In this edition we are featuring various Councils’ approaches to addressing the challenges of financial sustainability and asset management (refer pages 11 to 20). With recent Local Government financial sustainability studies, at both the national and state level, key findings are that, across the board Councils are struggling with an ever increasing infrastructure backlog, and this is throwing doubt on a number of Councils’ ongoing financial viability.
There is a growing recognition across all spheres of government that financial sustainability and asset management are inextricably interwoven and must be treated as such. However, the reality of political life means that elected members tend to be primarily focused on the next election. This results in long term plans, say over the next ten or 20 years, being somewhat off the radar.
Similarly with the community, people are more than happy to see new capital projects, such as new sports facilities, roads and the like, but few realise that on average the initial outlay for these projects is likely to be around 20 per cent of the total life cycle costs, not to mention ultimate replacement once the facility reaches its used-by date.
Without long term planning to address these issues, future generations will face massive debt, resulting in higher rates and charges or severely reduced services, and possibly both.
So where to start? It is vital that Councils understand the range of assets they hold stewardship over, and the current condition they are in.
But assessing this can be a time consuming and resource hungry task. The Institute of Public Works Engineering Australia (IPWEA) believes that many organisations can get lost in the collection of data and the selection and implementation of software systems.
As a result, IPWEA’s International Infrastructure Management Manual (IIMM) sets out two levels of asset management: core and advanced. It advocates that at the outset Councils formulate their asset management plan using a ‘core’ or basic approach. This will avoid it becoming too complicated or getting lost in a never ending cycle of data collection.
IPWEA suggests that Councils develop an asset management plan that initially meets only the minimum legislative, accounting or Council’s own requirements rather than waiting until more information becomes available or improved systems and processes are in place.
After the development of this initial plan, asset management will start to evolve in a continuous cycle of review and improvement so the quality of outputs matches the changing business needs of a Council.
IPWEA believes that some Councils’ asset management planning may not need to progress beyond this core approach.
‘Advanced’ asset management applies analysis to individual assets compared with a core approach that looks at assets at a network level. According to IPWEA, an advanced asset management plan, as opposed to a core plan, will be supported by well defined and agreed levels of service. It will rely on accurate and detailed asset data, with minimal assumptions and high confidence levels.
Future development of the IPWEA NAMS.PLUS program will assist Councils pursuing advanced asset management. However, IPWEA’s current focus is targeted at assisting Councils to achieve a ‘core’ approach to asset management planning.
Maintaining and renewing infrastructure for the long term is certainly having significant impacts on the financial sustainability of Local Government. With an estimated 35 per cent of Councils in Australia deemed unsustainable, reform cannot be delayed.
Councils must move from annual budgeting to long term financial planning, and long term financial plans need to be founded on sound asset management plans.
