MUNICIPAL ASSOCIATION OF VICTORIA 2006 ANNUAL REPORT

MU

NIC

IPAL A

SSOC

IATIO

N O

F VIC

TORIA

2006 ANN

UAL REPO

RT

072250 MAV Covers to print 21/12/06 2:56 PM Page 1

MUNICIPAL ASSOCIATION OF VICTORIA 2006 ANNUAL REPORT

PURPOSETo promote the efficient carrying out ofmunicipal government throughout the stateof Victoria and to watch over and protectthe interests, rights and privileges ofmunicipal corporations.

To be a world class peak body for worldclass local government.

OBJECTIVETo be the representative and influentialcollective voice of local government.

THE VOICE OF LOCAL GOVERNMENT

062250 MAV 2006 ARs FA 2 21/12/06 12:51 PM Page 1

MAV ANNUAL REPORT 2005/06 1

2 Year in Review

4 President’s Report

6 MAV Board

8 CEO’s Report

10 Collaboration & Capacity-building

12 Finance

14 Economic & Community Development

16 Transport

18 Infrastructure

20 Planning & Building

23 Environment

26 Human Services & Public Health

28 Council Governance

30 Workforce & Professional Development

32 MAV Governance

36 Operations

38 The MAV Team

40 Committees

42 Future Directions

44 Financial Overview

46 Guide to the Financial Report

48 Glossary

50 Financial Report

CONTENTS

Published byMunicipal Association of VictoriaLevel 12, 60 Collins StreetMelbourne VIC 3000Telephone: 03 9667 5555Facsimile: 03 9667 5550GPO Box 4326Melbourne 3001Email: inquiries@mav.asn.auWebsite: www.mav.asn.au

EditorPaula Hurley

DesignFrank Design Pty Ltd

PhotographySteven Diffey Photography

062250 MAV 2006 ARs FA 2 21/12/06 12:51 PM Page 2

2 YEAR IN REVIEW MAV ANNUAL REPORT 2005/06MAV ANNUAL REPORT 2005/06 YEAR IN REVIEW 3

ENVIRONMENTThe MAV played a key role in the development of the Victorian LocalSustainability Accord - a landmark partnership agreement betweenthe State Government and local government on environmentalsustainability. A dedicated waste policy officer was appointed and a policy forum convened to set the sector’s vision for wastemanagement for the next 10 years. ECO-Buy notched up a record$80 million spending on green alternative products - more thandouble councils’ previous achievements.

HUMAN SERVICES & PUBLIC HEALTH

A consortium of eight councils came together to plan an integratedlibrary management system that can be adopted by any Victorianpublic library service. The MAV worked closely with the StateGovernment to clarify the role of local government in the event of an influenza pandemic. Considerable progress was made in thearea of early years planning, with the State Government looking tocouncil plans in the development of its Statewide Plan for Children.

COUNCIL GOVERNANCE

Workshops for local government candidates were run in the lead upto the November council elections, providing information about theroles and responsibilities of councillors. The MAV examined thefactors leading to the increased cost of the elections, identifying thechanges to Victorian Electoral Commission fees for election servicesas the primary cause. An advisory service for mayors, councillorsand council officers provided assistance on a range of governanceand local government issues.

WORKFORCE & PROFESSIONAL DEVELOPMENT

Research on current workforce trends led to State Governmentfunding of $100 000 to establish a planning bank, designed toaddress the shortage of strategic land use planners in rural andregional Victoria, and work commenced on a pilot project toestablish a bank of nurses to fill maternal and child healthvacancies. Professional development initiatives such as theCouncillor Development Weekend and Councillor Fundamentalsworkshops were well attended and provided valuable opportunitiesfor enhancing skills and knowledge.

FINANCEThe MAV worked hard to achieve the historic signing of theInter-Governmental Agreement, designed to prevent costshifting practices. A project to establish the availability ofnationally consistent data on local government finances wascompleted and the MAV successfully argued for the AustralianLocal Government Association to commission a study tosupport greater Federal Government financial assistance.Reforms to the Penalty Enforcement by Registration ofInfringement Notice system came into effect and the increase in the fire services levy for metropolitan councils was limited to 4.5% - less than half the increase expected.

ECONOMIC & COMMUNITY DEVELOPMENT

The Lighthouse Community Planning Program was launched in recognition of the global trend towards empowering localcommunities to be drivers of planning. The MAV and RuralCouncils Network contributed to the development of the StateGovernment’s provincial statement and several projects wereinitiated to improve regulation and compliance processes viathe internet.

TRANSPORT An integrated transport strategy and action plan madesignificant progress and the State Government’s transport andliveability statement reflected the new emphasis sought on localand state government collaboration in transport planning. The Transporting Communities conference, hosted by the MAV,highlighted successful transport initiatives around the world.

INFRASTRUCTUREThe MAV provided assistance to all councils in the preparation of asset management plans and the Renewal Gap Projectidentified the funding liability for all asset classes in Victoria forthe first time. The MAV made successful representations on theimpact of changes to the Road Management Act and the sale ofsurplus VicRoads’ land.

PLANNING & BUILDING

Considerable support and input was provided to the Carbinesplanning process review. A range of initiatives was establishedto improve councils’ capacity to implement Melbourne 2030.The translation of rural zones progressed and a steeringcommittee was established to oversee expenditure on projectsto improve planning and management of rural land.

YEAR IN REVIEW

The MAV worked closely with State Government, councils and local government stakeholders on a wide range of initiatives and programs in 2005/06. Effective collaboration deliveredachievements in key areas such as intergovernmental relations,compliance, skills enhancement and service delivery.

062250 MAV 2006 ARs FA 2 21/12/06 12:51 PM Page 2

4 PRESIDENT’S REPORT MAV ANNUAL REPORT 2005/06MAV ANNUAL REPORT 2005/06 PRESIDENT’S REPORT 5

“LOCAL GOVERNMENTIS KICKING GOALSNATIONALLY AND, IN VICTORIA, THROUGHTHE MAV, IS PLAYING A CRITICAL ROLE IN ADVANCING THE IMPORTANT ISSUESTHAT WILL MAKE A DIFFERENCE FORCOUNCILS AND THEIR COMMUNITIES...”

Much has been done to advance long-termgoals for local government over the pastyear, particularly in the areas of financialsustainability, cost shifting and the ageingprofile of the sector’s workforce.

At the state level there has been a noticeableelevation in the sector’s status as evidenced bylocal government figuring prominently in majorpolicy statements including Moving Forward,the provincial statement and Meeting OurTransport Challenges, the transport andliveability statement.

At the federal level we have worked hard in conjunction with the Australian LocalGovernment Association (ALGA) to achieve the historic signing of the Inter-Governmental Agreement (IGA)designed to head off cost shifting practices.

We are now concentrating on ensuring theIGA delivers on our collective expectations andwe have secured a commitment from the StateGovernment to develop mechanisms thatensure the agreement is implemented.

We’ve completed a project to establish theavailability of nationally consistent data onlocal government finances and successfullyargued for the ALGA to commissionPricewaterhouseCoopers to undertake astudy that will lead to a stronger case for improved financial assistance from theFederal Government.

At Victoria’s urging, the ALGA has begun aprocess of organisational reform to sharpen itsroles and processes so as to best position it tomeet the challenges ahead. It has never lookedmore capable of achieving a national fundingdeal than it does now and we have highexpectations of what our national body willachieve over the coming years.

Meanwhile, over the past 12 months the MAVhas been pursuing outcomes on councils’behalf in policy, advocacy and capacity-building priorities across major functionalareas of local government responsibilityincluding finance, community development,infrastructure, planning, the environment,human services and professional development.

I truly believe things are looking up for oursector in a way that it has not in the past sixand a half years that I have been involvedwith local government. Local government iskicking goals nationally and Victoria,through the MAV, is playing a critical role inadvancing the important issues that willmake a difference for councils and theircommunities.

In our own backyard, the MAV continues to cultivate strategic and importantrelationships with key politicians as well as other public servants, relevantorganisations and peak bodies. I feel thatlocal government is poised for an excitingfuture and on the cusp of significantprogress and achievement.

Sadly, for me, this will not be a future that I will be part of. I am resigning as MAVPresident effective in August 2006 tocommence my legal career at one ofMelbourne’s commercial law firms. I feel incredibly privileged to have had the opportunity to lead the MAV and be part of the ALGA executive. Indeed, mydecision to leave at this point, when oursector appears to be on the verge ofsignificant, long-term and hard foughtchange, was not an easy one.

I appreciate all the support that has beengiven to me and the MAV over the past twoyears that I have been President. I would liketo thank the MAV Board of Managementwho have tolerated my weaknesses andpulled me back into line when I have strayedtoo far from their comfort zone from time totime. I am particularly indebted to our ChiefExecutive Officer, Rob Spence, for hisassistance and friendship since I becamePresident; and I am grateful for the supportof the MAV staff - an amazing crew oftalented, hard working and diligent people.

I thank all of you who have called, emailed,written and taken me aside at events to tellme what we are doing right, sometimes, andmore often what we are doing wrong. Thepeople and characters I have met from the79 councils across Victoria have beenremarkable and I will miss this unique roleimmensely. We are a diverse sector and it isa great challenge representing that diversitywhile advancing common causes.

In many ways it is quite appropriate that theMAV should have the opportunity to select anew President at this key juncture - for thedifficult but promising journey that lies aheadfor our sector in Victoria and more broadlyin Australia.

GEOFF LAKE PRESIDENT

PRESIDENT’SREPORT

062250 MAV 2006 ARs FA 2 21/12/06 12:51 PM Page 4

MAV ANNUAL REPORT 2005/06 THE MAV BOARD 76 THE MAV BOARD MAV ANNUAL REPORT 2005/06

CR JEFF AMOS

Wellington Shire Council MAV Board RepresentativeGippsland Region

Councillor Wellington Shire Council2003 to present. Mayor Wellington Shire Council 2004-05. Deputy MayorWellington Shire Council 2005-06.Chair MAV Professional DevelopmentAdvisory Group. Life Member ApexAustralia. Council Representative TimberTowns Victoria. Member Tarra FestivalOrganising Committee. Member WestGippsland Catchment ManagementAuthority Community ConsultativeCommittee. Member WGCMABiodiversity Portfolio Group.

CR DARRYL ARGALL

Hindmarsh Shire Council MAV Board Representative of Rural North West Region

Councillor Hindmarsh Shire Council1997 to present. Mayor HindmarshShire Council 1997-99 and 2004-06.Chair MAV Strategic EnvironmentAdvisory Group. Member North WestMunicipalities Association. MemberWimmera Catchment ManagementAuthority (WCMA) Board. MemberWCMA Communication Committee.Member Gerang Landcare Group.Member Hindmarsh LandcareNetwork.

CR MARK CONROY

Frankston City CouncilMAV Board Representative Metro Southern Region

Councillor Frankston City Council 1999to present. Mayor Frankston CityCouncil 2000-2001. Deputy MayorFrankston City Council 1999. DelegateMitcham-Frankston Freeway SteeringCommittee. Delegate Cities for ClimateProtection. Delegate InternationalCouncil for Local Government Initiative.Delegate Victorian Local GovernanceAssociation.

CR GEOFF GOUGH

Councillor Manningham City CouncilMAV Board Representative Metro East Region

Councillor Manningham City Council1997 to present. Mayor ManninghamCity Council 2002-2003. Panel MemberLiquor Licensing Victoria 1999-2004.Trustee Templestowe Cemetery 2003-present. Member Co-ordinating Councilfor Control of Liquor Abuse 1998–2003.

CR DICK GROSS

Port Phillip City CouncilMAV Board Representative Metro Inner Region

Councillor Port Phillip City Council1996 to present. Mayor Port Phillip CityCouncil 1998-2000, 2004. Chair MAVFuture of Local Government Group.Member MAV Insurance Committee.Member Towards Zero Waste AdvisoryCommittee. Vice President Associationof Waste Management Groups ofVictoria. Chair Western Region WasteManagement Committee. Member StKilda Edge Committee. MemberMetropolitan Transport Forum. ChairMetropolitan Waste Interim AdvisoryCommittee. Director Jewish Museum ofAustralia.

CR BRENDA HAMPSON

Moyne Shire CouncilMAV Board Representative Rural South West Region

Councillor Moyne Shire Council 1999to present. Mayor Moyne Shire Council2002-05. Board member South WestSports Assembly. Member DeakinUniversity Reference GroupWarrnambool Campus. Chair BarwonSouth West Regional Drug and AlcoholCoalition. Chair Mortlake CommunityDevelopment Committee. AssistantSecretary Deakin UniversityFootball/Netball Club. Chair SouthWest Regional Transport Taskforce.Member Victorian Local SustainabilityAdvisory Committee.

CR BILL MCARTHUR

Golden Plains Shire Council MAV Board Representative Rural South Central Region

Councillor Golden Plains Shire Council1996 to present. Mayor Golden PlainsShire 2004-05. Director G21(Geelong) Regional Alliance 2004 -05. Member MAV/Vic Roads LiaisonCommittee. Chair MAV PlanningAdvisory Group. Member MAVProfessional Development Committee.Local Government Representative -Federal Blackspot Advisory Committee.Municipal Representative (Ballarat) -Gorse Taskforce.

CR JOHN CHANDLER

Stonnington City CouncilMAV Board Representative Metro South East Region

Councillor Stonnington City Council1996 to present. Mayor StonningtonCity Council 1996-97. Chair MAVEconomics and Finance AdvisoryGroup. Member MAV Audit Committee.Member Australian Building CodesBoard (ABCB). Member ABCB BuildingAccess Policy Committee. MemberABCB Energy Efficiency SteeringCommittee.

CR GEOFF LAKE

Monash City Council MAV PRESIDENT Councillor Monash City Council 2000to present. Mayor Monash CityCouncil 2002-03 and 2003-04. Vice President Australian LocalGovernment Association.

CR JENNY DALE

Indigo Shire Council MAV DEPUTY PRESIDENT MAV Board Representative Rural North East Region

Councillor Indigo Shire Council 1997 topresent. Mayor Indigo Shire Council1997-99 and 2003-04. Deputy MayorIndigo Shire Council 1999-2002, 2006.Co-chair MAV Human Services PortfolioCommittee. Board Member AustralianLocal Government Association. StatePresident Australian Local GovernmentWomen’s Association - Victorian Branch.Advisory Board Member La TrobeUniversity. Councillor La Trobe University.Member Roads Corporation AdvisoryBoard. Awarded to State GovernmentHonor Roll of Victorian Women 2005.

CR SAM ALESSI

Whittlesea City Council MAV Board Representative Interface Region

Councillor Whittlesea City Council1997 to present. Mayor Whittlesea CityCouncil 1997-98, 2000-01, 2004-05.Chair MAV Transport and InfrastructureAdvisory Group. Member MAV LibraryWorking Party. Chair City of WhittleseaResponsible Gaming Forum. CouncilRepresentative Whittlesea CommunityConnections Committee ofManagement. Board Member YarraPlenty Regional Library Services.Whittlesea Representative, YMCA Boardof Directors. Whittlesea Representative,Interface Councils Group. WhittleseaRepresentative, Northern Region WasteManagement Group, MemberMAV/DOI Transport Working Party.

BOARD MEMBERS NOT PICTUREDWHO HELD OFFICE IN 2005-06

JOHN BRUCEBoard Member Metropolitan East Region

NAIM MELHEMBoard Member Metropolitan SouthernRegion

MAX O’SHEABoard Member Rural South CentralRegion

CR JOSEPH CUTRI

Maribyrnong City Council MAV Board Representative Metro West Region

Councillor Maribyrnong City Council1997 to present. Mayor MaribyrnongCity Council 2001-02, 2004-05. Co-Chair MAV Human ServicesPortfolio Committee. MemberBraybrook/Maidstone Public HousingRedevelopment. Member MaribyrnongPool Planning Committee. ChairMaribyrnong Disability AdvisoryCommittee. Chair MaribyrnongCultural & Linguistic DiversityCommittee.

CR ROD FYFFE

Greater Bendigo City CouncilMAV Board Representative Rural North Central Region

Councillor Greater Bendigo CityCouncil 1996 to present. MayorGreater Bendigo City Council 2003-05.Member MAV Insurance Committee.Chair MAV Library Working Party.Member State Library Public LibrariesAdvisory Committee. MemberMinisterial Advisory Council onLibraries. Chair Central VictorianGreenhouse Alliance. Member BendigoEaster Festival Committee. MemberBendigo Mining Environmental Trust.Greater Bendigo City Council AuditCommittee.

THE MAVBOARDAS AT 30 JUNE 2006

062250 MAV 2006 ARs FA 2 21/12/06 12:51 PM Page 6

8 CEO’S REPORT MAV ANNUAL REPORT 2005/06

CEO’SREPORT

Always keeping one step ahead, the MAV hascombined its efforts locally with nationalleadership to stimulate the campaign forimproved funding by working with the ALGA toensure clear evidence is used to support ourjoint advocacy. This work led to the ALGAcommissioning an Australia-wide study of localgovernment, which will inform the nationalcase for a fairer funding deal in the lead up tothe next federal election and beyond.

The MAV has combined its policy andresearch work with increased FederalGovernment engagement at both theMinisterial and administration levels to boostour capacity to articulate the growingfinancial and operational challenges facingVictoria’s councils.

A stronger relationship with the VictorianGovernment has also produced significantwins for the sector in the past year includingreforms to the infringement system,clarification of road managementresponsibilities for structures over waterwaysand support for small towns.

Looking ahead, the sector has an excitingand unique opportunity - perhaps the bestchance in decades - to significantly influencepartnership arrangements and funding dealsat both the state and federal levels.

To position us to achieve this, theorganisation has boosted its senior expertiseand added additional grant support in policyareas to deliver new initiatives. This modelhas improved our overall capacity butretained the flexibility to ensure we remainfluid enough to meet the needs of the sector.And for the first time in a decade, the MAVhas moved to increase its fees to provide thefinancial base to advance our fire power asmembers expect more of us.

The organisational reform process hassignificantly strengthened the MAV’s legal,governance and business skill base,providing a more dynamic and wide-ranginglevel of service and expertise to fill the gapsand priority areas identified by members.

We have commenced the development ofcompetency and conduct frameworks forcouncillors, which will help guide our trainingprograms, boost the leadership capabilitiesof those governing the sector and improvethe overall performance of councils.

Our own governance processes have alsocome under scrutiny as part of the MAV Rulesreview. This has progressed smoothlythroughout the year and we look forward toworking with councils to continually examineand improve the governance structures andpractices of the MAV over the next 12 months.

While significant reform has dominated boththe internal and external focus of the MAVthis past year, it has consolidated ourcapacity to deliver more wins for membersand positions us to effectively convert theopportunities at hand into positive outcomesfor Victorian local government.

ROB SPENCE CEO

“WE ARE... COMMITTEDTO ENERGETICALLYPURSUING... NEW AND INNOVATIVEOPPORTUNITIES THATPOSITION LOCALGOVERNMENT AS A CAPABLE LEADER,WORTHY OFPARTNERSHIPS THAT WILL BRINGLONG-TERMSUSTAINABILITY TO THE SECTOR...”

2005/06 has been a year of significantachievement for local government, with thesector showing its maturity and ability toembrace opportunities for continuedimprovement.

A high level of interest in businesscollaboration is one emerging area ofreform that has seen councils use theircombined economies of scale to leveragebetter deals. This approach has resulted in the development of new models to deliver shared services and structures,reduced costs and improved outcomes for communities.

As the tangible benefits and rewards ofcollaboration transpire, so too there hasbeen a motivational shift within the sector tomore actively pursue these reforms in aunited fashion. A number of examples havedemonstrated this appetite for reform andthere is a proven capability to do so whenthe conditions are conducive.

This was evidenced, for example, bycouncils’ willingness to join the Future ofLocal Government project, which gives thesector the opportunity to determine its owndestiny by demonstrating its capability andwillingness to undertake reforms thatimprove effectiveness.

Agreement has been reached on principlesand priorities that will increase efficiency byexpanded use of collaborative projects,introduce greater accountability againstcommunity needs and council performanceand, finally, indicate the future fundingneeds of the sector.

The MAV has dedicated considerableresources to capacity-building in this areaand will continue to assist councils identify,explore and share the benefits ofcollaborative approaches.

We are also committed to energeticallypursuing other new and innovativeopportunities that position local governmentas a capable leader worthy of partnershipsthat will bring long-term sustainability to the sector.

Aligned with this objective is the extensiveprogram undertaken by the MAV toovercome the financial challenges facingcouncils in Victoria and nationally. A focuson more research-driven activities and thebuilding of a stronger investigative basehave assisted the Association to facilitate thedevelopment of a growing catalogue ofrobust evidence to reinforce our case.

MAV ANNUAL REPORT 2005/06 CEO’S REPORT 9

062250 MAV 2006 ARs FA 2 21/12/06 12:51 PM Page 8

10 COLLABORATION & CAPACITY-BUILDING MAV ANNUAL REPORT 2005/06

COLLABORATION &CAPACITY-BUILDING

By harnessing synergies andbuilding strong partnerships, the benefits of effectivecollaboration were apparent.

MAV ANNUAL REPORT 2005/06 COLLABORATION & CAPACITY-BUILDING 11

INFORMATIONTECHNOLOGY &TELECOMMUNICATIONSCOMMITTEE

In 2005/06 the Information Technology andTelecommunications (IT&T) Committeefocused on initiatives to reduce the total costof technology for the sector, including a PCTender (see below) and the signing of anagreement with Microsoft that will contributeto the development of software solutionstailored to local government. The committeealso facilitated council participation in theState Government’s TelecommunicationsCarriage Services tender, with the resultingcontract delivering data cost reductions ofapproximately 30%. Several new projectswere initiated including an assessment ofworkforce mobility needs and thedevelopment of an IT&T Community Portal,designed to facilitate information andknowledge sharing among IT professionals.Local government was also represented onthe review by Multimedia Victoria of the E-Services Panel which pre-qualifies IT and business services suppliers.

PC TENDER Recognising that significant benefits can bederived from councils acting collaboratively,the MAV and Wellington Shire Councildeveloped a process to enable councils topurchase personal computers, notebooksand servers on a group basis and gain price benefits associated with collectivepurchasing while retaining individualcontracts. Participating councils canpurchase any quantity of products while still complying with the procurementrequirements in Section 186 of the LocalGovernment Act (Vic)1989. It is anticipatedthat approximately $10 million worth ofcomputer equipment will be purchased viathe contract, with savings to councils ofaround $1.5 million over three years.

REGULATIONREDUCTION - EASYBIZ

The City of Whittlesea, with support from theMAV, led a consortium of 31 Victoriacouncils in a successful bid for $6.2 millionin funding from the Federal Government’snew Regulation Reduction Incentive Fund(RRIF) to develop an online portal for smalland home-based businesses undertakingcouncil transactions. The pilot EasyBiz portalwill be launched in mid 2007 and will linkdirectly to participating council websites andother business entry points, providing a one-stop-shop for compliance information andapplications. The MAV has an ongoinggovernance role as a member in the ProjectDirections and Monitoring Group.

REGULATIONREDUCTION - NeDA

The MAV also collaborated with other localgovernment associations in a successfulnational $7 million funding bid to the RRIFfor the National Electronic DevelopmentAssessment Project (NeDA), which aims tostreamline the pre-lodgement andlodgement of development applications forsmall and home-based businesses. Eachparticipating council will support the newnational planning application format andforms will be submitted through a nationallyagreed electronic interface. Thirty-sevenVictorian councils are participating in theproject, which is due to be completed bymid 2007. The MAV is involved in theproject management of NeDA, inpartnership with other state localgovernment associations.

