Please note:  These minutes are yet to be confirmed as a true record of proceedings

CITY OF BUSSELTON

MINUTES FOR THE Finance Committee MEETING HELD ON 17 October 2019

TABLE OF CONTENTS

ITEM NO.                                        SUBJECT                                                                                                                              PAGE NO.

1....... Declaration of Opening and Announcement of Visitors. 2

2....... Attendance. 2

3....... Public Question Time. 2

4....... Disclosure Of Interests. 2

5....... Confirmation Of Minutes. 2

5.1          Minutes of the Finance Committee Meeting held 19 September 2019. 2

6....... Reports. 3

6.1          LIST OF PAYMENTS MADE - SEPTEMBER 2019. 3

6.2          FINANCIAL ACTIVITY STATEMENTS - PERIOD ENDING 30 SEPTEMBER 2019. 13

6.3          BUDGET AMENDMENT REQUEST / REVIEW - ACCOUNTING FOR NEW LEASING STANDARD.. 39

6.4          BUDGET AMENDMENT REQUEST / REVIEW - BRIDGE RESURFACING.. 42

6.5          MAIN ROADS WESTERN AUSTRALIA - REGIONAL ROAD GROUP FUNDING QUARTERLY REPORT. 45

6.6          ASSET MANAGEMENT UPDATE. 52

6.8          BUDGET AMENDMENT REQUEST / REVIEW - AIRPORT DEVELOPMENT. 61

6.7          MICROSOFT LICENCE AGREEMENT RENEWAL. 64

7....... General Discussion Items. 67

8....... Next Meeting Date. 67

9....... Closure. 67

 


Finance Committee                                                             3                                                                  17 October 2019

MINUTES

 

MINUTES OF Finance Committee HELD IN the Committee Room, Administration Building, Southern Drive, Busselton, ON 17 October 2019 AT 9.30am.

 

1.               Declaration of Opening and Announcement of Visitors

The Presiding Member opened the meeting at 9.32am.

2.               Attendance 

Presiding Member:

 

Members:

 

Cr Robert Reekie

 

Cr Ross Paine

Cr John McCallum

Cr Paul Carter

Cr Grant Henley

 

Officers:

 

Mr Mike Archer, Chief Executive Officer

Mr Tony Nottle, Director, Finance and Corporate Services

Mr Oliver Darby, Director, Engineering and Works Services

Mrs Naomi Searle, Director, Community and Commercial Services

Mr Paul Sheridan, Manager Financial Services

Mr Daniell Abrahamse, Manager Engineering and Technical Services

Mr Daniel Hall, Asset Management Coordinator

Mr Deon Viljoen, Information Technology Coordinator

Ms Melissa Egan, Governance Officer

 

Apologies:

 

Cr Coralie Tarbotton

3.               Public Question Time  

                   Nil

4.               Disclosure Of Interests

Nil

5.               Confirmation Of Minutes

5.1             Minutes of the Finance Committee Meeting held 19 September 2019

COMMITTEE DECISION

F1910/055               Moved Councillor J McCallum, seconded Councillor R Paine

That the Minutes of the Finance Committee Meeting held 19 September 2019 be confirmed as a true and correct record.

CARRIED 4/0

9.40am:             At this time, Cr Paul Carter joined the meeting.

6.               Reports

6.1             LIST OF PAYMENTS MADE - SEPTEMBER 2019

STRATEGIC GOAL

STRATEGIC OBJECTIVE

6. LEADERSHIP Visionary, collaborative, accountable

6.1 Governance systems, process and practices are responsible, ethical and transparent.

SUBJECT INDEX

Financial Operations

BUSINESS UNIT

Financial Services

REPORTING OFFICER

Manager Financial Services - Paul Sheridan

AUTHORISING OFFICER

Director Finance and Corporate Services - Tony Nottle

NATURE OF DECISION

Noting: the item does not require a decision of Council and is simply for information purposes and noting

VOTING REQUIREMENT

Simple Majority

ATTACHMENTS

Attachment a   List of payments made September 2019.  

 

COMMITTEE DECISION AND OFFICER RECOMMENDATION

F1910/056               Moved Councillor G Henley, seconded Councillor J McCallum

That the Committee notes payment of voucher numbers M117379 – M117457, EF067065 – EF067524, T007466 – T007470, and DD003900 – DD003924 together totalling $24,197,261.03

CARRIED 5/0

Question on Notice:    Committee members requested clarification of payment item numbers 67515, 65438 and 117453.

EXECUTIVE SUMMARY

This report provides details of payments made from the City’s bank accounts for the month of September 2019, for noting by the Committee and recording in the Committee Minutes.

 

BACKGROUND

The Local Government (Financial Management) Regulations 1996 require that when the Council has delegated authority to the Chief Executive Officer to make payments from the City’s bank accounts, that a list of payments made is prepared each month for presentation to, and noting by, Committee.

OFFICER COMMENT

In accordance with regular custom, the list of payments made for the month of September 2019 is presented for information.

Statutory Environment

Section 6.10 of the Local Government Act 1995 and more specifically, Regulation 13 of the Regulations refer to the requirement for a listing of payments made each month to be presented to the Council.

Relevant Plans and Policies

There are no relevant plans or policies to consider in relation to this matter.

Financial Implications

There are no financial implications associated with the officer recommendation.

Stakeholder Consultation

No external stakeholder consultation was required or undertaken in relation to this matter.

Risk Assessment

No risks of a medium or greater level have been identified.

Options

Not applicable.

CONCLUSION

The list of payments made for the month of September 2019 is presented for information.

TIMELINE FOR IMPLEMENTATION OF OFFICER RECOMMENDATION

Not applicable.

 

 


Finance Committee

5

17 October 2019

6.1

Attachment a

List of payments made September 2019.

 


 


 


 


 


 


 


 


Finance Committee                                                             19                                                               17 October 2019

6.2             FINANCIAL ACTIVITY STATEMENTS - PERIOD ENDING 30 SEPTEMBER 2019

STRATEGIC GOAL

STRATEGIC OBJECTIVE

6. LEADERSHIP Visionary, collaborative, accountable

6.1 Governance systems, process and practices are responsible, ethical and transparent.

SUBJECT INDEX

Budget Planning and Reporting

BUSINESS UNIT

Financial Services

REPORTING OFFICER

Manager Financial Services - Paul Sheridan

AUTHORISING OFFICER

Director Finance and Corporate Services - Tony Nottle

NATURE OF DECISION

Executive: substantial direction setting, including adopting strategies, plans and policies (excluding local planning policies), tenders, setting and amending budgets, funding, donations and sponsorships, reviewing committee recommendations

VOTING REQUIREMENT

Simple Majority

ATTACHMENTS

Attachment a   Investment Report September 2019

Attachment b    Financial Activity Statement Period Ended September 2019  

 

COMMITTEE RECOMMENDATION AND OFFICER RECOMMENDATION

F1910/057               Moved Councillor G Henley, seconded Councillor J McCallum

That the Council receives the statutory financial activity statement reports for the period ending 30 September 2019, pursuant to Regulation 34(4) of the Local Government (Financial Management) Regulations.

CARRIED 5/0

EXECUTIVE SUMMARY

Pursuant to Section 6.4 of the Local Government Act 1995 (the Act) and Regulation 34(4) of the Local Government (Financial Management) Regulations 1996 (the Regulations), a local government is to prepare, on a monthly basis, a statement of financial activity that reports on the City’s financial performance in relation to its adopted / amended budget.

This report has been compiled to fulfil the statutory reporting requirements of the Act and associated Regulations, whilst also providing the Council with an overview of the City’s financial performance on a year to date basis for the period ending 30 September 2019.

 

BACKGROUND

The Regulations detail the form and manner in which financial activity statements are to be presented to the Council on a monthly basis, and are to include the following:

 

·    Annual budget estimates

·    Budget estimates to the end of the month in which the statement relates

·    Actual amounts of revenue and expenditure to the end of the month in which the statement relates

·    Material variances between budget estimates and actual revenue/expenditure (including an explanation of any material variances)

·    The net current assets at the end of the month to which the statement relates (including an explanation of the composition of the net current position)

 

 

 

Additionally, and pursuant to Regulation 34(5) of the Regulations, a local government is required to adopt a material variance reporting threshold in each financial year. At its meeting of 31 July 2019, the Council adopted (C1907/131) the following material variance reporting threshold for the 2019/20 financial year:

“That pursuant to Regulation 34(5) of the Local Government (Financial Management) Regulations, the Council adopts a material variance reporting threshold with respect to financial activity statement reporting for the 2019/20 financial year as follows:

 

·    Variances equal to or greater than 10% of the year to date budget amount as detailed in the Income Statement by Nature and Type/Statement of Financial Activity report, however variances due to timing differences and/or seasonal adjustments are to be reported on a quarterly basis; and

·    Reporting of variances only applies for amounts greater than $25,000.”

OFFICER COMMENT

In order to fulfil statutory reporting requirements and to provide the Council with a synopsis of the City’s overall financial performance on a full year basis, the following financial reports are attached hereto:

 

Statement of Financial Activity

This report provides details of the City’s operating revenues and expenditures on a year to date basis, by nature and type (i.e. description). The report has been further extrapolated to include details of non-cash adjustments and capital revenues and expenditures, to identify the City’s net current position; which reconciles with that reflected in the associated Net Current Position report.

 

Net Current Position

This report provides details of the composition of the net current asset position on a full year basis, and reconciles with the net current position as per the Statement of Financial Activity.

 

Capital Acquisition Report

This report provides full year budget performance (by line item) in respect of the following capital expenditure activities: 

 

·   Land and Buildings

·   Plant and Equipment

·   Furniture and Equipment

·   Infrastructure

 

Reserve Movements Report

This report provides summary details of transfers to and from reserve funds, and associated interest earnings’ on reserve funds, on a full year basis.

 

Additional reports and/or charts are also provided as required to further supplement the information comprised within the statutory financial reports.

