0 | P a g e

Sundry Debtors Policy

2015

Attachment 1

1 | P a g e

Contents 1. INTRODUCTION ......................................................................................................................................................... 2

1.1 OBJECTIVES ............................................................................................................................................... 2

2. DEFINITION .............................................................................................................................................................. 2 2.1 CLASS RECOGNITION AND MEASUREMENT OF TRADE RECEIVABLES AND REVENUE FROM THE SALE OF GOODS .. 2

3. OUTLINE OF PRINCIPLES ........................................................................................................................................... 3

3.1 DEBTOR RECORDS ..................................................................................................................................... 3 3.2 INVOICE REQUESTS .................................................................................................................................... 3

3.3 INVOICE GENERATION ................................................................................................................................. 3 3.4 CREDIT NOTES AND BALANCES .................................................................................................................... 3

3.5 CUSTOMER STATEMENTS ............................................................................................................................ 3

3.6 DEBTOR PAYMENTS .................................................................................................................................... 3 3.7 DIRECT CREDITS ........................................................................................................................................ 3

3.8 CREDIT CARD PAYMENTS ............................................................................................................................ 4

3.9 RECEIVING CASH ........................................................................................................................................ 4 3.10 DISPUTED INVOICES .................................................................................................................................... 4

3.11 CREDIT TERMS AND CREDIT CHECKS ............................................................................................................ 4 3.12 DEBT MANAGEMENT ................................................................................................................................... 5

3.13 ACCOUNTING FOR BAD AND DOUBTFUL DEBTS .............................................................................................. 5

3.14 WHEN TO RECOGNISE A BAD DEBT ............................................................................................................... 6 3.15 MERCHANT FEES ........................................................................................................................................ 6

3.16 FOREIGN CURRENCY TRANSACTIONS ........................................................................................................... 6

3.17 DISHONOURED CHEQUES ............................................................................................................................ 6 4. REVIEW ..................................................................................................................................................... 6

2 | P a g e

1. INTRODUCTION This policy specifies appropriate internal controls to be applied in the generation of invoices and credit notes.

Record keeping and debt management policies should also be applied consistently by Council.

Refer to the Cash handling and Receipting policy for recording cash sales.

1.1 Objectives

• The objective of Council’s Sundry Debtor policy is to:-

- Ensure invoices are created in a timely manner and followed up within invoice terms

- Guidelines to extending credit to third parties

- Guidelines on the write-off of debt

• This policy is applicable to persons requesting the generation of a debtor invoices and request for credit notes

• This policy excludes Rate Debtors.

• Council shall comply with the Victorian Local Government Act 1989 and the relevant regulations and guidelines of the Australian Accounting Standards Board (AASB).

2. DEFINITION

Debtor An entity, a company or a person of a legal nature that owes money to Council.

Revenue Recognised and measured at the fair value of the consideration received or receivable to the extent it is probable that the economic benefits will flow to the Council and the revenue can be reliably measured.

2.1 Class Recognition and measurement of trade receivables and revenue from the sale of goods

• Trade receivables, which have 30 day term or can be less if contractually agreed, are recognised at their fair value.

• The collectability of trade receivables is reviewed on an ongoing basis. An allowance for impairment is made when there is objective evidence that the collection of the full amount is no longer probable.

• Financial difficulties of the debtor, default payments or debts more than 60 days overdue are considered objective evidence of impairment.

• Bad debts are written off when identified.

3 | P a g e

3. OUTLINE OF PRINCIPLES

3.1 Debtor Records

• Those responsible for the generation of debtor invoices and credit notes may not have access to edit Customer Master Files.

• Any changes to bank details must be authorised by the Finance Manager, Management Accountant or Financial Accountant.

• Those officers responsible for the maintenance of the Customer Master File shall verify that the new debtor is not already recorded in Pathway before proceeding with the approval.

• Debtor records which have had no transactions recorded against them within the previous two year period will be archived at each year-end.

3.2 Invoice Requests The “Request to Raise an Invoice” form must be completed, appropriately authorised and provided to Revenue Services for a Sundry Debtor invoice to be created.

3.3 Invoice Generation

• All outgoing debtor invoices shall be system-generated via the Pathway system.