SWIFT PROJECT The MAV and VicLink received StateGovernment funding of $200,000 to jointlysponsor the SWIFT Consortium, which aimsto provide public libraries with a modern,integrated library management system thatimproves service to patrons and reduces theadministrative demands required of librarystaff. Eight suppliers responded to the formaltender request and, after an exhaustive andthorough selection process involvingrepresentatives from the participatinglibraries, Sirsi Dynix was selected as thepreferred vendor. Implementation of thesystem will commence in 2006/07.Significant interest from other public librarieshas been generated and it is anticipatedthat up to half of public libraries in the statewill become members of the consortium in

the next year.

FUTURE OF LOCAL GOVERNMENT SUMMIT

Following the success of the first Future ofLocal Government summit in 2004, theMAV once again hosted a gathering ofstates and territory representatives whocame together to debate and map out thefuture of the sector. The 250 delegatesattending the summit were issued with achallenge to be candid, open to new ideasand willing to change. A range ofinternational and local speakers shared theirvisions of the future, identifying trends andissues, and providing case studies fromaround the globe. Participants then joined in a session of in-depth group discussionsabout the key themes that had emergedfrom the presentations. The output from thedeliberations was shared and shaped into a final ‘Way Forward’ statement, reflectingthe challenges of, and opportunities for, far-reaching reform.

STEP ASSETMANAGEMENT

The Renewal Gap project, an initiative ofthe Step Asset Management Program,provided councils with comprehensive dataon their capital funding liability for all assetclasses. This information had not previouslybeen available to local government and itenabled councils to commence detailedasset management plans for input intofuture annual budget processes. As a result,councils have been able to acquire a betterunderstanding of the financial and serviceobligations associated with custodialresponsibility for their assets. An AdvancedStep Program also commenced, providingcouncils with comprehensive and objectiveassessments by external experts.

FINANCIALSUSTAINABILITY

The MAV continued its work on the financialviability of councils, utilising its extensivedatabase of local government finances.Through analyses of ongoing financialperformance in areas such as long-termdebt, operating results and populationtrends, the MAV identified councils that facefinancial challenges. Further consultationwith councils will include scrutiny of the datato ensure the MAV’s advocacy is based onsolid evidence.

062250 MAV 2006 ARs FA 2 21/12/06 12:51 PM Page 10

12 FINANCE MAV ANNUAL REPORT 2005/06 MAV ANNUAL REPORT 2005/06 FINANCE 13

NATIONAL FUNDING DEAL

The MAV committed considerable resourcesto collect and analyse data on financialtrends in local government. Working withthe South Australian peak body, the MAVundertook an examination of the availabilityof data nationally. This report and successfulrepresentations resulted in the ALGAagreeing to co-ordinate a national projectto collect consistent data on the financialhealth of local government, based on theMAV model. This is an important project for the local government sector as it willprovide a robust financial case for fairerfunding arrangements.

INTERGOVERNMENTALAGREEMENT

The MAV was actively involved innegotiating the signing of an historic Inter-Governmental Agreement (IGA),establishing a framework for the allocationof roles and responsibilities betweenAustralia’s three spheres of government. The IGA provides mechanisms to deliverbetter funding arrangements and addressesthe vexed matter of ‘cost shifting’, and theassociated financial and resource pressuresgenerated by the transfer of responsibilitiesfrom other levels of government. The IGA is of critical importance to the sector as itrecognises the need for appropriateconsultation on legislative and fundingmatters relevant to local government.

INFRINGEMENT SYSTEM REFORMS

The MAV welcomed State Governmentlegislation to introduce tougher enforcementsanctions against serial fine defaultersthrough the Penalty Enforcement byRegistration of Infringement Notice system.Councils have been seeking these changesfor three years following revelations that the amount in unpaid fines owing to localgovernment had grown to $140 million.The MAV worked with the Department ofJustice and councils to maximise theeffectiveness of the new regime and toensure a comprehensive understanding of the process and system changes.

INTERSTATEDISTRIBUTION OFROADS GRANTS

In May the MAV attended a roundtableconvened by the Commonwealth GrantsCommission as part of its review of localroads grants. Local governmentstakeholders expressed a preference for asimple model based on road length andpopulation as well as an assessment of astandard average cost of maintaining roads,however the Commission indicated it wouldrecommend the use of a regression modelfor a short-term period while local roaddata is improved. The MAV stronglyopposed this model, which is based onpopulation, area and population density of municipalities, as it argued that there is only a limited relationship between thesevariables and the cost of maintaining andrenewing roads. The MAV has continued to campaign for a model based onpopulation and road length.

WATER RIGHTS & RATES

The MAV projected that the StateGovernment’s proposed separation, or‘unbundling’ of irrigation/water entitlementsfrom property titles could lead to anincrease of up to 20% in council rates insome rural communities. While supportingthe notion of unbundling entitlements toallow tradeability, the MAV argued that thestatus quo be retained for the purposes ofcouncil valuation and rating methodologies.Work continued with the State Government,councils and the Valuer General to examinethe options available to mitigate thepotential effects of this reform.

FIRE SERVICES LEVY

The MAV actively lobbied the Minister forPolice and Emergency Services, the Premierand the Treasurer for greater budgetarydiscipline in relation to the fire services levycollected from councils for the MetropolitanFire and Emergency Services Board(MFESB). New enterprise bargainingnegotiations for firefighters pointed to apotential increase in councils’ financialcontribution of up to 10%, adding to thesignificant financial impacts felt by localgovernment over a number of years. TheMFESB subsequently advised the proposedincrease in the fire services levycontributions would be 4.5%, well below the anticipated 10%.

NATIONALCOMPETITION POLICYPAYMENTS CEASE

The abolition of the Federal Government’sNational Competition Policy (NCP)payments adversely affected local councils,as the State Government previously passedon approximately 9% of its NCP paymentsto local government under the LocalGovernment Improvement IncentiveProgram. The resulting reduction of $18million in local government funding meantsome rural councils faced rate increases ofapproximately 4.5% just to recover the lossin revenue. The MAV made a formal budgetsubmission to the State Government tocontinue payments, but this was notsuccessful.

FINANCEImportant foundations were laidfor improving local governmentfinances and several hard-foughtissues were resolved.

062250 MAV 2006 ARs FA 2 21/12/06 12:51 PM Page 12

MAV ANNUAL REPORT 2005/06 ECONOMIC & COMMUNITY DEVELOPMENT 15

LIGHTHOUSEThe MAV launched the LighthouseCommunity Planning Program in response to a global trend towards empowering localcommunities to be the drivers of planning,with local government acting as thefacilitator, rather than the owner, of thisprocess. The Lighthouse Program advocatesan equal partnership between government,communities and organisations to steer thedelivery of local services and programs. This ‘bottom up’ approach represents asignificant cultural shift for the localgovernment sector and requires a freshmind-set about civic engagement. Sixty-fivecouncils signed up to the program in the first few months, reflecting the substantiallevel of interest in this innovative andchallenging process. The MAV will continueits active role as promoter and facilitator of the project.

VOLUNTEERPARTICIPATION

Increasing volunteer participation incommunity activities progressed through the Local and Regional Resource NetworksProject in conjunction with the Departmentfor Victorian Communities. The MAVidentified needs and activities across the sector and strengthened relationshipswith councils and key stakeholders. A consultation forum in August and aworkshop in December explored councils’ability to improve community volunteeringcapacity. A substantial grants program tosustain volunteer participation wasannounced and will be complemented by a capacity development program in the coming year.

BUILDING STRONGER BOARDS & COMMITTEES

As part of a major initiative run through the Department for Victorian Communities,the MAV and ourcommunity.com.au jointlyconvened a series of seminars to supportcommunity organisations on behalf ofcouncils across the state. The seminarscovered a wide range of governance andcapacity issues to assist in developing robustboards, committees and school councils incommunities. Councils supported theprogram in their municipalities by providingsuitable venues and promoting the seminarsto local community groups and businesses.

REGIONAL BUSINESSINVESTMENT READYPROGRAM

The Regional Business Investment ReadyProgram aims to enhance councils’ capacityto access capital for infrastructuredevelopment by improving business skillsand knowledge. Stage one included asurvey to scope the project and workshopsto assist councils identify and prioritiseinfrastructure projects, assess financingoptions and develop a business case forfunding and procurement. Ernst and Youngwill provide a financial advisory service to rural and regional councils as part ofstage two of the project.

PROVINCIALSTATEMENT

The MAV worked with the Rural CouncilsNetwork - comprising 26 councils withpopulations of fewer than 20,000 and nodominant town - to identify andcommunicate key issues to be considered inthe development of the State Government’sprovincial statement. Following a successfulmeeting of a Network delegation with theTreasurer, a number of initiatives wereincluded in Moving Forward: MakingProvincial Victoria the Best Place to Live,Work and Invest announced by the Premierand Treasurer in November 2005. The keyoutcome from this advocacy was therecognition by the State Government of theimportance of local government in the lifeand health of rural Victoria. The statementincluded funding of $1.8 million over fiveyears for the MAV to run a program ofsupport for small towns. This included thecreation of a Small Towns Victoria group,which will develop projects, facilitate thedevelopment of cross-regional initiatives,advise the Government on relevant matters,and assist with promotions to attract peopleand investment to small towns.

INTEGRATEDMUNICIPAL FIREMANAGEMENTPROJECT

The Integrated Municipal Fire ManagementPlanning Project (IMFMP) was established to implement recommendations ofinvestigations into the 2002-03 Victorianbushfires, focussing on improvements in agencies working together to prevent,prepare, respond to and recover from fire.The project proposed a planningframework, covering fire prevention andpreparedness, response to and recoveryfrom all fire events. The MAV hosted theIMFMP Local Government Consultation andCommunications Manager and was amember of the multi-agency referencegroup overseeing the project.

14 ECONOMIC & COMMUNITY DEVELOPMENT MAV ANNUAL REPORT 2005/06

ECONOMIC &COMMUNITYDEVELOPMENT

Policy was put into action throughprojects supporting communityengagement, collaborationbetween councils and furtherinvestment in rural Victoria.

062250 MAV 2006 ARs FA 2 21/12/06 12:51 PM Page 14

MAV ANNUAL REPORT 2005/06 TRANSPORT 17

TRANSPORT STRATEGY

In response to membership requests to engagemore strongly in the transport debate, the MAVundertook a thorough exploration of thetransport challenges facing Victoria,culminating in the Transport Strategy ReferenceDocument, which was adopted as MAV policyin early 2006. Based on these strong researchfindings, a Sustainable Transport Action Planwas then developed, which outlined the MAV’srole in, and plans for, promoting sustainabletransport choices through local governmentinto the Victorian community. The strategycovered the MAV’s actions to encourage betterintegration of land-use and transport planning,promote programs for walking and cyclingand help local councillors become championsfor sustainable transport.

TRANSPORT FORUM

To better understand the transport challengesfacing local communities and inform thedevelopment of preferred transport strategies,the MAV organised a transport forum thatexamined the role of local government.Around 100 councillors and council officersfrom across the state participated. The forumprovided an important opportunity for localgovernment to engage in debate about asector-wide approach to transport andcontribute to the MAV’s transport strategydevelopment. Along with the consultationfeedback received from councils, theoutcomes of the forum’s discussions andconsultative sessions provided valuable inputsfor the MAV’s continued work on transport.

DISABLED PARKING

Local government administers the disabledparking permits issued under the DisabledPersons’ Parking Scheme. The scheme hasbeen hindered by the prevalence of fraudulentapplications for, and use of, the permits. TheMAV has long advocated reform and this yearmade progress, with the establishment of astakeholder group of disability access andlocal laws officers. These officers were able toprovide helpful insights into the flaws in theexisting scheme and contribute valuable ideasfor reform. In partnership with VicRoads, theMAV enlisted the help of a consultant toprepare a review of the impacts of proposedregulatory changes to the scheme. As aconsequence, the MAV constructed a well-developed and researched set of reformoptions to put to government.

TRANSPORTINGCOMMUNITIESCONFERENCE

In March 2006 the MAV hosted 180delegates at the Transporting Communitiesconference, which aimed to develop avision for re-integrating transport systemswith land-use planning to improve socialoutcomes for Melbournians. Leadinginternational transport planning experts fromacross the globe provided examples ofinnovative and successful integratedtransport initiatives including case studiesfrom Vancouver, Brazil and London.Transport options were also discussed by a range of speakers from the VictorianGovernment, as well as transport, planningand academic sectors. Conferencedelegates prepared a position statementidentifying a range of priorities and potentialsolutions. The MAV will pursue thesefindings with the Federal and VictorianGovernments in an effort to improve theeffectiveness of the Melbourne 2030 vision and provide better transport optionsfor Victorians.

PUBLIC TRANSPORTLIAISON GROUP

The VicRoads/MAV Liaison Group continuedto examine and attempt to resolve high levelissues in relation to road management andrelated infrastructure. Key areas of focusincluded the management of street lightingon arterial roads, speed limits on localroads, school crossing supervisors and busmass limits. In addition, the Department ofInfrastructure (DOI)/MAV Public TransportLiaison Group was established to discussand resolve public transport related mattersof mutual interest to councils and the StateGovernment. Seven local governmentmembers from across the state wererepresented on the liaison group. Itemscovered included the ticketing zone system,funding of the Metropolitan Transport Plan,‘Think Tram’ initiative and bus services inregional cities. The appointment of the new DOI Local Government RelationshipManager and DOI Regional Managers inregional Victoria also provided opportunitiesfor the two levels of government to worktogether more effectively on public transport issues.

ACCESSIBLE BUS STOPS

Following the introduction of the RoadManagement Act 2004, there wasuncertainty about which level of governmentwas responsible for ensuring bus stops andshelters complied with the DisabilityDiscrimination Act 1992. Legal adviceindicated that the State Government hadprimary responsibility for ensuring bus stopcompliance, while councils hadresponsibility for the bus shelters theyprovided. In conjunction with a workingparty of council officers, the MAV developeda sector-wide compliance document andheld training sessions for councils. As aresult of ongoing negotiations with the StateGovernment, metropolitan councils wereinvited to join a new State Government busshelter contract.

CONGESTION INQUIRY

The Victorian Competition and EfficiencyCommission (VCEC) was asked by VictorianTreasurer John Brumby to conduct aninquiry into transport congestion aroundMelbourne and parts of regional Victoria.The MAV played a strong role in advocatingthe interests of local government throughoutthe period of the inquiry. In April the VCECreleased a draft report, Making the RightChoices, which identified various regulatoryand institutional barriers to resolvingtransport congestion problems, particularlysurrounding the complex mix of activitiesand powers allocated to local and StateGovernments. As the findings had apotentially significant impact on localgovernment’s role in the provision of andplanning for transport, the MAV made twowritten submissions about reducingcongestion and encouraging moresustainable transport systems in Victoria.

16 TRANSPORT MAV ANNUAL REPORT 2005/06

TRANSPORT A renewed focus on transport gainedtraction with the State Governmentacknowledging the importance of engaginglocal government in transport planning.

062250 MAV 2006 ARs FA 2 21/12/06 12:51 PM Page 16

18 INFRASTRUCTURE MAV ANNUAL REPORT 2005/06

INFRASTRUCTUREIn no other area is Victorian localgovernment demonstrating its maturitymore than in its battle against rapidlyageing infrastructure.

MAV ANNUAL REPORT 2005/06 INFRASTRUCTURE 19

ASSET MANAGEMENTCONFERENCE

Asset management has taken centre stageon the local government agenda in recenttimes. It is widely recognised that all levelsof government face serious challenges inmany areas of asset management andknowledge sharing is one key way ofmeeting these challenges. The 2006International Local Government AssetManagement Conference, hosted by theMAV, featured an array of experts presentingon topics such as key trends, tendering forasset management systems, public-privatepartnerships and allocation ofresponsibilities.

STRUCTURES OVER WATERWAYS

As an unintended consequence of the newRoad Management Act, responsibility forbridges and culvert structures was passed to councils. The ramifications of this weresignificant, with several rural councilsreporting more than 1000 irrigationstructures in their area and onemetropolitan council identifying bridgesvalued at over $10 million in itsmunicipality. Councils did not wish toassume this responsibility even withadequate financial compensation to covermaintenance responsibilities. The MAVexpressed concern on behalf of the sectorand sought an immediate amendment tothe Act. The Minister for Transport agreed toan amendment to return responsibility towater authorities and the MAV worked withthe Minister’s Infrastructure Panel to ensurethis change to the legislation would bepassed in the autumn session of Parliament.

SURPLUS VICROADS LAND

VicRoads proposed processes for disposingof surplus land in its ownership, which insome cases had significant financialimplications for councils where substantialmaintenance costs are involved. The MAVand councils raised serious concerns withthis proposal and advocated the need forcouncils to be given a right of refusal to theongoing ownership or management ofrelevant land. VicRoads heeded thisfeedback and included a right of refusal inits disposal policy. Mechanisms will beexplored to allow the Government LandMonitor to transfer land at lower thanmarket value in certain cases.

INFRASTRUCTURERENEWAL GAP PROJECT

Renewal of ageing assets is one of thebiggest challenges facing local government.Small rural councils with extensiveinfrastructure portfolios covering largegeographical areas but with smallpopulations are most heavily burdened byinfrastructure renewal requirements. In 2005the MAV Step Program was expanded toinclude the Renewal Gap project, aninitiative to identify the funding liability forall asset classes in all councils for the firsttime. The MAV has calculated an annualinfrastructure spending deficit ofapproximately $350 million over the nextfive years. The MAV has now providedassistance to all councils to draft assetmanagement plans to maintain and renewtheir assets adequately into the future.

SPATIAL INFORMATION

The MAV continued to be an active memberof the Victorian Spatial Council, a peakbody with responsibilities for co-ordinationacross the spatial information industry,including the private sector, government and universities. The Council developedinitial policies on data management andidentified the need to improve the PropertyInformation Project, whereby local councilsexchange land title information with theState Government.

ACCESSIBLE HOUSING

Councils recognise the need to makehousing more accessible to people with adisability and more broadly address theneeds of an ageing population. As a resultof advocacy, the State Governmentestablished the Accessible HousingTaskforce to provide advice on a statewideapproach for establishing accessible andadaptable housing policies. The MAV wasrepresented on the taskforce by ChiefExecutive Officer, Rob Spence. The taskforcesubmitted its final report to the Minister forconsideration in mid 2006.

062250 MAV 2006 ARs FA 2 21/12/06 12:51 PM Page 18

MAV ANNUAL REPORT 2005/06 PLANNING & BUILDING 21

MELBOURNE 2030

Melbourne 2030 continued to represent a major challenge to local government andthe MAV had a clear mandate from councilsto focus on strengthening partnerships incommunication, capacity, coordination andcommitment. Following the appointment of a Melbourne 2030 Liaison Officer, theCouncillor Reference Group and thePlanning Technical Committee wereestablished, convened and resourced. These groups contributed to the action plan, building on the outcomes of the AprilPlanning for Change forum. Education and information programs were welcomedby councils and a ‘beacon projects’methodology enabled sharing of bestpractice, while the MAV/VicUrban breakfastseries continued to build response capacityat a senior level. A green wedge researchreport carried out by the MAV identifiedissues and threats undermining the purposeand application of the green wedge zones.

RURAL ZONES

Following a determination from the Ministerfor Planning to directly translate the RuralZone to the Farming Zone, the MAVmonitored council responses and liaised withDepartment of Sustainability and Environmentas translation progressed. Direct translationwas well advanced at the end of the year,with 78% of affected councils amendmentsapproved or in the process of beingapproved. Consultation with affected councilsand the Minister’s office will continue, with aparticular focus on determining the mostappropriate use of a $150,000 grant toassist with rural zone implementation.

PLANNING FEES REVIEW

Planning fees regulated by StateGovernment do not reflect the real costs ofproviding planning services. Fees were set in2000 using data calculated prior to theintroduction of GST. Since that time, feeshave failed to keep pace with inflation,costing ratepayers of metropolitan councilshundreds of thousands of dollars in somecases. Meanwhile, the permit assessmentprocess continues to grow in cost andcomplexity. The MAV is collating data toinform an advocacy campaign for the levelof fees to be reviewed.

GROWTH AREAS

The MAV supported the introduction ofdeveloper contributions towards essentialinfrastructure for burgeoning urban fringecommunities. Communities in the growthcorridors of Melbourne will benefit fromimproved planning, ensuring new suburbsget the roads, schools, health facilities andpolice stations that make up well servicedand properly supported communities. In awelcome move, the State Government alsoannounced the establishment of a new co-ordinating body, the Growth Area Authority,which will provide a one-stop-shop forcouncils and developers who have had tocontend with multiple government agencies.The five growth areas identified by the StateGovernment under Melbourne 2030 areCasey-Cardinia, Hume, Melton-CarolineSprings, Whittlesea and Wyndham. MAVCEO Rob Spence was appointed to theGrowth Areas Authority Interim Board, whichworked closely with the Government andcouncils during the consultation phase toensure transitional issues were managed.

STREAMLINING THE PLANNINGPROCESS

The Eastern Metropolitan Region councilscommissioned a report proposing changes toplanning legislation and regulations thatwould make the system more efficient andeffective. Their work was significant insecuring a commitment from StateGovernment to conduct a review of planningpermit requirements. Headed by ParliamentarySecretary for Planning Elaine Carbines, theStreamlining the Planning Permit Processreview held a forum attended by more than60 councils in which the report was discussed,reform opportunities identified and potentialsolutions scoped. The MAV providedconsiderable support and input to the reviewprocess, including participation in aroundtable of key industry and governmentrepresentatives and consultation with councilsto identify minor works that could potentiallybe exempted from requiring permits.

ABORIGINAL CULTURAL HERITAGE

Following forums with the MAV LocalGovernment Indigenous Network andplanning and community developmentofficers, the MAV provided a localgovernment response to the StateGovernment’s draft bill canvassing a newsystem of Aboriginal cultural heritage. Thelegislation was passed in April, however theMAV was concerned that the lack ofguidance on what land use or developmentpermits required Aboriginal CulturalHeritage Management Plans prevented afull assessment of the impact on localgovernment. The MAV wrote to the Ministerfor Aboriginal Affairs seeking hiscommitment that local government beinvolved in the preparation of regulationsthat prescribe these activities. Someconcessions were made as a result ofconsultation, including stopping the clockon statutory requirements for processingpermit applications and enabling localgovernment access to the AboriginalCultural Heritage Register.

HERITAGECONSERVATION

The conservation of heritage placescontributes significantly to our cultural,social and economic environment and localgovernment plays an important role in thisendeavour. In Victoria, heritage controls areoften highly valued and sought after byresidents and property owners, with fewerthan 5% of owners contesting registration.The Productivity Commission Inquiry intoHeritage Conservation made draftrecommendations that privately ownedproperties be included on heritage lists onlywhen a negotiated conservation agreementhad been reached and remained in force.This recommendation was of concern to theMAV, which argued that the system inVictoria is comprehensive, based on solidand transparent methodology and hasbroad public awareness and support. Therecommendation was not included in thefinal report.

20 PLANNING & BUILDING MAV ANNUAL REPORT 2005/06

PLANNING & BUILDING

Improved relationships between the State Government and local governmentdelivered increased collaboration onplanning and building matters.

