MAV Insurance for the year ended 30 June 2008 was authorised for issue in accordance with a resolution of
the Directors of the Municipal Association of Victoria on the date shown on the attached Statement by Directors.
MAV Insurance is the insurance division of the Municipal Association of Victoria. The Municipal Association of Victoria is an association
incorporated by an Act of the Parliament of Victoria known as the Municipal Association Act 1907.
The nature of the operations and principal activities of MAV Insurance are the provision of public liability, professional indemnity and fidelity
insurance to its members and community groups within its council member boundaries.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Basis of preparation
The financial report is a general purpose financial report which has been drawn up in accordance with australian accounting standards,
mandatory professional reporting requirements (Urgent Issues Group Interpretations) and other relevant requirements.
The principal accounting policies adopted in preparing the financial report are stated to assist in a general understanding of the financial report.
Accounting policies have been consistently applied unless otherwise indicated.
The financial report is presented in Australian dollars.
The accounts have been prepared on the accruals basis using historical costs and, except where stated, do not take into account current
valuations of assets.
(b) Statement of compliance
The financial report complies with Australian accounting standards, which include Australian equivalents to International Financial Reporting
Standard (AIFRS). Compliance with AIFRS ensures that the financial report, comprising the financial statements and notes thereto, complies with
International Financial Reporting Standards (IFRS)
(c) Adoption of new accounting standard
The Association has adopted AASB 7 Financial Instruments; Disclosures and all consequential amendments which became applicable on 1
January 2007. The adoption of this standard has only affected the disclosure in these financial statements. There has been no affect on profit
and loss or the financial position of the Association or any of its Divisions.
(d) The Basis of the Combined Report
The combined financial report relates to the insurance activities of the Municipal Association of Victoria being its controlled entities the Local
Government Mutual Liability Insurance Scheme (trading as Civic Mutual Plus, - CMP), and the Municipal Officers’ Fidelity Guarantee Fund.
The presentation of the combined balances is for management purposes only. The two entities are separate independent legal entities.
The effects of all transactions between entities in the Combined entity have been eliminated.
The financial statements of the entities are prepared for the same reporting period as the Municipal Association of Victoria, using consistent
accounting policies.
(e) Income tax
The entities are exempt from income tax, in accordance with sections 50-10 and 50-25 of the Income Tax Assessment Act 1997.
(f) Investment income
Investment income consists of interest which is recognised on a time-proportionate basis that takes into account the effective yield on the
financial asset and movements in unit values in cash and fixed interest funds which are carried at fair value through the income statement.
(g) Premiums
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2008
(i) Claims
Claims-incurred expense and liability for outstanding claims are recognised in respect of direct business. The liability covers claims incurred but
not yet paid, incurred but not yet reported claims, and the anticipated direct and indirect costs of settling those claims. Claims outstanding are
assessed by reviewing individual claim files and estimating claims not notified and settlement costs using statistical and actuarial techniques.
The liability for outstanding claims is measured as the present value of the expected future payments, reflecting the fact that all the claims do
not have to be paid out in the immediate future. The expected future payments are estimated on the basis of the ultimate cost of settling claims,
which is affected by factors arising during the period to settlement such as normal inflation and ‘superimposed inflation.’
Superimposed inflation refers to factors such as trends in court awards, for example increases in the level and period of compensation for
injury. The expected future payments are then discounted to a present value at the reporting date using discount rates based on the investment
opportunities available to the organisation on the amounts of funds sufficient to meet claims as they became payable. Details of rates applied
are disclosed in note 16.
Claims-incurred expense has reduced from the prior year due to the impact of:
(i) improved risk management practices by members, and
(ii) reform to the law of tort.
(j) Other financial assets
Investments are valued at net market value at balance date. Investment income includes interest received and receivable on investments and
changes in net market values of investments in cash and bond unit trusts at call.
(k) Cash flows
For the purposes of the statement of cash flows, cash includes cash on hand and deposits held at call with banks and investments in cash
backed unit trusts net of outstanding bank overdrafts.
(l) Reinsurance and other recoveries receivable
Reinsurance and other recoveries receivable on paid claims, reported claims not paid, claims incurred but not reported and unexpired risk
liabilities are recognised as revenue. Recoveries receivable are assessed in a manner similar to the assessment of outstanding claims. Recoveries
are measured as the present value of the expected future receipts, calculated on the same basis as the liability for outstanding claims.
Reinsurance recoveries are reduced from the prior year due to a reduction in claims caused by:
(i) improved risk management practices by members, and
(ii) reform to the law of tort.
(m) Revenue recognition
Revenue is recognised to the extent that it is probable that the economic benefit will flow to the entity and the revenue can be reliably measured.
The following specific recognition criteria must also be met before revenue is recognised.
(i) Premiums – recognised in the period the fund is at risk.
(ii) Future reinsurance and other recoveries – on an accruals basis.
(iii) Investment Income – on an accruals basis including adjustments to bring values of cash backed unit trusts to account as investment income.
(n) Comparative figures
Where necessary, comparative figures have been adjusted to conform with changes in presentation in the current year.
(o) Catastrophe insurance
Catastrophe insurance relates to insurance premiums paid to reinsurers in accordance with the established reinsurance strategy of the entity and
in order to protect the Insurance businesses from catastrophic and unforseen claims.
Premiums comprise amounts charged to members of the Schemes for policy cover, net of amounts returned to members as bonuses.
The earned portion of premiums received is recognised as revenue. Premiums are treated as earned from date of attachment of risk.
The pattern of recognition over the policy is based on time, which is considered to closely approximate the pattern of risks undertaken.
(h) Premiums receivable
During the month of June each year, the CMP Scheme issues premium notices to Scheme Members. The risk attaches to the premiums in the
next accounting period and accordingly the revenue is recognised each following year commencing 1 July. Prior to each balance date members
have committed to participate in the scheme and the fund for the ensuing year and accordingly the premiums are disclosed in the balance sheet
as ‘contributions receivable’ with an offsetting liability described as ‘contributions billed in advance.’
