MUNICIPAL ASSOCIATION OF VICTORIA

ANNUAL REPORT 2009 /10

The voice of local government

PURPOSETo promote the efficient carrying out of municipal government throughoutthe state of Victoria and to watch over and protect the interests, rightsand privileges of municipal corporations.

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

d _ MAV ANNUAL REPORT 2009/10 FINANCE & ECONOMICS

Editor_ Kristi HighDesign_ Frank Design Pty LtdPhotography_ Portraits: Chris KapaMAV Events: Paul Jones Photography

This report is produced on a combination of elementalchlorine-free papers, sourced from sustainably managedforests and 100% recycled paper, and printed using vegetablebased inks by an environmentally responsible printer. Thisreflects the Municipal Association of Victoria’s commitment toenvironmental sustainability.

MAV ANNUAL REPORT & CONTENTS_

CONTENTS2_ Year In Review 4_ President’s Report 6_ CEO’s Report

8_ MAV Management Committee 12_ MAV Governance

16_ Finance & Economics 18_ Governance & Councillor Development20_ Environment 22_ Planning & Building 25_ Human Services & Public Health

28_ Transport & Infrastructure 30_ Emergency Management 32_ Workforce33_ MAV Procurement 34_ MAV Insurance

36_ MAV Team 36_ MAV Operations40_ MAV Representatives 41_ Committees 44_ CMP Members

45_ Fidelity Members 46_ Financial Overview

47_ Guide to the Financial Report49_ MAV Financials 79_ MAV Insurance Financials

MAV ANNUAL REPORT 2009/10 FINANCE2009/10ECONOMICS _ 1

YEAR &REVIEW

Councils get thegreen lightFunding was achieved tosubsidise the cost to councils

THE YEAR IN REVIEW_

Childs play hits $600millionA $600 million shortfall wasidentified for kindergartenfacilities and extra staff toachieve the federalgovernment’s aim of 15hours preschool for allfour year olds.

of upgrading to more energyefficient street lighting as aresult of a campaign involving45 councils.

Victoria gets betterwith ageCurrent arrangements forHome and Community Carewere secured outside theCOAG health agreement inrecognition of the role localgovernment plays in Victoria.

Councillors under coverAn independent model wasset up to provide claims andreturn to work services for72 councils when workcoverwas extended to provideprotection for councillors.

Is it hot in here?Ninety per cent of councilsattended one of sevenconsultation sessions toachieve a unified localgovernment position inresponse to the StateGovernment’s ClimateChange Green Paper.

2 _ MAV ANNUAL REPORT 2009/10 FINANCE ECONOMICS

Paving the road toCanberraThe State Government wasenlisted to lobby for morefederal funding for the localroad network in a jointsubmission to InfrastructureAustralia.

MAVREPORT REPORT 2009/10 & REVIEW

Planning for rising seasTwenty-two coastal councilswere involved in establishingconsistent and improveddecision making processes foraddressing developmentsaffected by climate change.

A wind-win resultThe State Governmentaccepted a proposal toaddress community concernswith wind farms.

Sifting the embersMultiple submissions weremade to the Bushfires RoyalCommission as part of localgovernment’s contribution toensuring the tragedy of BlackSaturday is never repeated.

Conflict resolvedAmendments were achievedto the conflict of interesthospitality and giftsprovisions.

Council workforcebenchedData was collected from38 councils to benchmarkperformance in humanresources and assist councilsto address real versusperceived workforce issues.

Phone bills slashedSixty-two councils will save upto 20 percent on their phonebills in a group purchasingcontract fortelecommunications servicesworth $20 million.

MAV ANNUAL ANNUAL2009/10 FINANCEYEARECONOMICS _ 3

PRESIDENTS REPORT_

When elected President of the MAVI made a commitment to beingaccessible and to engage directlyand regularly with members. This yearwe reinstated regional planning sessionsto better ascertain the challengesaffecting councils and their communities.These opportunities bought out the bestin the sector. Municipal agendas wereset aside in a genuine spirit ofcooperation, enabling us to identifyand map shared concerns.

As a combined force we have considerable influence overfederal and state policy. Achievements this year includedcommitments from all federal political parties towardsconstitutional recognition; and securing a landmark tripartitedeal that reinforces Victorian local government’s critical rolein planning and delivering home and community care(HACC) programs.Through federal-state negotiations on the National Health andHospitals Network Agreement, Victoria achieved specialimplementation arrangements for HACC in recognition of ourunique tripartite system. This ensured the national aged carereforms will not apply in Victoria.The 2009/10 reporting year has also been underpinned by asignificant spotlight on local government change – both pursuitof our ongoing self-reform agenda and the sector coming underincreased scrutiny across all areas of operation.The MAV received a boost from the federal and stategovernments to support our long-term commitment toimprove councils’ asset management practices through theStep Program.Working with Local Government Victoria, the MAV secured twogrants worth $2.5 million from the Federal Government’s $25million Local Government Reform Fund to boost rural andregional councils’ long-term asset and financial managementchallenges. The Premier then announced an extra $1.5 millionto continue Local Government Victoria’s work in partnershipwith the MAV through the successful Councils ReformingBusiness initiative.The cost of complying with never-ending layers of governmentregulation has become an ongoing sector-wide discussion,which was raised at length during the roadshows.

4 _ MAV ANNUAL REPORT 2009/10 PRESIDENT’S REPORT

The Victorian Government’s implementation of 1,500 new lawsand regulations over the past decade, with more than 280passed in this reporting year, has placed enormous pressure onlocal government as the responsible agent for many of theservices. It’s become clear that the cumulative impacts areunsustainable for councils, particularly as the real cost ofimplementation is usually higher than State funding received.During the year, the MAV ran a strong and united position withcouncils to oppose any new performance reporting frameworkuntil there has been a whole-of government review of existingreporting and regulatory obligations imposed on the sector. Wehave also called for mandatory Regulatory Impacts Statementsand for a reduction in existing obligations to, at the very least,offset any new reporting regime. By year’s end, we had madesignificant progress on this front and we will continue oursustained efforts in this area.The federal election result and what is expected to be a closelyfought state election demonstrates the need for the MAV tomaintain good relationships with all sides of politics all the time.We play fair, maintaining the confidence of all parties. Weengage on common ground and try not to manage our affairs

have used my President’s Update and the Bulletin to informmembers of the MAV’s progress and achievements, and toregularly invite input and feedback on topical issues.The Councillor Development Weekend was an outstandingsuccess and this popular annual event continues to gainwidespread momentum among councillors. We also expandedour professional development program to offer a greaterdiversity and number of programs to meet councillor needs, with35 training sessions held at locations spread across the state.This was further bolstered by the launch of the MAV andSwinburne University Graduate Diploma. With a specific focuson leadership, governance and strategy, the program has beentailored to support the work of councillors, and to provideopportunities for post-council life.In closing I would like to thank the Management Committee forits hard work, support and commitment to serving our membercouncils and to the MAV staff who continue to work underpressure, successfully meeting the challenges that come theirway, head on.CR BILL MCARTHUR_ PRESIDENT

on the front page of the newspapers unless absolutely necessary.Indeed it is a fine line that the MAV has to walk betweenconstructive dialogue and measured activism to get asatisfactory resolution and not jeopardise concurrent and futurenegotiations on any number of issues in the wide gamut of localgovernment interests.I’m pleased to have overseen some significant changes such asregional meetings of the MAV Management Committee so thatwe can better engage with members on your home turf andunderstand your challenges. We revamped ‘From the BoardTable’ to improve how we communicate MAV decisions and I

MAV ANNUAL REPORT 2009/10 PRESIDENT’S REPORT _ 5

CEO’S REPORT_

2009/10 was a year of optimism.While stretched as an organisationthrough the increased workload ofthe Bushfire Royal Commission,challenges facing the insurance businessand consolidating a new businessventure, our staff gelled as a groupand it was encouraging to see the teamrespond well to the enormity of deadlinepressures and the sheer quantity ofoutput required.

The Royal Commission was undoubtedly a major focus for theyear. Significant staff resources were dedicated to the inquiry toprovide evidence, coordinate submissions on critical aspects,plan our response to the Commission’s stagedrecommendations, resolve policy and liability issues with theState Government, assist the legal team’s preparations andsupport affected councils.Councils’ input was sought to inform our work, often at shortnotice. The efforts of those councils, councillors and councilofficers who appeared as witnesses should not be underestimatedand we acknowledge their significant contribution.Despite the pressure of the Royal Commission, we achievedmuch of what we set out to achieve in our work plan for theyear without fanfare, including:> Exploring opportunities for reforming rating practices to take

into account capacity to pay in the current economic climate> Completing a benchmarking survey to assist councils in

workforce planning> Standardising and simplifying local government awards to

comply with national standards> Negotiating a new local government kindergarten agreement

with the Australian Education Union> Maintaining local government’s role as the primary provider

of Home and Community Care services in Victoria> Developing a partnership agreement with the State

Government for the delivery of education and earlychildhood services

> Progressing a shared service model for IT systems supportingmaternal and child health services and data collection

> Establishing an aggregated procurement arrangement forlibrary materials

6 _ MAV ANNUAL REPORT 2009/10 CEO’S REPORT

> Monitoring and coordinating local government input to theintroduction of new legislative provisions and changes infood safety policy to minimise the burden on councils

> Providing comprehensive guidance for councils on the newfood safety requirements

> Piloting a planning process improvement methodology inresponse to the Victorian Auditor General’s performanceaudit of planning

> Establishing a consensus policy position on climate change> Seeking funding for councils to upgrade first and last mile

freight access and local road bridges> Establishing Councillor Conduct Panels> Monitoring the impacts of changes to the Local Government

Act 1989 and seeking further clarity where it was necessary> Supporting councillors to understand the new conflicts of

interest provisions> Conducting the four-yearly Councillor Census to better

understand the current composition of councillors and theirdevelopment needs

> Consolidating opportunities for accredited training for councillors> Completing modeling to ensure that insurance limits are

adequate in times of increasing frequency and severity ofcatastrophic events, and

> Working with procurement services offered by localgovernment associations in other states to deliver nationalprocurement programs where possible.

A critical characteristic of the MAV is always its ability to remainflexible and adaptable enough to achieve its set priorities andrespond in a timely manner to issues affecting the sector as theyarise. Some of the extraordinary issues that arose out of left fieldand had to be dealt with this year included the increase to

15 hours of kindergarten, the introduction of workcover forcouncillors, the ban on councillors working for members ofparliament and the review of regional waste managementarrangements.In its first full year of operation, MAV Procurement delivered ona number of large scale and niche products and services forcouncils. MAV Procurement is an innovative and complex bulkpurchasing model that is already providing great outcomes forcouncils, albeit operating on a lean-and-mean budget withlimited resources.Still in the start-up phase, MAV Procurement is not expected tomake an immediate profit due to an upfront spend on thetender process. However, all indicators point to profitability bythe third full year of operation. Once this is achieved, MAVProcurement will be in a position to fulfil its commitment ofgiving back to the sector through research, training anddevelopment on best practice procurement procedures.Civic Mutual Plus (CMP) recorded a significant deficit ofapproximately $5 million this year. This has come about throughmarkedly different assumptions applied by our new actuary toforecast amounts needed to cover claims for incidents that haveoccurred but not yet been reported. This reflects the long tailnature of insurance and variation in trying to predict claims thatmay not arise for decades. Due to the strong position of thefund we expect CMP to be back in surplus next year.The challenging nature of local government certainly put ourorganisation to the test again this and I would like to especiallycommend the staff for their achievements in 2009/10, whichhave provided a great level of vigour and optimism for thesector and the organisation.ROB SPENCE_ CHIEF EXECUTIVE OFFICER

MAV ANNUAL REPORT 2009/10 CEO’S REPORT _ 7

CR BILL MCARTHURGolden Plains Shire Council

PRESIDENTMember, MAV Audit Committee

Member, MAV Insurance CommitteeMember, Australian Local Government Association Board

Member, Australian Council of Local Government Steering CommitteeCouncillor, 1991 – 1994 (Grenville), 1996 – present (Golden Plains)

Mayor 2004, 2005

MAV MANAGEMENT COMMITTEE_CR SAM ALESSI

Whittlesea City CouncilDEPUTY PRESIDENT (METROPOLITAN)

INTERFACE REPRESENTATIVEMember, Australian Local Government Association Board

Member, Australian Packaging Covenant CouncilMember, MAV Metropolitan Housing Growth Councillor Reference Group

Member, Ministerial Council on Immigration and Multicultural AffairsMember, Workcover for Councillors Steering Committee

Councillor 1986 – 1987, 1997 – present, Mayor 1998, 2001, 2005Member, Yarra Plenty Regional Library Services Board

Member, Interface Councils GroupMember, Metropolitan Waste Management Group Forum

CR JANE ROWEEast Gippsland Shire Council

DEPUTY PRESIDENT (RURAL)RURAL GIPPSLAND REPRESENTATIVE

Co-chair, Environment Advisory GroupMember, MAV Audit Committee

Councillor 2003 - present, Mayor 2004, 2005, Deputy Mayor 2003, 2007Member, Victorian Local Sustainability Advisory Committee

Member, Essential Services Commission Local Government PerformanceMonitoring Framework Advisory Committee

Sub-delegate, Australian Local Government AssociationMember, Keep Australia Beautiful Community Advisory Committee

CR JOHN CHANDLERStonnington City Council

SOUTH EAST REPRESENTATIVEChair, MAV Metropolitan Housing Growth Councillor Reference Group

Deputy Chair, Planning Advisory GroupCouncillor 1982 – 1994 (Prahran), 1996 – present

Mayor 1988 (Prahran) 1996, 2006Member, Australian Building Codes Board

CR ENVER ERDOGANMoreland City Council

METROPOLITAN CENTRAL REPRESENTATIVECouncillor 2008 – present

CR JAN FARRELLGreater Geelong City Council

RURAL SOUTH CENTRAL REPRESENTATIVEMember, MAV Audit Committee

Chair, Planning Advisory GroupCouncillor 2004 - present

8 _ MAV ANNUAL REPORT 2009/10 MAV MANAGEMENT COMMITTEE

CR ROD FYFFEGreater Bendigo City Council

RURAL NORTH CENTRAL REPRESENTATIVEDeputy Chair, Professional Development Reference Group

Councillor1996 - present, Mayor 2004, 2005Member, Ministerial Advisory Council on Libraries

Co-chair, Rates Affordability Working GroupMember, State Library Public Libraries Advisory Committee

CR KEN GALEMoyne Shire Council

RURAL SOUTH WEST REPRESENTATIVEChair, Human Services Advisory Group

Co-chair, Rates Affordability Working GroupCouncillor 2004 - present

Mayor 2008, 2009Member, Rural Councils Victoria

Member, Timber Towns Victoria

CR GEOFF LAKEMonash City Council

METROPOLITAN SOUTH REPRESENTATIVECouncillor 2000 - present, Mayor 2002, 2003

President, Australian Local Government AssociationMember, Metropolitan Fire and Emergency Services Board

Member, Australian Council of Local Government Steering CommitteeTrustee, Vision Super

CR GEOFF GOUGHManningham City Council

METROPOLITAN EAST REPRESENTATIVECo-chair, Transport and Infrastructure Advisory Group

Councillor 1997 - presentMayor 2002, 2007

CR LISA MAHOODWodonga City Council

RURAL NORTH EAST REPRESENTATIVECo-chair, Transport and Infrastructure Advisory Group

Councillor 2000 - presentMayor 2002, 2003, 2004, 2005, 2006

Deputy Mayor 2001

CR REID MATHERBuloke Shire Council

RURAL NORTH WEST REPRESENTATIVECo-chair, Environment Advisory Committee

Councillor 2003 - presentMayor 2005, 2006, 2007, 2008, 2009

Member, Minister for Agriculture’s Drought Reference GroupChair, North Western Municipalities Association

Deputy Chair, Alliance of Councils for Rail Freight Development

CR JOHN SIPEKMoonee Valley City Council

METROPOLITAN WEST REPRESENTATIVEChair, Professional Development Reference Group

Councillor 2005 - presentDeputy Mayor 2009

Member, Metropolitan Waste Management Group BoardMember, Mayoral Aviation Committee (Victorian Branch)

MAV ANNUAL REPORT 2009/10 MAV MANAGEMENT COMMITTEE _ 9

Board meeting attendance Allowances and ExpensesJUL AUG SEP OCT NOV DEC JAN FEB MAR APR MAY JUN The Board Allowance and Expense Policy

Sam AlessiJohn Chandler

X

makes provision for ManagementCommittee members to receive an annualallowance paid quarterly in advance, and

Enver ErdoganJan Farrell

X X

X

XX

to claim out-of-pocket expenses for travel,parking, accommodation and mealswhen undertaking duties as a

Rod FyffeKen GaleGeoff Gough

X

X

Management Committee member.In 2009/10 the annual allowanceamounts were as follows:> President $54,024

Geoff Lake X X > Deputy President $11,136Lisa MahoodReid Mather

X

X

> Board member $7,582.44

Bill McArthur X Jane Rowe X John Sipek X X

10 _ MAV ANNUAL REPORT 2009/10 MAV MANAGEMENT COMMITTEE

ANNUALALLOWANCE

TRAVEL ANDACCOMMODATION TOTAL

* Note that Cr Geoff Gough’s allowanceis higher than others as it included

Sam AlessiJohn ChandlerEnver ErdoganJan FarrellRod FyffeKen GaleGeoff Gough*Geoff LakeLisa MahoodReid MatherBill McArthurJane Rowe

11,136.007,582.447,582.447,582.447,582.447,582.449,414.747,582.447,582.447,582.44

54,024.0011,136.00

8,213.08712.20

-2,721.149,341.696,891.16

--

7,118.319,317.20

14,763.626,406.60

19,349.088,294.647,582.44

10,303.5816,924.1314,473.609,414.747,582.44

14,700.7516,899.6468,787.6217,542.60

payment for the last quarter of 2008/09.The above amounts do not correlate tothe allowance and expense paymentfigures in the financial statements as theyinclude some payments made toManagement Committee members forexpenses incurred in 2008/09 andclaimed in 2009/10. Some expenses arealso charged to other areas in the MAVaccounts. Payments for expenses weremade directly to Management Committeemembers, to their council for travel wherethey have utilised a council fleet vehicle,or directly to the hotel for someaccommodation expenses. It should benoted that some Management Committeemembers may lodge claims after 30 June2010 for expenses incurred in the2009/10 year, details of which will bereflected in the 2010/11 Annual Report.President Cr Bill McArthur was alsoprovided with full private use of a motorvehicle at a cost of $12,416.20.

MAV ANNUAL REPORT 2009/10 MAV MANAGEMENT COMMITTEE _ 11

MAV GOVERNANCE

Municipal Association Act 1907The Municipal Association Act 1907defines the purpose of the MAV topromote the efficient carrying out ofmunicipal government throughout thestate of Victoria and watch over andprotect the interests, rights and privilegesof municipal corporations. It establishesthe MAV as a corporation with perpetualsuccession and requires it to provide amutual liability insurance scheme forlocal government and empowers it toprovide fidelity insurance.

MAV RulesThe Act requires the MAV to set Rules for> the management of the Association> the regulation of proceedings> fixing the annual subscription paid by

each municipality> fixing of contributions to the Municipal

Officers’ Fidelity Guarantee Fund> other matters affecting the

management of the Association.

State CouncilThe Act provides that each membercouncil may appoint a councillor

Management CommitteeTwelve board members are elected to theBoard of Management for a two-yearterm. Each Board member is elected torepresent a geographic grouping ofcouncils. The representatives in thatgrouping elect the regional Boardmember. The thirteenth member of theBoard is the President who is popularlyelected by the representatives of eachmember council. The Rules prescribe thefunctions of the Board which includeensuring the directions set by StateCouncil are met, setting the budget andoverseeing the manner by which the MAVengages with its membership.

as its representative, and theserepresentatives constitute the Association.The representatives come together twicea year to form State Council which setsthe policy direction of the Associationand monitors its performance. The StateCouncil Annual General Meeting washeld in October 2009 and received areport from the President on the activitiesand financial affairs of the Associationand voted on 54 motions from membercouncils. In May 2010 the State Councilmet and approved the Strategic WorkPlan for the MAV for 2010/11 andconsidered a further 54 motions frommember councils. For a list of MAVrepresentatives at 30 June 2010 seepage 40.

12 _ MAV ANNUAL REPORT 2009/10 MAV GOVERNANCE

2010/11 Strategic Work PlanA series of eight consultation sessionstook place in February and March 2010across various metropolitan and regionallocations to commence the MAV’sstrategic planning process. Following thecouncil consultation sessions, a writtendraft of the strategic plan was preparedand reviewed by the ManagementCommittee. The plan was then circulatedfor the feedback of councils. The draftidentified eight themes and proposedpriority actions in each functional area for2010/11. The themes are the financialcapacity of the sector; land use planningand power; the Victorian Bushfires RoyalCommission; the elections; thecomplexities of population anddemographic change; climate change;the cost of regulation enforcement and;intergovernmental relations. The draftalso included an election focus where afurther six areas were identified to formthe MAV’s advocacy activity ahead of theplanned state and federal elections. TheManagement Committee considered thefeedback received from councils andamended the plan accordingly. The planwas then approved at the May StateCouncil. The Management Committee isresponsible for overseeing delivery of theactions identified in that plan, and fordetermining, when required, how thoseactions will be implemented. The MAVAnnual Report for 2010/11 will provide asummary of achievements against the

Advisory GroupsIn 2009/10 four advisory groups wereestablished by the MAV ManagementCommittee. Groups established are:> Environment Advisory Group – Co-

chairs, Cr Reid Mather and Cr JaneRowe

> Human Services Advisory Group– Chair, Cr Ken Gale

> Planning Advisory Group – Chair, CrJan Farrell

> Transport and Infrastructure AdvisoryGroup – Co-chairs, Cr Geoff Goughand Cr Lisa Mahood

A member of the ManagementCommittee is appointed to chair each ofthese groups and provide a conduit forfeedback between the group and theManagement Committee. For furtherdetail on the role of each advisorycommittee, see page 41.

Deed of EstablishmentThe Deed of Establishment sets out howthe insurance scheme is to operate as amutual liability fund. It includes rules as toeligibility and obligations of theparticipants. It requires the formation of amanagement committee, and formalisesauthorities, duties and powers ofdelegation by the committee and providesguidance as to the day-to-day operationof the insurance business.

Insurance CommitteeThe Board of Management has delegatedauthority and responsibility for theoperation of the MAV Insurance business(Civic Mutual Plus and the MunicipalOfficers’ Fidelity Guarantee Fund) to theMAV Insurance Committee (MAVIC).MAVIC has oversight of the operationof the insurance schemes and monitorsthe MAV’s compliance with its AustralianFinancial Services Licence (AFSL).It comprises nine members – fourindependent insurance experts, onecouncil CEO, one MAV ManagementCommittee member, one representativeof the Local Government Associationof Tasmania, and the President and CEOof the MAV. The Committee oversees theoperations of the MAV Insurancebusiness. Adrian Nye resigned fromthe Committee on 2 July 2009 dueto potential conflicts resulting from hisposition as Chairman of VictoriaManaged Insurance Authority. MichaelGuilmartin was appointed in August tofill this vacancy.

objectives and actions in that plan.

Insurance Committee AttendanceAUG SEP OCT DEC FEB APR JUN

John Warburton X

Ron Farrell Cr Rod Fyffe X X X Allan GarciaMichael Guilmartin

X

Dr Michael Kennedy X X Cr Bill McArthur X X X XAnne MurphyRob Spence

MAV ANNUAL REPORT 2009/10 MAV GOVERNANCE _ 13

MAV Insurance Committee

JOHN WARBURTONAPPOINTED 1995

Chair, MAV Insurance Committee August 2005 - presentDirector, Lend Lease Real Estate Investments Limited

Director, Health Super Financial ServicesDirector, Emergency Services Foundation

Chairman, Vision Super Audit CommitteeChairman, Metlink Audit Committee

Chairman, Australian Wealth Management Limited 2005 - 2009Trustee, Melbourne Exhibition and Convention Centre Trust 1999 – 2009

Director, Living and Leisure Australia Limited 2006 - 2009Chairman, Port of Hastings Corporation 1997 - 2007

Director, Vision Super (formerly Local Authorities Super) 1997 - June 2007Deputy Chair, Victorian Managed Insurance Authority 1996 - 2000

RON FARRELLAPPOINTED 2001

Chair, Claims and Technical CommitteeNon-Executive Director, Victorian Managed Insurance Authority

General Manager, Australian Eagle Insurance Co LtdChairman and Non Executive Director, Utilities Insurance Co Pty Ltd

Non Executive Director, connect.com.au Pty LtdNon Executive Director, Metropolitan Fire and Emergency Services Board

Member, Professional Standards Councils (All States and Territories)

CR ROD FYFFEAPPOINTED 2004

MAV Regional Representative for Rural North CentralCouncillor, Greater Bendigo City Council

Mayor 2004, 2005

ALLAN GARCIAAPPOINTED 2003

Chief Executive Officer, Local Government Associationof Tasmania (LGAT)

LGAT representativeQuadrant Superannuation

MICHAEL GUILMARTINAPPOINTED AUGUST 2009

Company Director Lake Eildon Country Club LtdChief Executive Officer, Victorian Managed Insurance Authority 1997 – 2007

President, Association of Risk Insurance Managers of Australia 1980

DR MICHAEL KENNEDY OAMAPPOINTED 1995

CEO, Mornington Peninsula Shire CouncilChairman, Frankston Mornington Peninsula Local Learning and

Employment NetworkChairman, GAMUT (Centre for the Governance and Management

of Urban Transport) University of MelbourneDirector, Life Saving Victoria

Director, Inner East Community Health

14 _ MAV ANNUAL REPORT 2009/10 MAV GOVERNANCE

CR BILL MCARTHURAPPOINTED 2009

MAV PresidentCouncillor, Golden Plains Shire Council

Mayor, Golden Plains Shire Council 2004, 2005Director, Australian Local Government Association Board

Member, MAV Audit CommitteeMember, Australian Council of Local Government Steering

Committee

ANNE MURPHY OAMAPPOINTED 1993

Committee Chairman 1993 - August 2005Past President, MAV

Principal, Anne Murphy Strategy and FacilitationBoard member, KYM Employment Services Inc

ROB SPENCEAPPOINTED 1997

Chief Executive Officer, MAVChief Executive Officer, Brimbank City Council 1994 - 1997

Chief Executive Officer, City of Footscray 1992 - 1994Director of Municipal Operations, Office of Local Government

Trustee, Vision SuperMember, Victorian Children’s Council

Member, Victorian Freight and Logistics Council

Audit CommitteeThe Audit Committee is an independentcommittee established at the direction ofthe MAV Board of Management in 2004.Hugh Parkes’ tenure as Chair ended 30September 2009. Dean Newlan CPA, anindependent member of the Committeesince inception, was appointed Chair inDecember 2009. Elizabeth Reeves CPAremained an independent member.Management Committee representationfrom July 2009 to February 2010 was CrJan Farrell, Cr Jane Rowe and the MAVPresident, Cr Bill McArthur. In February2010, Cr Jane Rowe was appointedalternate to Cr Jan Farrell and the MAVPresident and Terry Makings AM FIEAustwere appointed independent members of

Insurance Committee Sitting FeesThe MAV makes provision forindependent committee members toreceive a sitting fee for each meetingattended. In 2009/10 the sitting fee was:> Chair: $850> Independent Committee members: $587In addition, an allowance of $1,133 waspaid to the independent committeemembers for attendance at otherinsurance-related meetings.

ComplianceIn addition to the requirements of theMunicipal Association Act 1907 and MAVRules, the MAV must comply with relevantregulations and obligations applicable tostatutory and public bodies. The MAV isalso required to comply with the provisionsof its Australian Financial Services Licence(AFSL). The MAV has established asignificant compliance and governancestructure to ensure it meets its obligationsunder the AFSL. This structure includes acompliance and risk management strategy;compliance and risk management plan;compliance and risk analysis table; anddisaster recovery and business continuityplan. An electronic risk management andcompliance system operates within MAVInsurance to ensure compliance with itsAFSL obligations. Compliance with thissystem is audited by the MAV’s independentinternal auditor and findings are reported toboth the MAV Insurance Committee and theMAV Management Committee.

the Committee.The Committee operates under a Charterapproved by the Board of Managementas most recently revised in September2009. Its primary objective is to assistMAV management in maintaining goodgovernance, compliant financialreporting, management of risk,maintaining a reliable system of internalcontrols and monitoring organisationalperformance. The Committee meetsquarterly and additional meetings areconvened as required. The AuditCommittee met on five occasions during2009/10. Minutes of all Audit Committeemeetings are provided to the MAVManagement Committee.In addition to monitoring the financialand risk management performance of theMAV and reviewing the annual workprogram of the internal and the externalauditors, in 2009/10 the MAV AuditCommittee received reports on MAVProcurement, STEP Program, theInsurance Catastrophe Loss Limits Projectand Internal Audit reports of MAVProcurement, MAV and MAV Insurance. Italso monitored the MAV’s involvement inthe Bushfire Royal Commission.

