Pp lg 2011 workshop

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Presentation from the 2011 Pitcher Partners Local Government Finance Workshop

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Pp lg 2011 workshop

  1. 1. INSERT PHOTO HERE Local Government WorkshopCarl Millington Brendan Jones John RossPartner Partner PartnerBusiness Advisory & Assurance Private Clients Tax Consulting Group Monday, 6 June 2011
  2. 2. 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
  3. 3. The trouble with accounting….. http://www.youtube.com/watch?v=wM- ZRLSjr6g&feature=related
  4. 4. Current Issues in Local GovernmentSUMMARY OF DLGCIRCULARS
  5. 5. Current Issues in Local GovernmentDLG 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
  6. 6. Current Issues in Local GovernmentDLG 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
  7. 7. Current Issues in Local GovernmentDLG 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
  8. 8. Code 19 UpdateSUMMARY OF CHANGES Code Update 19
  9. 9. 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!
  10. 10. 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‟;
  11. 11. 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].
  12. 12. Code 19 UpdateAccounting 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.
  13. 13. Code 19 UpdateThe 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‟.
  14. 14. 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.
  15. 15. Code 19 UpdateNotes on the Fair Valuation of Community Land, LandImprovements, 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.
  16. 16. 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.
  17. 17. Code 19 UpdateComment 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.
  18. 18. Code 19 UpdateNote 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.
  19. 19. 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.
  20. 20. Code 19 UpdateNote 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.
  21. 21. Issues of Interest to DLGKPI’S AND RATIOS
  22. 22. Issues of Interest to the DLG2009/10 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%
  23. 23. Issues of Interest to the DLG 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
  24. 24. Issues of Interest to the DLG 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)
  25. 25. Issues of Interest to the DLG 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
  26. 26. Issues of Interest to the DLG 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
  27. 27. Land Under Roads & Other Asset IssuesVALUATIONS ETC.
  28. 28. What we will cover in this sessionCircular 09-09 (amended the revaluation timetables set outin Circulars 06-43 and 08-07) – requirement to valueassets at fair value Land Under Roads Land Improvements Community Land Other Structures Other Assets
  29. 29. Land under roadsThe provisions contained in Circular 09-09 have been revised byCircular 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, includingland under footpaths, nature strips and median strips”
  30. 30. Land under roadsTwo 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 recognise2. Acquired from 1 July 2008 onwards
  31. 31. Land under roadsCouncil Considerations before valuing – Acquired pre 1 July 2008 and electedto 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.
  32. 32. Land under roadsCouncil 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.
  33. 33. Land under roadsFair 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 beconsistent.
  34. 34. Land under roadsUseful 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;
  35. 35. Community LandValuation 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.
  36. 36. Community LandIssues to consider: Opportunity to ensure land is correctly classified as operational or community and correct where relevant;
  37. 37. Land improvements, other structures &assetsCouncils may use depreciated historical cost or insurancevalues as a representation of fair value as long as Councilhas undertaken a high level review to determine if therehas been any impairment of these assets.Council may wish to calculate unit rates etc. whereapplicable.
  38. 38. 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!
  39. 39. Cost Advantage ProgramDEMONSTRATION
  40. 40. What is Cost Advantage?Budgeting Process Financial Budget Expenses Revenue - Sales - Cost Reduction - Cost Efficiency - Pricing
  41. 41. 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.
  42. 42. Today‟s ObjectivesNot 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.
  43. 43. Pitcher Partners 9-Step Cost AdvantageProgram1. Identify Costs2. Assign Responsibility3. Set Targets4. Analyse5. Options6. Recommendations & Approvals7. Implementation8. Communication9. Measure, Monitor & Report
  44. 44. 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).
  45. 45. Step 2&3 - Assign Responsibility/SetTarget 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?
  46. 46. 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
  47. 47. Step 5 - OptionsPrepare 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
  48. 48. 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
  49. 49. Step 6 – Recommendation & Approvals Evaluate and consider options Determine preferred action plan to achieve cost reduction objectives Put forward recommendations for relevant approval
  50. 50. 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
  51. 51. 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
  52. 52. Some Examples Specific Cost Advantage Strategies Cost of Labour Program Checklist Cost of Sales Program Checklist
  53. 53. Non-Cash Section 94 ContributionsTIMING AND MEASUREMENT
  54. 54. 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))