84> MAV INSURANCE FINANCIAL REPORT 2007/08
MAV INSURANCE FINANCIAL REPORT 2007/08 >85
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2008
COMBINED
NOTE
2008
CIVIC MUTUAL PLUS
2007
$
$
2008
2007
$
MUNICIPAL OFFICERS’
FIDELITY GUARANTEE FUND
2008
$
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2008
$
2007
CIVIC MUTUAL PLUS
2007
$
$
2008
2007
$
MUNICIPAL OFFICERS’
FIDELITY GUARANTEE FUND
2008
$
$
2007
$
6. SCHEME MANAGEMENT FEES
Included within administration
and general expenses are
management fees for:
REVENUES FROM
OPERATING ACTIVITIES
Premiums
Reinsurance and other
recoveries
2008
$
3. REVENUE FROM
ORDINARY ACTIVITIES
Performance bonus
COMBINED
29,561,562 31,697,332 28,937,693 30,979,972
18
2(l)
TOTAL REVENUE FROM
OPERATING ACTIVITIES
3,911,250
-
14,323,078
623,869
3,911,250
-
3,436,297 14,304,228
3,422,793
47,795,890 35,133,629 47,153,171 34,402,765
717,360
-
18,850
-
1,679,162
1,784,408
1,570,812
1,676,058
108,350
108,350
4(a)
1,373,860
1,459,970
1,285,210
1,371,320
88,650
88,650
3,053,022
3,244,378
2,856,022
3,047,378
197,000
197,000
730,864
REVENUES FROM
NON-OPERATING ACTIVITIES
7. LEASING COMMITMENTS
Investment income
583,815
1,211,599
546,806
1,169,521
37,009
42,078
TOTAL REVENUE FROM
OUTSIDE THE OPERATING
ACTIVITIES
583,815
1,211,599
546,806
1,169,521
37,009
42,078
679,728
772,942
TOTAL REVENUE FROM
ORDINARY ACTIVITIES
4(b)
Claims management
TOTAL SCHEME
MANAGEMENT FEES
13,504
642,719
Risk management and
administrative services
48,379,705 36,345,228 47,699,977 35,722,286
Operating lease commitments,
being for lease of leasehold
premises:
Not later than one year
130,700
-
130,700
-
-
-
Later than one year but not
later than five years
1,758,769
-
1,758,769
-
-
-
Later than five years
1,639,251
-
1,639,251
-
-
-
TOTAL LEASE COMMITMENT
3,528,720
-
3,528,720
-
-
-
4(a)CLAIMS EXPENSES
8. NOTES TO THE CASH FLOW STATEMENT
Paid
17,118,906 12,989,535 16,930,256 12,900,885
188,650
88,650
Outstanding claims at
end of financial year 11(a) & 2(i)
56,676,074 60,277,819 56,568,074 60,169,819
108,000
108,000
(108,000)
(108,000)
188,650
88,650
Outstanding claims at
beginning of financial year
TOTAL CLAIMS EXPENSES
(60,277,819) (68,487,569)(60,169,819) (68,379,569)
13,517,161 4,779,785 13,328,511 4,691,135
Cash at bank
4(b)ADMINISTRATION AND
GENERAL EXPENSES
The following items have
been recognised in the
operating surplus (deficit):
Stamp duty
Audit fees
Administration
Actuary and legal fees
1,826,241
2,058,605
1,826,241
2,058,605
-
-
93,013
90,770
84,465
85,620
8,548
5,150
1,331,784
870,616
1,326,524
870,555
5,260
61
262,884
90,898
11,242
4,024
Scheme management fee
1,679,162
274,126
1,784,408
94,922
1,570,812
1,676,058
108,350
108,350
TOTAL EXPENDITURE
5,204,326
4,899,321
5,070,926
4,781,736
133,400
117,585
TAX COMPLIANCE
79,330
-
93,013
84,465
11,440
90,770
74,180
-
84,465
11,440
85,620
8,548
5,150
8,548
5,150
5,862,815
3,601,448
319,544
928
209,204
572,115
TOTAL CASH
19,601,211 21,883,474 19,072,463 21,310,431
528,748
573,043
(53,274)
156,652
(b) Reconciliation of Net Cash
Used In Operating Activities
to Operating Surplus/(Deficit)
Surplus/(deficit) for year
8,121,847 2,631,396
Capital return to members
8,175,121 2,474,744
- (5,500,000)
- (5,500,000)
-
-
CHANGES IN ASSETS
AND LIABILITIES
2(l)
Increase/(decrease) in
outstanding claims
Increase/(decrease) in
unearned revenue
CASH FLOWS (USED IN)
/FROM OPERATIONS
2,572,336 8,935,312
(1,153,782)
(Increase)/decrease in provision
for reinsurance recoveries
93,013
3,602,376
13,418,852 18,281,098 13,209,648 17,708,983
Increase/(decrease) in
accounts payable
Amounts payable or due
and payable for audit services:
86> MAV INSURANCE FINANCIAL REPORT 2007/08
6,182,359
Other financial assets
(Increase)/decrease in
accounts receivable
5. AUDITOR’S REMUNERATION
AUDIT OF THE ENTITY
(a) Cash and cash equivalents at balance date as
shown in the Statement of Cash Flows are held
in Standard and Poor’s rated AA and AAf rated
cash deposits and are reconciled to the related
items in the Balance Sheet as follows:
2(i)
3,817,871
2,147,495 8,726,833
94,069 (1,122,346)
-
120,009
3,817,871
424,841
208,478
(31,436)
(25,940)
-
(3,315,415) (8,209,750) (3,315,415) (8,209,750)
-
-
-
-
(12,325,120)
2,855,252(11,940,694)
3,036,039
(384,426)
(180,786)
(2,282,263)
806,279 (2,237,968)
647,875
(44,295)
158,404
MAV INSURANCE FINANCIAL REPORT 2007/08 >87
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2008
COMBINED
NOTE
9. RECEIVABLES
Future reinsurance and
other recoveries receivable
2(l)
Discount to present value
Less: Doubtful Debts
Premiums receivable
2(h)
Other receivables
2008
CIVIC MUTUAL PLUS
2007
$
$
2007
$
MUNICIPAL OFFICERS’
FIDELITY GUARANTEE FUND
2008
$
$
2007
$
64,964,029 68,925,699 64,964,029 68,925,699
-
-
(9,199,110) (11,634,968) (9,199,110) (11,634,968)
-
-
55,764,919 57,290,731 55,764,919 57,290,731
-
-
(1,148,000) (1,161,750) (1,148,000) (1,161,750)
-
-
18,946,413 20,989,700 18,946,413 20,567,260
-
294,279 2,251,382
TOTAL RECEIVABLES
2008
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2008
290,666 2,248,980
73,857,611 79,370,063 73,853,998 78,945,221
422,440
3,613
2,402
3,613
424,842
11(b)RISK MARGIN - PROCESS FOR DETERMINING RISK MARGIN
Figures for private insurers published by APRA in October 2006 showed an average risk margin of 15.7% for public and product liability
outstanding claims, and 11.3% for professional indemnity. Based on these averages, and on three actuarial publications, Cumpston Sarjeant Pty
Ltd, the appointed actuary, recommended that risk margins be adopted intended to give an overall risk margin of 15% for outstanding claims, in
the absence of reinsurance. After allowing for the extent of reinsurance for each year, Cumpston Sarjeant calculated risk margins for each year,
in total being 1.8% of gross outstanding claims. They recommended a risk margin of 20% for the net unexpired risk liability.
These risk margins give a probability of approximately 75% that the provisions including the risk margins will prove adequate to meet the
relevant liabilities.