062250 MAV 2006 ARs FA 2 21/12/06 12:51 PM Page 20

22 PLANNING & BUILDING MAV ANNUAL REPORT 2005/06

BUILDINGREGULATIONS

The Building Act and BuildingRegulations set the rules that governconstruction in Victoria. In someinstances, councils may grant exceptionsto these rules and may also set theassociated fee. A Regulatory ImpactStatement (RIS) on Proposed BuildingRegulations 2006 proposed changes tothis system which had the potential toundermine council autonomy and limitcouncil capacity to recover costs. TheMAV, in conjunction with the VictorianMunicipal Building Surveyors Group(VMBSG), provided a submission to theRIS which covered a number of issues,notably the limited time available forcouncils to ensure compliance forpublicly accessed buildings and theintroduction of capped fees. The BuildingCommission conceded that furtherresearch on the true cost of service wasrequired and also provided clarificationon the application of fees. The BuildingRegulations 2006 were subsequentlyaltered in response to the majority ofconcerns raised by the MAV and VMBSGprior to their introduction in June 2006.

DEVELOPMENTASSESSMENT FORUM

The MAV continued to participate in theDevelopment Assessment Forum, whichprovided useful thinking and informationfor the Carbines review into streamliningthe planning process. The MAV workedclosely with the ALGA and other stateassociations to better co-ordinate andstrengthen local government views andinput to this process.

REVISEDCOUNCILLOR GUIDE

The MAV updated and improved Land-use Planning in Victoria - A Councillor’sGuide. The planning system in Victoria is a critical part of council activities and presents both opportunities andchallenges for elected representatives. It contributes towards sustainabilityobjectives, economic development,heritage and environmental conservationas well as guiding development for long-term community benefit. This guidehelps councillors understand theplanning system in Victoria, including its operating environment, relevantlegislation and roles and responsibilities,so that councillors are better equipped to perform their functions within theplanning system. The guide is availableon the MAV website.

MAV ANNUAL REPORT 2005/06 ENVIRONMENT 23

ENVIRONMENTConcerted advocacy and tailoredprograms continued to build thecapacity of local government toperform an integral role inenvironmental management.

062250 MAV 2006 ARs FA 2 21/12/06 12:51 PM Page 22

24 ENVIRONMENT MAV ANNUAL REPORT 2005/06

ENVIRONMENT

MAV ANNUAL REPORT 2005/06 ENVIRONMENT 25

WEED MANAGEMENT

Local government across Victoria is activelyinvolved in weed management, however thelevels of awareness and the capacity toundertake the activities vary betweenmunicipalities. In order to improveinformation sharing between councils, theMAV, with funding from the VictorianGovernment, reviewed local governmentweed management approaches over thepast three years. The study found this issuewas an increasingly high priority acrossVictorian councils and that there had been amarked rise in the number of councilsadopting strategies and local laws toprogress weed management. The study alsofound that several barriers affected theability to increase weed managementactivities, notably capacity and resourcelimitations and confusion over roles andresponsibilities. The outcomes of this studyare expected to encourage informationsharing between councils and other landmanagers, improve collaboration andreduce duplication of effort in weedmanagement approaches.

WASTE MANAGEMENT

The MAV appointed a Waste Policy Officerin September to further enhance its wastemanagement capabilities. A keyachievement in this area was the MAV’ssuccess in negotiating a strengthenedNational Packaging Covenant, which wassigned in November. More than 120delegates from 66 councils attended theMAV Waste Policy Forum to identify thesector’s agenda and vision for wastemanagement and resource recovery overthe next decade. The forum identified thesector’s key need to reach the goals of theTowards Zero Waste Strategy and therenewed National Packaging Covenant.These will form the basis of MAV’s ongoingadvocacy, capacity-building and wastemanagement program development.

WATER MANAGEMENT

Environmental capacity-building programsare a key MAV priority, particularly in thearea of domestic wastewater andstormwater management. The ClearwaterSmart Septics Roadshow, in partnership withthe Country Towns Water Supply andSewerage Program delivered workshops ondomestic wastewater management tocouncils. A website, community educationkit and specifications for informationmanagement were also launched to assistenvironmental health officers. The MAV alsoworked with the State Government andwater authorities to improve the regulatoryframework for domestic wastewater andstormwater management. $1.8 million hasso far been provided to rural, regional andinterface councils to undertake domesticwastewater management planning. Othereducation initiatives include the ClearwaterLeadership Program to develop the skills of future leaders, the Water and SustainableUrban Development Tools for Changeseminar attended by 120 industryrepresentatives, and major expansion of the Clearwater InfoExchange website(www.clearwater.asn.au) providing hundredsof new stormwater, domestic wastewater andwater conservation resources.

NATURAL RESOURCEMANAGEMENT

Under agreement with the AustralianGovernment, the MAV hosted the LocalGovernment Natural Resource Management(NRM) Facilitator. The position assists localgovernment in Victoria to actively engage inregional NRM planning and implementationof initiatives supported by the NaturalHeritage Trust, the National Action Plan forSalinity and Water Quality and otherCommonwealth NRM programs. Keyactivities in 2005/06 included raising theprofile of local government’s significantcontribution to NRM and identifyingopportunities for local government toparticipate in the NRM administrativearrangements at state and national levels.This was in the context of a review of thenational NRM programs, which are fundedto 2008.

ENVIRONMENT SURVEY

The MAV’s Local Government EnvironmentSurvey, conducted every three years, seeksto develop a thorough picture of theenvironment strategies, programs andpriorities of all councils, with responsesaggregated to develop a statewide overviewof local government environment activities.The 2005 survey was completed by 76 ofthe 79 Victorian councils. Some keyoutcomes of the survey included:

• widespread high priority areas identifiedas waste management, coastal/foreshoremanagement (for councils with coastlines)and local sustainability

• emerging environmental issues such asgenetic modification and ISO 14001standards are not currently a strong focus

• the two most common environmentalmanagement activities in 2005 weresupport for community environmentgroups and the Cities for ClimateProtection program.

• the most widespread environmentalmanagement incentive used by councilswith the community was the provision offree resources, such as indigenous plants;the least widespread incentive was the use of differential rates for landmanagement outcomes

• most councils feel they have a generalunderstanding of natural resourcemanagement, with half feeling they have a limited capacity to undertake NRM activities.

The full 2005 survey report will be availableon the MAV website in late 2006.

SUSTAINABILITYACCORD

The MAV played a key role in thedevelopment of the landmark VictorianLocal Sustainability Accord. Launched inNovember by the Minister forEnvironment, the Hon John Thwaites, theAccord aims to increase the effectivenessof state and local environmentalsustainability programs and foster themore consistent development ofenvironmental policies and legislation. Italso provides a mechanism for resolvingissues of sector responsibility andimproving communication between tiersof government. The Minister announcedfunding of $5 million from theSustainability Fund to support projectsthat arise out of the implementation ofthe Accord, such as the development ofLocal Environmental SustainabilityPriority Statements. Five councils wereinitial signatories to the Accord -Hobsons Bay, Nilllumbik, Moyne,Greater Bendigo and Moorabool. TheMAV will continue to work with theDepartment of Sustainability andEnvironment to promote the benefits andprinciples for the Accord to councils inthe coming year.

NATIVE VEGETATION

Greater certainty was achieved forcouncils on the administration of nativevegetation clearance permitapplications. A series of planningpractice notes was developed to providea more straightforward means forcouncils to administer planningrequirements for native vegetationremoval, after the development of thelong-awaited Operational Guidelines forNative Vegetation Management wasabandoned in late 2005. Propertymanagement plans identify nativevegetation that may be removed and theassociated offset arrangements over a10-year period, eliminating the need forindividual planning permits for nativevegetation removal within that time.Works programs identify how nativevegetation will be managed for capitalworks projects such as the constructionand maintenance of roads and publicutilities, again removing the need formultiple permit applications. The MAVhad strongly advocated for the StateGovernment to introduce both worksprograms and property managementplans to reduce the number of permitapplications moving through theplanning system.

NATIONAL PACKAGINGCOVENANT

The MAV is a signatory to the NationalPackaging Covenant, a voluntaryagreement for all levels of governmentand the packaging supply chain onshared responsibilities for managing theenvironmental impacts of consumerpackaging in Australia. As a provider ofwaste services to the community, localgovernment has a significant role to playin the lifecycle management ofpackaging and paper. The MAVsubmitted its National PackagingCovenant Action Plan for 2005-08,detailing the objectives, actions andtargets it is working towards with localgovernment and within its ownoperations. At a meeting of the NationalPackaging Covenant Council in March itwas reported that 372 organisations hadsigned the Covenant, with 65% of thefirst Covenant signatories re-signing.

ECO-BUY ECO-Buy notched up a record $80million spending on green alternativeproducts, more than doubling councils’previous achievements. In NovemberECO-Buy launched a free service toencourage businesses to adoptenvironment-friendly purchasingpractices. Twelve businesses joined theprogram, which was also part of theCommonwealth Games LegacyProgram. Other initiatives included theECO-Buy Ambassador Program, whichprovided council staff with specialisttraining in environmental purchasing,and the development of a strategicoptions paper for the future funding,governance and administrative directionsof ECO-Buy.

062250 MAV 2006 ARs FA 2 21/12/06 12:51 PM Page 24

MAV ANNUAL REPORT 2005/06 HUMAN SERVICES & PUBLIC HEALTH 27

PANDEMIC PLANNING

Under the Victorian Influenza Pandemic Plancouncils would provide mass vaccinationsand co-ordinate local activities throughMunicipal Emergency Management Plans.The MAV worked with the State Governmentto determine the detail of localgovernment’s responsibilities in the event ofa pandemic and expressed concern thatsome assumptions needed to be tested toensure they were realistic. A ‘think tank’session canvassed a number of scenariosand explored how local government wouldneed to respond to each. Further regionalforums provided opportunities to examinelocal arrangements.

HEALTH ACTREVIEW

A review of the Health Act (1958) wasinitiated by the Department of HumanServices and the resulting new legislation is likely to include changes that will affectlocal government. Issues that were the focus of MAV advocacy in the reviewprocess include funding for transitionalarrangements, flexibility in preparingMunicipal Public Health Plans,immunisations, new nuisance provisions and risk management plans for businessesregistered under the Act.

POSITIVE AGEING

MAV and the Council on the Ageing arepartners in the Positive Ageing Project, whichis designed to assist local government plan for the physical, emotional and mentalwellbeing of the ageing population. Theproject provides direct grants to Victoriancouncils to plan for ‘age friendly’ communitiesthat offer senior Victorians opportunities to liveactive and fulfilling lives. Seven fundedprojects were completed by councils in2005/06, covering various aspects of positiveageing including lifelong learning, communityengagement and council planning.

CULTURALLY EQUITABLE GATEWAYS STRATEGY

The Culturally Equitable Gateways Strategy(CEGS) is a three year, $6.2 millionprogram that assists local government andethnic agencies to improve access to Homeand Community Care (HACC) services forelderly people from culturally andlinguistically diverse (CALD) backgrounds.The MAV continued its role in sectordevelopment and as the peak bodyrepresentative on the CEGS working party.The MAV undertook a review of theprogram at the 18 month mark, finding thatthere had been a substantial increase inboth the capacity of the funded councils toprovide appropriate HACC services and inthe take-up of those services by elderlypeople from CALD backgrounds. A guide tolanguage services policies and resourceswas also published, designed to supportcouncils’ development or review oflanguage services policies in aged care.

HOME CARE OH&S GUIDE

Occupational health and safety (OH&S) inthe home care industry is a high risk area forlocal government. Safe work practices needto be flexible to meet the needs of individualcare recipients while minimising hazards forworkers. In response to this challenge, theMAV, in collaboration with the VictorianAssociation of Health and Extended Careand other stakeholders, produced the HomeCare Industry OH&S Guide. The guideidentifies safe work practices used by theindustry to manage risks and meet OH&Sobligations and provides councils with asystematic approach for checking currentwork practices, identifying hazards, assessingrisks and implementing safe, practicalsolutions. The MAV ran council briefingsessions about the Guide around the state.

AGED CARE REPORT

The MAV was a member of the steeringcommittee that oversaw the report Moving toCentre Stage: Community Care for the Aged,which provided a strategic overview of thecommunity care system and identified a rangeof options for creating a more capable,responsive and sustainable community caresystem. The draft report reflected the diverserange of perspectives among community careproviders and offered a valuable contributionto the debate about the future of aged care.The final report is expected to be launched inlate 2006.

EARLY YEARS The Early Years portfolio continued to be animportant focus for the MAV in 2005/06.Key activities included advocacy andsupport on needs such as improvedinfrastructure, better resourcing, addressingchildcare demand and achieving moreequitable cost sharing arrangements forchildcare and kindergarten services. TheMAV’s work resulted in a project to pilotcentralised childcare waiting lists in the citiesof Port Phillip and Darebin. The role of localgovernment was formally recognisedthrough the MAV’s participation in theVictorian Children’s Council and thecontribution of councils’ Municipal EarlyYears Plans to the development of theVictorian Government’s Plan for Victoria’sChildren. All councils were commended intheir early years planning work at aChildren’s Day Awards ceremony hosted bythe Minister in October.

AMBULATORY HEALTH CAREFRAMEWORK

The State Government’s Ambulatory CarePolicy and Planning Framework papersignalled major long-term reform to the healthsector through the proposed relocation of arange of in-hospital services to a communitybased setting. In consultation with councils, the MAV developed a response thatacknowledged the important role of localgovernment in the planning, funding, provisionand co-ordination of human services, andsought a formal partnership with the StateGovernment to progress the development of community based health services in aconsidered and well planned manner.

HOUSING TOOLKIT

The MAV worked with the SwinburneUniversity of Technology Institute for SocialResearch to update the Housing StrategyToolkit. First published in 1999 to providelocal government with information onaffordable housing, the guide has been aninvaluable resource for councils in achievingeffective housing outcomes for theircommunities. The new edition is updated toincorporate recent housing policydevelopments, such as the Melbourne 2030report. The fully revised Toolkit will beavailable on the MAV website in late 2006.

26 HUMAN SERVICES & PUBLIC HEALTH MAV ANNUAL REPORT 2005/06

HUMAN SERVICES& PUBLIC HEALTH

Local government continued achievingservice improvements while taking thelead in policy directions at both endsof life’s spectrum.

062250 MAV 2006 ARs FA 2 21/12/06 12:51 PM Page 26

MAV ANNUAL REPORT 2005/06 COUNCIL GOVERNANCE 29

COUNCIL ELECTIONS

In the lead up to the November councilelections, the MAV conducted a series offree information sessions for prospectivecandidates from 33 councils. A variety ofspeakers, including experienced councillorsand chief executive officers, providedinformation about the local area, the role oflocal government, the responsibilities of acouncillor and the process for nominating,as well as practical advice on campaigning.

The November council elections resulted in:

• 1,263 candidates nominating for 377vacancies across 54 councils

• the return of more than 75% of incumbentcouncillors

• all contesting councillors being returnedin 16 councils.

• female representation on councilsincreasing slightly from 27% to 31% ofthe state’s 635 elected councillors

• 47% of those elected taking to thechamber for the first time, with manyreplacing retiring councillors or filling new vacancies created through electoral reviews.

COST OF ELECTIONS

A survey conducted in response to concernsraised by councils identified an increase inelection costs of over $2.4 million or 42%since 2003. The MAV subsequentlyexamined the cost structures of the VictorianElectoral Commission (VEC) to ascertain thereasons for this. The significant increasecould largely be explained by theintroduction of a full cost recovery policy by the VEC. Other factors influencingelection costs include the services requiredby councils and the various electoralstructures and processes of councils. Thereare strong risks associated with pursuinggreater competition in the provision ofelection services. The MAV is proposing topursue system and legislative efficiencies,including waiving of the tenderingrequirements for election services andimproving data used to compile CEOs’ listsof ratepayers. A working group comprisingrepresentatives from the MAV, councils, theVEC and Local Government Victoria will beestablished to progress these measuresbefore the 2008 elections.

ELECTORALREGULATIONS

A review of electoral regulations only monthsbefore council elections in 54 municipalitiesproposed a number of changes to postalvoting processes designed to reduce thenumber of dummy candidates and preventdefamatory and untrue material beingcirculated at election time. While the MAVstrongly supports action by the StateGovernment to strengthen democraticprocesses in local government, certainproposed changes were felt to haveunintended negative consequences. TheMAV made a formal submission to the StateGovernment to immediately defer anychanges to electoral regulations, andidentified a number of options to enableappropriate reforms while also facilitatingcouncil elections in November. At the MAVCouncillor Development Weekend, theMinister announced that candidates in theNovember council elections would maintainthe ability to indicate their preferences andhave no new restrictions placed onstatements appearing in electoral material.Instead candidate statements had to carry adisclaimer that clearly distinguished thestatement as that candidate’s view and notthe view of the authority running the election.

COUNCILLORCOMPETENCYFRAMEWORK

The MAV commenced work on a project todevelop a Councillor CompetencyFramework. Developing the framework willenable the MAV to describe the unique roleof a councillor in comprehensive detail andthen develop targeted and appropriatelearning opportunities. Competencyframeworks are widely used to provide acommon frame of reference, clarifyperformance and behavioural expectations,understand development needs andunderpin professional development andtraining course design.

GOVERNANCE ADVICE

The MAV provided a ‘helpdesk’ andadvisory service for mayors, councillors andcouncil officers on a range of governanceand local government issues. Recognisingthe difficulties in understanding the LocalGovernment Act conflict of interestprovisions, guidelines were circulated to all.

COUNCILLOR CENSUS

The MAV conducted its second census totrack changes in the composition ofcouncillors following council elections in2004 and 2005. The first census,conducted in 2003, was the biggest evercollection of data about local governmentparticipation in this state. The 2006 surveywas refined to allow comparison againstAustralian Bureau of Statistics’ datacollections and its management wasoutsourced to Deakin University to assurecouncillor confidentiality. For the first time,the survey could also be completed online.The census will be repeated after everyround of general elections from 2008,enabling the MAV to analyse trends, monitorchanges in participation and build a casefor increased councillor allowances.

LOCAL GOVERNMENTFELLOWSHIP

The 2005 MAV/McArthur ManagementServices Local Government Fellowship wasawarded to Councillor Janet Rice fromMaribrynong City Council. Cr Rice receiveda $10,000 international study grant to assistwith research into sustainable transportstrategies. Her study of transport models incities that have reduced car dependency,such as Copenhagen and Helsinki, willinclude an examination of the role that localgovernment can play in planningdevelopment around public transport hubs.

The annual Fellowship is designed to broadenthe sector’s thinking and promote the flow ofnew ideas, with an emphasis on generatingpractical outcomes for communities.

ANNUAL REPORT AWARDS

The MAV and the Institute of CharteredAccountants hold Annual Report Awards forVictorian councils with the aim ofencouraging excellence in content, clarityand presentation. Winners of the 2006Awards (for 2004/05 annual reports) were:

• Best Annual Report Overall - MelbourneCity Council

• Best Annual Report, Population under20,000 - Southern Grampians Shire Council

Full details of the awards and the 2006category winners can be found on the MAVwebsite.

28 COUNCIL GOVERNANCE MAV ANNUAL REPORT 2005/06

COUNCILGOVERNANCE

Election processes and costscame under scrutiny ascouncils went to the polls.

062250 MAV 2006 ARs FA 2 21/12/06 12:51 PM Page 28

30 WORKFORCE & PROFESSIONAL DEVELOPMENT MAV ANNUAL REPORT 2005/06

WORKFORCE &PROFESSIONALDEVELOPMENT

Workforce recruitment and retention took onincreased focus with the development of profession-specific projects, while councillordevelopment activities targeted the large number of new councillors.

MAV ANNUAL REPORT 2005/06 WORKFORCE & PROFESSIONAL DEVELOPMENT 31

WORKFORCEPLANNING

The MAV had a strong focus on workforceplanning this year. A discussion paper wasdeveloped to inform a Workforce PlanningForum held in partnership with theDepartment for Victorian Communities. Asan outcome of this forum, two referencegroups were established to guide theimplementation of recommendations fromthe forum and to oversee workforce relatedprojects being undertaken by the MAV.These projects included the Planning BankProject, the GoGrad graduate recruitmentscheme and the Maternal and Child HealthNurse Recruitment and Retention Project. In addition, the MAV led a project on behalfof the Australian Local GovernmentAssociation, examining skills shortages andworkforce planning issues. This projectinvolved all state and territory localgovernment associations.

WORKFORCEINITIATIVES

GOGRAD

The MAV’s GoGrad graduate recruitmentservice for local government is a key initiativeto address recruitment. A council educationprogram was implemented and a range ofprofessional development and networkingevents targeting graduates were held.Recruitment activities included attendance atcareers expos, participation in universitycareer events and student associationactivities, plus a range of other promotionalstrategies aimed at students. Ten graduateswere recruited to five councils in 2005/06,taking up roles primarily in planning andengineering.

GETSET

The MAV’s GetSet program is designed tomeet the professional development needs ofnew graduates and entry level councilemployees. Over 160 people participated in21 workshops conducted across sevenlocations, with the Understanding LocalGovernment workshop proving the mostpopular. Four in-house sessions were alsotailored to meet the needs of specific councils.

NURSES BANK

The MAV commenced a pilot project inpartnership with the Victorian Governmentand 11 councils to establish a centrally co-ordinated service to fill casual andpermanent vacancies in local governmentmaternal and child health centres. The pilotformed part of an overall workforce strategyto support the recruitment and retention ofmaternal and child health nurses in localgovernment, and will be extended to otherareas across the state if successful.

PLANNING BANK

The chronic shortage of planners wasexamined in a workforce planning paperjointly developed by the MAV and VictorianGovernment. While the sector hasattempted to streamline planning processes,better utilise available planners and increasethe number of planning graduates throughpartnerships with tertiary institutions,workforce shortages have been unrelentingwith no real evidence this situation willchange. The Victorian Government providedseed funding of $100 000 to the MAV toestablish a planning bank to address theshortage of strategic land-use planners inrural and regional Victoria where the needis most critical. A business case wasdeveloped to assess service delivery options.

COUNCILLORDEVELOPMENT

The MAV again held its series of fiveinteractive workshops designed to equipcouncillors with critical skills and knowledgeto perform their roles. Developed inresponse to sector feedback, 104councillors from 40 councils across the stateparticipated in the program. The workshopseries used an interactive format and casestudies to provide participants with anunderstanding of key areas. Councillorswere encouraged to examine their ownexperiences to date in local government tofurther explore the topics covered and buildon the outcomes of the workshop.Beginning in early February, the firstworkshop, ‘Getting Started’, was offeredfree to all new councillors. It provided acritical overview of key topics and issuesand was structured to assist new councillorsearly in their term. Other workshopsincluded Finance and Budget, Planning,Governance, and Media &Communications.

MAV ANNUALCONFERENCE

More than 230 delegates from councilsacross Victoria attended the MAV AnnualConference in October to share strategiesfor success. In opening proceedings, HonCandy Broad, Minister for LocalGovernment, spoke about the importance ofthe Inter-Governmental Agreement as ameans of improving funding and clarifyingresponsibilities between governments.Planning Minister Rob Hulls provided acandid address on the need for councils totackle significant strategic planning tasks.Keynote speaker, Australian Football LeagueChief Executive Andrew Demetriou, sharedthe strategies employed by the AFL to re-brand the game and re-engagecommunities, and spoke about the vitalimportance of the AusKick program and thereinvigoration of country football asmechanisms for connecting withcommunities. Mayor of Invercargill in NewZealand, Tim Shadbolt, lightened theafternoon session with a highly entertainingpresentation on how optimism andperseverance turned around a city that wasin dire straits. The MAV Annual Dinner, heldat the South Wharf venue in Melbourne’sDocklands precinct, was attended by over400 representatives from local government.