• All invoices shall be printed on official Council Letterhead and include the Nillumbik Shire Council ABN. Electronic invoices may be generated in PDF format and must include the Council logo, ABN and address.

• All invoices shall comply with the GST legislative requirements.

• Invoices shall be processed within 3 working days of invoice details being entered on the system.

• Where no contractual arrangement with the debtor exists the default payment term will be 30 days from invoice date.

3.4 Credit notes and Balances

• The Request to raise a credit form must be completed and approved for any request to be processed.

• Credit Notes shall be raised within 3 days of request for credit being received. The Credit Note must be appropriately approved and submitted to the Finance Manager for review.

• Only Pathway-generated Credit Notes shall be issued to debtors.

• In reviewing any debtors with credit balances, the reason for the credit balance should be ascertained. If the credit is due to over-payment, the balance should be refunded to the debtor.

3.5 Customer Statements

• A Customer Statement shall be generated and issued after 30 days for non-payment.

• Customer Statements are to be issued monthly by the 8th working day of each month.

3.6 Debtor Payments

• Payments shall be banked promptly (also refer to Cash Handling and Receipting Policy).

3.7 Direct Credits

• Revenue Services shall be immediately notified by the Finance Officer when debtor payments are received directly into a Council bank account.

• Supporting documentation in the form of a remittance advice should be obtained from the debtor verifying the purpose of the payment.

• Revenue Services shall be notified of any unidentified amounts directly credited to a Council bank account.

4 | P a g e

3.8 Credit card Payments

• Credit card payments may be accepted. Reasonable steps must be taken to ensure the security of personal credit card details and destruction after a successful payment is processed.

• All credit card receipts must be promptly posted to the ledger and necessary recovery action taken on dishonoured credit card transactions.

3.9 Receiving Cash

• The receptionist / cashier can accept in-person payments of cash (notes, coins and money orders) and must count and confirm the amount while the payer is present.

• A receipt is to be issued to the payer which includes the amount received, date received, the name of the payer and the reason for payment. A copy of the receipt must be retained.

• All incoming payments shall be recorded in a daily remittance receipt log with payment, value of payment and payer noted.

• Moneys received should be kept in cash registers in a secure office space during normal working hours. Outside normal working hours, all moneys on hand and receipt books are to be locked in a safe.

• All cash receipts should be banked promptly.

3.10 Disputed Invoices

• Where disputes arise between Council and a debtor regarding the value of an invoice, the officer who requested the invoice or initiated the sale is responsible for resolving the dispute.

• Where a dispute arises, details shall be immediately reported to the Finance Manager. Should a debtor contact the Finance Department directly to advise of a dispute, details must be immediately referred to the Project Manager or Invoice Requestor. Revenue Services should keep a record of all such information.

3.11 Credit terms and Credit checks

• The following credit terms and credit check requirements apply to businesses or individuals to whom goods or services are to be provided on credit. Credit checks are to be performed prior to the supply of goods / services or, if applicable, during contract negotiation. The credit check policies do not apply to government departments.

• Where no formal credit limit has been established by the project manager or invoice requestor the credit limit of $10,000 shall be applied.

• Credit checks shall be performed where the annual value of goods / services to be supplied on credit by Council will exceed $10,000. This includes existing customers whose credit limit is to be extended beyond $10,000.

• Where a customer credit limit is requested to be set beyond $50,000 a deposit, guarantee or other form of security may be sought by Council.

• Where customers fail to provide a satisfactory credit history, customers are required to provide a guarantor. A credit check must be performed on the guarantor.

• The Finance Manager must be advised when a debtor has exceeded their credit terms. The Finance Manager shall review the debtor’s payment history and consider suspension of the delivery of goods or services

• In accordance with Privacy principles, any information obtained or maintained by Council in regards to credit checks or credit history shall be protected against misuse, unauthorised access, use or modification.

• Credit terms should not be extended to overseas-based customers.

• A summary of the minimum credit check requirements is provided below;

5 | P a g e

Credit limit to be made available to customer Minimum credit check requirement

Up to $9,999 Credit check is non-mandatory, but may be performed at direction of Program / Project Manager or Finance Manager

$10,000 to $99,999

Application for Credit form to be completed by prospective customer before goods or services are provided on credit. Credit check to be performed by appointed Credit Agency

Where credit limit to be made available exceeds $50,000 a deposit, guarantee or other form of security may be sought by Council.