MAV ANNUAL REPORT 2009/10 MAV GOVERNANCE _ 15

Finance & Economics

Rates AffordabilityThe MAV’s Rates Affordability WorkingGroup guided original research on theincidence of council rates, providing thefirst comprehensive evidence on theamount paid by individual residentialhouseholds. The group found that ratesaffordability concerns exist for somehousehold types — with single, femalepensioners having the lowest capacity topay rates. Based on this original research,the group identified several practicalrecommendations to improve ratingaffordability. Priority actions include thatcouncils through the MAV should improveand standardise approaches to hardshippolicies for rates; pensioner rateconcessions from the State Governmentshould be increased and escalated in linewith rates; and the MAV should continueto work with the ALGA to call for greaterfunding support for local government.These recommendations will continueto be pursued by the MAV.

Constitutional ReformA State Council resolution was passed inMay to support a referendum foramending the Australian Constitution torecognise local government. The MAV issupporting the ALGA’s intensive programof bipartisan consultation withstakeholders at federal and state levels onconstitutional reform. The MAV hasprepared a communications plan, whichincludes a members’ briefing paper, keymessages, and a media strategy tosupport the ALGA’s activity.In August, the ALGA commissionedmarket research to explore opinionsabout local government, constitutionalreform and the public’s perception oflocal government. Market researchincluded focus groups in four states anda national survey of 1,505 respondents.Based on this research, the ALGA Boardendorsed a general campaign to raisethe profile and improve perceptions oflocal government as well as explain

Rural Councils VictoriaADVOCACYIn December, 36 of Victoria’s 38 ruralcouncils agreed to an annual contributionof $2,000 to continue the Rural CouncilsVictoria (RCV) network.The network’s vision is for ruralcommunities with sustainable economiescontributing to the health, character andliveability of Victoria and for RCV to bean enabler of rural councils to sustaintheir local communities. This aim is tobring geographically disparate ruralcouncils together to provide truerepresentation of their needs to otherlevels of government. The three goalsof the network are to be a collectivevoice, to create a learning hub, and toenable bottom-up solutions.A submission to the State’s blueprint forprovincial Victoria was prepared by theMAV on behalf of rural councils. A secondsubmission was prepared for the StateBudget process, which contained thenetwork’s views on priorities for 2010/11.The RCV committee meets monthly to discussprojects and collaborative opportunities.SUMMITThe 2009 Small Towns Summit was held inthe Wellington Shire town of Maffra.Attended by over 200 delegates includingcouncillors, CEOs and officers, the summitprovided a forum for business and industryleaders, economic and communitydevelopment practitioners, academics andeducation providers and relevant decisionmakers to discuss rural challenges.This year’s Summit promoted apartnership with the Victorian chapterof Economic Development Australia andthe Country Education Project, enablingall three parties to cross promote eventsand increase delegate numbers.A strong media and communicationscampaign reaped excellent results ofnational press coverage as well as localTV, radio and print.

ESC Performance MonitoringFrameworkIn August, the Victorian Premierannounced the Essential ServicesCommission (ESC) would develop aperformance monitoring frameworkfor local government which would bereported on annually.The MAV strongly called for the reviewto reduce the net costs to councils ofcomplying with State reportingrequirements. Concerns were raised aboutincreased regulatory costs, the complexityof comparing such a diverse sector, andkey principles that should guide theselection of performance indicators.The MAV also called for a hold onincreasing councils’ compliance costs forreporting to State agencies. It called fora two-step process for the State to reviewand streamline existing reporting and theregulatory burden imposed on councilsto offset any new performancebenchmarking regime. The MAV alsocalled for the introduction of mandatoryRegulatory Impact Statements.The MAV also commissioned AllenConsulting to establish the cost to localgovernment to comply with StateGovernment regulations and reportingrequirements, and to identifyopportunities to reduce compliancecosts. The outcome of the MAV’sefforts was due to be announcedin July.

the case for constitutional reform.

16 _ MAV ANNUAL REPORT 2009/10 FINANCE & ECONOMICS

Victorian Competition andEfficiency CommissionThe MAV commenced work with councilsto develop a sector-wide response to aninquiry into the administration ofregulations by local government, beingconducted by the Victorian Competitionand Efficiency Commission (VCEC).Driven by the State Government, theinquiry will examine the capacity tostreamline and harmonise regulatorypractice across councils. It will particularlyexamine the impact of regulations onbusiness; the capacity to streamlinepractices where councils deliver stateregulation; consistency between councilapproaches to regulation; the costsincurred by the sector in administeringregulation; and an estimate of theeconomic impact of options to reformcouncil regulation. The Commission isexpected to provide its final report toGovernment by September 2010.MAV and VCEC worked closely during2009/10, with the VCEC Chairpresenting at the MAV CEO Forum andother workshops to keep councillors andcouncil officers informed about the statusof the inquiry into streamlining of localgovernment regulation.

Valuations ReviewThe outcome of a review of valuationssaw the State Government considermoving Victoria to a centralised model,causing many councils wishing to retainthe valuation function to express concern.In response, the MAV supported councilsin their efforts to ensure standards datawas maintained and high qualitycustomer service was provided toratepayers. After an initial proposal wasput forward that proposed to centralisevaluation responsibility with the Valuer-General, amendments to the Valuationof Land Act 1960 were introduced to theVictorian Parliament in August thatprovided a voluntary power for councilsto elect to transfer their valuationresponsibilities to the Valuer-General.The Bill represented a significant changefrom the initial proposal and reflects oneof the MAV’s alternatives to ensurecouncils retain control over howvaluations are undertaken. The MAVwill continue to work with councils inaddressing other issues with the proposal,such as supplementary valuations,objections, and any commercial useof valuation data.

Overheads ModelA standardised overheads model that canbe used to justify costs, calculatereimbursements and make subsidiestransparent and deliberate was launchedin July. The best practice guide wasfunded by the MAV and provided atemplate that can be used across allcouncils to gain efficiency andconsistency. Applications of the overheadsmodel template include budgetdevelopment, accountability, decisionmaking, targeting support todisadvantaged groups, cost control anincome development. The model wasdeveloped by a reference group offinancial professionals in localgovernment using comparable dataacross councils.

MAV ANNUAL REPORT 2009/10 FINANCE & ECONOMICS _ 17

Governance & Councillor Development

Councillor Conduct PanelsIn 2009/10, four Councillor ConductPanels were established, showing aninterest by councillors in resolving internaldisputes in accordance with theCouncillor Codes of Conduct.The MAV also assisted councils in thedispute resolution process in a variety ofways. Meetings between the CouncillorConduct Panel list members wereconvened to provide a forum for processmatters to be raised.

Conflicts of InterestThe MAV continued to be the first port ofcall for advice to councils, and individualcouncillors, on the conflict of interestprovisions. MAV made a comprehensivesubmission to the Conflict of Interestconsultation undertaken by Local

Councillor WorkcoverThe MAV circulated a Members Briefproviding an overview of relevant issuesand sought feedback from members. Thisconsultation process identified a numberof practical issues that required furtherconsideration and resulted in the MAVdeveloping an interim model to outsourceclaims management and return to workfor 72 councils. The MAV provided adviceand information on a range of mattersrelating to councillor workcover includingconflicts of interest, legislative rights, andthe obligations of councils as employersand councillors as employees.

Conflicting Duties FundThe Local Government (ConflictingDuties) Act 2009 disqualified electorateofficers and ministerial advisors from

Government Victoria (LGV), whichcontributed to the legislative amendmentsproposed by the State Government. Inaddition, the MAV advocated for changeduring meetings with the Minster for LocalGovernment and LGV.

holding an elected councillor position.In response the MAV established a fundto assist individual councillors in theirpreparation to seek declaration in theSupreme Court that provisions withinthe Act, were inconsistent with the Charterof Human Rights and Responsibility Act2006. The fund was established on the

Electoral Representation ReviewsThe MAV advocated for a comprehensive,multi-phased and detailed review of allaspects of the Electoral RepresentationReview process, including the potentialimpact of the outcomes on localgovernance.

basis that contributions would be returnedif no declaration was lodged. Noindividual councillors proceeded witha declaration and all contributions werereturned to the contributing councils.

18 _ MAV ANNUAL REPORT 2009/10 GOVERNANCE & COUNCILLOR DEVELOPMENT

The Knowledge CentreThe Knowledge Centre continues toprovide two-day training programs forsmall groups of up to 20 councillors andcouncil officers. The sessions, held at theMAV, provide meaningful conversationand debate around current issues.During 2009/10, programs offeredincluded Mastering Negotiation andInfluencing Skills, Mastering PublicSpeaking and Presenting Skills, Leadershipfor Councillors, So you think you knowwhat Good Governance is?, UsingTechnology to Engage Communities,and Results Based Accountability.The success of some of these programshas created ongoing demand, with thePresentation Skills and Negotiation Skillssessions already offered more than once.

Councillor FundamentalsThirty full day training programs wereheld at various locations across the statefor councillors covering areas includingfinance, governance, land use planning,meeting conduct and negotiation skills.A session on the Charter of Human Rightsand Responsibilities was also facilitatedby the MAV. The programs were attendedby almost 250 councillors. Financialsupport from the Department for Planningand Community Development for theprogram kept the cost at $75 per fullday session.In addition to these programs, five halfday sessions for audit committees wereheld for councillors and independentaudit committee members.

Partnerships in TrainingOver the past year, two importantpartnerships have been developed thatwill lead to new professional opportunitiesin 2010/11.Swinburne University of Technology andthe MAV announced a graduate programfor councillors and officers. This programdelivers a Graduate Diploma inManagement, awarded by SwinburneUniversity after two and a half yearspart-time study. The program willcommence in September 2010.The Australian Institute of CompanyDirectors and the MAV developed aprogram of short courses targeted atcouncillors. This program, tailored tolocal government needs, will be providedthrough a licensing agreement and willalso commence in September 2010.

AwardsCr Mendy Urie from East Gippsland andCr Charlotte Baines from Monash werethe recipients of this year’s CranlanaColloquium award. Each year the MAVprovides an opportunity for twocouncillors to attend the week-longcolloquium conducted by the MyerFoundation. The award is valued at$5,000 per recipient and provides anopportunity for the two councillors towork with corporate, not for profit andgovernment sector leaders.Cr Gaetano Greco from Darebin wasawarded the McArthur ManagementServices Local Government fellowship.This award allows a councillor to traveloverseas on a study tour that is relevant tothe sector. Cr Greco received the$10,000 prize at the MAV Conference inOctober and completed his study tour onMunicipal WiFi Networks in May.

MAV ANNUAL REPORT 2009/10 GOVERNANCE & COUNCILLOR DEVELOPMENT _ 19

Environment

Climate ChangeAn extensive consultation program on theVictorian Government’s Climate ChangeGreen Paper resulted in 90 per cent ofcouncils attending one of seven regionalconsultation sessions, which informed adetailed submission to the State.With the anticipated introduction of a wholeof economy carbon price, the MAV workedwith councils to understand the cost effectson procuring goods and services, and theexpected community challenges.More than 200 delegates from all threelevels of government attended a two-daynational climate change conference inApril and a series of 10 climate changecase studies were developed to showcaseactions and achievements by councils.The MAV actively advised councils’ onclimate change in areas includingemerging federal policies such as theNational Greenhouse and EnergyReporting System, and National CarbonOffset Standard.

WaterThe MAV represented councils seekingimproved integrated water planning atmunicipal and regional levels bysignificantly contributing to the newWater Sensitive Cities initiative.As an active participant in currentdiscussions on the development of theMurray Darling Basin Plan to establishnational water managementarrangements, the MAV supportscouncils to understand the rationalefor introducing the Basin Plan whileremaining responsive to the socio-economic needs of local communities.

20 _ MAV ANNUAL REPORT 2009/10 ENVIRONMENT

EnergyPublic street lighting was the focus ofthe MAV’s energy work in 2009/10,including advocacy on regulation, alighting technology review, preparationof a business case for a statewideupgrade to more energy efficient lighting,and the launch of a high-profilecommunity campaign Give Our Streetsthe Green Light.A submission was made to the AustralianEnergy Regulator’s review of the Victorianelectricity network service providers’charges for 2011–2015. This review is toestablish the regulated charges incurredby councils for operation andmaintenance of public lightinginfrastructure. The MAV submissionfocused on the contestability and fairnessof upgrading public lighting, theproposed increases in tariffs and variationbetween distributors, and regulatedcharges for new lighting technology.The MAV worked with Local GovernmentVictoria and the Department ofSustainability and Environment to providea way forward for councils in complyingwith public tender requirements underthe Local Government Act 1989 wherecouncils seek to upgrade to more energyefficient lights.MAV Public Lighting Customer InnovationCommittee (CIC) was established toassess public lighting technology forcouncils and VicRoads that haveimproved environmental, technical,and cost performance.

Weed and Pest ManagementThe issue of pest management onroadsides remains a priority issue for theMAV to resolve with the State Governmentand associated parties.The MAV is a member on the assessmentpanel for a grants program, designed asan interim measure to support councils toundertake roadside pest managementwhile discussions on responsibilitycontinue between the State and the MAV.The MAV President and three localgovernment senior officers represent localgovernment on a ministerial working partyto resolve the issue of responsibility forpast management on roadsides.The MAV formed a sub-committeecomprising of officers from 14 affectedcouncils to inform its representatives onthe ministerial committee.

BiodiversityThe MAV participated in the developmentof the Victorian Government’s SecuringOur Natural Future: A White Paper forLand and Biodiversity at a Time of ClimateChange by providing a submission inresponse to the initial consultation paperand the Green Paper, and by taking part inthe Stakeholder Reference Group. Sincethe White Paper was released as StateGovernment policy in December 2009,the MAV has continued its work to ensurethat local government remains engagedduring the implementation phase.The MAV also made submissions to, andparticipated on the Community ReferenceGroup, the Victorian EnvironmentalAssessment Council’s investigation ofremnant native vegetation on Crownand public authority land. The objectiveof this review was to assess largely intactlandscapes with areas greater than10,000 ha for their connectivity andcontribution to sustainable landscapes,and to identify opportunities for greaterecological linkages.

WasteAfter extensive consultation withcouncillors and officers through regionalforums, the MAV provided a submissionto the review of Regional WasteManagement Groups. The keyrecommendations of the MAV submissionwere accepted by the State.The MAV participated in the developmentand implementation of an improved thirdNational Packaging Covenant. Now calledthe Australian Packaging Covenant, it hasa stronger focus on packaging design toreduce environmental impact andmaximise compatibility with localgovernment kerbside recycling systems.A submission to the Regulatory ImpactStatement to amend the NationalEnvironment Protection Measure, whichunderpins the Covenant, put forwardlocal government’s position for a strongongoing regulatory foundation forimproved packaging design.The long-running issue of televisionand computer product stewardshipsignificantly progressed in 2009/10with the release of a Regulatory ImpactStatement from the Federal Government.The MAV made a submission, informedby MAV State Council resolutions,towards the support of properly fundednational schemes that reduce the burdenon local government for illegally dumpedtelevisions and computers, and thecollection, transport and recycling ofthese products. Subject to the legislativeprocess, the national scheme is due tocommence in early 2011.

MAV ANNUAL REPORT 2009/10 ENVIRONMENT _ 21

Planning & Building

Retaining Local InputThe state planning process applied to theFederal stimulus package school andsocial housing projects further erodedcouncils’ role in making local planningdecisions. Both streams of buildingprojects were removed from regularplanning permit processes with permitseither not required or issued centrally bythe Minister for Planning.The Victorian Government introducedlegislation enabling DevelopmentAssessment Committees (DAC). TheMAV joined the five DAC affected councils– Greater Geelong, Greater Dandenong,

Planning and Environment ActReviewThe MAV represented members’ interestsin the review of the Planning andEnvironment Act 1987 through a series ofworkshops, participation in the ExpertAdvisory Group, and submissions. Thedraft Bill set out proposed amendmentsincluding a dedicated assessment andapproval process for projects of Statesignificance. Other key reforms includedimproving the operation of both permitand amendment processes, Section 173agreements and annual reportingrequirements by councils.

Moreland, Manningham and Boroondara– to scope the process of appointingand identifying the issues to be addressedby DAC.A strategy to improve transparency andconsistency of the decision makingprocess across councils was implementedto help retain local input in planning. TheMAV, DPCD, Greater Geelong, GreaterDandenong and Golden Plainsdeveloped a methodology for a sectorwide performance improvement program.The result was a statewide Step Planningprogram designed to drive improvements,efficiency and effectiveness in planningoutcomes and meet risk managementand performance reporting obligations.

Although changes will no doubt improvethe operation of the current planningsystem, the MAV raised significantconcern with the proposed amendmentsto secondary consent provisions,authorisation of an individual to progressan amendment to a Municipal PlanningScheme, and statutory provisions for codeassessment of some application types.If implemented, these changes wouldsignificantly undermine the role of localgovernment as an authority responsible forplanning and do not guarantee significantimprovement to the timeliness andcertainty of the decision making processes.

Coastal PlanningThe MAV undertook a project withVictoria’s 22 coastal councils to establish aconsistent and improved decision makingprocess for addressing developmentsaffected by climate change. This project,established in response to a requirement inthe Victoria Coastal Strategy to plan for asea level rise of not less than 0.8m by2100 and concurrent changes to theVictorian State Planning Policy Framework,also considered the impacts of potentialsea level rise and potential risks andobligations facing councils.The Future Coasts Program is deliveringimproved data to councils regardingvulnerability to sea level change andassociated impacts. The MAV met with theCoastal Climate Change AdvisoryCommittee, established by the State to assesschanges required to planning provisions,application of vulnerability assessments, andother strategic planning issues to addresscoastal climate change impacts.

22 _ MAV ANNUAL REPORT 2009/10 PLANNING & BUILDING

Bushfire SupportThe MAV continued to provide support tothe planning directors of fire affectedcouncils through monthly forums, andliaised with the Victorian BushfireRecovery and Rebuilding Authority,Building Commission and the Departmentof Planning and Community Developmenton an ongoing basis.In late 2009 the forum widened toinclude high bushfire risk councils asplanning issues around land use becamemore actively considered by the BushfireRoyal Commission.The MAV supported councils inunderstanding, and applying, the newBushfire Attack Level requirements relatingto construction standards and access in

Planning and Subdivision FeesReviewThe MAV, along with a number ofcouncils, is contributing to the Planningand Subdivision Fees Review throughinvolvement in technical advisory andstakeholder reference groups. Planningfees have been capped since beingintroduced in 2000. The current fees, dueto sunset in 2010, have been extended to2011 and the MAV has shown them to beinadequate due to a rise in statutory andstrategic planning costs and alternativeservice channels such as onlinelodgement and application trackingsystems provided by councils that areincreasingly subsidising planning servicesthrough rates.Detailed planning and subdivisionapplication processing costs from 15councils will be supplemented by targeteddata collection on other processes suchas amendments, planning certificates,and engineering approvals in thesubdivision regulations. The MAV islooking to the review to broaden the basison which fees are charged so councilscan recover the fixed costs of maintaining

Wind Energy FacilitiesA proposal to improve support forcouncils managing wind energy facilitypermits and improving compliance waspresented to the Minister for Planning.The proposal addressed councils’ concernaround issues such as assessment criteria,responsibility for compliance andenforcement, and access to expertise.The proposal was accepted by theMinister, who also agreed to:> Work with the MAV to refine or vary

the current guidelines> Resource regional coordination and

project management> Review standard permit conditions> Pilot the preferred approach in

Victoria’s south west regionThe MAV also sought legal advice toresolve confusion and disagreementregarding the authority responsible forenforcement of permits – council, VCATor the Minister.

high risk areas. The MAV’s representationof 77 councils at the Bushfire RoyalCommission on planning and relatedmatters such as roadside vegetation andfuel reduction was successful. Planningdirectors directly informed the localgovernment submission, which wasreceived positively by Counsel Assistingand strongly influenced emergingrecommendations. Counsel Assistingacknowledged the significant variationbetween councils including resourceconstraints and difficulties in balancingcompeting policy objectives of bushfiremanagement and vegetation protection.The MAV also negotiated with LocalGovernment Victoria and the Departmentof Treasury and Finance to provide clarityaround reimbursement of private buildingsurveyors’ fees.

and updating planning schemes andinvestment required in Information andCommunications Technology systems tosupport delivery of planning services andreduce the burden on councils.

MAV ANNUAL REPORT 2009/10 PLANNING & BUILDING _ 23

Planning & Building

e-PlanningThe main focus this year was on expandingthe SPEAR system and representingcouncils in the e-DAIS National Steeringcommittee. The SPEAR system supportsonline lodgement, referral, approval and

Housing GrowthThe release of Melbourne@5 millionsignals the need for councils to plan formore housing as the state’s population isgrowing more quickly than expected whenMelbourne 2030 was developed.

tracking of planning permits at a locallevel. The MAV is representing councils inthe eDAIS project - an agreed nationalstandard to apply to all InformationCommunication Technology systems thatsupport planning services.Funding provided through the FederalHousing Affordability Fund has enabledaccelerated roll out of the e-PlanningRoadmap, with a focus on planningapplications online by the Departmentof Planning and Community Developmentwith the MAV and councils. More than70 councils use proprietary softwaresystems from 13 private vendors.The MAV co-hosted the e-PlanningCouncil, an expert working groupthat oversees implementation ofthe roadmap.

To achieve this, the Department ofPlanning and Community Development(DPCD) is refining Melbourne’s settlementstructure and identifying the requirementsfor housing growth at a municipal scaleover a three year period.The MAV received funding from DPCDto work with councillors to influence theHousing Growth Requirements project,which is assessing housing capacity ineach metropolitan municipality, settinga housing growth requirement anddeveloping a framework to meethousing needs.The MAV has prepared fact sheets forcouncils, participated in state projectcommittees and established a forum formetropolitan councillors to engage indiscussions around issues andopportunities. The MAV is working toensure that this project provides anagreed basis for the application of

Rural PlanningThe MAV was successful in attractingfunding from the State Government tohelp councils’ to address strategicresponses to rural land use challenges.A survey of rural councils and a seriesof workshops provided a solidfoundation for the MAV’s rural landuse planning report.The MAV raised the need for astreamlined or facilitated approach toenable easier application of the RuralActivity Zone by councils to help themmanage the ongoing issues associatedwith the Ministerial translation to the newrural zones.The MAV worked with groupsof councils, including the Peri-UrbanRegional Group on land use anddevelopment issues.

new residential zones and makes thedevelopment of local housing policiesmore effective for councils.

24 _ MAV ANNUAL REPORT 2009/10 PLANNING & BUILDING

Human Services & Public Health

LibrariesThe MAV continued to promote financialsustainability of libraries through sectordevelopment and aggregated purchasingto contain library costs. The MAV met withthe Minister for Local Government as partof the Ministerial Advisory Council (MAC)on Public Libraries to discuss high priorityprojects for public libraries addressingrecurrent funding issues and a proposedextension to Living Libraries (capitalinfrastructure program), which wasachieved in the May State Budget. TheMinister indicated support for undertakinga review of the State funding model,including identifying a potentialpartnering agreement on librariesbetween the State Government and theMAV, and also joint consideration ofpotential areas of funding assistance bythe Commonwealth. In November, theMAV held the Public Libraries Summit inconjunction with Public Libraries VictoriaNetwork. This summit discussed the MACvision for public libraries, and showcasedpublic library sector developments andinitiatives. It also explored the roles of thethree spheres of government in ensuringthe sustainability of public libraries.

Disability AccessThe MAV continued to pursue improveddisability accessibility by hosting aseminar in conjunction with other relevantpeak bodies based on the StateGovernment’s Regulatory ImpactStatement for Visitable and AdaptableHousing Features. The MAV made asubmission to the Regulatory ImpactStatement supporting the Government’s

HACCRETAINING RESPONSIBILITYFollowing significant advocacy effortsfrom MAV and councils, Victoriahas successfully retained responsibilityfor the Home and Community Care(HACC) program.At the Council of Australian Governments(COAG) meeting on health reform in April,all states except Victoria and WesternAustralia agreed that the CommonwealthGovernment would have policy andfunding responsibility for aged care,including HACC. Since this item was firstraised at COAG in 2008, the MAV hasargued for retention of the Victorianarrangements, which have built a stronglocal community care platform through theState and local government partnership.TRAINING PROJECTSWith resources provided from theDepartment of Health, the MAV hasundertaken a number of projects to assistcouncils introduce policy changes andquality improvements in HACC services.A training program on the active serviceapproach for community care staff towork in a way that increases the capacityof clients to retain independence in asmany areas of daily living as possible hasbeen developed along with a self directedlearning package for new assessmentstaff. This is an induction resource forcouncils and provides a more uniformand accessible ways of ensuringassessment staff have a workingknowledge of the relevant policyand program context for HACCand related services.

Positive AgeingResearch was undertaken by the MAV intolocal government’s use of the WorldHealth Organisation Age Friendly CitiesGuide and Checklist. The research foundthese documents were a valuableadvocacy resource for achieving a greaterwhole-of-council approach to respondingto the needs of older people, provided acomprehensive framework to support thedevelopment of age friendly communities,and increased council’s understanding ofthe breadth of issues.The MAV was involved in a presentationon the Positive Ageing in LocalCommunities project, which reviewedhow local government in Victoria hasimplemented the World HealthOrganisation’s Age Friendly Cities Guideand Checklist. A paper on this projectwas presented to the International Forumon Ageing in Place and Age FriendlyCities held in Japan in October. The MAValso participated in the InternationalFederation on Ageing 2010 GlobalConference held in Melbourne in May.

proposed improvements and emphasisingthe importance of adding a step-freeshower. Funding for a project to supportlocal government’s work in improvingaccess and inclusion for people withdisabilities was received in preparation forthe anticipated release of the newNational Disability Strategy.

MAV ANNUAL REPORT 2009/10 HUMAN SERVICES & PUBLIC HEALTH _ 25

Human Services & Public Health

National Quality Standards forEarly Childhood CareCouncils were given an opportunity toprovide input into the MAV’s submissionon the Commonwealth’s proposednational quality reforms for early childhoodcare and education. New quality standardswere approved by COAG forimplementation across the nation from2012-2016. The MAV assisted the State infinding local council managed serviceswilling to test and trial the use andimplementation of some of the reforms.The MAV also actively participated inState-facilitated groups advising onimplementation of key quality reforms,including the Victorian Early Childhood

Early Years Planning andInfrastructure CampaignQuarterly meetings between the MAVPresident and CEO, and the Minister forChildren and Early ChildhoodDevelopment enabled advocacy andnegotiation on a number of key issues.These included the Council of AustralianGovernments (COAG) NationalPartnership with Victoria, fundingshortfalls anticipated with reforms inprograms, workforce and infrastructure,and impacts on existing programs suchas three year old groups.Separate funding was received from theState to review the MAV framework formunicipal early years planning, and to

Workforce Strategy. Local governmentperspectives were included within Statepolicy guides for readiness planning by allVictorian children’s services for the 2009bushfire season.