Comments on Financial Activity to 30 September 2019

The Statement of Financial Activity for the period ending 30 September 2019 shows an overall Net Current Position of $45.4M as opposed to the amended budget of $34.3M. The following summarises the major variances in accordance with Council’s adopted material variance reporting threshold that collectively make up the above difference:


 

Description

2019/20
Actual

2019/20
Amended
Budget YTD

2019/20
Amended
Budget

2019/20
YTD Bud Variance

2019/20
YTD Bud Variance

 

$

$

$

%

$

Revenue from Ordinary Activities

 

Operating Grants, Subsidies and Contributions

1,078,531

        826,855

        4,926,958

30.44%

        251,676

Other Revenue

168,709

141,231

551,510

19.46%

27,478

Interest Earnings

618,582

320,520

1,955,000

92.99%

298,062

 

 

 

 

 

 

Expenses from Ordinary Activities

 

 

 

 

Materials & Contracts

(3,009,202)

(4,272,619)

(18,226,504)

29.57%

1,263,417

Utilities (Gas, Electricity, Water etc)

(540,469)

(704,080)

(2,774,257)

23.24%

163,611

Other Expenditure

(690,039)

(808,529)

(4,920,811)

14.66%

118,490

Allocations

304,449

538,054

2,161,452

43.42%

(233,605)

 

 

 

 

 

 

Non-Operating Grants, Subsidies and Contributions

1,127,815

1,707,407

32,042,712

-33.95%

(579,592)

 

 

 

 

 

 

Capital Revenue & (Expenditure)

 

 

 

 

Land & Buildings

(492,218)

(4,067,401)

(18,097,358)

87.90%

3,575,183

Plant & Equipment

(26,950)

(925,749)

(4,493,000)

97.09%

898,799

Furniture & Equipment

(29,639)

(286,382)

(1,129,169)

89.65%

256,743

Infrastructure

(2,368,528)

(6,529,530)

(36,851,773)

63.73%

4,161,002

Proceeds from Sale of Assets

209,785

313,000

3,476,580

-32.98%

(103,215)

Transfer to Restricted Assets

(65,505)

(15,027)

(60,100)

-335.92%

(50,478)

 

Revenue from Ordinary Activities

Year to date (YTD) actual income from ordinary activities is $772K more than expected when compared to year to date amended budget with the following items meeting the material variance reporting threshold being:

1.    Operating Grants, Subsidies and Contributions are $252K (net) better than amended budget. This variance is mainly due to the following:

a.    Grants Commission (10152) -$46K – local roads grant, special grants for bridges.  This variance arose as we did not receive the quarterly grants for the Kaloorup and Boallia roads bridges.  It should be noted that as this is a pass through to Main Roads, the related capital expenditure items have not occurred either, so it is a neutral position on cash basis.  The Director of EWS advises that should work on these particular bridges actually go ahead, Main Roads may hold the grants directly themselves;

b.    Reimbursements (10200) $43K – Insurance recoveries not yet allocated to correct section and contributions credit (1st instalment), received earlier than expected;

c.     Contributions (10380) -$39K – South West Library Consortia employee contribution not received due to the invoices not being sent out to the 13 other LGA’s.  This was due to staffing changes both in administration and at the library consortia group;

d.    Protective burning and firebreaks reserve (10931) $165.7K. This variance relates to receiving 50% grant awarded to the City under the mitigation activity fund (emergency services levy) and will be subject to a Council report requesting that the 2019/20 budget be amended to reflect this additional income.  Details of the cost codes for this amendment are being finalised;

e.    Bushfire risk management planning (10942) DFES $130K. This variance relates to the payment of grant in full for the bushfire risk planning coordinator position within the City of Busselton. This represents a timing difference between budget allocations (over 12 months), and actual funds received;

2.    Other Revenue is $27K above amended budget YTD.  This variance is due mainly to the following:

a.    LSL contribution from other LGA’s (10100) -$26K – to be recouped once employee actually takes LSL;

b.    Scrap Metal (G0030) $41K – budget of $35K YTD exceeded due to significantly higher unit prices achieved.

3.    Interest earnings is $298K better than amended budget.  This variance is mainly due to the following:

a.    Late payment interest (NA1203) -$33K

b.    Instalment plan interest (NA1204) $279K budgeted to be received in period 4

c.     Interest on municipal funds (NA1760) $29K

d.    Interest on reserve funds (NA1761) $2K

e.    Interest on restricted funds (NA1762) $22K

 

Expenses from Ordinary Activities

Expenditure from ordinary activities is $1.64M less than expected when compared to amended YTD budget, with the following items meeting the material variance reporting threshold:

 

1.    Materials and Contracts $1.263M

The main contributing items are listed below:

Cost Code

Cost Code Description / GL Activity

Variance
YTD
$

Finance and Corporate Services

 

10000

Members of Council

(36,058)

10250

Information & Communication Technology Services

65,933

Community and Commercial Services

 

10380

Busselton Library

25,887

10591

Geographe Leisure Centre

25,986

10600

Busselton Jetty Tourist Park

66,083

Planning and Development Services

 

10820

Strategic Planning

59,014

10830

Environmental Management Administration

80,447

11170

Meelup Regional Park

42,774

Engineering and Works Services

 

Various

Busselton Jetty Maintenance

85,150

12620

Rural-Tree Pruning

(131,192)

Various

Bridge Maintenance

49,339

Various

Building Maintenance

54,402

Various

Other Infrastructure Maintenance

33,380

Various

Waste services

280,893

Various

Road Maintenance

(30,404)

Various

Reserve Maintenance

215,572

 

2.    Utilities $164K better than amended YTD budget:

This relates mainly to a total underspend YTD in the 140 electricity accounts of $114K, and $41K in water.  Anecdotally this relates to timing differences of when the various invoices are received and processed, which, based on previous years, usually resolves itself closer to budget by year end. The accounts are monitored and reviewed with any major anomalies investigated.

3.    Other Expenditure $118K better than amended YTD budget due to:

a.    Public Relations (10700) $29K – an underspend on Sister City Involvements of $15K, Advertising in the Council Pages of $5K and Catering of $6K;

b.    Members of Council (10000) $79K – sitting fees of $33K being a month behind and only being caught up at year end, nothing being spent from the Council Contingency Holding Account budget of $16K and Mayor & Deputy Allowances underspent by $8K;

c.     Community and Commercial Services -$17K – timing differences on various accounts giving rise to and overspend against budget;

d.    Planning and Development Services $14K – timing differences on various accounts giving rise to and underspend against budget;

e.    Engineering and Works Services $5K – timing differences on various accounts giving rise to and underspend against budget.

 

4.    Allocations

In addition to administration based allocations which clear each month, this category also includes plant and overhead related allocations. Due to the nature of these line items, the activity reflects as a net offset against operating expenditure, in recognition of those expenses that are of a capital nature (and need to be recognised accordingly). It should be noted that performance in the category has no direct impact on the closing position.  

 

Non-Operating Grants, Subsidies and Contributions

Non-Operating Grants, Subsidies and Contributions are less than budget by $580K with the main items impacting on the above result being the timing of the receipt of funding which is also offset with less than anticipated capital expenditure at this time.

 

Cost Code

Cost Code Description

Variance
YTD

Finance and Corporate Services

 

10239

Contributions - Community Facilities

(182,584)

R0288/R0228

Contributions - Capital Activities

52,000

Engineering and Works Services

 

C1512

Port Geographe Boat Ramp Renewal Works Capital Grants - Other (State)

(41,250)

C3113

Busselton Tennis Club – Infrastructure

80,000

C3168

Busselton Foreshore Jetty Precinct Capital Grants - Other

(77,055)

S0035

Strelly Street / Barlee Street Roundabout

40,508

S0051

Causeway Road/ Rosemary Drive Roundabout Capital Grant (Main Roads)

(200,001)

S0064

Peel Terrace Capital Grant Department of Main Roads

(50,001)

S0069

Peel Terrace (Brown Street Intersection Upgrades)

(24,999)

S0070

Peel & Queen Street Roundabout Service Relocation Capital Grant (Main Roads)

74,999

S0071

Ludlow-Hithergreen Road Safety Improvements

230,600

S0072

Kaloorup Road - Reconstruct and Seal Shoulders

100,000

T0019

Wonnerup South Road Capital Grants (Roads to Recovery)

(156,135)

T0085

Yoongarillup Road Capital Grants (Roads to Recovery)

(52,500)

T0086

Yoongarillup Road Capital Grants (Roads to Recovery)

(369,525)

 

Capital Expenditure

As at 30 September 2019, there is a variance of 75.3% or $8.9M in total capital expenditure with YTD actual at $2.9M against YTD amended budget of $11.8M.

The attachments to this report include detailed listings of all capital expenditure (project) items, however the main areas of variance are summarised as follows:

 

1.    Buildings on the whole are $3.6M below budget with the main variance attributable to the Airport Terminal Stage 2 yet to commence pending funding approvals;

2.    Plant and equipment is $899K below budget, however at this stage this is mainly related to budget timing differences;

3.    Information & Communication Technology is $257K below budget;

4.    Busselton foreshore is $416K below budget, mainly due to underspend compared to budget for the Busselton Tennis Club Infrastructure;

5.    Administration building carpark $25K below budget;

6.    Lou Western Oval Courts $150K below budget;

7.    Various footpaths construction $92K below budget;

8.    Various car parking construction $51K below budget;

9.    Townscape works $170K below budget;

10.  Beach restoration works $236K over budget;

11.  Parks and gardens works $511K below budget;

12.  Sanitation infrastructure works $805K below budget;

13.  Airport development works (not included in 1. above) $449K below budget;

14.  Main Roads road construction works $585K below budget;

15.  Roads to Recovery road works $575K below budget;

16.  Black spot works $65K over budget;

17.  Council road initiatives road works $582K below budget.

 

Many of these items of under expenditure e.g. Main Roads construction works, also assists in explaining the above current YTD shortfall in Non-Operating Grants.

 

Proceeds from Sale of Assets

There is a variance for the proceeds from sale of assets of -$103K, due to delays in the changeover of vehicles.

 

Investment Report

Pursuant to the Council’s Investment Policy, a report is to be provided to the Council on a monthly basis, detailing the investment portfolio in terms of performance and counterparty percentage exposure of total portfolio. The report is also to provide details of investment income earned against budget, whilst confirming compliance of the portfolio with legislative and policy limits.

 

As at 30th September 2019 the value of the City’s invested funds totalled $84.47M, up from $70.47M as at 31st August. The increase is due to the receipt of the first instalments of the annual rating period.

 

During the month of September three term deposits held with two different institutions totalling $10.0M matured. All were renewed for a further 171 days at 1.61% (on average). Seven new term deposits were opened during the month totalling $23M. Spread between three institutions, they were opened for 221 days at 1.68% (on average).

