OBERON COUNCIL Buildings Asset Management Plan · Oberon Council – Buildings Asset Management Plan – June 2019 1.4 LIFE-CYCLE MANAGEMENT PLAN & FINANCIAL SUMMARY The practice

June 2019

OBERON COUNCILBuildings AssetManagement Plan

Oberon Council – Buildings Asset Management Plan – June 2019

Document ControlDocument ID: oberon bamp version 1 (draft).docx

Rev No Date Revision Details Author Reviewer Approver

1 Feb 2019 Initial Buildings Asset ManagementPlan Assetic

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TABLE OF CONTENTSTABLE OF CONTENTS ................................................................................................................... i1. EXECUTIVE SUMMARY ....................................................................................................... 1

1.1 Introduction ........................................................................................................................... 11.2 Levels of Service ..................................................................................................................... 11.3 Future Demand ...................................................................................................................... 11.4 Life-Cycle Management Plan & Financial Summary ................................................................. 21.5 Asset Management Improvement Plan ................................................................................... 3

2. INTRODUCTION ................................................................................................................. 42.1 Background ............................................................................................................................ 42.2 Asset Management Frameworks Applicable to this BAMP ....................................................... 42.3 Key stakeholders .................................................................................................................... 52.4 Goals and Objectives of Asset Management ............................................................................ 62.5 Plan Framework...................................................................................................................... 7

3. LEVELS OF SERVICE ............................................................................................................ 93.1 Customer Research and Expectations...................................................................................... 93.2 Legislative Requirements ........................................................................................................ 93.3 Asset Hierarchies .................................................................................................................. 103.4 Levels of Service ................................................................................................................... 11

4. FUTURE DEMAND ............................................................................................................ 124.1 Demand Forecast.................................................................................................................. 124.2 Changes in Service Expectations and Technologies ................................................................ 124.3 Demand Management Plan .................................................................................................. 12

5. LIFE-CYCLE MANAGEMENT PLAN ..................................................................................... 135.1 Buildings Asset Data ............................................................................................................. 135.2 Risk Management Plan ......................................................................................................... 165.3 Buildings Maintenance Plans ................................................................................................ 175.4 Buildings Renewal Plan ......................................................................................................... 175.5 New Works and Upgrade / Expansion Plans .......................................................................... 215.6 Building Disposal Plan ........................................................................................................... 21

6. FINANCIAL SUMMARY ..................................................................................................... 226.1 Forecast Expenditures .......................................................................................................... 226.2 Financial Ratios ..................................................................................................................... 22

7. ASSET MANAGEMENT PRACTICES .................................................................................... 237.1 Interaction with Accounting / Financial Systems.................................................................... 237.2 Asset Management Systems ................................................................................................. 237.3 Standards and Guidelines ..................................................................................................... 24

8. ASSET MANAGEMENT IMPROVEMENT PLAN ................................................................... 258.1 Performance Measures ......................................................................................................... 258.2 Improvement Plan ................................................................................................................ 258.3 Monitoring and Review Procedures ...................................................................................... 25

REFERENCES ............................................................................................................................. 27

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1. EXECUTIVE SUMMARY

1.1 INTRODUCTION

Oberon Council is responsible for building asset portfolio that has a total replacement value$21,142,0001.

This Buildings Asset Management Plan (BAMP) documents the management, financial, engineeringand technical practices to ensure that the level of service required by the community from thebuilding portfolio is provided at the lowest long term cost.

This asset management plan is prepared in accordance with the International InfrastructureManagement Manual. It is prepared to meet minimum legislative and organisational requirementsfor sustainable service delivery and long term financial planning and reporting and is an update ofprevious plans.

1.2 LEVELS OF SERVICE

Levels of Service communicate the philosophies of Council in relation to the management of itsbuilding portfolio including the rehabilitation and renewal of buildings as they deteriorate due to ageand use.

To achieve and sustain acceptable standards of service, Council’s buildings require an annualcommitment of funds. These funds provide for regular and responsive maintenance and for timelyrenewal or replacement. The provision of adequate financial resources ensures that the buildingsare appropriately managed and preserved.

The levels of service documented in this BAMP provide the best benefit of the community withinthe context of Council’s financial and human resources.

1.3 FUTURE DEMAND

Council’s principle function is to provide services to the community and infrastructure assets are ameans to support this. Thus the future demand for these assets is tied to the demand for Council’sservices.

The key factor influencing demand is population. For the Oberon Council region it was estimated tobe 5,430 people in June 2017, up from 5,302 people assessed by the June 2016 Census. Otherfactors affecting demand for services include changes in demographics, consumer preferences andexpectations, economic factors, agricultural practices, industrial projects in the regions,environmental awareness, etc.

Demand for new services will be managed through a combination of managing existing assets,upgrading of existing assets and providing new assets to meet demand and demand management.Opportunities for demand management including non-asset solutions will be developed in futurerevisions of this asset management plan.

1 Source: 2016-17 Annual Report & Financial Statements

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1.4 LIFE-CYCLE MANAGEMENT PLAN & FINANCIAL SUMMARY

The practice of life-cycle asset management requires the consideration of all management optionsand strategies as part of the asset life-cycle from initial planning to ultimate disposal. The objectiveof managing the assets in this manner is to look at long-term cost impacts (or savings) when makingasset management decisions. Figure 1 below provides a representation of the asset life-cycle.

