city of onkaparinga agenda for the audit, risk, value

City of Onkaparinga Agenda for the Audit, Risk, Value & Efficiency Committee meeting to be held on 14 September 2015

2 Date Printed: 10 September 2015

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City of Onkaparinga

Agenda for the Audit, Risk, Value and Efficiency Committee meeting

to be held on 14 September 2015

Venue: ::

Meeting Room 1, Civic Area Ramsay Place, Noarlunga Centre

Meeting commenced: :

Present: :

Apologies: :

Leave of absence: :

Absent: :

:



1. Opening of meeting 6

2. Confirmation of minutes of the Committee meeting held on 3 August 2015 6

3. Adjourned business 6

4. Chairperson's report 6

5. Presentation 6

6. Deputation 6

7. Reports of officers 7

7.1 Placement of Council Insurances 7

7.2 2014-15 External audit interim management report 11

7.3 Draft Financial Statements 30 June 2015 Report 19

7.4 2015 ARVEC annual performance review 23

7.5 Audit, Risk, Value and Efficiency Committee 2015 Work Plan 41

8. Questions on notice 45

9. Motions 45

10. Petitions 45

11. Urgent business 45

12. Confidential items 45

12.1 Membership of the Audit, Risk, Value and Efficiency Committee 47

12.2 External Auditor Selection and appointment process 49

13. Closure 50



1. Opening of meeting

2. Confirmation of minutes of the Committee meeting held on 3 August 2015

3. Adjourned business

Nil.

4. Chairperson's report

Nil.

5. Presentation

Nil.

6. Deputation

Nil.



7. Reports of officers

7.1 Placement of Council Insurances H2

This is a regular or standard report.

Manager: Karyn Ryan, Manager Risk and Compliance (Acting)

Report Author: Graham Cahill, Insurance and Liability Coordinator

Contact Number: 8384 0578

Attachments: 1. Summary of Council Insurances (1 page)

1. Purpose

This report and the Summary of Council insurances provide confirmation to the Audit, Risk, Value and Efficiency Committee (the Committee) that the insurances held by the City of Onkaparinga have been renewed for the 2015-16 financial year.

2. Recommendation

That the Audit, Risk, Value and Efficiency Committee note the City of Onkaparinga’s Summary of Council Insurances, as attached to the agenda

report.

3. Background

A summary of the placement of the City of Onkaparinga’s insurances is provided for the information of the Committee in accordance with the Committee’s 2015 work plan.

4. Financial Implications

Insurance cover is arranged in order to limit financial liability in the event of loss of an asset or a significant liability claim, to the value of the excess payable on each claim.

5. Risk and Opportunity Management

Risk

Identify Mitigation

A failure to maintain insurance policies with adequate sums insured could in the event of a loss or incident result in significant financial impact, disruption to service delivery and adverse impact on public opinion.

Insurance policies are taken out through the Local Government Association and reviewed annually to ensure that adequate cover is in place to cover all major risks (damage or loss to council assets, public liability, injury to employees elected members or volunteers) and minimise any business interruption.



6. Additional information

Each year on the 30 June, council’s insurances are renewed through Local Government Risk Services after a full review of each policy is undertaken and updated asset schedules are provided with any other required information.

The attached Summary of Council Insurances provides confirmation of the renewal of council’s insurances with details of the 2015-16 premium payable for each class of insurance, the previous 2014-15 premium, the name of the insurer and any comments as to any factors that have contributed to an increase in premium.

The council is indemnified by the insurer which effectively transfers the financial risk and limits council liability to the value of the excess.

All claims are reviewed regularly with the insurer to ensure that claims are finalised and assets reinstated as quickly as possible.