11(c) COMBINED RECONCILIATION OF MOVEMENT IN DISCOUNTED OUTSTANDING CLAIMS LIABILITY
2008
NOTE
GROSS REINSURANCE
$
$
NET
$
2007
GROSS
$
REINSURANCE
$
$
NET
Outstanding claims brought forward 60,277,819 56,128,981 4,148,838 68,487,569 65,276,866 3,210,703
Represented by:
CURRENT
34,608,056 35,771,537 34,604,443 35,346,695
NON-CURRENT
39,249,555 43,598,526 39,249,555 43,598,526
TOTAL
73,857,611 79,370,063 73,853,998 78,945,221
3,613
Changes in assumptions
424,842
3,613
424,842
Reinsurance recoveries are due from reinsurers with Standard and Poor’s ratings of AA+, AA-, A+ and A. Other recoveries are due from
unrated local authorities based in Victoria and Tasmania.
>30
days
(457,571) 10,886,709 12,570,678 (1,683,969)
Increase in claims incurred/
recoveries anticipated
(3,315,417) (1,512,062) (1,803,355) (7,566,894) (9,147,885)
1,580,991
Incurred claims recognised in
income statement
12,043,301 14,304,228 (2,260,926) 3,319,815 3,422,793
(102,978)
Claim payments/recoveries
during the year
(15,645,046)(15,816,289)
Outstanding claims carried forward 56,676,074 54,616,919
The ageing analysis of premiums receivable and other receivables are as follows:
Total
15,358,718 15,816,289
31-60
days
61-90
days
>90
days
171,244 (11,529,565) (12,570,678)
1,041,113
2,059,155 60,277,819 56,128,981
4,148,838
12. NET CLAIMS INCURRED
CURRENT YEAR
$
2008
2008
PRIOR YEAR
$
TOTAL CURRENT YEAR
$
$
2007
TOTAL
$
PRIOR YEAR
$
Combined
19,240,692 19,240,692
-
-
-
COMBINED
Civic Mutual Plus
19,237,079 19,237,079
-
-
-
-
-
-
Gross claims and related
expenses - undiscounted
12,912,258 (2,054,763) 10,857,495 14,378,920 (11,270,089)
3,108,831
Discount
(1,885,258)
1,670,954
Fidelity Fund
3,613
3,613
4,544,924
2007
Combined
23,241,042 23,241,042
Civic Mutual Plus
-
22,816,240 22,816,240
Fidelity Fund
424,802
424,802
-
-
-
-
-
-
-
-
11,027,000
Reinsurance and other recoveries
- undiscounted
(9,120,578) (1,879,609) (11,000,187 (10,828,628) 11,440,165
Reinsurance and other recoveries
- discounted
NET CLAIMS INCURRED
10. PREMIUMS IN ADVANCE
Contributions billed in advance 2(h) 18,880,563 30,024,265 18,880,563 29,639,839
-
4,448,815
Gross claims and related
expenses - discounted
Discount
All premiums receivable and other receivables are due from local authorities based in Victoria and Tasmania.
2,659,666 (2,777,861)
2,490,161 13,517,161 11,601,059 (6,821,274)
4,779,785
611,537
264,547 (3,587,438) (3,322,891) 1,428,183 (5,476,017) (4,047,834)
(8,856,031) (5,467,047) (4,323,078) (9,400,445)
2,170,969 (2,976,886)
(805,917)
2,200,614
5,964,148 (3,436,297)
(857,126)
1,343,488
384,426
CIVIC MUTUAL PLUS
11(a)OUTSTANDING CLAIMS
Central estimate
2(i)
Discount to present value
61,703,251 67,448,523 61,613,251 67,358,523
(8,679,823) (11,339,489) (8,679,823) (11,339,489)
53,023,428 56,109,034 52,933,428 56,019,034
11(b)
TOTAL OUTSTANDING CLAIMS
1,188,116
1,474,444
1,170,117
1,456,444
56,676,074 60,277,819 56,568,074 60,169,819
90,000
-
90,000
2,464,530 2,694,341 2,464,530 2,694,341
Claims handling costs
Risk margin
90,000
90,000
-
-
18,000
18,000
108,000
108,000
Gross claims and related
expenses - undiscounted
12,723,608 (2,054,763) 10,668,845 14,290,270 (11,270,089)
3,020,181
Discount
(1,885,258) 4,544,924 2,659,666 (2,777,861) 4,448,815
1,670,954
Gross claims and related
expenses - discounted
10,838,350 2,490,161 13,328,511 11,512,409 (6,821,274)
4,691,135
Reinsurance and other recoveries
- undiscounted
(9,101,728) (1,879,609)(10,981,337) (10,815,124) 11,440,165
Discount
Comprising:
CURRENT
17,529,018 15,593,966 17,421,018 15,485,966
NON-CURRENT
39,147,056 44,683,853 39,147,056 44,683,853
TOTAL CLAIMS PROVISION
56,676,074 60,277,819 56,568,074 60,169,819
108,000
108,000
-
108,000
108,000
Reinsurance and other recoveries
- discounted
NET CLAIMS INCURRED
264,547 (3,587,438) (3,322,891)
(8,837,181) (5,467,047)(14,304,228) (9,386,941)
2,001,169 (2,976,886)
(975,717)
625,041
1,428,183 (5,476,017) (4,047,834)
2,125,468
5,964,148 (3,422,793)
(857,127)
1,268,342
88> MAV INSURANCE FINANCIAL REPORT 2007/08
MAV INSURANCE FINANCIAL REPORT 2007/08 >89
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2008
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2008
12. NET CLAIMS INCURRED (continued)
13. CLAIMS DEVELOPMENT TABLE (continued)
CURRENT YEAR
$
2008
TOTAL CURRENT YEAR
$
$
PRIOR YEAR
$
2007
TOTAL
$
PRIOR YEAR
$
ACCIDENT YEAR
2004
2005
2006
2007
2008
TOTAL
$
$
$
$
$
$
NOTE
MUNICIPAL OFFICERS’ FIDELITY
GUARANTEE FUND
Current estimate of cumulative
claims cost
879,003
Gross claims and related
expenses - undiscounted
Cumulative payments
(91,224)
Outstanding claims - undiscounted
787,779
188,650
-
Discount
-
Gross claims and related expenses
- discounted
Reinsurance and other recoveries
- undiscounted
188,650
-
88,650
-
-
88,650
-
-
-
(18,850)
-
-
188,650
88,650
(18,850)
-
-
(13,504)
-
-
88,650
-
(13,504)
-
-
Reinsurance and other recoveries
- discounted
(18,850)
-
(18,850)
(13,504)
-
(13,504)
NET CLAIMS INCURRED
169,800
-
169,800
75,146
-
75,146
13. CLAIMS DEVELOPMENT TABLE
NOTE
1,832,851
1,723,493
(502,323)
(391,838)
(269,083)
2004
$
2005
2006
$
2007
$
$
2008
$
TOTAL
$
GROSS ESTIMATE OF
ULTIMATE CLAIMS COST
- CIVIC MUTUAL PLUS
1,102,701
1,441,013
1,454,410
8,377,043
(158,001) (1,412,469)
2,178,669
6,964,573
Discount
(4,550,235)
278,583
2003 and prior
(741,766)
TOTAL GROSS
OUTSTANDING CLAIMS
- CIVIC MUTUAL PLUS
1,951,155
TOTAL NET
OUTSTANDING CLAIMS
- MUNICIPAL OFFICERS’
FIDELITY GUARANTEE FUND
108,000
COMBINED NET
OUTSTANDING CLAIMS 11(c)
2,059,155
These tables show the trend in the balance of outstanding claims.
