Accurate asset valuations essential to satisfy audit requirements
Located in Melbourne’s vibrant and culturally diverse inner north, Merri-bek City Council supports a growing population in one of Victoria’s most densely populated municipalities.
With a $2.1 billion asset portfolio to manage and finite funding, Merri-bek City Council needs accurate asset valuations to prioritize capital works, allocate budgets and satisfy audit requirements. To support this, the council conducts high-level revaluations of its major asset classes each year, including roads, drainage and footpaths. However, during a recent review following changes to the AASB 13 accounting standards, auditors identified data gaps, vague assumptions and a lack of evidence in the council’s previous valuation methodology.
“While core construction costs were being captured, some project-specific expenses, such as traffic management and other third-party requirements, were not consistently reflected in our unit rate calculations,” said Chiranjit Saha, Principal Asset Management Specialist at Merri-bek City Council.
“Hiring traffic controllers to set up detours and manage lane closures in populated areas can add up to five percent to project budgets, so it was important that these variable costs were accurately captured.”
Developing evidence-based revaluations calculations
Facing limited resources and tight timeframes, Merri-bek City Council worked with Siemens to review its revaluation methodology, strengthen its data and ensure its valuations aligned with evolving accounting requirements. To achieve this, the approach involved combining financial measurement and engineering practices to develop evidence-based revaluation calculations that would accurately reflect replacement costs.
“We really wanted a fresh set of eyes to look at our revaluation process and help us identify any missing pieces,” said Chiranjit. “Our methodology and data needed to be sound to not only satisfy auditors, but also to support long-term financial planning and help us quantify the true cost of delivering projects.”
Having used the Assetic platform from Siemens for almost a decade, the council was already familiar with its asset management capabilities. The Siemens team had extensive experience conducting revaluations for councils across Australia, providing the knowledge and resources needed to get the job done.
Working closely with the council’s Asset & Programs and Finance teams, Siemens was tasked with reviewing the existing revaluation approach and completing the report to the satisfaction and approval of auditors.
As part of the revaluation, the council provided detailed supplier and internal costs for six projects selected as excellent samples to represent the whole network. The team analyzed project costs, calculated updated unit rates and benchmarked the findings against the Rawlinsons Australian Construction Handbook and Australian Bureau of Statistics data to identify emerging cost trends and determine whether replacement costs had increased.
Siemens prepared detailed reports for the council’s Asset & Programs and Finance teams, providing a clear and transparent methodology that could be presented to auditors. Throughout the review process, they collaborated with the council and the external auditors to answer questions and provide supporting evidence. Scheduled weekly meetings and a commitment from all teams kept the project on track and ensured its completion within a tight timeframe.
“After we received the green tick from the auditors, Siemens updated the unit rates in our system, ensuring the revised valuations could be used immediately to support financial reporting, planning and future decision-making,” said Chiranjit.
Achieving Auditor Approval and Long-Term Capital Planning Confidence
By partnering with Siemens, Merri-bek City Council gained greater confidence in both its asset valuation methodology and the underlying data used to support financial reporting and decision-making.
“Using the Siemens asset management team really gave us confidence in our approach and data,” said Chiranjit. “You can get tired of seeing the same data, so it’s really valuable to have experts review your valuations.”
The partnership also delivered significant time savings for the council’s internal teams. “It saved the team weeks of work, enabling us to focus on other priorities while Siemens worked through the detail required to address the auditors’ questions and concerns,” said Chiranjit. “Because this is something the asset management team at Siemens does for many councils, they have the expertise to work through issues much faster than we could on our own.”
Beyond achieving auditor sign-off, the project strengthened the council’s confidence in its long-term financial planning. With more accurate unit rates informing replacement costs and depreciation calculations, Merri-bek can make better-informed choices about future capital works programs and investment priorities.
“If the unit rate is right, it means we have the right replacement cost and annual depreciation for the next 10 years, allowing us to plan our capital works accordingly,” said Chiranjit.