Pp lg 2011 workshop

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Local Government Workshop
Carl Millington Brendan Jones John Ross
Partner Partner Partner
Business Advisory & Assurance Private Clients Tax Consulting Group

Monday, 6 June 2011

Agenda

 Introduction - current issues in Local Government
 Code 19 Update
 Issues that interest the DLG
 Land under roads and other asset issues
 Cost Advantage Program – Demonstration
 Non-cash Sec 94 Contributions
 Tax issues - FBT & MV‟s, GST on Developer
Contributions
 Accounting for interest free loans
 Year-end efficiencies and preparing for the audit

The trouble with accounting…..

 http://www.youtube.com/watch?v=wM-
ZRLSjr6g&feature=related

Current Issues in Local Government

SUMMARY OF DLG
CIRCULARS


DLG Circulars
 10-16 Amendment to the local government 1993 -
partial rate exemptions for religious bodies, charities
and public benevolent institutions
 10-17 Integrated planning and reporting self-
assessment checklist
 10-18 Maximum amount of minimum rates 2010/11
 10-19 Strategic tasks guide 2010/11
 10-20 Snapshot of NSW councils - comparative
information on NSW local government councils 2008/09


DLG Circulars
 10-21 Annual reporting and state of the environment
reporting requirements of local councils
 10-22 Revised internal audit guidelines
 10-25 Draft quarterly budget review statement and long
term financial plan guidelines
 10-29 Guidelines for the preparation of a special rate
variation application and guidelines for the preparation
of an application to exceed the minimum rate statutory
limit -2011/12


DLG Circulars
 10-32 Quarterly budget review statement
 10-34 Capital expenditure guidelines
 11-01 Revised ministerial investment order
 11-03 Long service leave – amending regulation
 11-05 Information about rating for 2011/12
 11-06 Boarding house tariffs for residential rating for
2011/12
 11-08 Collaborative arrangements between councils -
survey report

Code 19 Update

SUMMARY OF CHANGES Code

Update

19

Code 19 Update

 The draft code was issued on 11/04/11 for review and
comment by interested parties.

 The final code was recently issued without any
significant changes to the draft.
This was not unexpected given the insignificant
changes that have occurred for 2010/2011 reporting
year. A nice change from what has ensued in the last
few years!

Code 19 Update

 Most changes outlined in the Code involve “tweaking” of
the presentation requirements of the GPFR statements.
These changes included:

 The Statement of Changes in Equity now
disclosing the „net operating result‟ and „other
comprehensive income‟ separately;
 Note 2, GPFR (Functions or Activities) and Special
Schedules re the split of the „Administration‟
category into „Governance‟ and „Administration‟;

Code 19 Update

 Note 9 (I,P,P&E) re commentary required to clarify the
methodology used to value „Land under Roads‟ [which
will be discussed in detail in the next session]; and
 Notes 13 (Statement of Performance Measures) and
Note 21 (Results by Fund) require splits into funds –
„Consolidated‟, „Water‟, and „Sewer‟. [Applicable for
those councils (outside the Sydney metro area and
Kiama) where such services are provided].

Code 19 Update

Accounting Policy Changes:

 Accounting policy changes noted are not related to any
accounting standards changes but rather DLG
interpretation of accounting policies.
The Code does refer to AASB 117 (finance versus
operating lease classifications) and AASB 5 (accounting
for non-current „held-for-sale‟ assets) where future year
changes have been flagged, however these are not
mandatory for 2010/2011.

Code 19 Update

The most significant changes for 2010/2011 are:

 The I,P,P&E asset categories including:
 recognition of land under roads – the Code allows 3
options to value. The 3rd of these, - the „Englobo‟
value was noted by the DLG at the LGFP conference
as favourably recognised by NSW Treasury.
 Fair valuation of the existing asset categories of
„Community Land‟, „Land Improvements‟, „Other
Structures‟ and Other Assets‟.