  55. 55. Non-cash Sec 94 Contributions 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.
  56. 56. Non-cash Sec 94 Contributions 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.”
  57. 57. Non-cash Sec 94 Contributions 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?
  58. 58. Non-cash Sec 94 Contributions 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.
  59. 59. Taxation IssuesFBT & GST
  60. 60. Taxation Issues6 June 2011John RossTax DirectorPitcher Partners Sydney
  61. 61. 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- LAFHAExcludes – Superannuation Meal entertainment – actual usage v 50% / 50%Motor vehicles concessionally taxed
  62. 62. 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
  63. 63. Value of car fringe benefitsStatutory 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 cost2 / 3 rd‟s - More than 4 years old
  64. 64. Budget 2011/12 Statutory rate changes cars Statutory rate (multiplied by the cost of the car to determine a persons car fringe benefit)Distance travelled New contracts entered into after 7:30pm (AEST) on 10during 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 20140 – 15,000 km 0.26 0.20 0.20 0.20 0.2015,000 – 25,000 km 0.20 0.20 0.20 0.20 0.2025,000 – 40,000 km 0.11 0.14 0.17 0.20 0.20More than 40,000 km 0.07 0.10 0.13 0.17 0.20
  65. 65. 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
  66. 66. 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
  67. 67. 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
  68. 68. 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]
  69. 69. GST GrantsIf a payment is for no service – no GSTIf recipient required to do something – GSTGSTR 2000/11 Credits for input taxLimitation where council have exempt financial supplies on investmentsMay 2010 Budget increased threshold from $50,000 to $150,000
  70. 70. Interest Free LoansREVIEW ACCOUNTING
  71. 71. What we will cover in this sessionWe will consider how the lender and the borrower shouldaccount for interest free loans. Interest free loans areoften provided to not-for-profit entities or related partieswithin 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).
  72. 72. Issues to considerWhen accounting for interest free loans the following twoissues 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).
  73. 73. Accounting for interest free loansMeasurement 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;
  74. 74. Accounting for interest free loansRepayment 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.RecognitionAccounting for interest free loans depends on the partiesinvolved and the reason for the loan.
  75. 75. Accounting for interest free loansLoan receivable – exampleCouncil lends $100,000 to For-profit entity and borrower for 5 years andclassifies the financial asset under loans and receivables. The loan carries nointerest. 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 whendiscounted is $75,816.Entry in Councils books when loan is made:Dr – Loan / receivable $75,816Dr – Grants expense $24,184 Cr – Cash $100,000Entry at end of year 1:Dr – Cash $20,000 Cr – Interest income $7,582 Cr – Loan receivable $12,418
  76. 76. Accounting for interest free loansLoan payable – exampleSimilar treatment to the previous example except theopposite way around. With the initial entry from Councilsperspective the interest free element ($24,184) will betreated as a contribution received and will be accounted forin accordance with AASB1004 Contributions.
  77. 77. Accounting for interest free loansEmployee loanAssume similar terms and conditions to previous example:Entry in Councils books when loan is made:Dr – Loan / receivable $75,816Dr – Employee expense $24,184 Cr – Cash $100,000Entry at end of year 1:Dr – Cash $20,000 Cr – Interest income $7,582 Cr – Loan receivable $12,418
  78. 78. 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.
  79. 79. Year End EfficienciesPreparing for AuditTAKING EFFECTIVE CONTROLOF YEAR END PROCESSES
  80. 80. Year end efficienciesKey factors in achieving effective interaction betweenfinance teams and audit teams:-Understanding respective obligations & requirementsa. Audit teams can work much more efficiently when finance teams supply them with all the data they need to fulfil their audit obligationsb. Finance teams are able to help the audit process by having a better understanding of the audit processc. A better understanding of audit team requirements will lead to better year end processes and improved internal controls.
  81. 81. Year end efficienciesPlan properlya. As planning is critical to audit efficiency, so it is to year end accounts preparationb. 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.
  82. 82. Year end efficiencies10 Steps to Year End SuccessStep 1 - Assign ResponsibilityStep 2 - Develop a Project TimetableStep 3 – Determine Project MilestonesStep 4 – Identify Closing Dates & Pre Year-End FunctionsStep 5 – Secure Organisational SupportStep 6 – Identify and Specify Resource RequirementsStep 7 - Work with Your AuditorStep 8 – Train the TeamStep 9 – Match Resources with RequirementsStep 10 – Have a Contingency Plan
  83. 83. Year end efficienciesA smooth year-end close can be achieved by following 2basic 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.
  84. 84. Year end efficienciesAudit Preparation Planning Tipsa. Review Client Assistance Pack and cross reference your working papers to ensure completenessb. 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 poste. Working papers are providing electronically and/or set up on an audit drive and/or saved to disk
  85. 85. CONCLUSIONOPEN FORUM

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