 

The balance of the 11am account (an intermediary account which offers immediate access to the funds compared to the term deposits and a higher rate of return compared to the cheque account) decreased by $9.0M with the funds being converted to Term Deposits during September to increase investment return.

 

The balance of the Airport Development ANZ and WATC cash accounts remained steady, other than a small increase due to interest earnings. The Airport Development term deposit held at the WATC was closed with the funds transferred to the cash account.

The RBA left official rates steady during August after two earlier 0.25% reductions, however a further 0.25% decrease was announced in September. Rates being offered on term deposit renewals are now noticeably lower. Further official drops are possible in coming months.

 

Chief Executive Officer – Corporate Credit Card

Details of monthly (August to September) transactions made on the Chief Executive Officer’s corporate credit card are provided below to ensure there is appropriate oversight and awareness of credit card transactions made.

 

Date

Amount

Payee

Description

04-Sep-19

 $181.34

Autorent Hertz

National LG Awards Hobart Vehicle Hire (50% reimbursed by CEO)

06-Sep-19

-$70.00

Brolga Theatre - Fraser Coast Council

*Refund of 1 Partner Conference Ticket

*Funds debited against CEO Annual Professional Development Allowance as per employment Contract Agreement

+ Allocated against CEO Hospitality Expenses Allowance

Statutory Environment

Section 6.4 of the Act and Regulation 34 of the Regulations detail the form and manner in which a local government is to prepare financial activity statements.

Relevant Plans and Policies

There are no relevant plans or policies to consider in relation to this matter.

Financial Implications

Any financial implications are detailed within the context of this report.

Stakeholder Consultation

No external stakeholder consultation was required or undertaken in relation to this matter.

Risk Assessment

An assessment of the potential implications of implementing the officer recommendation has been undertaken using the City’s risk management framework, with risks assessed taking into account any controls already in place. No risks of a medium or greater level have been identified.

Options

The Statements of Financial Activity are presented in accordance with Section 6.4 of the Act and Regulation 34 of the Regulations and are to be received. Council may wish to make additional resolutions as a result of having received these reports.

 

CONCLUSION

As at 30 September 2019, the City’s financial performance is considered satisfactory.

 

TIMELINE FOR IMPLEMENTATION OF OFFICER RECOMMENDATION

Not applicable.

 


Finance Committee

20

17 October 2019

6.2

Attachment a

Investment Report September 2019

 


Finance Committee

21

17 October 2019

6.2

Attachment b

Financial Activity Statement Period Ended September 2019

 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 



Finance Committee                                                             41                                                               17 October 2019

6.3             BUDGET AMENDMENT REQUEST / REVIEW - ACCOUNTING FOR NEW LEASING STANDARD

STRATEGIC GOAL

STRATEGIC OBJECTIVE

6. LEADERSHIP Visionary, collaborative, accountable

6.1 Governance systems, process and practices are responsible, ethical and transparent.

SUBJECT INDEX

Budget Planning and Reporting

BUSINESS UNIT

Financial Services

REPORTING OFFICER

Manager Financial Services - Paul Sheridan

AUTHORISING OFFICER

Director Finance and Corporate Services - Tony Nottle

NATURE OF DECISION

Executive: substantial direction setting, including adopting strategies, plans and policies (excluding local planning policies), tenders, setting and amending budgets, funding, donations and sponsorships, reviewing committee recommendations

VOTING REQUIREMENT

Absolute Majority

ATTACHMENTS

Nil

 

COMMITTEE RECOMMENDATION AND OFFICER RECOMMENDATION

F1910/058               Moved Councillor J McCallum, seconded Councillor G Henley

That the Council endorse the requested budget amendment outlined in Table 1 below resulting in no change to the budgeted cash position:

 

Table 1:

Cost Code

Description

Current Budget

Change

Resulting Proposed Amended Budget

Expenditure

 

 

 

 

336.10591.3381.0000

Lease of Equipment (GLC)

$0

Increase by $82,480

$82,480

220.10250.3381.0000

Lease of Equipment (IT)

$0

Increase by $676,820

$676,820

Liability

 

 

 

 

9000.8050

Lease Liability Account

$0

Increase by  -$759,300

-$759,300

 Net Total 

$0

$0

$0

CARRIED 5/0

EXECUTIVE SUMMARY

This report seeks recommendation of the Finance Committee to Council for the approval of a budget amendment as detailed in this report.  Adoption of the officer recommendation will result in no change to the City’s current amended budgeted position of $0.

 

BACKGROUND

Council adopted its 2019/2020 municipal budget on Wednesday 31 July 2019 with a balanced budget position. Since this time, Council has been advised of certain expense changes that have impacted the original budget and the Finance Committee is now being asked to recommend to Council a budget amendment for the following item:

·    Adjustment of budget items initially included in the original budget to account for the adoption of new accounting standard AASB 16 – Lease Accounting.

OFFICER COMMENT

This budget amendment seeks to amend the existing budget entries catering for the adoption of the new lease accounting standard AASB 16 – Lease Accounting, by including a lease expenditure line item and increasing an existing liability line item.

 

The effect of the initial budget in relation to this was an increase in Right of Use Assets and a decrease in cash.

 

Subsequent to the proposed amendment, the impact is to leave the Right of Use Asset item intact, include a Lease Expense line in the Statement of Comprehensive Income, increase the Lease Liability line in the Statement of Financial Position, and leave the original reduction in Cash at bank the same, hence no effect on the budgeted cash position.

 

Planned Expenditure Item

Officers propose that the 2019/2020 adopted budget be amended to reflect the following funding changes, shown in Table 1.

 

Table 1:

Cost Code

Description

Current Budget

Change

Resulting Proposed Amended Budget

Expenditure

 

 

 

 

336.10591.3381.0000

Lease of Equipment (GLC)

$0

Increase by $82,480

$82,480

220.10250.3381.0000

Lease of Equipment (IT)

$0

Increase by $676,820

$676,820

Liability

9000.8050

Lease Liability Account

$0

Increase by

-$759,300

-$759,300

 Net Total 

$0

$0

$0

Statutory Environment

Section 6.8 of the Local Government Act 1995 refers to expenditure from the municipal fund that is not included in the annual budget. In the context of this report, where no budget allocation exists, expenditure is not to be incurred until such time as it is authorised in advance, by an absolute majority decision of the Council.

Relevant Plans and Policies

Practical adoption of new accounting standard AASB 16, effect from 1 July 2019.

Financial Implications

The financial implications of this recommendation are contained within the report.

 


 

Stakeholder Consultation

The City’s auditors were consulted during their most recent on-site engagement, whereby they confirmed that provided the year end statutory treatment complied with the new standard, the City’s practical month to month accounting practice can remain as is, in the interests of facilitating more transparent reporting of the net cash position.

Risk Assessment

An assessment of the potential implications of implementing the officer recommendation has been undertaken using the City’s risk management framework, with risks assessed taking into account any controls already in place.

 

There is a risk to the City, as there is with all projects undertaken that the final cost could exceed budget. If this looks to be the case Council will be notified so a suitable offset / project scope back can be identified.

Options

The Council could decide not to go ahead with the proposed budget amendment request.

CONCLUSION

Council’s approval is sought to amend the budget as per the details contained in this report. Upon approval the proposed works will be planned, organised and completed.

TIMELINE FOR IMPLEMENTATION OF OFFICER RECOMMENDATION

Should the officer recommendation be endorsed, the associated budget amendment will be processed within a month of being approved.

 

 


Finance Committee                                                             44                                                               17 October 2019

6.4             BUDGET AMENDMENT REQUEST / REVIEW - BRIDGE RESURFACING

STRATEGIC GOAL

STRATEGIC OBJECTIVE

6. LEADERSHIP Visionary, collaborative, accountable

6.1 Governance systems, process and practices are responsible, ethical and transparent.

SUBJECT INDEX

Budget Planning and Reporting

BUSINESS UNIT

Financial Services

REPORTING OFFICER

Manager Financial Services - Paul Sheridan

AUTHORISING OFFICER

Director Finance and Corporate Services - Tony Nottle

NATURE OF DECISION

Executive: substantial direction setting, including adopting strategies, plans and policies (excluding local planning policies), tenders, setting and amending budgets, funding, donations and sponsorships, reviewing committee recommendations

VOTING REQUIREMENT

Absolute Majority

ATTACHMENTS

Nil

 

COMMITTEE RECOMMENDATION AND OFFICER RECOMMENDATION

F1910/059               Moved Councillor G Henley, seconded Councillor J McCallum

That the Council endorse the requested budget amendment outlined in Tables 1 below resulting in no change to the budgeted cash position:

 

Table 1:

Cost Code

Description

Current Budget

Change

Resulting Proposed Amended Budget

Expenditure

 

 

 

 

541.W0084.3280.0000

Contractors – Vasse Yallingup Siding Road

$0

Increase by $13,978

$13,978

Revenue

 

 

 

 

541.W0084.1280.0000

Reimbursement Other (Water Corporation)

$0

Increase by  -$13,978

-$13,978

 Net Total 

$0

$0

$0

CARRIED 5/0

 

EXECUTIVE SUMMARY

This report seeks recommendation of the Finance Committee to Council for the approval of budget amendments as detailed in this report. Adoption of the officer recommendation will result in no change to the City’s current amended budgeted position of $0.

BACKGROUND

Council adopted its 2019/2020 municipal budget on Wednesday 31 July 2019 with a balanced budget position. Since this time, Council has been advised of certain expense changes that have impacted the original budget. The Finance Committee is now being asked to consider recommending to Council a budget amendment for the following item:

·    Addition of a bridge resurfacing capital project onto the 2019/2020 budget.

OFFICER COMMENT

Approximately two years ago the Water Corporation replaced bridge 3370A on the Vasse Yallingup Siding Road where the surface (concrete) was given its initial asphalt prima-seal.  A second coat seal is now required to complete the resurfacing of the bridge.  The Water Corporation has requested that the City arrange these final works to be completed in the warmer months of the year, packaged together with other similar types of works.  The estimated cost to complete these works is $13,978. To this end, the Water Corporation will provide the City with a reimbursement to this value. This amendment seeks to bring this arrangement onto the 2019/2020 budget.