Figure 1 – The Cycle of Asset Management

A key measure in understanding where an asset is in its life-cycle is its condition. Council is using ameasurement scheme that is based industry good practice where a score of 1 indicates that an assetis in Very Good condition and a score of 5 indicates Very Poor condition. The full range of descriptorsis set out in the body of this BAMP.

The condition Council’s building portfolio has been determined by assessing the condition of 7 keybuilding components. Overall the condition of Council’s buildings is generally in Good to Very Goodcondition and, with the exception of some building roofs, only a small percentage of building assetsrequire renewal works in the short term. The results are presented as pie charts in the body of thisBAMP (see Figure 5 on page 15).

Good practice asset management requires more than making observation about assetportfolios…quantification of the renewal task is required. To achieve this, Council has used anadvanced asset renewal forecasting tool (Assetic Predictor) to forecast both the likely asset conditionoutcome as a result of continuing with its current level of renewal expenditure and, if the currentlevels were found to be inadequate, the renewal expenditure required to achieve an acceptableasset outcome.

With the use of the tool, it has been found that while Council’s current level of renewal expenditureon its buildings is adequate, this situation will change from 2023-34 onwards. It is forecast that fromthen on, major renewal projects will become necessary and these will require a significant increase infunding from the current level of $52,400 per annum to an average $275,000 per annum.

While immediate action is not necessary, failing to respond to this forecast change will result in afunding gap of $1,100,000 over the next 10 years.

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1.5 ASSET MANAGEMENT IMPROVEMENT PLAN

During the course of the preparation of this Plan, aspects of Council’s asset management practiceswere found to be requiring improvement.

The Asset Management Improvement Plan (Table 10 on page 26) sets out a 16-step, 2-yearimprovement program that will significantly lift the Strategic Asset Management practices applied toits building portfolio and improve the quality of the long-term financial forecasts.

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2. INTRODUCTION

2.1 BACKGROUND

The fundamental purpose of this Buildings Asset Management Plan (BAMP) is to improve Council’slong-term strategic management of its building assets in order to cater for the community’s desiredlevels of service in the future, in accordance with Council’s key strategic documents and demonstratereasonable management in the context of Council’s available financial and human resources.

The BAMP achieves this by setting standards, service levels and programmes which Council willdevelop and deliver. The standards and service levels have been set in accordance with user needs,regulations, industry practice and legislative codes of practice.

The asset management plan is to be read with the following associated planning documents:· Office of Local Government Integrated Planning and Reporting Framework.· Oberon Council Asset Management Policy.· Oberon Council Community Strategic Plan 2015-2018.· Oberon Council Infrastructure Asset Management Plan 2018.

This BAMP is an expansion of the philosophies and practices set out in the Infrastructure AssetManagement Plan adopted by Council in June 2018. Assetic Assets and Predictor software has beenutilised to produce the forecasts presented in this BAMP. The building assets covered by this BAMPare summarised in Table 1 below.

Table 1 – Categories of Building Assets provided and maintained by Oberon Council2

Building CategoryFair Value

ReplacementCost

CarryingValue

AnnualDepreciation

Buildings $18,654,000 $16,005,000 $175,000

Other Structures $920,000 $684,000 $21,000

Swimming Pools $1,568,000 $881,000 $39,000

Total $21,142,000 $17,570,000 $235,000

2.2 ASSET MANAGEMENT FRAMEWORKS APPLICABLE TO THIS BAMP

NATIONAL FRAMEWORK FOR LOCAL GOVERNMENT FINANCIAL SUSTAINABILITYIn March 2007 the Local Government and Planning Ministers’ Council (LGPMC) agreed to a nationallyconsistent approach to asset planning and management, financial planning and reporting andassessing financial sustainability. Each State Minister endorsed the National Frameworks forFinancial Sustainability in Local Government for implementation in the context of their relationshipswith their local government sectors.

The National Frameworks consist of three main components as follows:· Asset Planning and Management· Financial Planning and Reporting· Criteria for Assessing Financial Sustainability

2 Source: 2016-17 Annual Report & Financial Statements

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NSW OFFICE OF LOCAL GOVERNMENT – INTEGRATED PLANNING AND REPORTINGThe NSW Office of Local Government has established an integrated planning and reportingframework that all local government authorities in NSW are required to follow. The framework aimsto improve Councils’ capacity for long-term planning and will enable the identification of theirresourcing needs earlier in the planning cycle. The requirement to consider resourcing over at least a10-year period of the plan will help Council to take a wider view of their needs, considering not onlyfinances, but also human resources and asset requirements. The components of the framework andhow they fit together are shown in Figure 2 below.

Figure 2 – Local Government Planning & Reporting Framework

The recommendations provided through this Buildings Asset Management Plan (as prescribed underSection 403(2) of the Local Government Act) feeds directly into Council’s strategy for the provision ofresources required to implement the Oberon Community Strategic Plan 2015-2018.

