• Igor Ivannikov

Benchmarking roads unit rates - 2018

No doubt, majority of NSW councils will be performing revaluations of transport assets in 2020 financial year. Regardless what approach you will select to valuation: internal, external, or combination of both, benchmarking is always a good tool to see if your council is in “trend”.


We performed analysis of General Purpose Financial Statements and Special Schedule 7 for the year ended 30 June 2018 of all 128 NSW councils. As a result of that research, we prepared a roads benchmarking spreadsheet which can be a useful tool to compare your roads unit rates with other councils.


The spreadsheet is available from our Products page and it is for FREE. Some interesting results of our research are described below.


Valuer


By 30 June 2018 councils performed valuation of roads as earliest in 2014 and as latest in 2018. Highly probable that councils who did valuation last time in 2015 (or earlier) will perform revaluation of roads in 2020 (78 in total).

About 45% of all councils performed revaluation of roads internally. Another 7% did it utilising both internal and external expertise. Further 25% did not disclose anything about the valuer but, reading through the text of “Fair Value Measurement” disclosure, it is highly probable that valuation was done internally. For the rest of the councils (23%) valuation was completely done by the external valuer.


External valuers were represented by following companies: APV, JRA, Pavement Management Services, Assetic, AVS, Blue Sky Contracting, EMC-Works, IMG Data, Morrison Low, Pickles Valuation Services.


Note: Keep in mind that, starting from the year ended 30 June 2018, Office of Local Government mandated to perform independent valuations of all infrastructure, property, plant and equipment held at fair value (see NSW Code of Accounting Practice and Financial Reporting (Update 26, page A-50; Update 27, page A-60). To us it looks a bit unfair to councils because of the following reasons: (a) there is no requirement in the AASB 116 that valuations should be performed by independent experts; (b) council might have very good internal specialists who can perform revaluations; and (c) this may be very expensive.


Even with the independent valuation, council should still take control over the revaluation process to ensure deliverables from the valuer meet audit, financial accounting and internal management requirements.


Unit Rates


By aggregating all unit rates into groups by values (AUD/km), some interesting results came up.


Sealed roads


Majority of councils (63 in total) had sealed roads unit rates in a range of >$400k per km. The rest can be seen in a graph below:



Unsealed roads


Majority of councils with unsealed roads in their network, valued unsealed roads for less than $50k per km (39 councils). 25 councils valued this class of roads at a unit rate between $50k and $100k per km. See more details in a graph below.



Bulk earthworks


There is some uncertainty for 41 councils who did not disclose value of road earthworks in their financial statements (because they were combined with the roads values). However, we know that a pretty significant group (33 councils) applied unit rate of less than $50k per km; 22 councils used a rate in between $50 and $100k per km. See details in the graph below.



Feel free to download our benchmarking spreadsheet for free from our Products page.

Contact us you want to discuss opportunities for making your revaluation done in a cost-effective manner, on-time and which will meet requirements of the Code, audit and internal management.


Note:

We have already started to work on the same spreadsheet based on the 2019 financial statements. The new update will be available shortly. Monitor our Article releases.

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Igor Ivannikov MPhil (UNE), CA, FCCA 

Principal

e | igor@vanguardconsulting.com.au

p | 0412 932174

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