062250 MAV 2006 ARs FA 2 21/12/06 12:51 PM Page 30

32 MAV GOVERNANCE MAV ANNUAL REPORT 2005/06MAV ANNUAL REPORT 2005/06 MAV GOVERNANCE 33

BOARD ADVISORY COMMITTEES

Over the past two years the Board has put in place a number ofAdvisory Committees to support and provide advice across a rangeof policy portfolios. A Board member is appointed to Chair each ofthese Committees and provide a conduit for feedback between theCommittee and the Board.

Current Committees in place are:

CHAIR

Human Services Portfolio Committee Joseph Cutri and Jenny Dale

Strategic Environment Advisory Group Darryl Argall

Planning Advisory Group Bill McArthur

Economics and Finance Advisory Group John Chandler

Strategic Transport and Infrastructure Group Sam Alessi

Professional Development Reference Group Jeff Amos

Future of Local Government Advisory Group Dick Gross

A review of the Advisory Committee structure including terms ofreference, role and reporting structures is planned following theFebruary 2007 Board elections. For further detail on the role ofeach Advisory Committee, see p 40.

MAV STRATEGIC WORK PLAN 2006/07

The MAV commenced its annual Work Plan review in March 2006with a series of member council meetings in both rural andmetropolitan locations. The feedback from those sessions was usedto inform and update the Strategic Work Plan 2006/07, which wasapproved in draft form by the MAV Board and circulated to allcouncils for review in early May. The draft Work Plan was thendiscussed and approved at the June 2006 State Council. The Boardis responsible for overseeing delivery of the actions identified in thatplan, and for determining, when required, how those actions may beimplemented.

The MAV Annual Report for 2006/07 will provide a summary ofachievements against the objectives and actions in that plan.

BOARD REGIONAL MEETINGS

In addition to undertaking regional meetings as part of thedevelopment process for the Strategic Work Plan, the Board has alsocommitted to holding some Board meetings in regional locations overthe course of its term. The objective of this is to make the MAV moreaccessible to rural councils and provide an opportunity for councils tomeet directly with the Board to discuss issues. Two regional meetingswere held over the year - with Hindmarsh Shire Council in September2005 and with Hepburn Shire Council in October 2005.

MAV INSURANCE COMMITTEE

The MAV Insurance Committee (MAVIC) has oversight of theoperation of the insurance schemes and monitors the MAV’scompliance with its Australian Financial Services Licence (AFSL). It is comprised of members with technical strategic insuranceknowledge and representatives of the MAV Board and localgovernment sector. Further information on the activities of theCommittee and the schemes is contained in the MAV InsuranceAnnual Report for 2005/06.

RISK MANAGEMENT

To effectively manage risk exposures at the MAV, the ManagementBoard, with the approval of State Council, has put in place a structureto ensure sufficient oversight of the activities of both the Associationand the two insurance schemes operated by the MAV: Civic MutualPlus and the Municipal Officers’ Fidelity Guarantee Fund.

This structure includes:

AUDIT COMMITTEE

The Audit Committee is an independent committee established atthe direction of the MAV Board of Management in 2004.

The primary objective of the Committee is to assist the MAV inmaintaining good governance, notably in the areas of financialreporting, risk management, the maintenance of a reliable system ofinternal controls, the monitoring of organisational performance andthe facilitation of the organisation’s continued ethical development.

During 2005/06 the MAV Audit Committee reviewed and approvedannual financial statements, enhanced MAV financial reporting,participated in the tender process for the appointment of an externalauditor, strengthened the relationship with the MAV InsuranceCommittee, provided overview and advice on MAV’s IT infrastructureprojects and insurance matters, and provided oversight to internalaudit reports.

CONTRACT MANAGER

The Contract Manager has a key responsibility to facilitate the flow of information from MAVIC to the MAV Board. The ContractManager also ensures the Scheme Manager performs its duties in accordance with the requirements of the Scheme ManagementAgreement and monitors compliance with Australian FinancialServices Licence requirements, risk management strategies and riskmanagement plans.

SYSTEMS DEVELOPMENT

The MAV has commenced a project to implement an electronic risk management program. This program is already in place for the MAV Insurance business and is to be rolled out to the rest of the organisation.

The implementation of this program continues the establishment of a risk management process and is part of the overall aim to builda strong risk management culture across the whole of MAV.

GOVERNANCE STRUCTURE AT THE MAV

MUNICIPAL ASSOCIATION ACT 1907

The Act defines the purpose of the MAV - to promote theefficient carrying out of municipal government throughout thestate of Victoria and watch over and protect the interests, rightsand privileges of municipal corporations.

It establishes the MAV as a corporation with perpetualsuccession and requires it to provide a public liability schemefor local government and empowers it to provide fidelityinsurance.

STATE COUNCIL

The Act provides that each member council may appointcouncillor to be its representative, and these representatives soappointed constitute the Association.

The representatives come together twice annually to form StateCouncil which sets the policy direction of the Association andmonitors its performance.

The representatives of State Council also elect the Board ofManagement and President of the MAV, and set the Rules forthe Association.

MAV RULES 2004

The Act requires the MAV to set Rules for:

• the management of the Association• the regulation of proceedings• fixing the amount of subscription to be paid annually by each

municipality• fixing of contributions to the Municipal Officers’ Fidelity

Guarantee Fund• other matters affecting the management of the Association.

The Rules require Governor in Council consent.

BOARD OF MANAGEMENT

Twelve Board members are elected to the Board ofManagement for a two-year term. Each Board member iselected to represent a geographic grouping of councils, and itis the representatives from the councils in that grouping thatelect the regional Board member.

The thirteenth member of the Board is the President who iselected at large by the representatives of each member council.

The Rules prescribe the functions of the Board which includeensuring the directions set by State Council are met, setting thebudget and employing and managing the performance of thechief executive officer.

STATE COUNCIL

The State Council met twice in 2005/06. The AGM for the2004/05 year was held in October 2005 and received a reportfrom the President on the activities and financial affairs of theAssociation. In June 2006 the State Council met to approve theStrategic Work Plan for the MAV for 2006/07 period.

MAV RULESIn early 2005, under the direction of State Council, the MAVBoard commenced a review of the MAV Rules 2004. Thisprocess commenced with the release of an Issues Paper inAugust 2005 which explored the challenges confronting localgovernment in Victoria, the MAV’s possible responses to theseand the overall role played by the MAV.

Feedback from this process was then used to inform thedevelopment of an Options Paper, which focussed on thegovernance structure and processes that would enable the MAV to fulfil the role identified in the Issues Paper. Responses to the Options Paper will be used by the Board to develop rule change proposals for determination at the October 2006State Council.

BOARD OF MANAGEMENT

During 2005/06 further change occurred on the MAV Board.Council elections in November 2005 resulted in three Boardmembers no longer continuing as councillors and, as a result, no longer eligible under the Rules to continue on the MAVBoard. By-elections were held to fill these vacancies, andfollowing appointments were made in February 2006:

• Mark Conroy (Frankston City Council) replaced NaimMelham (Greater Dandenong City Council) as theMetropolitan Southern Representative

• Geoff Gough (Manningham City Council) replaced JohnBruce (Manningham City Council) as the Metropolitan EastRepresentative

• Bill McArthur (Golden Plains Shire Council) replaced MaxO’Shea (Hepburn Shire Council) as the Rural South CentralRepresentative

The term of the current Board concludes in February 2007.

At the June 2006 State Council, the MAV President, GeoffLake, also announced his intention to resign as President of theMAV effective as of 25 August 2006. The process to fill thisimpending vacancy commenced in June 2006.

MAV GOVERNANCE

062250 MAV 2006 ARs FA 2 21/12/06 12:51 PM Page 32

MAV ANNUAL REPORT 2005/06 MAV GOVERNANCE 3534 MAV GOVERNANCE MAV ANNUAL REPORT 2005/06

AUDITOR APPOINTED

Under the Rules it is the role of State Council to appoint the auditorfor the Association. The auditor is responsible for auditing thefinancial statements for the MAV and MAV Insurance. Following anExpression of Interest process and tender, the Audit Committeemade recommendation to the Board that Ernst and Young beappointed auditor of the Association. This recommendation wasapproved by the Board and put to State Council for its approval. Atits meeting in June 2006 State Council resolved to appoint Ernstand Young as the auditor for the Association commencing for the2007 financial year.

BOARD MEETING ATTENDANCE’

July Aug Sept Oct Nov Dec Feb Mar April May JuneSam Alessi ✔ ✔ ✘ ✘ ✔ ✔ ✔ ✘ ✔ ✔ ✔

Jeff Amos ✘ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔

Darryl Argall ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔

John Bruce1 ✔ ✔ ✔ ✔ - - - - - - -

John Chandler ✔ ✔ ✘ ✔ ✔ ✔ ✔ ✘ ✔ ✔ ✔

Mark Conroy2 - - - - - - - ✔ ✔ ✘ ✘

Joseph Cutri ✔ ✔ ✘ ✔ ✘ ✘ ✔ ✘ ✔ ✔ ✔

Jenny Dale ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔

Rod Fyffe ✔ ✔ ✔ ✘ ✔ ✔ ✔ ✘ ✔ ✔ ✘

Geoff Gough3 - - - - - - ✔ ✔ ✔ ✔ ✔

Dick Gross ✔ ✔ ✘ ✔ ✔ ✔ ✔ ✘ ✔ ✔ ✔

Brenda Hampson ✘ ✔ ✔ ✔ ✔ ✘ ✔ ✔ ✔ ✘ ✔

Geoff Lake ✘ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔

Bill McArthur4 - - - - - - - ✔ ✔ ✔ ✔

Naim Melhem5 ✘ ✔ ✘ ✔ ✔ - - - - - -

Max O’Shea6 ✔ ✔ ✘ ✔ ✔ - - - - - -

1, 5, 6 Term concluded November 2005

2, 3, 4 Term commenced February 2006

BOARD ALLOWANCES

The Board Allowance and Expense Policy makes provision for Boardmembers to receive an annual allowance paid quarterly in advance,and to claim out-of-pocket expenses for travel, parking,accommodation and meals when undertaking duties as a Boardmember. Board allowance amounts are adjusted by CPI each July.

In 2005/06 the annual allowance amounts were as follows

President $49,440Deputy President $10,191Board member $6939

Annual Travel and TOTALAllowance Accommodation

claimsSam Alessi $7,168.25 $660.50 $7,828.75

Jeff Amos $7,015.55 $2,375.54 $9,391.09

Darryl Argyll $7,168.25 $13,715.44 $20,883.69

John Bruce $3,546.05 - $3,546.05

John Chandler $7,168.25 $157.50 $7,325.75

Mark Conroy $4,099.75 - $4,099.75

Joseph Cutri $7,015.55 - $7,015.55

Jenny Dale $10,422.00 $6,830.24 $17,252.24

Geoff Davey $152.60 - $152.60

Julie Eisenbise $114.50 - $114.50

Rod Fyffe $7,168.25 $4,608.68 $11,776.93

Geoff Gough $2,313.00 $125.46 $2,438.46

Dick Gross $7,015.55 $328.00 $7,343.55

Brenda Hampson $7,015.55 $748.14 $7,934.09

Geoff Lake 1 $50,715.00 $1,168.87 $51,883.87

Bill McArthur $2,313.00 $128.19 $2,441.19

Naim Melhem $3,787.50 - $3,787.50

Max O’Shea $3,698.75 $2,061.84 $5,760.59

Chris Papas $152.60 - $152.60

Rae Perry $114.50 - $114.50

Jim Ryan $114.50 $2,012.90 $2,127.40

The above amounts do not correlate to the allowance and expense payments figures in the financial statements as they includes some payments made to Board members for expenses incurred in 2004/05 and claimed in 2005/06. Some expenses are alsocharged to other areas in the MAV accounts.

Payments were made direct to Board members, to their council for travel where they have utilised a council fleet vehicle, or directly to the hotel for someaccommodation expenses.

It should be noted that some Board members may lodge claims after 30 June 2006 forexpenses incurrect in the 2005/06 year, details of which will be reflected in the2006/07 Annual Report.1 As President Geoff Lake is also provided with full private use of a motor vehicle at costof $14,718.72 and mobile phone $5,621.18

COMPLIANCEIn addition to the requirements of the Municipal Association Act1907 and MAV Rules 2004, the MAV must comply with regulationsand obligations applicable to statutory and public bodies includingthe Information Privacy Act 2000, Whistleblowers Protection Act2001 and Freedom of Information Act 1982.

The MAV has established policies and procedures to meet legislativerequirements and staff are advised of these policies at induction.Copies are publicly available on the MAV website.

No privacy complaints or Freedom of Information applications weremade to the MAV in 2005/06.

MAV REPRESENTATIVES AS AT 30 JUNE 2006

REGION COUNCIL REPRESENTATIVE

Metropolitan Central Darebin City Cr Stanley Chiang

Metropolitan Central Melbourne City Cr Brian Shanahan

Metropolitan Central Moreland City Cr Joseph Caputo

Metropolitan Central Port Phillip City Cr Dick Gross

Metropolitan Central Yarra City Cr Judy Morton

Metropolitan East Banyule City Cr Jenny Mulholland

Metropolitan East Knox City Cr Joe Cossari

Metropolitan East Manningham City Cr Geoffrey Gough

Metropolitan East Maroondah City Cr Jo-anne Taylor

Metropolitan East Whitehorse City Cr Sharon Ellis

Interface Cardinia Shire Cr Bill Ronald

Interface Hume City Cr Adem Atmaca

Interface Mornington Peninsula Shire Cr Bill Goodrem

Interface Nillumbik Shire Cr Michael Young

Interface Whittlesea City Cr Sam Alessi

Interface Yarra Ranges Shire Cr Kenneth Smith

Metropolitan South East Bayside City Cr James Long

Metropolitan South East Boroondara City Cr Luke Tobin

Metropolitan South East Glen Eira City Cr David Feldman

Metropolitan South East Kingston City Cr Justin McKeegan

Metropolitan South East Stonnington City Cr John Chandler

Metropolitan Southern Casey City Cr Mick Morland

Metropolitan Southern Frankston City Cr Mark Conroy

Metropolitan Southern Greater Dandenong City Cr Maria Sampey

Metropolitan Southern Monash City Cr Geoff Lake

Metropolitan West Brimbank City Cr Anthony Abate

Metropolitan West Hobsons Bay City Cr Bill Baarini

Metropolitan West Maribyrnong City Cr Joe Cutri

Metropolitan West Melton Shire Cr Chris Papas

Metropolitan West Moonee Valley City Cr Lydia Kauzlaric

Metropolitan West Wyndham City Cr Leigh Barrett

Rural Gippsland Bass Coast Shire Cr Neville Goodwin

Rural Gippsland Baw Baw Shire Cr Ian Clark

Rural Gippsland East Gippsland Shire Cr Jane Rowe

Rural Gippsland Latrobe City Cr Bruce Lougheed

Rural Gippsland South Gippsland Shire Cr David Lewis

Rural Gippsland Wellington Shire Cr Jeff Amos

Rural North Central Campaspe Shire Cr Neil Repacholi

Rural North Central Central Goldfields Shire Cr Brian O’Connor

Rural North Central Gannawarra Shire Cr Lui Basile

Rural North Central Greater Bendigo City Cr Rod Fyffe

REGION COUNCIL REPRESENTATIVE

Rural North Central Loddon Shire Cr Allen Brownbill

Rural North Central Macedon Ranges Shire Cr Noel Harvey

Rural North Central Mount Alexander Shire Cr Philip Schier

Rural North East Alpine Shire Cr Jan Vonarx

Rural North East Benalla Rural City Cr John Brownstein

Rural North East Greater Shepparton City Cr Bruce Wilson

Rural North East Indigo Shire Cr Jenny Dale

Rural North East Mansfield Shire Cr Tom Ingpen

Rural North East Mitchell Shire Cr Bob Humm

Rural North East Moira Shire Cr Edward Cox

Rural North East Murrindindi Shire Cr Lyn Gunter

Rural North East Strathbogie Shire Cr Robyn Machin

Rural North East Towong Shire Cr Peter Joyce

Rural North East Wangaratta Rural City Cr Don Joyce

Rural North East Wodonga City Cr Lisa Mahood

Rural North West Buloke Shire Cr Harold Flett

Rural North West Hindmarsh Shire Cr Darryl Argall

Rural North West Horsham Rural City Cr Gary Bird

Rural North West Mildura Rural City Cr Eddie Warhurst

Rural North West Northern Grampians Shire Cr Kevin Erwin

Rural North West Swan Hill Rural City Cr Bruce Jones

Rural North West West Wimmera Shire Cr Linda Gutheridge

Rural North West Yarriambiack Shire Cr Geoffrey Lovel

Rural South Central Ballarat City Cr David Vendy

Rural South Central Golden Plains Shire Cr Bill McArthur

Rural South Central Greater Geelong City Cr Jan Farrell

Rural South Central Hepburn Shire Cr Bill McClenaghan

Rural South Central Moorabool Shire Cr Thomas Sullivan

Rural South Central Pyrenees Shire Cr Lester Harris

Rural South Central Queenscliffe Borough Cr Chris Player

Rural South Central Surf Coast Shire Cr Beth Davidson

Rural South West Ararat Rural City Cr Ian Wilson

Rural South West Colac-Otway Shire Cr Warren Riches

Rural South West Corangamite Shire Cr Geoff Smith

Rural South West Glenelg Shire Cr Frank Zeigler

Rural South West Moyne Shire Cr Brenda Hampson

Rural South West Southern Grampians Shire Cr Mick Leeming

Rural South West Warrnambool City Cr Glenys Phillpot

062250 MAV 2006 ARs FA 2 21/12/06 12:51 PM Page 34

36 MAV OPERATIONS MAV ANNUAL REPORT 2005/06

HUMAN RESOURCES

The success of the MAV stems from its people and theAssociation has prided itself on building a quality team of staffand consultants to ensure the needs of members are met andthat the MAV is well positioned to fulfill its purpose.

2005/06 was a period of change and consolidation in thestaffing at the MAV. A new organisational structure introducedearly in 2006 further strengthened the executive team with thecreation of a new position, Director, Legal and Corporate.

ORGANISATIONAL PROFILE

The staffing profile of the MAV continues to be a mixture of:

• staff funded from membership subscription whose primaryfocus is the delivery of the Strategic Work Plan andimplementation of State Council resolutions through policysupport and advice, capacity-building programs and therepresentation of Victorian councils

• staff funded from State or Commonwealth grants to deliverspecific programs and support to Victorian councils

• specialist consultants to supplement the skills of the staffwithin the organisation and provide support across a rangeof functions including finance, insurance schememanagement and business development.

Although staffing numbers from 30 June 2005 remainedconstant, eight staff departed the organisation in the 12 monthperiod - four were from grant-funded positions and four wereMAV employees. The resulting vacancies were filled throughrecruitment or re-organisation. Four tertiary students alsoundertook work placements during this period.

STAFFING TRENDS - AS AT 30 JUNE EACH YEAR

Staff numbers ‘97 ‘98 ‘99 ‘00 ‘01 ‘02 ‘03 ‘04 ‘05 ‘06

Full time 24 13 15 16 16 26 23 24 30 30

Part time 2 1 1 1 0 4 4 3 4 3

Temp/Casual - - - - - - 2 1 1 3

Vacant/other* - - - - - - - 2# 2# 1#

Total staff 26 14 16 17 16 30 29 30 37 37

Gender

Male 7 6 5 4 6 11 11 10 11 10

Female 19 8 11 13 10 19 18 20 26 27

EFT* Positions

MAV filled 24.1 11.5 14.5 15.5 14 19.7 20.8 20.4 20.8 23.7

MAV vacant/other - 3 1 1 3 - - 2 2 1#

MAV temp/casual - - - - - - 0.6 0.6 0.6 -

Grant funded 1 2 1 2 2 8 4.3 5.6 11.9 9.2

Grant vacant - - - - - - 1 - - -

Total EFT’s 25.1 16.5 16.5 18.5 19 27.7 26.77 28.6 35.3 33.9*# maternity leave

* three casual staff members are working in the grant-funded area to supplementthe resources in this area. These have not been included in the EFT totals.

STAFF DEVELOPMENT

Work is well underway within the organisation to implementstaff recommendations from a team development session heldin October 2004. The key recommendation of this session wasto improve the internal communications and recordsmanagement processes within the organisation. Refer toInformation and Communications Technology (ICT) Strategyoutcomes below.

During 2005/06 the Director, Policy, Programs andCommercial also instigated development opportunities for the policy and project staff to build the team and ensure that communication, knowledge and information sharingopportunities were maximised.

With the implementation of components of the MAVInformation and Communications Technology (ICT) strategyspecific software based training was also conducted for staff.

$32,254 was spent on staff training and development duringthe 2005/06 reporting period.

MAV OPERATIONS

MAV ANNUAL REPORT 2005/06 MAV OPERATIONS 37

SYSTEMS & STRUCTURE IMPROVEMENTS

ORGANISATIONAL STRUCTURE

Further refinement and reform occurred to the organisationalstructure over the 2005/06 year with the creation of a Director,Legal and Corporate role to oversee the functions of the corporateand finance areas of the MAV, including MAV Insurance, and toprovide legal and governance advice to both the MAV and the localgovernment sector.

At the same time the communications unit was moved into thecorporate area under the Manager Corporate and Secretariat, and professional training and development unit moved into thePolicy and Programs area. Position descriptions within the corporatearea were revised to appropriately reflect the priorities and needs of the organisation.

These changes were made to strengthen the executive team at theMAV and to ensure appropriate expertise given the growth in theorganisation over the past few years.

INFORMATION AND COMMUNICATIONS TECHNOLOGY STRATEGY

The MAV’s ICT Strategy is in the final stages of completion. In the last 12 months 57% of the ICT projects outlined in this strategy have been completed and 34% are in progress ornearing completion. The remaining 9% are scheduled to progress in 2006/07.

The Board’s decision to migrate from Lotus Notes to a Microsoftenvironment, a major outcome of the strategy, has progressedsignificantly. The initiatives implemented in the last 12 months haveprovided the critical elements and foundation to complete thisproject and improve service delivery to our stakeholders.

A summary of the key outcomes achieved in 2005/06 are:

• the Lotus Notes to Microsoft Exchange migration projectcompleted, improving the MAV’s messaging capabilities andreliability

• upgrade of all desktop resources to Windows XP and Office 2003completed

• document management policies including new file classificationsystem and procedures implemented, resulting in improvedknowledge management capabilities

• infrastructure upgrades have improved network speed, securityand reliability implemented.

REMUNERATION STRUCTURE

A review of the remuneration processes at the MAV was alsoundertaken during the year, with a new four-level remunerationstructure being put in place. Each staff member was assessedagainst this structure and necessary adjustments were implementedwith the objective being to ensure greater consistency inremuneration levels across the organisation. This structure will beused as a base for setting relevant human resources policy over thecourse of 2006/07.

One of the key outcomes of this process was the alignment of allstaff remuneration reviews to 1 October each year.

COMMUNICATIONSCOMMUNICATIONS REVIEW

This year the MAV conducted a review of its communications toascertain if the information it provided fulfilled the requirements ofmembers, and communicated relevant information in a usefulformat and timely manner.