2.3 KEY STAKEHOLDERS

The key stakeholders are internal custodians as well as external individuals, companies, serviceauthorities, government authorities and community groups who have a vested interest inmanagement of buildings and structures. The groups that have been identified as key stakeholdersare set out in Table 2 on page 6.

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Table 2 – Key Stakeholders in Asset Management at Oberon

Stakeholder Roles

Elected Members· Endorsement of the asset management policy, strategy and plans.· Setting high level direction through the development of asset

management principles in the Community Strategic Plan.

Senior Management

· Endorsing the development of asset management plans and providing theresources required to complete this task.

· Setting high level priorities for asset management development inCouncil.

· Raising the awareness of this function among Council staff andcontractors.

· Ensuring completion of the implementation of actions resulting from thisplan.

· Supporting an asset management driven budget and LTFP.

Finance &Community Services

· Consolidating the asset register and ensuring the asset valuations areaccurate.

· Developing supporting policies such as capitalisation and depreciation.· Preparation of asset sustainability and financial reports incorporating

asset depreciation in compliance with current Australian accountingstandards.

Planning &Development

· Defining customer Levels of Service for community use building assets.· Justifying Levels of Service by a business case to Council for approval.· Overall management of building portfolio and swimming pools.

External Parties

· Community residents & local businesses;· Tourist and Visitors (as occasional users);· Neighbouring Councils;· State and Federal parliamentary members;· State and Federal Authorities

2.4 GOALS AND OBJECTIVES OF ASSET MANAGEMENT

Oberon Council exists to provide services to its community. Many of these services are provided byCouncil’s broad range of assets with buildings being a key component. Community buildings areused to enable a service or provide a service to the community and Operational buildings are utilisedto administer and facilitate the operations of Council.

Council’s goal in managing its assets in general and its buildings in particular is to meet the requiredlevel of service in the most cost effective manner for present and future consumers. The focus of theBuildings Asset Management Plan is to enable Council to:

· Take a life cycle approach to the management of its buildings,· Develop cost-effective management strategies for the long term (10-20 years),· Provide a defined level of service and monitor its performance,· Understand and meet the demands of growth through demand management and capital

investment,· Manage risks associated with asset failures,· Sustainably use its physical resources, and· Continuously improve asset management practices.

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The preparation of this asset management plan has been guided by Council’s Vision and Values thatare set out below:

Council’s Vision – what we want Oberon LGA to be like in 2025:A prosperous town, villages and rural communities set amongst the rolling hills, rivers, forests,mountains and caves of the Great Divide. A breath of fresh air in a landscape of light, colourand seasonal beauty. Life as it should be!

Council’s Values Statement – values to guide our choice and behaviour:We respect the past, the future and position of others. We take pride in communityachievement, and we work together in an open and co-operative manner.

2.5 PLAN FRAMEWORK

Key elements of this plan are· Levels of service – Specifies the services and levels of service to be provided by Council.· Future demand – How technology changes as well as demographic and user demand will

impact on future service delivery and how this is to be met.· Life cycle management – How Council will manage its existing and future assets to provide

the required services.· Financial summary – 10-year forecast of funding to provide the required services.

A process map for preparing an asset management plan is shown in Figure 3 on page 8.

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Figure 3 – Process Map for preparing an Asset Management Plan3

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3 Source: International Infrastructure Management Manual

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3. LEVELS OF SERVICELevels of Service relate to outcomes the customer receives in terms of quality, quantity,responsiveness and performance as provided by the asset.

To achieve and sustain acceptable standards of service, Council’s infrastructure assets require anannual commitment of funds. These funds provide for regular and responsive maintenance and fortimely renewal or replacement of the assets. The provision of adequate financial resources ensuresthat the assets are appropriately managed and preserved. Maintenance and renewal funding belowthe levels required impacts directly on the community and if prolonged, results in substantial needsfor “catch up” expenditure imposed on the community in the future. Additionally, deferred renewalresults in increased reactive maintenance as aged assets deteriorate at an escalating rate togetherwith a greater community exposure to injury and economic loss.

In developing the levels of service, Council gives due consideration to the strategic goals andobjectives in the Community Strategic Plan 2015, a document which sets out the strategic directionof Council to implement its objectives over the next 10 years. Council gives due consideration tolegislative requirements, Australian Standards and stakeholder expectations.

The levels of service adopted by Council provide the best benefit of the community within thecontext of Council’s financial and human resources.

3.1 CUSTOMER RESEARCH AND EXPECTATIONS

Historically, Council has undertaken a limited level of formal customer research. Generally,knowledge of community expectations is based on feedback via the elected representatives,requests and complaints from community groups and residents, and direct contact with council staff.While this has provided a degree of direction for Council’s actions, it is not sufficient in terms ofadopting good contemporary asset management practices.

Council’s Community Engagement Strategy provides a template for how Councillors and theadministration with interact with the community. A method missing from that strategy is broad-based community surveys aimed understanding the mood and opinions of the entire community.

Council needs to investigate the benefit of measuring, on an annual basis, community satisfactionwith Council’s performance in relation to the provision and ongoing management of its buildingportfolio. The most common approach adopted by other Councils is to undertake a CommunitySatisfaction Survey. Such a survey can also be used to gather customer expectations.