14. FINANCIAL RISK MANAGEMENT POLICIES AND OBJECTIVES
The Group’s exposure to interest rate risk and the effective average interest rate for the classes of financial assets are set out below:
At end year of accident
20,602,497 18,375,690 19,426,057 12,918,950 11,438,398
One year later
18,799,966 17,546,887 14,414,065 10,750,452
Two years later
16,772,897 17,554,596 13,972,302
Three years later
15,229,343 14,652,975
Four years later
14,728,229
Current estimate of cumulative
claims cost
14,728,229 14,652,975 13,972,302 10,750,452 11,438,398 65,542,356
Bank
-
Cumulative payments
(8,660,378) (4,682,885) (2,249,407) (1,083,872)
Cash investments
- 13,418,852
Outstanding claims - undiscounted
COMBINED
NON-INTEREST
EARNING
$
CIVIC MUTUAL PLUS
FLOATING NON-INTEREST
INTEREST RATE
EARNING
$
$
MUNICIPAL OFFICERS’
FIDELITY GUARANTEE FUND
FLOATING NON-INTEREST
FLOATING
INTEREST RATE
EARNING
INTEREST RATE
$
$
$
2008
FINANCIAL ASSETS
6,067,851
9,970,090 11,722,894
(310,434) (16,986,977)
9,666,580 11,127,964 48,555,379
Discount
(9,004,265)
Claims handling expense
1,942,215
2003 and prior
TOTAL GROSS
OUTSTANDING CLAIMS
- CIVIC MUTUAL PLUS
2,336,670
Claims handling expense
188,650
Discount
ACCIDENT YEAR
1,605,025
6,182,359
-
5,862,815
- 13,209,648
Receivables
73,857,611
TOTAL FINANCIAL ASSETS
73,857,611 19,601,211 73,853,998 19,072,463
Weighted average interest rate
- 73,853,998
2.8%
-
-
319,544
-
209,204
3,613
-
3,613
528,748
2.7%
6.7%
15,074,745
FINANCIAL LIABILITIES
11(a)
56,568,074
TOTAL GROSS OUTSTANDING
CLAIMS - MUNICIPAL
OFFICERS’ FIDELITY
GUARANTEE FUND
11(a)
Outstanding claims
56,676,074
- 56,568,074
-
Unearned premiums/subscriptions
18,880,563
- 18,880,563
-
- 2,069,545
-
9,286
-
-
117,286
-
Accounts payable
108,000
COMBINED GROSS
OUTSTANDING CLAIMS 11(c)
56,676,074
Lease Accumulation
TOTAL FINANCIAL LIABILITIES
Weighted average interest rate
2,078,831
24,493
77,659,961
108,000
-
-
24,493
- 77,542,675
0%
0%
0%
NET ESTIMATE OF
ULTIMATE CLAIMS COST
At end year of accident
3,048,847
2,125,606
2,182,437
2,103,826
One year later
2,431,922
1,847,897
2,104,523
1,723,493
Two years later
1,245,405
2,191,811
1,832,851
Three years later
1,280,196
1,605,025
Four years later
90> MAV INSURANCE FINANCIAL REPORT 2007/08
2,336,670
879,003
MAV INSURANCE FINANCIAL REPORT 2007/08 >91
COMBINED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2008
COMBINED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2008
14. FINANCIAL RISK MANAGEMENT POLICIES AND OBJECTIVES (continued)
COMBINED
14. FINANCIAL RISK MANAGEMENT POLICIES AND OBJECTIVES (continued)
CIVIC MUTUAL PLUS
MUNICIPAL OFFICERS’
FIDELITY GUARANTEE FUND
FLOATING NON-INTEREST
FLOATING
INTEREST RATE
EARNING
INTEREST RATE
$
$
$
NON-INTEREST FLOATING NON-INTEREST
EARNING INTEREST RATE
EARNING
$
$
$
2007
FINANCIAL ASSETS
Bank
Cash investments
- 3,602,376
-
Receivables
- 18,281,098
79,370,063
TOTAL FINANCIAL ASSETS
3,601,448
-
928
17,708,983
-
572,115
-
424,842
Year Ended 30 June 2008
$
1-5 years
>5 years
$
Total
$
$
COMBINED
FINANCIAL ASSETS
Cash and cash equivalents
19,601,211
Receivables
23,311,056 11,297,000 34,687,555
4,562,000 73,857,611
42,912,267 11,297,000 34,687,555
4,562,000 93,458,822
4,550,553 12,978,465 35,369,925
3,777,131 56,676,074
-
5.6%
424,842
573,043
-
-
- 19,601,211
5.6%
COMBINED
8.5%
FINANCIAL LIABILITIES
Outstanding claims
FINANCIAL LIABILITIES
Outstanding claims
60,277,819
- 60,169,819
-
108,000
-
Unearned premiums
/subscriptions
Unearned premiums/subscriptions
30,024,265
- 29,639,839
-
384,426
-
Accounts payable
TOTAL FINANCIAL LIABILITIES
3-12
months
$
- 78,945,221
79,370,063 21,883,474 78,945,221 21,310,431
Weighted average interest rate
Accounts payable
<3 months
3,274,439
-
93,576,523
3,237,329
- 94,046,987
Weighted average interest rate
0%
18,880,563
-
-
- 18,880,563
2,078,831
-
-
-
2,078,831
-
24,493
-
37,110
-
Lease Accumulation
-
529,536
-
TOTAL FINANCIAL LIABILITIES
25,509,947 12,978,465 35,394,418
NET MATURITY
17,402,320 (1,681,465)
0%
0%
-
24,493
3,777,131 77,659,961
784,869 15,798,861
(706,863)
The carrying amounts of financial assets and financial liabilities represent their approximate net fair value.
Risk management objectives and policies for mitigating insurance risk
All maturity dates are within twelve months.