$100,000 and above Application for Credit form to be completed by prospective customer. Credit check to be performed by appointed Credit Agency. To be approved by General Manager Corporate Services

3.12 Debt Management

• It is responsibility of the rates officers to follow up on overdue debts.

• Debtors with amounts outside their payment terms (usually over 30 days) shall be contacted by telephone to request immediate payment of the debt.

• Debtors with total amounts outstanding for more than 60 days are to be contacted in writing to request payment.

• Once the debt exceeds 90 days and if insufficient reason for non-payment is known, the Finance Manager in consultation with the relevant Invoice Requestor should seek to ensure that future services or sales are suspended pending settlement of all outstanding monies.

• The Finance Manager shall evaluate if a debt outstanding for a period of 120 days or more should be referred to a debt collection agency. Debt collection agencies should be used only if it is economically viable to do so.

• Debtors shall be advised of the intention to refer their debt to a debt collection agency before doing so.

• The Finance Manager must obtain approval from the General Manager – Corporate Services before referring a debtor to a Debt Collection Agency.

3.13 Accounting for bad and doubtful debts

• Where there is objective evidence indicating that a debt will be uncollectible, a provision for doubtful debt should be recognised

• Objective evidence may include observable data indicating that;

• the debtor is in significant financial difficulty; or

• the debtor has been reported by ASIC as being insolvent.

• The provision for doubtful debts must be made in respect to specific debts; no general provision may be made.

6 | P a g e

3.14 When to recognise a bad debt

• Debts may be written off;

• Once all reasonable attempts to recover the debt have been made; and

• Where bankruptcy proceedings or company liquidation has been finalised; or

• Where costs of pursuing the debt would be greater than the debt amount.

• Whilst awaiting bankruptcy / liquidation proceedings, the debt will be regarded as a doubtful debt in the financial statements.

• The Finance Manager must approve all bad debt write-offs and seek further approval from the General Manager if the debt is material (either individually or in aggregate).

• A debt is considered to be material if the value of the total debt exceeds

• 10% of the total value of debtors or

• $5,000

3.15 Merchant fees

• Payments must be recorded at their nominal value. Credit card fees (i.e. merchant fees) shall be allocated to the Bank Fees account.

3.16 Foreign currency transactions

• Invoices raised against overseas debtors must be raised in Australian Dollars. When payment is received in a foreign currency, the exchange rate current on the date of receiving the payment should be used for conversion.

3.17 Dishonoured cheques

• Should a debtor’s cheque be dishonoured, the debtor must be immediately contacted in writing to request payment of the dishonour fee and a replacement remittance.

4. REVIEW

This Policy will be reviewed every four years or as required in the event of legislative changes. Council may review this policy at any time (but not so as to affect any process that has already commenced).

This policy is to be read in conjunction with any other relevant Council policies.