 

Planned Expenditure Item

Officers propose that the 2019/2020 adopted budget be amended to reflect the following funding changes, shown in Table 1.

 

Table 1:

Cost Code

Description

Current Budget

Change

Resulting Proposed Amended Budget

Expenditure

 

 

 

 

541.W0084.3280.0000

Contractors – Vasse Yallingup Siding Road

$0

Increase by $13,978

$13,978

Revenue

 

 

 

 

541.W0084.1280.0000

Reimbursement Other (Water Corporation)

$0

Increase by

-$13,978

-$13,978

 Net Total 

$0

$0

$0

Statutory Environment

Section 6.8 of the Local Government Act 1995 refers to expenditure from the municipal fund that is not included in the annual budget. In the context of this report, where no budget allocation exists, expenditure is not to be incurred until such time as it is authorised in advance, by an absolute majority decision of the Council.

Relevant Plans and Policies

There are multiple plans and policies that support the proposed budget amendments.

Financial Implications

The financial implications of this recommendation are contained within the report.

Stakeholder Consultation

No external stakeholder consultation was required or undertaken in relation to this matter

Risk Assessment

An assessment of the potential implications of implementing the officer recommendation has been undertaken using the City’s risk management framework, with risks assessed taking into account any controls already in place.

There is a risk to the City, as there is with all projects undertaken, that the final cost could exceed budget. If this looks to be the case, Council will be notified so a suitable offset / project scope back can be identified.

Options

The Council could decide not to go ahead with the proposed budget amendment request.

CONCLUSION

Council’s approval is sought to amend the budget as per the details contained in this report. Upon approval the proposed works will be planned, organised and completed.

TIMELINE FOR IMPLEMENTATION OF OFFICER RECOMMENDATION

Should the officer recommendation be endorsed, the associated budget amendment will be processed within a month of being approved.

 

 


Finance Committee                                                             51                                                               17 October 2019

6.5             MAIN ROADS WESTERN AUSTRALIA - REGIONAL ROAD GROUP FUNDING QUARTERLY REPORT

STRATEGIC GOAL

STRATEGIC OBJECTIVE

5. TRANSPORT Smart, connective and accessible

5.2 Road networks that provide for a growing population and the safe movement of all users through the District.

SUBJECT INDEX

Infrastructure

BUSINESS UNIT

Engineering and Facilities Services

REPORTING OFFICER

Manager, Engineering and Facilities Services - Daniell Abrahamse

AUTHORISING OFFICER

Director, Engineering and Works Services - Oliver Darby

NATURE OF DECISION

Noting: the item does not require a decision of Council and is simply for information purposes and noting

VOTING REQUIREMENT

Simple Majority

ATTACHMENTS

Nil

 

COMMITTEE DECISION AND OFFICER RECOMMENDATION

F1910/060               Moved Councillor G Henley, seconded Councillor R Paine

That the Finance Committee note the Regional Road Group Report for the fourth quarter of the 2018/19 financial year.

CARRIED 5/0

 

EXECUTIVE SUMMARY

The Finance Committee is requested to note the Regional Road Group Report for the fourth quarter of the 2018/19 financial year. This report provides the Finance Committee and the Council with a progress report on five road projects funded through Main Roads Western Australia’s (MRWA) Regional Road Group. The projects are individually reported on in terms of project description, project type, i.e. an improvement or a preservation project, the scope of works (what the project entails), financial information for projects currently underway, project progress report and a risk assessment.

 

BACKGROUND

There are 10 Regional Road Groups (RRG) in WA, established under the State Road Funds to Local Government Agreement. The City of Busselton is a member of the South West group comprising 15 other local government areas, including the Cities of Bunbury and Mandurah and the Shires of Harvey, Collie, Dardanup, Capel, Augusta-Margaret River, Nannup, Manjimup, Bridgetown-Greenbushes, Boyup Brook, Waroona, Boddington, Murray and Donnybrook-Balingup.

 

The South West Regional Road Group (SWRRG) is guided by a document referred to as ‘Roads 2030’. This document identifies roads within the various Local Government Authorities (LGA) that are of regional significance. These local government roads (as contained in the Roads 2030 document) are reviewed on a five yearly interval to assess the effects of changing circumstances and demand on the local road network. New roads can be added through this process although the justification can be difficult to achieve and is not guaranteed.

 


 

The City of Busselton currently has 21 roads of regional significance on the list. These are detailed in alphabetical order in the table below:

 

·    Albert Street

·    North Jindong Road

·    Bussell Highway

·    Payne Road

·    Cape Naturaliste Road

·    Peel Terrace

·    Causeway Road

·    Queen Elizabeth Avenue

·    Commonage Road

·    Queen Street

·    Fairway Drive

·    Roy Road

·    Jindong – Treeton Road

·    Strelly Street

·    Layman Road

·    Tuart Drive

·    Ludlow – Hithergreen Road

·    Vasse-Yallingup Siding Road

·    Metricup Road

·    Wildwood Road

·    Yallingup Beach Road

 

 

Each year the City applies for funding based on works required, derived either from an asset management perspective, or more recently, as a result of the Busselton Traffic Study outcomes. All projects applied for by the SWRRG are then reviewed, prioritised and ranked based on the SWRRG prioritisation guidelines.

 

Funding for eligible projects is based on a 2/3rd RRG and 1/3rd LGA basis. The City is required to contribute the 1/3rd of the cost of any project from its own funds. There is also a maximum RRG funding distribution per project per year of $500,000, thus no project can exceed $750,000 combined funding in any given year unless the City contributes in excess of its 1/3rd. Projects can however be staged over multiple years at the maximum allowable amount.

 

The SWRRG has an expenditure performance target of 90% of Grants assigned to be expended annually.

 

The RRG funding is broken into two separate allocation streams being Preservation or Improvement works:

 

·    Preservation works largely involve the reconditioning of the existing infrastructure with only minor improvements.

 

·    Improvement works are to expand the infrastructure, increase its capacity or other significant works. Improvement works usually required more detailed design and planning, and projects are generally located in high density areas. Sometimes, environmental considerations and service relocations are needed for these projects.

 

It is important to note that the funding associated with RRG is treated as a funding pool and is distributed or treated in two different ways, dependent on the type of endorsed project. Projects for both funding streams can be either a one-off project or a long-term ongoing project.

 

A one-off project may be a reconstruction or reseal of a particular road or section of road. The work is completed in that financial year and no further works are required on that road. Any surplus funds on completion of the one-off project are returned to the funding pool where the funding gets redistributed amongst the other RRG local governments. Or by request (requires RRG approval) the funds can be transferred to other RRG budgeted projects.


 

Long-term or ongoing projects are projects that have been budgeted and programmed to complete over a number of years, generally commencing with detailed design work, service relocation and finally construction.  Similar to a one-off project, in any one year unspent funds can be returned to the funding pool. This is however with the knowledge that funding has been allocated for the following year.

 

Or, as per the City of Busselton’s prior approach, funds can be carried over in order to retain the funds and bank it with future year’s allocations. This allows a larger scale project to be completed in a one off manner. The long-term projects are nominated over a set period, generally up to 5 years. Where the project exceeds this delivery timeframe it will need to be reapplied for and be assessed against other nominated RRG projects.

OFFICER COMMENT

Current Year Projects and Progress Commentary

For the 2018/19 financial year the City had eight projects administered under the Regional Road Group Program. However, one of these projects; the Chain Avenue Drainage Project, is in fact a State Funded Black Spot project that is simply administered through the program using the same process. The Georgina Molly Bus Bay Project is another project administered through this program that is not strictly a Regional Road Group Project. For the purpose of this report these two projects have been excluded.

 

As a result, there are five Regional Road Group grants being administered by the City for 2018/19. One of these grants associated with Peel Terrace has been split into two distinct and separate projects, as such, although there are five RRG grants there are six individual projects being reported on.   

 

Note, Main Roads assigns new project numbers annually for each funding amount allocated. The City will however consolidate multi-year project into only the once Cost Code or Project number making the administration of the funding significantly more complex.

 

Project Update

Project 1:                             S0035 - Strelly Street/Barlee Street Roundabout                     

Project Type:                     Improvement, complex

 

Project Scope

This project is part of Busselton Traffic Study (BTS) and involves the following:

·    Short term: Construction of a roundabout at the intersection of Strelly/Barlee Street intersection. The first stage involved the relocation of services and land resumptions. The second stage of the works included the construction of the roundabout.

·    Long Term: Construction of an upgraded link from the Busselton Bypass to West Street, onto the old Bussell Highway/Albert Street. This is known as the Strelly/Barlee/West Street connection which offers alternative access to the Busselton City Centre, the foreshore and the western portion of the Busselton CBD. Construction of a dual carriageway along the above route is envisaged by 2036.

 

Works in Progress

Short-term works included the construction of a roundabout at the intersection of Strelly/Barlee Street intersection. The roundabout construction was completed mid July 2019, as a result of inclement weather.

 

 

 

 

Project 2:                             S0067 - Layman Road           

Project Type:                     Preservation, simple

                                                 

Project Scope

The original project budget of $600,000 comprised preservation works on two separate sections of Layman Road, one being adjacent the Wonnerup town site.

These works were completed towards the end of the 2017/18 financial year. The remaining budget totalling $152,487, reported above was subsequently carried over.

 

The City sought and obtained approval to increase the project scope to complete additional road repairs on an alternative section of Layman Road SLK 0.00 to 1.28 being between the roundabout intersecting with Tuart Drive to Bussell Highway.  These repairs comprised the following elements:

 

a)    Asphalt overlay between SLK 0.04 to SLK 0.550.

b)    The repair of a road failure at SLK 0.60 (creek crossing point) also caused by significant heavy vehicle movements and flooding.

c)    Drainage repairs to table drains and culverts along this same section.

d)    Re-shouldering and edge break repairs.

 

Works in Progress

The sections of Layman Road adjacent the Wonnerup Town site was completed towards the end of the 2017/18 financial year. The section of Layman Road from the Bussell Highway heading north towards Tuart Drive, which was added to the project scope as a result of project savings, was completed in June 2019.