This investigation has been included in the Asset Improvement Plan set out in Section 8.

3.2 LEGISLATIVE REQUIREMENTS

Council has to meet many legislative requirements including Australian and State legislation andState regulations. The significant legislation and standards are set out in Table 3 on page 10. Itshould be noted that these legislative and statutory requirements, regulations, design specificationsand standards form the general minimum levels of service for Council’s building portfolio.

Specific technical standards and regulations applicable to the management of building assets havenot been listed in this plan.

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Table 3 – Key Legislation and Standards applicable to Building AssetsLegislation and Standards RequirementIntegrated Planning andReporting Framework (Office ofLocal Government NSW)

Establishes the requirement for Council to have a CommunityStrategic Plan supported by long term financial planning, assetmanagement planning and workforce management planningwhich will be used to develop tactical and operational budgets(the Delivery Program and the Operational Plan).

Local Government Act 1993(NSW)

Sets out role, purpose, responsibilities and powers of localgovernments including the preparation of a long term financialplan supported by asset management plans for sustainable servicedelivery.

Work Health and Safety Act2011 (NSW)

Aims to secure the health, safety and welfare of people at work. Itlays down general requirements which must be met at places ofwork in New South Wales. The provisions of the Act cover everyplace of work in New South Wales. The Act covers self-employedpeople as well as employees, employers, students, contractors andother visitors.

Work Health and SafetyRegulations 2017 (NSW)

Outlines minimum actions to be taken to comply with Work Healthand Safety Act 2011.

Disability Discrimination Act1992

Sets out the responsibilities of Council and staff in dealing withaccess and use of public buildings.

Australian AccountingStandards.

Sets out the financial reporting standards relating to infrastructureassets. Of particular relevance to Infrastructure Assets are:

· AASB 13 Fair Value Measurement – prescribesrequirements a framework for measuring fair value andrequires disclosures about fair value measurements.

· AASB 116 Property, Plant & Equipment – prescribesrequirements for recognition and depreciation ofproperty, plant and equipment assets.

· AASB 136 Impairment of Assets – prescribes requirementsto ensure that assets are carried at no more than theirrecoverable amount.

3.3 ASSET HIERARCHIES

In the management of building assets, higher quality standards and quicker response times are givento the more critical buildings in the portfolio. Such prioritisation is an essential part of providing theexpected level of service across the entire building portfolio at the lowest total cost.

Oberon Council is investigating adopting the three-level hierarchy shown in Table 4 below to assist inthe management of its building assets.

Table 4 – Buildings Hierarchy

Buildings Hierarchy Level No. of Buildings Extent of CommunityImpact

Regional 15 Entire Council regionTown 47 Oberon TownshipVillage & Rural 3 Smaller communities

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3.4 LEVELS OF SERVICE

Oberon Council is codifying its current short-term and long-term maintenance practices for itsbuilding assets into Levels of Service. Where applicable, use is made of the Hierarchy Levels toclearly establish differential Levels of Service that provide for responsive and high quality service forCouncil’s key buildings.

Oberon Council has determined two tiers of asset Levels of Service (LoS) as follows:Tier 1: Strategic Levels of Service - relates to provision standards, accessibility, overall satisfaction,disruption management and safety.Tier 2: Operational or Technical Levels of Service – relates to provision of day to day maintenanceand repairs as well as long term renewal and upgrade needs to deliver desired outcomes.

The Tier 1 Strategic Levels of Service for buildings are set out in Table 5 below.

The Tier 2 Levels of Service for buildings are in the course of development and will be included infuture versions of this Buildings Asset Management Plan.

Table 5 – Buildings Strategic Levels of Service

Level of Service Performance MeasureProcess Performance Target

Well maintained and suitable Buildings Customer complaints andrequests for improvements

<200 requests / complaints perannum

Building assets meet community needs Customer satisfaction survey >60% satisfactory or better

Building assets will be accessible duringnormal operating business hours.

Availability excluding In theinstance where a building isclosed to users for reasons suchas maintenance, upgrading,renewal or a Council relatedpublic event or non-Councilevents and appropriate noticehas be given to relevant users inaccordance with Council’s publicinformation policy.

95% Compliance.

Response time to customer requests Requests adequately respondedto within target times. > 70% of all requests.

Condition assessment of Buildingnetwork every 3 years.

Building condition as measuredby the Building Condition Index(BCI).

BCI no worse than an average 3out of a possible 5.

Sustainable building assets. Renewal capital works arecompleted on an annual basis.

Current target is to raise fundinglevels to match required renewalexpenditure in less than 5 years.

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4. FUTURE DEMAND

4.1 DEMAND FORECAST

Council’s fundamental role is to provide services to the community and its infrastructure assets are ameans to support this. Consequently, future demand for these assets is tied to the demand forCouncil’s services. At its simplest, demand is tied to population growth.

The population of the Oberon Council region was estimated to be 5,430 people in June 2017, up from5,301 people as assessed by the June 2016 Census. This represents a 2.4% yearly increase inpopulation which is a significant increase over the annual increase of 1.04% measured between the2011 Census and 2016 Census. While an increasing population is good news for the Oberon LGA, therate of growth lags behind the overall trend for Australia as a whole grew by 1.78% per annumbetween 2011 and 2016.