Attachment 1

Summary of Council Insurances

Class Insurer Premium

2014–15

No of claims 2014–15

Comments Expiry date Premium

2015–16

Asset LG Asset Mutual Fund $416,588 24 $170,849 paid for 2014–15 claims

0% rate increase

30 June—has been renewed for 2015-16

$415,015

Motor vehicle LG Asset Mutual Fund $156,832 57 $213,381 paid for 2014–15 claims 30 June—has been renewed for 2015–16

$150,794

Computer LG Asset Mutual Fund $8,907 0 $0 paid for 2014-15 claims 30 June—has been renewed for 2015–16

$8,809

Income protection LG Income Protection Fund $262,308 14 $165,111 paid for 2014-15 claims 30 June—has been renewed for 2015–16

$250,934

Personal accident

(volunteers and elected members)

QBE Insurance Ltd $1,803 0 $0 paid for 2014–15 claims 30 June—has been renewed for 2015–16

$1,803

Personal accident—employee journey

QBE Insurance Ltd $31,363 1 $9175 paid for 2014–15 claims 30 June—has been renewed for 2015–16

$31,902

Hall hirer insurance QBE Insurance Ltd $5,580 0 $0 paid for 2014-15 claims 30 June—has been renewed for 2015–16

$5,580

Public liability LGA Mutual Liability Scheme $626,036 55

Claims loss ratio of 41% for a 7 year window. Risk management and claims discounts total 29.7% of gross premium to cap increase to 2.3%

30 June—has been renewed for 2015-16

$640,435

Workers compensation LGA Workers Compensation Scheme

$2,263m 57

(21LTI)

Based on rate of 4.25% of total budgeted salaries and a loss ratio of 29% for a 4 year window

30 June—has been renewed for 2015–16

$2,412m



7.2 2014-15 External audit interim management report H2


Manager: Darren Styler, Manager Finance

Report Author: Sonia Sghendo, Team Leader Financial Accounting


Attachments: External audit management report June 2015 (5 pages)

1. Purpose

This report presents the auditor’s findings and recommendations as noted during the fourth interim visit for 2015 for the information of the Audit, Risk, Value & Efficiency Committee (the committee).

2. Recommendation

That the Audit, Risk, Value & Efficiency Committee note the reports received

from Dean Newbery and Partners in relation to the fourth 2014–15 external audit, in attachment 1 to the agenda report.

3. Background

The external auditors (Dean Newbery and Partners) have undertaken four onsite visits relating to both the internal control and statutory account audit opinion for the year ending 30 June 2015.

Dates Area of Focus

25 – 26 November 2014 internal control environment (accounts payable, credit card reconciliations, revenue recognition and revenue policies)

financial account reconciliations

rollover of accounting system in 2015 financial year

18 – 20 February 2015 consolidate understanding of the internal control environment and undertake additional qualitative and quantitative testing

9 – 10 April 2015 payroll

elected member reimbursements

15 – 17 June 2015 administration procedures

review of plant and equipment asset class

reconciliation of non-rateable council properties to Council asset registers

audit site visit

contract

Attachment 1 details the audit findings noted during the attendance in June.

In accordance with the committee work plan for 2015, an update on the outcome of the audit visits will be provided to the committee at its meeting on 7 December 2015.




None.


None.



Attachment 1

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7.3 Draft Financial Statements 30 June 2015 Report H2

Manager: Darren Styler, Manager Finance

Report Author: Sonia Sghendo, Team Leader Financial Accounting


Attachments: 1. Draft copy of 30 June 2015 Financial Statements

(72 pages - provided under separate cover)

1. Purpose

This report presents the draft Financial Statements for 30 June 2015 (the draft statements) for consideration of the Audit, Risk, Value and Efficiency Committee (the Committee).

2. Recommendations

1. That the Audit, Risk, Value and Efficiency Committee note the draft Financial

Statements for 30 June 2015 as detailed in this report and attachment 1 to this agenda report.

2. That the Audit, Risk, Value and Efficiency Committee review the draft Financial Statements 2015 and provide feedback for consideration by

administration in preparing the final documents.

3. Background

The Local Government Act 1999 requires that the Committee review the statements of council to ensure ‘they present fairly the state of affairs of the council’ as at 30 June each year.

This report presents the draft statements for consideration of the Committee.


The draft statements present the financial affairs of council for the year ended 30 June 2015.


Key risk/opportunity Details and analysis

External audit qualification The Financial Statements do not fairly present the state of affairs of council for the year ended 30 June 2015, giving rise to a qualified auditors opinion.