The local government mutual liability scheme (trading as Civic Mutual Plus) is established by legislation contained in the Municipal Association
Act 1907. Membership is available to local government councils and prescribed bodies. The Scheme operates in Victoria and Tasmania to
provide services to members in respect of their potential and actual liabilities. A member may seek indemnity from the Scheme in respect of
a claim.
The table below reflects all contractually fixed pay-offs and receivables for settlement, repayments and interest resulting from recognised financial
assets and liabilities as at 30 June 2008. Cash flows for financial assets and liabilities without fixed amount or timing are based on conditions
existing at 30 June 2008.
The principal risk is that the frequency and severity of claims is greater than expected. Civil Liability Risk events are, by their nature, random, and
the actual number and size of events during any one-year may vary from those estimated using established statistical techniques.
The remaining contractual maturities of the financial liabilities are:
COMBINED
2008
$
2007
$
CIVIC MUTUAL PLUS
2008
$
2007
MUNICIPAL OFFICERS’
FIDELITY GUARANTEE FUND
2008
$
$
$
25,509,947 37,500,158 25,392,661 36,970,622
3-12 months
12,978,465 12,283,717 12,978,465 12,283,717
-
-
1-5 years
35,394,418 35,873,906 35,394,418 35,873,906
-
-
3,777,131 7,918,742 3,777,131 7,918,742
-
-
77,659,961 93,576,523 77,542,675 93,046,987
117,286
2007
3 months or less
Over 5 years
Actuarial models, using information from the Scheme’s management information systems are used to confirm contributions and monitor claim
patterns. Past experience and statistical methods are used as part of the process.
117,286
529,536
529,536
Maturity analysis of financial assets and liabilities based on management’s expectation.
The risk implied from the values in the table below, reflects a balanced view of cash inflows and outflows. These liabilities originate from
insurance contracts and other financial assets used in the ongoing operations of the business. These assets are considered in the Association’s
overall liquidity risk. To monitor existing financial assets and liabilities as well as to enable effective controlling of future risks, the Association
has established a comprehensive risk reporting covering its insurance business that reflects the expectations of the management of expected
settlement of financial assets and liabilities.
Objectives in managing risk arising from insurance and policies for mitigating those risks
The Scheme has an objective to control insurance risk thereby reducing the volatility of its operating surplus. In addition to the inherent
uncertainty of civil liability risks, which can lead to variability in the loss experience, operating surpluses can also be affected by external factors,
such as competition and movements in asset values. The Scheme relies on a strong relationship with its members and actively encourages them
to adopt practices of risk management that reduce the incidence of claims to the Scheme.
Reinsurance strategy
The Scheme adopts a conservative approach towards management of risk and does this by utilising various risk transfer options. The MAV
Insurance Committee determines the level of risk, which is appropriate for the Scheme having regards to ordinary concepts of prudence
and regulatory constraints. The risk transfer arrangements adopted by the Scheme include the utilisation of commercial reinsurance / excess
arrangements. These arrangements include constant review of both reinsurers’ financial strength, and ensuring spread of risk among reinsurers
92> MAV INSURANCE FINANCIAL REPORT 2007/08
who meet the requirements of the MAV insurance policies. These risk transfer arrangements assist the Scheme to limit exposures to large single
claims and catastrophic events. These programs are regularly reviewed each year to ensure that they continue to meet the risk needs of the Scheme.
Terms and conditions of membership
Membership to the Scheme is offered to eligible bodies and renewed annually on 30th June. Payment of the annual contribution confirms
continuation of membership. Termination of membership is subject to at least 90 days written notice of intent ion as laid out by the Scheme Rules.
MAV INSURANCE FINANCIAL REPORT 2007/08 >93
COMBINED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2008
COMBINED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2008
14. FINANCIAL RISK MANAGEMENT POLICIES AND OBJECTIVES (continued)
14. FINANCIAL RISK MANAGEMENT POLICIES AND OBJECTIVES (continued)
Product features
Credit risk
The Scheme operates in Victoria and Tasmania. Should a claim be accepted the Scheme provides indemnity to the member in respect of their
civil liabilities for $500 million public / products liability and $300 million for professional indemnity insurance, subject to any excess, for any
claim incurred anywhere throughout the world.
The Scheme is exposed to credit risk on insurance contracts as a result of exposure to reinsurers. The credit risk to reinsurers is managed through
the Scheme’s Reinsurance Management Strategy and policies that includes regularly monitoring both the financial rating of the reinsurers both
prior to and during the reinsurance program and the flow of payments coming from the reinsurers. With regard to the investments in cash and
cash equivalents at balance date as shown in the Statement of Cash Flows are held in Standards and Poor’s rated AA and AAf rated cash
deposits.
Operating surpluses arise from the total contributions charged to members less the amounts paid to cover claims and the expenses incurred by
the Scheme.
Price risk
Management of risks
Investments held are not subject to price risk. Investments are cash deposits held in Australian banks.
The key insurance risks that affect the Scheme are contribution risk, and claims experience risk.
Contribution risk is the risk that the Scheme does not charge contributions appropriate for the indemnity cover it provides. The Scheme partially
manages contribution risk through its proactive approach to risk management that addresses all material risks both financial and non-financial.
There are no specific terms and conditions that are expected to have a material impact on the financial statements. Claims experience risk is
managed through the non-financial risk assessment and risk management and reinsurance management process.
Claims experience is monitored on an ongoing basis to ensure that any adverse trending is addressed. The Scheme is able to reduce the claims
experience risk of severe losses through the reinsurance program, and by managing the concentration of insurance risks.
Concentration of insurance risks
Insurance risk is managed by taking a long term approach to setting the annual contribution rates that eliminates price fluctuations, appropriate
investment strategy, reinsurance and by maintaining an active state-wide risk management profile. It is vital that the Scheme spreads its risk
of reinsurance failure by ensuring reinsurers are of high financial quality and can meet their commitments to the Association. The Association
maintains policies and strategies and receives advice from an independent actuary on at least an annual basis in order to determine the
concentration and amount of risk exposure. The Association keeps abreast of changes in the general economic, legal and commercial
environment in which it operates.
Reinsurance and other
recoveries on outstanding
claims
Reinsurance and other
recoveries on paid claims
+/ $m
A
+/$m
AA
BBB
$m
SPECULATIVE
GRADE
$m
NOT
RATED
$m
TOTAL
$m
(a) Estimation of outstanding claims liability
Provision is made at the year-end for the estimated cost of claims incurred but not settled at the balance sheet date, including the cost of claims
incurred but not yet reported (‘IBNR’) to the Scheme.
The Scheme takes all reasonable steps to ensure that it has appropriate information regarding its claims exposure. However, given the
uncertainty in establishing claims provisions, it is likely that the final outcome may be different from the original liability established.
Provisions are calculated gross of all recoveries. A separate estimate is made of the amounts that will be recoverable from reinsurers and any
third party.
