Integrated Planning and Reporting Manual - Division of Local ...

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3. THE RESOURCING STRATEGY It is important that: all the assumptions in the Long Term Financial Plan are documented. This should be contained in a Planning Assumptions Statement that accompanies the Plan those matters which will have moderate to significant impacts are identified the Plan is tested by varying the parameters of moderate to significant assumptions (eg changing interest and inflation rates, changing the population growth rate, reducing or eliminating grants and subsidies, increasing taxation rates) 3.2.2 Risk assessment Once the Long Term Financial Plan begins to take shape, it is important to continue testing the assumptions through a risk assessment process. This should consider questions such as: How accurate are the projected estimates of expenditure How certain is the revenue stream What could impact on the expenditures What could impact on the revenues What other risks are associated with key projects eg loss of key staff, loss of subsidy How reliable are investment options Are ratepayers’ funds at risk What are the potential liabilities for Council – legal and financial – if key projects fail Other means of testing the Long Term Financial Plan include: undertaking a cost/benefit analysis conducting a SWOT analysis to ensure that problems can be anticipated and properly dealt with rigorously considering all the options and alternatives to carry out a function, provide a service or raise funds and choosing the option that is the least risky or the most likely to succeed. 3.2.3 Financial modelling The development process for the Long Term Financial Plan should include financial modelling of different scenarios eg planned/optimistic/conservative. This will provide Council with an idea of how much flexibility is in the Plan and how much latitude it has with various projects and scenarios. These models will be important when discussing the financial implications of the Community Strategic Plan with residents and will also assist councillors in developing suitable actions for the Delivery Program. Planning & Reporting Manual Page 64 of 115
3. THE RESOURCING STRATEGY 3.2.4 Performance monitoring An intrinsic part of building the Long Term Financial Plan is deciding how Council will monitor its performance against the Plan. The statement of performance measures should be in accordance with Note 13 – Statement of Performance Measures of the current Accounting Code. Council should review the LTFP each year as part of the development of the Operational Plan. This review should include an assessment of the previous year’s performance in terms of the accuracy of the projections made in the LTFP compared to the actual results. Were the estimates accurate Were the assumptions underpinning the estimates appropriate The assumptions may need to be adjusted to improve the accuracy of the LTFP over the longer term. Major differences between budget and actual figures should be documented with an explanation. The review process should be repeated every four years, in line with the review of the Community Strategic Plan. The LTFP will need to be adjusted if there are any substantial changes to the Community Strategic Plan. It is also an appropriate time to test the underpinning assumptions and the accuracy of the estimates of the past four-year period. Council should not only monitor its performance against the LTFP and the annual budget, but also develop measures to assess its long-term financial sustainability. This might include reference to standard indicators such as debt service ratio, unrestricted current ratio, net current assets, and capital expenditure ratio. It might also include comparison of Council’s proposed renewals expenditure over the next four years with the required renewals expenditure in its asset management plan. Planning & Reporting Manual Page 65 of 115
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PLANNING A SUSTAINABLE FUTURE MANUA
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CONTENTS INTRODUCTION Planning requ
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Reporting requirements at a glance
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I NTRODUCTION Integrating council p
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