0

Asset Lifecycle Policy

2015

Attachment 2

1

Contents 1. INTRODUCTION ......................................................................................................................................................... 2 1.1 OBJECTIVES ............................................................................................................................................... 2 2. DEFINITION .............................................................................................................................................................. 2 2.1 CLASS OF ASSETS ...................................................................................................................................... 3 3. OUTLINE OF PRINCIPLES ........................................................................................................................................... 3 4. ASSET RECOGNITION ............................................................................................................................................... 4 4.1 AUTHORITY TO ACQUIRE AN ASSET .............................................................................................................. 4 4.2 REVALUATION OF ASSETS ........................................................................................................................... 4 4.3 ASSET IMPAIRMENT .................................................................................................................................... 5 4.4 DEPRECIATION ........................................................................................................................................... 5 4.4.1 ESTIMATED USEFUL LIFE ............................................................................................................................. 6 5. CAPITAL AND MAINTENANCE EXPENDITURE ............................................................................................................... 6 5.1 ASSET MAINTENANCE ................................................................................................................................. 7 5.2 ASSET UPGRADES AND IMPROVEMENTS ....................................................................................................... 7 5.3 ASSET RENEWAL OR REPLACEMENTS .......................................................................................................... 7 5.4 EXAMPLES OF NON-CURRENT ASSET TREATMENTS ...................................................................................... 8 6. ASSET ACQUISITION ................................................................................................................................................ 9 6.1 PURCHASE OF ASSETS AND CAPITAL WORKS PROGRAM ............................................................................... 9 6.2 RECORDING OF ASSETS IN THE ASSET REGISTER ....................................................................................... 11 6.3 RECONCILIATION OF ASSET REGISTER ....................................................................................................... 11 7. LEASED ASSETS .................................................................................................................................................... 12 8. DISPOSAL OF ASSETS ............................................................................................................................................ 13 8.1 DECISION TO DISPOSE .............................................................................................................................. 13 8.2 RESPONSIBILITY FOR MONITORING AND CONTROL ....................................................................................... 13 8.3 DISPOSAL DELEGATION ............................................................................................................................. 13 8.4 DISPOSAL METHOD - PLANT, MACHINERY, FURNITURE, EQUIPMENT AND ART WORK .................................... 14 8.5 NOTIFYING DISPOSAL OF ASSETS .............................................................................................................. 14 9. ROLES AND RESPONSIBILITIES ................................................................................................................................ 14 10. STOCKTAKES ....................................................................................................................................................... 15 10.1 FREQUENCY OF STOCKTAKES..……………………………………… .......................................................... ..15 10.2 RESPONSIBILITY FOR THE STOCKTAKE …….…………………………… ...................................................... .15 10.3 RESULTS OF THE STOCKTAKE …….…………………………… .................................................................. .15 11. POST IMPLEMENTATION ACTION ............................................................................................................................ 15 12. REFERENCES ....................................................................................................................................................... 15

2

1. INTRODUCTION This policy gives direction for the management of Council owned assets. It covers Council’s requirements and obligations in the asset management process and will inform Council officers of their responsibilities in the accounting and reporting of assets. 1.1 Objectives The objective of Council’s asset lifecycle policy is to:- • document asset accounting principles adopted by Council;

• document asset thresholds associated with the capitalisation of non-current assets;

• specify the accounting treatments associated with the acquisition, disposal, depreciation, revaluation and transfer of assets; and

• specify control activities required to ensure the complete, accurate and valid recording of non-current assets.

• provide a systematic, transparent and accountable method for the disposal of Council owned assets.

• manage operational risks to an acceptable level including ensuring that assets are adequately monitored and recorded.

• ensure that effective internal controls are in place to minimise, theft, unauthorised use and disposal of Council property.

2. DEFINITIONS

Assets (property, plant & equipment)

Tangible items that are held for use in the production or supply of goods or services,. An asset of Council shall be recognised if:

- It is probable that future economic benefits associated with the asset will flow to Council; and

- The cost of the asset can be measured reliably.

Non-Current assets Those assets which are held for the purpose of carrying out Council’s functions, the benefits of which will extend over more than one accounting period (i.e. held for more than 12 months).

Asset classes Categories of assets that are disclosed in Council’s financial statements.

Useful Life The expected period of time during which a depreciating asset will be productive.

Works in Progress (WIP)

Assets that are under construction, and are not yet completed, are defined as Work in Progress and are valued at cost.

Land All land to which Council holds title or land which Council is entitled to hold title.

Buildings Defined as structures that have a roof and walls and stand permanently in one place

Major Plant and Equipment

Includes all major machinery and equipment owned by the Council. It includes all trucks, graders, other operating machinery and major plant items.

Minor Plant and Equipment

Includes all minor plant and equipment owned by Council. It includes all loose tools and store items removed from Major Plant and Equipment which fall above the asset threshold.

3

2.1 Class of Assets In accordance with Council’s policies, the following asset classes are reported in Council’s financial statements under the fixed assets ledger: Asset Class Minimum Cost Buildings $5,000 Land improvements $5,000 Infrastructure $5,000 Office Equipment $1,000 Plant and Machinery – Major Plant $1,000 Plant and Machinery – Minor Plant $1,000 Furniture and Fittings $1,000 Artworks $500 Motor Vehicles Nil Land (including land under roads) Nil Purchases less than the thresholds mentioned 2.1 above, are to be expensed in the period in which they were purchased.

3. OUTLINE OF PRINCIPLES

• Council will act in a manner which is accountable, responsible and transparent.