The determination of an appropriate outstanding claims provision involves:
(ii) A development allowance of 25% on the net outstanding balance of reported claims and confirmed as appropriate by the Actuary;
(iii) Allowance for incurred but not reported claims as confirmed by the actuarial review on 30 June 2008;
(iv) An allowance of 4% for claim settlement expenses, as assumed by the Actuary;
(v) Allowances for discount at 6.7%, as assumed by the Actuary;
2008
-
17.79
9.98
-
-
2.13
29.90
2007
-
18.93
9.50
-
-
2.73
31.16
(vi) A risk margin of 20% of net outstanding claims after the effect of reinsurance has been applied, as assumed by the Actuary.
Details of specific actuarial assumptions used in deriving the outstanding claims liability at year-end are detailed in note 16.
(b) Assets arising from reinsurance contracts
2008
-
3.88
0.43
-
-
1.42
5.73
2007
-
3.43
0.37
-
-
1.80
5.60
LESS THAN
3 MONTHS
$’000
3 TO 6
MONTHS
$’000
6 MONTHS
TO 1 YEAR
$’000
Assets arising from reinsurance contracts were estimated for each accident year, from the payments to date and estimated outstanding claims
history at 30 June 2008, taking into account the reinsurance terms applying to that accident year. In calculating the present value of reinsurance
recoveries, allowance was made for an average recovery delay of three and half months, as assumed by the Actuary.
In accordance with the Actuarial recommendations an allowance was made for non-recoveries from relevant insurers.
PAST DUE BUT NOT IMPAIRED
NEITHER PAST
DUE NOR IMPAIRED
$’000
Reinsurance and other
recoveries on paid claims
The Scheme makes estimates and judgements in respect of certain key assets and liabilities. Estimates and judgements are continually reviewed
and are based on past experience and other factors, including expectations of future events that are believed to be reasonable under the
circumstances. The key areas in which critical estimates and judgements are applied are described below.
(i) Establishing a case estimate for each reported claim at year-end taking into account legal advice where appropriate on larger claims;
CREDIT RATING
AAA
+/$m
15. ACCOUNTING ESTIMATES AND JUDGEMENTS
GREATER
THAN 1 YEAR
$’000
IMPAIRED
TOTAL
$’000
$’000
16. ACTUARIAL ASSUMPTIONS AND METHODS
Actuarial assumptions
2008
-
2.21
0.55
0.99
0.61
1.37
5.73
2007
-
1.39
1.02
0.56
0.89
1.74
5.60
The following assumptions have been made in determining the outstanding claims liabilities:
2008
Interest rate risk
KEY ACTUARIAL ASSUMPTIONS
The reinsurance indemnity contracts contain no clauses that expose the Scheme, directly to interest rate risk. The reinsurance contracts are long
term arrangements, reviewed and payable annually.
Case estimate development
IMPACT OF CHANGES IN INTEREST RATES - CIVIC MUTUAL PLUS
Variable
Current Rate
%
Change
Operating
Operating
Total accumulated
variable
surplus at
surplus at funds after the impact
to
30 June 2008 30 June 2013 of applying variable
%
$
$
$
2007
25%
25%
4.5%
4%
Claim administration expense
4%
4%
Superimposed inflation
2%
2%
6.7%
6.45%
20%
20%
Wage inflation
Discount rate
Risk margin
Base value at 30 June 2008
$8,175,121 $41,465,000
$15,383,000
Interest rate pa
6.7%
7.7%
$8,111,121 $44,053,000
$15,319,000
5.7%
$8,244,121 $38,938,000
$15,451,000
94> MAV INSURANCE FINANCIAL REPORT
2007/08
MAV INSURANCE FINANCIAL REPORT 2007/08 >95
COMBINED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2008
16. ACTUARIAL ASSUMPTIONS AND METHODS (continued)
COMBINED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2008
16. ACTUARIAL ASSUMPTIONS AND METHODS (continued)
Process used to determine actuarial assumptions
IMPACT OF CHANGES IN KEY VARIABLES
A description of the processes used to determine the above key actuarial assumptions is provided below:
CIVIC MUTUAL PLUS
Civic Mutual Plus has provided public and professional indemnity insurance to local government bodies in Victoria and Tasmania and other
bodies constituted under any Act for any public or local governing purpose since 30 September 1993. The Actuary was supplied aggregate
data on claims from each years cover at each balance date, together with details for each claim at various dates, including 30 June 2008
The individual claim payments and case estimates reconciled closely with totals in Civic Mutual Plus’s financial statements for each year of
cover. The actuary made estimates of gross outstanding claims with 4 differential actuarial methods – payments per person incurred, developed
claims incurred, and developed case estimates plus estimated claim incurred but not reported. The actuary selected the last of these methods,
including a 25% allowance for case estimate development, for use in estimating outstanding claims. Payments were projected with a payment
pattern, based on past experience, assuming an average delay of 4.6 years from the middle of the accident year. Estimates of outstanding non
reinsurance recoveries were made by a recoveries per person insured method.
Variable
During the 2001 financial year three of the participants in the Scheme’s reinsurance program FAI, HIH and Independent were placed into the
hands of liquidators. These companies were part of the reinsurance programs in fund years from 1994 to 1998. The Committee continues
to constantly monitor the position with a view to ensuring that the Scheme takes all reasonable steps to protect its position and to maximise
potential recoveries. In accordance with the Committees prudent approach to reserving within the actuarial calculation of the central estimate
of reinsurance recoveries, the estimated future recoveries from FAI, HIH and Independent is assumed to be zero. The MAV is currently in
negotiation with The Underwriting Insurance Company of the UK, a company under management runoff, regarding its reinsurance obligations
to Civic Mutual Plus and about their ability to meet their liabilities to Civic Mutual Plus. At the date of this report there has been no resolution
to this issue. Within the actuarial calculation of the central estimate of reinsurance, the estimated future recoveries from TUIC were assumed
to be 75% of the debt due.
Estimates of reinsurance recoveries were made from projected gross payments and non reinsurance recoveries, allowing for the different
insurance treaties applying to each year and assuming an average 4 months delay in the receipt of reinsurance recoveries. Recoveries from
FAI, HIH and Independent have been assumed to be zero. Recoveries from TUIC were assumed to be 75% of those due. Based on the yields
of medium term Commonwealth bonds at 30 June 2008 the discount rate was assumed to be 6.7% pa. Based on the actual expense rates
of Civic Mutual Plus, claim administration expenses were assumed to be 4% of the net claim payments.
Based on averages for private insurers by APRA, and on three actuarial publications the actuary recommended that risk margins be adopted
intended to give an overall risk margin of 15% for outstanding claims, in the absence of reinsurance. After allowing for the extent of reinsurance
for each year the actuary calculated risk margins for each year, in total being 1.8% of gross outstanding claims liabilities. The actuary considered
that these risk margins are likely to give a probability of about 75% that the provisions including the risk margins will prove adequate to meet
the relevant liabilities. Unexpired risk liabilities were estimated by bringing gross claim incurred estimates for each of the 10 years to 30 June
2003 to 2008/09 values using Victorian average weekly earnings adjusting for membership changes and fitting a trend line to the 10 years.