Food ActCouncils have an important regulatoryrole in food safety, registeringapproximately 45,000 food businesses inVictoria and issuing thousands of permitsfor one-off events. This role has astatutory basis, with specific requirementsof councils set out in the Food Act 1984.The State Government has initiatedstatutory and administrative changes toVictoria’s food regulatory system as aresult of pressure for change from industryand local government. The first round ofchanges will come into effect on 1 July2010. In the lead up to this date, theMAV worked with the Department ofHealth in respect to the changesimpacting local government. The MAVreceived funding to support the jointDepartment of Health and MAV FoodSafety Coordination project.As a result of advocacy, the Departmentof Health agreed to fund council IT

support councils to undertake researchand assessments about expanding earlychildhood education, specifically thenational policy to provide universalaccesss to 15 hours of kindergarten. TheMAV provided support to councils throughtwo statewide forums and conducted 27regional workshops that were attended byall councils.The MAV signed a heads of agreementwith unions and other employers aboutpreparing the early childhood servicesand workforce for reform, negotiated anew employment agreement anddeveloped a model position descriptionfor local government early childhoodeducation employees.The focus of infrastructure campaignsmoved to the Federal Government withsubmissions and presentations to aSenate Committee hearing on child care,which reinforced the case for a moresustainable model for early yearsinfrastructure provision. A CommonwealthGovernment advocacy campaign aimingfor $600m in infrastructure funding waslaunched by the MAV in a week allcouncils were meeting in Canberra, andreceived high profile media coverage.

TobaccoIn 2009/10 the MAV disbursed over$400,000 in funding to 78 councils toundertake tobacco education andenforcement activities. This joint programwith the Department of Human Services isnow in its eleventh year of operation andsupports the objectives of the Tobacco Act1987. A tobacco advisory groupdetermines how the funding provided tocouncils could be used to best effect.To encourage smoke-free policies inoutdoor settings in local governmentareas, the MAV participated in anadvisory group established by the HeartFoundation and Quit Victoria.

system upgrades to enable food safetyregulation data to be stored. This was animportant initiative that achieved greaterconsistency of application of foodregulations across the state.

26 _ MAV ANNUAL REPORT 2009/10 HUMAN SERVICES & PUBLIC HEALTH

MulticulturalThe MAV provided sector leadership inmulticultural policy development andrelated project support. In partnership withthe Department of Health, the MAVsupported local councils to improve Homeand Community Care funded services andretention rates for culturally andlinguistically diverse communities. A seriesof four workshops on this topic were heldand an eNetwork was established.The MAV worked closely with the VictorianHealth Promotion Foundation to supportthe Localities Embracing and AcceptingDiversity program’s pilot projects inShepparton and Whittlesea.Workshops have been held on topics

Maternal & Child HealthWorkforce InitiativeAn extensive qualitative survey ofrecruitment and retention difficulties wasconducted with councils.The survey highlighted the ongoing issuesof an ageing workforce, impact of theincreased birth rate in Victoria, increasingpattern of part-time work, availability ofrelief staff, and management andprofessional issues for local governmentin managing quality and risk includingnon-nursing support staff, studentplacement arrangements, graduatesupport and clinical supervision.All of these issues are being addressedin the MAV strategy with councils.In anticipation of the National HealthProfessionals Registration from 1 July2010, the MAV held consultation sessionswith key stakeholders to identify issueslikely to impact on local governmentMCH nurses.Almost the entire MCH workforceattended the two successful MCH nursesconferences during 2009-10 that wereplanned and co-ordinated through theWorkforce Initiative.MCH marketing activities included featurearticles and advertising in The Age andHerald-Sun newspapers, nursing journalsand Municipality magazine. MCH nursesattended university careers expos and akey nursing expo in Melbourne. Marketingstrategies were supported by the newstand-alone MCH nursing website.

Health ReformThe Council of Australian Governments(COAG) agreed in late 2009 that healthreform would be a central priority for2010. Population growth, ageing,increase in chronic disease and disabilityin addition to the cost of technologicaladvances, are placing added pressureon the health system. The MAV submitteda response to the national reform reporton health and primary care, ensuringthat the position of local governmentwas actively communicated to the Federaland State governments.The MAV’s views were clearly heard,as reflected in a statement by theVictorian Premier in Putting Patients Firstwhich recognised that a nationalreorganisation of primary care should notinclude broader social care andcommunity services, specifically Homeand Community Care and Maternal andChild Health, which are provided inpartnership with local government.Consultation has continued on theestablishment of primary health careorganisations, which will play acoordination role. In the context of theCOAG National Partnership Agreementon Preventive Health, the VictorianDepartment of Health in collaborationwith the MAV has established a localgovernment health and wellbeingplanning advisory group to providedirection and high level strategic adviceon government policy and planningrelating to preventive strategies.

including the use of ethnicity data forprogram planning, conducting citizenshipconferral ceremonies and the SportsWithout Borders local governmentfunding program.The MAV continued its partnership withthe Victorian Local GovernmentMulticultural Issues Network, supportingits 21st Anniversary Forum.Local government participation in initiativessuch as Harmony Day, A Taste of Harmony,Cultural Diversity Week and Refugee Weekhas been promoted by the MAV.

Education Agreement SignedIn line with the Victorian State LocalGovernment Agreement the MAV enteredinto a partnership with the Department ofEducation and Early ChildhoodDevelopment (DEECD) to workcollaboratively in areas of commoninterest, particularly around earlychildhood development, co-location andintegration of children’s services, learningand development of young people, andpartnerships around joint use facilities.The agreement commits to buildingpositive and collaborative relationshipsbetween DEECD, the MAV and councils. Italso provides guiding principles for futurerelationships regarding policy, fundingand program development.

MAV ANNUAL REPORT 2009/10 HUMAN SERVICES & PUBLIC HEALTH _ 27

Transport & Infrastructure

Local Government Reform FundThe Federal Government’s $25 millioncommitment to the Local GovernmentReform Fund aimed to improve thecapacity of the sector in relation to assetand financial management andconsistency of reporting to State andFederal governments against the newNational Asset and Financial Frameworks.The MAV submitted a competitive proposalto the Local Government Reform Fund inNovember in collaboration with theVictorian Department of Planning, whichwas built on the Step SustainabilityProgram, designed to assist councils’ assetmanagement capacity. It also identified keyissues still challenging the sector in termsof asset management, including the needfor a more integrated, whole of councilapproach to asset and financialmanagement, and a lack of resources,consistent data and agreed standards.Out of seven proposed projects, tworeceived funding. This included the StepSustainability Program to include allcouncils. This will align councils’ assetand financial data into a single consistentframework that enables a strategicassessment of the organisation’s longterm financial sustainability, and its abilityto provide required levels of service toits community. The 10 councils that havecommenced the Step SustainabilityProgram to date have reported highlevels of satisfaction with the processand outputs.The second funded project aims toinitiate regional shared assetmanagement services. The MAV has

Infrastructure AustraliaThe MAV continued to work with the StateGovernment in its efforts to attractInfrastructure Australia’s support for keyprojects across the state. In October2009, the MAV launched its jointsubmission with the Minister for Roadsand Ports to Infrastructure Australia. Thesubmission highlighted the vital role localroads play in building national economiccapacity and the fundamental need forthe Commonwealth to provide funding tocouncils to help meet their roadinfrastructure responsibilities. The MAVreciprocated by supporting the VictorianGovernment’s submissions on a range ofpublic transport initiatives, including forthe Route 86 Demonstration Project andMelbourne Metro.

Community Infrastructure FundingThe MAV has maintained its advocacyefforts, both directly and via the ALGA, forFederal Government funding to councilsfor community infrastructure. Since 2008,the Federal Government has allocatedmore than $1 billion to councils Australia-wide. This year, the MAV welcomed theGovernment’s announcement of a further$100 million funding for the sector in2010/11. The MAV supported andcontributed to an ALGA publication,which showcased a selection ofinfrastructure projects undertaken bycouncils. This additional funding willagain provide much-needed assistance tocouncils’ effort to building andmodernising community facilities whilestimulating economic activity.

Freight PlanningIn conjunction with the Victorian Freightand Logistics Council, the MAV hasundertaken consultation with councilsto identify the major barriers to effectivefreight planning within local government.Among these barriers are a lack ofunderstanding of the role of freight inthe economy and the absence of decisionmaking tools. The MAV is working withthe Victorian Freight Logistics Counciland the Australian Road Research Boardto develop a route planning tool to assistcouncils in processing applicationsfor Higher Productivity Vehicles onlocal roads.The MAV has also identified priorityactions to increase the capacity of localgovernment to plan for freight across fourbroad areas. These include: improvingthe understanding of freight issues bycouncillors and council staff; developinga freight planning and evaluation toolbox;implementing a regional multi-modalfreight strategy; and designing land useand transport guidelines for freightgenerating areas.

received nominations from five ruralregions to participate in this initiative,which will assess benefits derived from acollaborative regional approach to assetmanagement rather than each councilduplicating the work of the others.

28 _ MAV ANNUAL REPORT 2009/10 TRANSPORT & INFRASTRUCTURE

Railway Level Crossing SafetyThe MAV continued to represent thesector’s interests in relation to itsobligations in managing risks at railwaylevel crossings. Following amendments tothe Rail Safety Act 2006, rail infrastructureand road managers must enter intoagreements to jointly manage risk atroad-rail interfaces. The MAV has beenactively involved in drafting the sharedtemplate for use by all road and railauthorities. It worked with councils toensure the text and demarcation ofresponsibility within the draft agreementdoes not result in new or additionalresponsibilities for local government. TheMAV also made it clear to keystakeholders the many frustrationscouncils have experienced in their effortsto work cooperatively with the railauthorities in the past. The MAV hasworked with the rail authorities to holdbriefing sessions for councils in regionalareas, and continues to represent theinterests of the sector in the ongoingnegotiations on the template andassociated issues.

Shared ServicesThe MAV Shared Services project includessix sub-projects:INFORMATION AND COMMUNICATIONSTECHNOLOGYThe MAV put out an expression of interest toseek feedback from the market about thebenefits of a collaborative approach tointegrate councils’ IT systems. Thisinformation formed the business case togain ongoing council commitment to theinitiative. A tender process commenced with13 councils, and a similar number plan tobe involved once the project starts.RECORDS MANAGEMENT AND ASSETMANAGEMENT SYSTEMSThe MAV worked with the Public RecordsOffice Victoria to produce a BetterPractice Framework, which underpinnedthe launch of the Step RecordsImprovement Project.MATERNAL AND CHILD HEALTH SYSTEMSIdentifying a common statewide system totrack birth information over time wasundertaken in partnership with the State.PROPERTY DATAA common property model was developedto ensure councils could access aconsistent, high quality property database.CENSUS OF LAND USE ANDEMPLOYMENTThrough a pilot of 11 councils,information on land use and employmenttrends was collected as a reference pointfor policy makers.FRONT OF HOUSE SERVICESA number of councils have agreed toshare professional staff to enable greaterskill retention and skills transfer.

MAV ANNUAL REPORT 2009/10 TRANSPORT & INFRASTRUCTURE _ 29

Emergency Management

Royal CommissionThe MAV coordinated the response to the2009 Victorian Bushfires RoyalCommission on behalf of the 77 Victoriancouncils insured under Civic Mutual Plus.Of these, 26 councils were directlyimpacted by the Black Saturday bushfires.The MAV and the councils wererepresented at the Commission by anexpert legal team that included NeilYoung QC, Dr Greg Lyon SC, andbarrister Jonathon Redwood. This teamwas supported by legal firm MallesonsStephen Jacques.The broad terms of reference resulted in adetailed examination of the role of localgovernment in emergency management,land use planning and building, and

MAV Bushfire Recovery FundIn the aftermath of the Black Saturdaybushfires, the MAV was approachedby a number of Victorian and interstatecouncils pledging donations to supportbushfire affected municipalities. Inresponse to this generous expressionof support, the MAV Bushfire RecoveryFund was established.A total of $565,224 was donated tothe fund by two local governmentorganisations and 37 councils fromacross Australia. Donation amountsranged from $1,000 to $100,000and any interest earned was allocatedto eligible bushfire affected councils.No administration or other fees werecollected by the MAV.

roadside maintenance. In August 2009the Commission delivered an InterimReport which included 51recommendations, three of which weredirected at the MAV and localgovernment. In response to theserecommendations, the MAV submitted animplementation plan, outlining action thatwould be taken in response to eachrecommendation, and a progress reportwas submitted in March 2010.MAV CEO Rob Spence appeared as awitness three times and the MAV made10 written submissions on topics includingland use planning, roads and roadsides,the fire services levy and insurance,neighbourhood safer places, andcommunity fire refuges and relief centres.Evidence provided at the Commission

After consulting with the 26 affectedcouncils, it was agreed that the fundswould be divided between ninemunicipalities most severely impacted -Murrindindi, Nillumbik, Yarra Ranges,Latrobe, Baw Baw, Greater Bendigo,Whittlesea, Mitchell and Alpine. The fundswere unrestricted, providing each eligiblecouncil the autonomy to allocate thefunds where they were most required.Funds were used in these councils’recovery and rebuilding efforts as wellas community bushfire education andawareness campaigns, fire preventionactivities, improvements to relief centres,Municipal Emergency CoordinationCentres, and capital works to reducebushfire risk.

Neighbourhood Safer PlacesThe Royal Commission Interim Reportrecommended the introduction ofNeighbourhood Safer Places as a placeof last resort when all other bushfire planshave failed. Legislation received royalascent in December 2009, giving councilsresponsibility for identifying, designatingand maintaining sites. The MAVdeveloped the Municipal NeighbourhoodSafer Places Plan template, Deed ofConsent and guidance note, anddesigned, developed and deliveredsignage. The MAV also provided ongoingguidance to the sector and individualsupport to councils.

demonstrated the complexity of thelegislative regime and limited resourcesfacing councils around fire management.

30 _ MAV ANNUAL REPORT 2009/10 EMERGENCY MANAGEMENT

Swine FluThe outbreak of H1N1 Influenza (swineflu) in 2009 put many councils’ pandemicplans to the test. Several councilsprovided home support to people inquarantine during the early phases of theswine flu outbreak.During this outbreak, the MAV regularlyrepresented councils as a member of theState Emergency Strategy Team –Pandemic. The MAV also worked withcouncils and the Department of HumanServices to provide clarity about State andlocal government roles andresponsibilities through the developmentof a community and household supportguidance note. The MAV advocated oncouncils’ behalf regarding the localgovernment role in the distribution of theswine flu vaccine.

Emergency Relief and RecoveryThe MAV took part in the State’sEmergency Relief Working Group,comprising representatives from theDepartment of Human Services,emergency services and councils.Councils have the responsibility forco-ordinating emergency relief at thelocal level, which was brought to a headafter the 2009 Black Saturday Bushfires.The working group created a new LocalGovernment Emergency Relief CentreGuidance Note to support councils and

In October, the MAV ManagementCommittee endorsed the National LocalGovernment Pandemic CommunicationsProtocol between the Australian LocalGovernment Association (ALGA) and otherstate/territory local governmentassociations. The communications protocolprovides an agreed position between ALGAand the state/ territory associations aboutcommunication during a pandemic andaims to facilitate a more consistent level ofpreparedness across all associations andcouncils ahead of an outbreak.

emergency management agencies inestablishing and operating relief centres.To complement the guidance note, keymessages and a communications planwere developed to inform communitiesthat relief centres would be open on highfire risk days.The MAV also represented the localgovernment emergency managementsector by attending committees, exercisesand workshops. Among these are theVictorian Bushfire Reconstruction andRecovery Authority, Melbourne BushfireProtection Program Project ControlGroup, Bereaved Community Recoveryand Memorial Projects Committee, StateEmergency Management Training andExercise Strategy Committee, EmergencyRelief Working Group.

MAV ANNUAL REPORT 2009/10 EMERGENCY MANAGEMENT _ 31

Workforce

HR Benchmarking SurveyThe MAV’s Workforce Planning andServices Advisory Group identified theneed for a local government specifichuman resources benchmarking tool thatcould be used to provide a sector wideanalysis of data collected as well asenabling individual councils to comparetheir results with those of like councils.Data was collected from 38 councils asat 30 June 2009 and a report containingthe results was issued to participatingcouncils in late 2009.The feedback received from theparticipating councils has been thatthe report is a valuable resource andmanagement information tool that hasassisted them to make comparativeassessments with like councils therebyenabling the identification of issues andthe development of relevant responsesand programs.The survey will again be conducted asat 30 June 2010 and it is pleasing tonote that 48 councils are participatingin the survey.

Workforce Development StrategyThe Australian Centre for Excellence inLocal Government is facilitating thedevelopment of a national workforcestrategy for local government. Thisimportant project has commenced andwill be undertaken over the next few yearsthrough Federal Government fundingarrangements.The MAV, along with the Queensland andNew South Wales local governmentassociations, have been grantedmembership of a project steeringcommittee. This direct involvement willensure that state-based issues will beconsidered in the development of anational strategy. Victorian councils willhave direct input on issues that arise andacknowledgement will be made that aone-size-fits-all approach will not producea sustainable outcome for the sector.

32 _ MAV ANNUAL REPORT 2009/10 FINANCE

Award ModernisationIn December 2009, the AustralianIndustrial Relations Commission (AIRC)handed down a modern award for thelocal government industry. While this is anational award, in reality it has had littleapplication in a number of states. InVictoria the former awards havecontinued to have application as statereference public sector transitionalawards, due to the requirement that whileall Victorian employees are nationalsystem employers under the (Fair WorkAct), Victorian councils are notconstitutional trading corporations.As a consequence, the transitional awardswill continue to apply until they expire on31 December 2013 or are terminatedunder the Local (Government Act).This outcome was not expected by keystakeholders or state and territory localgovernment associations acting on behalfof their members.MAV will address this issue in consultationwith councils across the state over thenext year.

Legislation ChangesThe 2009/10 year has seen significantdevelopments in the legislativeframework, which councils, as employers,must operate.Some of the key legislation introducedduring this period included Fair Work Act2009, Equal Opportunity Act 2010, PaidParental Leave Act 2010 and AccidentCompensation Act.The new environment demands thatcouncil’s human resource and riskmanagement practitioners are aware ofthe legislative framework, which hasincreased the rights of employees toaccess multi-jurisdictions to seek redresson a range of issues, scope and quantumof monetary penalties, and introducednew courses of action available to them.

Retirement Pilot Study ReportThe issue of an ageing workforce and itsimpact on local government, as mature ageworkers consider their retirement plans, is ofcritical importance to councils. As workersaged 55 years and over move out of theworkforce, councils will increasinglyexperience difficulty in attracting andretaining employees given the broadindustry competition for resources and there-emergence of skills shortages.The MAV, with support from theDepartment of Innovation, Industry andRegional Development, undertook aproject to understand the retirementintentions of older workers in the Victorianlocal government workforce. Theobjective of this project is to supportcouncils in developing strategies andprograms to prepare and support olderworkers in their transition to retirement.The project involved a survey of over1,400 employees from rural andmetropolitan councils aged 55 years.The report issued to all Victorian councilsincludes a statistical analysis of the datacollected from the employees, graphicalpresentations and, where available,comparable data from other research.It also identified strategic issues facingcouncils, research findings, potentialstrategies for attracting and retainingolder workers, and recommendationsfor councils to consider as part of thedevelopment of their own strategicresponse to this critical issue.

MAV Procurement

Collaborative ProcurementThe first 12 months of operation has beenhighly productive for MAV Procurement.MAV Procurement completed six tendersduring 2009/10 acting as agent for73 councils and 12 regional librarycorporations, with a combined annualspend in excess of $50 million.Collaborative tenders were finalisedfor library materials, telecommunications(including videoconferencing), fueland lubricants, office supplies, webcontent management and after hourscall handling. MAV Procurement hasdelivered cost and time savings forcouncils, while fulfilling their strategicand policy objectives.

Councils Reforming BusinessThrough an existing partnership withthe State Government to progress theCouncils Reforming Business (CRB)initiative, MAV Procurement co-organiseda one day training session for councilrepresentatives around the state.MAV Procurement also has representationon the CRB Local GovernmentProcurement Technical Advisory Group,chartered with the objective of providingstrategic guidance for the developmentand implementation of a suite ofprocurement excellence tools for theVictorian local government sector.

National Procurement NetworkMAV Procurement is a member of theNational Procurement Network (NPN),an alliance of all state and territory localgovernment association procurementorganisations. The NPN was formedwith the objectives of assessing nationallocal government purchasingopportunities, exchanging tender detailsand experiences, benchmarking counciloutcomes, and comparing supplierperformance. As part of the NPN,MAV Procurement has partnered withLocalBuy QLD to participate in a nationaltender for trucks, vans and buses onbehalf of 32 councils. MAV Procurementhas also formed a strategic alliancewith the Local Government Associationof Tasmania, allowing it to accesscontracts established throughMAV Procurement.

Training and DevelopmentIncreasing sector capability was one of thecore objectives for establishing MAVProcurement. During the year, a number ofworkshops for council procurement staffand management were held. The mostnotable training session, conducted inMay, was Probity and Innovation inProcurement. Presentations were made atthis session from the Victorian AuditorGenerals Department, VictorianCompetition and Efficiency Commission,Ombudsman Victoria, Port Phillip CityCouncil, Greater Bendigo City Counciland Parmalat Australia. Almost 100representatives from 60 councils attended.

VideoconferencingAs part of the telecommunications tender,MAV Procurement partnered with theSouth West Alliance of Rural Health(SWARH) to offer highly competitivevideoconferencing services to councils.Councils are encouraged to take upvideoconferencing on a single network tomaximise connectivity between councilsand enable the future development andmarketing of citizen-facing applications.Potential applications ofvideoconferencing include coordinatingemergency operations that cross councilboundaries, allowing customer access tocouncil staff in remote locations,accessing professional developmentopportunities in Melbourne, andtranslation services for non-Englishspeakers and hearing impaired. To date,four councils and the MAV are utilisingthe network with more expected to join inthe second half of 2010.

MAV ANNUAL REPORT 2009/10 PROCUREMENT_ 33

MAV Insurance

Royal CommissionMAV was given general leave to appearbefore the 2009 Victorian Bushfires RoyalCommission, which required thepreparation of a number of submissions.Evidence was given to the Commission onbehalf of the local government sector,namely around the role councils play inbushfire management and theexperiences of the 26 councils directlyaffected by Black Saturday. Thesubmissions identified the different sizes,populations, environments, communitypreferences, rate bases and resources ofcouncils and provided a context for localapproaches to statutory obligations.The submissions highlighted the complexframework of legislation and regulationswithin which local government operates;explained the challenges facing localgovernment in balancing competingobjectives; and identified the numerousstakeholders involved in emergencymanagement in Victoria.This coordinated approach ensured thatissues confronting local government wereheard by the Commission and theresponsibilities undertaken by councilsunderstood. Considerable resources wereinvested in the approach and manycouncils contributed significantly in terms

Actuaries & LegalsA tender process was conducted duringthe year that resulted in the appointmentof Taylor Fry – Consulting Actuaries as theindependent actuary for MAV Insurance.The actuary is a key service provider tothe MAV Insurance Committee (MAVIC)and is heavily involved with both CivicMutual Plus (CMP) and the MunicipalOfficers’ Fidelity Guarantee Fund. Theactuary’s standard deliverables duringeach year are to prepare a report used todetermine the total insurance pool andthe total contributions to be collectedfrom members; review the method ofallocating contributions to members;prepare information for inclusion in theend of year financial statements; andprepare reports relating to minimumcapital holdings.The MAV’s external CMP Legal PanelAgreement requires legal costs charged tothe scheme to be checked and certified byan independent consultant as beingreasonable and in accordance with theappropriate court scale. In November2009, the MAV issued a request fortender to four legal costs consulting firmsto provide these services to the schemeand two were appointed to certify all legalbills submitted by CMP’s external panel.

Service improvementsA review of risk management softwarewas conducted during the year. Based onthe review, and the varying needs of themembers, MAVIC concluded it would notrecommend preferred risk managementsoftware for use by members.MAVIC service provider, Jardine LloydThompson (JLT), moved its CMP aligned staffto the MAV’s Melbourne headquarters. Thisco location has improved communicationaround claims management, riskmanagement, policy and strategydevelopment and business planning.Following the appointment of a new CMPexternal legal panel by the MAV in July, anumber of outcomes were achieved.Among these is a structured claims reviewprocess where JLT and MAV staff meet toreview files and ensure best practiceclaims preparation and managementstrategies are in place. Bi monthlymeetings, chaired by the MAV, are heldand attended by JLT claims staff and thelegal panel firms to ensure efficientinformation sharing and policy andstrategy dissemination. Reportingprocesses relating to claims status andoutcome performance have improved.

of information and human resources.Policy Improvements

ReinsuranceThere are currently 16 insurers andreinsurers that participate in thereinsurance program to provide coverfor public liability up to a maximum of$500 million for water authorities and$400 million for all other members andprofessional indemnity cover up to alimit of $300 million for each event.MAV Insurance Committee (MAVIC)constantly monitors the performance,financial ratings and financial viabilityof each of the insurers and reinsurersthat have participated in the reinsuranceprogram since the inception of thescheme in 1993. Civic Mutual Plus’(CMP)reinsurance broker Lloyd andPartners, a division of Jardine LloydThompson, assists in placing andmonitoring the program.

34 _ MAV ANNUAL REPORT 2009/10 MAV INSURANCE

(catastrophic risk)Marsh was contracted to carry out aCatastrophic Loss Estimation Project. Thisproject included several workshops withmembers to establish the potential forcatastrophic events to impact members,and the risk mitigation strategies relatedto these events. This project confirmed theneed for members to be insured for thecurrent insurance loss limits. A review ofthe policy wording commenced with aview to improve its scope and simplicity.

Civic Mutual Plus ResultsThe operating deficit for the year was$4,984,348 (2009 deficit $2,613,270).This result reduced the net asset positionfrom $12,770,531 in 2009 down to$7,786,182 at 30 June 2010. This resultwas impacted significantly by an increasein claims and related costs in the 2010financial year. Approximately $4 million ofthe increased claims liability has resultedfrom a change in actuary and theresultant change in actuarial andeconomic assumptions that resulted.There has also been identified asignificant increase in the number ofreported claims during the 2010 financialyear leading to a higher estimate ofprovision for claims as at 30 June 2010of $89.9 million (2009 $75.1 million).This upward trend in claims reported willbe monitored closely to see what impacts,if any, it will have on future membercontributions.

Civic Mutual Plus Claims TrendsClaims outcome trends were satisfactoryduring 2009/2010. The number of newclaims received remains reasonably stableat around 200 per calendar year. Thisfinancial year saw an increase in claimssettlement activity with over 150 claimssettled, representing a 58 percentincrease on the previous year and thehighest number of claims settled in anyyear since 2006. Furthermore, the timetaken to settle a claim from lodgment wasthe lowest it has been since 2003. As partof this increased settlement activity, agood number of larger claims wereresolve. Despite this, the averagesettlement amount per claim remainedbelow that of the previous two years.Overall, 231 claims were closed in theyear, being a 28 percent increase on theprevious year.MUNICIPAL OFFICERS’ FIDELITYGUARANTEE FUNDThe operating surplus for the year was$6,734 (2009 deficit $51,074). Thisresult increased the net asset positionfrom $364,001 in 2009 up to $370,735at 30 June 2010.No major claims were received during thefinancial year and the Fund’s target breakeven performance is being maintained forthe benefit of members.FIDELITY CLAIMS TRENDSTwo small claims were paid during theyear totalling $13,547. One claimrelated to a customer services officerfraudulently drawing cheques andembezzling money collected fromfundraising and a community busscheme. The second claim occurredat a council owed café and involveda temporary employee fraudulentlyreporting sales of promotional coffeesat no charge. Both incidents wereprosecuted to the full extent of the lawin line with MAV Insurance’s policyin matters of fraud.