Failure to comply with requirements of the Local Government Act 1999 and associated standards/regulations

Delay or non-production of financial statements may result in a breach of the Act and/or associated standards/regulations




An initial draft of the Financial Statements for the year ended 30 June 2015 is attached for review and comment. These have been prepared in accordance with the Local Government Act 1999 and the Local Government (Financial Management) Regulations 2011. Consistent with prior years the 2015 statements have been presented with figures rounded to the nearest thousand dollars. Status of current draft

The draft statements are in a format suitable for presentation to the external auditors for finalisation of the 2014-15 balance date audit. We are currently finalising the infrastructure asset review and the operating segments disclosure. The relevant changes will be communicated to the auditors and form part of the final set of Financial Statements presented to the Committee on the 26 October 2015.

Significant items:

Early payment of Financial Assistance Grants (FAGs)

In June 2015 the Federal Government announced it was resuming its practice of early payment of the first half of FAGs for the forthcoming year. As such council received approximately $4m of 2015-16 FAGs in June 2015.

In accordance with AASB 1004 Contributions and the recommendations of the Local Government Association of South Australia these funds have been treated as 2014-15 grant income.

As the early payment of FAGs did not occur in 2013-14, grant income reported in the draft statements for 2013-14 only includes 2013-14 FAGs whereas grant income for 2014-15 includes 2014-15 FAGs and a half year of 2015-16 FAGs, creating a $4m variance.

Land remediation provision for Kangarilla landfill

As discussed with the Committee as part the 2013-14 Financial Statement process the $2.6m cost of remediating the Kangarilla Landfill site was included in the 2013-14 Financial Statements by way of a provision, despite the fact that funding to cover the cost of the remediation work was not raised until the 2014-15 Budget.

This accounting treatment was in accordance with AASB 137 Provisions, Contingent Liabilities and Contingent Assets that requires all liabilities existing at the balance sheet date to be recognised in the financial statements where they can reasonably be quantified.

The existence of the Kangarilla Landfill remediation liability at 30 June 2014 was confirmed following the Environmental Protection Authority issuing council a licence to remediate the site and the 2014-15 Budget process quantified the value of the remediation to be $2.6m. As such the full cost of $2.6m was included in the 2013-14 Financial Statements.

The remediation work was completed during 2014-15 and as such the provision made in 2013-14 has been reversed in 2014-15.

New accounting standard AASB 10, 11 and 12



In preparation of the 2015 financial statements Council has adopted the new accounting standards AASB 10 Consolidated Financial Statements, AASB 11 Joint Arrangements and AASB 12 Disclosures of Interests in Other Entities.

This adoption has led to a review of the nature of our arrangements with various entities (SRWRA, CSRA, various state and federal bodies) in order to determine the measurement and disclosures necessary for our consolidated accounts.

This review resulted in no change in the assumptions and inputs to measurements, nor any further entities being consolidated. Minor disclosure adjustments have however been made as required.

Next steps

The external auditors are expected to conduct their 2014–15 balance date audit from 23 to 25 September 2015. Results will continue to be refined until final audit sign-off.

Subsequent to outcomes of the Committee’s consideration of this report and the external audit we will prepare a final draft set of Financial Statements for presentation to the Committee at its meeting on 26 October 2015.

In order to assist the Committee satisfy itself that the final draft set of Financial Statements ‘present fairly the state of affairs of the council’ for the year ended 30 June 2015, more detailed analysis of the financial results for 2014-15 will be also be provided to the Committee at its meeting on 26 October 2015.

At that meeting the Committee will be requested to recommend that:

the external auditor be advised that the Committee is satisfied that the statements ‘present fairly the state of affairs of the council’

the chair of the Committee sign a statement to certify the independence of the

external auditors

the Mayor and CEO certify the statements in the format prescribed in Section

14 of the Local Government (Financial Management) Regulations 2011.

The external auditor will issue an audit opinion following the Committee’s consideration and recommendations and once all requirements are satisfied. The audited statements will then be presented to Council for noting at its meeting on 10 November 2015.



