Meeting papers

ATTACHMENT 10 - FINANCIAL SECURITIES POLICY


                                                                             Council Policy
                                                       FINANCIAL SECURITIES
                                      (BONDS AND BANK GUARANTEES)
 Corporate Plan Reference:         Theme No. 5. - Excellence
                                   Objective 5.2 - Continue to deliver a financially sustainable Council
                                   that has the resources now and into the future to achieve its
                                   strategic objectives. This will be supported through the introduction
                                   of enhanced sustainability reporting and performance indicators,
                                   as well as ESG (environment social and governance) accounting
                                   practices as guided by statutory requirements
 Endorsed by Council:              30 June 2025

 Policy Author:                    Director Corporate Services



POLICY BACKGROUND

Dealing with the construction industry and developers can be a high-risk environment for Council and
as a result, it is important that Council obtains a financial security instrument that has a ‘cash-like’
quality to secure contractual obligations.

This policy sets out the constraints and risk management considerations for the acceptance,
management and release of financial securities provided to Council. The aim of this policy is to
minimise Council’s exposure to credit, legal, financial and documentation risk.

This policy relates to parties who have an obligation to Council under a specific transaction, contract,
agreement or undertaking and are required to provide a performance security.

The policy refers to the following credit instruments as the only forms of financial security accepted by
Council:
   • Cash bonds
   • Bank Guarantees

The effect of obtaining these types of securities is that the amount deposited or guaranteed can be
immediately accessed when the party dealing with Council fails to perform the agreed obligation.

The implementation of this policy is supported by the ‘Policy Guideline – Guidelines for the
Acceptance, Management and Release of Financial Securities.’ These policy guidelines provide the
detailed processes that must be adhered to by all officers who are authorised to enter into contracts
or transactions on behalf of Council.

COUNCIL POLICY

In implementing a policy for the acceptance, management and release of financial securities, Council
has been guided by the following principles and objectives:

•   They have a dual purpose of allocating risk and providing financial security
•   Their primary purpose is to increase confidence and manage risk between Council and the
    relevant party in order to ensure the obligations under a contract are met
•   Their essential function is that they should be equivalent to cash. If this was not the case, the only
    form accepted would be cash bonds

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