 

Project 3:                             S0051 - Causeway Road/Rosemary Drive Roundabout           

Project Budget:                 $750,000

Project Type:                     Improvement, complex

 

Financial information

Budget

YTD Actual

Commitments

Budget Remaining

Grants outstanding

$750,000

$93,320

$0

$656,680

$300,000

 

Project Scope

This project is part of the Busselton Traffic Study and involves the construction of a roundabout on Causeway Road providing access to the new City Centre Eastern Link Bridge and Rosemary Drive.

 

Works in Progress

The design for the Causeway Road/Rosemary Drive roundabout that forms part of the City Centre Eastern Link project was advertised for Expressions of Interest (EOI) for the construction of the City Centre Eastern link – Stage 1 in late 2018.  The EOI closed on 22 January 2019.  Three (3) companies were shortlisted and invited to tender on the project in early April 2019. The tender submission closed on 28th May 2018.

 

City officers opted to re-tender the project as the tender rates submitted by the shortlisted companies were in some instances double the available project budget.

 

The tender for RFT11/19 Road Network Upgrade – City Centre Eastern Link Stage 1 and Stage 2A + 2B has been submitted to the Council for awarding a suitable contractor. The works is scheduled to commence in October 2019 and completed by June 2020.

 

Note, all the environmental approvals for undertaking the City Centre Eastern Link project is currently in place. 

 

Project Risks

The project risk commencing the project at the start of summer rather than winter has reduced the financial risk, as starting the project during winter would have the potential to add to the total construction cost.

 

Project 4 & 5:                     S0064 - Peel Terrace - Stanley Place / Cammilleri Intersection upgrades

                                                S0069 - Brown Street Intersection Upgrade     

Project Budget:                 $863,033 (includes $113,033 carry over)

Project Type:                     Improvement, complex

 

Financial information

Project #

Budget

YTD Actual

Commitments

Budget Remaining

Grants outstanding

S0064

$613,033

$187,121

$0

$425,912

$200,000

S0069

$250,000

$4,151

$0

$245,849

$100,000

 

Part of this project represents a carry-over from the 2017/18 financial year. The $500,000 grant received this financial year for the Peel Terrace works has been assigned against two separate projects linked to Peel Terrace.

 

Project Scope

This project is part of the Busselton Traffic Study and involves:

 

1.    the upgrade of the existing intersection at Stanley Place and Peel Terrace;

2.    a new roundabout at Cammilleri Street and Peel Terrace that will link Peel Terrace to the City Centre Eastern Link; and

3.    Brown Street Intersection Upgrade works not scheduled until 2019/2020.     

 

Works in Progress

The services along Peel Terrace were relocated as part of the 2017/18 financial year works. The section of road between Causeway Road and Stanley Place has also been upgraded. Some of these works including the new footpath were finalised this financial year, hence the expenditure that has been incurred year to date.

 

As with the Causeway Road project above, the design for the works on Peel Terrace forms part of the City Centre Eastern Link project was advertised for Expressions of Interest (EOI) for the construction of the City Centre Eastern link – Stage 1 in late 2018.  The EOI closed on 22 January 2019.  Three (3) companies were shortlisted and invited to tender on the project in early April 2019. The tender submission closed on 28th May 2018.

 

City officers opted to re-tender the project as the tender rates submitted by the shortlisted companies were in some instances double the available project budget.

 

The tender for RFT11/19 Road Network Upgrade – City Centre Eastern Link Stage 1 and Stage 2A + 2B has been submitted to the Council for awarding a suitable contractor. The works is scheduled to commence in October 2019 and completed by June 2020.

 

Note, all the environmental approvals for undertaking the City Centre Eastern Link project are in place. 

 

Project Risks

As above, the project risk commencing the project at the start of summer rather than winter has reduced the financial risk, as starting the project during winter would have the potential to add to the total construction cost.

 

Project 6:                             S0066 Queen Street             

Project Budget:                 $0

Project Type:                     Improvement, complex

 

Financial information

Budget

YTD Actual

Commitments

Budget Remaining

Grants outstanding

$0

$0

$0

$0

$0

 

There were left over carried forward funds totalling $52,846 on this project that have been successfully transferred against Project 1 – S0035 Strelly Street Roundabout.

 

Project Scope

No project scope for 2018/19.

 

Progress Report

Not applicable.

 

Project Risks

Not applicable.

Statutory Environment

The officer recommendation supports the general function of a local government under the Local Government Act 1995 to provide for the good government of persons in its district.

Relevant Plans and Policies

There are no relevant plans or policies to consider in relation to this matter

Financial Implications

There are no financial implications associated with the officer recommendation.

Stakeholder Consultation

No external stakeholder consultation was required or undertaken in relation to this matter

Risk Assessment

An assessment of the potential implications of implementing the officer recommendation has been undertaken using the City’s risk management framework, with risks assessed taking into account any controls already in place. No risks of a medium or greater level have been identified.

Options

The officer recommendation is only for information purposes.

CONCLUSION

The report has been provided to the Finance Committee as an update on the status and progress of currently funded RRG projects. The update provides expenditure to date, project progress and the potential of project carry overs.

TIMELINE FOR IMPLEMENTATION OF OFFICER RECOMMENDATION

The officer recommendation is only for information purposes.

 

 

10.03am:          At this time, Mr Daniell Abrahamse, Manager Engineering and Technical Services left the meeting.           

 

10.06am:          At this time, Mrs Naomi Searle, Director Community and  Commercial Services, entered the meeting.


Finance Committee                                                             60                                                               17 October 2019

6.6             ASSET MANAGEMENT UPDATE

STRATEGIC GOAL

STRATEGIC OBJECTIVE

6. LEADERSHIP Visionary, collaborative, accountable

6.4 Assets are well maintained and responsibly managed.

SUBJECT INDEX

Asset Management

BUSINESS UNIT

Engineering and Facilities Services

REPORTING OFFICER

Asset Coordinator - Daniel Hall

AUTHORISING OFFICER

Director, Engineering and Works Services - Oliver Darby

NATURE OF DECISION

Noting: the item does not require a decision of Council and is simply for information purposes and noting

VOTING REQUIREMENT

Simple Majority

ATTACHMENTS

Nil

 

COMMITTEE RECOMMENDATION AND OFFICER RECOMMENDATION

F1910/061               Moved Councillor P Carter, seconded Councillor J McCallum

That the Council note the Asset Management update for October 2019.

CARRIED 5/0

EXECUTIVE SUMMARY

This update provides an overview of the City’s current asset management priorities, how they can be addressed through policy principles and gives an example of how the principles can be put into practice. All of the examples given with this update will form part of the overall asset management plan review and update. They have been provided as a summary to suit the purpose of this update, however more detail will be provided as the update progresses.

The formal adoption of an updated Asset Management Policy will provide guidance for the finalisation of the review and update of the overall asset management plan.  If the Council supports the proposed policy principles, an updated Asset Management Policy will be presented back to Council for adoption through the Policy and Legislation Committee.

 

BACKGROUND

Asset management staff are reviewing the current Asset Management Policy in preparation for re-adoption by the Council. The purpose of this update is to present the proposed underpinning policy principles and provide examples as justification for how each principle reflects current asset management priorities for the City.

The examples provided for each principle will form part of future asset management planning updates to be presented to the Council following adoption of a revised policy. These examples are not intended as a definitive list of what the principles may drive, but rather the best example to illustrate how the principle can be implemented through the asset management plans.

 

OFFICER COMMENT

Asset management is a broad subject area covering a range of elements. All of these elements have a purpose, however, some will be more important for the City to address than others, at any given point in time. Adoption of the most important elements as policy principles ensures organisational understanding of what the current priorities are and allows for a targeted approach to asset management planning. Below are the five priority areas proposed to be addressed by aligned policy principles, justification for why they have been chosen and examples to illustrate their practical application.


 

1.    Growth of the Infrastructure Asset Base

The estimated replacement value of the City’s infrastructure assets (as per asset management calculations) has increased to a total value of $920,758,934 (an increase of $386,758,934 from the 2013 calculation of $534,000,000). A breakdown of the current value is shown in Table 1 below.

The 2013 calculations in Table 1 are an extract from the original Overall Asset Management Plan. Assets such as Car Parks, Airport, Bridges, Busselton Jetty, Signage and Waste Sites would have carried a value in 2013, however had not received an asset management valuation at that point in time. This demonstrates that a significant amount of work has been undertaken since 2013 to improve the knowledge of the asset base.

Table 1 Current Replacement Value of Infrastructure Assets

Asset Type

Value 2013 $

Value 2019 $

Variance

Roads

284,000,000

370,419,378

86,419,378

Car Parks

0

11,959,466

11,959,466

Airport 

0

64,350,789

64,350,789

Bridges

0

69,028,840

69,028,840

Footpaths

30,000,000

47,118,362

17,118,362

Coastal Infrastructure (Excluding Busselton Jetty)

8,000,000

19,279,000

11,279,000

Busselton Jetty

0

33,658,187

33,658,187

Buildings

104,000,000

126,907,523

22,907,523

Drainage

69,000,000

101,497,452

32,497,452

Signage

0

3,045,626

3,045,626

Public Open Space and Lighting

34,000,000

70,024,377

36,024,377

Waste Sites

0

3,469,934

3,469,934

Other (now valued above)

5,000,000

0

-5,000,000

Total

534,000,000

920,758,934

386,758,934

An overview of the key elements within this increase are provided below.

1.1  Improved Valuation Processes

Since the 2013 overall Asset Management Plan was adopted, knowledge about the extent of the asset base has improved considerably, with data collection and valuation processes being refined each time they are undertaken. The calculation process is now more thorough than it was and completion of numerous plans since 2013 and the three yearly fair value cycle have created more accurate valuation data.

The calculation of fair value for all infrastructure (other than buildings) is undertaken in-house by asset management staff and presented to Council’s financial auditors on a three yearly cycle. This is now a requirement in accordance with regulation 17A(2) of the Local Government (Financial Management) Regulations which requires property, plant and equipment to be shown at fair value.

AASB 13 defines “fair value” as “the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date”. Fair value for infrastructure (other than buildings) is essentially the current replacement value of an asset, taking into account factors such as age and condition.

Undertaking this calculation in-house every three years requires a significant effort from the asset team. The trade-off for this however is that each cycle builds more in-house expertise and improves the City’s overall knowledge of the quantity and value of the infrastructure to be managed.