With low rates of overall population growth, the demand for additional building assets should belimited.

4.2 CHANGES IN SERVICE EXPECTATIONS AND TECHNOLOGIES

Even though increasing demand from population growth is likely to be limited, account must betaken of the changing service expectations of the community and how these impact on the design,construction and maintenance of building assets. For example, many people now have differentexpectations of how they will spend their “retirement years” and across Australia the participation inSenior Citizens Clubs is declining.

The impact of changes in services expectations and of new technologies requires detailedinvestigation. This will be developed in future revisions of the BAMP.

4.3 DEMAND MANAGEMENT PLAN

Demand for new services is managed through a combination of retiring inefficient assets, upgradingof existing assets and providing new assets when required. Demand management practices alsoinclude provision of non-asset solutions, insuring against risks and managing failures. A DemandManagement Plan will be developed in a future revision of this BAMP.

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5. LIFE-CYCLE MANAGEMENT PLANThe life-cycle management plan details how Oberon Council plans to manage and operate itsbuildings assets at the agreed Levels of Service (defined in Section 3) while optimising life-cycle costs.

Life-Cycle Management is recognised by Oberon Council as an essential component of this BuildingsAsset Management Plan (BAMP). This section of the BAMP will provide details of Oberon’s data andprocesses required to effectively manage, renew and upgrade its building assets. It also documentsthe analysis that Oberon Council undertakes regularly to predict and monitor expected futureexpenditures required to effectively manage the building portfolio.

The practice of life-cycle asset management requires the consideration of all management optionsand strategies as part of the asset life-cycle from initial planning to ultimate disposal. The objectiveof managing the assets in this manner is to look at long-term cost impacts (or savings) when makingasset management decisions. Figure 4 below provides a graphical representation of the assetlifecycle including each of the stages an asset passes through during its life.

Figure 4 – The Cycle of Asset Management

5.1 BUILDINGS ASSET DATA

5.1.1 BUILDINGS PORTFOLIOThe specific data describing the assets of the buildings and structures portfolio is retained inCouncil’s Asset Management System (Assetic myData).

5.1.2 BUILDINGS CONDITION ASSESSMENTCondition Assessment is a technical inspection done by a competent assessor to evaluate thephysical state of the asset elements and services. Council currently uses its Valuation Consultants toundertake the Condition Assessment of its building portfolio.

For consistency, a common five-level condition scoring scheme is used across all infrastructure assetclasses and the buildings portfolio. The scheme is based industry good practice where a score of 1indicates that an asset is in Very Good condition and a score of 5 indicates Very Poor condition. Thefull range of descriptors is set out in Table 6 on page 14.

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Table 6 – Condition Score Descriptors

Condition Score Description

1 Very Good

2 Good

3 Fair

4 Poor

5 Very Poor

Table 7 – Asset Elements assessed to determine the Condition of Council’s building assets

Asset Category Elements Assessed

Buildings

Sub-Structure ConditionSuper-Structure ConditionRoof ConditionFitouts & Fittings ConditionFloor Coverings ConditionServices (Mechanical) ConditionServices (Other) Condition

Usually, condition assessment surveys of the complete building portfolio are undertaken every3 years for each asset class. In determining the condition score for a particular asset, the assessorreviews the state of key elements of the asset against standardised criteria based on assessorexperience and condition descriptions and photographs. For buildings, the particular elementsassessed are set out in Table 7 above.

The methodology used for assessing Council’s buildings is more subjective than it is objective. Whilethis is quite acceptable at this early stage of developing good asset management practice, Councilwill need to introduce more objective condition assessment methods to improve the quality of thebuildings condition data it is using for decision making. This has been identified as one of the actionsset out in the Asset Management Improvement Plan in Section 8.

5.1.3 ASSET CONDITION & FUNCTIONALITYOn page 15, Figure 5 shows the seven principle measures of building condition. Together these showthat Council’s building portfolio is generally in Good to Very Good condition and, with the exceptionof some building roofs, only a small percentage of building assets require renewal works in the shortterm.

This does not, however, indicate that Council will necessarily be free from undertaking capital workson its buildings. Condition only measures where an asset is on its life-cycle from the perspective ofaging and deterioration. Asset Functionality is an additional measure and is a measurement of anasset’s suitability for the service it is being used to provide. For building portfolios AssetFunctionality is the more common trigger for capital projects.

There are three basic aspects that characterise asset functionality:· Capacity – is it big enough to handle the demand?· Features – does it have everything needed to provide the services expected?· Utility – does it work in practice?

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Figure 5 – Current Distribution of Building Condition Scores

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Although functionality assessments of buildings are undertaken on a case-by-case basis whenneeded, application on a whole-of-asset-class basis for modelling purposes has not been undertakenfor the buildings portfolio. As a consequence the ability to forecast the future need for buildingupgrades and expansion is restricted.

The need to undertake an Asset Functionality assessment of the buildings portfolio has beenidentified as an improvement action in Section 8.

5.1.4 ASSET VALUATIONSThe estimated value of assets as at 30 June 2017 covered by this asset management plan is detailedin Table 1 on page 4 with the amounts being fair value estimates based on AASB reporting guidelines.