Code 19 Update

 the treatment of grant and contribution revenues
which are now to be recognised based on the basis in
which they are received, not the basis on how they are
spent.
Accordingly, all grants and contribution revenue should
be recognised per the GPFRs as being „operating‟ in
nature unless specifically received for capital purposes.
This change in policy requires the comparatives in
the 2010/2011 GPFR’s to be restated to reflect the
definition used now.

Code 19 Update

Notes on the Fair Valuation of Community Land, Land
Improvements, Other Structures and Other Assets:

 Community Land – to be valued, per land parcel,
based on NSW Valuer-General valuations, unless
acquired at market value previously.
Community land parcels „found‟ or „lost‟ are to be
treated as correction of errors with the related
adjustments made to Retained Earnings before
revaluation.

Code 19 Update

Should a reclassification between Operational and
Community Land occur then an adjustment to the Asset
Revaluation reserve is required to reflect the revaluation
of Operational Land in the 2008 year.

 Land Improvements, Other Structures & Other
Assets – the Code allows valuation of these
categories at depreciated historical costs, as done for
Plant & Equipment in 2008. Therefore the description
of the basis of valuation will change however the
calculation of the value will not.

Code 19 Update

Comment on I,P,P& E valuation basis and values:
 All asset categories except for Construction/WIP per
Note 9 in 2010/2011 should be „at valuation‟.
 The revaluation cycle for all asset categories is 5 years
however Councils are still required to review the
contents of each annually. Such a review should be
documented as part of the year-end documentation and
signed off by appropriate line management personnel.
If there has been a significant shift in fair value [such as
a boom or bust in land values] this should be reflected
in the valuations per the GPFRs.

Code 19 Update

Note 1 – Summary of Significant Accounting Policies

 The DLG in presenting at the LGFP conference made
specific reference to the contents in Note 1.
The point was made that the standard wording for Note
1 as presented in the Code and as provided by the
various financial statement software packages used (i.e.
LG Solutions, Coalface etc.) should be scrutinised by
Council management.
Note 1 in each Council‟s GPFRs should be specific to
that Council.

Code 19 Update

I,P,P&E - Note 9 and Special Schedule 7:

 Special Schedule 7 „Condition of Public Works‟ refers
to Note 9 and should equal Note 9.
This has not always been the case and management
should ensure that reconciliation of the 2 occurs and
if applicable explanations for differences
documented.

Code 19 Update

Note 6(b) – Externally Restricted Assets held:

 Reminder - Unlike in years prior to 2009 the requirement
to classify cash/investment assets as Current/Non-
current depending on the timing/nature of the restriction
no longer applies.
Assets are to be classified as Current or Non-Current
based on the characteristics of the Cash and/or
Investments held.

Issues of Interest to DLG

KPI’S AND RATIOS

Issues of Interest to the DLG

2009/10 statistics of interest to DLG (NSW averages)
 Revenue
‒ Rates – 33%
‒ Annual charges - 13%
Reasonably stable
‒ User charges & fees – 17% over last 5 years

‒ Operating grants – 14%
‒ Capital grants – 12%


 Expenses
‒ Depreciation & impairment – 20%
‒ Employee – 39%
‒ Materials & contracts – 25%
 Unrestricted cash – 9% had NIL
 UCR
‒ < 1.5 = 16 councils
‒ 1.5 – 2 = 26 councils
‒ 2 – 3 = 42 councils
‒ 3 – 5 = 47 councils
‒ > 5 = 35 councils


 Outstanding rates benchmarks
‒ Metropolitan councils = < 5%
‒ Rural councils = 5 – 10%
 Employee Costs/Rates & Annual Charges
‒ 15 councils = 150% or greater
‒ 34 councils = 100% - 150%
 Infrastructure assets benchmark – WDV better than
40%
 DLG expected asset renewal ratio - 1:1
 Value of Road Assets - $44B (total assets $120B)