 

1.2 City Construction Program

The City is actively catering for the demand for growth with larger projects such as the Busselton foreshore, airport, waste site, traffic study implementation as well as upgrades to smaller coastal recreation nodes, narrow seal rural roads etc. All of these activities will improve the condition of these areas and will also add to the value of the assets to be managed into the future. The ongoing management of these assets includes maintenance as well as renewal planning.

 

1.3 Donated Assets

The growth of the City also generates an annual amount of donated assets which are constructed by property developers and handed to the City to manage after a set maintenance period. These donated assets include Public Open Space (POS) and associated assets, roads, stormwater drainage, footpaths and cycleways. Once they are donated to the City, they are included in the relevant asset registers to form part of calculations for ongoing maintenance and renewal planning.

 

1.4 Implications of This Growth

As a general rule, as the value of the asset portfolio increases, so does the funding required to maintain it at an acceptable standard. What this means in terms of actual cost and an annual impact on the Councils bottom-line is complex, requiring the consideration of many variables for each asset class. This includes life of the asset and its components, complexity of components, required appearance, intended functionality etc. Adopting a principle targeting the impacts of growth is essential to ensure these impacts can be fully understood, communicated to the Council and planned for.

 

An example of the immediate impact of growth occurs in POS and associated assets. POS areas contain many components that require maintenance and management from the time they are constructed. Within the overall increase in value of $36M (incorporating all of the factors detailed above) is an increase in maintainable areas such as gardens, turf, playgrounds and bushlands (natural areas).

 

The actual impact of this in terms of resourcing and budget expenditure is currently being compiled and will be presented to the Council as a separate, more detailed item. Preliminary work undertaken however, indicates that this increase in maintainable areas for POS has increased by in excess of 52 hectares (520,000 m2) between 2013 and 2019. Targeting the impacts of growth as a policy principle ensures the Council is kept informed of the true cost of operating and maintaining new assets such as POS.

 

2. Lifecycle Management of Assets

In order to understand and quantify the bottom-line impact of growth, it is necessary to first understand the lifecycle management requirements for each asset class. Lifecycle management of infrastructure involves many activities throughout its life including planning, design, construction, acquisition, operation, maintenance, renewal and disposal costs.

 

Initial asset management plans undertaken have focussed on the renewal portion of the lifecycle in determining the funds required to replace the asset at the end of its life. Improved asset management knowledge has highlighted the need for a more comprehensive approach within asset planning activities.  This would address maintenance related works also, and in particular, preventative maintenance activities.

 

Preventative (or scheduled) work involves pre-planned activities designed to avoid wear and tear, more expensive structural issues in the future and reduce mobilisation costs through undertaking works in a structured manner. Other maintenance is defined as corrective (or reactive) work; that is tasks undertaken in response to an event or general wear and tear of the elements. This includes work such as storm damage clean-up, pothole repair and removal of drain blockages.

 

Renewal work is required either when corrective and /or preventive works have not been undertaken when required, are ineffective or the element has simply reached the end of its useful life. This end of useful life can be triggered by either very poor condition or increased demand (i.e. size and amount of traffic) that the asset is no longer able to meet.

 

All elements of the lifecycle are linked, and therefore must be considered together when determining the financial requirements for infrastructure. Levels of preventive and corrective maintenance undertaken can have a bearing on required renewal (i.e. may cause it to be undertaken sooner if not adequate) and conversely, timing of renewals can impact maintenance and operating costs if assets remain in a poor condition for too long.

 

Taking a broader view of asset management to include more of the lifecycle activities also highlights items that are sometimes overlooked as part of renewal planning. An example of this occurs for assets located within a road reserve. Table 2 provides an overview of all of the maintainable elements located within road reserves throughout the City. This information has been compiled as part of a criticality analysis and includes both urban and rural road reserves and illustrates all the possible road reserve elements. For the purpose of this exercise, car parks have been included as road reserve assets.

 

Table 2 Maintainable Road Elements

No.

Maintainable Element

No.

Maintainable Element

1

Barriers

19

Pedestrian Hoops

2

Batter / Roadside

20

Pram Ramps

3

Bridges

21

Rain Gardens

4

Bus Shelters

22

Road Reflectors

5

Culverts

23

Road Shoulder

6

Drainage Outlets

24

Road Surface - Unsealed

7

Drainage Swales

25

Roundabouts

8

Fencing

26

Roundabouts - Gardens

9

Footpath - Asphalt

27

Seal

10

Footpath - Concrete

28

Signs

11

Footpath - Paving

29

Stormwater Pipes

12

Gross Pollutant Traps

30

Stormwater Pits

13

Guide Posts

31

Street Lights

14

Kerbs

32

Street Trees

15

Line Marking

33

Table Drains

16

Medians - Gardens

34

Tactile Pavers

17

Medians Concrete

35

Traffic Management Devices - Other

18

Parking

 

 

 

The table lists 35 possible elements located within a road reserve dependant on the location of the road. The road surface is generally considered the main component to be maintained within the reserve, however there are many elements over and above the road surface that require inspection, maintenance and renewal.

 

Improved organisational understanding of lifecycle management activities will facilitate a broader view of asset management considering all maintainable elements, such as those outlined in table 2. This will include implementation of preventive maintenance plans as part of ongoing asset management planning.

 

3. Community Expectations and Setting of Service Standards

Initial asset management planning undertaken has been based around industry best practice and staff knowledge and experience when determining parameters for asset maintenance and renewal. This is a sound methodology which can deliver effective outcomes, however would benefit from improved knowledge of community expectations.

Community engagement should be undertaken in order to fully understand what the community values, and in turn what they are prepared to pay for. Community engagement provides guidance on standards for operating, maintenance and renewal activities to determine asset appearance, functionality and performance.

This principle can be addressed by quantifying community expectations through the development of service standards which can be costed, tested for affordability and discussed with the community. These discussions can also inform the community on how the city plans to balance the required renewal against the need for new and upgraded assets.

 

4. Ongoing Improvement of the City’s Asset Management Capability

Asset Management Capability is defined as the combined concepts of the capacity and ability of a system to meet a specified objective in all its aspects. This includes all the assets and associated personnel, resources and services which are required to meet the objective (i.e. required service standards for infrastructure). A system relies on all its elements to work effectively together, so if one is missing or insufficient, it can affect the whole system.

 

In order to meet statutory obligations and reporting requirements the City must implement systems and practices enabling effective storage, sharing and evaluation of asset data, knowledge and information.

 

The capability is all the elements required to be in place to ensure that the City can undertake effective asset management.  Adopting a capability-based principle acknowledges the importance of a strong foundation for asset management.

Asset staff are currently improving the building asset management capability through improvements to the collection of as-constructed information for buildings. A standardised specification is now in place for all new building projects to ensure the City receives as-constructed information in a format consistent with current data management practices. The aim of this standardisation is to transfer the data received straight into the asset register, as opposed to having to first reconfigure it to make it fit. This reconfiguration takes time and creates unnecessary double-handling of information – which in turn leads to increased cost of managing the assets. It is envisaged that the time saved by this initiative will lead to improvements for capability for condition assessment, long-term renewal planning and preventative maintenance planning.

The proposed principle will give priority to capability improvements across all infrastructure assets and the required asset management systems and practices. 

 

5. Maintaining Asset with Minimal Backlog of Maintenance and Renewal Works

Consideration should be given to existing assets for their operation, maintenance and renewal in conjunction with provision of new assets. This is to ensure a balance between expenditure on new and upgraded assets and required renewal expenditure on existing assets. This approach will assist in the long-term stainability of the City’s infrastructure assets.

 

The principle aims to ensure that all infrastructure assets are maintained adequately and passed on to future generations in a good condition (i.e. no major backlog of maintenance or renewal works). The focus of this principle is the ongoing ‘like for like’ maintenance and renewal of an asset and its components. Items such as replacement, expansion or major upgrade are considered separate to the normal ‘like for like’ renewal incumbent on the current users of the assets.

Replacement, expansion or major upgrade of assets should be subject to separate discussions with the community at the time the works are planned, to agree on the best course of action. An example of this differentiation in practice is outlined below within the building funding methodology.

5.1 Building Funding Methodology

In 2018 asset staff undertook a modelling exercise for the purpose of allocating renewal funds for buildings into Reserve Accounts. The purpose of this being to fund major and minor renewal works, such as replacement of components and larger-scale maintenance that require a capital budget allocation.

The methodology allocates an annual percentage of the replacement value of buildings into reserves based on building criticality (Service Level Hierarchy), replacement value and apportioning a percentage of replacement value annually into a reserve account.

The percentage to be allocated is based on the Buildings Asset Management Plan (2013) which recommended a minimum benchmark for yearly renewal expenditure for buildings at 1.5% p.a. of the replacement cost of the building. This figure was obtained from IPWEA (Institute of Public Works Engineers Australia) and undertaken by TEFMA (Tertiary Education Facilities Management Association).  Modelling activities undertaken since 2013 by the asset management team have pointed to between 1.5% and 2.5% p.a. being an appropriate minimum range to cater for different types and criticality of buildings. In terms of the maximum percentage to be applied, High criticality (SLH 1) buildings are capped at 4% and all other buildings are capped at 2.5%. The percentage currently allocated for the 2019/20 financial year is 1.75%.

The annual increments to be applied between the minimum and the capped percentage, and the annual funds this will generate, are tested for affordability with the LTFP. This ensures that it is affordable within the context of all other competing organisational priorities.

The ultimate intention of the funding plan is to maintain these buildings at an acceptable standard until such time as they require replacement, refurbishment or significant upgrade. The reserve may have a balance of funds at this point (i.e. from holding off certain works due just before these major works) to contribute, however, first and foremost, the funds should be used as the buildings age in order to maintain them at the required standard.

Buildings as a whole will generally have an anticipated useful life of around fifty years, however buildings have many and varied components with a range of useful lives from ten years to fifty years. On this basis, maintenance and renewal expenditure for buildings is required to be available from the time it’s constructed to ensure it can be adequately maintained. Below is an example of how building annual maintenance and renewal requirements differ from the longer term requirement of eventual building replacement.

The like for like replacement of the City’s Administration Building in 50 years’ time would cost an estimated $52.7M (based on base cost of $20M plus 2% p.a. Building Cost Indexation). In basic terms this equates to an annual amount of $1.05M required to be saved over the fifty years in order to fund the replacement. This would be in addition to the annual amount required to be spent on maintenance and renewal of components, currently allocated through the methodology.

