Regulations Update

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Regulations Update
Shane Sody. Acting Manager, Legislation

• Office for State/Local Government Relations

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Background

• Local Government (Financial Management and
  Rating) Amendment Act 2005 passed Parliament in
  Nov 2005 received assent 1 Dec 2005.
• Minor provisions already commenced (1/1/06 and
  1/7/06) but most of the Act not not yet
  commenced, pending new regulations
• Discussions on new Regulations occurred
  throughout 2006 with LGA, FMG, FAAC and
  Treasury
• New Regulations and amending Act all to come into
  operation on one date (intended to be January
  07) to be relied upon for 07-08 budgets and
  beyond.

• Office for State/Local Government Relations

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Regulations are in DRAFT form!

• Two sets of regulations (General and Financial
  Management) are each marked Draft for Comment
• Comments are really welcome (but need to arrive
  in time only 1 more week!)
• The policy behind the regs is more important than
  specific wording
• If different words would better achieve the
  policy, please let us know.
• Put it in writing!

• Office for State/Local Government Relations

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Topics covered in draft Regulations

• Differential rating categories
• Seniors Rate Postponement scheme
• Model financial statements
• Long-Term Financial Plans
• Annual Business Plans and Budgets
• Audit Committees
• Independence of the auditor
• Other, technical matters and
• Updated definitions.

• Office for State/Local Government Relations

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Differential rating categories(General Regs -
r10)

• Despite earlier recommendation, no change
  proposed to area categories
• Township boundaries
• Development plan zones
• One new option proposed for land use categories
• Non-intensive primary production (i.e farming)
  and
• Intensive primary production all others

• Office for State/Local Government Relations

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Seniors Rate Postponement scheme(General Regs
r13A)

• Policy intent is simplicity, consistency,
  clarity.
• Ratepayer gets approval only ONCE entitlement
  continues indefinitely
• Council may reject application only if any
  pre-existing mortgages secure more than 50 of
  current C.V. This means evidence of mortgages
  should be sought. Also means an applicant who
  does not qualify may re-apply if/when CV has
  risen or after mortgage is re-financed
• Prescribed proportion - 500 (125 quarterly)
  cannot be postponed
• State Government pensioner concession, if
  available, can reduce payments to 310 annually
  (77.50 quarterly)
• No application form prescribed but LGA intends
  to develop one
• Ratepayer must notify council of change in
  entitlement within six months
• Each quarterly rates notice must update the
  postponed balances (rates plus interest) accrued,
  and advise of options.

• Office for State/Local Government Relations

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Model Financial Statements

• From 2007, the MFS will provide the format for
• budgets
• income statement, balance sheet and statement of
  cash flows
• operating and capital investment activities
• operating surplus ratio, asset sustainability
  ratio and net financial liabilities ratio.
• long-term financial plans (income statement,
  balance sheet and statement of cash flows)
• CEOs certification of financial statements
  (r11).
• MFS are published by the LGA and must be
  available for inspection etc. (New r4A)
• MFS may be updated annually by LGA requires
  Ministers concurrence for changes. (New r4A)

• Office for State/Local Government Relations

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Long-Term Financial Plans (reg 5)

• must include, in a manner consistent with the
  Model Financial Statements
• income statement, balance sheet and statement of
  cash flows
• summary of proposed operating and capital
  investment activities (prepared in a uniform
  basis)
• estimates of operating surplus ratio, an asset
  sustainability ratio and a net financial
  liabilities ratio.
• See new regulation 5.

• Office for State/Local Government Relations

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Annual Business Plans and Budgets

• ABP must include information that has, until now,
  have been in a councils Rating Policy - i.e.
  reasons to explain the
• valuation method
• differential rates
• any fixed charge or minimum rate
• service charges
• rebates and remissions policy etc (see new Reg
  5A)
• The budget must include, in a manner consistent
  with the Model Financial Statements
• income statement, balance sheet and statement of
  cash flows
• summary of proposed operating and capital
  investment activities (prepared in a uniform
  basis)
• estimates of operating surplus ratio, an asset
  sustainability ratio and a net financial
  liabilities ratio - (see new Reg 5B) .

• Office for State/Local Government Relations

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Audit Committee (r13A)

• At least 3, but no more than 5 members
• At least one member must be independent and that
  person must have financial experience relevant
  to the functions of an audit committee
  (relevant as determined by the council)
• Must NOT include the councils auditor
• Not in Regs but under s126 of the Act as
  amended an audit committee cannot include a
  council employee
• Complementary provisions for subsidiaries and
  regional subsidiaries (unless they are exempted
  e.g. by their own charter from the need to have
  their own audit committee)

• Office for State/Local Government Relations

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Independence of the auditor (r 16A)

• Maximum hours test (to apply to any contract
  work apart from the audit itself). No more than
  20 hours per year in additional contract work (cf
  Corporations Act 10 hours)
• CEO must sign annual statement that the role of
  the auditor has not (or has) been affected by
  the provision of services outside the scope of
  the auditor's functions.

• Office for State/Local Government Relations

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Other, technical matters

• Abolition of the rate determination statement
  that linked rates to cash revenues and expenses
  (r5)
• Fewer budget reviews each year (3 instead of 2)
  but each must include and if necessary update the
  councils income statement, balance sheet and
  statement of cash flows (r7)
• Revaluation of infrastructure assets on fair
  value not cost basis (r9)
• Reassess the method of revaluing assets at least
  once every 4 years (r9)
• No need to send financial statements to ABS (r13)

• Office for State/Local Government Relations

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Updated Definitions

• Update of definition of Australian Accounting
  Standard to refer to the publisher as Australian
  Accounting Standards Board (r4)
• Copies of the Australian Accounting Standards
  must be kept at OS/LGR (r4A)
• Update the definition of financial statements
  (r4)
• Update the definition of infrastructure so that
  it no longer refers to assets with indefinite
  lives (r4)
• Update the definition of material (r4)
• Update the body named as publisher of auditing
  standards (the Auditing and Assurance Standards
  Board) (r14)

• Office for State/Local Government Relations

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Feedback sought

• Consultation Draft regulations mailed 3 Nov
• Also available at http//www.localgovt.sa.gov.au
• Responses must be received by 15 Dec
• Timeline cannot be extended - OS/LGR must report
  to Minister by 22 Dec
• Minister to make decisions early January and go
  to Cabinet
• Regulations (and amending Act) all likely to
  commence late January 07.

• Office for State/Local Government Relations