 DLG monitoring Councils‟ financial health:-
‒ Operating result
‒ Balance sheet stability
‒ Levels of unrestricted cash
‒ KPI‟s (Note 13)
‒ % of employee costs to rates & annual charges
‒ WDV of infrastructure assets
‒ Asset renewal ratio


 DLG stages in monitoring Councils health
‒ Informal discussions
‒ “Please explain” letters
‒ On-site visits and focussed reviews
‒ Formal quarterly monitoring program
‒ Formal investigation (under the LG Act)
‒ Public enquiry

Land Under Roads & Other Asset Issues

VALUATIONS ETC.

What we will cover in this session

Circular 09-09 (amended the revaluation timetables set out
in Circulars 06-43 and 08-07) – requirement to value
assets at fair value
 Land Under Roads
 Land Improvements
 Community Land
 Other Structures
 Other Assets

Land under roads
The provisions contained in Circular 09-09 have been revised by
Circular 09-25, as follows, extracted from Code 19:
 The Division has now determined that in accordance with AASB
1051 Land Under Roads, a council may elect to recognise or not
to recognise as an asset land under roads acquired before
 1 July 2008. Land under roads acquired after that date is
accounted for under AASB 116.

Definition – “Land under roadways, and road reserves, including
land under footpaths, nature strips and median strips”

Land under roads
Two components:

1. Acquired pre 1 July 2008?
‒ Elect not to recognise (then need to derecognise any previously
recognised against opening balance of accumulated
surplus/deficit)
‒ Elect to recognise
2. Acquired from 1 July 2008 onwards

Land under roads
Council Considerations before valuing – Acquired pre 1 July 2008 and elected
to recognise:
 Determine if land under road meets the definition of an asset
 Determine if the asset can be reliably measured.
 Disclose accounting policy in financial reports in each reporting period that
the standard applies to.
 Measure at cost or fair value as at that date. (If land under roads obtained
at no or nominal cost AASB 116 states that Not For Profit entities must
record at fair value).
 Recognise any land under roads acquired before 1 July 2008 against
opening balance of accumulated surplus/deficit.
 Disclosure nature and net amount of each adjustment made.
 Report to council any budget implications.

Land under roads
Council Considerations before valuing – Acquired post 1 July 2008:
 Determine if land under road meets the definition of an asset
 Determine if the asset can be reliably measured.
 Account for land under roads acquired in accordance with AASB
116 – Property, Plant and Equipment.
 Councils should recognise land under roads acquired at its cost,
where the cost represents fair value.
 Any land under roads acquired at no or nominal value should be
measured at its fair value.

Land under roads
Fair value valuation method - acquired pre 1 July 2008:
 Valuation of the entity‟s total land under roads at the average unit
value of the land contained within the entity‟s area of control.
 valuation of road segments at the average unit value of properties
adjoining the relevant road segment
 valuation on the „Englobo‟ basis (see Code 19 for method).

Valuation methods - acquired post 1 July 2008:
 In accordance with AASB116 – at cost, or where no cost or nominal
value, then at fair value (see above).

Valuation methods between pre and post 1 July 2008 should be
consistent.

Land under roads

Useful guidance to assist in this valuation process:
 Code 19;
 AASB1051 – Land under roads
 AASB116 – Property, plant and equipment;
 Australian Infrastructure Financial Management
Guidelines;
 Comparison with other Councils;

Community Land
Valuation methods:
 The NSW Valuer General‟s valuations may be used to initially recognise community
land acquired at no cost or nominal cost. It is considered that the valuations
represent the fair value of such land in lieu of actual cost.
 Community land acquired at market price fulfils the requirement of recognition as an
asset under clause 7 of AASB 116. Such land should be recorded initially at cost as
per clause 15 of AASB 116. Therefore, the Valuer General‟s valuations for the initial
recognition of the land acquired at market price should not be used.
 The NSW Valuer General‟s valuations may be used under the revaluation model to
represent fair value for the revaluation of community land under Clause 31 of AASB
116.
 In the case where community land has not been valued by the Valuer General,
council may request a valuation under section 20 of the Valuation of Lands Act
1916.