If the eventual like for like replacement of the Administration Building in fifty years’ time was required to be contributed towards within the current LTFP, it could mean another $10.5M being allocated to the Administration Building reserve over the next ten years if the above example was to be followed. This is not the intention of the methodology as it would not be affordable within the current LTFP.


 

Below is a snapshot of the items that the methodology is intended to cover in the short-medium term for the Administration Building. This list assumes that all required servicing and minor maintenance activities will be undertaken as required, if they are not, then some additional items may be replaced within this timeframe also.

·    External components subject to the elements such as external wall finishes, windows and doors.

·    Internal components subject to wear and tear such as stairs, cabinet work, door hardware, internal wall finishes, floor finishes, ceiling finishes, window treatments, operable walls and pin boards etc.

·    Components relating to service items such as lifts, heating, ventilation and air-conditioning, plumbing, hydraulic and electrical services (including emergency lighting and security systems).

·    Feature elements of the building such as feature timber, feature lighting, internal glazing and Solar Panels and associated components.

·    Renewal of spaces such as toilets, change rooms, meeting rooms, common areas and kitchens, particularly in areas which are open to both the public and also City staff (reception, Undalup Room and Council Chambers).

To further illustrate this, Rawlinson’s Australian Construction Handbook estimates that items such as those outlined above (fittings, finishes, fitments and services) equate to around 45% of the buildings total value, based on elemental costs of administration office buildings. This provides some context around the likely cost of maintaining the Administration Building in the short–medium term if some or all of these elements require major maintenance and renewal over this period.

Whilst the methodology does consider each generations required contributions to these buildings, it is also very mindful of the importance of avoiding situations such as the narrow seal country roads. The narrow seal country roads program is currently dealing with a backlog of renewal as a result of works undertaken in the late sixties without a structured renewal program attached. Had a funding and renewal methodology been implemented at the time of construction, the current backlog of renewal works could have largely been avoided.

How the actual expenditure tracks against what has been predicted, should be monitored and annual allocations adjusted if necessary. This should be a living process that is reviewed and updated to inform each iteration of the Long Term Financial Plan.

 

5.2 Research Undertaken

Research undertaken of other regional local governments in Western Australia (Albany, Bunbury and Mandurah) highlighted that there is not a standard approach being used to predict future renewal requirements for buildings. Each Council had a slightly different method based on the best available asset data and their capacity to fund. The research also indicated that all were undertaking this at a high level as opposed to detailed asset information for each and every building. The City’s building funding methodology follows a similar high level approach, but is taking it a step further by placing funds into reserves, to be used as the buildings age.

 

Asset Management Policy Principles

Based on the points noted above, the following principles are proposed to be included in an update of the Asset Management Policy.  These principles outline the City’s approach to asset management and provide staff with an understanding of Council expectations for the development of strategies and plans. The policy defines what the Council considers important with respect to Asset Management.

The proposed policy principles are as follows:

·    Assets are to be acquired, maintained and renewed to adequately meet present-day community expectations and pass to future generations with minimal backlog of maintenance and renewal works.

·    Community expectations will be quantified through the implementation of service standards informed by asset lifecycle costing and incorporated into the asset management and Long Term Financial Plans.

·    Decisions on implementation of new assets, major upgrades or acceptance of donated assets is to be informed by lifecycle costing analysis to determine the true cost of operating and maintaining the asset.

·    Ensure that the City has the Asset Management capability to meet statutory obligations and reporting requirements through the implementation of systems and practices enabling effective storage, sharing and evaluation of asset data, knowledge and information.

The desired outcomes and actions required to implement these principles are to be further expanded upon within the Asset Management Strategy.  This will then provide guidance in the day to day asset management as well as with the development of asset management plans.

The principles cover the main asset management priorities at the City of Busselton, which are maintaining the existing portfolio, understanding, quantifying and implementing community expectations, catering for the financial and operational impacts of new and upgraded assets and understanding key asset management capabilities required for effective asset management.

Statutory Environment

The officer recommendation supports the general function of a local government under the Local Government Act 1995 to provide for the good government of persons in its district.

 

Relevant Plans and Policies

The proposed principles will be incorporated into a revised Asset Management Policy, to be presented to Council through the Policy and Legislation Committee.

Financial Implications

There are no direct financial implications associated with officer recommendation.

Stakeholder Consultation

No external stakeholder consultation was required or undertaken in relation to this matter.

Risk Assessment

An assessment of the potential implications of implementing the officer recommendation has been undertaken using the City’s risk management framework, with risks assessed taking into account any controls already in place.  No risks of a medium or greater level have been identified.

Options

As an alternative to the proposed recommendation the Council could identify alternative policy principles to underpin asset management priorities for the City.

 

 

CONCLUSION

This update provides an overview of the City’s current asset management priorities, how they can be addressed through policy principles and gives an example of how the principles can be put into practice. The formal adoption of an updated Asset Management Policy will provide guidance for the finalisation of the review and update of the overall asset management plan.

 

TIMELINE FOR IMPLEMENTATION OF OFFICER RECOMMENDATION

If the Council is in agreement with the proposed policy principles, an updated Asset Management Policy will be presented for adoption through the Policy and Legislation Committee as soon as practicable.

 

10.17am:             At this time, Mr Oliver Darby, Director Engineering and Works, left the meeting.

 

10.21am:             At this time, Mr Tony Nottle, Director Finance and Corporate Services, left the meeting.

 

10.22am:             At this time, Cr Grant Henley left the meeting.

 

10.24am:             At this time, Mrs Naomi Searle, Director Community and Commercial Services, left the meeting.

 

10.25am:             At this time, Mr Tony Nottle, Director Finance and Corporate Services, re-entered the meeting.

 

                The Presiding Member proposed and members agreed to consider Agenda Item 6.8 prior to Agenda Item 6.7. This was to enable time for officers to attend the meeting to speak to Agenda Item 6.7.

 


Finance Committee                                                             63                                                               17 October 2019

6.8             BUDGET AMENDMENT REQUEST / REVIEW - AIRPORT DEVELOPMENT

STRATEGIC GOAL

STRATEGIC OBJECTIVE

6. LEADERSHIP Visionary, collaborative, accountable

6.1 Governance systems, process and practices are responsible, ethical and transparent.

SUBJECT INDEX

Budget Planning and Reporting

BUSINESS UNIT

Financial Services

REPORTING OFFICER

Manager Financial Services - Paul Sheridan

AUTHORISING OFFICER

Director Finance and Corporate Services - Tony Nottle

NATURE OF DECISION

Executive: substantial direction setting, including adopting strategies, plans and policies (excluding local planning policies), tenders, setting and amending budgets, funding, donations and sponsorships, reviewing committee recommendations

VOTING REQUIREMENT

Absolute Majority

ATTACHMENTS

Nil

 

COMMITTEE RECOMMENDATION AND OFFICER RECOMMENDATION

F1910/062               Moved Councillor P Carter, seconded Councillor J McCallum

That the Council endorse the requested budget amendment outlined in Tables 1 below resulting in no change to the budgeted cash position:

 

Table 1:

Cost Code

Description

Current Budget

Change

Resulting Proposed Amended Budget

Expenditure

 

 

 

 

345.B9716.3280.0000

Contractors – Airport Terminal Stage 2

$12,500,000

Decrease by

-$12,308,532

$191,468

345.B9717.3280.0000

Contractors – Airport Construction, Existing Terminal Upgrade

$500,000

Increase by

$4,048,532

$4,548,532

Revenue

 

 

 

 

 

345.C6099.1215.0000

Airport Development Capital Grants (State)

-$9,500,000

Decrease by

$9,500,000

$0

345.C6099.1215.0000

Airport Development Capital Grants (State – Additional RFR)

$0

Increase by

-$1,740,000

-$1,740,000

345.C6099.1221.0000

Airport Development Capital Grants (Federal)

-$977,978

Decrease by

$500,000

-$477,978

 Net Total 

$2,522,022

$0

$2,522,022

CARRIED 5/0

EXECUTIVE SUMMARY

This report seeks recommendation of the Finance Committee to Council for the approval of budget amendments as detailed in this report. Adoption of the officer recommendation will result in no change to the City’s current amended budgeted cash position of $0.

 

BACKGROUND

Council adopted its 2019/2020 municipal budget on Wednesday 31 July 2019 with a balanced budget position. Since this time, Council has been advised of changes to the timing and contractual arrangements regarding the Airport Development project that have impacted the original budget. The Finance Committee is now being asked to consider recommending to Council a budget amendment for this.

OFFICER COMMENT

Through ongoing discussions with the State Government, the City was formally notified that funding would not be released to construct the new terminal.  As such, cost estimates were sought for the required upgrade works to the existing terminal, incorporating a separate arrivals hall, in order to facilitate Regular Public Transport (RPT) Services.  As part of these discussions, the State Government advised that an additional $1,740,000 would be made available to facilitate this, in addition to the release of $1,525,000 in existing Royalties for Regions funding currently held in the Western Australian Treasury Corporation account.  The total project budget for the upgrade works is $3,265,000 which includes furniture and equipment that will be repurposed when the new terminal is constructed and operational.

 

Planned Expenditure Item

Officers propose that the 2019/2020 adopted budget be amended to reflect the following funding changes, shown in Table 1.

 

Table 1:

Cost Code

Description

Current Budget

Change

Resulting Proposed Amended Budget

Expenditure

 

 

 

 

345.B9716.3280.0000

Contractors – Airport Terminal Stage 2

$12,500,000

Decrease by

-$12,308,532

$191,468

345.B9717.3280.0000

Contractors – Airport Construction, Existing Terminal Upgrade

$500,000

Increase by

$4,048,532

$4,548,532

Revenue

 

 

0

 

0

345.C6099.1215.0000

Airport Development Capital Grants (State)

-$9,500,000

Decrease by

$9,500,000

$0

345.C6099.1215.0000

Airport Development Capital Grants (State – Additional RFR)

$0

Increase by

-$1,740,000

-$1,740,000

345.C6099.1221.0000

Airport Development Capital Grants (Federal)

-$977,978

Decrease by

$500,000

-$477,978

 Net Total 

$2,522,022

$0

$2,522,022

Statutory Environment

Section 6.8 of the Local Government Act 1995 refers to expenditure from the municipal fund that is not included in the annual budget. In the context of this report, where no budget allocation exists, expenditure is not to be incurred until such time as it is authorised in advance, by an absolute majority decision of the Council.