5.2 RISK MANAGEMENT PLAN

Council has adopted a Risk Management Policy that provides for a Risk Management Program tosafeguard and enhance its assets. The program covers the following areas of Council activity:

· Corporate governance· Legal compliance· Business risks· Assets· Human resources· Information systems· Financial risk management

The Risk Management Policy requires that: The risks associated with these areas of activity willnormally be identified, analysed and managed by responsible officers in each of the functional areasof Council, however some major projects or activities may require the allocation of specific resourcesto the risk management process. Budget considerations will necessitate the allocation of funds inorder of risk priority.

Table 8 on page 17 lists the range of potential risks that may have an impact on the delivery of assetmanagement services. The next stage is to identify the specific risks for Oberon Council and todocument the likelihood and consequences of these risks into a Risk Management Plan. This actionhas been included Improvement Plan detailed in Section 8.

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Table 8 – Risks associated with the delivery of Asset Management servicesType of Risk Description of RiskCommunity Impact Risk to the community as a consequence of delivering council services.Environmental Risk to the biophysical environment due to Council activities.Occupational Health andSafety

Risk to the employees, building users and contractors due to the non-compliance to Safety and Health standards.

Operational Risks inherent in the operation of the asset.Service Performance Risk of failure to meet expected service performance levels.

Social Risk to council from community as a reaction on asset construction,maintenance or demolition.

Political Risk due to change of political view.Statutory Infringement Risk of breaching statutory obligations by council.Technical Risk of failure of an asset on technical grounds.

Investment Risk on over-capitalisation, under-utilisation, opportunity costs, futureobsolescence and less flexibility of assets for future use.

Financial Risk of adverse impact financially to council due to the nature of theplanning and delivery of services and projects.

5.3 BUILDINGS MAINTENANCE PLANS

Maintenance is the regular on-going work that is necessary to keep assets operating, includinginstances where portions of the asset fail and need immediate repair to make the asset operationalagain. Maintenance is the work that must be undertaken to achieve the intended design life of theasset. While maintenance does not extend the life of an asset, a failure to maintain will shorten thelife of an asset.

Building maintenance, which includes activities such as repairing breakages, replacing worn outitems, gutter cleaning, and general painting, takes one of two forms:

· Planned: Scheduled work based on time or usage intervals or predicted work based on theexpected condition of the asset.

· Unplanned: On-demand work to repair failures and other damage to the asset.

Building assets require both types of maintenance with the balance between the two forms being acost/benefit trade-off. For Council buildings that are not mission critical, the trade-off tends to lietowards Unplanned Maintenance except where defined activities are mandated by regulation.

The responsibility for building maintenance is divided between Planning & Development whomanage the community-use buildings such as the Library and sporting pavilions and Works &Engineering who manage the operational buildings such as treatment plant buildings.

Although Council undertakes its building maintenance in accordance with internally set parameters,these have not yet been formalised into a Levels of Service manual.

5.4 BUILDINGS RENEWAL PLAN

Renewal expenditure is major work which restores, rehabilitates, replaces or renews an existingasset back to its original design parameters. Effectively, renewal expenditure makes an asset newagain and restarts its design life. Renewal expenditure does not contribute to increasing the capacityor functionality of an asset. This latter work is Upgrade/Expansion expenditure.

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Buildings are complex assets that have many factors influencing how they are used and renewed. Interms of asset management practices, most buildings do not undergo a planned renewal per se. Inpractice, changing use and demands on a building usually require some form of expansion orupgrade before the original asset components reach the end of their life. As a consequence, capitalprojects are often triggered for reasons other than asset renewal.

Depending solely on expansion and upgrade projects to trigger asset renewal projects however canbe a trap. Any building not requiring a growth project can end up being left to decay to the point ofbe unusable. Local halls and sports pavilions in small communities are susceptible to this situation.

Although the Assetic Predictor forecasting tool is capable of taking into account the need forfunctionality driven building upgrades or expansion, Council does not presently have the robust datanecessary to produce reliable results. For this reason the building forecasts are restricted toconsidering only the building renewal needs of the asset portfolio. Moving to this next level ofcapability is an action listed in the Improvement Plan detailed in Section 8.

When preparing the following forecasts, it has been assumed that the currently planned renewalbudget of $52,400 for 2018-19 will continue to be available over the next 10 years. As can be seenfrom Fortunately for Council however, the potential impact of the renewal funding shortfall is stillseveral years away as this allows time to detail the works required, investigate alternative optionssuch as service relocation and rationalisation and to identify suitable funding sources.

Figure 6 below, this level of expenditure will be sufficient to keep the building portfolio in anacceptable condition. The graph however does forecast a significant deterioration in overall portfoliocondition from 2023-24 onwards. This is due to impending renewal projects that will be too large tobe funded from the current budget levels as shown by forecast required renewal budgets in Figure 7on page 19. Potentially this could result in a Cumulative Renewal Gap of $1.1 million over the nextdecade as shown in Figure 8 also on page 20.

Fortunately for Council however, the potential impact of the renewal funding shortfall is still severalyears away as this allows time to detail the works required, investigate alternative options such asservice relocation and rationalisation and to identify suitable funding sources.