• Council will be governed by the requirements of the Local Government Act 1989 and any other legislation that is relevant to dealing with its assets including, but not limited to the Planning and Environment Act 1987 and the Subdivision Act 1988.

To appropriately account for its assets, Council is required to:

• monitor the assets it owns or controls, incorporating assessing the current condition and residual lives of the assets (including the replacement dates of assets);

• record all asset transactions (acquisitions, disposals, depreciation, transfers and all other adjustments);

• record assets at fair value by revaluing where required on a regular interval not exceeding 2 years; and

• reconcile the general ledger to the Fixed Asset Register.

4

4. ASSET RECOGNITION The criteria that Council will use to determine the creation of an asset is that:

• the benefits must be controlled by the entity, o the ability of Council to benefit from the asset and to deny or regulate the access of others to that

benefit;

• the benefits must have arisen from a past event; and

• future economic benefits must be expected to flow to the entity. Indicators of control include: • assets, other than those that are acquired at no cost or for nominal consideration, are to be initially

recognised at their cost of acquisition, which includes: - purchase price plus import duties and non-refundable/claimable taxes minus trade discounts and

refundable/claimable taxes; - costs directly attributable to bringing the asset to the location and condition necessary for it to be

capable of operating in the manner intended by management; and - the initial estimate of the costs of dismantling and removing another asset and restoring that site on

which it is located, the obligation for which an entity incurs either when the item is acquired or as a consequence of having used the item during a particular period for purposes other than to produce inventories during that period.

• assets acquired at no cost or for nominal consideration are to be initially recognised at their fair value.

• assets acquired as a consequence of a restructure of administrative arrangements will be recognised at book value

4.1 Authority to Acquire an Asset Asset Acquisitions must be approved by a financial delegate with delegation to approve the acquisition of assets It is the responsibility of the approving officer to: • ensure the most appropriate procurement method is used when acquiring the asset;

• ensure the acquisition process maintains a high ethical standard;

• maintain asset acquisition records that provide certainty of ownership; and

• if not otherwise captured, formally record the acquisition when the next asset stocktake occurs. 4.2 Revaluation of Assets • Assets are revalued on a regular basis where the fair value of assets is likely to vary materially from one

reporting period to another.

• The choice of revaluation method is driven by the AASB requirements

• The assigned Council officers and independent experts will be responsible for scheduling the assets for revaluation.

5

Frequency of Revaluation Subject to 4.2 above, asset revaluations are required to occur every two years to ensure that the fair value recorded for material asset classes remain relevant.

4.3 Asset Impairment An annual assessment will occur to determine whether any evidence exists for any accounting adjustment being required for impaired assets Indicators of impairment include:

• evidence of obsolescence or physical damage to an asset;

• significant changes regarding the way an asset is used or expected to be used; and

• evidence from internal reporting that indicates that the economic performance of an asset is or will be worse than expected.

4.4 Depreciation Assets held on to a long term basis with the exception of land, have limited useful lives. The decline in service potential of an asset is recognised in the financial statements through depreciation which is a systematic charge against revenue of the recorded value of the asset over its useful life. Factors contributing to this decline include: • Wear and tear

• Technical obsolescence

• Commercial obsolescence

Commencement of Depreciation at either: • Date of Acquisition of asset

• Date of installation and ready to use

Assets constructed:

• Date of practical completion Depreciation of additions to existing assets • Additions or extensions to existing depreciating assets are to be depreciated over the remaining useful life of

the asset.

• Additions or extensions to existing depreciating assets which retain separate identity and which have a useful life extending beyond the life of the existing depreciating asset should be depreciated independently.

6

Depreciation Method • Buildings, land improvements, plant and equipment, infrastructure, and other assets having limited useful

lives are depreciated over their useful life, which reflects consumption of the asset.

• Estimates of remaining useful lives and residual values are revised annually along with major asset classes.

• Where a condition audit has been undertaken on roads and/or footpaths, the remaining useful life is assessed and adjusted accordingly.

• Depreciation rates and methods are reviewed annually.

• Where infrastructure assets have separate identifiable components that are subject to regular replacement, these components are assigned distinct useful lives and residual values and a separate depreciation rate is determined for each component.

• Road earthworks are not depreciated.

• Artworks are not depreciated.