The trend value for 2002/03 was projected to 2008/09, assuming a 20% drop due to tort reform, superimposed inflation at 2% pa and
population growth at 1% pa. After allowing for reinsurance costs and a risk margin of 20%, no premium deficiency was apparent.
VARIABLE
IMPACT OF MOVEMENT IN VARIABLE
Wage inflation
Expected future payments are inflated to take account of inflationary increases. An increase or
decrease in the assumed levels of economic inflation would have a corresponding impact on claims
expense, with particular reference to longer tail claims.
Superimposed inflation
In addition to the general economic inflation rate an amount is superimposed to take account of
non-economic inflationary factors, such as increases in court awards. Such rates of superimposed
inflation are specific to the model adopted. An increase or decrease in the assumed levels of
superimposed inflation would have a corresponding impact on claims expense, with particular
reference to longer tail claims.
Discount rate
The outstanding claims liability is calculated by reference to expected future payments. These
payments are discounted to adjust for the time value of money. An increase or decrease in the
assumed discount rate will have an opposing impact on total claims expense.
Case estimate development
Case estimates are initially established in accordance with established guidelines and by reference
to the known facts. Where new information becomes available the initial case estimate will change.
This development movement is applied to open claims and will have a corresponding impact on
claims expense.
96> MAV INSURANCE FINANCIAL REPORT 2007/08
Current Rate
%
Change
variable
to
%
Operating
surplus at
30 June 2008
$
Operating
surplus at
30 June 2013
$
Total accumulated
funds after the impact
of applying variable
$
Base value at 30 June 2008
8,175,121
41,465,000
15,383,000
Inflation rate pa
40,866,000
15,365,000
TUIC recovery
4.5%
5.5%
8,157,121
3.5%
8,192,121
42,042,000
15,400,000
75.0%
100.0%
9,844,121
43,293,000
17,051,000
50.0%
6,649,121
39,650,000
13,877,000
17. CAPITAL MANAGEMENT OBJECTIVES
The Association is specifically excluded from the provisions of the Insurance Act and from APRA regulation. There is no externally imposed capital
requirement on the Association. The Association’s capital management philosophy is focused on capital efficiency and effective risk management
to support a progressive business model for the benefit of members of both CMP and the Municipal Officers’ Fidelity Guarantee Fund.
The independent actuary provides advice on the target capital holding on at least an annual basis. The target capital holding is to be at a level
that provides operational flexibility, avoids sudden increases in contribution levels in response to fluctuations in surplus and ensures solvency in the
event of the maximum likely adverse event. Both CMP and the Municipal Officers’ Fidelity Guarantee Fund are non discretionary mutual funds
and have as a last resort an ability to claim against its members to protect its capital holdings.
The independent actuary has advised that a sufficient capital holding at 30 June 2008 would amount to $14 million. The actual capital holding
as at 30 June 2008 was $15.4 million.
18. CONTINGENT ASSET - REINSURANCE PERFORMANCE BONUS
CMP, in conjunction with similar local government self insured mutual liability schemes around Australia has entered into a performance bonus
arrangement with its primary reinsurers, based on the national local government claims experience. The arrangement enables any surplus per
each year over the five-year reinsurance period to be shared between the various Schemes and the reinsurers on a proportional basis.
The actuary has calculated the potential value of the CMP Scheme’s performance bonus for the remaining period of the five-year program, at
balance date, to be $13.4 million (2007 $11.4 million) Performance bonus totalling $3.911 million became due and receivable on 30 June
2008 and has been received at the date of this report.
There is significant potential for future events to impact the performance bonus receivable and a number of variable factors involved in the final
determination of the Scheme’s performance bonus. Accordingly the directors are not satisfied at 30 June 2008 that the potential benefit is an asset
that is probable of receipt and reliably measurable. The financial statements do not include any value attributable to the potential performance
bonus not yet received. The position will be monitored on an annual basis.
19. RENT FREE PERIOD
During the 2008 financial year the Association negotiated a new ten-year lease over the property at Level 11, 60 Collins Street Melbourne with the
Reserve Bank of Australia for and on behalf of MAV Insurance. The lease commenced on 1 June 2008 and included an 8 months rent free period
up to 31 January 2009.
In accordance with ‘Lessee Accounting for Surplus Leased Space Under Non-Cancellable Operating Lease,’ lease incentives received have
been recognised as a liability. This liability recognised in respect of the lease incentive will be reduced by allocating lease rental payments between
rental expense and reduction of the liability.
20. RELATED PARTIES
The Municipal Association of Victoria is a body corporate established under the Municipal Association Act 1907 to provide services for and the
representation of local government authorities in Victoria. The Association and its wholly-owned controlled entities, including MAV Insurance, trade
with its members in the normal course of business and on an arm’s length basis. The Deed of Establishment provides for the MAV to appoint a
Committee of Management (MAVIC) to be responsible for the administration of the Scheme. Mr A. Nye is the Chairman of the Victorian Managed
Insurance Authority (VMIA) and President of the Metropolitan Fire and Emergency Services Board, and Mr R. Farrell was a Board Director of VMIA
up to 28 February 2008. The MAV and the VMIA from time to time have conflicting interests in insurance claims matters. Any such claims were
settled on commercial terms without the involvement of these Committee members. The discreet nature of these transactions is not material. Total
expenses of $512,356 (2007 $565,494) were payable to the Municipal Association of Victoria being payment for administrative supp ort, and
overseeing the management of the insurance activities, including the conduct of bi-monthly Committee meetings. Other than this there were no
material related party transactions during the year.
MAV INSURANCE FINANCIAL REPORT 2007/08 >97
STATEMENT BY COMMITTEE OF MANAGEMENT
COMBINED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2008
20. RELATED PARTIES (continued)
In accordance with a resolution of the MAV Insurance Committee, we state that:
Committee members during the year
In the opinion of the members of the MAV Insurance Committee:
J. Warburton (Independent Chairperson)
(a) the financial statements and notes of the combined entity are drawn up so as to give a true and fair view of the results of Civic Mutual Plus and
the Municipal Officers’ Fidelity Guarantee Fund for the year ended 30 June 2008;
R. Farrell (Independent)
(b) the accompanying Balance Sheet is drawn up so as to give a true and fair view of the state of affairs of Civic Mutual Plus and the Municipal
Officers’ Fidelity Guarantee Fund as at that date; and
Cr. R. Fyffe (MAV Representative)
A. Garcia (LGAT Representative)
(c) at the date of this statement there are reasonable grounds to believe that Civic Mutual Plus and the Municipal Officers’ Fidelity Guarantee Fund
will be able to pay its debts as and when they fall due.
