notice of ordinary meeting of council · the audit committee meeting of the district council of...

THE AUDIT COMMITTEE MEETING OF THE DISTRICT COUNCIL OF MALLALA WILL BE HELD IN THE COUNCIL CHAMBERS, REDBANKS ROAD, MALLALA ON TUESDAY 31 MARCH 2015, COMMENCING AT 1:30 PM

........................................... Peter Sellar ACTING CHIEF EXECUTIVE OFFICER

AGENDA 1. ATTENDANCE 1.1 Members Present

1.2 Members Apologies

1.3 Members Absent 2. CONFIRMATION OF MINUTES

2.1 “that the Minutes of the Audit Committee meeting held on Wednesday 1 December 2014, be taken as read and confirmed.”

3. BUSINESS ARISING

3.1 4. REPORTS

4.1 Audit Committee Action List and Annual Program

4.2 Audit Committee Governance Plan Update

4.3 LGFA Cash Advance Debenture – Cash Flow

4.4 External Auditor – Expression of Interest

4.5 2014/15 Annual Budget Review as at 28 February 2015

4.6 Review of Internal Financial Controls Status Update

4.7 Asset Management Plan Review Status Update 5. GENERAL BUSINESS

5.1

6. NEXT MEETING

6.1 Mid May 2015

7. CLOSURE

2. CONFIRMATION OF MINUTES

TUESDAY 31 March 2015

Items:

2.1 “that the Minutes of the Audit Committee meeting held on Wednesday 1 December 2014, be taken as read and confirmed.”

3. BUSINESS ARISING

3.1

Audit Committee Page 1 of 68 31 March 2015

1

MINUTES OF THE MEETING OF THE DISTRICT COUNCIL OF MALLALA AUDIT COMMITTEE HELD IN THE COUNCIL CHAMBERS, REDBANKS ROAD, MALLALA ON MONDAY 1 DECEMBER 2014, COMMENCING AT 2.00 PM 1. ATTENDANCE 1.1 Members Present

John Comrie (Chairman), Peter Fairlie-Jones, Mayor Duncan Kennington, Cr Melville Lawrence and Cr Stephen Jones

Administration / Guests: Peter Sellar (Acting Chief Executive Officer), Gary

Graham (Finance Coordinator), Paul Cleghorn (Strategic Infrastructure Coordinator), Tom Jones (Asset Management Officer) and Christine Kelly (Executive Assistant).

1.2 Members Apologies Nil 1.3 Members Absent Nil 2. CONFIRMATION OF MINUTES

Moved P Fairlie-Jones Seconded Cr Kennington “that the Minutes of the Audit Committee meeting dated 1 October 2014 be taken as read and confirmed”.

CARRIED 3. BUSINESS ARISING

3.1 Progress report was required on Internal controls – G Graham (Finance Coordinator) provided a verbal update to the Audit Committee, with a brief report to follow at the next Audit Committee meeting in February 2015, in preparation for end of financial year at 30 June 2015. 3.2 Asset management to be addressed under agenda item 4.5. 3.3 Per the interim external Auditor letter relating to Tender documents within TRIM – P Sellar (Acting Chief Executive Officer) provided verbal update to the Audit Committee in relation to council’s record management system, advising of the new process for individual record containers being created for major Tender documents, with a brief report to follow at the next Audit committee meeting expected in February 2015.


2 4. REPORTS 4.1 Audit Committee Action List and Annual Program

Moved Cr Jones Seconded Cr Kennington “that the Committee having considered Item 4.1 Audit Committee Action List and Annual Program Report dated 1 December 2014 receives and notes the Report”.

CARRIED

4.2 Audit Committee Governance Plan

Moved Cr Jones Seconded P Fairlie-Jones “that the Committee having considered Item 4.2 Audit Committee Governance Plan Report dated 1 December 2014 notes and receives the report”.

CARRIED 4.3 Audit Committee Self Assessment

Moved P Fairlie-Jones Seconded Cr Jones “that the Audit Committee having considered Item 4.3 Audit Committee Self Assessment Report dated 1 December 2014 notes and receives the report,” And, “that the Audit Committee having considered Item 4.3 Audit Committee Self Assessment Report dated 1 December 2014, to extend an invitation for the external current Auditor to attend an Audit Committee meeting prior to June 2015,” And, ”that the Audit Committee having considered Item 4.3 Audit Committee Self Assessment Report dated 1 December 2014, to receive a brief report in April 2015 detailing with the selection process for a new external Auditor.”