MAV ANNUAL REPORT 2009/10 MAV INSURANCE _ 35

Governance

Victoria Project

Luke Murphy

THE MAV TEAM1 2

MAV MANAGEMENT COMMITTEE

Rob SpenceChief Executive Officer2

Christine JonesExecutive Assistant18

5 6 7

10

Alison LyonGeneral Counsel &Corporate Secretary5

Kimberley Stillwell John SmithLegal & Claims Adviser

41Support Officer

John HennessySectorDevelopmentConsultant

Trevor KoopsSeniorEconomist

Kaye OwenDirector,Research & Policy

Gavin MahoneySenior ProjectsOfficer38

Daniel HoganManager,Marketing21

Geoff PawseyManager,Workforce & RiskManagement29

6

Alison StandishManager,HR & CorporateServices31

Andrew RoweCouncillorDevelopmentOfficer34

ClareHargreavesManager,Social Policy40

Liz JohnstoneManagerPlanning Policy& Projects19

Nina RogersManagerClimate Change& EnvironmentPolicy11

Imogen KellySenior AdviserCorporateCommunications

Debbie SmithSeniorCommunicationsAdviser10

Steve VasilevskiIT Coordinator15

Simon MorganFinance,Insurance &Project Officer22

May YinPosarnigAccounts Officer23

Chestine OngCorporateServices Officer

CameronSpenceManager, MAVProcurement37Max FonovicMarketingManager, MAVProcurement24

RebeccaWatkinsProcurementOfficer26

Ann TokManager, Eventsand Spoonsorhip7

Jodie KaaEventsCo-ordinator

DeborahTaboneEventsCo-ordinator17

Jan BrucePositive AgeingAdvsier27

Sally EverittEarly YearsAdviser

Con PagonisMulticulturalPolicy Adviser8

Derryn WilsonHACC ProjectAdviser33

Helen RoweMaternal & ChildHealth Adviser4

Jan BarrettEarly YearsAdviser

Naree AtkinsonPolicy Adviser

MichelleCroughanPlanning ProjectOfficer42

Luke BayleyRural & RegionalPolicy Adviser20

Amy McDonaldHousing GrowthPolicy Officer39

Ben Morris MaxineEnergy & Waste MorrisonPolicy Adviser Rural Councils14

Adviser32

LocalGovernment Claire DunnNRM Facilitator Policy Adviser35 9

Simone Stuckley ElisabethPolicy Adviser, JacksonEnvironment Executive Officer,3 VicLink

13

Jillian MolinaTTV\NTCTCoordinator43

Darcy PimblettActingCoordinaotor,Association ofBaysideMunicipalities

Emma RosemaryFitzclarence HancockPolicy Adviser Policy Adviser25 30

Kate Smallwood JenniferPolicy Advisor Thompson28 Public Health &

Wellbeing ProjectLance KingLocalGovernmnetLiaison Officer,EmergencyManagement

16

Jenna StewartCorporateServices Officer36

JanineKleynhansWebsiteDevelopmentConsultant1

29

Michael GreenElectronicRecords Officer 33 34 35 3612

Lloyd BradyAdministrator,SWIFT Systems

36 _ MAV ANNUAL REPORT 2009/10 FINANCE & ECONOMICS41 42

8

3

9

4

11 12 13

21

14

22

15

18

23

16

19

24

20

17

25

30

26

31

27

32

28

37 38 39 40

MAV ANNUAL REPORT 2009/10 _ 3743

Operations

Human ResourcesThe MAV retains a mix of staff andconsultants to advocate the interestsof its members, raise the sector’s profile,provide advice and capacity buildingprograms to support local governmentactivities, and supply insurance andprocurement services to councils. In2009/10 the staffing profile of theMAV included:> 37 staff (29 full-time and eight

part-time) funded from membershipsubscriptions. These staff focus ondelivering the MAV Strategic WorkPlan ratified by State Council andprovide policy support, advice andcapacity-building programs tocouncils in addition to maintainingthe representation of Victorian localgovernment views to the State andFederal governments and otherkey groups

> 11 staff (eight full-time and threepart-time) funded from State andFederal government grants or externalorganisations to deliver specificprojects and programs to supportVictorian councils

> Seven specialist consultants whosupplement the skills of staff andprovide support in areas such asinsurance, financial management,information technology andpolicy advice.

During the year, five staff left theorganisation. The end of grant fundingwas the cause of three staff departuresand two moved on to new careeropportunities. These positions werefilled through recruitment orreorganisation of tasks.As testament to the calibre of MAV staff,one employee was seconded to theOffice of the Commissioner forEnvironmental Sustainability for threemonths and another was a recipientof a Winston Churchill Memorial TrustFellowship to study regional partnershipsand collaborative approaches forenhanced local government adaptationto climate change.

38 _ MAV ANNUAL REPORT 2009/10 OPERATIONS

EventsIn 2009/10 the MAV ran 110 events,excluding committee meetings, attractingmore than 6,500 registrations. Theseincluded conferences, forums, workshops,and training to support the ongoingprofessional development of councillorsand senior officers. The CouncillorDevelopment Weekend, AnnualConference, Asset ManagementConference, Future of Local GovernmentSummit, National Human ResourcesConference and the first NationalEnvironment Conference were amongthe major events staged. New initiatives toensure MAV events are waste wise andenvironmentally friendly were alsoimplemented. This included eliminatingpaper based registrations in favour ofonline forms and marketing material andpresentations were available electronicallyinstead of in hard copy.Many MAV events are sponsored byexternal organisations, keepingregistration costs low. Sponsorshipgenerally takes the form of direct financialcontributions but may also involvediscounted or in-kind services or productsprovided to the MAV. In 2009/10 theMAV received $576,000 from eventssponsorship. MAV partners withcorporations that are socially andenvironmentally engaged, and that ideallyprovide products or services at significantcost savings or efficiencies for the sector.

Media coverageThe MAV established itself as the leadingcommentator on local government issueswith more than 1,500 mentions inVictorian media reports. This includedmore than 800 press articles and 600radio reports for the 12 month period.Leading media outlets to publish MAVcomments were The Age, Herald Sun andMelbourne Times newspapers, as well asABC regional radio.A key focus of the MAV’s media effort hasbeen to represent the views of councils inrelation to bushfires and the RoyalCommission. Discussion topics in relationto bushfires where the MAV providedwidespread media commentary includednative vegetation management, roadsideclearance, land use planning andbuilding regulations, fire refuges andneighbourhood safer places. At periodicintervals throughout the RoyalCommission hearings the MAV developedkey messages for use by all membercouncils on specific topics, providedtailored media assistance to individualmunicipalities, and undertook a series ofbackground briefings with leading print,radio and TV journalists.Another focus of the MAV’s media effortwas to promote the role of localgovernment in the development approvalsprocess and defend the retention ofcommunity rights as a crucial democraticelement of government decision making.MAV comments appeared in dailymetropolitan newspapers and on radio inrelation to Ministerial fast trackedplanning decisions; the creation of newDevelopment Assessment Committees;councils’ legal costs to defend decisionsat VCAT; and proposed legislative reformseroding councils’ planning powers.Other media achievements included a700 word opinion piece on council ratespublished in the Herald Sun and a WeeklyTimes opinion editorial on the financialconstraints faced by rural municipalities.Statewide print, TV and radio mediacoverage was achieved, including a pagethree exclusive in The Age to support theMAV’s Commonwealth Governmentkindergarten infrastructure fundingadvocacy campaign calling for animmediate injection of $600 million forcouncils to deliver on national preschooluniversal access reforms.

MAV facilities improvementsThe increasing frequency of meetingsheld at the MAV required an expansionof facilities. The MAV headquarters atCollins Street Melbourne has expandedto two floors in the Reserve Bank Building.Additional meeting rooms were createdto include a training room, workshopspace and two smaller areas for groupsof less than 10. Equipped with the latesttechnology such as interactive whiteboards, video conferencing and webcasting facilities, these meeting roomsare constantly used by the MAV andmember councils.

Municipality magazineQuickly establishing itself as a popularmedia title among all councils,

Emissions reductionsThe MAV continued its commitment toreducing greenhouse emissions through anumber of measures. These includeturning lights off in meeting rooms whennot in use, turning computers off at thewall when leaving, and using timers onprinters, shredders and the hot waterservice at night to eliminate unnecessaryenergy use. The establishment of videoconferencing facilities at the MAV hasalso contributed to energy savings forboth the MAV and councils. Theinstallation of a shower and change roomfor use by staff was an initiative toencourage staff to ride bicycles or walk towork. These energy saving practices areembedded into the MAV inductionschedule for new staff.

Municipality magazine seeks to highlightinnovation and promote best practice inVictorian local government. Cover storieshave featured Towong Shire’s broadbandsuccess, reclaimed rail lines acrossVictoria converted into walking andcycling trails and Melton Shire’scommitment to new communityinfrastructure. Releasing three issues ayear, Municipality is produced anddistributed by Countrywide Media inconjunction with the MAV under apartnership contract.

MAV ANNUAL REPORT 2009/10 OPERATIONS _ 39

MAV Representatives

CouncilAlpine Shire CouncilArarat Rural City CouncilBallarat City CouncilBanyule City CouncilBass Coast Shire CouncilBaw Baw Shire CouncilBayside City CouncilBenalla Rural City CouncilBoroondara City CouncilBrimbank City CouncilBuloke Shire CouncilCampaspe Shire CouncilCardinia Shire CouncilCasey City CouncilCentral Goldfields Shire CouncilColac Otway Shire CouncilCorangamite Shire CouncilDarebin City CouncilEast Gippsland Shire CouncilFrankston City CouncilGannawarra Shire CouncilGlen Eira City CouncilGlenelg Shire CouncilGolden Plains Shire CouncilGreater Bendigo City CouncilGreater Dandenong City CouncilGreater Geelong City CouncilGreater Shepparton City CouncilHepburn Shire CouncilHindmarsh Shire CouncilHobsons Bay City CouncilHorsham Rural City CouncilHume City CouncilIndigo Shire CouncilKingston City CouncilKnox City CouncilLatrobe City CouncilLoddon Shire CouncilMacedon Ranges Shire CouncilManningham City CouncilMansfield Shire CouncilMaribyrnong City Council

RepresentativeCr Nino MautoneCr Gwenda AllgoodCr Cheryl BromfieldCr Jenny MulhollandCr John DuscherCr Adam TysonCr James LongCr Bill HillCr Coral RossMs Joanne AndersonCr Reid MatherCr Peter WilliamsCr Graeme LeggeCr Shar BalmesCr John SmithCr Stephen HartCr Matt MakinCr Vince FontanaCr Jane RoweCr Brad HillCr Keith den HoutingCr Margaret EsakoffCr Geoff WhiteCr David CotsellCr Rod FyffeCr Peter BrownCr Jan FarrellCr Jenny HoulihanCr Bill McClenaghanCr Michael GawithCr Angela AltairCr Michael RyanCr Ros SpenceCr Larry GoldsworthyCr Arthur AthanasopoulosCr Joe CossariCr Bruce LougheedCr Allen BrownbillCr John LetchfordCr Geoffrey GoughCr Tom IngpenCr Michael Clarke

CouncilMaroondah City CouncilMelton Shire CouncilMildura Rural City CouncilMitchell Shire CouncilMoira Shire CouncilMonash City CouncilMoonee Valley City CouncilMoorabool Shire CouncilMoreland City CouncilMornington Peninsula Shire CouncilMount Alexander Shire CouncilMoyne Shire CouncilMurrindindi Shire CouncilNillumbik Shire CouncilNorthern Grampians Shire CouncilPort Phillip City CouncilPyrenees Shire CouncilQueenscliffe Borough CouncilSouth Gippsland Shire CouncilSouthern Grampians Shire CouncilStonnington City CouncilStrathbogie Shire CouncilSurf Coast Shire CouncilSwan Hill Rural City CouncilTowong Shire CouncilWangaratta Rural City CouncilWarrnambool City CouncilWellington Shire CouncilWest Wimmera Shire CouncilWhitehorse City CouncilWhittlesea City CouncilWodonga City CouncilWyndham City CouncilYarra City CouncilYarra Ranges Shire CouncilYarriambiack Shire Council

RepresentativeCr Alex MakinCr Kathy MajdlikCr Glenn MilneCr Bill MelbourneCr Ed CoxCr Geoff LakeCr John SipekCr Thomas SullivanCr Enver ErdoganCr Bev ColombCr Michael ReddenCr James PurcellCr Peter BealesCr Helen ColemanCr Kevin ErwinCr Rachel PowningCr Robert VanceCr Bob MerrimanCr James FawcettCr Marcus RentschCr John ChandlerCr Howard MyersCr Joe RemenyiCr Gary NortonCr Peter JoyceCr Anthony GriffithsCr Michael NeohCr Jeff AmosCr Ron HawkinsCr Bill PembertonCr Sam AlessiCr Lisa MahoodCr Cynthia MansonCr Alison ClarkeCr Len CoxCr Andrew McLean

40 _ MAV ANNUAL REPORT 2009/10 MAV REPRESENTATIVES

Committees

MAV Advisory GroupsThe MAV Management Committee hasestablished a number of advisory groupsto provide advice in the following areas:MAV ENVIRONMENT ADVISORY GROUPProvides advice on environmental issuesof importance to local government andthe needs and issues of members fordelivery of environmental outcomes.MAV HUMAN SERVICES ADVISORYGROUPProvides advice on social policy andhuman services issues. The committeealso facilitates consultation with regionalgroupings of councils on current state-wide issues.MAV PLANNING ADVISORY GROUPProvides advice on strategic and statutoryplanning issues affecting local governmentand guides MAV policy and positiondevelopment on planning related issues.MAV TRANSPORT AND INFRASTRUCTUREADVISORY GROUPProvides advice on infrastructure andtransport issues affecting localgovernment and assists the MAV to carryforward key policies and campaigns inthis area.

Other MAV CommitteesThe MAV has also established andsupported several other committeesacross major policy areas and projects,including:MAV COAG WORKING PARTY(HUMAN SERVICES)Advises MAV advocacy into COAG policydirections, and monitors progress ofagreements being developed with the State.MAV/DEPARTMENT OF HEALTH FOODSAFETY COORDINATION PROJECTSTEERING COMMITTEEProvides an interface mechanism betweenState and local government in respect offood regulations.MAV EARLY YEARS ADVISORY GROUPGuides the MAV on issues relating toearly years policy and service provisionand planning.MAV ECOLOGICALLY SUSTAINABLEDEVELOPMENT ADVOCACY GROUPAdvises the MAV and shares informationon reducing the environmental impacts ofthe built environment.MAV HACC AND AGEING ADVISORYGROUPGuides the MAV on issues relating togovernment ageing policies, Home andCommunity Care and related agedprograms, and positive ageing issues.MAV HOUSING GROWTH COUNCILLORREFERENCE GROUPGuides MAV input to the Department ofPlanning and Community Developmenton housing growth requirements andmetropolitan planning issues.MAV LOCAL GOVERNMENT ALCOHOLAND OTHER DRUG ISSUES FORUMBrings councils together to share ideas

MAV LOCAL GOVERNMENT INDIGENOUSNETWORKBrings councils together to share ideasand information for improving relationswith Victoria’s Indigenous communities.MAV PROFESSIONAL DEVELOPMENTREFERENCE GROUPProvides advice on the MAV’s professionaldevelopment program for councillors,identifies ongoing areas of need within thesector to be addressed, and encouragesparticipation of colleagues in the MAVprofessional development program.MAV ROADSIDE PESTS SUB-COMMITTEEProvides input to the Ministerial WorkingParty on roadside pests.MAV STEP PLANNING PROCESSIMPROVEMENT PROGRAM STEERINGCOMMITTEEProvides direction to the growth areacouncils project and program developmentMAV SWIFT CONSORTIUM MANAGEMENTGROUPManages the ongoing implementation ofshared library services contracts and policies.MAV TOBACCO ADVISORY COMMITTEEAdvises the MAV and on fundingarrangements between State and localgovernment for tobacco enforcement andeducation measures.MAV VICTORIAN LOCAL SUSTAINABILITYNETWORKBrings together councils and stakeholdersactively pursuing local sustainabilityapproaches.MAV WORKFORCE PLANNING ANDSERVICES ADVISORY GROUPSAdvises on initiatives to address keystrategic and operational issues affectingthe sector in workforce planning.

and information for improving responsesto drug use in our communities.MAV INFORMATION ANDCOMMUNICATION TECHNOLOGYCOMMITTEEPlans, coordinates and supportsinformation and communicationtechnology initiatives that deliver bettercouncil services and reduce costs.

MAV ANNUAL REPORT 2009/10 COMMITTEES _ 41

External CommitteesAs the peak body for local government,the MAV is regularly invited by theVictorian and Federal Government andvarious agencies to represent the sectoron a range of committees.In 2009/10, these committees included:Animal Welfare Advisory CommitteeAssociation of Bayside MunicipalitiesAssociation of Regional Waste ManagementGroupsBetter Bays and Waterways SteeringCommitteeBetter Practice Building Site ManagementProject Technical Reference GroupBroiler Code CommitteeBuilding Regulation Advisory CommitteeBus Service Review Reference GroupBusiness Skills Victoria BoardCatchment Management Authority LocalGovernment Coordinators NetworkCentral Region Sustainable Water StrategyConsultative CommitteeClearwater Steering CommitteeCommunity Services and Health IndustryTraining BoardCountry Fire Authority BoardCustomer Consultative Committee, EssentialService CommissionDevelopment Assessment ForumDepartment of Human Services PartnershipImplementation CommitteeDepartment of Primary Industries DroughtReference GroupDepartment of Transport MaintainingMobility Steering GroupDomestic Animal ManagementImplementation CommitteeEmergency Management Manual VictoriaStrategy GroupEmergency Relief Steering CommitteeE-planning CouncilE-Dais National Steering CommitteeFlood Warning Consultative CommitteeVictoria

42 _ MAV ANNUAL REPORT 2009/10 COMMITTEES

Future Coasts: Preparing Victoria’s Coastsfor Climate Change Steering CommitteeFuture Farms - Technical Working GroupGreen Building Council of Australia PrecinctProject Technical Reference CommitteeInfringements Standing Advisory CommitteeHeart Foundation (Vic) and Quit VictoriaSmoke-Free Policies Advisory GroupLocal Action on Affordable Housing (LAAH)Project Steering CommitteeLocal Government Natural ResourceManagement Facilitator NetworkMAV/Department of Education and EarlyChildhood Development Maternal andChild Health Services ImprovementImplementation Advisory GroupMAV/Department of Human Services FoodSafety Coordination Project SteeringCommitteeMelbourne Bushfire Protection ProgramProject Control GroupMetropolitan Fire and Emergency ServicesBoardMetropolitan Local Government WasteForumMetropolitan Transport ForumMinisterial Advisory Council on PublicLibrariesMinisterial Planning and Environment ActReview Expert Advisory GroupMinisterial Utilities Infrastructure ReferencePanelMunicipal Emergency ManagementEnhancement GroupMunicipal Emergency Management PlanAudit CommitteeNational Packaging Covenant CouncilNature Based Tourism Design GuidelinesReference GroupNorth East Environment NetworkNorthern Biodiversity NetworkOffice for Children Early ChildhoodDevelopment Advisory GroupOpen Space Policy Working GroupPlanning and Environment Act Review ExpertAdvisory GroupPlanning and Subdivision Fees ReviewTechnical Advisory Group and StakeholderReference Group

Prostitution Control Act Ministerial AdvisoryCommitteePublic Transport Access CommitteeRailway Crossing Project Delivery CommitteeRailway Crossing Technical GroupCommitteeRegional Greenhouse Alliance andStakeholders NetworkRide to School Steering CommitteeRoad Safety Reference GroupRoad Safety Conference CommitteeRoad Transport Advisory CommitteeRural Councils VictoriaRural Workforce Agency VictoriaSaferoads PartnershipSouth West (Corangamite) EnvironmentNetworkStanding Committee on Local Governmentand Cultural DiversityState Emergency Mitigation CommitteeState Emergency Recovery PlanningCommitteeState Natural and Built Recovery PlanningSub-CommitteeState Social, Health and CommunityRecovery Planning Sub-committeeState Emergency Relief Sub-committeeState Emergency Strategy TeamState Fire Management Planning CommitteeState Fire Management Planning ExecutiveCommitteeState Flood Policy CommitteeState Library Advisory Committee on PublicLibrariesState Natural and Built EnvironmentRecovery Planning CommitteeState Social, Health and CommunityRecovery CommitteeTimber Towns VictoriaUN Global Compact Cities ProgrammeAdvisory CouncilVicRoads Board (Roads CorporationAdvisory Board)Victorian Bushfire Reconstruction andRecovery Authority Interagency TaskforceVictorian Childcare Industry Liaison GroupVictorian Children’s Council

Victorian Climate Change Coastal HazardGuidelines Project Steering GroupVictoria Emergency Management CouncilVictorian Feedlot CommitteeVictorian Food Safety CouncilVictorian Freight Logistics CouncilVictorian Jurisdictional Projects Group forthe National Packaging CovenantVictorian Litter Action Alliance AdvisoryGroupVictorian Local Government DisabilityPlanners’ NetworkVictorian Local Government Health andWellbeing Planning Advisory GroupVictorian Local Government MulticulturalIssues NetworkVictorian Local Sustainability AccordCommitteeVictoria Rail Crossing Safety SteeringCommitteeVictorian Rail Industry Environmental ForumVictorian Road Based Public TransportAdvisory CommitteeVictorian Road Freight Advisory CouncilVictorian Settlement Planning CommitteeVictorian Spatial CouncilVictorian Speed Limit Advisory GroupVictorian Sustainable Public Lighting ActionGroupVision Super BoardWhite Paper for Land and BiodiversityStakeholders Reference GroupWomen’s Participation in Local GovernmentCoalition

MAV ANNUAL REPORT 2009/10 COMMITTEES _ 43

Civic Mutual Plus Members

Alpine Shire CouncilArarat Rural City CouncilBallarat City CouncilBanyule City CouncilBass Coast Shire CouncilBaw Baw Shire CouncilBayside City CouncilBenalla Rural City CouncilBoroondara City CouncilBreak O’Day CouncilBrighton CouncilBrimbank City CouncilBuloke Shire CouncilBurnie City CouncilCampaspe Shire CouncilCardinia Shire CouncilCasey City CouncilCentral Coast CouncilCentral Gippsland Region WaterCorporationCentral Goldfields Shire CouncilCentral Highlands CouncilCentral Highlands Region WaterCorporationCircular Head CouncilClarence City CouncilColac Otway Shire CouncilColiban Region Water CorporationCorangamite Shire CouncilCradle Coast Water AuthorityDarebin City CouncilDerwent Valley CouncilDevonport City CouncilDorset CouncilEast Gippsland Region Water CorporationEast Gippsland Shire CouncilEastern Regional Libraries CorporationEsk Water AuthorityFlinders CouncilFrankston City CouncilGannawarra Shire CouncilGeorge Town CouncilGlamorgan/Spring Bay CouncilGlen Eira City CouncilGlenelg Shire CouncilGlenorchy City Council

Golden Plains Shire CouncilGoulburn Valley Region Water CorporationGoulburn Valley Regional Library CorporationGoulburn-Murray Rural Water CorporationGrampians Wimmera Mallee WaterCorporationGreater Bendigo City CouncilGreater Geelong City CouncilGreater Shepparton City CouncilHepburn Shire CouncilHindmarsh Shire CouncilHobart City CouncilHobart Regional Water AuthorityHobsons Bay City CouncilHorsham Rural City CouncilHume City CouncilHuon Valley CouncilIndigo Shire CouncilKentish CouncilKing Island CouncilKingborough CouncilKingston City CouncilKnox City CouncilLatrobe City CouncilLatrobe CouncilLaunceston City CouncilLocal Government Association of TasmaniaLoddon Shire CouncilLower Murray Urban & Rural Water CorporationMacedon Ranges Shire CouncilManningham City CouncilMansfield Shire CouncilMaribyrnong City CouncilMaroondah City CouncilMeander Valley CouncilMelbourne City CouncilMelton Shire CouncilMildura Rural City CouncilMitchell Shire CouncilMoira Shire CouncilMonash City CouncilMoonee Valley City CouncilMoorabool Shire CouncilMoreland City CouncilMornington Peninsula Shire CouncilMount Alexander Shire Council

Moyne Shire CouncilMunicipal Association of VictoriaMurrindindi Shire CouncilNillumbik Shire CouncilNorth Central Goldfields Library ServiceNorth East Region Water CorporationNorthern Grampians Shire CouncilNorthern Midlands CouncilPort Phillip City CouncilPyrenees Shire CouncilQueenscliffe Borough CouncilRivers and Water Supply CommissionSorell CouncilSouth Gippsland Region Water CorporationSouth Gippsland Shire CouncilSouthern Grampians Shire CouncilSouthern Midlands CouncilSouthern Rural Water CorporationStrathbogie Shire CouncilSurf Coast Shire CouncilSwan Hill Rural City CouncilTasman CouncilTowong Shire CouncilVictorian Water Industry Association Inc.Wangaratta Rural City CouncilWannon Region Water CorporationWaratah-Wynyard CouncilWarrnambool City CouncilWellington Shire CouncilWest Coast CouncilWest Gippsland Regional Library ServiceWest Tamar CouncilWest Wimmera Shire CouncilWestern Region Water CorporationWesternport Region Water CorporationWhitehorse City CouncilWhitehorse Manningham Regional LibraryCorporationWhittlesea City CouncilWodonga City CouncilWyndham City CouncilYarra City CouncilYarra Plenty Regional Library ServiceYarra Ranges Shire CouncilYarriambiack Shire Council

44 _ MAV ANNUAL REPORT 2009/10 CIVIC MUTUAL PLUS MEMBERS

Fidelity Members

Alpine Shire CouncilArarat Rural City CouncilBallarat City CouncilBanyule City CouncilBass Coast Shire CouncilBaw Baw Shire CouncilBayside City CouncilBenalla Rural City CouncilBoroondara City CouncilBrimbank City CouncilBuloke Shire CouncilCardinia Shire CouncilCasey City CouncilCentral Goldfields Shire CouncilCentral Highlands Water CorporationCitywide Service Solutions Pty LtdColac Otway Shire CouncilColiban Region Water CorporationCorangamite Regional Library CorporationCorangamite Shire CouncilCrowlands Water Supply Co-operativeDarebin City CouncilEast Gippsland Region Water CorporationEast Gippsland Shire CouncilEastern Regional LibrariesFrankston City CouncilGannawarra Shire CouncilGeelong Cemeteries TrustGeelong Regional Library CorporationGlen Eira City CouncilGlenelg Shire CouncilGolden Plains Shire CouncilGoulburn Valley Region Water CorporationGoulburn-Murray Rural Water CorporationGrampians Wimmera Mallee WaterCorporationGreater Bendigo City CouncilGreater Dandenong City CouncilGreater Geelong City CouncilGreater Shepparton City CouncilHepburn Shire CouncilHindmarsh Shire CouncilHobsons Bay City CouncilHorsham Rural City CouncilHume City Council

Indigo Shire CouncilKingston City CouncilKnox City CouncilLatrobe City CouncilLoddon Shire CouncilLower Murray Urban and Rural WaterCorporationMacedon Ranges Shire CouncilManningham City CouncilMansfield Shire CouncilMaribyrnong City CouncilMelbourne City CouncilMelbourne Wholesale Fish MarketMelton Shire CouncilMildura Rural City CouncilMitchell Shire CouncilMoira Shire CouncilMonash City CouncilMoonee Valley City CouncilMoorabool Shire CouncilMoreland City CouncilMornington Peninsula Shire CouncilMount Alexander Shire CouncilMoyne Shire CouncilMunicipal Association of VictoriaMurrindindi Shire CouncilNillumbik Shire CouncilNorth East Region Water CorporationNorthern Grampians Shire CouncilPort Phillip City CouncilPyrenees Shire CouncilQueen Victoria MarketQueenscliffe Borough CouncilSouth Gippsland Region Water CorporationSouth Gippsland Shire CouncilSouthern Grampians Shire CouncilSouthern Rural Water CorporationStonnington City CouncilStrathbogie Shire CouncilSurf Coast Shire CouncilSwan Hill Rural City CouncilTanjil Bren Water Co-op Ltd and Committeeof Management Recreation ReserveTowong Shire CouncilWangaratta Rural City Council

Wannon Region Water CorporationWarrnambool City CouncilWellington Shire CouncilWest Gippsland Regional LibraryCorporationWest Wimmera Shire CouncilWestern Region Water CorporationWesternport Region Water CorporationWhitehorse City CouncilWhittlesea City CouncilWodonga City CouncilWyndham City CouncilYarra City CouncilYarra Ranges Shire CouncilYarriambiack Shire Council

MAV ANNUAL REPORT 2009/10 FIDELITY MEMBERS _ 45

Financial Overview

Report on financial results for theyear ended 30 June 2010In accordance with the requirements ofthe Municipal Association Act 1907, andapplicable accounting standards, theeconomic activity of the MunicipalAssociation of Victoria, the MunicipalOfficers’ Fidelity Guarantee Fund andLocal Government Mutual LiabilityInsurance Scheme (Civic Mutual Plus) isreported to the members as an economicentity within the annual accounts. Thecombined activities are shown as thecombined accounts and the MunicipalAssociation of Victoria, being the parententity, is shown separately as the MAVGeneral Fund.The Association represents localgovernment in Victoria. One of theactivities of the MAV is that it seeks out,applies for, and administers grant fundsfor, and on behalf of its members, for thebenefit of both local government and theVictorian community. This activity of theAssociation has been accounted for as asegment and included at note 24 in thefinancial statements.The MAV financial statements also includethe activities of MAV Procurement, whichprovides a range of procurement servicesand training in purchasing andprocurement for MAV members; andMAV Insurance, which operates theMunicipal Officers’ Fidelity GuaranteeFund and the Local Government MutualLiability Insurance Scheme (Civic MutualPlus) for the benefit of councils and otherlocal authorities.Both insurance activities are non-discretionary mutual funds and aresubject to the oversight of theAssociation’s Board of Management,which acts through a committee ofmanagement constituted by the Board,the MAV Insurance Committee (MAVIC).MAVIC carries out oversight andmanagement of the operational activitiesof both the Municipal Officers’ FidelityGuarantee Fund and Civic Mutual Plus.Jardine Lloyd Thompson Pty. Ltd providesclaims and risk management services tothe MAV.