A survey was distributed to chief executive officers, councillors andsenior managers and 295 responses were received. The surveyconfirmed that the MAV Bulletin is a key source of information onthe latest projects, news and events of relevance to localgovernment, and is widely read by the membership. Respondentsexpressed a desire for the MAV to expand the availability of regularupdates in specific policy areas.

The survey identified a clear need for the MAV to improve its onlinecommunications and accessibility to a wider range of information.Email updates to members were also favoured by respondents,particularly where they convey important information requiringcouncil action.

Twenty-eight recommendations were proposed in a report circulatedto members. The MAV has implemented a number ofrecommendations and will continue to do so in the coming year.

MEDIA COMMUNICATIONS

The MAV continued to foster quality media relationships andimproved media coverage through regular meetings and informationsharing with key print and radio journalists.

In particular, widespread balanced media reporting was achieved formembers through the MAV collation and distribution of statewidecouncil rating and budget data, complemented by fact sheets,media releases and personal media briefings.

The current cost pressures facing the sector, along with MAVpositioning on specific policy matters, also received extensive mediacoverage during the year. Highlights included the positive reportingof MAV’s participation in, and analysis of, the 2005 councilelections process, as well as increased awareness of localgovernment issues through media generated for the TransportingCommunities into 2030 Conference, Asset ManagementConference and Future of Local Government Summit.

This year the MAV refined its process for informing prospectivecandidates about the transition from citizen to councillor as part of the 2005 local government election cycle through a series of 35 information sessions. Many journalists attended and reported on the information presented, further disseminating educationalmessages about operation of local government.

A targeted initiative was also undertaken by the MAV to improve the understanding of local government’s roles among key industrystakeholders. Formal presentations with a focus on the role ofcouncils, rates and current leadership work by the sector wereconducted at events hosted by the farming, urban development,disability, arts and planning sectors.

062250 MAV 2006 ARs FA 2 21/12/06 12:51 PM Page 36

MAV BOARD

Rob SpenceCHIEF EXECUTIVE OFFICER

Gavin MahoneySENIOR PROJECT OFFICER

Trevor Koops*

SENIOR ECONOMISTChristine JonesEXECUTIVE ASSISTANT TO THE CEO

John Hennessy*

SECTOR DEVELOPMENT CONSULTANT

Paula Giles*

DIRECTOR POLICY, PROGRAMS & COMMERCIAL

Liz JohnstonSENIOR PLANNING OFFICER

Clare HargreavesMANAGER, SOCIAL POLICY & PROGRAMS

Nina RogersENVIRONMENT POLICY & PROGRAMS MANAGER

Rosemary Hancock#

POLICY ADVISERJeff BurnsPROFESSIONAL DEVELOPMENT MANAGER

Clare O'NeilPOLICY ADVISER

Alison Standish#

COMMERCIAL PROJECTS MANAGER

Naree Atkinson*ABM EXECUTIVE OFFICER

Owen Harvey-BeavisPOLICY ADVISER

Jodie DelaneyEVENTS CO-ORDINATOR

Vicky MavrosSPONSOR RELATIONS

Eleanor WilliamsPOLICY ADVISER

Ann TokEVENT CO-ORDINATOR POLICY & PROGRAMS

Alison LyonDIRECTOR LEGAL & CORPORATE

Sarah JonesMANAGER CORPORATE SERVICES

Imogen KellyCOMMUNICATIONS ADVISER

MAV INSURANCE

JARDINE LLOYD THOMPSON Pty Ltd

Deb SmithCOMMUNICATIONS ADVISER

Simon MorganFINANCE, INSURANCE & PROJECT OFFICER

Rod MummeryDATABASE ADMINISTRATOR

May Yin PosarnigACCOUNTING SUPPORT OFFICER

John RyanCORPORATE SUPPORT OFFICER

Julie JacksonRECEPTIONIST/ADMIN SUPPORT

22

18

8 12

21

3 9 1 27

26

16 25 17

6 24 20

Lauren BurnsDESIGN & DEVELOPMENT PROJECT MANAGER

13

14

15

5

4

19

11

10

23

2 7

Liz HarveyPOSITIVE AGEINGADVISER

Nina KeathCLEARWATER PROJECT OFFICER

Sarah FaganPROJECT MANAGER HEALTH

Liz HoganRESOURCE NETWORKSPROJECT MANAGER

Eugenia Grammatikakis#

MULTICULTURAL POLICY ADVISER

Adrienne StephensEXECUTIVE OFFICER ECO-BUY

Norm FreeEMERGENCY MANAGEM’T PROJECT OFFICER

Taimor HazouVOLUNTEERING PROJECT OFFICER

Tania StruzinaECO-BUY LOCAL GOV’T PROGRAM MANAGER

Geoff PawseyPLANNING BANK & WORKFORCE SERVICES

John EnrightDISABILITY ACCESS PROJECT CONSULTANT

Alison RaymondECO-BUY BUSINESS PROGRAM MANAGER

Luke MurphyLOCAL GOVERNMENT NRM FACILITATOR

Kellie KendrickTIMBER TOWNS EXECUTIVE OFFICER

Amy McDonaldDOMESTIC WASTE WATER PROJECT OFFICER

Ben MorrisWASTE MANAGEMENT OFFICER

*Consultants# Part time

28 40 42

35

33

41

36 31

37

32

38

39

34

29

30

38 THE MAV TEAM MAV ANNUAL REPORT 2005/06

THE MAV TEAM

1 2 3 4 5 6 7 8 9 10 11 12 13

14 15 16 17 18 19 20 21 22 23 24 25 26 27

28 29 30 31 32 33 34 35 36 37 38 39 40 41 42

MAV ANNUAL REPORT 2005/06 THE MAV TEAM 39

GRANT-FUNDEDPOSITIONS

GRANT-FUNDEDPOSITIONS

062250 MAV 2006 ARs FA 2 21/12/06 12:51 PM Page 38

MAV ANNUAL REPORT 2005/06 COMMITTEES 41

EXTERNAL COMMITTEES

As the peak body for localgovernment, the MAV isregularly invited by the Stateand Federal governments andvarious agencies, to representthe sector on a range ofcommittees. In 2005/06, thesecommittees included:

Accessible Built Environment WorkingGroup

Advisory Committee on Public Libraries

Agricultural Subcommittee of the StateEmergency Recovery PlanningCommittee

Alpine Advisory Committee

Alternative Urban Water SuppliesReview Working Group

Animal Welfare Advisory Committee

Asbestos Management Working Group

Association of Bayside Municipalities

Association of Regional WasteManagement Groups

Australian Building Codes Board

Australian Environmental LabellingAssociation Advisory Committee

Broiler Code Committee

Building Regulation AdvisoryCommittee

Business Skills Victoria Board

Central Region Sustainable WaterStrategy Consultative Committee

Commonwealth Aged Care AdvisoryCommittee

Commonwealth Children’s ServicesPlanning Advisory Committee

Community Health Policy ReferenceGroup

Community Safety Month ReferenceGroup

Community Services and HealthIndustry Training Board

Country Fire Authority Board

Country Town Water Supply andSewerage Project Steering Committee

Customer Consultative Committee,Essential Service Commission

DE&T/MAV Joint Working Party

Development Assessment Forum

DHS Early Years Advisory Group

DHS HACC Department AdvisoryCommittee

DHS Human Services PartnershipImplementation Committee

DHS Industry Development PlanReference Group

DHS Licensed Premises AdvisoryGroup

DHS Influenza Pandemic PlanningSteering Committee

DOI Maintaining Mobility SteeringGroup

Domestic Animal ManagementImplementation Committee

DSE Sustainability In Built EnvironmentReference Group

Emergency Management ManualVictoria - Strategy Group

Environmental Weeds Working GroupCommittee

EPA On-site Wastewater AdvisoryGroup

Evaluation of the Victorian MCHService Steering Group

Flood Warning ConsultativeCommittee Victoria

Greater Melbourne Water SensitiveUrban Design Steering Committee

Integrated Municipal Fire ManagementPlanning Project Multi-AgencyReference Group

Infringements Framework ReferenceGroup

Intergovernmental Agreement WorkingParty

LGIIP Assessment Panel forCompliance

Library Network Committee (StateLibrary)

Local Government Drug Issues Forum

Local Government Indigenous Network

Local Government Liaison Co-ordinators Group

Local Government WasteManagement Forum

Local Government Working Group onGambling

MAV/DHS Disability Services WorkingParty

MAV/DHS MCH Services ImprovementImplementation Advisory Group

MAV/DHS HACC/Primary CareWorking Party

MAV/DHS Office for ChildrenPartnerships Working Party

Melbourne 2030 Activity CentresThematic Working Group

Melbourne 2030 ImplementationReference Group

Melbourne Water DrainageImplementation Steering Committee

Metropolitan Fire and EmergencyServices Board

Metropolitan Transport Forum

Ministerial Advisory Committee forVictorian Communities

Ministerial Advisory Council on PublicLibraries

Ministerial Employment Advisory Panel

Model Split Contracts Advisory Group

Municipal Emergency ManagementEnhancement Group

Municipal Emergency ManagementPlan Audit Committee

National Local Government Training &Professional Development Group

National Packaging Covenant Council

National Parks Advisory Council

Native Vegetation Exemptions ReviewAdvisory Group

Neighbourhood EnvironmentImprovement Plans Committee

Port Phillip & Westernport CatchmentManagement Authority LocalGovernment Working Group

Port Phillip and Westernport Flood andDrainage Strategy Steering Committee

Public Land Stewardship ReferenceGroup

Public Sector Management Program

Public Transport Access Committee

Roundtable on Inclusive Arts, Tourism,Sport and Recreation for People with aDisability

Rural Workforce Agency Victoria

Saferoads Partnership

Speed Limit Advisory Group

Sporting Grounds Committee

State Community Support Committeefor Drought

State Emergency Mitigation Committee

State Emergency Recovery PlanningCommittee

State Emergency Relief Sub-committee

State Flood Policy Committee

State Stormwater Strategy SteeringCommittee

Stormwater Industry Association ofVictoria

Streamlining the Planning ProcessReview Committee

Streamlining the Planning ProcessRoundtable

Timber Towns Victoria

Towards Zero Waste Working Party

Urban Stormwater & WaterConservation Fund SteeringCommittee

Urban Rural Links Steering Committee

VicHealth Planning and HealthAdvisory Panel

VicRoads Board (Roads CorporationAdvisory Board)

Victorian Catchment ManagementStakeholders Forum

Victorian Childcare Industry LiaisonGroup

Victorian Children’s Council

Victorian Community Care Coalition

Victorian Domestic WastewaterReference Group

Victorian Emergency ManagementCouncil

Victorian Food Safety Council

Victorian Kerbside Recycling ProjectsGroup

Victorian Litter Action Alliance AdvisoryGroup

Victorian Local Government DisabilityPlanners’ Network

Victorian Local GovernmentMulticultural Issues Network

Victorian Local Sustainability AccordCommittee

Victorian Ministerial Housing Council

Victoria Multicultural CommissionStanding Committee on LocalGovernment & Cultural Diversity

Victorian Rail Environmental Forum

Victorian Road Based Public TransportAdvisory Committee

Victorian Road Freight AdvisoryCouncil

Victorian Settlement PlanningCommittee

Victorian Speed Limit Advisory Group

Victorian Universities Rural HealthConsortium

Vision Super Board

Wastewise Local Government SteeringCommittee

Water Quality Improvement PlanSteering Committee

Women’s Participation in LocalGovernment Coalition

40 COMMITTEES MAV ANNUAL REPORT 2005/06

MAV BOARD ADVISORY COMMITTEES

The MAV has convened a number of key Advisory Committeesto assist the Board and organisation in strategic policydevelopment. These committees are:

MAV Economics and Finance Advisory GroupProvides strategic advice to the MAV Board and support toachieve objectives relating to financial sustainability for localgovernment, including the development of campaigns,submissions and analysis of issues.

MAV Human Services Portfolio CommitteeProvides strategic advice to the MAV Board on social policy and human services issues, particularly on intergovernmentalrelations. The committee also facilitates consultation withregional groupings of councils on current statewide issues.

MAV Planning Advisory GroupProvides strategic advice to the MAV Board on strategic andstatutory planning issues affecting local government and guides MAV policy and position development on planningrelated issues.

MAV Professional Development Reference GroupProvides input to the MAV’s professional development programfor councillors, identifies ongoing areas of need within thesector to be addressed, and encourages participation ofcolleagues in the MAV professional development program.

MAV Strategic Environment Advisory GroupProvides advice to the MAV Board on environmental issues ofimportance to local government and the needs and issues ofmembers for delivery of environmental outcomes.

MAV Strategic Transport and Infrastructure AdvisoryGroupProvides advice to the MAV Board on infrastructure andtransport issues affecting on local government and assists the MAV Board to carry forward key policies and campaigns in this area.

MAV Future of Local Government GroupProvides advice to the MAV on future trends in the role ofgovernment and assists the MAV Board to promote theimportance of local government identifying and pursuing itspreferred direction.

See page 33 for the list of Committee Chairs.

OTHER MAV COMMITTEES

The MAV has also established and supported several otherCommittees across major policy areas and projects, including:

Clearwater Steering CommitteeDirects development and delivery of statewide education andtraining program on sustainable management of urbanstormwater to local government and industry professionals.

EPA/MAV State Environmental Protection Policy (SEPP)Implementation Steering Committee Oversees development and delivery of the joint project aimedat improving local government implementation of the SEPP.

Indigenous Interagency Co-ordination CommitteeAssists local government and other agencies to maintain andimprove governance responsibilities for indigenous communities.

MAV Competition CommitteeConsults on competition policy and the Local GovernmentImprovement Incentive Program, and issues of training,implementation and compliance.

MAV/Sustainability Victoria/DSE ECO-Buy SteeringCommitteeProvides direction for ECO-Buy program.

MAV Information Technology & Telecommunciations CommitteePlans, co-ordinates and supports IT&T initiatives that deliverbetter council services and reduce costs.

MAV Library Working PartyProvides support to the MAV on campaigning for improved outcomesfor councils in public library funding, policy input and planning.

MAV PERIN Reference GroupProvides advice to the MAV on issues with the infringementsystem and the enforcement of outstanding infringement notices.

MAV/VicRoads Liaison GroupFacilitates regular consultation between the MAV and VicRoadsat executive level.

National ECO-Buy AllianceAims to support and partner other states and territories in thedevelopment of successful green purchasing programs.

Public Lighting Reference GroupSupports council officers actively involved in advancing publiclighting issues such as energy efficiency, pricing systems andmarket regulation.

Victorian Local Sustainability NetworkBrings together councils and stakeholders actively pursuing localsustainability approaches such as Local Agenda/Action 21.

COMMITTEES

062250 MAV 2006 ARs FA 2 21/12/06 12:51 PM Page 40

42 FUTURE DIRECTIONS MAV ANNUAL REPORT 2005/06MAV ANNUAL REPORT 2005/06 FUTURE DIRECTIONS 43

Having laid the foundations for improving local governmentfinances, the challenge is now ahead for the MAV to put thearchitecture in place to make the best use of these.

Work will commence to make good a commitment securedfrom the State Government to develop mechanisms that ensurethe Inter-Governmental Agreement is actionable in Victoria.

At the federal level the MAV will continue to work with theALGA to compile and argue a stronger case for improvedfinancial assistance. A research project will examinecommunities' capacity to pay rates, and a submission will seekto influence the Productivity Commission review of localgovernment revenue raising.

For its part, local government has to demonstrate that it isdeserving of external assistance. Underpinning arguments forincreased financial autonomy will be a renewed push to strengthenlocal government's credentials as the sphere of government bestpositioned to articulate and deliver community needs.

At last year's Future of Local Government Summit, delegatesagreed that the sector needs to lead change and pursue self-regulation by being open and accountable. A commitment wasmade to review and improve the efficiency and effectiveness ofcouncil operations in the pursuit of community sustainability,with frameworks for regional collaboration, accountability,

performance and funding to be developed in association withother local government associations, including the ALGA, bythe end of this year.

The process of reforming business practices throughcollaboration has already begun, with innovation in librarymanagement systems utilising economies of scale to deliver animproved service and considerable savings for councils. Furtherresearch will examine alternative applications for deliveringshared services and identify ways to overcome any constraintswhich could impede future collaborative efforts.

Safeguarding the reputation of local government will be vital toengendering confidence in the decisions and responsibilitiesentrusted to councils. Tougher mechanisms will be pursued toresolve governance breakdowns in councils and ensure thatunacceptable behaviour is dealt with in accordance withcommunity expectations.

Priorities as determined by the membership will be pursuedacross all the major functional areas of local governmentresponsibility, and the MAV remains flexible and adaptableenough to respond in a timely manner to issues affecting thesector as they arise.

FUTURE DIRECTIONS

062250 MAV 2006 ARs FA 2 21/12/06 12:52 PM Page 42

MAV ANNUAL REPORT 2005/06 FINANCIAL OVERVIEW 45

MAV INSURANCE

The MAV Insurance business consists ofCivic Mutual Plus (the ‘scheme’) and TheMunicipal Officers’ Fidelity Guarantee Fund(the ‘fund’). The Association is requiredunder the Municipal Association Act 1907 toprovide both public liability and fidelityinsurance to local government and otherstatutory authorities.

MAV Insurance is not subject to AustralianPrudential Regulatory Authority (APRA)regulations. However, the MAV InsuranceCommittee of Management viewscompliance with these regulations as beinggood business governance and practice andhas a policy of complying with the ‘spirit’ ofthe APRA regulations.

The MAV holds an Australian FinancialServices Licence (AFSL No 27143). TheAFSL ensures that the MAV and MAVInsurance maintain the highest standards ofgovernance, provides operational efficiencyand enhances the future viability of the MAVInsurance business for the betterment ofmembers of both the scheme and the fund.

The combined surplus for 2006 was $2.145million (2005 $1.02 million). The net assetposition at the end of 2006 was $10.55million (2005 $8.4 million).

CIVIC MUTUAL PLUS

Insurance activities of the entity experiencedimproved performance this year resulting inan improvement in this year’s result.

This year’s results have been impacted by:

a) the actuarially calculated risk margin of20% that has resulted in an increase of$1.702 million in the provision for claims.This has impacted both the 2005 and2006 financial years

b)a re-insurer appointing a manager andgoing into insurance runoff

c) the improvement in the general insuranceenvironment.

The operating surplus of Civic Mutual Plusfor this year was $1.94 million (2005 $1.26million). The surplus of assets againstliabilities at 30 June 2006 was $10.23million (2005 $8.3 million).

The actuary estimated that the share ofprofit from re-insurers as at 30 June 2006 is$7.139 million. This amount has not beenincluded as revenue in the financial reportsas there is the potential for future events toimpact the quantum of the final profit share.

MUNICIPAL OFFICERS’ FIDELITYGUARANTEE FUND

The 2006 year for the Municipal Officers’Fidelity Guarantee Fund saw a significantimprovement in performance. This has beencaused by a marked reduction in claimsduring the year. This is the result of thesignificant investment made by both thefund and its members to raise theawareness of this insurance risk and by therisk management initiatives introduced.

This year’s results have been impacted by:

a) the actuarially calculated risk margin of20% that has resulted in an increase of$39,000 in the Provision for Claims. Thishas impacted both the 2005 and 2006financial years

b) claims expenses reduced from $352,786in 2005 to $96,969 in 2006

c) re-insurance premium increasing from$258,824 in 2005 to $405,798 in 2006due to poor past claims performance

d) increase in premiums as the result of theincrease in minimum sums insured forcouncil members to $500,000 each andevery claim.

The operating surplus for the 2006 yearimproved to $203,881 (2005 deficit$238,289). The net asset position of thefund increased to $311,697 (2005$107,816).

44 FINANCIAL OVERVIEW MAV ANNUAL REPORT 2005/06

In accordance with the requirements of the MunicipalAssociation Act 1907, and applicable accounting standards, theeconomic activity of the Municipal Association of Victoria(MAV), the Municipal Officers’ Fidelity Guarantee Fund andLocal Government Mutual Liability Insurance Scheme (CivicMutual Plus) is reported to the members as an economic entitywithin the annual accounts. The combined activities are shownas the consolidated accounts and the MAV, being the parententity, is shown separately as the MAV General Fund.

The Association represents local government in Victoria. One of the activities of the MAV is to seek out, apply for andadminister grant funds for and on behalf of its members for thebenefit of both local government and the Victorian community.This activity of the Association has been accounted for as asegment and included at Note 25 in the financial statements.

The MAV financial statements also include the activities of itsinsurance business, MAV Insurance, which operates theMunicipal Officers’ Fidelity Guarantee Fund and the LocalGovernment Mutual Liability Insurance Scheme (Civic MutualPlus) for the benefit of councils and other local authorities. Bothinsurance activities are non-discretionary mutual funds and aresubject to the oversight of the Association’s Board ofManagement, which acts through a committee of managementconstituted by the Board, the MAV Insurance Committee ofManagement (MAVIC).

MAVIC carries out oversight and contract management of theoperational activities of both the Municipal Officers’ FidelityGuarantee Fund and Civic Mutual Plus. Jardine Lloyd ThompsonPty Ltd provides the claims and risk management services undercontract to the MAV.

MAVThe MAV’s 2006 financial result has again been solid,achieving a small surplus for the year of $16,227 (2005($166,370 deficit). The result, inclusive of grants received andexpended for the 2006 year, was a $487,358 deficit (2005$697,573 surplus) with net assets falling to $3.882 million(2005 $4.37 million).

The 2006 year was a year in which the MAV received a further$4.89 million (2005 $4.95 million) in grants from both Federaland State Governments. It was also a year in which the MAVdelivered on several significant projects that had been fundedby grants from both Federal and State Governments. Thesegrants are managed by the MAV for the betterment of the localgovernment sector and Victorian communities. The deficitrelating to grant activities was $503,585 for the year ended 30June 2006, as compared to a surplus in 2005 of $884,953.

Consequently, as at 30 June 2006 the MAV had a commitmentto expend $2.39 million (2005 $2.99 million) of grant fundson projects for the betterment of local government andVictorian communities.

The 2006 year was again a year of project delivery and firmcost control.

The operating surplus of the consolidated entity was $1.658million (2005 $1.72 million). This had the effect of increasingthe net assets of the Association from $12.77 million in 2005to $14.4 million this year.

FINANCIAL OVERVIEW

062250 MAV 2006 ARs FA 2 21/12/06 12:52 PM Page 44

MAV ANNUAL REPORT 2005/06 GUIDE TO THE FINANCIAL REPORT 47

2.1 Current and non-current assetsCash assets includes cash held in the bank, petty cash, cashdeposits and cash investments.

Receivables are monies owed to the Association.

Prepayments are payments made in the current financial year whichrelate to the next financial year. For example, annual subscriptions etc.

Property, plant and equipment represents the value of theequipment, furniture and fittings, computers, web site and intranetand motor vehicles owned by the Association.

Intangible assets are trademarks, educational programs and otherintellectual property owned by the Association

Other financial assets represent the value of shares held by theAssociation in the Co-operative Purchasing Scheme.

2.2 Current and non-current liabilitiesBank overdraft indicates the amount the Association owes itsbankers on its daily operating account.

Payables are monies owed by the Association to its suppliers as at30 June.

Premiums in advance are insurance premiums relating to the nextfinancial year billed to members of the insurance fund before 30 June.

Provision for employee entitlements is the accounting term forannual leave, long service leave and staff retirement gratuities owedto staff.