CARRIED 4.4 Mallala Community Wastewater Management System – Gum Estate Moved Cr Kennington Seconded P Fairlie-Jones “that the Audit Committee having considered Item 4.4 Mallala Community

Wastewater System - Gum Estate dated 1 December 2014, receives and notes the report”.

CARRIED


3 Moved Cr Kennington Seconded Cr Lawrence “that the Audit committee having considered Item 4.4 Mallala Community Wastewater

System - Gum Estate dated 1 December 2014, recommends to Council to endorse the inclusion of the Gum Estate Strata to construct and install the infrastructure to connect this development to the Mallala CWMS system, subject to user pays principles being applied.“

CARRIED 4.5 Asset Management Plans (Information Presentation Report)

Moved Cr Jones Seconded Cr Lawrence “that the Audit committee having considered Item 4.5 Asset Management Plans dated 1 December 2014, receives and notes the report,” And, “that the Audit committee having considered Item 4.5 Asset Management Plans, requested a brief report to the next the Audit committee, showing by asset class the renewals per the asset management plan, and the actual renewals for the 2013-14 year; and the reasons why the asset sustainability ratio was below expectation. The report should include comments on the forward projections for sustainability.”

CARRIED 4.6 2014/15 Annual Budget Review as at 31 October

Moved P Fairlie-Jones Seconded Cr Jones “that the Committee, having considered Item 4.6 2014/15 Annual Budget Review as

at 31 October 2014 dated 1 December 2014, recommends to Council that it receives and notes the report.”

CARRIED 4.7 2014/15 Annual Budget Review as at 31 October

Moved Cr Kennington Seconded P Fairlie-Jones “that the Committee, having considered Item 4.7 2013/14 Year End to Original Budget

Comparison Review dated 1 December 2014, recommends to Council that it receives and notes the report.”

CARRIED 5. GENERAL BUSINESS

5.1 External Auditor Correspondence – 18 November 2014 - Financial Reports

Moved Cr Jones Seconded P Fairlie-Jones


4 “that the Audit Committee having considered Item 5.1 receives and notes the

correspondence, and notes the satisfaction expressed from the Auditor on the way the Audit papers were prepared by the Finance staff.”

CARRIED 6. NEXT MEETING Proposed before end of February 2015 7. CLOSURE

There being no further business, the Chairperson declared the meeting closed at 3.30pm.

Confirmed as a true record

Chairperson: ......................................................................

Date: 01/12/2014


4. REPORTS


Items:

4.1 Audit Committee Action List and Annual Program

4.2 Audit Committee Governance Plan Update




4.6 Review of Internal Controls Summary Report

4.7 Asset Management Plan Review Status Update


4.1 Audit Committee Action List and Annual Program Report

Container No: CON12/522

Document No: D15/5855

Report Date: 31 March 2015 Prepared by: Acting Chief Executive Officer

Corporate Objective: 5.1 Effective governance, leadership and teamwork.

Purpose:

To provide updates to the Audit Committee regarding the progress of identified actions requested by the Committee and progress of the Audit Committee’s Annual Program (Attachment 1).

Recommendation 1:

“that the Committee having considered Item 4.1 Audit Committee Action List and Annual Program Report dated 31 March 2015, receives and notes the Report”.


Impact Summary

Organisational and Governance

Financial The continued review and actions associated with the Action Sheet and Annual Program will assist Council in meeting the requirements of the Local Government Act, 1999 and the Local Government (Financial Management) Regulations 1999.

Legislation The continued review and actions associated with the Action Sheet and Annual Program will assist Council in meeting the requirements of the Local Government Act, 1999 and the Local Government (Financial Management) Regulations 1999.

Risk The continued review and actions associated with the Action Sheet and Annual Program will assist Council minimise the exposure to associated risks and will help in identifying and assessing potential organisational culture.

Consultation The Action Sheet and Annual Program is reviewed and completed as directed by Council’s Audit Committee.

Asset Management Plans

Nil Impact.

Service Standards The identified actions and subsequent progression of items identified by the Audit Committee through its Action Sheet and Annual Program will demonstrate to the community, Councils commitment to ensuring and addressing legislative compliance and those strategies identified Councils 2013-2016 Strategic Plan.