• Straight line depreciation is charged based on residual useful life. 4.4.1 Estimated Useful Life Asset Class Useful life (years) Property land - playgrounds 15 land improvements 50 buildings 50-100 Plant and Equipment plant and machinery 6-7 motor vehicles 6-7 furniture 6-7 fittings and computers 6-7 artwork 100 Infrastructure road surface 12 - 30 road pavement 50 - 80 road kerb 50 traffic treatments/ calming 5 - 50 major bridge culverts 50 - 100 bridges - concrete/ steel 100 bridges - timber 50 footpaths, trails and cycleways 10-50 drainage 50-100 waste management 5-15 guard fence 10 fire hydrants 50 bus shelters 20 reserves furniture 17 water treatment devices 15 - 20

7

5. REPAIRS AND MAINTENANCE EXPENDITURE

Capital Expenditure

is expenditure, where the benefits will occur over future years and which involves at least one of the following conditions: • It creates a new asset which will not be consumed by the Council within 12

months.

• It significantly extends the expected useful life of an existing asset .

• It significantly increases the performance of an existing asset.

• It adds to the existing capabilities of the asset

Maintenance Expenditure • The repair or making good of any existing physical asset.

• Work required to existing physical assets to prevent further deterioration or to maintain the character and value of the asset.

• On-going servicing of physical assets.

• Will not significantly increase the service potential or useful life of the asset.

Asset Maintenance Maintenance on an asset may be performed at regular intervals or on an ad-hoc basis during its useful life. Routine maintenance or repairs on an asset is often the subject of a program of works. Both are aimed at preserving or restoring the asset to its predetermined standards. Expenditure in either case should be categorised as operating in nature and expensed during the period in which it occurred. 5.1 Asset Upgrades and Improvements Expenditure on upgrading or improving an asset may be classified as capital expenditure if the useful life or function of the asset is affected. 5.2 Asset Renewal or Replacements If the renewal or replacement of the asset part represents a separable asset the replacement should be treated as capital. Separation assumes the renewal or replacement of the part can be distinctively identified and a useful life determined for the part...

8

5.3 Examples of Non-Current Asset Treatments The below table prescribes the general accounting treatment of expenditure incurred within the Council. This treatment applies equally to any expenditure that may be either directly or indirectly attributable to each listed activity, including project supervision and other administrative costs. This list is not exhaustive Treatments Category Design costs (includes architect fees) Capital

Meeting and public consultation costs Operating

Constructing New Facilities Capital

Renovation or Fit-out of office/building Capital

Painting Operating

Replacing existing carpets / Flooring Operating

Acquiring furniture Capital

Permanent signage Capital

Air conditioning Upgrades Capital

Repairs / maintenance of existing air conditioning equipment Operating

9

6. ASSET ACQUISITION 6.1 Purchase of Assets Individual Assets The individual assets must be identifiable so that they can be individually capitalised to the relevant asset account. Examples of these assets are:

Plant and Equipment • photocopiers • gym equipment • video cameras • electronic whiteboards • Tools and machinery

Computer Equipment • pc’s (unit consisting of hard-drive, monitor, keypad, mouse, speakers) • laptops • digital cameras • printers • servers

Motor Vehicles purchase of new vehicle Furniture and Fittings • table

• chairs • filing cabinet

(note that bulk purchases of furniture with individual costs below the threshold are to be expensed). In special circumstances, bulk furniture will be spent through the works program e.g. as part of major refurbishment. In this case the expenditure will be capitalised.

Artwork • painting • sculpture • antique furniture

Land purchase of property All assets are subject to stock-take and valuations. Under no circumstances should assets above the threshold be budgeted and purchased from operating expenditure.

10

Capital Works –Property and Infrastructure Assets Capital Expenditure on other assets (Roads, Footpaths, Drains, Bridges, Building refurbishment etc.) must be set up as capital projects. All capital expenditure should be budgeted and spent through the Capital Works Program and reported in the Capex report. All capital projects must meet the requirements of the definition of capital as stated in section 4 above. Advice should be sought from Finance if there is ambiguity. It is the responsibility of the Asset Manager to identify which costs are capital and which are operating and communicate to Finance for recording in the general ledger. All costs related to the creation, construction or the upgrade of that asset must be charged to the project. The project created must have a clear description so that the costs can be capitalised to the correct asset account. Capital Project Finalisation procedures: • All expenditure to be capitalised as an asset must be set up as a capital project in the Capex Report.