Attachment 1

Draft copy of 30 June 2015 Financial Statements

Provided under separate cover (72 pages)



7.4 2015 ARVEC annual performance review H2



Report Author: Mike Gostlow, Internal Auditor


Attachments: 1. 2015 annual performance review questionnaire (5 pages)

2. Items considered by the Committee (2 pages)

3. Audit, Risk, Value and Efficiency Committee Terms of

Reference (8 pages)

1. Purpose

The report advises the Audit, Risk, Value and Efficiency Committee (the Committee) that its annual performance review (the review) is due and proposes that the review be undertaken following the conclusion of the meeting.

2. Recommendations

1. That the 2015 Audit, Risk, Value and Efficiency Committee annual

performance review be conducted as a discussion between Committee

members, following the conclusion of the meeting.

2. That the review be facilitated by the Director Corporate and City Services and

be undertaken with no other staff present.

3. That the results of the review be provided to Council in the Committee’s

Annual report.

3. Background

The Terms of Reference (ToR) of the Audit, Risk, Value and Efficiency Committee require the Committee to review its performance against the ToR annually, and provide the results of the review to Council in the Committee’s annual report. The Local Government Association Financial Sustainability Program Information Paper No 3, Audit Committees regards an annual review as better practice for audit committees.

In recent years the review has been undertaken as a discussion among Committee members, following a Committee meeting. The discussion, based on a questionnaire, has been facilitated by a senior member of the administration.

It is proposed that the 2015 review be undertaken on the same basis as in the past, and a questionnaire is provided as attachment 1 to this agenda report. The discussion will be facilitated by the Director Corporate and City Services.



This year, members are also asked to consider and provide comments and suggestions for improvement in regard to:

the Committee’s work plan

the Committee’s Terms of Reference

the format of the annual performance review.

To assist members in considering whether the Committee has met the requirements of its ToR, a list of agenda items considered by the Committee since the last performance review is provided as attachment 2 to the report.

A copy of the Committee’s Terms of Reference is provided as Attachment 3.


The review will be undertaken internally.


Risk

Identify Mitigation

The Committee not meeting Council expectations as expressed in the ToR.

The ToR outlines the functions of the Committee as determined by Council. The annual performance review provides an opportunity for the Committee to consider whether it is undertaking its functions in accordance with the ToR and report this to Council.

Opportunity

Identify Maximising the opportunity

Performance improvement

The review has potential to identify practice or process improvements or changes to the ToR and work plan that can build on the Committee’s effectiveness and outcomes.

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Attachment 2



Attachment 3



7.5 Audit, Risk, Value and Efficiency Committee 2015 Work Plan H2



Report Author: Mike Gostlow, Internal Auditor


Attachments: Audit, Risk, Value and Efficiency Committee 2015 Work Plan

(1 page)

1. Purpose

The report provides an amended work plan (the plan) for the information of the Audit, Risk, Value and Efficiency Committee (the Committee).

2. Recommendation

That the Audit, Risk, Value and Efficiency Committee note the amended work plan as attached to this report.

3. Background

At its meeting on 16 December 2013 the Committee resolved, in part:

‘…that an amended work plan be included in the agenda for each meeting of the Audit, Risk, Value and Efficiency Committee.’


Preparation of the plan is internally funded.


Risk

Identify Mitigation

Work plan not approved

The Committee’s Terms of Reference require it to prepare and keep under review an annual work plan. The Committee has delegated authority to approve the work plan and may not achieve the objectives of its Terms of Reference if it does not do so.



Opportunity

Identify Maximising the opportunity

Performance improvement

On-going review of the work plan has potential to identify improvements or changes that can build on the

Committee’s effectiveness and outcomes.


The plan, as attached, provides the Committee with information relating to items that are to be considered at each meeting and is designed to ensure that the objectives of the Terms of Reference are met. It is approved by the Committee on a calendar year basis and updates are provided to each Committee meeting.



Attachment 1



8. Questions on notice

Nil.

9. Motions

Nil.

10. Petitions

Nil.

11. Urgent business

12. Confidential items

Confidential Clause

If Council so determines items 12.1 and 12.2 may be considered in confidence under Section 90(2) of the Local Government Act 1999 on grounds contained in the Recommendations below.

