Blind Spots for Councils: Why we need greater coordination between asset management and financial management

Most councils have an Asset Management Plan, a Long-Term Financial Plan and a Community Strategic Plan. Asset management is predominantly run by engineers, while financial management is handled by accountants. These two functions report separately, plan on different cycles and meet properly often only when the audit committee requests it. The blind spots between them are where financial sustainability can be quietly lost.

The integration that should already exist

Under the Local Government Act 1993 and the Integrated Planning and Reporting framework, NSW councils are required to develop integrated planning to ensure financial sustainability in line with community priorities. The Community Strategic Plan sets the direction, the Resourcing Strategy translates that direction into a Long-Term Financial Plan, Workforce Plan and Asset Management Plan, and the Delivery Program and Operational Plan turn it into action.

The Audit Office of NSW has repeatedly found that this integration, while clear on paper, is much weaker in practice. In its review of MidCoast Council in 2023, the Auditor-General found the Council had not established effective processes to analyse the true cost of services or address unreliable asset condition data, despite a projected operating deficit over a ten-year horizon. Put simply, asset and financial information were not speaking to one another.

Three blind spots that recur

Blind spot one: Asset condition data does not reach the Long-Term Financial Plan. The Audit Office reports integrity findings each year on asset management, including weak controls over fixed asset registers and revaluation errors running into billions of dollars. When baseline condition data is unreliable, depreciation, renewal forecasts and the backlog calculation all become unreliable. The Long-Term Financial Plan ultimately inherits these compounding errors.

Blind spot two: Renewal funding is treated as a flexible line item. When budgets tighten, the easiest line to defer is asset renewal, largely because the cost falls on a future council. The result is the well-documented NSW infrastructure backlog. The NRMA’s Funding Local Roads report in 2017 identified a $1.96 billion local roads backlog across NSW, rising 13.2 per cent in a single year. The same logic applies across buildings, stormwater and water assets.

Blind spot three: Capital projects are evaluated without their whole-of-life cost. A new aquatic centre, library or hub is typically presented to Council with its construction cost. The operating cost, renewal liabilities and disposal costs are rarely given equal visibility. Over a 50-year asset lifespan, the initial capital cost is usually a minority of the total. Decisions made on capital cost alone bake in financial pressure that the next generation of councillors will need to resolve.

What good integration looks like

Councils that have made progress on integration share a few practical features.

A single source of truth for asset data. The fixed asset register, the asset management system and the financial ledger reconcile with one another, and the reconciliation is reviewed annually. Errors are corrected at source, not patched in reporting.

Joint ownership of the Resourcing Strategy. The Asset Management Plan and Long-Term Financial Plan are prepared collaboratively by engineering, finance and corporate planning, not handed between them. Scenarios are modelled jointly, with sensitivity analysis on both asset condition assumptions and financial assumptions.

Whole-of-life evaluation of capital proposals. Business cases for major projects include construction, operating, renewal and disposal costs across the asset’s life, alongside community benefit. The Office of Local Government’s capital expenditure review guidelines provide the basic framework.

Service-based budgeting. Budgets are presented by service rather than by line item, so the community and the Council can see what each service costs to deliver, maintain and renew. This makes trade-offs visible.

Real-time variance reporting on major projects. Willoughby City Council, following its leisure centre experience, resolved to notify Councillors in real time when the drawdown in a major project contingency reaches 50 per cent or $500,000, whichever is lesser. That kind of trigger turns financial and asset data into a governance signal.

The IPWEA and IIMM foundation

The International Infrastructure Management Manual, published by IPWEA, has long been clear that effective asset management requires integration with financial management. The accompanying International Infrastructure Financial Management Manual extends the same principle on the finance side.

The frameworks already exist, and the gap is usually a matter of organisational capability and culture rather than method. As IPWEA notes, asset management is most effective when engineers, accountants, community planners and environmental planners contribute together.

From compliance to capability

Integration of asset and financial management is not a compliance exercise. It determines whether a council can deliver its services sustainably across decades, not just the current budget cycle. Closing these blind spots starts with two people, one from engineering and one from finance, agreeing to plan the next Resourcing Strategy together. The technical frameworks are available. The professional capability is fundable. The integration is a choice.

About the Author

Paul Vorbach MCom, LLM, MBA, FCG, F.ISRM, FAICD, FGIA is the Founder and Managing Director of AcademyGlobal, a Sydney-based capability development firm established in 2004 that has delivered training in more than twenty countries across five continents. Paul has taught at post-graduate university level and for leading professional associations including the Institute of Public Works Engineering Australasia (IPWEA). He is also the adjunct Academic at the Australian Graduate School of Management (AGSM) at the University of New South Wales.

Paul’s full profile is available at academyglobal.com/paul-vorbach and on LinkedIn.