Sponsored Article By Nicole Montague and Deb Alessi, Senior Asset Accountants, Brightly Software
Good asset accounting matters – especially at audit time. Yet each year as the end-of-financial-year (EOFY) approaches, many councils struggle to accurately value and report their infrastructure assets by the June 30 deadline.
Some councils face challenges due to insufficient capacity, inadequate internal systems and processes, or simply not enough preparation time to account for capital works until it’s too late in the year. Others grapple with the extensive process of asset valuations, determining useful life assumptions, and calculating depreciation.
However, the most significant hurdle often stems from the quality of asset data. Incomplete asset registers, a lack of a clear asset framework and hierarchy, and irregular condition assessment programs can significantly slow the valuation process. This increases the risk of misstating the final asset valuation.
EOFY audits consistently highlight why councils need to move beyond reactive data fixes toward continuous improvement. But how? Drawing on lessons from the FY24/25 audit season, we look at the key issues raised by auditors and how councils can respond.
What auditors raised in FY24/25
In FY24/25, some councils did not meet statutory deadlines, highlighting limited contingency and late preparation.
Following recent amendments to AASB 13 in Victoria, the Victorian Auditor-General’s Office (VAGO) and other independent auditors have increasingly noted delays in financial reporting.
Natural disasters also played a role. Flooding and extreme weather disrupted inspections and delayed revaluations in some regions. This reinforced the critical need for resilient data processes that can quickly reflect changes in asset condition and value when circumstances change.
Auditors consistently emphasised the need for stronger internal controls over asset valuations and improved asset management oversight. They also recommended earlier revaluations and enhanced asset data governance, pointing to a systemic need for overall improvement in the asset data capture and valuation process.
Lessons learned and tips for FY25/26
Robust asset registers, a clear capitalisation process, and early preparation all reduce audit risk and improve outcomes. Here are our tips for turning last year’s audit findings into a clear set of practical actions for a smoother EOFY ahead:
Maintaining a robust asset register
A strong asset register is the bedrock of effective asset accounting. It is more than just a list of assets, but a continuously updated system that reflects current asset value, condition and remaining useful life. A well-maintained register with updated revaluation and condition data not only supports asset performance and investment decisions, but also stronger audit outcomes. The core elements of a robust asset register include:
- A clear asset framework: A consistent, well-defined asset hierarchy clearly sets out asset classes, components and network measurements. Standardised naming conventions and attribute fields are essential to prevent data becoming fragmented and difficult to analyse.
- Key attributes, components and condition data: Key attributes include dimensions, materials, installation year, location, useful life and valuation data such as current replacement cost and fair value. Condition data is essential as it allows councils to link physical condition to asset value and remaining useful life.
- Regularly updated condition scores at the component level: This is particularly important as reliable condition data directly influences fair value, remaining useful life, capital renewal modelling and risk assessments – clearly linking physical reality to financial outcomes. It is also highlighted in AASB accounting standards.
Optimising the asset capitalisation process
When it comes to asset capitalisation and handover, a fundamental challenge many councils face is the degree of collaboration between the project, finance and asset teams. Optimising the asset capitalisation process is a critical area that directly impacts financial statements, regulatory compliance and the ability to make informed investment decisions. It requires: Â
- Capitalisation criteria: Councils should have well-defined and consistently applied rules covering CAPEX vs OPEX thresholds, useful life and residual value guidelines, project cost allocation methods and componentisation rules for complex assets.
- A standardised project handover: Standardised handover templates help ensure all required information is collected when a project concludes and an asset is brought into service. These templates act as a practical checklist, significantly improving audit readiness.
Early preparation is key
Remember to start revaluations early! Document all valuation assumptions and plan proactively to prevent last-minute rushes and improve transparency.
There’s also a lot to be said about clean data – and cleaning it regularly. It is the backbone of reliable financial statements and effective asset management. Improve the accuracy of asset registers with systematic data cleansing – not just before a major project, valuation or audit, but by using a dashboard as a reminder to clean a little each day.
EOFY audits will always involve pressure – but they do not need to be a scramble. Councils that perform best treat asset accounting as a year-round discipline, not an annual event. By applying the lessons learned from FY24/25 and embedding continuous improvement, councils can build genuine confidence in their asset accounting for the next audit and beyond.
Ready to enhance your asset accounting processes and ensure audit readiness?
Contact Brightly Software to learn how we can support your council. Visit us at brightlysoftware.com