Municipal Association of VictoriaThe financial result of the MAV in 2010was significantly impacted by a number ofevents during the Year including the RoyalCommission into the Victorian Bushfiresand the Global Financial Crisis.The MAV result was therefore verysatisfying given the significant added costsincurred during the year.The operating deficit for the year was$29,955 (2009 deficit $130,367). Theoperating result when boththe grant fund and MAV Procurement isincluded was a surplus of $392,127.(2009 deficit $360,245)The year also saw the continueddevelopment and expansion of MAVProcurement.Combined net assets before including theMAV Insurance business rose to $6.82million (2009 $6.43 million). During the2010 year, the MAV received a further$6.89 million in grants and other grantrelated income (2009 $6.8 million).The MAV delivered on several significantprojects during the year that have beenfunded by grants from both Federal andVictorian Governments and fundscontributed by its members. These grantsand contributions are managed by theMAV for the betterment of the localgovernment sector and Victoriancommunities. As at 30 June 2010, theMAV had a commitment to spend $7.35million (2009 $6.22 million).The operating deficit of the combinedentity has been further impacted by eventsin MAV Insurance.Some of these include:1. Representing members of Civic Mutual

Plus at the Victorian Bushfire RoyalCommission

2. Change in independent actuary for theinsurance business

3. Increase in claim numbers4. Increase in reinsurance premiumsThe operating deficit of the combinedentity was $4.59 million (2009 deficit$3.02 million) with net assets reducingfrom $19.57 million in 2009 to $14.98

MAV INSURANCEThe MAV Insurance business consists ofCivic Mutual Plus and the MunicipalOfficers’ Fidelity Guarantee Fund. TheAssociation is required under theMunicipal Association Act 1907 to provideboth public liability and fidelity insuranceto local government and other statutoryauthorities. MAV Insurance is not subjectto Australian Prudential RegulatoryAuthority (APRA) regulations. However, theMAVIC views compliance with theseregulations as being good businessgovernance and practice and has a policyof complying with several, but not all, ofthe APRA regulations.The MAV holds an Australian FinancialServices Licence (AFSL No 27143). TheMAV and MAV Insurance have AFSL-compliant processes and activities inplace to maintain the highest standards ofgovernance, provide operationalefficiency and enhance the future viabilityof the MAV Insurance business. Thecombined deficit for 2009 was $4.977million (2009 $2.664 million). The netasset position at the end of 2010 was$8.157 million (2009 $13.135 million).MAV PROCUREMENTThe MAV restructured its procurementactivities, and MAV Procurementcommenced in March 2010. The MAVbelieves that it can assist members inaccessing significant benefits fromimprovements in purchasing andprocurement processes and activities.The deficit for the period of operation1 July 2009-30 June 2010 was$230,095 (2009 $124,070). This resultincluded the writing off of costs ofestablishment and development.

million in 2010.

46 _ MAV ANNUAL REPORT 2009/10 FINANCIAL OVERVIEW

Guide to the Financial Report

Components of the FinancialReportThe financial report contains three mainsections: the financial statements, thenotes to the financial statements and thestatements by the directors and auditor.The financial statements consist of threemain statements: income statement,balance sheet and statement of cash flows.The notes to the financial statementsdetail the Association’s accounting policiesand set out the detailed values that arecarried into the financial statements.The statements by directors and auditorprovide the views of the directors of theMAV and the independent auditor on thefinancial report. The statement by directorsconfirms the view of the directors that thefinancial report provides a true and fairview of the financial performance, financialposition and solvency of the Association.The audit report by the independentauditor expresses the auditor’s opinion onwhether the financial statements presentfairly the financial position of theAssociation as at 30 June 2009, and theresults of the various business operationsand cash flows for the year ended 30June 2009, in accordance withaccounting standards and othermandatory professional reportingrequirements.

Financial Statements1. 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 businessoperations and do not include costsassociated with the purchase of assets.The expense item ‘depreciation’ spreadsthe cost of the assets over the estimatedlife of the assets.The most important figure is the surplus forthe year. Where it is positive, this meansthat revenues were greater than expenses.2. BALANCE SHEETThe balance sheet shows the assets theAssociation owns and the liabilities itowes at 30 June. The balance sheetseparates the assets and liabilities intocurrent and non-current. Current meansthose assets or liabilities that will be eithercollected or that fall due within the next12 months.The components of the balance sheet are:

2.1 CURRENT AND NON-CURRENT ASSETSCash assets include cash held in thebank, petty cash, cash deposits and cash

2.2 CURRENT AND NON-CURRENTLIABILITIES

Bank overdraft indicates the amount theAssociation owes its bankers on its dailyoperating account.Payables are monies owed by theAssociation to its suppliers as at 30 June.Premiums in advance are insurancepremiums relating to the next financialyear billed to members of the insurancefund before 30 June.Provision for employee entitlements isthe accounting term for annual leave,long service leave and retirementgratuities owed to staff.Provision for claims outstandingrepresents insurance claims reported bymembers together with an estimate ofclaims incurred but not yet reportedincluding an estimate of the costs ofsettlement for these claims.2.3 NET ASSETSThis term describes the difference betweentotal assets and total liabilities. Itrepresents the net worth of the Associationas at 30 June.

investments. Receivables are moniesowed to the Association.Prepayments are payments made in thecurrent financial year which relate to thenext financial year. For example, annualsubscriptions etc.Property, plant and equipment representsthe value of the equipment, furniture andfittings, computers, web site and intranet andmotor vehicles owned by the Association.Intangible assets are trademarks,educational programs and other intellectualproperty owned by the Association.

MAV ANNUAL REPORT 2009/10 GUIDE TO THE FINANCIAL REPORT _ 47

3. STATEMENT OF CASH FLOWSThe statement of cash flows summarisescash payments and cash receipts for theyear. The values may differ from thoseshown in the income statement becausethe income statement is prepared on anaccrual basis.Cash is derived from, and is used in, twomain areas:

3.1 CASH FLOWS FROM OPERATINGACTIVITIES :

Receipts relate to all cash received intothe Association’s bank account frommembers and others who owed money tothe Association in the form of fees orpremiums. Receipts also include interestearned from the Association’s cashinvestments. It does not include receiptsfrom the sale of assets.Payments relate to all cash paid out ofthe Association’s bank account to staff,creditors and others. It does not includecash paid for the purchase of assets.3.2 CASH FLOWS FROM INVESTING

ACTIVITIESThis relates to cash receipts and cashpayments resulting from either the sale orpurchase of property, plant andequipment. The statement of cash flowsconcludes with cash at end of year whichindicates the cash the Association has at30 June to meets its debts and liabilities.

Notes To The Financial StatementsTo enable the reader to understand thebasis on which the values shown in thestatements are established it is necessaryto provide details of the Association’saccounting policies. These are describedin note 2. Apart from the accountingpolicies, the notes also give details behindmany of the summary figures contained inthe statements. The note numbers areshown beside the relevant items in theincome statement, balance sheet and thestatement of cash flows.Where the Association wishes to discloseinformation which cannot be incorporatedinto the statements, this is shown in thenotes. The notes should be read at thesame time as the financial statements inorder to get a full and clear picture of thefinancial statements.

Statements by DirectorsThe statement by directors is made by twodirectors on behalf of the ManagementCommittee of the Municipal Associationof Victoria. The statement states that inthe opinion of the ManagementCommittee the financial statementspresent a true and fair view of theoperations of the Association and that theAssociation can pay its debts as and whenthey fall due.

Independent Audit ReportThis report is the independent auditor’sopinion on the financial statements. Itprovides the reader of the financialstatements a completely independentopinion of the financial statements of theAssociation. The opinion covers allstatutory and accounting standardscompliance requirements as well asproviding a view on the truth and fairnessof the financial statements.

48 _ MAV ANNUAL REPORT 2009/10 GUIDE TO THE FINANCIAL REPORT

MAV FINANCIAL REPORT 09/10

Financial Report 08/0

MAV FINANCIAL REPORT 2009/10 >49

STATEMENT OF COMPREHENSIVE INCOMEFOR THE YEAR ENDED 30 JUNE, 2010

COMBINED MAV - GENERAL FUND

NOTE2010

$2009

$2010

$2009

$

REVENUE

EXPENSESNET SURPLUS/(DEFICIT)

4

5(b)3

62,829,558

67,415,028(4,585,470)

59,365,282

62,389,871(3,024,589)

15,307,938

14,915,811392,127

12,938,192

13,298,437(360,245)

STATEMENT OF FINANCIAL POSITIONAS AT 30 JUNE, 2010

COMBINED MAV - GENERAL FUND

NOTE2010

$2009

$2010

$2009

$

CURRENT ASSETSCash and cash equivalentsReceivablesPrepaymentsTOTAL CURRENT ASSETS

9(a)10, 2(g)

33,256,45647,318,293

68,65280,643,401

32,443,93235,870,892

101,36668,416,190

6,400,9854,852,860

68,65111,322,496

7,153,2481,443,294

101,3668,697,908

NON-CURRENT ASSETSReceivablesProperty, plant and equipmentIntangiblesTOTAL NON-CURRENT ASSETS

10, 2(g)12, 2(i)13, 2(i)

50,754,386967,635176,925

51,898,946

49,467,806593,485221,786

50,283,077

-715,096176,925892,021

-593,485221,786815,271

TOTAL ASSETS 132,542,347 118,699,267 12,214,517 9,513,180

CURRENT LIABILITIESPayablesPremiums in advanceProvision for employee entitlementsProvision for claims outstandingOther current liabilitiesTOTAL CURRENT LIABILITIES

201117

14(a), 2(s)

3,424,28320,344,090

702,34119,013,209

2,994,52446,478,447

2,583,40619,168,622

673,12120,352,0001,315,845

44,092,994

1,452,927-

702,341-

2,994,5245,149,792

808,686-

673,121-

1,315,8452,797,652

NON-CURRENT LIABILITIESProvision for employee entitlementsProvision for claims outstandingOther non-current liabilitiesTOTAL NON-CURRENT LIABILITIESTOTAL LIABILITIESNET ASSETS

EQUITY

1714(a), 2(s)

19,78670,842,256

220,61471,082,655

117,561,10214,981,245

14,981,245

18,96254,756,229

264,36755,039,55899,132,55219,566,715

19,566,715

19,786-

220,614240,399

5,390,1916,824,326

6,824,326

18,962-

264,367283,329

3,080,9816,432,199

6,432,199The accompanying notes form an integral part of these statements.

50> MAV FINANCIAL REPORT 2009/10

STATEMENT OF CHANGES IN EQUITYFOR THE YEAR ENDED 30 JUNE, 2010

COMBINED MAV - GENERAL FUND

NOTE2010

$2009

$2010

$2009

$

RETAINED EARNINGSBalance at beginning of yearSurplus from ordinary activitiesBALANCE AT END OF YEAR

19,566,715(4,585,470)14,981,245

22,591,304(3,024,589)19,566,715

6,432,199392,127

6,824,326

6,792,444(360,245)

6,432,199

COMBINED STATEMENT OF CASH FLOWSFOR THE YEAR ENDED 30 JUNE, 2010

COMBINED MAV - GENERAL FUND

NOTE2010

$2009

$2010

$2009

$

CASH FLOW FROM OPERATING ACTIVITIESRECEIPTSSubscriptions, grants and feesInvestment incomeReinsurance and other recoveries

42,050,6461,304,505

16,807,815

38,827,2331,569,209

13,808,690

16,904,607287,016

-

16,246,033381,8734

-

PAYMENTSSuppliers (37,965,056) (34,451,201) (17,627,680) (16,566,605)Claim payments (20,791,721) (14,003,157) - -NET CASH (USED IN)/PROVIDED BYOPERATING ACTIVITIES 9(b) 1,406,189 5,750,774 (436,058) 61,301

CASH FLOW FROM INVESTING ACTIVITIESProceeds from sale of fixed assetsPayments for fixed assets and intangiblesNET CASH USED IN INVESTING ACTIVITIES

NET (DECREASE)/INCREASE IN CASH HELDCash at beginning of year

401,202(994,867)(593,665)

812,52432,443,932

62,640(292,217)(229,577)

5,521,19726,922,735

124,085(440,290)(316,205)

(752,263)7,153,248

62,640(292,217)(229,577))

(168,276)7,321,524

CASH AT END OF YEAR 9(a) 33,256,456 32,443,932 6,400,985 7,153,248The accompanying notes form an integral part of these statements.

MAV FINANCIAL REPORT 2009/10 >51

NOTES TO AND FORMING PART OF THE FINANCIALSTATEMENTS FOR THE YEAR ENDED 30 JUNE 2010

1. CORPORATE INFORMATIONThe combined financial report of Municipal Association of Victoria for the year ended 30 June 2010 was authorised for issue in accordancewith 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 Municipal Association of Victoria are:---

-

to provide a public liability insurance scheme for local governmentto provide fidelity insurance for local governmentto 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 corporationsto 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 financialreport. 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 complianceThe 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).

(c) Adoption of new accounting standardThe Association has adopted AASB 7 Financial Instruments; Disclosures and all consequential amendments which became applicable on 1January 2007. The adoption of this standard has only affected the disclosure in these financial statements. There has been no effect on profitand loss or the financial position of the Association or any of its divisions.

(d) Principles of the combined entityThe economic entity comprises the financial report of Municipal Association of Victoria and its controlled entities the Local Government MutualLiability Insurance Scheme (trading as Civic Mutual Plus, - CMP), The Municipal Officers’ Fidelity Guarantee Fund and MAV Procurement.A controlled entity is any entity controlled by Municipal Association of Victoria (Incorporated under the Municipal Association Act 1907).Control exists where Municipal Association of Victoria has the capacity to dominate the decision-making in relation to the financial andoperating policies of another entity so that the other entity operates with Municipal Association of Victoria to achieve the objectives ofMunicipal Association of Victoria.The effects of all transactions between entities in the combined 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 interdivisional 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.

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

(f) Cash and cash equivalentsCash and cash equivalents in the balance sheet comprise cash at bank and in hand and short-term deposits with an original maturity of threemonths or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. For thepurposes of the Cash Flow Statement, cash and cash equivalents consist of cash and cash equivalents as defined above, net of outstandingbank overdrafts. Bank overdrafts are included within interest-bearing loans and borrowings in current liabilities on the balance sheet.

52> MAV FINANCIAL REPORT 2009/10

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2010

(g) Trade and other receivablesTrade receivables, which generally have 30-60 day terms, are recognised initially at fair value and subsequently measured at amortised costusing the effective interest method, less an allowance for impairment.Collectability of trade receivables is reviewed on an ongoing basis at an operating unit level. Individual debts that are known to beuncollectible are written off when identified. An impairment provision is recognised when there is objective evidence that the Group will notbe able to collect the receivable. Financial difficulties of the debtor, default payments or debts more than 60 days overdue are consideredobjective evidence of impairment. The amount of the impairment loss is the receivable carrying amount compared to the present value ofestimated future cash flows, discounted at the original effective interest rate.

(h) Trade and other payablesTrade and other payables are carried at amortised cost and due to their short term nature they are not discounted. They represent liabilities forgoods and services provided to the Group prior to the end of the financial year that are unpaid and arise when the Group becomes obliged tomake future payments in respect of the purchase of these goods and services. The amounts are unsecured and are usually paid within 30 daysof recognition.

(i) Property, plant, equipment, trademarks and intellectual propertyPlant 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 are depreciated/amortised on a straight linebasis over their estimated useful lives to the entity commencing from the time the asset is held ready for use. Leasehold improvements aredepreciated over 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:Leasehold improvements at costFurniture and equipment at costMotor vehicles at costInteractive communications system at cost

ANNUAL RATE20%

20 - 33%20%33%

INTANGIBLE ASSETSIntangible assets (computer software, trademarks and intellectual property) acquired separately or in a business combination are initiallymeasured at cost. The cost of an intangible asset acquired in a business combination is its fair value as at the date of acquisition. Followinginitial recognition, intangible assets are carried at cost less any accumulated amortisation and any accumulated impairment losses. Internallygenerated intangible assets, excluding capitalised development costs, are not capitalised and expenditure is recognised in profit or loss in theyear in which the expenditure is incurred.The useful lives of intangible assets are assessed to be either finite or indefinite. Intangible assets with finite lives are amortised over the usefullife and tested for impairment whenever there is an indication that the intangible assets may be impaired. The amortisation period and theamortisation method for an intangible asset with a finite life are reviewed at least at each financial year-end. Changes in the expected usefullife or the expected pattern of consumption of future economic benefits embodied in the asset are accounted for prospectively by changing theamortisation period or method, as appropriate, which is a change in the accounting estimate. The amortisation expense on intangible assets

with finite lives is recognised in profit or loss in the expense category ‘Amortisation.’The Association does not have any intangible assets with indefinite useful lives.IMPAIRMENTThe 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 those assets. The recoverable amount is assessed on the basis of the expected net cash flows that willbe received from the assets’ employment and subsequent disposal. The expected net cash flows have not been discounted to present values indetermining the recoverable amounts.

MAV FINANCIAL REPORT 2009/10 >53

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2010

(j) LeasesA 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 thebeginning of the lease term and amortised on a straight line basis over the expected economic life. A corresponding liability is also establishedand each lease 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.

(k) Employee entitlementsThe liabilities arising in respect of employee entitlements (note 17) are measured at their nominal amounts: wages and salaries, annual leaveand sick leave regardless of whether they are expected to be settled within twelve months of balance date.Other employee entitlements are expected to be settled within twelve 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 andsalaries and past experience regarding staff departures. Related on-costs are included.Contributions made to an employee superannuation fund are charged as expenses when incurred.

(l) Revenue recognitionInterest 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. Controlover the grants is normally 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.

(m) Investment incomeInvestment 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.

(n) Other financial assetsInvestments are valued at net market value at balance sheet date.

(o) Comparative figuresWhere necessary, comparative figures have been adjusted to conform with changes in presentation in the current year.

(p) Cash flowsFor the purposes of the statement of cash flows, cash includes cash on hand and deposits held at call with banks and investments in cashbacked unit trusts net of outstanding bank overdrafts.

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

(r) Premiums receivableDuring 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

have committed to participate in both the scheme and the fund for the ensuing year and accordingly the premiums are disclosed in thebalance sheet as ‘contributions receivable’ with an offsetting liability described as ‘contributions billed in advance.’

54> MAV FINANCIAL REPORT 2009/10

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2010

SUMMARY OF ACCOUNTING POLICIES RELATING TO INSURANCE ACTIVITIES(s) Claims

Claims-incurred expense and liability for outstanding claims are recognised in respect of direct business. The liability covers claims incurredbut not yet paid, incurred but not yet reported claims, and the anticipated direct and indirect costs of settling those claims. Claims outstandingare assessed by reviewing individual claim files and estimating claims not notified and settlement costs using statistical and actuarial techniques.The liability for outstanding claims is measured as the present value of the expected future payments, reflecting the fact that all the claims donot have 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 theMAV’s actuary has estimated normal and superimposed inflation to be 0% (2009 1%) and the discount rate at 4.75% (2009 4.75% ).Superimposed inflation refers to factors such as trends in court awards, for example increases in the level and period of compensation forinjury. 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.Claims-incurred expense has reduced from the prior year due to the impact of:(i) improved risk management practices by members, and(ii) reform to the law of tort.

(t) Reinsurance and other recoveries receivableReinsurance and other recoveries receivable on paid claims, reported claims not paid, claims incurred but not reported and unexpiredrisk liabilities are recognised as revenue. Recoveries receivable are assessed in a manner similar to the assessment of outstanding claims.Recoveries are measured as the present value of the expected future receipts, calculated on the same basis as the liability for outstandingclaims.Reinsurance recoveries are reduced from the prior year due to a reduction in claims caused by:(i) improved risk management practices by members, and(ii) reform to the law of tort

(u) Revenue recognitionRevenue is recognised to the extent that it is probable that the economic benefit will flow to the entity and the revenue can be reliablymeasured. 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.(v) Catastrophe insurance

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

MAV FINANCIAL REPORT 2009/10 >55

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2010

COMBINED

3. CONTRIBUTION TO OPERATING SURPLUSCONTRIBUTION FROM INSURANCE ACTIVITIESPremium income

NOTE2010

$

19,621,762

2009$

19,520,661Re-insurance expense 28 & 2(v) (11,043,859) (10,479,554)NET PREMIUM INCOME 8,577,903 9,041,107Claims expense 5(a) (35,690,500) (33,055,202)Reinsurance and other recoveriesPerformance bonusNET CLAIMS EXPENSENET UNDERWRITING RESULTInvestment incomeAdministration and general expensesINSURANCE ACTIVITY OPERATING SURPLUSMAV SURPLUS (DEFICIT)OPERATING SURPLUS

2(t)26

25,885,2941,995,765

(7,809,441)768,462

1,017,744(6,763,803)(4,977,597)

392,127(4,585,470)

22,029,4564,541,737

(6,484,009)2,557,0981,182,050

(6,403,492)(2,664,344)

(360,245)(3,024,589)

COMBINED MAV - GENERAL FUND2010

$2009

$2010

$2009

$

4. REVENUEREVENUES FROM OPERATING ACTIVITIESSubscriptions/premiums 21,852,867 21,715,526 2,250,524 2,214,679Reinsurance and other recoveriesBrokerage and management fees incomePerformance bonusSeminars and sale of publicationsProject, sponsorship, management and rental incomeGrant incomeTOTAL REVENUE FROM OPERATING ACTIVITIES

2(t)

26

25,885,2941,425,2931,995,7651,564,4991,475,1587,347,736

61,546,612

22,029,4561,366,7394,541,737

982,327868,741

6,224,49857,729,024

-1,425,293

-1,564,4992,454,6827,347,736

15,042,734

-1,366,739

-982,327

1,695,7416,224,498

12,483,984

REVENUES FROM NON-OPERATING ACTIVITIESInvestment incomeGain on disposal of non-current assets

1,262,73520,212

1,617,29618,962

244,99220,212

435,24618,962

TOTAL REVENUE FROM OUTSIDE THEOPERATING ACTIVITIESREVENUE

1,282,94762,829,558

1,636,25859,365,282

265,20315,307,938

454,20812,938,192

COMBINED

5(a) CLAIMS EXPENSESPaid

NOTE2010

$

20,943,264

2009$

14,623,047Outstanding claims at end of financial year 14(a) 89,855,465 75,108,229Outstanding claims at beginning of financial year (75,108,229) (56,676,074)TOTAL CLAIMS EXPENSES 2(s) 35,690,500 33,055,202

56> MAV FINANCIAL REPORT 2009/10

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2010

COMBINED MAV - GENERAL FUND2010

$2009

$2010

$2009

$

5(b)OPERATING EXPENSESThe following items have been recognisedin the operating surplus:Claims expenseCatastrophe insurance expenseStamp dutyGeneral scheme expensesSalary and payroll costsGrants, projects and legalAdministrationOperating lease rental expenseSuperannuation contributionsScheme management feeMeetings and seminarsDepreciation leasehold improvementsDepreciation furniture and equipmentDepreciation motor vehiclesAmortisation of website, educational programs and trademarksBoard of management expensesALGA membershipTOTAL EXPENDITURE

35,690,50011,043,859

1,418,973147,198

4,383,1865,686,4582,375,010

666,110348,068

3,149,0261,581,153

69,38690,57294,55273,796

225,988371,193

67,415,028

33,055,20210,479,554

1,320,223270,518

3,700,4575,215,1721,960,974

639,489313,959

3,223,4461,396,093

46,21966,62680,37983,272

181,477356,811

62,389,871

----

4,383,1865,686,4581,362,747

666,110348,068

-1,568,676

47,71687,32094,55273,796

225,988371,194

14,915,811

----

3,700,4575,215,1721,219,087

639,489313,959

-1,395,489

46,21966,62680,37983,272

181,477356,811

13,298,437

6. LEASING COMMITMENTSOperating lease commitments, being for leaseof new OCE and OCE colour copiersNot later than one yearLater than one year but not later than five yearsTOTAL LEASE COMMITMENT

26,56013,28039,840

29,21643,82473,040

26,56013,28039,840

29,216643,82473,040

Operating lease commitments, being for leaseof leasehold premises:Not later than one yearLater than one year but not later than five yearsLater than five yearsTOTAL LEASE COMMITMENT

648,7132,792,278

833,3154,274,306

623,7623,030,1211,244,1854,898,068

648,7132,792,278

833,3154,274,306

623,7623,030,1211,244,1854,898,068

7. AUDITOR’S REMUNERATIONAmounts received or due and receivable for audit services:Audit servicesTax Compliance

113,674-

113,674

134,235-

134,235

30,960-

30,960

29,400-

29,400

MAV FINANCIAL REPORT 2009/10 >57

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2010

COMBINED

8. SCHEME MANAGEMENT FEESScheme management fees are paid to the SchemeManager for:Re-insurance placementRisk management and administrative services

NOTE2010

$

1,807,3851,341,641

2009$

1,826,0741,407,372

Total administrationClaims management (included in claims expenses)TOTAL SCHEME MANAGEMENT FEES

5(b) 3,149,0261,103,1384,252,164

3,233,4461,131,2804,364,726

9. NOTES TO STATEMENT OF CASH FLOWS(a) Cash and cash equivalents at balance date as

shown in the Statement of Cash Flows are heldin Standard and Poor’s rated AA and AAf cashdeposits and reconciled to the related itemsin the Balance Sheet as follows:

COMBINED MAV - GENERAL FUND2010

$2009

$2010

$2009

$

CashOther financial assetsTOTAL CASH AND CASH EQUIVALENTS

14,247,83919,008,61733,256,456

14,346,90118,097,03132,443,932

6,400,985-

6,400,985

7,153,248-

7,153,248

(b) Reconciliation of net cash used in operatingactivities to operating surplusSurplus for yearDepreciation and amortisation(Surplus)/deficit on disposal of assets

(4,585,470)328,307(20,212)

(3,024,574)276,497(18,962)

392,127303,384(20,212)

(360,245)276,497(18,962)

Changes in assets and liabilities(Increase)/decrease in accounts receivable 2(g) (10,828,123) (10,045,288) (3,409,566) (571,349)(Increase)/decrease in prepaymentsIncrease/(decrease) in accounts payableIncrease /(decrease) in provision for employee entitlements

32,714852,010

30,043

18,740(415,319)

7,531

32,714644,225

30,043

18,740(294,729)

7,531Increase/(decrease) in outstanding claimsIncrease/(decrease) in accrued revenueIncrease/(decrease) in other liabilitiesCASH FLOWS FROM OPERATIONS

2(s) 12,830,2361,175,4651,591,2191,406,189

17,660,272288,059

1,003,8185,750,774

--

1,591,227(436,058)

--

1,003,81861,301

58> MAV FINANCIAL REPORT 2009/10

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2010

COMBINED MAV - GENERAL FUND

NOTE2010

$2009

$2010

$2009

$

10. RECEIVABLESFuture reinsurance and other recoveries receivableDiscount to present value

Less doubtful debtsPremiums receivable

2(t)

2(r)

80,531,587(7,673,155)72,858,432

-18,310,798

72,327,806(9,215,000)63,112,806

-17,863,762

Other receivablesTOTAL RECEIVABLES

6,903,44998,072,679

4,362,13085,338,698

4,852,8604,852,860

1,443,2941,443,294

Represented by:CURRENTNON-CURRENTTOTAL

47,318,29350,754,38698,072,679

35,870,89249,467,80685,338,698

4,852,860-

4,852,860

1,443,294-

1,443,294Reinsurance recoveries are due from reinsurers with Standard and Poor’s ratings of AA+, AA-, A+ and A. Other recoveries are due fromunrated local authorities based in Victoria and Tasmania.