Provision for claims outstanding represents insurance claimsreported by members together with an estimate of claims incurredbut not yet reported including an estimate of the costs of settlementfor these claims.

2.3 Net assetsThis term describes the difference between total assets and totalliabilities. It represents the net worth of the Association as at 30 June.

3. Statement of cash flows

The statement of cash flows summarises cash payments and cashreceipts for the year.

The values may differ from those shown in the income statementbecause the income statement is prepared on an accrual basis.

Cash is derived from, and is used in, two main areas:

3.1 Cash flows from operating activities:Receipts relate to all cash received into the Association’s bankaccount from members and others who owed money to theAssociation in the form of fees or premiums. Receipts also includeinterest earned from the Association’s cash investments. It does notinclude receipts from the sale of assets.

Payments relate to all cash paid out of the Association’s bankaccount to staff, creditors and others. It does not include cash paidfor the purchase of assets.

3.2 Cash flows from investing activitiesThis relates to cash receipts and cash payments resulting from eitherthe sale or purchase of property, plant and equipment.

The statement of cash flows concludes with cash at end of yearwhich indicates the cash the Association has at 30 June to meets itsdebts and liabilities.

NOTES TO THE FINANCIAL STATEMENTS

To enable the reader to understand the basis on which the valuesshown in the statements are established it is necessary to providedetails of the Association’s accounting policies. These are describedin note 2.

Apart from the accounting policies, the notes also give detailsbehind many of the summary figures contained in the statements.The note numbers are shown beside the relevant items in the incomestatement, balance sheet and the statement of cash flows.

Where the Association wishes to disclose information which cannotbe incorporated into the statements, it this is shown in the notes.

The notes should be read at the same time as the financialstatements in order to get a full and clear picture of the financialstatements.

STATEMENTS BY DIRECTORS

The statement by directors is made by two directors on behalf of theBoard of the Municipal Association of Victoria. The statement statesthat in the opinion of the Board the financial statements present atrue and fair view of the operations of the Association and that theAssociation can pay its debts as and when they fall due.

INDEPENDENT AUDIT REPORT

This report is the independent auditor’s opinion on the financialstatements. It provides the reader of the financial statements acompletely independent opinion of the financial statements of theAssociation. The opinion covers all statutory and accountingstandards compliance requirements as well as providing a view onthe truth and fairness of the financial statements.

46 GUIDE TO THE FINANCIAL REPORT MAV ANNUAL REPORT 2005/06

AUSTRALIAN EQUIVALENTS TO INTERNATIONAL FINANCIALREPORTING STANDARD (AIFRS)

All Australian organisations are required to produce financialstatements that comply with Australian equivalents toInternational Financial Reporting Standard (AIFRS) for reportingperiods beginning on or after 1 January 2005.

The new reporting standards have had a significant impact onthe reporting requirements of the Municipal Association ofVictoria (MAV). The MAV through its insurance arm, MAVInsurance, has had to deal with a number of additionalcomplexities in making the transition to AIFRS.

In particular, the MAV Insurance businesses of Civic Mutual Plusand the Municipal Officers’ Fidelity Guarantee Fund have hadto include an additional risk margin in developing its provisionsfor claims and has had its reporting obligations expandedconsiderably. The financial impact of the introduction of AIFRSis that the net assets of the MAV have reduced by $1.83million.The details of the impact are set out in Note 2(s) of the 2006Financial Statements.

INTRODUCTIONThe financial report is a key part of the MAV’s Annual Report. It shows how the MAV performed financially during the2005/06 financial year and the position at the end of thefinancial year (30 June 2006).

The financial report is presented in accordance with theAustralian Accounting Standards and the recommendations ofthe Urgent Issues Group.

The MAV is a not-for-profit association that represents itsmembers who are the 79 local government authorities aroundVictoria. The MAV also runs the MAV Insurance business. Thisbusiness consists of two entities, Civic Mutual Plus (publicliability and professional indemnity insurer) and the MunicipalOfficers’ Fidelity Guarantee Fund. The MAV also managesgrants received from Federal and State Government for and onbehalf of the local government sector.

All these different interests are accounted for separately andthen consolidated into the MAV Financial Report.

The MAV is committed to accountability in all of its operations.It is with this in mind that this plain English guide has beendeveloped to assist readers understand and analyse thefinancial report.

WHAT IS CONTAINEDIN THE ANNUAL FINANCIAL REPORT?

The financial report contains three main sections: the financialstatements, the notes to the financial statements and thestatements by the directors and auditors.

The financial statements consist of three main statements:income statement, balance sheet and statement of cash flows.

The notes to the financial statements detail the Association’saccounting policies and sets out the detailed values that arecarried into the financial statements.

The statements by directors and auditor provide the views of the directors of the MAV and the independent auditor on the financial report. The statement by directors confirms theview of the directors that the financial report provides a trueand fair view of the financial performance, financial positionand solvency of the Association. The audit report by theindependent auditor expresses the auditor’s opinion on whetherthe financial statements present fairly the financial position ofthe Association as at 30 June 2006, and the results of thevarious business operations and cash flows for the year ended30 June 2006, in accordance with Accounting Standards andother mandatory professional report requirements.

FINANCIAL STATEMENTS

1. Income statementThe income statement shows:• the MAV’s revenue from its various activities• the expenses incurred in running the MAV and its business

activities.These expenses relate only to the business operations and donot include costs associated with the purchase of assets. Theexpense item ‘depreciation’ spreads the cost of the assets overthe estimated life of the assets.

The most important figure is the surplus for the year. Where is itpositive, this means that revenues were greater than expenses.

2. Balance sheetThe balance sheet shows the assets the Association owns andthe liabilities it owes at 30 June.

The balance sheet separates the assets and liabilities intocurrent and non-current. Current means those assets orliabilities that will be either collected or that fall due within the next 12 months.

The components of the balance sheet are:

GUIDE TO THE FINANCIAL REPORT

062250 MAV 2006 ARs FA 2 21/12/06 12:52 PM Page 46

MAV ANNUAL REPORT 2005/06 4948 GLOSSARY MAV ANNUAL REPORT 2005/06

ALGA – Australian Local Government AssociationCEGS – Culturally Equitable Gateways Strategy DHS – Department of Human ServicesDoI – Department of InfrastructureDSE – Department of Sustainability and Environment DVC – Department for Victorian Communities HACC – Home and Community CareIMFMP – Integrated Municipal Fire Management Planning LGIIP – Local Government Improvement Incentive ProgramLRRN – Local and Regional Resource Networks MAV – Municipal Association of VictoriaMAVIC – Municipal Association of Victoria Insurance CommitteeMFESB – Metropolitan Fire and Emergency Services BoardPERIN – Penalty Enforcement by Registration of Infringement NoticeRIS – Regulatory Impact Statement SEPP – State Environmental Protection PolicyVEC – Victorian Electoral Commission

GLOSSARY

062250 MAV 2006 ARs FA 2 21/12/06 12:52 PM Page 48

50 MAV ANNUAL REPORT 2005/06

MAVFINANCIALREPORT2006

062250 MAV 2006 ARs FA 2 21/12/06 12:52 PM Page 50

MAV FINANCIAL REPORT 2005/06 51

CONSOLIDATED MAV - GENERAL FUND

2006 2005 2006 2005NOTE $ $ $ $

REVENUE 4 49,063,642 61,856,774 10,150,094 9,623,310

EXPENSES 5(b) 47,406,111 60,140,132 10,637,452 8,925,737

NET SURPLUS/(DEFICIT) 3 1,657,531 1,716,642 (487,358) 697,573

The accompanying notes form an integral part of these statements.

INCOME STATEMENTFOR THE YEAR ENDED 30 JUNE 2006

072250 MAV FR FA 21/12/06 2:21 PM Page 51

52 MAV FINANCIAL REPORT 2005/06

BALANCE SHEET AS AT 30 JUNE 2006

STATEMENT OF CHANGES IN EQUITY FOR YEAR ENDED 30 JUNE 2006

CONSOLIDATED MAV - GENERAL FUND

2006 2005 2006 2005NOTE $ $ $ $

CURRENT ASSETS

Cash and cash equivalents 9(a) 25,140,202 25,830,204 4,063,005 4,339,500

Receivables 10 44,319,031 40,483,814 593,850 802,376

Prepayments 220,875 280,168 220,875 280,168

TOTAL CURRENT ASSETS 69,680,108 66,594,186 4,877,730 5,422,044

NON-CURRENT ASSETS

Receivables 10 47,967,122 51,970,077 - -

Property, plant and equipment 2(e),12 610,015 578,841 610,015 578,841

Intangibles 2(e),13 77,011 98,368 77,011 98,368

Other financial assets 10 10 10 10

TOTAL NON-CURRENT ASSETS 48,654,158 52,647,296 687,036 677,219

TOTAL ASSETS 118,334,266 119,241,482 5,564,766 6,099,263

CURRENT LIABILITIES

Payables 3,835,358 3,905,042 823,053 1,049,982

Premiums in advance 11 30,724,013 29,975,891 - -

Provision for employee entitlements 17 438,928 282,708 438,928 282,708

Provision for claims outstanding 14 15,830,519 17,054,589 - -

Other current liabilities 113,815 88,140 113,815 88,140

TOTAL CURRENT LIABILITIES 50,942,633 51,306,370 1,375,796 1,420,830

NON-CURRENT LIABILITIES

Provision for employee entitlements 17 143,566 124,300 143,566 124,300

Provision for claims outstanding 14 52,657,050 54,855,955 - -

Other non-current liabilities 163,094 184,465 163,094 184,465

TOTAL NON-CURRENT LIABILITIES 52,963,710 55,164,720 306,660 308,765

TOTAL LIABILITIES 103,906,343 106,471,090 1,682,456 1,729,595

NET ASSETS 14,427,923 12,770,392 3,882,310 4,369,668

EQUITY 14,427,923 12,770,392 3,882,310 4,369,668

The accompanying notes form an integral part of these statements.

RETAINED EARNINGS

Balance at beginning of year 12,770,392 11,053,750 4,369,668 3,672,095

Surplus (Deficit) 1,657,531 1,716,642 (487,358) 697,573

BALANCE AT END OF YEAR 14,427,923 12,770,392 3,882,310 4,369,668

072250 MAV FR FA 21/12/06 2:21 PM Page 52

CONSOLIDATED MAV - GENERAL FUND

2006 2005 2006 2005NOTE $ $ $ $

CASH FLOW FROM OPERATING ACTIVITIES

RECEIPTS

Subscriptions, grants and fees 44,708,865 46,510,145 11,801,813 10,580,819

Investment income 1,153,312 1,036,681 221,090 192,915

Reinsurance and other recoveries 12,427,791 15,318,370 - -

PAYMENTS

Suppliers (45,218,854) (40,432,431) (12,077,279) (9,409,575)

Claim payments (13,538,997) (16,413,015) - -

NET CASH (USED IN)/PROVIDED BY OPERATING ACTIVITIES 9(b) (467,883) 6,019,750 (54,376) 1,364,159

CASH FLOW FROM INVESTING ACTIVITIES

Proceeds from sale of fixed assets 158,219 88,064 158,219 88,064

Payments for fixed assets & intangibles (380,338) (431,696) (380,338) (431,696)

NET CASH USED IN INVESTING ACTIVITIES (222,119) (343,632) (222,119) (343,632)

NET (DECREASE)/INCREASE IN CASH HELD (690,002) 5,676,118 (276,495) 1,020,527

Cash at beginning of year 25,830,204 20,154,086 4,339,500 3,318,973

CASH AT END OF YEAR 9(a) 25,140,202 25,830,204 4,063,005 4,339,500

The accompanying notes form an integral part of these statements.

MAV FINANCIAL REPORT 2005/06 53

CONSOLIDATED STATEMENT OF CASH FLOWS AS AT 30 JUNE 2006

072250 MAV FR FA 21/12/06 2:21 PM Page 53

54 MAV FINANCIAL REPORT 2005/06

1. CORPORATE INFORMATION

The consolidated financial report of the Municipal Association of Victoria for the year ended 30 June 2006 was authorised for issue inaccordance with a resolution of the directors on the date shown on the attached statement by directors.

The Municipal Association of Victoria is an association incorporated by an Act of the Parliament of Victoria, Australia, known as the MunicipalAssociation Act 1907.

The nature of the operations and principal activities of the Municipal Association of Victoria are:- to provide a public liability insurance scheme for local government

- to provide fidelity insurance for local government

- to promote the efficient carrying out of municipal government throughout the state of Victoria and watch over and protect the interests,rights and privileges of municipal corporations

- to serve the interests of the Victorian community

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a) Basis of preparation

The financial report is a general purpose financial report which has been drawn up in accordance with Australian Accounting Standards,Mandatory Professional Reporting Requirements (Urgent Issues Group Interpretations) and other relevant requirements.

The principal accounting policies adopted in preparing the financial report are stated to assist in a general understanding of the financial report.Accounting policies have been consistently applied unless otherwise indicated.

The financial report is presented in Australian dollars.

The accounts have been prepared on the accruals basis using historical costs and, except where stated, do not take into account currentvaluations of assets.

(b) Statement of compliance

The financial report complies with Australian Accounting Standards, which include Australian equivalents to International Financial ReportingStandard (AIFRS). Compliance with AIFRS ensures that the financial report, comprising the financial statements and notes thereto, complies withInternational Financial Reporting Standards (IFRS).

This is the first financial report prepared based on AIFRS and comparatives for the year ended 30 June 2005 have been restated accordingly.Reconciliations of AIFRS equity at 1 July 2004 and 30 June 2005 and profit for 30 June 2005 to the balances reported in the 30 June 2005financial report are detailed in Note 2 (s) below.

(c) Principles of consolidation

The economic entity comprises the financial report of the Municipal Association of Victoria and its controlled entities, the Local GovernmentMutual Liability Insurance Scheme (trading as Civic Mutual Plus - CMP) and the Municipal Officers’ Fidelity Guarantee Fund.

A controlled entity is any entity controlled by the Municipal Association of Victoria (Incorporated under the Municipal Association Act 1907). Controlexists where the Municipal Association of Victoria has the capacity to dominate the decision making in relation to the financial and operatingpolicies of another entity so that the other entity operates with the Municipal Association of Victoria to achieve the objectives of the MunicipalAssociation of Victoria.

The effects of all transactions between entities in the consolidated entity have been eliminated.

The financial statements of the divisions are prepared for the same reporting period as the Municipal Association of Victoria, using consistentaccounting policies.

All inter-divisional balances and transactions, including unrealised profits arising from intra-divisional transactions, have been eliminated in full.Unrealised losses are eliminated unless costs cannot be recovered.

The equity in the insurance businesses of Civic Mutual Plus and the Municipal Officers’ Fidelity Guarantee Fund represent the assets of themembers of each of the insurance mutuals and are not available to the members of the Association.

(d) Income tax

The Association is exempt from income tax, in accordance with sections 50-10 and 50-25 of the Income Tax Assessment Act 1997.

NOTES TO AND FORMING PART OF THEFINANCIAL STATEMENTS AS AT 30 JUNE 2006

072250 MAV FR FA 21/12/06 2:21 PM Page 54

MAV FINANCIAL REPORT 2005/06 55

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2006

(e) Property, plant, equipment, trademarks and intellectual property

Plant and equipment, trademarks and intellectual property are carried at cost, less, where applicable, any accumulated depreciation oramortisation and any impairment value.

On disposal of an item of property, plant, equipment, trademarks and intellectual property the difference between the sales proceeds and thecarrying amount of the asset is recognised as a gain or loss.

The depreciable amount of all fixed assets, including buildings and capitalised leased assets, is depreciated/amortised on a straight line basisover their estimated useful lives to the entity, commencing from the time the asset is held ready for use. Leasehold improvements are depreciatedover the shorter of either the unexpired period of the lease or the estimated useful lives of the improvements.

THE FOLLOWING DEPRECIATION RATES ARE IN USE: ANNUAL RATE

Leasehold improvements at cost 20%

Furniture and equipment at cost 20 - 33%

Motor vehicles at cost 20%

Interactive communications system at cost 33%

Software, website and intranet at cost 33%

Trademarks, intellectual property & educational programs at cost 10 - 20%

IMPAIRMENT

The carrying amount of property, plant, equipment, trademarks and intellectual property is reviewed annually by directors to ensure it is not inexcess of the recoverable amount from these assets. The recoverable amount is assessed on the basis of the expected net cash flows that will bereceived from the assets’ employment and subsequent disposal. The expected net cash flows have not been discounted to present values indetermining recoverable amounts.

(f) Leases

A distinction is made between finance leases, which effectively transfer from the lessor to the lessee substantially all the risks and benefitsincidental to ownership of the leased property without transferring the legal ownership, and operating leases under which the lessor effectivelyretains substantially all the risks and benefits.

Where assets are acquired by means of finance leases, the present value of minimum lease payments is established as an asset at the beginningof the lease term and amortised on a straight line basis over the expected economic life. A corresponding liability is also established and eachlease payment is allocated between such liability and interest expense.

Operating lease payments are charged to expense on a basis which is representative of the pattern of benefits derived from the leased property.

Lease incentives received under operating leases are recognised as a liability.

(g) Employee entitlements

The following liabilities arising in respect of employee entitlements are measured at their nominal amounts:- wages and salaries, annual leave and sick leave regardless of whether they are expected to be settled within 12 months of balance date.- other employee entitlements that are expected to be settled within 12 months of balance date.

All other employee entitlements, including long service leave, are measured at the present value of the estimated future cash outflows in respectof services provided up to balance date. Liabilities are determined after taking into consideration estimated future increase in wages and salariesand past experience regarding staff departures. Related on-costs are included.

Contributions made to an employee superannuation fund are charged as expenses when incurred.

(h) Revenue recognition

INTEREST REVENUE

Interest revenue is recognised on a time-proportionate basis that takes into account the effective yield on the financial asset.

GRANT REVENUE

Grants are recognised as revenue when the Association obtains control over the assets comprising the contribution. Control over the grants isnormally obtained upon their receipt or upon prior notification that a grant has been secured.

SUBSCRIPTIONS AND SPONSORSHIPS

Subscriptions and sponsorships are recognised on an accrual basis.

072250 MAV FR FA 21/12/06 2:21 PM Page 55

56 MAV FINANCIAL REPORT 2005/06

(i) Investment income

Investment income consists of interest which is recognised on a time-proportionate basis that takes into account the effective yield on thefinancial asset and movement in unit values in cash and fixed interest funds which are carried at fair value through the income statement.

(j) Other financial assets

Investments are valued at net market value at balance sheet date. The insurance scheme and fund have adopted a policy of investing in secureinvestments backed by fixed interest securities of amounts and terms broadly matching its liabilities for claims and unearned contributions.

(k) Comparative figures

Where necessary, comparative figures have been adjusted to conform with changes in presentation in the current year.

(l) Cash flows

For the purposes of the statement of cash flows, cash includes cash on hand and deposits held at call with banks and investments in cash-backed unit trusts net of outstanding bank overdrafts.

SUMMARY OF ACCOUNTING POLICIES RELATING TO INSURANCE ACTIVITIES

(m)Premiums

Premiums comprise amounts charged to members of the schemes for policy cover, net of amounts returned to members as bonuses. The earnedportion of premiums received is recognised as revenue. Premiums are treated as earned from date of attachment of risk. The pattern ofrecognition over the policy is based on time, which is considered to closely approximate the pattern of risks undertaken.

(n) Premiums receivable

During the month of June each year, the schemes issue premium notices to scheme members. The risk attaches to the premiums in the nextaccounting period and accordingly the revenue is recognised each following year commencing 1 July. Prior to each balance date members havecommitted to participate in both the scheme and the fund for the ensuring year and accordingly the premiums are disclosed in the balance sheetas ‘contributions receivable’ with an offsetting liability described as ‘contributions billed in advance’.

(o) Claims

Claims-incurred expense and liability for outstanding claims are recognised in respect of direct business. The liability covers claims incurred butnot yet paid, incurred but not yet reported claims, and the anticipated direct and indirect costs of settling those claims. Claims outstanding areassessed by reviewing individual claim files and estimating claims not notified and settlement costs using statistical and actuarial techniques. Theliability for outstanding claims is measured as the present value of the expected future payments, reflecting the fact that all the claims do nothave to be paid out in the immediate future. The expected future payments are estimated on the basis of the ultimate cost of settling claims,which is affected by factors arising during the period to settlement such as normal inflation and ‘superimposed inflation’. Advice from the MAV’sactuary has estimated normal and superimposed inflation to be 6% (2005 6%) and the discount rate at 5.9% (2005 5.2%).

Superimposed inflation refers to factors such as trends in court awards, for example increases in the level and period of compensation for injury.The expected future payments are then discounted to a present value at the reporting date using discount rates based on the investmentopportunities available to the organisation on the amounts of funds sufficient to meet claims as they became payable.

Details of rates applied are disclosed in note 22.

(p) Reinsurance and other recoveries receivable

Reinsurance and other recoveries receivable on paid claims, reported claims not paid, claims incurred but not reported and unexpired riskliabilities are recognised as revenue. Recoveries receivable are assessed in a manner similar to the assessment of outstanding claims. Recoveriesare measured as the present value of the expected future receipts, calculated on the same basis as the liability for outstanding claims. The levelof reinsurance and other recoveries in the 2005 financial year was higher than normal due to the reforms to the Laws of Tort passed by the StateGovernment of Victoria and the deadline set for lodging claims.

(q) Revenue recognition

Revenue is recognised to the extent that it is probable that the economic benefit will flow to the entity and the revenue can be reliably measured.The following specific recognition criteria must also be met before revenue is recognised:

(i) premiums - recognised in the period the fund is at risk

(ii) future reinsurance and other recoveries - on an accruals basis

(iii) investment income - on an accruals basis including adjustments to bring values of cash-backed unit trusts to account as investment income.

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2006

072250 MAV FR FA 21/12/06 2:21 PM Page 56

MAV FINANCIAL REPORT 2005/06 57

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2006

(r) Catastrophe insurance

Catastrophe insurance relates to insurance premiums paid to reinsurers in accordance with the established reinsurance strategy of the entity andin order to protect the insurance businesses from catastrophic and unforseen claims.

(s) Impact of adoption of AIFRS

The impact of adopting AIFRS on the total equity and profit as reported under previous Australian Generally Accepted Accounting Principles(AGAAP) is illustrated below.

CONSOLIDATED MAV - GENERAL FUND

NOTE $’000 $’000

(i) RECONCILIATION OF NET ASSETS AS AT 1 JULY 2004

NET ASSETS (AGAAP)1 JULY 2004 12,687,891 3,713,236

Provision for claims outstanding aa (1,593,000) -

Write off of intangible asset bb (41,141) (41,141)

NET ASSETS (AIFRS) JUNE 2005 11,053,750 3,672,095

(ii) RECONCILIATION OF NET ASSETS AS AT 30 JUNE 2005

NET ASSETS (AGAAP) 14,573,543 4,431,819

Provision for claims outstanding aa (1,741,000)

Write off of intangible asset bb (62,151) (62,151)

NET ASSETS (AIFRS) 12,770,392 4,369,668

(iii) RECONCILIATION OF OPERATING SURPLUS FOR 30 JUNE 2005

OPERATING SURPLUS (DEFICIT) (AGAAP) 1,885,652 718,583

Net claims aa (148,000) -

Write off of intangible asset bb (21,010) (21,010)

OPERATING SURPLUS (DEFICIT) (AIFRS) cc 1,716,642 697,573

(iv) EXPLANATION OF MATERIAL ADJUSTMENTS TO THE CASH FLOW STATEMENTS

There are no material differences between the cash flow statement presented under AIFRS and the cash flow statement presented under previousAGAAP.