Community Land

Issues to consider:
 Opportunity to ensure land is correctly classified as operational or community and
correct where relevant;

Land improvements, other structures &
assets
Councils may use depreciated historical cost or insurance
values as a representation of fair value as long as Council
has undertaken a high level review to determine if there
has been any impairment of these assets.

Council may wish to calculate unit rates etc. where
applicable.

Summary
 Ensure methodology for valuation complies with the requirements to
AASB1051, AAS116 and Code 19;
 Ensure all assets are captured;
 Recommend to prepare a brief methodology document covering the
valuation of land under roads, community land, land improvements, other
structures and other assets. Have documentation in place to support any
calculations or assumptions used – be able to support your valuation and
logic come audit time – please send to us prior to the year end audit, when
available;
 Try not to leave the process to the late minute;
 If unsure contact other Councils with regard to their treatment or your
Auditors;
 We have to do it all again in 5 years!

Cost Advantage Program

DEMONSTRATION

What is Cost Advantage?

Budgeting Process

Financial
Budget

Expenses
Revenue
- Sales - Cost Reduction
- Cost Efficiency
- Pricing

Relevance to Local Government?

Local Government Planning and Reporting framework

 Annual Operational Plan/Budget
 Long Term Financial Plan must include:
‒ Projected income and expenditure, balance sheet and cash flow
‒ Planning assumptions used to develop the Plan
‒ Sensitivity analysis - highlights factors/assumptions most likely
to affect the Plan
‒ Financial modelling for different scenarios
e.g. planned/optimistic/conservative
‒ Methods of monitoring financial performance.

Today‟s Objectives

Not to provide you with all the answers………….

 Provide you with framework to help identify, analyse
& critically assess the different layers of costs in your
organisation and look to find increased operational
efficiency.

Pitcher Partners 9-Step Cost Advantage
Program
1. Identify Costs
2. Assign Responsibility
3. Set Targets
4. Analyse
5. Options
6. Recommendations & Approvals
7. Implementation
8. Communication
9. Measure, Monitor & Report

Step 1 – Identify Costs

 Analytical review of actual costs in current and prior
years
(identify variances $ and %)

 Systematic review of each and every class of purchase

 Costs should be categorised into:
Essential; (business critical - hard to change)
Necessary;
Discretionary; (should be easiest to reduce)
Avoidable/Inefficient; (should be focus of analysis).

Step 2&3 - Assign Responsibility/Set
Target
 Determine who will carry out the review?
 Who is the appropriate person who has control
over/knowledge of each category of expense?

 How much cost $ are we looking to reduce?
Attainable & sustainable!

 What is motivation that drives the target – cashflow,
KPIs, strategic, deliver financial plan?
 To be completed by when?

Step 4 - Analyse

 Involves checking existing policies & processes

 Looking at trends in spending

 Benchmark each major cost category with industry
averages

 Looking at cost drivers to gain thorough understanding

 Make observations and comments

Step 5 - Options

Prepare a plan on how cost savings can be achieved.

General Cost Advantage Strategies

 Consider lower cost options
 Renegotiate terms with suppliers
 Test the market
 Take advantage of discounts/favourable payment terms

Step 5 – Options (continued)

Specific Cost Advantage Strategies

 Advertising/Marketing Computer Expenses
 Financing/Interest Insurances
 Freight/Postage Office Supplies
 Light & Power Rent
 Motor Vehicle/Transport Staff/Recruitment
 Telecommunications Travel/Entertainment

Step 6 – Recommendation & Approvals

 Evaluate and consider options

 Determine preferred action plan to achieve cost
reduction objectives

 Put forward recommendations for relevant approval

Step 7 & 8 – Implementation &
Communication
 Project plan including timeframe and key project
deliverables