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Figure 6 – Predicted Percentage of Council’s Building Portfolio in Poor Condition

Figure 7 – Forecast Renewal Budget required for Council’s Building Portfolio

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Figure 8 – Cumulative Renewal Funding Gap for Council’s Building Portfolio

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5.5 NEW WORKS AND UPGRADE / EXPANSION PLANS

New works are those works that create a new asset that did not previously exist, or works whichupgrade or improve an existing asset beyond its existing capacity. They may result from growth,social or environmental needs. Assets may also be acquired at no cost to the Council from landdevelopment. New assets add to Council’s total life-cycle expenditure and are thus far less desirablethan the renewal of existing assets unless the acquisition of new assets goes hand-in-hand with thedisposal of existing assets.

As noted in section 5.1.3, Council does not yet have a formal Asset Functionality assessment programthat would provide data critical to the formulation of long-term New Works and Upgrade/ExpansionPlans for its building portfolio.

5.6 BUILDING DISPOSAL PLAN

Disposal includes any activity associated with disposal of a decommissioned asset including sale,demolition or relocation. It is acknowledged that the disposal of community assets is problematic atbest and highly contentious at its worst. Council’s best tactic is to put easily understood options tothe community that demonstrate the impact on their Rates for each of the choices.

Disposal projects should be listed in a separate works program to ensure that they are funded andthe change in overall asset value is tracked. The Disposal program should also recognise the netreduction in maintenance expenditure required as a result in the reduction of the size of the assetportfolio.

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6. FINANCIAL SUMMARY

6.1 FORECAST EXPENDITURES

The forecast renewal expenditures discussed in Section 5.4 have been summarised in Table 9 below.If the current renewal expenditure remains unchanged over the 10-year study period, the shortfall inrenewal funds has been forecast to be $1,100,000 or 67% of the required expenditure.

Table 9 – 10-Year Forecast Buildings Renewal Expenditures

YearRequired AnnualBuilding Renewal

Expenditure

Current Budget

2018-19 $139,100 $52,4002019-20 $7,800 $52,4002020-21 $5,000 $52,4002021-22 $98,600 $52,4002022-23 $0 $52,4002023-24 $434,600 $52,4002024-25 $20,000 $52,4002025-26 $354,900 $52,4002026-27 $124,800 $52,4002027-28 $439,200 $52,400Total $1,624,000 $524,000

6.2 FINANCIAL RATIOS

As broad indicators of Council’s asset management practice, two financial ratios have beencalculated using the forecasting results. One is the popular but problematic Asset SustainabilityRatio. Determined by dividing the Capital Renewal Expenditure by the Annual Depreciation, thetarget for this ratio is notionally 100%. For the ratio to be in this range it is necessary for the assetsto be uniformly distributed along the life-cycle range however in practice, this is rarely the case.

If the assets are predominately newer and in the early stages of their life-cycles, the requiredrenewal expenditure will be low in comparison to the depreciation expenditure and the resultantratio will be inherently lower that 100%. This is the situation with Council’s building portfolio. Asdiscussed in section 5.1.3, the buildings are currently in Good to Very Good condition with very littlerenewal works required. Thus the renewal works required is a small fraction of the depreciationexpenditure resulting in:

Asset Sustainability Ratio 69%

A more useful ratio is the Asset Renewal Funding Ratio which is determined by dividing the PlannedCapital Renewal Expenditure by the Required Capital Renewal Expenditure over a 10-year period.With the target being 100%, any result less than the target indicates that an increase in renewalexpenditure is required. Using the figures from Table 9, the ratios for Council have been determinedto be:

Asset Renewal Funding Ratio 32%

This result is a direct correlation the shortfall shown in Figure 8 on page 20 and puts furtheremphasis on the need to increase the planned buildings renewal expenditure from the 2023-24onwards.

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7. ASSET MANAGEMENT PRACTICES

7.1 INTERACTION WITH ACCOUNTING / FINANCIAL SYSTEMS

The NSW Local Government (Financial Management) Regulations 1999 requires that Council prepareand maintain all accounting records, accounts and financial statements in accordance with allrelevant Australian Accounting Standards. Council has complied with the following accountingstandards and guidelines as required:

· AASB 13 Fair Value Measurement – prescribes requirements a framework for measuring fairvalue and requires disclosures about fair value measurements.

· AASB 116 Property, Plant & Equipment – prescribes requirements for recognition anddepreciation of property, plant and equipment assets

· AASB 136 Impairment of Assets – aims to ensure that assets are carried at amounts that arenot in excess of their recoverable amounts

· AASB 1021 Depreciation of Non-Current Assets – specifies how depreciation is to becalculated

· AAS 1001 Accounting Policies – specifies the policies that Council is to have for recognition ofassets and depreciation

· AASB 1041 Accounting for the reduction of Non-Current Assets – specifies the frequency andbasis of calculating depreciation and revaluation basis used for assets

· AAS 1015 Accounting for acquisition of assets – method of allocating the value to new assetson acquisition

· AAS 27 Financial reporting by Local Government· AAS 1010 Recoverable Amounts of Non-Current Assets – specifies requirement to test the

reasonableness of valuations

Council has prepared and endorsed a capitalisation and depreciation policy with schedules forcapitalisation and valuation thresholds. These financial thresholds and activities have beendeveloped to assist in determining when expenditure is capital or maintenance.