072250 MAV FR FA 21/12/06 2:21 PM Page 57

58 MAV FINANCIAL REPORT 2005/06

aa. Net claims

Under 5.1.8 of accounting standard AASB 1023 for the reporting year ending 30 June 2006 a risk margin is required to be added to the centralestimate of the present value of expected future payments. AASB 1047 requires disclosure of the impact of adopting this standard in the 2006financial statements. Actuarial advice from the independent actuary to MAV Insurance has recommended a risk margin of 20% for the netunexpired risk liability.

The risk margin has been included in accordance with AIFRS from 1 July 2004 and the required adjustments are reflected in the reconciliation ofoperating surplus and the reconciliations of total equity shown above.

bb. Intangible asset

The intangible asset arises from the development of an internal project and does not meet the requirements for recognition set out in accordancewith AASB 138. The intangible asset has been written off in compliance with the standard. Amortisation of the intangible asset expensed duringthe 2005 financial year has been deducted from the depreciation expense to more accurately reflect the nature of the depreciation attributed tocapital assets.

cc. Revenue from ordinary activities

Some transactions have impacted the net surplus for the 2005 financial of the MAV - General fund and the consolidated entity. The adoption of AIFRS has also resulted in a number of transactions being recorded on a net basis rather than a gross basis. In addition, the adoption ofAIFRS results in the reclassification of proceeds from the sale of non-current assets from ‘revenue from ordinary activities’ to ‘other income andexpense items’ in the income statement.

As a consequence, revenue will decrease by $88,064 (MAV - General fund $88,064), other expenses will decrease by $64,382 (MAV - General account $64,382) and a gain on sale of non-current assets of $23,684 (MAV - General fund $23,684) has been included in other revenue.

dd. Defined benefit superannuation plan

Under AIFRS, the consolidated entity is required to recognise the surplus or deficit of defined benefit plans as an asset or liability in thebalance sheet. AASB 119 provides an exemption for multi-employer sponsored funds where the assets and liabilities are pooled, which is the case with the defined benefits plan of Vision Super. The Association is a member of Vision Super.

ee. Property, plant equipment and intangible assets

Property, plant, equipment and intangible assets of the Association will be subject to an impairment test when there is an indication thatimpairment exists by reference to internal and external market factors. Any item of property, plant, equipment and intangible assets that isimpaired must be written down to its recoverable amount. The amount of the impairment write down for assets carried at cost will be expensedthrough the statement of financial performance.

Management has considered the carrying values of property, plant, equipment and intangible assets and considers that there is not materialimpact upon adoption of the AIFRS.

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2006

072250 MAV FR FA 21/12/06 2:21 PM Page 58

MAV FINANCIAL REPORT 2005/06 59

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2006

CONSOLIDATED MAV - GENERAL FUND

2006 2005 2006 2005NOTE $ $ $ $

3 CONTRIBUTION TO OPERATING SURPLUS

CONTRIBUTION FROM INSURANCE ACTIVITIES

Premium income 31,001,410 30,360,081

Catastrophe insurance 2(r) (21,872,398) (23,128,011)

NET INCOME BEFORE CLAIMS 9,129,012 7,232,070

Claims expense 5(a) (11,106,894) (24,055,535)

Reinsurance and other recoveries 7,604,111 21,562,318

NET CLAIMS EXPENSE (3,502,783) (2,493,217)

UNDERWRITING RESULT 5,626,229 4,738,853

Investment income 929,077 848,927

Administration and general expenses (4,410,417) (4,568,711)

INSURANCE ACTIVITY OPERATING SURPLUS/(DEFICIT) 2,144,889 1,019,069

MAV SURPLUS / DEFICIT (487,358) 697,573

OPERATING SURPLUS 1,657,531 1,716,642

CONSOLIDATED MAV - GENERAL FUND

2006 2005 2006 2005$ $ $ $

4 REVENUE

REVENUES FROM OPERATING ACTIVITIES

Subscriptions/premiums 32,958,092 32,324,809 2,030,588 2,030,588

Reinsurance and other recoveries 7,604,111 21,562,318 - -

Brokerage and management fees income 1,316,165 1,190,426 1,316,165 1,190,426

Seminars and sale of publications 771,891 706,482 771,891 706,482

Project, sponsorship and management income 307,214 227,048 854,358 699,048

Grant income 4,935,162 4,769,193 4,935,162 4,769,193

TOTAL REVENUE FROM OPERATING ACTIVITIES 47,892,635 60,780,276 9,908,164 9,395,737

REVENUES FROM NON-OPERATING ACTIVITIES

Investment income 1,146,373 1,052,814 217,296 203,889

Gain on disposal of non-current assets 24,634 23,684 24,634 23,684

TOTAL REVENUE FROM OUTSIDE THE OPERATING ACTIVITIES 1,171,007 1,076,498 241,930 227,573

REVENUE 49,063,642 61,856,774 10,150,094 9,623,310

CONSOLIDATED

2006 2005NOTE $ $

5(a)CLAIMS EXPENSES

Paid 14,529,869 17,620,147

Outstanding claims at end of financial year 14(h) 68,487,569 71,910,544

Outstanding claims at beginning of financial year (71,910,544) (65,475,156)

Total claims expenses 11,106,894 24,055,535

072250 MAV FR FA 21/12/06 2:21 PM Page 59

60 MAV FINANCIAL REPORT 2005/06

CONSOLIDATED MAV - GENERAL FUND

2006 2005 2006 2005$ $ $ $

5(b)OPERATING EXPENSES

The following items have been recognised in the operating surplus (deficit):

Claims expense 11,106,894 24,055,535 - -

Catastrophe insurance expense 21,872,399 23,128,011 - -

Stamp duty 1,770,909 1,968,553 - -

General scheme expenses 253,182 238,699 - -

Salary and payroll costs 2,489,255 1,908,185 2,489,255 1,908,185

Grants, projects and legal 4,569,129 3,789,263 4,569,129 3,789,263

Administration 1,595,310 1,693,110 1,461,701 1,459,680

Operating lease rental expense 277,593 271,597 277,593 271,597

Superannuation contributions 301,277 248,564 301,277 248,564

Scheme management fee 1,631,666 1,590,167 - -

Meetings and seminars 789,684 561,432 789,684 561,432

Depreciation leasehold improvements 17,921 18,694 17,921 18,694

Depreciation furniture and equipment 78,554 49,650 78,554 49,650

Depreciation motor vehicles 100,648 92,045 100,648 92,045

Amortisation of website, educational programs & trademarks 39,813 52,076 39,813 52,076

Board of management expenses 196,166 167,600 196,166 167,600

ALGA membership 315,711 306,951 315,711 306,951

TOTAL EXPENDITURE 47,406,111 60,140,132 10,637,452 8,925,737

6 LEASING COMMITMENTS

Operating lease commitments, being for lease of computer and other equipment:

Not later than one year 11,186 22,372 11,186 22,372

Later than one year but not later than five years - 11,186 - 11,186

TOTAL LEASE COMMITMENT 11,186 33,558 11,186 33,558

Operating lease commitments, being for lease of leasehold premises:

Not later than one year 264,976 254,785 264,976 254,785

Later than one year but not later than five years 1,493,325 1,435,198 1,493,325 1,435,198

Later than five years 594,209 916,593 594,209 916,593

TOTAL LEASE COMMITMENT 2,352,510 2,606,576 2,352,510 2,606,576

7 AUDITOR’S REMUNERATION

Amounts received or due and receivable for audit services:

Audit services 65,097 47,700 22,000 19,000

Other services - - - -

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2006

072250 MAV FR FA 21/12/06 2:21 PM Page 60

MAV FINANCIAL REPORT 2005/06 61

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2006

CONSOLIDATED MAV - GENERAL FUND

2006 2005 2006 2005NOTE $ $ $ $

8 SCHEME MANAGEMENT FEES

Scheme management fees are paid to the scheme manager for:

Risk management and administrative services 5(b) 1,631,666 1,590,167

Claims management (included in claims expenses) 5(a) 1,424,195 1,301,046

TOTAL SCHEME MANAGEMENT FEES 3,055,861 2,891,213

9 NOTES TO STATEMENT OF CASH FLOWS

All of the surplus funds of the Civic Mutual Plus Scheme are invested at market rates with UBS Asset Management (Aust) Ltd in their CashEnhanced Cash Fund and their Australian Bond Fund. Investments are brought to account at net market value at balance date.

(a) Cash and cash equivalents at balance date as shownin the statement of cash flows are reconciled to therelated items in the balance sheet as follows:

CONSOLIDATED MAV - GENERAL FUND

2006 2005 2006 2005$ $ $ $

Cash 11,155,857 15,293,081 4,063,005 4,339,500

Other financial assets 13,984,345 10,537,123 - -

TOTAL CASH AND CASH EQUIVALENTS 25,140,202 25,830,204 4,063,005 4,339,500

(b) Reconciliation of net cash used in operating activities to operating surplus/(deficit)

Surplus/(deficit) for year 1,657,531 1,716,642 (487,358) 697,573

Depreciation & amortisation 236,936 212,465 236,936 212,465

Doubtful reinsurance - 355,377 - -

(Surplus)/deficit on disposal of assets (24,634) (23,684) (24,634) (23,684)

Changes in assets and liabilities

(Increase)/decrease in accounts receivable 167,738 (4,271,131) 208,526 (294,140)

(Increase)/decrease in prepayments 59,293 (165,345) 59,293 (165,345)

Increase/(decrease) in accounts payable (69,684) 922,379 (226,929) 871,118

Increase /(decrease) in provision for employee entitlements 175,486 68,086 175,486 68,085

Increase/(decrease) in outstanding claims (3,422,975) 6,435,388 - -

Increase/(decrease) in accrued revenue 773,797 748,562 25,675 (22,925)

Increase/(decrease) in other liabilities (21,371) - (21,371) -

CASH FLOWS FROM OPERATIONS (467,883) 6,019,750 (54,376) 1,364,159

072250 MAV FR FA 21/12/06 2:21 PM Page 61

62 MAV FINANCIAL REPORT 2005/06

CONSOLIDATED MAV - GENERAL FUND

2006 2005 2006 2005NOTE $ $ $ $

10 RECEIVABLES

Future reinsurance and other recoveries receivable 2(p) 78,423,222 80,695,205

Discount to present value (13,146,356) (11,115,163)

65,276,866 69,580,042

Premiums receivable 2(n) 24,299,302 22,241,911

Other receivables 2,709,985 631,938 593,850 802,376

TOTAL RECEIVABLES 92,286,153 92,453,891 593,850 802,376

Represented by:

CURRENT 44,319,031 40,483,814 593,850 802,376

NON-CURRENT 47,967,122 51,970,077 - -

TOTAL 92,286,153 92,453,891 593,850 802,376

11 PREMIUMS IN ADVANCE

Contributions billed in advance 30,724,013 29,975,891 - -

12 PROPERTY, PLANT AND EQUIPMENT

Leasehold improvements - at cost 404,008 397,008 404,008 397,008

Less accumulated depreciation 379,655 361,735 379,655 361,735

24,353 35,273 24,353 35,273

Furniture and equipment - at cost 468,642 456,236 468,642 456,236

Less accumulated depreciation 400,502 356,255 400,502 356,255

68,140 99,981 68,140 99,981

Motor vehicles - at cost 505,495 512,116 505,495 512,116

Less accumulated depreciation 107,300 104,295 107,300 104,295

398,195 407,821 398,195 407,821

Software, website and intranet 112,584 112,584 112,584 112,584

Less accumulated amortisation 97,772 76,818 97,772 76,818

14,812 35,766 14,812 35,766

Interactive communications system - at cost 423,002 287,913 423,002 287,913

Less accumulated depreciation 318,487 287,913 318,487 287,913

104,515 - 104,515 -

TOTAL PROPERTY, PLANT AND EQUIPMENT 610,015 578,841 610,015 578,841

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2006

072250 MAV FR FA 21/12/06 2:21 PM Page 62

MAV FINANCIAL REPORT 2005/06 63

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2006

CONSOLIDATED MAV - GENERAL FUND

2006 2005 2006 2005$ $ $ $

Reconciliations of the carrying amounts of property, plant and equipment at the beginning and end of the financial year.

LEASEHOLD IMPROVEMENTS

Movements during the year

Beginning of year 35,273 53,967 35,273 53,967

Additions 7,000 - 7,000 -

Depreciation (17,920) (18,694) (17,920) (18,694)

End of year 24,353 35,273 24,353 35,273

FURNITURE AND EQUIPMENT

Beginning of year 99,981 81,425 99,981 81,425

Additions 12,906 80,475 12,906 80,475

Write offs (500) (12,269) (500) (12,269)

Depreciation (44,247) (49,650) (44,247) (49,650)

End of year 68,140 99,981 68,140 99,981

MOTOR VEHICLES

Movements during the year

Beginning of year 407,821 403,710 407,821 403,710

Additions 224,614 195,634 224,614 195,634

Disposals (133,593) (99,478) (133,593) (99,478)

Depreciation (100,647) (92,045) (100,647) (92,045)

End of year 398,195 407,821 398,195 407,821

INTERACTIVE COMMUNICATIONS SYSTEM

Movements during the year

Beginning of year - - - -

Additions 135,089 - 135,089 -

Depreciation (30,574) - (30,574) -

End of year 104,515 - 104,515 -

SOFTWARE, WEBSITE AND INTRANET

Beginning of year 35,766 60,677 35,766 60,677

Additions - 11,309 - 11,309

Amortisation (20,954) (36,220) (20,954) (36,220)

End of year 14,812 35,766 14,812 35,766

072250 MAV FR FA 21/12/06 2:21 PM Page 63

64 MAV FINANCIAL REPORT 2005/06

CONSOLIDATED MAV - GENERAL FUND

2006 2005 2006 2005$ $ $ $

13 INTANGIBLE ASSETS

Trademarks and intellectual property 118,718 117,484 118,718 117,484

Less accumulated amortisation (41,707) (19,116) (41,707) (19,116)

77,011 98,368 77,011 98,368

Reconciliation of the carrying amounts of intangible assets at the beginning and end of the financial year

INTANGIBLE ASSETS

Movement during the year

Beginning of year 98,368 52,724 98,368 52,724

Additions 1,234 61,500 1,234 61,500

Amortisation (22,591) (15,856) (22,591) (15,856)

End of year 77,011 98,368 77,011 98,368

All intangible assets represent development expenditure and have a finite useful life.

14(a) OUTSTANDING CLAIMS

Central estimate 76,331,070 77,821,049

Discount to present value (13,010,444) (10,756,547)

63,320,626 67,064,502

Claims handling costs 3,049,643 3,105,042

Risk margin 14 (b) 2,117,300 1,741,000

TOTAL OUTSTANDING CLAIMS 68,487,569 71,910,544

Comprising:

Current 15,830,519 17,054,589

Non-current 52,657,050 54,855,955

TOTAL CLAIMS PROVISION 68,487,569 71,910,544

14(b) RISK MARGIN - PROCESS FOR DETERMINING RISK MARGIN

Figures for private insurers published by APRA in October 2005 showed an average risk margin of 15.7% for public and product liabilityoutstanding claims, and 11.3% for professional indemnity. Based on these averages, and on three actuarial publications, Cumpston Sarjeant PtyLtd recommended that risk margins be adopted intended to give an overall risk margin of 15% for outstanding claims, in the absence ofreinsurance.

After allowing for the extent of reinsurance for each year, Cumpston Sarjeant Pty Ltd calculated risk margins for each year, in total being 2.4% of gross outstanding claims. They recommended a risk margin of 20% for the net unexpired risk liability.

These risk margins are likely to give a probability of about 75% that the provisions including the risk margins will prove adequate to meet therelevant liabilities.

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2006

072250 MAV FR FA 21/12/06 2:21 PM Page 64

MAV FINANCIAL REPORT 2005/06 65

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2006

2006 2005GROSS REINSURANCE NET GROSS REINSURANCE NET

$ $ $ $ $ $

14(c) RECONCILIATION OF MOVEMENT IN DISCOUNTED OUTSTANDING CLAIMS LIABILITY

Outstanding claims brought forward 71,910,544 69,580,042 2,330,502 65,475,156 63,645,325 1,829,831

Changes in assumptions (i) (1,234,000) (1,264,000) 30,000 605,000 608,000 (3,000)

Increase in claims incurred/recoveries anticipated 12,340,894 8,868,111 3,472,783 23,450,535 20,954,318 2,496,217

Incurred claims recognised in income statement 11,106,894 7,604,111 3,502,783 24,055,535 21,562,318 2,493,217

Claim payments/recoveries during the year (14,529,869) (11,907,287) (2,622,582) (17,620,147) (15,627,601) (1,992,546)

Outstanding claims carried forward 68,487,569 65,276,866 3,210,703 71,910,544 69,580,042 2,330,502

(i) Significant changes in assumptions relate to the actuarial reassessment of future investment earnings and the average delay inreinsurance receipts.

2006 2005CURRENT YEAR PRIOR YEAR TOTAL CURRENT YEAR PRIOR YEAR TOTAL

$ $ $ $ $ $

15 NET CLAIMS INCURRED

INSURANCE

Gross claims and related expenses - undiscounted 20,858,271 (7,497,481) 13,360,790 22,178,205 (55,143) 22,123,062

Discount (3,995,548) 1,741,652 (2,253,896) (3,396,298) 5,328,771 1,932,473

Gross claims and related expenses - discounted 16,862,723 (5,755,829) 11,106,894 18,781,907 5,273,628 24,055,535

Reinsurance and other recoveries - undiscounted (17,342,365) 4,875,876 (12,466,489) (17,300,332) (873,633) (18,173,965)

Discount 3,212,803 1,649,575 4,862,378 1,431,914 (4,820,267) (3,388,353)

Reinsurance and other recoveries - discounted (14,129,562) 6,525,451 (7,604,111) (15,868,418) (5,693,900) (21,562,318)

NET CLAIMS INCURRED 2,733,161 769,622 3,502,783 2,913,489 (420,272) 2,493,217

072250 MAV FR FA 21/12/06 2:21 PM Page 65

66 MAV FINANCIAL REPORT 2005/06

16 CLAIMS DEVELOPMENT TABLE - CIVIC MUTUAL PLUS

ACCIDENT YEAR 2002 2003 2004 2005 2006 TOTAL$ $ $ $ $ $

GROSS ESTIMATE OF ULTIMATE CLAIMS COST

At end year of accident 21,666,297 20,194,583 20,602,497 18,375,690 19,426,057

One year later 18,851,675 18,948,794 18,799,966 17,546,887

Two years later 17,899,824 16,345,749 16,772,897

Three years later 25,953,475 14,715,087

Four years later 21,240,415

Current estimate of cumulative claims cost 21,240,415 14,715,087 16,772,897 17,546,887 19,426,057 89,701,343

Cumulative payments (9,792,256) (6,671,767) (3,336,218) (1,510,256) (183,631) (21,494,128)

Outstanding claims - undiscounted 11,448,159 8,043,320 13,436,679 16,036,631 19,242,426 68,207,215

Discount (14,320,204)

Claims handling expense 2,728,289

2001 and prior 11,764,269

TOTAL GROSS OUTSTANDING CLAIMSCIVIC MUTUAL PLUS 68,379,569

MUNICIPAL OFFICERS’ FIDELITY GUARANTEE FUND -TOTAL GROSS OUTSTANDING CLAIMS 108,000

COMBINED GROSS OUTSTANDING CLAIMS refer note 14(a) $68,487,569

ACCIDENT YEAR 2002 2003 2004 2005 2006 TOTAL$ $ $ $ $ $

NET ESTIMATE OF ULTIMATE CLAIMS COST

At end year of accident - 2,035,718 3,048,847 2,125,606 2,182,437

One year later 700,829 1,667,854 2,431,922 1,847,897

Two years later 741,020 991,622 1,245,405

Three years later 2,184,106 1,156,060

Four years later 1,409,752

Current estimate of cumulative claims cost 1,409,752 1,156,060 1,245,405 1,847,897 2,182,437 7,841,551

Cumulative payments (416,581) (824,042) (516,235) (591,620) (166,323) (2,514,801)

Outstanding claims - undiscounted 993,171 332,018 729,170 1,256,277 2,016,114 5,326,750

Discount (2,201,459)

Claims handling expense 213,070

2001 and prior (235,658)

TOTAL NET OUTSTANDING CLAIMS - CIVIC MUTUAL PLUS 3,102,703

MUNICIPAL OFFICERS’ FIDELITY GUARANTEE FUND -TOTAL NET OUTSTANDING CLAIMS 108,000

COMBINED NET OUTSTANDING CLAIMSrefer note 14 (c) $3,210,703

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2006

072250 MAV FR FA 21/12/06 2:21 PM Page 66

MAV FINANCIAL REPORT 2005/06 67

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2006

CONSOLIDATED MAV - GENERAL FUND

2006 2005 2006 2005NOTE $ $ $ $

17 PROVISIONS FOR EMPLOYEE ENTITLEMENTS

The aggregate amount of employee entitlement liability is comprised of:

Provisions (current) 438,928 282,708 438,928 282,708

Provisions (non-current) 143,566 124,300 143,566 124,300

TOTAL EMPLOYEE ENTITLEMENTS 582,494 407,008 582,494 407,008

Meets AIFRS requirements 2(b)

Reconciliation of the carrying amounts of provision for employee entitlements at the beginning and end of the financial year

EMPLOYEE ENTITLEMENTS

Movement during the year

Beginning of year 407,008 338,922 407,008 338,922

Additions 175,486 68,086 175,486 68,086

Charges against - - - -

End of year 582,494 407,008 582,494 407,008

18 SUPERANNUATION CONTRIBUTION

The MAV contributes in respect of its employees to both the Local Authorities Superannuation Fund’s LASPLAN and the Defined Benefits Fund.

The amount of superannuation contributions paid by the MAV to the LASPLAN and the Defined Benefits Fund during the reporting period was$301,277 (2005 $248,564). The MAV contributes to LASPLAN based on a fixed percentage of employee earnings in accordance with thesuperannuation guarantee legislation (9% in 2006 and 9% in 2005). No further liability accrues to the employer as the superannuation benefitsaccruing to employees are represented by their share of the net assets of the fund.

Contributions to the Defined Benefits Fund are determined by the scheme’s actuary. The fund’s liability for accrued benefits for defined benefitand defined contribution members was determined in the 31 December 2005 actuarial investigation carried out by Vision Super pursuant to therequirements of Australian Accounting Standard AASB 2005-13. The actuarial investigation calculated that the Defined Benefits SuperannuationFund was in surplus.

19 GOVERNMENT GRANTS

The Association receives grant monies from various Federal and State government departments on behalf of local government. Grant moniesreceived have been accounted for as income in accordance with Australian Accounting Standard 1004. At the end of the financial year theAssociation had commitments to expend grants totalling approximately $2,388,437 (2005 $2,987,029) after deducting an estimate of costs ofadministering the grants.

CONSOLIDATED MAV - GENERAL FUND

2006 2005 2006 2005$ $ $ $

RECOGNISED IN INCOME STATEMENT

Grant income 4,935,162 4,769,193 4,935,162 4,769,193

The Association does not receive any other government assistance.