Relevant Plans and Policies

There are multiple plans and policies that support the proposed budget amendments.

Financial Implications

The financial implications of this recommendation are contained within the report.

Stakeholder Consultation

No external stakeholder consultation was required or undertaken in relation to this matter.

Risk Assessment

An assessment of the potential implications of implementing the officer recommendation has been undertaken using the City’s risk management framework, with risks assessed taking into account any controls already in place.

There is a risk to the City, as there is with all projects undertaken, that the final cost could exceed budget. If this looks to be the case, Council will be notified so a suitable offset / project scope back can be identified.

Options

The Council could decide not to go ahead with the proposed budget amendment request.

CONCLUSION

Council’s approval is sought to amend the budget as per the details contained in this report. Upon approval the proposed works will be planned, organised and completed.

TIMELINE FOR IMPLEMENTATION OF OFFICER RECOMMENDATION

Should the officer recommendation be endorsed, the associated budget amendment will be processed within a month of being approved.

 

 

 

10.26am:          At this time, Mr Deon Viljoen, Information Technology Coordinator, entered the meeting.

 

10.32am:          At this time, Cr Grant Henley re-entered the meeting.

 

10.40am:          At this time, Cr John McCallum left the meeting.

 

10.41am:          At this time, Cr John McCallum re-entered the meeting.

 


Finance Committee                                                             67                                                               17 October 2019

6.7             MICROSOFT LICENCE AGREEMENT RENEWAL

STRATEGIC GOAL

STRATEGIC OBJECTIVE

6. LEADERSHIP Visionary, collaborative, accountable

6.1 Governance systems, process and practices are responsible, ethical and transparent.

SUBJECT INDEX

Licencing

BUSINESS UNIT:

Information Services

REPORTING OFFICER:

Manager Information Services - Kris Davis

AUTHORISING OFFICER:

Director Finance and Corporate Services - Tony Nottle

PRIMARY NATURE OF DECISION

Executive: substantial direction setting, including adopting strategies, plans and policies (excluding local planning policies), tenders, setting and amending budgets, funding, donations and sponsorships, reviewing committee recommendations

VOTING REQUIREMENT:

Simple Majority

ATTACHMENTS:

Nil

 

COMMITTEE DECISION AND OFFICER RECOMMENDATION

F1910/063               Moved Councillor J McCallum, seconded Councillor G Henley

That the Council:

1.         Accepts Data #3 Ltd Microsoft Enterprise Agreement Renewal (Contract) totaling $265,749 (excluding GST) annualised over a three (3) year term. The total procurement is estimated to be $797,248 (excluding GST).

2.         Authorise the Chief Executive Officer (CEO) to enter on behalf of the City into the Contract outlined in paragraph (2) above.

CARRIED 4/1

Voting:

In favour of the motion: Cr J McCallum, Cr R Reekie, Cr G Henley, Cr P Carter

Against the motion: Cr R Paine

Question on Notice:    Cr Henley requested a report to Committee detailing all of the information technology expenses, including hardware, software and licensing agreements.

BACKGROUND

The City uses a range Microsoft software products for technology and application services. The City is therefore obliged to correctly license these software products to meet the Terms of Use. The Microsoft Enterprise Agreement and Volume Licencing Program is a 3-year licencing and subscription arrangement. The three-year agreement allows the City to forecast costs and the option to pay in three instalments instead of an upfront payment.

The program offers significant savings compared to the other lower volume licensing programs and allows the City flexibility to buy cloud services and additional software licenses under a single agreement.

OFFICER COMMENT

Microsoft’s business model requires Government organisations to engage through a Licensing Partner (Reseller) to procure and maintain product licensing. Data #3 Ltd holds the ‘Whole of Australian Government Microsoft Licensing Solutions Provider’ contract and WA State Government CUA and has intimate knowledge of the City licensing setup and requirements. Data #3 Ltd therefore provides the best value proposition to be the sole reseller of Microsoft Product Licenses in accordance with the City’s requirements.

Officers, in consultation with the Microsoft Account Manager and Data #3 Ltd licencing specialist, reviewed the City’s licensing requirements for the ‘true-up’ (i.e. to allow for increases and decreases in subscription counts of hardware devices and user licences) and renewal of the Enterprise Agreement for the next three-year term, due to start 1 November 2019.

Statutory Environment

The Local Government (Functions and General) Regulations 1996 (WA) (Regulations) and the City's Purchasing Policy 239 (Purchasing Policy) provide the statutory procurement framework.  In terms of Regulation 11(1) of the Regulations, unless an exemption applies, tenders are to be publicly invited before a local government enters into a contract for another person to supply goods or services if the consideration under the contact is, or is expected to be, more, or worth more, than $150,000.

 

Regulation 11(2)(b) stipulates that tenders do not have to be publicly invited if the supply of the goods or services is to be obtained through the WALGA Preferred Supplier Program. Data #3 Ltd is a preferred supplier of WALGA for Microsoft licencing solutions including the Microsoft Enterprise Agreement Program and who manages all the business transactions for all license purchases. Therefore, should the City wish to procure the Microsoft Enterprise Agreement, it would be exempt from inviting tenders as that service will be obtained through the WALGA Preferred Supplier Program.

 

In terms of Section 5.27 of the City’s Purchasing Policy the City can make purchases from WALGA preferred suppliers for amounts over $150,000 in reliance on the exemption to the requirement for a public tender, provided that three quotes must be sought. However Section 5.27 is subject in all cases to sections 5.14 and 5.15 of the Purchasing Policy.

 

Section 5.14 of the Purchasing Policy recognises that from time to time there will be circumstances where it is not appropriate or not reasonably practicable to adhere to the requirements to obtain quotations as set out in the Purchasing Policy. Section 5.15 specifies that, under such circumstances, the Chief Executive Officer (or such other employee of the City to whom such power has been delegated) may waive the requirements to obtain quotations as set out in the Purchasing Policy.

 

Given there are no other suppliers who could provide the required service, it is in this instance not reasonably practicable to adhere to the requirement under Section 5.27 of the Purchasing Policy to obtain at least three quotes. Therefore pursuant to Section 5.15 of that policy it is considered appropriate for the CEO to waive the requirement to obtain further quotations.

In terms of Section 9.49B of the Local Government Act 1995 (WA) (Act) a person acting under the authority of a local government may make, vary or discharge a contract in the name of or on behalf of the local government in the same manner as if that contract was made, varied or discharged by a natural person. Section 5.43(b) of the Act requires City to determine the amount which the CEO’s purchasing authority must not exceed. Currently, under Delegation LG3J, the CEO is authorised to enter into contracts and accept of tenders where the contract value does not exceed $500,000.

 

The estimated contract value for the proposed Contract renewal is $797,248, therefore the CEO requires the power and authority to procure the renewal of the Microsoft Enterprise Agreement and Microsoft Volume Licensing Program in which the City will engage Data #3 Ltd as the sole Microsoft Reseller.

Relevant Plans and Policies

There are no relevant plans or policies to consider in relation to this matter.

Financial Implications

There is currently no requirement for the City to review or consider alternative software and cloud products which underpins ICT infrastructure and information technology services. 

The structure of the Enterprise Agreement consists of (1) an Enterprise Enrolment, and (2) Server and Cloud Enrolment. The Enterprise Agreement is a three-year agreement in which the City has the option to make three annual payments instead of one single payment upfront.

 

The total value of the Contract for the renewal over three year term is estimated to be $797,248 (excluding GST). The annual payments are extrapolated in the table below.

 

Year

Financial year

Amount Excl. GST

Notes

Year 1

2019 -2020

$ 265,749

Data#3, Quotation

Year 2

2020-2021

$ 265,749

Estimate, subject to true-up

Year 3

2021-2022

$ 265,749

Estimate, subject to true-up

Total

 

$ 797,248

Estimate

 

 

The Contract is funded from the Information Technology Services operational budget for Computer Licencing (Account String 220-10250-3291-0000) and is within planned parameters.

Stakeholder Consultation

No external stakeholder consultation was required or undertaken in relation to this matter.

Risk Assessment

An assessment of the potential implications of implementing the officer recommendation has been undertaken using the City’s risk management framework, with risks assessed taking into account any controls already in place.

 

The City is obliged to correctly license software applications used by the organisation to meet the terms of use for these products. Data #3 Ltd provides technical expertise in volume licencing to mitigate risks that may lead to financial loss or have a negative impact on the City’s reputation. 

Options

As an alternative to the proposed recommendation the Council could consider to not use the Microsoft range of products, but this is not a practicable solution for the operation of the City.

 

CONCLUSION

It is recommended that Council approve Data #3 Ltd to renew the Microsoft Enterprise Agreement for software and cloud services licences and subscriptions. The recommendation is based on ‘whole of business’ outcome for the provision of ICT services in accordance with corporate objectives and the application of procurement rules as determined in the City’s purchasing policy.

 

TIMELINE FOR IMPLEMENTATION OF OFFICER RECOMMENDATION

The Contract between City and Data #3 Ltd and Microsoft will be executed as soon as practicable following the approval and adoption of the recommendation of this Report i.e. the new Microsoft contract will officially commence on 1 November 2019 for a term of three years.

 

Contract documentation will be prepared and forwarded to Data #3 Ltd for execution. City staff will work with Data #3 Ltd to ensure all relevant documentation required by Microsoft is completed and submitted with time for processing by both Data #3 Ltd and Microsoft. 

 

 

 

 

10.53am:          At this time, Mr Mike Archer, Chief Executive Officer, entered the meeting.

 

11.00am:          At this time, Mr Mike Archer, Chief Executive Officer, left the meeting.

 

11.10am:          At this time, Mr Paul Sheridan, Manager Financial Services, left the meeting.

 

11.17am:          At this time, Mr Deon Viljoen, Information Technology Coordinator, left the meeting.

 

7.               General Discussion Items  

Nil

 

8.               Next Meeting Date

21 November 2019.

 

9.               Closure

The meeting closed at 11.26am.

 

 

 

THESE MINUTES CONSISTING OF PAGES 1 TO 67 WERE CONFIRMED AS A TRUE AND CORRECT RECORD ON Thursday, 21 November 2019.

 

DATE:____________________       PRESIDING MEMBER:_________________________