Mark Dowd Chief Executive Officer



12.1 Membership of the Audit, Risk, Value and Efficiency Committee

1. That:

a. under the provisions of Section 90(2) of the Local Government Act 1999 an order be made that the public, with the exception of staff on

duty, be excluded from attendance at the meeting in order to consider this item in confidence.

b. the Audit, Risk, Value and Efficiency Committee is satisfied that it is

necessary that the public, with the exception of staff on duty, be excluded to enable the Audit, Risk, Value and Efficiency Committee to

consider the report at the meeting on the following grounds:

Section 90(3)(a) information the disclosure of which would involve the

unreasonable disclosure of information concerning the personal affairs of any person (living or dead):

c. accordingly, on this basis the principle that meetings of the Audit, Risk,

Value and Efficiency Committee should be conducted in a place open to the public has been outweighed by the need to keep the information or

discussion confidential.

4. That the matter of Membership of the Audit, Risk, Value and Efficiency

Committee having been considered by the Audit, Risk, Value and Efficiency

Committee in confidence under sections 90(2) and 90(3)(a) of the Local Government Act 1999 that an order be made under the provisions of

sections 91(7)and (9) of the Local Government Act 1999 that the Membership of the Audit, Risk, Value and Efficiency Committee report and

minutes (with the exclusion of point 2, if carried) of the Audit, Risk, Value and Efficiency Committee relating to discussion of the subject matter be kept confidential until 31 December 2016.

5. That, pursuant to section 91(9)(a) of the Local Government Act 1999, the

Audit, Risk, Value and Efficiency Committee delegates the duty to conduct an annual review of the confidentiality order to the Chief Executive Officer,

or their sub-delegate.

6. That, pursuant to section 91(9)(c) of the Local Government Act 1999, the

Audit, Risk, Value and Efficiency Committee delegates the power to revoke

the confidentiality order to the Chief Executive Officer, or their sub-delegate.



12.2 External Auditor Selection and appointment process

1. That:

a. under the provisions of Section 90(2) of the Local Government Act 1999 an order be made that the public, with the exception of staff on

duty, be excluded from attendance at the meeting in order to consider this item in confidence.

b. the Audit, Risk, Value and Efficiency Committee is satisfied that it is

necessary that the public, with the exception of staff on duty, be excluded to enable the Audit, Risk, Value and Efficiency Committee to

consider the report at the meeting on the following grounds:

Section 90(3)(k) tenders for the supply of goods, the provision of

services or the carrying out of works;

c. accordingly, on this basis the principle that meetings of the Audit, Risk,

Value and Efficiency Committee should be conducted in a place open to

the public has been outweighed by the need to keep the information or discussion confidential.

3. That the matter of the outcomes of the External auditor selection and appointment process having been considered by the Audit, Risk, Value and

Efficiency Committee in confidence under sections 90(2) and 90(3)(k) of

the Local Government Act 1999 that an order be made under the provisions of sections 91(7)and (9) of the Local Government Act 1999 that:

a. the discussion, report and attachments and minutes of the Audit, Risk, Value and Efficiency Committee relating to the External

auditor selection and appointment process be kept confidential until the expiry of the contract

b. point 2 of the resolution of the Audit, Risk, Value and Efficiency

Committee relating to appointment of the external auditor remain confidential until the matter has been determined by Council.

4. That, pursuant to section 91(9)(a) of the Local Government Act 1999, the Audit, Risk, Value and Efficiency Committee delegates the duty to conduct

an annual review of the confidentiality order to the Chief Executive Officer,

or their sub-delegate.

5. That, pursuant to section 91(9)(c) of the Local Government Act 1999, the

Audit, Risk, Value and Efficiency Committee delegates the power to revoke the confidentiality order to the Chief Executive Officer, or their sub-

delegate.



13. Closure



Declarations of Interest

Council Meeting Date: Councillor:

Item No. (e.g. 3.1)

Declaration of Interest (where a member has an interest that does not lead to a conflict)

Declaration of Conflict of Interest (where a member has an interest that leads to a conflict)

city of onkaparinga agenda for the audit, risk, value

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