072250 MAV FR FA 21/12/06 2:21 PM Page 67

68 MAV FINANCIAL REPORT 2005/06

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2006

20 FINANCIAL INSTRUMENTS INTEREST RATE AND CREDIT RISK EXPOSURE

The Group’s exposure to interest rate risk and the effective average interest rate for the classes of financial assets is set out below.

CONSOLIDATED MAV - GENERAL FUND

Non- Floating Non- Floatinginterest interest interest interestearning rate earning rate

2006

$ $ $ $

FINANCIAL ASSETS

Bank 47,902 11,107,955 47,902 4,015,103

Cash investments - 13,984,345 - -

Receivables 92,286,153 - 593,850 -

TOTAL FINANCIAL ASSETS 92,334,055 25,092,300 641,752 4,015,103

Weighted average interest rate 5.56% 5.54%

FINANCIAL LIABILITIES

Outstanding claims 68,487,569 - - -

Unearned premiums/subscriptions 30,837,828 - 113,815 -

Accounts payable 3,835,357 - 823,056 -

TOTAL FINANCIAL LIABILITIES 103,160,754 - 936,871 -

Weighted average interest rate 0% 0%

The carrying amounts of financial assets and financial liabilities represent their approximate net fair value.

CONSOLIDATED MAV - GENERAL FUND

Non- Floating Non- FloatingInterest Interest Interest InterestEarning Rate Earning Rate

2005

$ $ $ $

FINANCIAL ASSETS

Bank 100,001 10,946,309 92,730 -

Cash investments - 14,783,894 - 4,246,770

Receivables 92,453,891 - 802,376 -

TOTAL FINANCIAL ASSETS 92,553,892 25,730,203 895,106 4,246,770

Weighted average interest rate 5.8% 5.8%

FINANCIAL LIABILITIES

Outstanding claims 71,910,544 - - -

Unearned premiums/subscriptions 30,064,030 - 88,140 -

Accounts payable 3,905,043 - 1,049,983 -

TOTAL FINANCIAL LIABILITIES 105,879,617 - 1,138,123 -

Weighted average interest rate 0% 0%

The carrying amounts of financial assets and financial liabilities represent their approximate net fair value.

All maturity dates are within 12 months.

072250 MAV FR FA 21/12/06 2:21 PM Page 68

MAV FINANCIAL REPORT 2005/06 69

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2006

21 INSURANCE CONTRACTS - RISK MANAGEMENT

Risk management objectives and policies for mitigating insurance risk

The Association’s local government mutual liability insurance scheme (trading as Civic Mutual Plus) is established by legislation contained in theMunicipal Association Act 1907. Membership is available to local government councils and prescribed bodies. The scheme operates in Victoriaand Tasmania to provide a claims management service to members in respect of their potential and actual liabilities. A member may seekindemnity from the scheme in respect of a claim.

Actuarial models, using information from the scheme’s management information systems are used to confirm contributions and monitor claimpatterns. Past experience and statistical methods are used as part of the process.

The principal risk is that the frequency and severity of claims is greater than expected. Civil liability risk events are, by their nature, random, andthe actual number and size of events during any one year may vary from those estimated using established statistical techniques.

Objectives in managing risk arising from insurance and policies for mitigating those risks

The scheme has an objective to control insurance risk, thereby reducing the volatility of its operating surplus. In addition to the inherentuncertainty of civil liability risks, which can lead to variability in the loss experience, operating surpluses can also be affected by external factors,such as competition and movements in asset values.

The scheme relies on a strong relationship with its members and actively encourages them to adopt practices of risk management that reduce theincidence of claims to the scheme.

Reinsurance strategy

The scheme adopts a conservative approach towards management of risk and does this by utilising various risk transfer options. The MAV InsuranceCommittee determines the level of risk, which is appropriate for the scheme, having regard to ordinary concepts of prudence and regulatoryconstraints. The risk transfer arrangements adopted by the scheme include the utilisation of commercial reinsurance / excess arrangements.

These risk transfer arrangements assist the scheme to limit exposures to large single claims and catastrophic events. These programs arereviewed each year to ensure they continue to meet the risk needs of the scheme.

Terms and conditions of membership

Membership of the scheme is offered to eligible bodies and renewed annually on 30 June. Payment of the annual contribution confirmscontinuation of membership. Termination of membership is subject to at least 90 days written notice of intention as laid out by the scheme rules.Once a claim is accepted and indemnity granted, each claim is handled individually, based on the circumstances peculiar to the claim.

Product features

The scheme operates in Victoria and Tasmania. Should a claim be accepted the scheme provides indemnity to the member in respect of theircivil liabilities for $300 million public/products liability and $200 million professional indemnity insurance, subject to any excess, for any claimincurred anywhere throughout the world.

Operating surpluses arise from the total contributions charged to members less the amounts paid to cover claims and the expenses incurred bythe scheme.

Management of risks

The key insurance risks that affect the scheme are contribution risk and claims experience risk.

Contribution risk is the risk that the scheme does not charge contributions appropriate for the indemnity cover it provides. The scheme partiallymanages contribution risk through a proactive approach to risk management that addresses all material risks, both financial and non-financial.There are no specific terms and conditions that are expected to have a material impact on the financial statements.

Claims experience risk is managed through the non-financial risk assessment and risk management and reinsurance management process.Claims experience risk is monitored on an ongoing basis to ensure that any adverse trending is addressed. The scheme is able to reduce theclaims experience risk of severe losses through the reinsurance program and by managing the concentration of insurance risks.

Concentration of insurance risks

Insurance risk is managed by taking a long-term approach to setting the annual contribution rates that eliminates price fluctuations throughappropriate investment strategy, reinsurance and by maintaining an active statewide risk management profile. It is vital that the scheme keepsabreast of changes in the general economic, legal and commercial environment in which it operates.

Interest rate risk

The reinsurance indemnity contracts contain no clauses that expose the scheme directly to interest rate risk. The reinsurance contracts are long-term arrangements, reviewed and payable annually.

Credit risk

The scheme is exposed to credit risk on insurance contracts as a result of exposure to reinsurers. The credit risk to reinsurers is managed throughthe scheme regularly monitoring the financial rating of the reinsurers both prior to and during the reinsurance program.

072250 MAV FR FA 21/12/06 2:21 PM Page 69

70 MAV FINANCIAL REPORT 2005/06

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2006

22 ACCOUNTING ESTIMATES AND JUDGEMENTS

The scheme makes estimates and judgements in respect of certain key assets and liabilities. Estimates and judgements are continually reviewedand are based on past experience and other factors, including expectations of future events that are believed to be reasonable under thecircumstances. The key areas in which critical estimates and judgements are applied are described below.

a) Estimation of outstanding claims liability

Provision is made at the year-end for the estimated cost of claims incurred but not settled at the balance sheet date, including the cost of claimsincurred but not yet reported to the scheme.

The scheme takes all reasonable steps to ensure that it has appropriate information regarding its claims exposure. However, given the uncertaintyin establishing claims provisions, it is likely that the final outcome may be different from the original liability established.

Provisions are calculated gross of all recoveries. A separate estimate is made of the amounts that will be recoverable from reinsurers and anythird party.

The determination of an appropriate outstanding claims provision involves:

(i) establishing a case estimate for each reported claim at year-end taking into account legal advice where appropriate on larger claims

(ii) a development allowance of 25% on the net outstanding balance of reported claims and confirmed as appropriate by the actuary

(iii) allowance for incurred but not reported claims as confirmed by the actuarial review on 30 June 2006

(iv) an allowance of 4% for claim settlement expenses, as assumed by the actuary

(v) allowances for discount at 5.9%, as assumed by the actuary

(vi) a risk margin of 20% of net outstanding claims after the effect of reinsurance has been applied, as assumed by the actuary.

Details of specific actuarial assumptions used in deriving the outstanding claims liability at year-end are detailed in note 23.

b) Assets arising from reinsurance contracts

Assets arising from reinsurance contracts were estimated for each accident year, from the payments to date and estimated outstanding claimshistory at 30 June 2006, taking into account the reinsurance terms applying to that accident year. In calculating the present value of reinsurancerecoveries, allowance was made for an average recovery delay of 3.5 months, as assumed by the actuary.

In accordance with the actuarial recommendations an allowance was made for non-recoveries from relevant insurers.

23 ACTUARIAL ASSUMPTIONS AND METHODS

Actuarial assumptions

The following assumptions have been made in determining the outstanding claims liabilities:

2006 2005

KEY ACTUARIAL ASSUMPTIONS

Case estimate development 25.0% 25.0%

Wage inflation 4.0% 4.0%

Claim administration expense 4.0% 4.0%

Superimposed inflation 2% 2%

Discount rate 5.9% 5.2%

Risk margin 20% 20%

Process used to determine actuarial assumptions

A description of the processes used to determine the above key actuarial assumptions is provided below.

Civic Mutual Plus (CMP) has provided public and professional indemnity insurance to local government bodies in Victoria and Tasmania since30/9/1993. The actuary was supplied aggregate data on claims from each year’s cover at each balance date, together with details for eachclaim at various dates, including 30/6/2006. The individual claim payments and case estimates reconciled closely with totals in CMP’s financialstatements for each year of cover. The actuary made estimates of gross outstanding claims with four differential actuarial methods - payments perperson incurred, developed claims incurred, and developed case estimates and estimated claims incurred but not reported. The actuary selectedthe last of these methods, including a 25% allowance for case estimate development, for use in estimating outstanding claims. Payments wereprojected with a payment pattern, based on past experience, assuming an average delay of 4.8 years from the middle of the accident year.Estimates of outstanding non-reinsurance recoveries were made by a recoveries per person insured method.

072250 MAV FR FA 21/12/06 2:21 PM Page 70

MAV FINANCIAL REPORT 2005/06 71

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2006

During the 2001 financial year two of the participants in the scheme’s reinsurance program, FAI/HIH and Independent, were placed into thehands of liquidators. These companies were part of the reinsurance programs in fund years from 1994 to 1998. The MAV Insurance Committeecontinues to constantly monitor the position with a view to ensuring that the scheme takes all reasonable steps to protect its position and tomaximise potential recoveries.

The liquidators of HIH have indicated that an initial distribution to creditors will occur soon. However, no final date or confirmation of anyamount is available. In accordance with the committee’s prudent approach to reserving within the actuarial calculation of the central estimate ofreinsurance recoveries, the estimated future recoveries from FAI and HIH were assumed to be 10% of the debt due. During the financial year TheUnderwriting Insurance Company of the UK, a company under management runoff, responded positively to the concerns about their ability tomeet their liabilities to CMP. Within the actuarial calculation of the central estimate of reinsurance, the estimated future recoveries from TUICwere assumed to be 75% of the debt due.

Estimates of reinsurance recoveries were made from projected gross payments and non-reinsurance recoveries, allowing for the differentinsurance treaties applying to each year and assuming an average 3.5 months delay in the receipt of reinsurance recoveries. Recoveries fromFAI/HIH were assumed to be 10% and Independent were assumed to be zero. Recoveries from TUIC were assumed to be 75% of those due.Based on the yields of medium term commonwealth bonds at 30/6/2006 the discount rate was assumed to be 5.9% pa. Based on the actualexpense rates of CMP, claim administration expenses were assumed to be 4% of the net claim payments.

Based on averages for private insurers by APRA, and on three actuarial publications the actuary recommended that risk margins be adopted togive an overall risk margin of 15% for outstanding claims, in the absence of reinsurance. After allowing for the extent of reinsurance for eachyear the actuary calculated risk margins for each year, in total being 2.4% of gross outstanding claims liabilities. The actuary considered thatthese risk margins are likely to give a probability of about 75% that the provisions including the risk margins will prove adequate to meet therelevant liabilities. Unexpired risk liabilities were estimated by bringing gross claim incurred estimates for each of the 10 years to 30/6/2003 to2006/07 values using Victorian average weekly earnings adjusting for membership changes and fitting a trend line to the 10 years. The trendvalue for 2002/03 was projected to 2006/07, assuming a 20% drop due to tort reform, superimposed inflation at 2% pa and populationgrowth at 1% pa. After allowing for reinsurance costs and a risk margin of 20%, no premium deficiency was apparent.

VARIABLE IMPACT OF MOVEMENT IN VARIABLE

Wage inflation Expected future payments are inflated to take account of inflationary increases. An increase or decrease in the assumed levels of economic inflation would have a corresponding impact on claims expense, with particular reference to longer tail claims.

Superimposed inflation In addition to the general economic inflation rate an amount is superimposed to take account of non-economic inflationary factors, such as increases in court awards. Such rates of superimposed inflation are specific to the model adopted. An increase or decrease in the assumed levels of superimposed inflation would have a corresponding impact on claims expense, with particular reference to longer tail claims.

Discount rate The outstanding claims liability is calculated by reference to expected future payments. These payments are discounted to adjust for the time value of money. An increase or decrease in the assumed discount rate will have an opposing impact on total claims expense.

Case estimate development Case estimates are initially established in accordance with established guidelines and by reference to the known facts. Where new information becomes available the initial case estimate will change. This development movement is applied to open claims and will have a corresponding impact on claims expense.

072250 MAV FR FA 21/12/06 2:21 PM Page 71

72 MAV FINANCIAL REPORT 2005/06

23 ACTUARIAL ASSUMPTIONS AND METHODS (CONTINUED)

IMPACT OF CHANGES IN KEY VARIABLES

CIVIC MUTUAL PLUS

Variable Current Rate Change Gross of Operating Total accumulatedvariable reinsurance surplus funds after the impact

to of applying variable

% % $ $ $

Base value at 30 June 2006 14,222,250 1,941,013 10,233,921

Interest rate pa 5.9% 8.9% 19,112,000 1,979,000 10,272,000

2.9% 8,433,000 1,930,000 10,223,000

Inflation rate pa 4.0% 7.0% 13,985,000 1,917,000 10,210,000

2.9% 14,459,000 1,964,000 10,257,000

TUIC recovery 75.0% 100.0% 14,938,000 3,743,000 12,036,000

50.0% 13,506,000 139,000 8,432,000

Contribution increase 4.0% 5.0% 14,222,000 1,941,000 10,234,000

3.0% 14,222,000 1,941,000 10,234,000

24 RENT-FREE PERIOD

During the 2004 financial year the Association negotiated a new 10 year lease over the property at Level 12, 60 Collins Street with the ReserveBank of Australia. The lease commenced on 1 March 2004 and included a period of 15 months rent free up to 31 May 2005.

In accordance with ‘lessee accounting for surplus leased space under non-cancellable operating lease’, lease incentives received have beenrecognised as a liability. This liability recognised in respect of the lease incentive will be reduced by allocating lease rental payments betweenrental expense and reduction of the liability.

The Association is of the view that the treatment adopted by the standard does not fully recognise the position with regard to not-for-profitenterprises. Members need be aware that even though a deficit has been booked in the 2005 financial year due to implementing the accountingstandard, the cash benefit of the saving from the rent-free period has been passed on to members by holding subscription levels down and thedeficit shown in the accounts will be returned over the remaining life of the lease contract (7 years).

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2006

072250 MAV FR FA 21/12/06 2:21 PM Page 72

MAV FINANCIAL REPORT 2005/06 73

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 200625

SEGM

ENT IN

FORM

ATION

– PRIMA

RY SEGM

ENT

SEGM

ENT

TYPES OF PRO

DU

CTS AN

D SERVIC

ES

InsuranceInsurance including public liability, professional liability, product liability and fidelity guarantee.

Grants

Obtains Federal and State governm

ent grants and expends these grants on projects for the betterment of both local governm

ent and the comm

unity in Victoria

Association

Local government association that represents and provides support to local governm

ent and its comm

unities in Victoria

LOC

AL G

OVERN

MEN

T

BUSIN

ESS SEGM

ENTS

INSU

RANC

EG

RANTS

ASSOC

IATION

ELIMIN

ATION

SC

ON

SOLID

ATED

20062005

20062005

20062005

20062005

20062005

$$

$$

$$

OPERATIN

G REV

ENU

E

Sales to customers outside the group

39,460,69252,705,466

4,962,1004,945,014

4,640,8504,206,294

49,063,64261,856,774

Inter-segment sales

73,90665,860

1,841,9071,267,203

1,915,8131,333,063

--

TOTA

L SEGM

ENT REV

ENU

E39,534,598

52,771,3264,962,100

4,945,0146,482,757

5,473,4971,841,907

1,333,063

TOTA

L CO

NSO

LIDATED

REVEN

UE

49,063,64261,856,774

SEGM

ENT RESU

LT2,144,889

1,019,069(503,585)

884,95316,227

(166,370)-

-1,657,531

1,716,642

CO

NSO

LIDATED

ENTITY SU

RPLUS

FROM

ORD

INA

RY AC

TIVITIES

1,657,5311,716,642

ASSETS

Segment assets

112,937,572113,341,933

3,120,1963,582,661

2,633,2792,550,612

(356,781)(233,724)

118,334,266119,241,482

TOTA

L ASSETS

118,334,266119,241,482

LIABILITIES

Segment liabilities

102,391,956104,941,207

620,595579,477

1,250,5731,184,130

(356,781)(233,724)

103,906,343106,471,090

TOTA

L LIABILITIES

103,906,343106,471,090

OTH

ER SEGM

ENT IN

FORM

ATION

Acquisition of property, plant and equipm

ent and other non-current assets-

--

92,575217,154

339,121-

-217,154

431,696D

epreciation-

-28,989

14,977207,947

197,488-

-236,936

212,465

GEO

GRA

PHIC

AL SEG

MEN

TS

All of the Association’s business segments operate only in the geographical area of Australia.

072250 MAV FR FA 21/12/06 2:21 PM Page 73

74 MAV FINANCIAL REPORT 2005/06

26 CONTINGENT ASSET

Reinsurance share of profit

CMP, in conjunction with similar local government self-insured mutual liability schemes around Australia, has entered into a profit-sharingarrangement with its primary reinsurers, based on the national local government claims experience. The arrangement enables any surplus pereach year over the five-year reinsurance period to be shared between the various schemes and the reinsurers on a proportional basis.

No amount is payable until June 2007 and some of the surplus can only be redeemed on the commutation of the reinsurance policy. Theactuary has calculated the potential value of the CMP scheme’s profit share for the first two years of the five year program, at balance date, tobe $7.139 million (2005 $3.4 million).

There is significant potential for future events to impact the profit share receivable and a number of variable factors involved in the finaldetermination of the scheme’s profit share. Accordingly, the directors are not satisfied at 30 June 2006 that the potential benefit is an asset thatis probable of receipt and reliably measurable. The financial statements do not include any value attributable to the share of profit. The positionwill be monitored on an annual basis.

27 CONTINGENT LIABILITY

MAV Insurance provides cover to members up to a sum insured of $2 million each and every claim and then arranges for insurance cover foreach member with various insurers up to a sum insured of $300 million each and every claim. The $2 million sum insured provided by MAVInsurance is reinsured through the international reinsurance market. There is uncertainty as to whether a portion of the premium paid to overseasbased insurers for the insurance cover provided to each member in excess of the $2 million sum insured provided by MAV Insurance is subject towithholding tax. If withholding tax is payable the amount of the withholding tax liability has been estimated at $50,000. There is significantuncertainty in relation to whether a withholding tax liability exists and if so as to the amount of any such liability.

28 REMUNERATION OF KEY MANAGEMENT PERSONNEL

The MAV employed 35 key management personnel and provided these personnel with short-term employee benefits and post-employmentbenefits.

CONSOLIDATED MAV - GENERAL FUND

2006 2005 2006 2005$ $ $ $

Short-term employment benefits 700,339 623,912 684,389 603,662

Post-employment benefits 76,722 60,734 76,722 60,734

Loans to directors

No loans were made to or are payable by directors

Other transactions

There were no other material transactions with directors.

Insurance

The activities of the MAV board members are covered by the MAV directors’ and officers’ indemnity insurance policy effected by the MunicipalAssociation of Victoria

29 RELATED PARTIES

The Municipal Association of Victoria is a body corporate established under the Municipal Association Act of 1907 to provide services for andrepresent local government authorities in Victoria. The Association and its wholly owned controlled entities trade with its members in the normalcourse of business and on an arm’s length basis. The discreet nature of these transactions is not material. There were no material-related partytransactions during the year.

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2006

072250 MAV FR FA 21/12/06 2:21 PM Page 74

MAV FINANCIAL REPORT 2005/06 75

STATEMENT BY DIRECTORS

In the opinion of the directors of the Municipal Association of Victoria:

(a) the accompanying income statement is drawn up so as to give a true and fair view of the surplus of the Association for the year ended 30 June2006;

(b) the accompanying balance sheet is drawn up so as to give a true and fair view of the state of affairs of the Association as at that date;

(c) at the date of this statement there are reasonable grounds to believe that the Association will be able to pay its debts as and when they fall due;and

(d) the accompanying consolidated financial statements give a true and fair view of the matters with which they deal.

The financial statements and consolidated financial statements have been made out in accordance with applicable accounting standards andother mandatory professional reporting requirements.

Signed in accordance with the resolution of directors.

Richard Gross President John Chandler Director

Melbourne29 September 2006

072250 MAV FR FA 21/12/06 2:21 PM Page 75

76 MAV FINANCIAL REPORT 2005/06

INDEPENDENT AUDIT REPORT

To the members of the Municipal Association of Victoria

Scope

We have audited the financial report of the Municipal Association of Victoria for the financial year ended 30 June 2006 as set out on pages 51 to 74. The financial report includes the consolidated entity comprising the Municipal Association of Victoria and the entities it controlled atthe year’s end or from time to time during the financial year. The Municipal Association of Victoria’s directors are responsible for the financialreport. We have conducted an independent audit of this financial report in order to express an opinion on it to the members of the MunicipalAssociation of Victoria.

Our audit has been conducted in accordance with Australian Auditing Standards to provide reasonable assurance whether the financial report isfree of material mis-statement. Our procedures included examination, on a test basis, of evidence supporting the amounts and other disclosuresin the financial report, and the evaluation of accounting policies and significant accounting estimates. These procedures have been undertakento form an opinion whether, in all material respects, the financial report is presented fairly in accordance with accounting standards and othermandatory professional reporting requirements and statutory requirements so as to present a view which is consistent with our understanding ofthe Municipal Association of Victoria’s and the consolidated entity’s financial position, and performance as represented by the results of theiroperations and their cash flows.

The audit opinion expressed in this report has been formed on the above basis.

Audit opinion

In our opinion the financial statements present fairly in accordance with accounting standards and other mandatory professional reportingrequirements the financial position of the Municipal Association of Victoria and the consolidated entity as at 30 June 2006 and the results oftheir operations and their cash flows for the year then ended.

PKF R. A. Dean Partner

Chartered AccountantsA Victorian Partnership

MelbourneOctober 2006

CONSOLIDATED FINANCIAL REPORTS-INDEPENDENT AUDIT REPORT

072250 MAV FR FA 21/12/06 2:21 PM Page 76

MAV FINANCIAL REPORT 2005/06 77

Legal Form

The Municipal Association of Victoria is an Association Incorporated by the Municipal Association Act 1907.

Domicile:

Melbourne, Australia

Address of Registered Office and Principal Place of Business:

Level 12, 60 Collins Street, Melbourne, 3000, Victoria, Australia

Nature of the Operation and principal activities:

The Municipal Association of Victoria represents, promotes and supports the interest of Victorian local government and its communities.

Employees

Average number of equivalent full-time employees during the year is 33.9 EFT.

OTHER INFORMATION

072250 MAV FR FA 21/12/06 2:21 PM Page 77