The ageing analysis of trade receivables are as follows:

Total <30days

31-60days

61-90days

>90days

2010CombinedMAV General Fund

25,544,4044,779,046

25,410,3734,645,015

33,27733,277

5,5005,500

95,25495,254

2009CombinedMAV General Fund

22,507,7001,348,142

22,144,900985,342

292,614292,614

12,43012,430

57,75657,756

COMBINED MAV - GENERAL FUND

NOTE2010

$2009

$2010

$2009

$

11. PREMIUMS IN ADVANCEContributions billed in advance 20,344,090 19,168,622 - -

12. PROPERTY, PLANT AND EQUIPMENTLeasehold improvements - at costLess accumulated depreciation

Furniture and equipment - at costLess accumulated depreciation

Motor vehicles - at costLess accumulated depreciation

Information technology equipment- at costLess accumulated depreciation

TOTAL PROPERTY, PLANT AND EQUIPMENT

834,142587,042247,100833,707555,678278,029497,520105,170392,350539,152488,996

50,156967,635

616,101517,65698,445

562,848491,66171,187

471,24293,205

378,037508,608462,79245,816

593,485

654,702565,372

89,330735,686552,426183,260497,520105,170392,350539,152488,996

50,156715,096

616,101517,65698,445

562,848491,66171,187

471,24293,205

378,037508,608462,79245,816

593,485

MAV FINANCIAL REPORT 2009/10 >59

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2010

COMBINED MAV - GENERAL FUND2010

$2009

$2010

$2009

$

12. PROPERTY, PLANT AND EQUIPMENT (continued)Reconciliations of the carrying amounts of property,plant and equipment at the beginning and end ofthe financial year.LEASEHOLD IMPROVEMENTSMovements during the yearBeginning of yearAdditionsDisposalsDepreciationEnd of year

98,445495,158

(277,117)(69,386)247,100

144,664--

(46,219)98,445

98,44538,601

-(47,716)

89,330

144,664--

(46,219)98,445

FURNITURE AND EQUIPMENTMovements during the yearBeginning of yearAdditionsDisposalsDepreciationEnd of year

71,187271,921

(713)(64,367)278,028

80,63216,615

-(26,060)71,187

71,187173,901

(713)(61,115)183,260

80,63216,615

-(26,060)71,187

MOTOR VEHICLESMovements during the yearBeginning of yearAdditionsDisposalsDepreciationEnd of year

378,037212,737

(103,872)(94,552)392,350

236,408298,866(76,858)(80,379)378,037

378,037212,737

(103,872)(94,552)392,350

236,408298,866(76,858)(80,379)378,037

INFORMATION TECHNOLOGY EQUIPMENTMovements during the yearBeginning of yearAdditionsDepreciationEnd of year

45,81630,544

(26,204)50,156

48,29038,092

(40,566)45,816

45,81630,544

(26,204)50,156

48,29038,092

(40,566)45,816

13. INTANGIBLE ASSETSTrademarks and intellectual propertyLess accumulated amortisation

583,948(407,023)

176,925

555,013(333,227)221,786

583,948(407,023)

176,925

555,013(333,227)221,786

60> MAV FINANCIAL REPORT 2009/10

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2010

COMBINED MAV - GENERAL FUND2010

$2009

$2010

$2009

$

13. INTANGIBLE ASSETS (continued)Reconciliation of the carrying amounts of intangibleassets at the beginning and end of the financial yearINTANGIBLE ASSETSMovement during the yearBeginning of yearAdditionsAmortisationEnd of year

221,78628,935

(73,796)176,925

252,20952,849

(83,272)221,786

221,78628,935

(73,796)176,925

252,20952,849

(83,272)221,786

DESCRIPTION OF INTANGIBLE ASSETSComputer software, trademark and intellectual property costs are carried at cost less accumulated amortisation. These intangible assets havebeen assessed as having a finite life and are amortised using the straight line method over a period of three to ten years. The amortisationhas been recognised in the income statement in the line item ‘Amortisation.’ If an impairment indication arises, the recoverable amount isestimated and an impairment loss is recognised to the extent that the recoverable amount is lower than the carrying amount.

14(a)OUTSTANDING CLAIMSCOMBINED

2010$

2009$

Central estimate 92,621,866 81,069,229Discount to present value (9,919,401) (10,728,000)

82,702,465 70,341,229Claims handling costs 3,276,000 2,807,000Risk marginTOTAL OUTSTANDING CLAIMS

14(b) 3,877,00089,855,465

1,960,00075,108,229

Comprising:CurrentNon-current

19,013,20970,842,256

20,352,00054,756,229

TOTAL CLAIMS PROVISION 2(s) 89,855,465 75,108,229

14(b)RISK MARGIN - PROCESS FOR DETERMINING RISK MARGINBased on two actuarial publications Taylor Fry Consulting Actuaries, the appointed actuary recommended that a risk margin of 20% of the netliabilities be adopted to give a probability of about 75% that the provisions including the risk margins will prove adequate to meet the relevantliabilities.

MAV FINANCIAL REPORT 2009/10 >61

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2010

2010 2009GROSS

$REINSURANCE

$NET

$GROSS

$REINSURANCE

$NET

$

14(c)RECONCILIATION OF MOVEMENTIN DISCOUNTED OUTSTANDINGCLAIMS LIABILITYOutstanding claims brought forwardChanges in assumptions

75,108,22921,747,228

63,112,80616,134,132

11,995,4235,613,096

56,676,07414,151,030

54,616,91913,456,008

2,059,155695,022

Increase in claims incurred/recoveries anticipatedIncurred claims recognised in

12,826,22734,573,455

9,745,62625,879,758

3,080,6018,693,697

17,660,27231,811,302

8,495,88721,951,895

9,164,3859,859,407

income statementClaim payments/recoveries during the year (19,826,219) (16,134,132) (3,692,087) (13,379,147) (13,456,008) 76,861Outstanding claims carried forward 89,855,465 72,858,432 16,997,033 75,108,229 63,112,806 11,995,423

(d) AFFECT OF CHANGE IN VALUATION METHODOLOGY OF OUTSTANDING CLAIMS LIABILITYThe estimate of net outstanding liabilities has increased by $3.935 million in the 12 month period to 30 June 2010 from those estimatedby the previous actuaries in their review at 30 June 2009. This increase is primarily driven by the substantial changes in the valuationmethodologies compared to the previous valuation and some deterioration in claims for the 2009 accident year.

2010 2009CURRENT YEAR

$PRIOR YEAR

$TOTAL

$CURRENT YEAR

$PRIOR YEAR

$TOTAL

$

15. NET CLAIMS INCURREDINSURANCEGross claims and related expenses -undiscountedDiscount

21,410,197(3,117,422)

13,475,7133,992,012

34,885,910804,590

34,339,364(5,084,000)

764,0153,035,823

35,103,379(2,048,177)

Gross claims and related expenses -discounted 18,292,775 17,397,725 35,690,500 29,255,364 3,799,838 33,055,202Reinsurance and other recoveries -undiscounted (11,415,003) (25,749,748) (37,164,751) (4,557,151) (7,140,240) (11,697,390)Discount 991,035 10,288,422 11,279,457 21,466,000 (31,798,066) (10,332,066)Reinsurance and other recoveries -discounted (10,423,968) (15,461,326) (25,885,294) 16,908,849 (38,938,305) (22,029,456)NET CLAIMS INCURRED 7,868,807 1,936,399 9,805,206 46,164,213 (35,138,467) 11,025,746

62> MAV FINANCIAL REPORT 2009/10

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2010

16. CLAIMS DEVELOPMENT TABLEACCIDENT YEAR 2006

$2007

$2008

$2009

$2010

$TOTAL

$

GROSS ESTIMATE OF ULTIMATE CLAIMS COST- CIVIC MUTUAL PLUSAt end year of accidentOne year laterTwo years later

19,426,05714,414,06513,972,302

12,918,95010,750,45212,452,238

11,438,39814,574,37315,754,621

33,095,46441,692,816

20,293,152

Three years laterFour years later

13,554,89013,970,384

14,523,339

Current estimate of cumulative claims costCumulative payments

13,970,384(5,860,700)

14,523,339(4,906,466)

15,754,621(2,164,518)

41,692,816(8,008,798)

20,293,152 106,234,313(421,835) (21,362,318)

Outstanding claims - undiscounted 8,109,684 9,616,873 13,590,103 33,684,018 19,871,317 84,871,995DiscountClaims handling expense2004 and prior

TOTAL GROSS OUTSTANDING CLAIMS -

(11,820,073)2,760,000

13,935,543

CIVIC MUTUAL PLUS 14(a) 89,747,465TOTAL GROSS OUTSTANDING CLAIMS -MUNICIPAL OFFICERS’ FIDELITYGUARANTEE FUNDCOMBINED GROSSOUTSTANDING CLAIMS

14(a)

14(c)

108,000

89,855,465

ACCIDENT YEAR 2006$

2007$

2008$

2009$

2010$

TOTAL$

NET ESTIMATE OF ULTIMATE CLAIMS COST- CIVIC MUTUAL PLUSAt end year of accidentOne year laterTwo years later

2,182,4372,104,5231,832,851

2,103,8261,723,4931,789,409

2,336,6701,146,1951,143,419

10,850,87419,307,213

8,883,685

Three years laterFour years later

1,340,145741,774

697,816

Current estimate of cumulative claims costCumulative paymentsOutstanding claims - undiscounted

741,774(489,718)252,056

697,816(342,513)355,304

1,143,419(477,314)666,105

19,307,213(7,145,128)12,162,084

8,883,685(285,250)

8,598,435

30,773,907(8,739,923)22,033,984

DiscountClaims handling expense2004 and prior

TOTAL NET OUTSTANDING CLAIMS -CIVIC MUTUAL PLUSTOTAL NET OUTSTANDING CLAIMS -MUNICIPAL OFFICERS’ FIDELITYGUARANTEE FUNDCOMBINED NET

(5,419,123)516,000

(241,828)

16,889,033

108,000

OUTSTANDING CLAIMS 14(c) 16,997,033These tables show the trend in the balance of outstanding claims.

MAV FINANCIAL REPORT 2009/10 >63

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2010

COMBINED MAV - GENERAL FUND

NOTE 2010$

2009$

2010$

2009$

17. PROVISIONS FOR EMPLOYEE ENTITLEMENTSThe aggregate amount of employee entitlementliability is comprised of:Provisions (current)Provisions (non-current)TOTAL EMPLOYEE ENTITLEMENTS

702,34119,785

722,126

673,12118,962

692,083

702,34119,785

722,126

673,12118,962

692,083

Reconciliation of the carrying amounts of provisionfor employee entitlements at the beginning andend of the financial yearEMPLOYEE ENTITLEMENTSMovement during the yearBeginning of yearAdditionsEnd of year

692,08330,043

722,126

684,5527,531

692,083

692,08330,043

722,126

684,5527,531

692,083

18. SUPERANNUATION CONTRIBUTIONThe Municipal Association of Victoria contributes in respect of its employees to both the Vision Super Superannuation Fund’s AccumulationFund and the Defined Benefits Fund.The amount of superannuation contributions paid by the Municipal Association of Victoria to the Vision Super Accumulation Fund and theDefined Benefits Fund during the reporting period was $313,959 (2009 $248,138). The Municipal Association of Victoria contributes to theAccumulation Fund based on a fixed percentage of employee earnings in accordance with the Superannuation Guarantee Legislation 9% in2010 and 9% in 2009. No further liability accrues to the employer as the superannuation benefits accruing to employees are represented bytheir share of the net assets of the FundContributions to the Defined Benefits Fund are determined by the Scheme’s actuary. The Funds liability for accrued benefits for defined benefitand defined contribution members was determined in the 31 December 2005 actuarial investigation carried out by Local Authorities Superpursuant to the requirements of Australian Accounting Standard AASB 2005-13. An actuarial review again occurred in December 2009 whereit was calculated that the Defined Benefits Superannuation Fund was in surplus. A further review is currently being undertaken based on 30June 2010 data.

19. GOVERNMENT GRANTSThe 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 $5,310,809 (2008 $5,578,025) after deducting an estimate of costs ofadministering the grants.

COMBINED MAV - GENERAL FUND2010

$2009

$2010

$2009

$

RECOGNISED IN INCOME STATEMENTGrant income 7,191,981 6,034,050 7,191,981 6,034,050

The Association does not receive any other government assistance.

64> MAV FINANCIAL REPORT 2009/10

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2010

20. FINANCIAL RISK MANAGEMENT POLICIES AND OBJECTIVESThe Group’s exposure to interest rate risk and the effective average interest rate for the classes of financial assets is set out below:

COMBINED MAV - GENERAL FUND

Non-interestearning

Floatinginterest

rate

Non-interestearning

Floatinginterest

rate2010

$ $ $ $

FINANCIAL ASSETSBankCash investmentsReceivablesTOTAL FINANCIAL ASSETSWeighted average interest rate

--

98,072,67998,072,679

14,247,83919,008,617

-33,256,456

3.8%

--

4,852,8604,852,860

6,400,985--

6,400,9853.6%

FINANCIAL LIABILITIESOutstanding claimsUnearned premiums/subscriptionsAccounts payableTOTAL FINANCIAL LIABILITIESWeighted average interest rate

89,855,46520,344,090

3,424,283113,623,838

0%

---

--

1,452,9271,452,927

----

0%The Bank and Cash Investments are level 1 financial assets in accordance with AASB7.The carrying amounts of financial assets and financial liabilities represent their approximate net fair value.All maturity dates are within twelve months.

COMBINED MAV - GENERAL FUND

Non-InterestEarning

FloatingInterest

Rate

Non-InterestEarning

FloatingInterest

Rate2009

$ $ $ $

FINANCIAL ASSETSBankCash investmentsReceivablesTOTAL FINANCIAL ASSETSWeighted average interest rate

--

85,338,69885,338,698

14,346,90218,097,031

-32,443,933

4%

--

1,443,2941,443,294

7,153,248--

7,153,2486%

FINANCIAL LIABILITIESOutstanding claimsUnearned premiums/subscriptionsAccounts payableTOTAL FINANCIAL LIABILITIESWeighted average interest rate

75,108,22919,168,6222,583,406

96,860,257

----

0%

--

808,702808,702

----

0%The Bank and Cash Investments are level 1 financial assets in accordance with AASB7. The carrying amounts of financial assets and financialliabilities represent their approximate net fair value.All maturity dates are within twelve months.

MAV FINANCIAL REPORT 2009/10 >65

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2010

20. FINANCIAL RISK MANAGEMENT POLICIES AND OBJECTIVES (continued)The table below reflects all contractually fixed pay-offs and receivables for settlement, repayments and interest resulting from recognisedfinancial assets and liabilities as at 30 June 2010. Cash flows for financial assets and liabilities without fixed amount or timing are based onconditions existing at 30 June 2010.The remaining contractual maturities of the financial liabilities are:

CONSOLIDATED MAV - GENERAL FUND2010

$2009

$2010

$2009

$3 months or less3-12 months1-5 yearsOver 5 years

28,606,42217,891,81060,749,24010,313,630

117,561,102

26,941,40317,151,59142,503,49812,536,06099,132,552

1,452,9273,716,650

220,614-

5,390,191

808,7021,988,966

283,329-

3,080,997

LIQUIDITY RISKMaturity analysis of financial assets and liabilities based on management’s expectation.The risk implied from the values in the table below, reflects a balanced view of cash inflows and outflows. These liabilities originate frominsurance contracts and other financial assets used in the ongoing operations of the business. These assets are considered in the Association’soverall liquidity risk. To monitor existing financial assets and liabilities as well as to enable effective controlling of future risks, the Associationhas established a comprehensive risk reporting covering its insurance business that reflects the expectations of the management of expectedsettlement of financial assets and liabilities.

Year Ended 30 June 2010 <3 months 3-12 1-5 years >5 years Totalmonths

$ $ $ $ $COMBINEDFINANCIAL ASSETSCash and cash equivalents 33,256,456 33,256,456Receivables 35,612,843 11,705,450 43,325,910 7,428,476 98,072,679

68,869,399 11,705,450 43,325,910 7,428,476 131,329,135COMBINEDFINANCIAL LIABILITIESOutstanding claimsUnearned premiums/subscriptionsAccounts payableOther liabilities

4,838,04920,344,090

3,424,283-

14,175,160--

3,716,650

60,528,626--

220,614

10,313,630---

89,855,46520,344,090

3,424,2833,937,264

TOTAL FINANCIAL LIABILITIES 28,606,422 17,891,810 60,749,240 10,313,630 117,561,102NET MATURITY 40,262,877 (6,186,360) (17,423,330) (2,885,154) 13,768,033

PARENTFINANCIAL ASSETSCash and cash equivalentsReceivables

6,400,9854,757,627

11,158,612

-95,23395,233

---

---

6,400,9854,852,860

11,253,845PARENTFINANCIAL LIABILITIESAccounts payableOther Liabilities

To

tal Fin

ancial Liabilities

NET MATURI

TY

1,452,927-

1,452,9279,705,685

-3,716,6503,716,650

(3,621,417)

-220,614220,614

(220,614)

----

1,452,9273,93

7,2645,390,1915,863,654

66> MAV FINANCIAL REPORT 2009/10

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2010

20. FINANCIAL RISK MANAGEMENT POLICIES AND OBJECTIVES (continued)

Risk management objectives and policies for mitigating insurance riskThe Association’s local government mutual liability scheme (trading as Civic Mutual Plus) is established by legislation contained in theMunicipal Association Act 1907. Membership is available to local councils and prescribed bodies. The Scheme operates in Victoria andTasmania to provide services to members in respect of their potential and actual liabilities. A member may seek indemnity from the Scheme inrespect 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 risksThe 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 reducethe incidence of claims to the Scheme.

Reinsurance strategyThe Scheme adopts a conservative approach towards management of risk and does this by utilising various risk transfer options. The MAVInsurance Committee determines the level of risk, which is appropriate for the Scheme having regards to ordinary concepts of prudenceand regulatory constraints. The risk transfer arrangements adopted by the Scheme include the utilisation of commercial reinsurance / excessarrangements. These arrangements include constant review of both reinsurers’ financial strength, and ensuring spread of risk among reinsurerswho meet the requirements of the MAV insurance policies. These risk transfer arrangements assist the Scheme to limit exposures to large singleclaims and catastrophic events. These programs are reviewed each year to ensure that they continue to meet the risk needs of the Scheme.

Terms and conditions of membershipMembership to the Scheme is offered to eligible bodies and renewed annually on 30th 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.

Product featuresThe Scheme operates in Victoria and Tasmania. Should a claim be accepted the Scheme provides indemnity to the member in respect of theircivil liabilities for $500 million public / products liability and $300 million for professional indemnity insurance, subject to any excess, for anyclaim incurred anywhere throughout the world.Operating surpluses arise from the total contributions charged to members less the amounts paid to cover claims and the expenses incurredby the Scheme.

Management of risksThe 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 its 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 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 risksInsurance 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 state-wide risk management profile. It is vital that the Scheme keepsabreast of changes in the general economic, legal and commercial environment in which it operates. It is vital that the Scheme spreads its riskof reinsurance failure by ensuring reinsurers are of high financial quality and can meet their commitments to the Association. The Associationmaintains policies and strategies and receives advice from an independent actuary on at least an annual basis in order to determine theconcentration and amount of risk exposure. The Association keeps abreast of changes in the general economic, legal and commercialenvironment in which it operates.

MAV FINANCIAL REPORT 2009/10 >67

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2010

20. FINANCIAL RISK MANAGEMENT POLICIES AND OBJECTIVES (continued)CREDIT RATING

AAA+/-$m

AA+/-$m

A+/-$m

BBB

$m

SPECULATIVEGRADE

$m

NOTRATED

$m

TOTAL

$m

Reinsurance and otherrecoveries on outstandingclaims 2010

2009--

2.4332.284

25.88625.669

--

--

0.6641.612

28.98329.565

Reinsurance and otherrecoveries on paid claims 2010

2009--

0.0921.368

4.6613.118

--

--

0.7951.470

5.5485.956

PAST DUE BUT NOT IMPAIREDNEITHER PAST

DUE NOR IMPAIRED$m

LESS THAN3 MONTHS

$m

3 TO 6MONTHS

$m

6 MONTHSTO 1 YEAR

$m

GREATERTHAN 1 YEAR

$m

IMPAIRED

$m

TOTAL

$m

Reinsurance and otherrecoveries on paid claims 2010

2009--

4.6923.938

0.0060.125

0.0300.376

0.0540.088

.7651.429

5.5475.956

Interest rate riskThe reinsurance indemnity contracts contain no clauses that expose the Scheme, directly to interest rate risk. The reinsurance contracts are longterm arrangements, reviewed and payable annually.

IMPACT OF CHANGES IN INTEREST RATESVariable Current Rate

%

Changevariable

to%

Operatingsurplus at

30 June 2010$

Total accumulatedfunds after the impactof applying variable

$MAVBase value at 30 June 2010 (4,585,470) 14,981,245Interest rate pa 4.75% 5.75%

3.75%(4,006,227)(5,194,799)

15,560,48814,371,916

CIVIC MUTUAL PLUSBase value at 30 June 2010 (4,984,348) 7,786,182Interest Rate pa 4.75% 5.75%

3.75%(4,405,105)(5,593,677)

8,365,4257,176,853

Credit riskThe Scheme is exposed to credit risk on insurance contracts as a result of exposure to reinsurers. The credit risk to reinsurers is managedthrough the Scheme’s Reinsurance Management Strategy and policies that includes regularly monitoring both the financial rating of thereinsurers both prior to and during the reinsurance program and the flow of payments coming from the reinsurers. Investments in cashand cash equivalents at balance date as shown in the Statement of Cash Flows are held in Standard and Poor’s rated AA and AAf ratedcash deposits.

Price riskInvestments held are not subject to price risk. Investments are cash deposits held in Australian banks.

68> MAV FINANCIAL REPORT 2009/10

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2010

21. ACCOUNTING ESTIMATES AND JUDGEMENTSThe 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 liabilityProvision is made at the year-end for the estimated cost of claims incurred but not settled at the balance sheet date, including the cost ofclaims incurred but not yet reported (‘IBNR’) to the Scheme.The Scheme takes all reasonable steps to ensure that it has appropriate information regarding its claims exposure. However, given theuncertainty in 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) Allowance for incurred but not reported claims as confirmed by the actuarial review on 30 June 2010;(iii) An allowance of 4% for claim settlement expenses, as assumed by the Actuary;(iv) Allowances for discount at 4.75%, as assumed by the Actuary;(v) 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 22.

(b) Assets arising from reinsurance contractsAssets arising from reinsurance contracts were estimated for each accident year, from the payments to date and estimated outstandingclaims history at 30 June 2010, taking into account the reinsurance terms applying to that accident year. In calculating the present value ofreinsurance recoveries, 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.

22. ACTUARIAL ASSUMPTIONS AND METHODSActuarial assumptionsThe following assumptions have been made in determining the outstanding claims liabilities:

KEY ACTUARIAL ASSUMPTIONS2010 2009

Wage inflationClaim administration expenseSuperimposed inflationDiscount rateRisk margin

3.25%4%0%

4.75%20%

3.25%4%1%

4.7520%

MAV FINANCIAL REPORT 2009/10 >69

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2010

22. ACTUARIAL ASSUMPTIONS AND METHODS (continued)Process used to determine actuarial assumptionsProcess use to determine actuarial assumptionsA description of the processes used to determine the above key actuarial assumptions is provide below:Civic Mutual Plus has provided public and professional indemnity insurance to local government bodies in Victoria and Tasmania and otherbodies constituted under any Act for any public or local governing purpose since 30/9/1993. The Actuary was supplied with details of alltransactions (payment, recoveries, changes of estimates) from 30/9/1993 to 30 June 2010. The individual claim payments and case estimatesreconciled closely with totals in Civic Mutual Plus’s financial statements for each year of cover. The actuary subdivided the claims data intothree claim types (Public Liability, Professional Indemnity and the 2009 Bushfire claims) and made separate estimates of the gross outstandingclaims liabilities for each of these claim types. The actuary estimated the gross outstanding claims liabilities for each claim type using fivedifferent actuarial methods. Large claims (above $250,000) were estimated based on a number times average size method and non-largeclaims were estimated using four different actuarial methods - payments per claim incurred, payments per claim finalised, incurred costdevelopment and projection of case estimates. The actuary selected a combination of these methods for estimating the outstanding claims.Payments were projected with a payment pattern based on past experience. Estimates of outstanding excesses were based on a numbers timesaverage size method and estimates of non reinsurance recoveries were made by a recoveries per claim method.Estimates of reinsurance recoveries were made from projected gross payments, excesses and non reinsurance recoveries, allowing for thedifferent insurance treaties applying to each year. Based on Access Economics June 2010 forecasts for Victorian average weekly claims inflationwas assumed to be 3.25%. The discount rate was assumed to be 4.75% pa, derived from the yields on Commonwealth government bonds.Based on the actual expense rate of Civic Mutual Plus, claim administration expenses were assumed to be 4% of the net claim payments.Based on two actuarial publications the actuary recommended that a risk margin of 20% of the net liabilities be adopted to give a probabilityof about 75% that the provisions including the risk margins will prove adequate to meet the relevant liabilities..

VARIABLEWage inflation

Superimposed inflation

Discount rate

Case estimate development

IMPACT OF MOVEMENT IN VARIABLEExpected future payments are inflated to take account of inflationary increases. An increase ordecrease in the assumed levels of economic inflation would have a corresponding impact on claimsexpense, with particular reference to longer tail claims.In addition to the general economic inflation rate an amount is superimposed to take account ofnon-economic inflationary factors, such as increases in court awards. Such rates of superimposedinflation are specific to the model adopted. An increase or decrease in the assumed levels ofsuperimposed inflation would have a corresponding impact on claims expense, with particularreference to longer tail claims.The outstanding claims liability is calculated by reference to expected future payments. Thesepayments are discounted to adjust for the time value of money. An increase or decrease in theassumed discount rate will have an opposing impact on total claims expense.Case estimates are initially established in accordance with established guidelines and by referenceto 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 onclaims expense.

70> MAV FINANCIAL REPORT 2009/10

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2010

IMPACT OF CHANGES IN KEY VARIABLESCIVIC MUTUAL PLUSVariable Current Rate

%

Changevariable

to%

Operatingsurplus at

30 June 2009$

Total accumulatedfunds after the impactof applying variable

$CIVIC MUTUAL PLUSBase value at 30 June 2010 (4,984,348) 7,786,182Inflation Rate pa 3.25% 4.25%

2.25%(6,317,559)(4,076,650)

6,452,9718,693,8807

23. RENT-FREE PERIODDuring the 2004 financial year the Association negotiated a new ten-year lease over the property at Level 12, 60 Collins Street Melbourne withthe Reserve Bank of Australia. The lease commenced on 1 March 2004 and included a 15 months rent free period up to 31 May 2005.During the 2008 financial year the Association negotiated a new ten-year lease over the property at Level 11, 60 Collins Street Melbourne withthe Reserve Bank of Australia for and on behalf of Civic Mutual Plus. The lease commenced on 1 June 2008 and included an 8 months rentfree period up to 31 January 2009.In accordance with ‘Lessee Accounting for Surplus Leased Space Under Non-Cancellable Operating Lease,’ lease incentives receivedhave been recognised as a liability. This liability recognised in respect of the lease incentive will be reduced by allocating lease rental paymentsbetween rental expense and reduction of the liability.