• It will be the responsibility of the Project Manager to advise on the completion of the project and the asset that has been created.

• This is communicated to Finance through the Capex meeting or via updating the Capex Report.

• Project managers or their assigned delegate are required to provide finance with asset handover forms for all completed assets no later than the last weekday in April.

• The Finance unit will be responsible for financially registering assets in the asset account in JDE. An asset handover form must be completed for each asset. Asset classes requiring the completion of an asset handover form include:

Asset Class Property land playgrounds land improvements buildings Infrastructure road surface road pavement road kerb traffic treatments/ calming school crossings & sealed road surfaces major bridge culverts bridges - concrete/ steel bridges - timber footpaths, trails and cycleways drainage waste management guard fence fire hydrants bus shelters reserves furniture water treatment devices

11

6.2 Recording of Assets in the Asset Register • Assets below the capitalisation threshold are to be recorded in the Minor and Attractive Assets Register

(Refer to Minor and Attractive Assets Policy). Assets below the capitalisation threshold are not recognised in the Asset Register and are expensed in the period in which they are acquired. The only exceptions to this are infrastructure assets whereby, due to their nature, may be below the capitalisation threshold individually but are above as a whole (e.g. roads).

• Assets above the capitalisation threshold will be subjected to depreciation. They will be reflected in the financial statements under the Non-Current Assets section.

• The Assistant Financial Accountant and the Finance Officer will be responsible for entering purchased assets and Work in Progress (WIP) assets in the asset register.

6.3 Reconciliation of Asset Register Finance is required to perform reconciliations between the General Ledger and the asset register on an annual basis. If the reconciliation identifies discrepancies between the Asset Register, Capex Report and the General Ledger, such discrepancies are to be identified, investigated and resolved.

12

7. LEASED ASSETS The Financial Accountant shall determine if each lease contract shall be classified as a finance lease or an operating lease and account for the instrument accordingly.

A Finance Lease is a lease that transfers substantially all the risks and rewards of ownership of an asset. Title may or may not be eventually transferred. The leased asset and the associated liabilities for the minimum lease payments are capitalised in the books of the lessee.

Risks and benefits of ownership can be considered to be transferred to the lessee if one or more of the following tests are met:

• Asset ownership is transferred at the end of the lease term;

• There is future intention to exercise an option to purchase the asset for a price that is lower than the fair value

• The lease term is 75% or more of the remaining economic life of the asset

• The present value of the minimum lease payments at the beginning of the lease term equals or exceeds 90% of the fair value of the leased asset at the inception of the lease The leased asset is so specialised that only the lessee can use it

Accounting for finance leases Finance leases are capitalised, recording an asset and a liability at the lower of the fair value of the asset and the present value of the minimum lease payments, including any guaranteed residual value. Lease payments are allocated between the reduction of the lease liability and the interest expense. Leased assets are depreciated on a straight line basis over their estimated useful lives to the Council where it is likely that the Council will obtain ownership of the asset or over the term of the lease, whichever is the shorter. Leased assets are currently being amortised over a 6 to 7 year period. An Operating Lease is where the risks and benefits of ownership are not transferred to the lessee. Lease payments are treated as a rental expense.

Authority to enter into finance and operating leases must be sought as outlined in Council’s purchasing delegations.

13

8. DISPOSAL OF ASSETS Prior to disposing of any Council owned assets, refer to the Asset sale and disposal policy (available on SONIC under Assets and Property policies). 8.1 Decision to dispose The decision to sell or dispose of an asset will be made after considering:

• The usefulness of the asset;

• Its useful life (particularly as it relates to machinery and equipment);

• The annual cost of maintenance;

• Any alternate future use of the asset;

• Any duplication of the asset;

• The current market value of the asset;

• The impact the sale or disposal of the asset may have on the community;

• The impact the sale or disposal of an asset may have on the operations of Council;

• Any cultural or historical significance;

• A benefit and risk analysis of the proposed disposal or sale; and

• Any restrictions on disposal. 8.2 Responsibility for monitoring and control Responsibility for the monitoring of and control over disposal of assets (excluding land) is delegated to the manager level. For disposal of land, refer to Appendix A and Appendix B of the Asset sale and disposal policy (available on SONIC under Assets and Property policies).

