2013 National Local Government Infrastructure and
Asset Management Conference
Case Study
Wombat Shire Council
Wombat Shire Council is a progressive mid tier municipality. It has an executive team of a CEO and three
general mangers who are well respected by the staff and Councillors. The Councillors work well together and
are well connected into the community. Community satisfaction levels have been high however over the last
couple of years a gradual decline has been observed.
The recently elected Council has completed a review of its Council Plan and is seeking to “make its mark” on
the community. Many goals could only be considered as aspirational.
Council has a strategic objective to remain sustainable over the long term. It uses a long term financial plan to
set the strategic framework for the budget each year. Council has in place a policy of no more than CPI plus 2%
rate increases each year. In the past Council has been fortunate that it has utilised its good linkages with
government to attract a significant amount of external funding for community programs.
The community is now reluctant to accept higher rate increases and general state and federal government
grant funding has reduced placing a higher reliance on Council’s own source funding.
Last year the CEO and staff worked diligently to achieve a balanced budget through efficiency savings and one
off cost reductions. This year the preparation of Council’s annual budget has been particularly difficult.
With efficiency savings already in place the CEO had to resort to a 1.5% across the board expenditure cut to
“balance the books”.
The CEO is unsure of the true impact of this 1.5% funding cut to each service area and is concerned that it may
lead to a drop in service in some areas causing more complaints and further exasperating the decline to
community satisfaction with Council.
The LTFP is Council’s principal financial planning document. It shows the Council is sustainable over the
forward 10 years however the executive know that there are some weaknesses in the underlying assumptions.
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Council only has asset management plans and asset data for roads, buildings, footpaths and bridges.
Asset Renewal Demand is under funded over the 10 year period (Only 85% of renewal demand is funded
by year 10)
Council has a significant new and upgrade capital works program however ongoing operating and
maintenance costs have not been recognised in the forward plan. This is of particular concern as the
Council have stated publicly that they will build a $9.0 million community facility in year 2 but the business
case to determine the operating costs has not been completed.
There is only a casual link between the Council Plan and LTFP
Service funding has traditionally increased by CPI each year however this is not keeping pace with
changing community needs.
The budget service funding increase this year was CPI minus 1.5%
The CEO considers that the economic situation will not improve over the next 12 months so wants to put in
place measures which give more certainty to the LTFP and so that he does not have the same difficulty when
preparing the 2014/15 budget.
What advice can you provide the CEO?
Response from Conference Attendees
Summary List
The suggestions provided during the conference case study workshop have been summarised below under
subject matter headings. Some duplication remains.
Council Status
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Council is living beyond their means
Council have miss allocated funding over the last 10 years
Strategic Planning
3. Link the Council Plan, Service Plans and Asset Management Plans
4. Align Council Plan with Long Term Financial Plan
5. Business Plans to link to Community Plans to Council Plan to Directorate Service Plans to Department
Service Plan to Individual Staff
6. Council must have:
a. Asset Management Plans
b. CAPEX process
c. LTFP
d. An understanding of its whole of life costs
e. A robust business case process
7. Questions to ask:
a. Are service levels to high
b. Are asset useful lives correct (maybe to short)
c. Is there a need to rationalise assets
d. Are the communities expectations fundable
Finance/LTFP
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Define the size of the problem before making decisions – get more information
Get data to determine funding needs
Transfer capital expenditure to operational accounts
Align financial information from all sources across the organisation – should be the same in the LTFP, asset
management plans, service plans and Council Plan
Should fully cost the Council Plan
Include the asset management plan outputs into the long term financial plan
Undertake a financial analysis of Council and use it to become more efficient
Link grant funds to “nice to have” projects and rate money to “non‐discretionary” projects
Get a commitment from Council to increase funding to renewal
Adopt a lifecycle cost approach
Adopt a service driven budget process
Amend LTFP to reflect actual financial plan (include 1.5% expenditure cut, asset renewal demand,
operational expenditure and capex for new and upgrade)
Financial analysis of organisational expenditures
Can core services be funded with a 1.5% rate cut in funding?
Investigate where cuts can safely be made without much of an impact on core services
Fund renewal before new and upgrade
Consider additional funding sources – e.g. waste charges at transfer station
Introduce and monitor sustainability indicators
Amend LTFP to reflect actual financial plan (include 1.5% expenditure cut, asset renewal demand,
operational expenditure and capex for new and upgrade)
Financial analysis of organisational expenditures
Can core services be funded with a 1.5% rate cut in funding?
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Investigate where cuts can safely be made without much of an impact on core services
Fund renewal before new and upgrade
Consider additional funding sources – e.g. waste charges at transfer station
Introduce and monitor sustainability indicators
Asset Management
26. Identify non‐asset solutions
27. Better utilise existing assets to defer the need for new assets
28. Develop and Asset Management Policy to include:
a. AM Plans for all major asset categories
b. AM Plans to link to LTFP
c. Service levels to be documented with performance standards (target/achieved)
d. Maintenance, operational and renewal funding requirements are non‐discretionary expenditures in
budget
e. Capital works for upgrade and new are discretionary
f. No Capital Works project to proceed without a rigorous calculation of increases in operational and
maintenance budgets
29. Ensure that Asset Management Plans are complete for majority of asset cagtegories – gives a high level of
confidence
30. Develop an asset disposal program
31. Review utilisation rates of assets
32. Rationalise parks within the municipality
33. Extend asset lives
34. Develop Service and Asset Management Plans with community consultation
35. Implement a data collection program
36. Develop costed technical levels of service with asset management plans
37. Asset Management Plans need to consider demand and utilisation of existing assets
Capital Works
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Ensure that business cases are completed for all capital works projects which include estimations of
ongoing operational and maintenance cost impacts
Finalise business case prior to commitment to build new community facility
Review CAPEX to determine whether new or upgrade works are required.
Push back $9M to year 3 and complete business case – may then not proceed at all
Reduce new development and apply more funds to renewal
Service Planning/Levels of Service
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Set priorities for Services – which are more important?
Look at service levels and asset lives
Define the changes to services – what does the 1.5% mean in real terms
Undertake service planning to identify areas of under and over funding
Document levels of service
Review Service Plans. Amend priorities regarding civic services
Review service levels / cost of service delivery with community
Review service provision for duplication and overlap
Identify gaps in service provision
Define service levels that can be funded and cost of desired levels of service
Prepare service plans with levels of service which feed into LTFP
Undertake a demand reduction program/eliminate waste
Education
55. Get the Executive to talk to the Council to:
a. Educate the Council
b. Adopt a policy of renewal before new
c. Work with the community to understand Levels of Service
d. Clearly explain the cost level of service trade off – What you can afford
56. Educate CEO on asset management principles
Community Consultation
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Discuss with community the level of rates they are prepared to pay versus what they want
Consult with the community regarding Levels of Service
Engage in community consultation. Explain the effects of the $9M project on rates. Put onus back on
community
Organisational Development
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Investigate alliances to share workload and reduce costs
Undertake a staff capability assessment
Identify responsibilities for maintenance
More communication between Assets and Finance to align LTFP
Include service providers in preparing budget