 Assign project leader and team leaders

 Define process, allocate tasks/responsibilities and
reporting framework

 Important to communicate implementation with
employees

 Communication is essential between project team

Step 9 – Measure, Monitor & Report

 Schedule quarterly meetings for project team to meet
with senior management to review whether targeted
savings are being achieved and/or whether further
action is required

 Measure results and monitor – ongoing

 Report progress to relevant stakeholders

Some Examples

 Specific Cost Advantage Strategies

 Cost of Labour Program Checklist

 Cost of Sales Program Checklist

Non-Cash Section 94 Contributions

TIMING AND MEASUREMENT

Non-cash Sec 94 Contributions

 Section 94 of the EP&A Act allows Council to impose a
condition on a development consent where that
development is “likely to require the provision of or
increase the demand for public amenities and public
services” within the local government area.
 Contributions can be
‒ Monetary contributions - (Sec 94(1)(a))
‒ Dedication of land free of cost – (Sec 94(1)(b)
‒ The provision of a material public benefit – (Sec
95(5)(b))


 AASB 1004 requires contributions to be measured at
the Fair Value of the contributions received or
receivable.
 Fair Value is defined in the Australian Accounting
Standards as the amount for which an asset could be
exchanged between knowledgeable, willing parties in an
arm‟s length transaction.


 Example:-
‒ Council A enters into agreements with developers in
accordance with Sec 95(5)(b).
‒ These agreements are evidenced by a “Works in
Kind” (WIK) agreement and are backed by a bank
guarantee in case on non-performance.
‒ The WIK Agreement provides
• “For the purposes of this Agreement, the Parties
acknowledge that the Contribution Value in relation to the
works is the value of the Works specified by, or determined
in accordance with, in the Contributions Plan or as otherwise
agreed between the Parties.”


 Example (cont.)
‒ On 31 May 2011, building to the value of $1M to be
provided.
‒ How is this transaction handled at 30 June 2011?
‒ On 31 March 2012 the building is completed and title
transferred to Council A
‒ Council‟s engineers assess the building and
determine that it‟s value is $750,000
‒ How is this transaction handled at 30 June 2012?


 Where the Contribution Value is not expressed in
monetary terms (ie where an area of land is prescribed
rather than a dollar amount) it will be necessary to
determine the Fair Value as follows:
‒ If the land is classified as operational land – by
reference to recent valuations of similar land in the
local government area
‒ If the land is classified as community land – by
reference to the latest Valuer General‟s valuation of
the land.

Taxation Issues

6 June 2011

John Ross
Tax Director
Pitcher Partners Sydney

Fringe benefits tax – employer cost
 Employees
„Salary & wages‟

Excluded exempt benefits
- „otherwise deductible‟ rule
- laptops primarily for business usage
- mobile phones principally for business usage
- LAFHA
Excludes – Superannuation
Meal entertainment – actual usage v 50% / 50%
Motor vehicles concessionally taxed

Motor vehicles
 „Car‟ – carry less than one tonne / < 9 passengers
- not motor cycles
 „Held‟ – made available to a person
 Provided in respect of employment of employee
 Private use – used for private purposes
‒ home to work is private use
‒ taken to be available for private use
‒ car garaged by employee
‒ in employee‟s custody or control
- annual leave/interstate trips– take control of keys
 Work related travel in commercial vehicles utes/panel vans <1
tonne exempt where private use is minor in frequent, irregular

Value of car fringe benefits
Statutory formula
0 -14,999 km 26%
15,000 – 24,999 km 20%
25,000 – 40,000 km 11%
40,000 km plus 7%

Cost price - reduced by employee trade-in or cash contribution
- excludes rego, tax on rego/transfer
- includes dealer delivery costs
- new car warranty (not extended warranty)
- GST inclusive price, if any
- fleet discount and manfacturer‟s rebate reduce cost
2 / 3 rd‟s - More than 4 years old