MAV FINANCIAL REPORT 2009/10 >71

24. SEGMENT INFORMATION – PRIMARY SEGMENT

SEGMENT

Procurement

Insurance

Grants

Insurance including public liability, professional liability, product liability and fidelity

Local government association that represents and provides support to local government and its com

LOCAL GOVERNMENT

BUSINESS SEGMENTS

2010$

OPERATING REVENUE

$

$

$

2009

2010

2009

2010

PROCUREMEN

INSURANCE

GRANTS

2009

ASSOCIATION

2010$

2009$

TYPES OF PRODUCTS AND SERVICES

Provides a range of procurement services and training in purchasing and procurement for

Obtains Federal and State government grants and expends these grants on projects for the betterment of both local government and

Association

ELIMINATIONS

COMBINED

2010

2009

2010

2009

$

$

Sales to customers outside the gr

-

146,900

(230,095)

19,420

19,814

146,900

48,421 48,501,145 47,254,090

7,561,587

6,318,698

6,619,926

2,580,025

5,744,073

2,342,131

62,829,558 59,365,282

Inter-segment

2,599,445

7,561,587

652,194

6,318,698

(105,808)

9,199,951

(29,955)

8,086,204

(130,367)

2,361,945

TOTAL SEGMENT REVENUE

TOTAL COMBINED REVENUE

SEGMENT RESULT

COMBINED ENTITY SURPLUS

FROM ORDINARY ACTIVITIES

ASSETS

Segment asset

TOTAL ASSETS

LIABILITIES

Segment liabilitie

TOTAL LIABILITIES

OTHER SEGMENT INFORMATION

Acquisition of property, plant an

equipment and other non-curre

Depreciation

-

12,164

-

2,702

277,460

24,922

485,924

131,757

48,421 48,520,565 47,273,904

(124,070) (4,977,614) (2,664,344)

2,599,445

2,361,945

62,829,558 59,365,282

-

- (4,585,470) (3,024,589)

(4,585,470) (3,024,589)

119,155 120,731,800 109,563,048

-

6,888,295

6,799,485

5,960,776

3,102,628 (1,170,281)

(885,049) 132,542,347 118,699,267

132,542,347 118,699,267

243,226 112,574,883 96,428,516

885,366

1,448,755

4,785,210

1,897,104 (1,170,281)

(885,049) 117,561,102 99,132,152

117,561,102 99,132,152

--

-

1,579

34,243

7,498

484,718

289,642

257,974

266,297

-

-

762,178

292,217

-

-

328,307

276,497

GEOGRAPHICAL SEGMENT

All of the Association’s business segments operate only in the geographica

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2010

72> MAV FINANCIAL REPORT 2009/10

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2010

25. CAPITAL MANAGEMENT OBJECTIVESThe Association is specifically excluded from the provisions of the Insurance Act and from APRA regulation. There is no externally imposedcapital requirement on the Association. The Association’s capital management philosophy is focused on capital efficiency and effective riskmanagement to support a progressive business model for the benefit of members of both CMP and the Municipal Officers’ FidelityGuarantee Fund.The independent actuary provides advice on the target capital holding on at least an annual basis. The target capital holding is to be at a levelthat provides operational flexibility, avoids sudden increases in contribution levels in response to fluctuations in surplus and ensures solvency inthe event of the maximum likely adverse event. Both CMP and the Municipal Officers’ Fidelity Guarantee Fund are non discretionary mutualfunds and have as a last resort an ability to claim against its members to protect its capital holdings.

26. CONTINGENT ASSET – REINSURANCE PERFORMANCE BONUSCMP, 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.The actuary has calculated the potential value of the CMP Scheme’s performance bonus for the remaining period of the five-year program,at balance date, to be $6.8 million (2009 $9.3 million). Performance bonus totalling $1.995 million became due and receivable on 30 June2010 and has been received at the date of this report. The reduction in the performance bonus received this year in comparison to last yearrelates to the lower re-insurance premium going into the experience account during the 2006 financial year and the deferment of part of thisyear’s bonus due to uncertainty around some motor accident claims.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 2010 that the potential benefit is an assetthat is probable of receipt and reliably measurable. The financial statements do not include any value attributable to the share of profit. Theposition will be monitored on an annual basis.

27 VICTORIAN BUSHFIRESCMP provides public liability and professional indemnity insurance to councils affected by the Victorian bushfires. The Municipal Associationof Victoria on behalf of CMP is representing councils at the Victoria Royal Commission into the bushfires. There are 27 councils that could beimpacted of which half may be subject to an insurance claim. Councils are not substantially liable for the causes or the affects of the bushfiresand as such the quantum of any potential liability is uncertain. The extent of any potential liability for councils will be impacted substantiallyby the number of events that occurred and the extent of both the insurance excesses of affected councils. In addition, CMP is protected by astrong reinsurance program involving financially sound Australian and international reinsurers. A best estimate of the potential liability of CMPrelating to the Victorian Bushfires is $28.5 million. This amount has been included in the provision for claims outstanding.Both the MAV and CMP have provided substantial assistance and support to member’s affected by the Bushfire Royal Commission findings andsignificant resources have been applied to assist member’s implement the recommendations coming out of the Royal Commission that appliesto members. These activities have resulted in an increase in the costs of administration.

28. REMUNERATION OF KEY MANAGEMENT PERSONNELThe MAV employed five key management personnel and provided these personnel with short term employee benefits and post employmentbenefits.

COMBINED MAV - GENERAL FUND2010

$2009

$2010

$2009

$

Short-term employment benefitsPost-employment benefits

1,006,94957,503

891,64855,811

991,12457,503

868,53555,811

Loans to directorsNo loans were made to or are payable by directors.Other transactionsThere were no other material transactions with directors.InsuranceThe activities of the MAV board members are covered by the MAV directors’ and officers’ indemnity insurance policy effected by the MunicipalAssociation of Victoria

MAV FINANCIAL REPORT 2009/10 >73

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2010

29. RELATED PARTIESThe Municipal Association of Victoria is a body corporate established under the Municipal Association Act of 1907 to provide services forand represent Local Government authorities in Victoria. The Association and its wholly owned controlled entities trade with its membersin the normal course of business and on an arm’s length basis. The Deed of Establishment provides for the MAV to appoint a Committeeof Management (MAVIC) to be responsible for the administration of the Scheme. Mr A. Nye was a member of the of the Committee ofManagement up to 2 July 2009 and was Chairman of the Victorian Managed Insurance Authority (VMIA). The MAV and the VMIA from timeto time have conflicting interests in insurance claims matters. Any such claims were settled on commercial terms without the involvement ofthese Committee members. The discreet nature of these transactions is not material. There were no material related party transactions duringthe year.

74> MAV FINANCIAL REPORT 2009/10

STATEMENT BY DIRECTORSAS AT 30 JUNE 2010

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 June 2010;(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 Combined Financial Statements give a true and fair view of the matters with which they deal.The financial statements and combined 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.

William McArthurPresident

Cr. Sam AlessiDirector

Robert SpenceChief Executive Officer

Melbourne 27 October 2010

MAV FINANCIAL REPORT 2008/09 >75

COMBINED FINANCIAL REPORTS

76> MAV FINANCIAL REPORT 2009/10

COMBINED FINANCIAL REPORTS

MAV FINANCIAL REPORT 2009/10 >77

OTHER INFORMATIONLegal FormThe Municipal Association of Victoria is an association incorporated by the Municipal Association Act 1907.Domicile:Melbourne, AustraliaAddress of Registered Office and Principal Place of Business:Level 12, 60 Collins Street, Melbourne, 3000, Victoria, AustraliaNature of the operation and principal activities:The Municipal Association of Victoria represents, promotes and supports the interest of Victorian local government and their communities.EmployeesAverage number of equivalent full-time employees during the year is 39.657 EFT.

78> MAV FINANCIAL REPORT 2008/09

MAV 2008/09

MAV INSURANCEFINANCIAL REPORT 09/10

Financial Report 08/09

MAVMAVINSURANCE FINANCIAL REPORT 2009/10 >79>79

STATEMENT OF COMPREHENSIVE INCOMEFOR THE YEAR ENDED 30 JUNE, 2010

NOTE2010

$

COMBINED

2009$

CIVIC MUTUAL PLUS

2010 2009$ $

MUNICIPAL OFFICERS’FIDELITY GUARANTEE FUND

2010 2009$ $

Premium Revenue 3 19,621,762 19,520,661 18,962,668 18,880,563 659,094 640,098Performance Bonus 18 1,995,765 4,541,737 1,995,765 4,541,737 - -Re-insurance ExpenseNET PREMIUM INCOMEClaims Expense

(11,043,859) (10,479,554)(10,614,560) (10,034,025)10,573,668 13,582,844 10,343,873 13,388,275

4(a) (35,690,500) (33,055,202)(35,586,371) (32,852,360)

(429,299)229,795

(104,129)

(445,529)194,569

(202,842)Reinsurance and otherrecoveriesNET CLAIMS EXPENSE

312

25,885,294 22,029,456 25,879,758 21,951,895(9,805,206) (11,025,746) (9,706,613) (10,900,465)

5,536(98,593)

77,561(125,281)

NET UNDERWRITING RESULT 768,462 2,557,098 637,260 2,487,810 130,842 69,288Investment Income 3 1,017,744 1,182,050 999,086 1,158,004 18,658 24,046Administration and GeneralExpenses 4(b) (6,763,820) (6,403,492) (6,620,694) (6,259,084) (143,126) (144,408)OPERATING SURPLUS(DEFICIT) (4,977,614) (2,664,344) (4,984,348) (2,613,270) 6,734 (51,074)

STATEMENT OF FINANCIAL POSITIONAS AT 30 JUNE, 2010CURRENT ASSETS

Cash AssetsReceivablesTOTAL CURRENT ASSETS

8(a)9

26,855,471 25,290,684 26,360,741 24,819,12742,869,404 34,804,558 42,862,641 34,800,61269,724,875 60,095,242 69,223,382 59,619,739

494,7306,763

501,493

471,5573,946

475,503

NON-CURRENT ASSETSProperty, plant & equipment 7 252,539 - 252,539 - - -Receivables 9 50,754,386 49,467,806 50,754,386 49,467,806 - -TOTAL NON-CURRENTASSETSTOTAL ASSETS

51,006,925 49,467,806 51,006,925 49,467,806120,731,800 109,563,048 120,230,306 109,087,545

-501,493

-475,503

CURRENT LIABILITIESPayables 2,375,327 2,151,665 2,352,539 2,148,163 22,758 3,502Premiums in advance 10 20,344,090 19,168,622 20,344,090 19,168,622 - -Provision for claimsoutstanding 11(a) 19,013,209 20,352,000 18,905,209 20,244,000 108,000 108,000TOTAL CURRENT LIABILITIES 41,732,626 41,672,287 41,601,868 41,560,785 130,758 111,502

NON-CURRENT LIABILITIESProvision for claimsoutstanding 11(a) 70,842,256 54,756,229 70,842,256 54,756,229 - -TOTAL NON-CURRENTLIABILITIESTOTAL LIABILITIES

70,842,256 54,756,229 70,842,256 54,756,229112,574,882 96,428,516 112,444,124 96,317,014

-130,758

-111,502

NET ASSETSEQUITY

8,156,918 13,134,5328,156,918 13,134,532

7,786,182 12,770,5317,786,182 12,770,531

370,735370,735

364,001364,001

The accompanying notes form an integral part of these statements.80> MAV INSURANCE FINANCIAL REPORT 2009/10

STATEMENT OF CHANGES IN EQUITYFOR THE YEAR ENDED 30 JUNE, 2010

NOTE2010

$

COMBINED

2009$

CIVIC MUTUAL PLUS

2010 2009$ $

MUNICIPAL OFFICERS’FIDELITY GUARANTEE FUND

2010 2009$ $

Balance at beginning of year 13,134,532 15,798,876 12,770,531 15,383,786 364,001 415,075Surplus/(deficit) from ordinaryactivities (4,977,614) (2,664,344) (4,984,348) (2,613,255) 6,734 (51,074)BALANCE AT END OF YEAR 8,156,918 13,134,532 7,786,182 12,770,531 370,735 364,001

STATEMENT OF CASH FLOWSFOR THE YEAR ENDED 30 JUNE, 2010

NOTE2010

$

COMBINED

2009$

CIVIC MUTUAL PLUS

2010 2009$ $

MUNICIPAL OFFICERS’FIDELITY GUARANTEE FUND

2010 2009$ $

CASH FLOW FROMOPERATING ACTIVITIESRECEIPTSPremiums and fees 25,299,330 20,043,260 24,560,017 19,315,194 793,316 728,066Performance bonusInvestment income

-1,017,489

4,541,7371,187,336

-1,001,888

4,541,7371,163,446

-15,601

-23,890

Reinsurance and other recoveries 16,807,815 13,808,690 16,802,279 13,731,129 5,536 77,561

PAYMENTSSuppliersClaim payments

(20,490,666) (19,888,393) (19,767,294) (19,114,305)(20,791,721) (14,003,157) (20,777,814) (13,890,537)

(723,375)(13,907)

(774,088)(112,620)

NET CASH PROVIDED BY/(USED IN) OPERATINGACTIVITIES 8(b) 1,842,247 5,689,473 1,819,074 5,746,664 23,173 (57,191)

Proceeds from sale of fixed assetsPayments for fixed assets & intangibles

277,117(554,577)

--

277,117(554,577)

--

--

--

NET CASH USED IN INVESTINGACTIVITIES (277,460) - (277,460) - - -NET INCREASE/(DECREASE) IN CASH HELD 1,564,787 5,689,473 1,541,614 5,746,664 23,173 (57,191)

Cash at beginning of year 25,290,684 19,601,211 24,819,127 19,072,463 471,557 528,748CASH AT END OF YEAR 8(a) 26,855,471 25,290,684 26,360,741 24,819,127 494,730 471,557The accompanying notes form an integral part of these statements.

MAV INSURANCE FINANCIAL REPORT 2009/10 >81

NOTES TO AND FORMING PART OF THE FINANCIALSTATEMENTS FOR THE YEAR ENDED 30 JUNE 20101. CORPORATE INFORMATION

The combined financial report of MAV Insurance for the year ended 30 June 2010 was authorised for issue in accordance with a resolution ofthe Directors of the Municipal Association of Victoria on the date shown on the attached Statement by Directors.MAV Insurance is the insurance division of the Municipal Association of Victoria. The Municipal Association of Victoria is an associationincorporated by an Act of the Parliament of Victoria known as the Municipal Association Act 1907.The nature of the operations and principal activities of MAV Insurance are the provision of public liability, professional indemnity and fidelityinsurance to its members and community groups within its council member boundaries.

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 financialreport. 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 complianceThe 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)

(c) Adoption of new accounting standardThe Association has adopted AASB 7 Financial Instruments; Disclosures and all consequential amendments which became applicable on 1January 2007. The adoption of this standard has only affected the disclosure in these financial statements. There has been no affect on profitand loss or the financial position of the Association or any of its divisions.

(d) The Basis of the Combined ReportThe combined financial report relates to the insurance activities of the Municipal Association of Victoria being its controlled entities the LocalGovernment Mutual Liability Insurance Scheme (trading as Civic Mutual Plus, - CMP), and the Municipal Officers’ Fidelity Guarantee Fund.The presentation of the combined balances is for management purposes only. The two entities are separate independent legal entities.The effects of all transactions between entities in the Combined entity have been eliminated.The financial statements of the entities are prepared for the same reporting period as the Municipal Association of Victoria, using consistentaccounting policies.

(e) Income taxThe entities are exempt from income tax, in accordance with sections 50-10 and 50-25 of the Income Tax Assessment Act 1997.

(f) Cash and cash equivalentsCash and cash equivalents in the balance sheet comprise cash at bank and in hand and short-term deposits with an original maturity of threemonths or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. For thepurposes of the Cash Flow Statement, cash and cash equivalents consist of cash and cash equivalents as defined above, net of outstandingbank overdrafts. Bank overdrafts are included within interest-bearing loans and borrowings in current liabilities on the balance sheet.

(g) Trade and other receivablesTrade receivables, which generally have 30-60 day terms, are recognised initially at fair value and subsequently measured at amortised

costusing the effective interest method, less an allowance for impairment.Collectability of trade receivables is reviewed on an ongoing basis at an operating unit level. Individual debts that are known to beuncollectible are written off when identified. An impairment provision is recognised when there is objective evidence that the Group will notbe able to collect the receivable. Financial difficulties of the debtor, default payments or debts more than 60 days overdue are consideredobjective evidence of impairment. The amount of the impairment loss is the receivable carrying amount compared to the present value ofestimated future cash flows, discounted at the original effective interest rate.

(h) Trade and other payablesTrade and other payables are carried at amortised cost due to their short term nature they are not discounted. They represent liabilities forgoods and services provided to the Group prior to the end of the financial year that are unpaid and arise when the Group becomes obliged tomake future payments in respect of the purchase of these goods and services. The amounts are unsecured and are usually paid within 30 daysof recognition.

82> MAV INSURANCE FINANCIAL REPORT 2009/10

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2010

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

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

(k) Premiums receivableDuring the month of June each year, the CMP Scheme issues premium notices to Scheme Members. The risk attaches to the premiums inthe next accounting period and accordingly the revenue is recognised each following year commencing 1 July. Prior to each balance datemembers have committed to participate in the scheme and the fund for the ensuing year and accordingly the premiums are disclosed in thebalance sheet as ‘contributions receivable’ with an offsetting liability described as ‘contributions billed in advance.’

(l) ClaimsClaims-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.The liability for outstanding claims is measured as the present value of the expected future payments, reflecting the fact that all the claimsdo not have to be paid out in the immediate future. The expected future payments are estimated on the basis of the ultimate cost of settlingclaims, which is affected by factors arising during the period to settlement such as normal inflation and ‘superimposed inflation.’Superimposed inflation refers to factors such as trends in court awards, for example increases in the level and period of compensation forinjury. 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 appliedare disclosed in note 16.Claims-incurred expense has reduced from the prior year due to the impact of:(i) improved risk management practices by members, and(ii) reform to the law of tort.

(m) Other financial assetsInvestments are valued at net market value at balance date. Investment income includes interest received and receivable on investments andchanges in net market values of investments in cash and bond unit trusts at call.

(n) Cash flowsFor the purposes of the statement of cash flows, cash includes cash on hand and deposits held at call with banks and investments in cashbacked unit trusts net of outstanding bank overdrafts.

(o) Reinsurance and other recoveries receivableReinsurance 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.Reinsurance recoveries are reduced from the prior year due to a reduction in claims caused by:(i) improved risk management practices by members, and(ii) reform to the law of tort.

(p) Revenue recognitionRevenue is recognised to the extent that it is probable that the economic benefit will flow to the entity and the revenue can be reliablymeasured. 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.

(q) Comparative figuresWhere necessary, comparative figures have been adjusted to conform with changes in presentation in the current year.

(r) Catastrophe insuranceCatastrophe insurance relates to insurance premiums paid to reinsurers in accordance with the established reinsurance strategy of the entityand in order to protect the insurance businesses from catastrophic and unforseen claims.

MAV INSURANCE FINANCIAL REPORT 2009/10 >83

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2010

NOTE2010

$

COMBINED

2009$

CIVIC MUTUAL PLUS

2010 2009$ $

MUNICIPAL OFFICERS’FIDELITY GUARANTEE FUND

2010 2009$ $

3. REVENUE FROMORDINARY ACTIVITIESREVENUES FROMOPERATING ACTIVITIESPremiums 19,621,762 19,520,661 18,962,668 18,880,563 659,094 640,098Performance bonus 18 1,995,765 4,541,737 1,995,765 4,541,737 - -Reinsurance and otherrecoveries 2(o) 25,885,294 22,029,456 33,552,913 21,951,895 5,536 77,561TOTAL REVENUE FROMOPERATING ACTIVITIES 47,502,821 46,091,854 54,511,346 45,374,195 664,630 717,659REVENUES FROMNON-OPERATING ACTIVITIESInvestment income 1,017,744 1,182,050 999,086 1,158,004 18,658 24,046TOTAL REVENUE FROMOUTSIDE THE OPERATINGACTIVITIES 1,017,744 1,182,050 999,086 1,158,004 18,658 24,046TOTAL REVENUE FROMORDINARY ACTIVITIES 48,520,565 47,273,904 55,510,432 46,532,199 683,288 741,705

4(a)CLAIMS EXPENSESPaid 20,943,264 14,623,047 20,839,135 14,420,205 104,129 202,842Outstanding claims atend of financial year 11(a) & 2(l) 89,855,465 75,108,229 89,747,465 75,000,229 108,000 108,000Outstanding claims atbeginning of financial yearTOTAL CLAIMS EXPENSES

(75,108,229) (56,676,074)(75,000,229) (56,568,074)35,690,500 33,055,202 35,586,371 32,852,360

(108,000)104,129

(108,000)202,842

4(b)ADMINISTRATION ANDGENERAL EXPENSESThe following items havebeen recognised in theoperating surplus (deficit):Stamp dutyAudit fees

1,418,97382,714

1,320,223104,837

1,418,97378,214

1,320,22399,818

-4,500

-5,019

Administration 19 1,940,987 1,474,468 1,917,260 1,464,837 23,727 11,631Actuary and legal feesDepreciation leasehold improvementsDepreciation furniture & equipmentScheme management feeTOTAL EXPENDITURE

147,19821,670

3,2523,149,0266,763,820

270,518--

3,233,4466,403,492

142,57721,670

3,2523,038,7486,620,694

253,031--

3,123,1756,259,084

4,621--

110,278143,126

17,487-

110,271144,408

5. AUDITOR’S REMUNERATIONAmounts payable or dueand payable for audit services:AUDIT OF THE ENTITYTAX COMPLIANCE

82,714-

82,714

104,837-

104,837

78,214-

78,214

99,818-

99,818

4,500-

4,500

5,019-

5,019

84> MAV INSURANCE FINANCIAL REPORT 2009/10

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2010

2010$

COMBINED

2009$

CIVIC MUTUAL PLUS

2010 2009$ $

MUNICIPAL OFFICERS’FIDELITY GUARANTEE FUND

2010 2009$ $

6. SCHEME MANAGEMENT FEESIncluded within administrationand general expenses aremanagement fees for:Re-Insurance placement 1,807,385 1,826,074 1,807,385 1,826,074 - -Risk management andadministrative services 1,341,641 1,407,372 1,231,363 1,297,101 110,278 110,271Total administratiionClaims management

4(b) 3,149,0261,103,138

3,233,4461,131,280

3,038,7481,012,916

3,123,1751,041,058

110,27890,222

110,27190,222

TOTAL SCHEMEMANAGEMENT FEES 4,252,164 4,364,726 4,051,664 4,164,233 200,500 200,493

7. PROPERTY, PLANT & EQUIPMENTLeasehold Improvements - at costLess accumulated depreciation

Furniture and Equipment - at costLess accumulated depreciation

179,44121,670

157,77198,020

3,25294,768

------

179,44121,670

157,77198,020

3,25294,768

------

------

----

TOTAL PROPERTY, PLANT ANDEQUIPMENT 252,539 - 252,539 - - -

Reconciliations of the carrying amounts ofproperty, plant and equipment at thebeginning and end of the financial year.LEASEHOLD IMPROVEMENTSMovements during the yearBeginning of yearAdditions

-456,557

--

-456,557

--

--

--

Disposals 277,117 277,117DepreciationEnd of year

21,670157,771

--

21,670157,771

--

--

--

FURNITURE AND EQUIPMENTMovements during the yearBeginning of yearAdditionsDepreciationEnd of year

-98,020

3,25294,768

----

-98,020

3,25294,768

----

----

----

8. NOTES TO THE CASH FLOW STATEMENT(a) Cash and cash equivalents at balance date as

shown in the Statement of Cash Flows are heldin Standard and Poor’s rated AA and AAf ratedcash deposits and are reconciled to the relateditems in the Balance Sheet as follows:Cash at bank 7,846,854 7,193,653 7,833,114 6,942,637 13,740 251,016Other financial assetsTOTAL CASH

19,008,617 18,097,031 18,527,627 17,876,49026,855,471 25,290,684 26,360,741 24,819,127

480,990494,730

220,541471,557

MAV INSURANCE FINANCIAL REPORT 2009/10 >85

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2010

NOTE2010

$

COMBINED

2009$

CIVIC MUTUAL PLUS

2010 2009$ $

MUNICIPAL OFFICERS’FIDELITY GUARANTEE FUND

2010 2009$ $

8(b) Reconciliation of Net CashUsed In Operating Activitiesto Operating Surplus/(Deficit)Surplus/(deficit) for year (4,977,614) (2,664,329) (4,984,348) (2,613,255) 6,734 (51,074)Depreciation and Amortisation 24,922 - 24,922 - - -CHANGES IN ASSETS & LIABILITIES(Increase)/decrease inaccounts receivable 2(o) (21,444,721) 2,485,237 (21,441,884) 2,485,566 (2,837) (329)Increase/(decrease) inaccounts payable 207,795 (120,593) 188,519 (114,805) 19,276 (5,788)(Increase)/decrease in provisionfor reinsurance recoveries 14,026,164 (11,959,171) 14,026,164 (11,959,171) - -Increase/(decrease) inoutstanding claims 2(o) 12,830,236 17,660,270 12,830,236 17,660,270 - -Increase/(decrease) inunearned revenue 1,175,465 288,059 1,175,465 288,059 - -CASH FLOWS (USED IN)/FROM OPERATIONS 1,842,247 5,689,473 1,819,074 5,746,664 23,173 (57,191)

9. RECEIVABLESFuture reinsurance andother recoveries receivableDiscount to present value

2(o) 80,531,587 72,327,806 80,531,587 72,327,806(7,673,155) (9,215,000) (7,673,155) (9,215,000)72,858,432 63,112,806 72,858,432 63,112,806

---

---

Less: Doubtful Debts - - - - - -Premiums receivable 2(k) 18,310,798 17,863,762 18,310,798 17,863,762 - -Other receivables 2,454,560 3,295,796 2,447,797 3,291,850 6,763 3,946TOTAL RECEIVABLES 93,623,790 84,272,364 93,617,027 84,268,418 6,763 3,946Represented by:CURRENTNON-CURRENTTOTAL

42,869,404 34,804,558 42,862,641 34,800,61250,754,386 49,467,806 50,754,386 49,467,80693,623,790 84,272,364 93,617,027 84,268,418

6,763-

6,763

3,946-

3,946

Reinsurance recoveries are due from reinsurers with Standard and Poor’s ratings of AA+, AA-, A+ and A. Other recoveries are due fromunrated local authorities based in Victoria and Tasmania.The ageing analysis of premiums receivable and other receivables are as follows:

Total >30days

31-60days

61-90days

>90days

2010CombinedCivic Mutual Plus

20,765,358 20,765,35820,758,595 20,758,595

--

--

--

Fidelity Fund 6,763 6,763 - - -

2009CombinedCivic Mutual Plus

21,159,558 21,159,55821,155,612 21,155,612

--

--

--

Fidelity Fund 3,946 3,946 - - -All premiums receivable and other receivables are due from local authorities based in Victoria and Tasmania.

86> MAV INSURANCE FINANCIAL REPORT 2009/10

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2010

NOTE2010

$

COMBINED

2009$

CIVIC MUTUAL PLUS

2010 2009$ $

MUNICIPAL OFFICERS’FIDELITY GUARANTEE FUND

2010 2009$ $

10. PREMIUMS IN ADVANCEContributions billed in advance 2(k) 20,344,090 19,168,622 20,344,090 19,168,622

11(a)OUTSTANDING CLAIMS

- -

Central estimateDiscount to present value

2(l) 92,621,866 81,069,229 92,531,866 80,979,229(9,919,401) (10,728,000) (9,919,401) (10,728,000)82,702,465 70,341,229 82,612,465 70,251,229

90,000-

90,000

90,000-

90,000Claims handling costs 3,276,000 2,807,000 3,276,000 2,807,000 - -Risk margin 11(b) 3,877,000 1,960,000 3,859,000 1,942,000 18,000 18,000TOTAL OUTSTANDING CLAIMS 89,855,465 75,108,229 89,747,465 75,000,229 108,000 108,000Comprising:CURRENTNON-CURRENTTOTAL CLAIMS PROVISION

19,013,209 20,352,000 18,905,209 20,244,00070,842,256 54,756,229 70,842,256 54,756,22989,855,465 75,108,229 89,747,465 75,000,229

108,000-

108,000

108,000-

108,000

(b) Risk margin - Process for determining risk marginBased on two actuarial publications Taylor Fry Consulting Actuaries, the appointed actuary recommended that a risk margin of 20% of the netliabilities be adopted to give a probability of about 75% that the provisions including the risk margins will prove adequate to meet the relevantliabilities.