7.2 ASSET MANAGEMENT SYSTEMS

Oberon Council’s Asset data is held in a corporate asset management system. This includes:· Asset inventory and location including mapping.· Asset condition.· Asset’s remaining lives and year of construction.· Asset’s service potential.· Asset values – replacement cost, written down value and annual depreciation.· Annual capital works history.· Inspection and assessment data.

Council’s commitment to asset management relies on the ability to resource information upload anddata updates on regular basis. Therefore as part of the Asset Management Planning process, Councilhas adopted the framework shown in Figure 9 on page 24.

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Figure 9 – Information Flow Diagram for Oberon’s Corporate Asset Management System

7.3 STANDARDS AND GUIDELINES

Council has endorsed an Asset Management Policy which prescribes how asset managementpractices are to be implemented throughout Council to achieve it strategic outcomes.

The principal purpose of the Asset Management Policy is to guide Council in the delivery of needsbased services to the residents, businesses and visitors. It is based on a set of policy principles thatrelate to:

· Asset Planning & Budgeting· Asset Operations & Maintenance· Risk Assessment & Management· Asset Accounting & Costing· Service Planning and associated functional requirements· Information Systems· Data Management

A key benefit of implementing this BAMP is the resultant ability for Council to align its resources andneeds against a key set of actions to implement asset management planning techniques that can bemonitored for their performance and cost effectiveness.

The International Infrastructure Management Manual provides an international best practice contextto the development of asset management capability within Council.

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8. ASSET MANAGEMENT IMPROVEMENT PLAN

8.1 PERFORMANCE MEASURES

The effectiveness of the Buildings Asset Management Plan (BAMP) can be measured in the followingways:

· The degree to which the required cash flows identified in this asset management plan areincorporated into Council’s long-term financial planning process and Management Plan.

· The degree to which 5-year detailed works programs, budgets, business plans andorganisational structures take into account the trends provided by the BAMP.

8.2 IMPROVEMENT PLAN

The Asset Management Improvement Plan set out in Table 10 (commencing on page 26) sets out thekey tasks required for significantly lifting Council’s Strategic Asset Management capabilities andimproving the quality of future long-term financial forecasts.

8.3 MONITORING AND REVIEW PROCEDURES

This BAMP will be reviewed during annual budget preparation and amended to recognise anychanges in service levels and/or resources available to provide those services as a result of thebudget decision process.

A full review and update of this BAMP will be undertaken on completion of the actions listed in theAsset Management Improvement Plan.

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Table 10 – Asset Management Improvement PlanAction

No Action BAMPSection Responsibility Timeline

1 Investigate options for measuring community satisfaction and expectations in relation to themanagement of building assets. 3.1

DirectorPlanning &Development

May 2020

2 Implement an Asset Hierarchy to inform maintenance and asset provision prioritisationdecisions. 3.3 April 2019

3 Assess Council’s performance against the current Tier 1 Strategic Levels of Service for the 2019calendar year. 3.4 February 2020

4 Review the current Tier 1 Strategic Levels of Service and revise if necessary. 3.4 March 2020

5 Document Council’s current buildings maintenance and provision practices as Tier 2 TechnicalLevels of Service. 3.4/5.3 September 2019

6 Assess Council’s performance against the current Tier 2 Technical Levels of Service for the 2019calendar year. 3.4 February 2020

7 Review the current Tier 2 Technical Levels of Service and revise if necessary. 3.4 April 20208 Investigate the impact of changes in services expectations and of new technologies on assets. 4.2 May 20209 Document condition assessment methods in an Assessment Manual. 5.1.2 May 2019

10 Document functionality assessment methods in an Assessment Manual. 5.1.3 May 2019

11 Undertake a condition and functionality assessment using methods documented in theAssessment Manual. 5.1.3 September 2019

12 Identify the specific risks for Oberon Council related to the management of its building portfolioand document the likelihood and consequences of these risks into a Risk Management Plan 5.2 August 2019

13 Prepare a Buildings Renewal Plan using the updated condition assessment data. 5.4 November 201914 Prepare a New Works and Upgrade/Expansion Plan using the functionality assessment data. 5.5 November 2019

15 Prepare revised 10-year financial forecasts using Buildings Renewal Plan and the New Works andUpgrade/Expansion Plan. 6.1 December 2019

16 Update and re-issue this Buildings Asset Management Plan using the information obtainedthrough the previous steps. 8.3 June 2020

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REFERENCES2016-17 Annual report & Financial Statements, Oberon Council

Oberon Community Strategic Plan 2015, Oberon Council

Community Engagement Strategy, Oberon Council

Integrated Planning & Reporting Manual for local government in NSW, Office of Local Government

International Infrastructure Management Manual, Institute of Public Works Engineering Australia

Documents

OBERON COUNCIL Buildings Asset Management Plan · Oberon Council – Buildings Asset Management Plan – June 2019 1.4 LIFE-CYCLE MANAGEMENT PLAN & FINANCIAL SUMMARY The practice