Budget 2011/12 Statutory rate changes cars

Statutory rate (multiplied by the cost of the car to
determine a person's car fringe benefit)

Distance travelled New contracts entered into after 7:30pm (AEST) on 10
during the FBT year May 2011
(1 April – 31 March) Existing
contracts From 10 May From 1 April From 1 April From 1 April
2011 2012 2013 2014

0 – 15,000 km 0.26 0.20 0.20 0.20 0.20

15,000 – 25,000 km 0.20 0.20 0.20 0.20 0.20

25,000 – 40,000 km 0.11 0.14 0.17 0.20 0.20

More than 40,000 km 0.07 0.10 0.13 0.17 0.20

Budget 2011/12 FBT car benefit calculation

 Removes incentive to drive further to > tax conc.
 Phase out of concessional FBT rate for increased kilometres
travelled
 Applies for new contracts entered into after 7:30 pm 10 May
2011
‒ Increases the tax concession for cars <15,000 km
‒ Maintain conc. 15,000 – 25,000
‒ Decreases tax concession cars travel > 25,000 km
 Henry Review recommendation
Car industry support continues; May be benefit for exec‟s to
upgrade

Employee contribution

 Reduces taxable value
 97% of taxpayers earn < $180,000
 FBT 46.5% penalty on grossed up value
 Marginal tax rate 31.5%
37.5%
 Bonus payment, subject to PAYG, contributed to
employer, can reduce taxable value to nil eliminating
FBT at less cost to council than FBT

Goods and Services Tax
(Exempt Taxes, Fees & Charges) Determination 2010 (No.2)

 Listing Australian taxes, fees and charges the payment
of which will not constitute the provision of consideration
for a supply [Part 2 – NSW]
‒ Local government rates
‒ Building application and planning /zoning fees
‒ Compulsory charges for domestic waste removal
‒ FOI charges
 Until gazetted not free from GST
 18 month process
 ATO to introduce principles based approach
 2 years to implement

Goods and Services Tax – taxable charges

 Taxable charges
‒ Inspection and testing fees, for example building
inspections
‒ Swimming pool and leisure centre fees
‒ Fees for use of public land
‒ Fees for attendance by officers at events
‒ Cemetery, burial and cremation fees
 Land developer contributions –‟in kind‟
Supply of contribution and supply of approval are not
treated as consideration for supply [s.82-5;82-10]

GST

 Grants
If a payment is for no service – no GST
If recipient required to do something – GST
GSTR 2000/11

 Credits for input tax
Limitation where council have exempt financial supplies on
investments
May 2010 Budget increased threshold from $50,000 to
$150,000

Interest Free Loans

REVIEW ACCOUNTING

What we will cover in this session

We will consider how the lender and the borrower should
account for interest free loans. Interest free loans are
often provided to not-for-profit entities or related parties
within a group, for example, subsidiaries;
 When accounting for interest free loans the following
two issues should be considered:
‒ measurement (that is, what is the fair value of the
interest free loan);
‒ recognition (that is, what is the reason(s) for the loan
and who are the parties involved).

Issues to consider

When accounting for interest free loans the following two
issues should be considered:
 Measurement (that is, what is the fair value of the
interest free loan);
 Recognition (that is, what is the reason(s) for the loan
and who are the parties involved).

Accounting for interest free loans

Measurement issues
 Fair value of an interest free loan may not equal its fair
value.
 Long term receivable with no stated interest - fair value
normally arrived at using discounted cash flow method;
 For discounting use an interest rate for a similar
instrument or with a similar credit rating or that is issued
at the same time;
 AASB139 permits short term receivables to be recorded
at face value without discounting as long as the impact
of not discounting is not material;


Repayment terms?
 Need to ascertain expected repayment terms;
 If none, then lender has no intention to recall the loan
(indicates in substance that this is a capital contribution)
or borrower no intention to pay.