(c) Combined reconciliation of movement in discounted outstanding claims liability2010

GROSS REINSURANCE NET GROSS$ $ $ $

2009REINSURANCE

$NET

$

Outstanding claims brought forward 75,108,229 63,112,806 11,995,423 56,676,074 54,616,919 2,059,155Changes in assumptions 21,747,228 16,134,132 5,613,096 14,151,030 13,456,008 695,022Increase in claims incurred/recoveries anticipated 12,826,227 9,745,626 3,080,601 17,660,272 8,495,887 9,164,385Incurred claims recognised inincome statement 34,573,455 25,879,758 8,693,697 31,811,302 21,951,895 9,859,407Claim payments/recoveries duringthe year (19,826,219)(16,134,132) (3,692,087) (13,379,147) (13,456,008) 76,861Outstanding claims carried forward 89,855,465 72,858,432 16,997,033 75,108,229 63,112,806 11,995,423

(d) Affect of Change in Valuation Methodology of outstanding claims liabilityThe Estimate of net outstanding liabilities has increased by $3.935 million in the 12 month period to 30 June 2010 from those estimatedby the previous actuaries in their review at 30 June 2009. This increase is primarily driven by the substantial changes in the valuationmethodologies compared to the previous valuation and some deterioration in claims for the 2009 accident year.

MAV INSURANCE FINANCIAL REPORT 2009/10 >87

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2010

12. NET CLAIMS INCURRED

CURRENT YEAR$

2010PRIOR YEAR

$TOTAL CURRENT YEAR

$ $2009

PRIOR YEAR$

TOTAL$

COMBINEDGross claims and relatedexpenses - undiscounted 21,410,197 13,475,713 34,885,910 34,339,364 764,015 35,103,379Discount (3,117,422) 3,922,012 804,590 (5,084,000) 3,035,823 (2,048,177)Gross claims and related expenses- discounted

Reinsurance and other recoveries18,292,775 17,397,725 35,690,500 29,255,364 3,799,838 33,055,202

- undiscountedDiscountReinsurance and other recoveries- discounted

(11,415,003)(25,749,748)(37,164,751) (4,557,151) (7,140,240) (11,697,390)991,035 10,288,422 11,279,457 21,466,000 (31,798,066) (10,332,066)

(10,423,968) (15,461,326) (25,885,294) 16,908,849 (38,938,305) (22,029,456)NET CLAIMS INCURRED 7,868,807 1,936,399 9,805,206 46,164,213 (35,138,467) 11,025,746

CIVIC MUTUAL PLUSGross claims and relatedexpenses - undiscounted 21,306,068 13,475,713 34,781,781 34,136,522 764,015 34,900,537Discount (3,117,422) 3,922,012 804,590 (5,084,000) 3,035,823 (2,048,177)Gross claims and related expenses- discounted

Reinsurance and other recoveries18,188,646 17,397,725 35,586,371 29,052,522 3,799,838 32,852,360

- undiscountedDiscountReinsurance and other recoveries- discounted

(11,409,467) (25,749,748) (37,159,215) (4,479,590) (7,140,240) (11,619,829)991,035 10,288,422 11,279,457 21,466,000 (31,798,066) (10,332,066)

(10,418,432) (15,461,327) (25,879,758) 16,986,410 (38,938,305) (21,951,895)NET CLAIMS INCURRED 7,770,214 1,936,399 9,706,613 46,038,932 (35,138,467) 10,900,465

MUNICIPAL OFFICERS’FIDELITY GUARANTEE FUNDGross claims and relatedexpenses - undiscountedDiscount

104,129-

--

104,129-

202,842-

--

202,842-

Gross claims and related expenses- discounted 104,129 - 104,129 202,842 - 202,842

Reinsurance and other recoveries- undiscounted

Discount(5,536)

---

(5,536)-

(77,561)-

--

(77,561)-

Reinsurance and other recoveries- discounted

NET CLAIMS INCURRED(5,536)98,593

--

(5,536)98,593

(77,561)125,281

--

(77,561)125,281

88> MAV INSURANCE FINANCIAL REPORT 2009/10

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2010

13. CLAIMS DEVELOPMENT TABLE

ACCIDENT YEARNOTE

2006$

2007$

2008$

2009$

2010$

TOTAL$

CIVIC MUTUAL PLUSAt end year of accidentOne year laterTwo years laterThree years laterFour years laterCurrent estimate of cumulativeclaims cost

19,426,057 12,918,950 11,438,398 33,095,464 20,293,15214,414,065 10,750,452 14,574,373 41,692,81613,972,302 12,452,238 15,754,62113,554,890 14,523,33913,970,384

13,970,384 14,523,339 15,754,621 41,692,816 20,293,152 106,234,313Cumulative payments (5,860,700) (4,906,466) (2,164,518) (8,008,798) (421,835) (21,362,318)Outstanding claims - undiscountedDiscountClaims handling expense2004 and prior

8,109,684 9,616,873 13,590,103 33,684,018 19,871,317 84,871,995(11,820,073)

2,760,00013,935,543

TOTAL GROSSOUTSTANDING CLAIMS- CIVIC MUTUAL PLUS 11(a) 89,747,465TOTAL GROSS OUTSTANDINGCLAIMS - MUNICIPALOFFICERS’ FIDELITYGUARANTEE FUND 11(a)COMBINED GROSSOUTSTANDING CLAIMS 11(c)

NET ESTIMATE OFULTIMATE CLAIMS COST

108,000

89,855,465

At end year of accidentOne year laterTwo years laterThree years later

2,182,4372,104,5231,832,8511,340,145

2,103,8261,723,4931,789,409

697,816

2,336,670 10,850,8741,146,195 19,307,2131,143,419

8,883,685

Four years laterCurrent estimate of cumulative

741,774

claims costCumulative paymentsOutstanding claims - undiscounted

741,774(489,718)252,056

697,816(342,513)355,304

1,143,419 19,307,213(477,314) (7,145,128)666,105 12,162,084

8,883,685 30,773,907(285,250) (8,739,923)

8,598,435 22,033,984DiscountClaims handling expense2004 and priorTOTAL NETOUTSTANDING CLAIMS- CIVIC MUTUAL PLUSTOTAL NETOUTSTANDING CLAIMS- MUNICIPAL OFFICERS’FIDELITY GUARANTEE FUNDCOMBINED NETOUTSTANDING CLAIMS 11(c)

(5,419,123)516,000

(241,828)

16,889,033

108,000

16,997,033These tables show the trend in the balance of outstanding claims.

MAV INSURANCE FINANCIAL REPORT 2009/10 >89

COMBINED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2010

14. FINANCIAL RISK MANAGEMENT POLICIES AND OBJECTIVESThe Group’s exposure to interest rate risk and the effective average interest rate for the classes of financial assets are set out below:

COMBINED CIVIC MUTUAL PLUS MUNICIPAL OFFICERS’FIDELITY GUARANTEE FUND

NON-INTERESTEARNING

FLOATING NON-INTERESTINTEREST RATE EARNING

FLOATING NON-INTERESTINTEREST RATE EARNING

FLOATINGINTEREST RATE

$ $ $ $ $ $2010

FINANCIAL ASSETSBank - 7,846,854 7,833,114 - 13,740Cash investments - 19,008,617 18,527,627 - 480,990Receivables 93,623,790 - 93,617,027 - 6,763 -TOTAL FINANCIAL ASSETS 93,623,790 26,855,471 93,617,027 26,360,741 6,763 494,730Weighted average interest rate 3.9% 3.9% 3.84%

FINANCIAL LIABILITIESOutstanding claimsUnearned premiums/subscriptions

89,855,46520,344,090

- 89,747,465- 20,344,090

--

108,000-

--

Accounts payable 2,170,921 - 2,148,163 - 22,758 -TOTAL FINANCIAL LIABILITIES 24,493 24,493 -Weighted average interest rate 112,370,476 -112,239,718 - 130,758 -

FINANCIAL ASSETS

0%2009

0% 0%

Bank 7,193,654 - 6,942,637 - 251,017Cash investments - 18,097,030 - 17,876,490 - 220,540Receivables 84,272,364 - 84,268,418 - 3,946 -TOTAL FINANCIAL ASSETS 84,272,364 25,290,684 84,268,418 24,819,127 3,946 471,557Weighted average interest rate 5.3% 5.3% 4.8%

FINANCIAL LIABILITIESOutstanding claimsUnearned premiums/subscriptions

75,108,22919,168,622

- 75,000,229- 19,168,622

--

108,000-

--

Accounts payable 2,151,665 - 2,148,163 - 3,502 -TOTAL FINANCIAL LIABILITIESWeighted average interest rate

96,428,516 - 96,317,0140%

-0%

111,502 -0%

The Bank and Cash Investments are considered level 1 financial assets in accordance with AASB7. The carrying amounts of financial assetsand financial liabilities represent their approximate net fair value.All maturity dates are within twelve months.

90> MAV INSURANCE FINANCIAL REPORT 2009/10

COMBINED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2010

14. FINANCIAL RISK MANAGEMENT POLICIES AND OBJECTIVES (continued)The table below reflects all contractually fixed pay-offs and receivables for settlement, repayments and interest resulting from recognisedfinancial assets and liabilities as at 30 June 2010. Cash flows for financial assets and liabilities without fixed amounts or timing are based onconditions existing at 30 June 2010

The remaining contractual maturities of the financial liabilities are:

2010COMBINED

2009CIVIC MUTUAL PLUS

2010 2009MUNICIPAL OFFICERS’

FIDELITY GUARANTEE FUND2010 2009

$ $ $ $ $ $3 months or less3-12 months1-5 yearsOver 5 years

27,557,466 26,509,662 27,426,708 26,398,16014,175,160 15,162,625 14,175,160 15,162,62560,528,626 42,220,169 60,528,626 42,220,16910,313,630 12,536,060 10,313,630 12,536,060

130,759---

111,502---

112,574,882 96,428,516 112,444,124 96,317,014 130,759 111,502

Maturity analysis of financial assets and liabilities based on management’s expectation.The risk implied from the values in the table below, reflects a balanced view of cash inflows and outflows. These liabilities originate frominsurance contracts and other financial assets used in the ongoing operations of the business. These assets are considered in the Association’soverall liquidity risk. To monitor existing financial assets and liabilities as well as to enable effective controlling of future risks, the Associationhas established a comprehensive risk reporting covering its insurance business that reflects the expectations of the management of expectedsettlement of financial assets and liabilities.

Year Ended 30 June 2010 <3 months 3-12 1-5 years >5 years Totalmonths

$ $ $ $ $COMBINEDFINANCIAL ASSETSCash and cash equivalentsReceivables

COMBINEDFINANCIAL LIABILITIES

26,855,47131,259,188 11,610,216 43,325,91058,114,659 11,610,216 43,325,910

26,855,4717,428,476 93,623,7907,428,476120,479,261

Outstanding claimsUnearned premiums/

4,838,049 14,175,160 60,528,626 10,313,630 89,855,465

subscriptions 20,344,090 - - - 20,344,090Accounts payable 2,375,327 - - - 2,375,327TOTAL FINANCIAL LIABILITIES 27,557,466 14,175,160 60,528,626 10,313,630 112,574,882NET MATURITY 30,557,193 (2,564,944)(17,202,716) (2,885,154) 7,904,379

MAV INSURANCE FINANCIAL REPORT 2009/10 >91

COMBINED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2010

14. FINANCIAL RISK MANAGEMENT POLICIES AND OBJECTIVES (continued)

Risk management objectives and policies for mitigating insurance riskThe local government mutual liability scheme (trading as Civic Mutual Plus) is established by legislation contained in the Municipal AssociationAct 1907. Membership is available to local government councils and prescribed bodies. The Scheme operates in Victoria and Tasmania toprovide services to members in respect of their potential and actual liabilities. A member may seek indemnity from the Scheme in respect ofa 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 risksThe 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 reducethe incidence of claims to the Scheme.

Reinsurance strategyThe Scheme adopts a conservative approach towards management of risk and does this by utilising various risk transfer options. The MAVInsurance Committee determines the level of risk, which is appropriate for the Scheme having regards to ordinary concepts of prudenceand regulatory constraints. The risk transfer arrangements adopted by the Scheme include the utilisation of commercial reinsurance / excessarrangements. These arrangements include constant review of both reinsurers’ financial strength, and ensuring spread of risk among reinsurers whomeet the requirements of the MAV insurance policies. These risk transfer arrangements assist the Scheme to limit exposures to large single claimsand catastrophic events. These programs are regularly reviewed each year to ensure that they continue to meet the risk needs of the Scheme.

Terms and conditions of membershipMembership to the Scheme is offered to eligible bodies and renewed annually on 30th 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.

Product featuresThe Scheme operates in Victoria and Tasmania. Should a claim be accepted the Scheme provides indemnity to the member in respect of theircivil liabilities for $500 million public / products liability and $300 million for professional indemnity insurance, subject to any excess, for anyclaim incurred 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.

92> MAV INSURANCE FINANCIAL REPORT 2009/10

COMBINED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2010

14. FINANCIAL RISK MANAGEMENT POLICIES AND OBJECTIVES (continued)Management of risksThe 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 its 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 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 risksInsurance risk is managed by taking a long term approach to setting the annual contribution rates that eliminates price fluctuations,appropriate investment strategy, reinsurance and by maintaining an active state-wide risk management profile. It is vital that the Schemespreads its risk of reinsurance failure by ensuring reinsurers are of high financial quality and can meet their commitments to the Association.The Association maintains policies and strategies and receives advice from an independent actuary on at least an annual basis in order todetermine the concentration and amount of risk exposure. The Association keeps abreast of changes in the general economic, legal andcommercial environment in which it operates.

CREDIT RATINGAAA+/-$m

AA+/-$m

A+/-$m

BBB

$m

SPECULATIVEGRADE

$m

NOTRATED

$m

TOTAL

$m

Reinsurance and otherrecoveries on outstandingclaims 2010

2009--

2.4332.284

25.88625.669

--

--

0.6641.612

28.98329.565

Reinsurance and otherrecoveries on paid claims 2010

2009--

0.0921.368

4.6613.118

--

--

0.7951.470

5.5485.956

PAST DUE BUT NOT IMPAIREDNEITHER PAST

DUE NOR IMPAIRED$m

LESS THAN3 MONTHS

$m

3 TO 6MONTHS

$m

6 MONTHSTO 1 YEAR

$m

GREATERTHAN 1 YEAR

$m

IMPAIRED

$m

TOTAL

$m

Reinsurance and otherrecoveries on paid claims 2010

2009--

4.6923.938

0.0060.125

0.0300.376

0.0540.088

.7651.429

5.5475.956

Interest rate riskThe reinsurance indemnity contracts contain no clauses that expose the Scheme, directly to interest rate risk. The reinsurance contracts are longterm arrangements, reviewed and payable annually.IMPACT OF CHANGES IN INTEREST RATES - CIVIC MUTUAL PLUSVariable

Base value at 30 June 2010Interest rate pa

Current Rate

%

4.75%

Changevariable

to%

5.75%3.75%

Operatingsurplus at

30 June 2010$

(4,984,348)(4,405,105)(5,593,677)

Total accumulatedfunds after the impactof applying variable

$7,786,1828,365,4257,176,853

MAV INSURANCE FINANCIAL REPORT 2009/10 >93

COMBINED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2010

14. FINANCIAL RISK MANAGEMENT POLICIES AND OBJECTIVES (continued)Credit riskThe Scheme is exposed to credit risk on insurance contracts as a result of exposure to reinsurers. The credit risk to reinsurers is managedthrough the Scheme’s Reinsurance Management Strategy and policies that includes regularly monitoring both the financial rating of thereinsurers both prior to and during the reinsurance program and the flow of payments coming from the reinsurers. Investments in cashand cash equivalents at balance date as shown in the Statement of Cash Flows are held in Standards and Poor’s rated AA and AAf ratedcash deposits.Price riskInvestments held are not subject to price risk. Investments are cash deposits held in Australian banks.

15. ACCOUNTING ESTIMATES AND JUDGEMENTSThe 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 liabilityProvision is made at the year-end for the estimated cost of claims incurred but not settled at the balance sheet date, including the cost ofclaims incurred but not yet reported (‘IBNR’) to the Scheme.The Scheme takes all reasonable steps to ensure that it has appropriate information regarding its claims exposure. However, given theuncertainty in 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) Allowance for incurred but not reported claims as confirmed by the actuarial review on 30 June 2010;(iii) An allowance of 4% for claim settlement expenses, as assumed by the Actuary;(iv) Allowances for discount at 4.75%, as assumed by the Actuary;(v) 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 16.

(b) Assets arising from reinsurance contractsAssets arising from reinsurance contracts were estimated for each accident year, from the payments to date and estimated outstandingclaims history at 30 June 2010, taking into account the reinsurance terms applying to that accident year. In calculating the present value ofreinsurance recoveries, allowance was made for an average recovery delay of three and half months, as assumed by the Actuary.In accordance with the Actuarial recommendations an allowance was made for non-recoveries from relevant insurers.

16. ACTUARIAL ASSUMPTIONS AND METHODSActuarial assumptionsThe following assumptions have been made in determining the outstanding claims liabilities:

KEY ACTUARIAL ASSUMPTIONS2010 2009

Wage inflationClaim administration expenseSuperimposed inflationDiscount rateReinsurer Default

Risk

margin

94> MAV INSURANCE FINANCIAL REPORT 2009/10 3.25%4%0%

4.75%1%

20%

3.25%4%1%

4.75%1.5%20%

COMBINED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2010

16. ACTUARIAL ASSUMPTIONS AND METHODS (continued)Process used to determine actuarial assumptionsA description of the processes used to determine the above key actuarial assumptions is provided below:Civic Mutual Plus has provided public and professional indemnity insurance to local government bodies in Victoria and Tasmania and otherbodies constituted under any Act for any public or local governing purpose since 30/9/1993. The Actuary was supplied with details of alltransactions (payments, recoveries, changes of estimates) from 30 September 1993 to 30 June 2010. The individual claim payments and caseestimates reconciled closely with totals in Civic Mutual Plus’s financial statements for each year of cover. The actuary subdivided the claimsdata into three claim types (Public Liability, Professional Indemnity and the 2009 Bushfire claims) and made separate estimates of the grossoutstanding claims liabilities for each of these claim types. The actuary estimated the gross outstanding claims liabilities for each claim typeusing 5 different actuarial methods. Large claims (claims above $250,000) were estimated based on a numbers times average size methodand non-large claims were estimated using 4 different actuarial methods- payments per claim incurred, payments per claim finalised, incurredcost development and projection of case estimates. The actuary selected a combination of these methods for estimating the outstanding claims.Payments were projected with a payment pattern, based on past experience. Estimates of outstanding excesses were based on a numbers timesaverage size method and estimates of non reinsurance recoveries were made by a recoveries per claim method.Estimates of reinsurance recoveries were made from projected gross payments, excesses and non reinsurance recoveries, allowing for thedifferent insurance treaties applying to each year. Based on Access Economics June 2010 forecasts for Victorian average weekly claims inflationwas assumed to be 3.25%. The discount rate was assumed to be 4.75% pa., derived from the yields on Commonwealth government bonds.Based on the actual expense rates of Civic Mutual Plus, claim administration expenses were assumed to be 4% of the net claim payments.Based on two actuarial publications the actuary recommended that a risk margin of 20% of the net liabilities be adopted to give a probabilityof about 75% that the provisions including the risk margins will prove adequate to meet the relevant liabilities.

VARIABLEWage inflation

Superimposed inflation

Discount rate

Case estimate development

IMPACT OF MOVEMENT IN VARIABLEExpected future payments are inflated to take account of inflationary increases. An increase ordecrease in the assumed levels of economic inflation would have a corresponding impact on claimsexpense, with particular reference to longer tail claims.In addition to the general economic inflation rate an amount is superimposed to take account ofnon-economic inflationary factors, such as increases in court awards. Such rates of superimposedinflation are specific to the model adopted. An increase or decrease in the assumed levels ofsuperimposed inflation would have a corresponding impact on claims expense, with particularreference to longer tail claims.The outstanding claims liability is calculated by reference to expected future payments. Thesepayments are discounted to adjust for the time value of money. An increase or decrease in theassumed discount rate will have an opposing impact on total claims expense.Case estimates are initially established in accordance with established guidelines and by referenceto 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 onclaims expense.

IMPACT OF CHANGES IN KEY VARIABLESCIVIC MUTUAL PLUSVariable

B

ase

valu

e at 30 June 2010Inflation rate pa

Current Rate

%

3.25%

Changevariable

to%

4.25%2.25%

Operatingsurplus at

30 June 2009

$

(4,984,348)(6,317,559)(4,076,650)

Total accumulatedfunds after the impactof applying variable

$

7,786,1826,452,9718,693,880

MAV INSURANCE FINANCIAL REPORT 2009/10 >95

COMBINED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2010

17. CAPITAL MANAGEMENT OBJECTIVESThe Association is specifically excluded from the provisions of the Insurance Act and from APRA regulation. There is no externally imposed capitalrequirement on the Association. The Association’s capital management philosophy is focused on capital efficiency and effective risk management tosupport a progressive business model for the benefit of members of both CMP and the Municipal Officers’ Fidelity Guarantee Fund.The independent actuary provides advice on the target capital holding on at least an annual basis. The target capital holding is to be at a levelthat provides operational flexibility, avoids sudden increases in contribution levels in response to fluctuations in surplus and ensures solvency inthe event of the maximum likely adverse event. Both CMP and the Municipal Officers’ Fidelity Guarantee Fund are non discretionary mutualfunds and have as a last resort an ability to claim against its members to protect its capital holdings.

18. CONTINGENT ASSET - REINSURANCE PERFORMANCE BONUSCMP, in conjunction with similar Local Government Self Insured Mutual Liability Schemes around Australia has entered into a performance bonusarrangement 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.The actuary has calculated the potential value of the CMP Scheme’s performance bonus for the remaining period of the five-year program, atbalance date, to be $6.825 million (2009 $9.3 million). Performance bonus totalling $1.995 million became due and receivable on 30 June2010 and has been received at the date of this report.The reduction in the performance bonus received this year in comparison to last year relates to the lower re-insurance premium going intothe experience account during the 2006 financial year and the deferment of part of this year’s bonus due to uncertainty around some motoraccident claims. There is significant potential for future events to impact the performance bonus receivable and a number of variable factorsinvolved in the final determination of the Scheme’s performance bonus. Accordingly the directors are not satisfied at 30 June 2010 that thepotential benefit is an asset that is probable of receipt and reliably measurable. The financial statements do not include any value attributable tothe potential performance bonus not yet received. The position will be monitored on an annual basis.

19. VICTORIAN BUSHFIRESCMP provides public liability and professional indemnity insurance to Councils affected by the Victorian bushfires. The Municipal Associationof Victoria on behalf of CMP represented Councils at the Victorian Royal Commission into the bushfires. There are 27 Councils that could beimpacted of which half may be subject to an insurance claim. Councils are not substantially liable for the causes or the affects of the bushfiresand as such the quantum of any potential liability is uncertain. The extent of any potential liability for Councils will be impacted substantiallyby the number of events that occurred and the extent of the insurance excesses of affected Councils. In addition, CMP is protected by a strongreinsurance program involving financially sound Australian and international reinsurers. A best estimate of the potential liability of CMP relatingto the Victorian Bushfires is $28.5 million. This amount has been included in the provision for claims outstanding.CMP also provided substantial assistance and support to member’s affected by the Bushfire Royal Commission findings and significantresources have been applied to assist member’s implement the recommendations coming out of the Royal Commission that applies tomembers. These activities have resulted in an increase in the costs of administration of the Scheme.

20. RELATED PARTIESThe Municipal Association of Victoria is a body corporate established under the Municipal Association Act of 1907 to provide services forand represent Local Government authorities in Victoria. The Association and its wholly owned controlled entities trade with its membersin the normal course of business and on an arm’s length basis. The Deed of Establishment provides for the MAV to appoint a

Committeeof Management (MAVIC) to be responsible for the administration of the Scheme. Mr A. Nye was a member of the of the Committee ofManagement up to 2 July 2009 and was Chairman of the Victorian Managed Insurance Authority (VMIA). The MAV and the VMIA from timeto time have conflicting interests in insurance claims matters. Any such claims were settled on commercial terms without the involvement ofthese Committee members. The discreet nature of these transactions is not material. There were no material related party transactions duringthe year.Total expenses of $855,725 (2009 $700,291) were payable to the Municipal Association of Victoria being payment for Administrativesupport, and overseeing the management of the insurance activities, including the conduct of bi-monthly Committee Meetings. Other than thisthere were no material related party transactions during the year.Committee Members During The YearJ. Warburton (Independent Chairperson)A. Murphy (OAM) (Independent)Cr. W McArthur ( MAV President)A. Garcia (LGAT Representative)R. Farrell (Independent)A. Nye (Independent) Resigned 2 July 2009M. Guilmartin (Independent) Appointed 6 November 2009Dr. M. Kennedy (OAM) (CEO, Mornington Peninsula Shire Council)R. Spence (MAV - Chief Executive Officer)Cr. R. Fyffe (MAV Representative)

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COMBINED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2010

RELATED PARTIES (continued)Key management personnel remuneration

2010$

COMBINED

2009$

CIVIC MUTUAL PLUS

2010 2009$ $

MUNICIPAL OFFICERS’FIDELITY GUARANTEE FUND

2010 2009$ $

Independent committee membersreceive meeting fees. The Chairpersonreceives $850 per committee meetingand other independent committeemembers receive $600 per committeemeeting plus $1,133 per annumfor claims and technical committeeand other meetings.Short-term remuneration of keymanagement personnel 203,083 192,905 203,083 192,905 - -

Loans to committee membersNo loans were made to or are payable by committee members.Other transactionsThere were no other material transactions with committee members.InsuranceThe activities of the MAV Insurance Committee members are covered by the MAV directors and officers indemnity insurance policy, effected bythe Municipal Association of Victoria.

MAV INSURANCE FINANCIAL REPORT 2009/10 >97

STATEMENT BY COMMITTEE OF MANAGEMENTIn accordance with a resolution of the MAV Insurance Committee, we state that:In the opinion of the members of the MAV Insurance Committee:

(a) the financial statements and notes of the combined entity are drawn up so as to give a true and fair view of the results of Civic Mutual Plus and

the Municipal Officers’ Fidelity Guarantee Fund for the year ended 30 June 2010;(b) the accompanying Balance Sheet is drawn up so as to give a true and fair view of the state of affairs of Civic Mutual Plus and the Municipal

Officers’ Fidelity Guarantee Fund as at that date; and(c) at the date of this statement there are reasonable grounds to believe that Civic Mutual Plus and the Municipal Officers’ Fidelity Guarantee

Fund will be able to pay its debts as and when they fall due.The financial statements have been made out in accordance with applicable Accounting Standards and other mandatory professional reportingrequirements.On behalf of the MAV Insurance Committee

John WarburtonMAV Insurance Committee Chairman

Robert SpenceMAV Chief Executive Officer

Melbourne27 October 2010

STATEMENT BY DIRECTORSIn accordance with a resolution of the Directors of the Municipal Association of Victoria, we state that:In the opinion of the Directors:

(a) the accompanying Income Statement is drawn up so as to give a true and fair view of the results of Civic Mutual Plus and the MunicipalOfficers’ Fidelity Guarantee Fund for the year ended 30 June 2010;

(b) the accompanying Balance Sheet is drawn up so as to give a true and fair view of the state of affairs of Civic Mutual Plus and the Municipal

Officers’ Fidelity Guarantee Fund as at that date; and(c) at the date of this statement there are reasonable grounds to believe that Civic Mutual Plus and the Municipal Officers’ Fidelity Guarantee

Fund will be able to pay its debts as and when they fall due.The financial statements have been made out in accordance with applicable accounting standards and other mandatory professional reportingrequirements.Signed in accordance with the resolution of Directors.

William McArthurPresident

Melbourne27 October 2010

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Cr. Sam AlessiDirector

COMBINED FINANCIAL REPORTS - INDEPENDENTAUDIT REPORT

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COMBINED FINANCIAL REPORTS - INDEPENDENTAUDIT REPORT

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OTHER INFORMATIONLegal formMAV Insurance is the insurance division of the Municipal Association of Victoria. The Municipal Association of Victoria is an associationincorporated by the Municipal Association of Victoria Act 1907.Domicile:Melbourne, AustraliaAddress of registered office:Level 12, 60 Collins Street, Melbourne, 3000, Victoria, AustraliaPrincipal place of businessLevel 1, 468 St. Kilda Road, Melbourne 3004, Victoria, AustraliaNature of the operation and principal activities:The Municipal Association of Victoria has the power provided to it by the Municipal Association of Victoria Act 1907 to establish Civic MutualPlus and the Municipal Officers’ Fidelity Guarantee Fund in order to provide public liability, professional indemnity and fidelity insurance tolocal government and water authorities.Number of employeesNil

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