Meeting papers

Types of financial securities accepted by Council

The only forms of security accepted by Council are:

•   Cash bonds: a performance bond that is held in Council’s trust account
•   Bank guarantees: an unconditional performance guarantee given by a bank

Council will not approve or accept the following forms of security:

•   Letters of credit
•   Mortgage over land
•   Related party guarantee
•   Insurance bonds: an unconditional performance bond given by an insurance company
•   Cash retentions (where are percentage of the contract value is withheld from supplier invoice
    payments) except where these maybe required by legislation such as the Building
    Industry Fairness (Security of Payment) and Other Legislation Amendment Act 2020
    (BIFOLA Act)

Determining the value of a security

The appropriate value of a financial security required to secure an obligation, is determined in
accordance with the specific guidelines and procedures adopted by the branch within Council that is
responsible for managing the underlying transaction. The following methods are used to determine
the value of a required security:

•   Council’s adopted Fees and Charges Schedule
•   Onsite inspections and/or assessments of works undertaken as a condition of subdivision or other
    development approvals
•   An agreed percentage of the sum of a contract based on risk or other legislative requirements

Requirements for financial institutions

The reputation and credit rating of an issuer of a financial security is one of the fundamental
considerations of this policy to ensure that Council’s exposure to credit risk is minimised.

The Policy Guideline, “Guidelines for the Acceptance, Management and Release of Financial
Securities” sets out the minimum requirements for all financial institutions issuing bank guarantees.

Documentation requirements

The construction of the financial security document is another fundamental consideration of this policy
to ensure that all bank guarantees are irrevocable and payable on demand.

The Policy Guideline, ‘Guidelines for the Acceptance, Management and Release of Financial
Securities’ stipulates specific documentation requirements that must be implemented when accepting
bank guarantees.

ROLES AND RESPONSIBILITIES

A The key Council stakeholders in ensuring the effective implementation of this policy and adherence
to the related policy guidelines are:

• The Financial Services Branch will have primary responsibility in ensuring that the specific
  requirements stipulated in the policy and related guidelines are adhered to as well as monitoring
  and reporting Council’s exposure to risk in relation to financial securities.



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