Recognition
Accounting for interest free loans depends on the parties
involved and the reason for the loan.

Loan receivable – example
Council lends $100,000 to For-profit entity and borrower for 5 years and
classifies the financial asset under loans and receivables. The loan carries no
interest. The loan is repaid in 5 equal instalments over the next 5 years.
Assume a market related interest rate is 10% (fair value of loan when
discounted is $75,816.
Entry in Councils books when loan is made:
Dr – Loan / receivable $75,816
Dr – Grants expense $24,184
Cr – Cash $100,000
Entry at end of year 1:
Dr – Cash $20,000
Cr – Interest income $7,582
Cr – Loan receivable $12,418


Loan payable – example
Similar treatment to the previous example except the
opposite way around. With the initial entry from Councils
perspective the interest free element ($24,184) will be
treated as a contribution received and will be accounted for
in accordance with AASB1004 Contributions.


Employee loan
Assume similar terms and conditions to previous example:
Entry in Councils books when loan is made:
Dr – Loan / receivable $75,816
Dr – Employee expense $24,184
Cr – Cash $100,000
Entry at end of year 1:
Dr – Cash $20,000
Cr – Interest income $7,582
Cr – Loan receivable $12,418

Summary

 Aim is to ascertain the fair value;
 Need repayment terms and to use an
appropriate interest rate;
 If no repayment terms then possible capital
contribution to the receiver;
 Loan is recognised at the discounted value and
the difference between this and the face value is
an income or expense depending on whether
the loan is receivable or payable.

Year End Efficiencies
Preparing for Audit

TAKING EFFECTIVE CONTROL
OF YEAR END PROCESSES

Year end efficiencies

Key factors in achieving effective interaction between
finance teams and audit teams:-
Understanding respective obligations & requirements
a. Audit teams can work much more efficiently when
finance teams supply them with all the data they need
to fulfil their audit obligations
b. Finance teams are able to help the audit process by
having a better understanding of the audit process
c. A better understanding of audit team requirements will
lead to better year end processes and improved
internal controls.


Plan properly
a. As planning is critical to audit efficiency, so it is to year
end accounts preparation
b. Planning the year end accounts preparation and audit
ensures that both the finance team and the audit team
are aware of expectations, timing, suitable audit
evidence, systems and processes, business cycles,
materiality, staff availability, meeting dates, etc.


10 Steps to Year End Success
Step 1 - Assign Responsibility
Step 2 - Develop a Project Timetable
Step 3 – Determine Project Milestones
Step 4 – Identify Closing Dates & Pre Year-End Functions
Step 5 – Secure Organisational Support
Step 6 – Identify and Specify Resource Requirements
Step 7 - Work with Your Auditor
Step 8 – Train the Team
Step 9 – Match Resources with Requirements
Step 10 – Have a Contingency Plan


A smooth year-end close can be achieved by following 2
basic rules:
 Predetermine KPIs for things such as the time taken to perform a
process (eg accruals, prepayments, ELE, cash and investments,
etc), the number of errors made in preparing the statements
(evidenced by the number of adjusting journal entries required) and
the utilisation of technology to speed up the process (eg the
number of automated journal entries as a percentage of total
journal entries).
 Hold regular meetings of team members before the year-end close
to consider issues such as review of lessons learned from prior
years, discuss material transactions or events that may be new this
year or have a significant impact on the result for the year, the
timing of the external audit of the financial statements.


Audit Preparation Planning Tips
a. Review Client Assistance Pack and cross reference
your working papers to ensure completeness
b. Ensure that all discussions regarding management
decisions are documented and included on the working
paper file (eg impairment, provisions, valuations)
c. Consider: Is this sufficient and appropriate evidence?
d. Complete confirmation letters in a timely manner and
return to us to post
e. Working papers are providing electronically and/or set
up on an audit drive and/or saved to disk

Pp lg 2011 workshop

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