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2. Special Schedule 7 – infrastructure reporting 2019 – 2020

June 2020

It’s that time of year again where councils will need to report on the condition of their infrastructure assets in Special Schedule 7 (SS7). SS7 has received a lot of flak over the years, primarily due to the inconsistencies of reporting across councils and financial years. At its core SS7 is an essential document for local government as not only does it tell you what your asset expenditure and condition is, it also clearly articulates what you should be spending on your assets in any given year.

In a post Covid-19 environment where many councils have experienced significant decreases in income and local economies are suffering, we know that both the state and federal government are providing economic stimulus to kick start local economies. We also know that targeted infrastructure spending will likely be a priority.

In prioritising grant applications, it is essential that priority projects help maintain and improve organisational sustainably. Understanding your asset condition and current expenditure will allow an organisation to target grant applications. Producing a reliable and realistic report on the current state of your infrastructure (SS7) will feed into your Long Term Financial Plan and help guide your overall financial sustainability measures.

We appreciate the importance of understanding your organisation’s present and future infrastructure needs and the importance of accurate infrastructure reporting via Special Schedule 7. If SS7 can provide a realistic picture of your asset condition, and on the asset actual and required expenditure for the year, it can not only provide a valuable tool in developing your long-term asset expenditure requirements but also highlight where your infrastructure issues really are.

Morrison Low has reviewed a number of councils’ Special Schedule 7s for the current and previous financial years. We cannot stress enough that, for consistent reporting, councils must adopt a systematic, repeatable and justifiable process for determining Special Schedule 7.

Through our work for the Office of Local Government on the NSW Infrastructure Audit, the Far West Councils’ initiative and numerous other councils we have developed a robust model that realistically and consistently produces an annual SS7 statement.

Morrison Low reviews Special Schedule 7 in the following way:

• Cost to satisfactory. We apply our condition-based approach to the calculation of cost-to-satisfactory. We then require council to supply us with information about each asset class (inventory, value, condition etc). Our process then involves an onsite workshop with all the relevant asset managers to explain our methodology and to get an agreement on an organisational approach to the preparation of the schedule. Once that agreement is obtained and the staff understand the methodology, we run the calculation and provide staff with the model that calculates the cost-to-satisfactory so that it can be used in future years.​

• Required maintenance. We believe that this calculation is best based on a percentage value of the current replacement cost of the assets. While this will always be a value to be determined by the organisation, based on its service levels etc, if we use this standard approach we are able to provide details of what other similar sized organisations consider their required maintenance to be for comparison purposes.

• Cost to agreed service level. We have modified our original spreadsheet to include this new measure which is mandatory from this year. We have adopted the full replacement cost of assets below a council’s agreed intervention level as the basis for this. We work through our methodology with the council to understand service level requirements in developing this measure.

Upon the completion of the review process we provide a report setting out the following:

• the documented methodology for Special Schedule 7
• the council’s 2019/20 Special Schedule 7 return
• a spreadsheet detailing the Special Schedule 7 calculations and output for the council’s financial statements.

We undertake this analysis for a fixed fee and can complete our deliverables within two weeks. We are able to work in with your council’s financial reporting time frame.

If you would like further information and pricing of our Special Schedule 7 returns please contact Tim McCarthy on 0407 247 256 or Egor Ilyukevich on 0413 977 432.