Cr. R. Gross (MAV President)
Dr. M. Kennedy (CEO, Mornington Peninsula Shire Council)
A. Murphy (Independent)
The financial statements have been made out in accordance with applicable Accounting Standards and other mandatory professional reporting
requirements.
A. Nye (Independent)
On behalf of the MAV Insurance Committee
R. Spence (MAV - Chief Executive Officer)
Key management personnel remuneration
COMBINED
2008
CIVIC MUTUAL PLUS
2007
$
2008
$
$
2007
$
MUNICIPAL OFFICERS’
FIDELITY GUARANTEE FUND
2008
$
2007
$
Independent committee members
receive meeting fees.
The Chairperson receives $750
per committee meeting and other
independent committee members
receive $500 per committee
meeting plus $1,030 per annum
for claims and technical committee
and other meetings.
Short-term remuneration of key
management personnel
John Warburton
Rob Spence
MAV Insurance Committee Chairman
MAV Chief Executive Officer
Melbourne
3 October 2008
174,767
108,095
174,767
108,095
-
-
Loans to committee members
No loans were made to or are payable by committee members.
Other transactions
STATEMENT BY DIRECTORS
There were no other material transactions with committee members.
Insurance
The activities of the MAV Insurance Committee members are covered by the MAV directors’ and officers’ indemnity insurance policy, effected by
the Municipal Association of Victoria.
21. SUBSEQUENT EVENTS
Civic Mutual Plus has certain reinsurance arrangements with AIG UK Limited a wholly owned subsidiary of American International Group Inc
(AIG). On Tuesday 16 September 2008 AIG sought bankruptcy protection under Chapter 11 (United States Bankruptcy Code). On Wednesday
17 September 2008 the Federal Reserve Board and the Federal Reserve Bank of New York developed a rescue package for AIG which resulted
in a capital injection of USD 85 billion and the US Government taking a 79.9% equity interest in AIG. At this point in time the Directors and
management of MAV are monitoring the financial position of AIG and its potential impact, if any, on existing and future reinsurance recoveries.
At the date of this report the financial impact of this event, if any, is not known.
In accordance with a resolution of the Directors of the Municipal Association of Victoria, we state that:
In the opinion of the Directors:
(a) the accompanying Income Statement is drawn up so as to give a true and fair view of the results of Civic Mutual Plus and the Municipal
Officers’ Fidelity Guarantee Fund for the year ended 30 June 2008;
(b) the accompanying Balance Sheet is drawn up so as to give a true and fair view of the state of affairs of Civic Mutual Plus and the Municipal
Officers’ Fidelity Guarantee Fund as at that date; and
(c) at the date of this statement there are reasonable grounds to believe that Civic Mutual Plus and the Municipal Officers’ Fidelity Guarantee Fund
will be able to pay its debts as and when they fall due.
The financial statements have been made out in accordance with applicable accounting standards and other mandatory professional reporting
requirements.
Signed in accordance with the resolution of Directors.
Richard Gross
President
Geoff Gough
Director
Melbourne
3 October 2008
98> MAV INSURANCE FINANCIAL REPORT 2007/08
MAV INSURANCE FINANCIAL REPORT 2007/08 >99
COMBINED FINANCIAL STATEMENTS
INDEPENDENT AUDIT REPORT
OTHER INFORMATION
THE LOCAL GOVERNMENT MUTUAL LIABILITY INSURANCE SCHEME AND MUNICIPAL OFFICERS’ FIDELITY GUARANTEE FUND
Legal form
We have audited the accompanying financial report of Civic Mutual Plus and the Municipal Officer’s Fidelity Guarantee Fund, which comprises
the balance sheet as at 30 June 2008, and the income statement, statement of changes in equity and cash flow statement for the year ended on
that date, a summary of significant accounting policies, other explanatory notes and the directors declaration.
MAV Insurance is the insurance division of the Municipal Association of Victoria. The Municipal Association of Victoria is an association
incorporated by the Municipal Association of Victoria Act 1907.
Domicile:
Melbourne, Australia
Address of registered office:
The Directors Responsibility for the Financial Report
Level 12, 60 Collins Street, Melbourne, 3000, Victoria, Australia
The Association’s Directors are responsible for the preparation and fair presentation of the financial report in accordance with Australian
Accounting Standards (including the Australian Accounting Interpretations) and with the Municipal Associations Act 1907. This responsibility
includes establishing and maintaining internal controls relevant to the preparation and fair presentation of the financial report that is free from
material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates
that are reasonable in the circumstances.
Principal place of business
In Note 2b, the directors also state that the financial report, comprising the financial statements and notes, complies with International Financial
Reporting Standards as issued by the International Accounting Standards Board.
Level 1, 468 St. Kilda Road, Melbourne 3004, Victoria, Australia
Nature of the operation and principal activities:
The Municipal Association of Victoria has the power provided to it by the Municipal Association of Victoria Act 1907 to establish Civic Mutual
Plus and the Municipal Officers’ Fidelity Guarantee Fund in order to provide public liability, professional indemnity and fidelity insurance to local
government and water authorities.
Number of employees
Nil
Auditor’s Responsibility
Our responsibility is to express an opinion on the financial report based on our audit. We conducted our audit in accordance with Australian
Auditing Standards. These Auditing Standards require that we comply with relevant ethical requirements relating to audit engagements and plan
and perform the audit to obtain reasonable assurance whether the financial report is free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial report. The procedures
selected depend on our judgment, including the assessment of the risks of material misstatement of the financial report, whether due to fraud
or error. In making those risk assessments, we consider internal controls relevant to the entity’s preparation and fair presentation of the financial
report in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on
the effectiveness of the entity’s internal controls. An audit also includes evaluating the appropriateness of accounting policies used and the
reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Independence
In conducting our audit we have complied with the independence requirements of the Australian professional accounting bodies.
Auditor’s Opinion
In our opinion:
1. the financial report of Civic Mutual Plus and Municipal Officers’ Fidelity Guarantee Fund is in accordance with:
(a) the Municipal Associations Act 1907, including:
(i) giving a true and fair view of the financial position of the Municipal Association of Victoria at 30 June 2008 and of its performance for
the year ended on that date; and
(ii) complying with Australian Accounting Standards (including the Australian Accounting Interpretations); and
(b) other mandatory financial reporting requirements in Australia.
2. the financial report also complies with International Financial Reporting Standards as issued by the International Accounting Standards
Board.
T.M. Dring
Partner
Ernst & Young
Melbourne
3 October 2008
100> MAV INSURANCE FINANCIAL REPORT 2007/08
MAV INSURANCE FINANCIAL REPORT 2007/08 >101
102> MAV INSURANCE FINANCIAL REPORT 2007/08