8.3 Disposal Delegation Disposal delegations can be found in the Asset sale and disposal policy (available on SONIC under Assets and Property policies). Council or its officers with delegated authority will, when making decisions under this Policy, act in accordance with Council’s budget, relevant policies, plans, industrial awards, agreements and resolutions. The officer preparing the asset for disposal must be independent of the officer approving the asset disposal request form.

14

8.4 Disposal Method – Plant, Machinery, Furniture, Equipment and Art Work Once a decision to dispose of an asset has been made, the Asset sale and disposal policy has been reviewed and a method has been selected, an Asset Disposal Request Form must be completed for all assets and authorised by the appropriate delegate prior to disposing of the asset. The forms must be attached to supporting documentation and provided to Finance. 8.5 Notifying Disposal of Assets – Plant, Machinery, Furniture, Equipment and Art Work Following the disposal of an asset, it is the responsibility of the relevant Asset Manager, or their delegate, to notify the Finance team of the disposal to ensure the financial asset registers are updated accordingly. These registers need to be maintained in an up to date manner to reflect Council’s asset holdings and financial status. This is required by the Australian Accounting Standards Board (AASB). 9. ROLES AND RESPONSIBILITIES

Computer Equipment

IT Services unit will be responsible for all computer equipment (hardware and software) assets. They will purchase, install, and remove all assets. All assets surplus to requirements will be disposed as per Council procedures. The IT Services unit will also be responsible for the physical stock-take to be conducted as deemed necessary. All assets to be written-off will be certified by the manager IT services.

Plant and Equipment, Furniture and Fittings

Managers will be responsible for these assets under their control. As assets are purchased, they will be coded to their organisation unit in the asset register in JDE. Managers are responsible for notifying Finance of any new assets under their control. Finance is responsible for maintaining the asset register. A stock-take will be carried out as deemed necessary.

Motor Vehicles

Infrastructure Services will have responsibility for all to Council’s motor vehicle assets. They will purchase and dispose of assets as per Council procedures. Finance is responsible for maintaining the asset register. A physical stock-take will be carried out at the end of each year (June 30) and an impairment valuation of those assets is to be provided to Finance as required by the current accounting standards.

Infrastructure Assets

Infrastructure Services will be responsible for all infrastructure assets and will provide valuations every 2 years. They will be responsible for maintaining the asset register and sending it to Finance as at 30 June for recording in JDE.

Land and Buildings

Independent valuers will have responsibility of valuing the Council’s Land and Buildings every 2 years. Infrastructure Services will be responsible for all land and buildings owned by Council or under Council control. The register is to be maintained in RapidAsset / SMEC by Infrastructure Services.

10. STOCKTAKES

15

Stocktakes are the mechanism that assists in confirming the existence and proper control over assets. Stocktakes also ensure that teams are accountable for the minor and attractive items under their control and assist them to: • Identify items that have been lost or stolen and, where possible, recover them; and • Assess the effectiveness of control practices for minor and attractive items and, where required, improve

them. 10.1 Frequency of stocktakes Teams must ensure that stocktakes are performed as deemed necessary or as otherwise specified in the relevant accounting standards or Council policy. 10.2 Responsibility for the stocktake The responsibility of performing the stocktake rests with the area responsible for the assets. However, the person assigned to perform the stocktake must not maintain the asset register. 10.3 Results of the stocktake The results of each stocktake must be provided to the head of the operational unit or cost centre responsible for reporting on assets. The head of the operational unit or cost centre should then address any significant issues of concern.

11. POST IMPLEMENTATION ACTION This Policy will be reviewed on a four yearly basis or as legislation changes that warrants updating. Council may review this policy at any time (but not so as to affect any process that has already commenced).

12. REFERENCES AASB 101 Presentation of Financial Statements AASB 116 Property, Plant and Equipment AASB 117 Leases AASB 136 Impairment of Assets AASB 137 Provisions, Contingent Liabilities and Contingent Assets Victorian Local Government Act 1989 This policy is to be read in conjunction with any other relevant Council policies.