Background

The Audit Committee Action List and Annual Program were implemented to assist the Audit Committee identify, action and monitor specific motions and requirements of the Committee relating to asset, financial and risk management within Council and ensuring that legislative compliance and key dates where being met. Both items are reviewed quarterly as part of the Audit Committee Agenda with completed actions identified and archived accordingly. Discussion

The Audit Committee Action List has been updated (Attachment 2) but as can be seen due to the previous Governance Officer on leave through December 2014and leaving the employ of Council in January 2015 much of the scheduled work has not been completed with notes in blue to reflect this. Interviews for a replacement Governance Officer are being conducted on Monday 30 March 2015. The Audit Committee Program has also been updated with updates scheduled through the program which is proposed to be based on financial years. Summary

The Audit Committee Action List and Annual Program continues to enable members of the Committee to monitor previous motions and requests. The requirements of the Annual Program are subject to change and should be used as a guide only.


Attachment 1 To report 4.1 dated 31 March 2015

Audit Committee Action List and Annual Program Report


DISTRICT COUNCIL OF MALLALA AUDIT COMMITTEEPROGRAM

ITEMS DETAILS 1st 2nd 3rd 4th 1st 2nd 3rd 4th

Terms of Reference Review X X

Audit Committee Governance Plan Review X X X X X X X X

Audit Committee Action Sheet Review X X X X X X X XReview External Auditor Management Reports Reports to Committee X X X X& Proposed Actions

Strategic Plan Reports to Committee X XAnnual Business Plan Final Draft for Review X X X XBudget Final Draft for Review X X X X1st Revised Budget Reports to Committee X X X2nd Revised Budget Reports to Committee X X3rd Revised Budget Reports to Committee X X X X4th Revised Budget Reports to Committee X XFinancial Statements Final Draft for Review X XAnnual Report Final Draft for Review X X

Financial Sustainability - KPI's X X XInternal Controls X X X X X X X X

10 Year Asset Management Plan Final Draft for Review

Buildings X X

Roads X X

Stormwater X X

Asset Management X X

Long Term Financial Plan Final Draft for Review X X XEfficiency & Economy AuditCommittee Annual Review / Self Assessment X X

LegendX Denotes ScheduledX Denotes CompletedX Denotes Not Completed

2014/15 2015/16



Audit Committee Action List and Annual Program Report


Electronic version is the controlled version. Printed copies are considered uncontrolled. Before using a printed copy, verify that it is the current version.

District Council of Mallala

Audit Committee Action List

Legend: X – Unchanged since last review X – Proposed Date / Action not met X – Action since previous review

Meeting Date

Item

Action Responsible Person

Action to Date Status

Internal

Controls That a detailed report is prepared and provided to the first scheduled Audit Committee meeting in 2013 outlining Council’s current Internal Controls, a schedule / summary of controls and the assessments of those controls and what actions are proposed by staff.

Finance Coordinator

Councils Finance Department is continuing to risk assess and develop internal financial controls. Draft Internal Controls presented to the 4 December 2013. Further report provided to the 1 May 2014 meeting outlining progress with Internal Control document provided to External Auditor for comment and provision of document to The Barossa Council for review and comment. Update report provided in this 31 March 2015 Agenda

In Progress

4 December 2013 Internal Governance Audit

That Council conducts an internal audit of governance practices prior to the appointment of the new Council in November 2014.

Governance Coordinator

Internal Audit Tool completed identifying the requirement to complete an internal audit every 2 years following completion of first audit. To be completed week 1 and 2 December 2014

In Progress


Electronic version is the controlled version. Printed copies are considered uncontrolled. Before using a printed copy, verify that it is the current version.

Not complete, will be scheduled with new Governance Officer

4 December 2013 External Auditor

That the external auditor be contacted to clarify the wording in his letter regarding the 2012/2013 year allocation of funds from the Grants Commission.

Finance Coordinator

Item being discussed with the External Auditor on the 2 May 2014.

In Progress

1 May 2014 Governance Plan

Improve formatting to identify action against the Plan improving identification of progress.


The colour GREEN used to identify progress from Audit Committee meeting to Audit Committee meeting.

Completed 01

September 2014

1 October Internal Review of Council Decisions Policy

Make recommended changes to Policy prior to going to Council for consideration.


Internal Review of Council Decisions Policy changes made and to be provided to Council January 2015. Policy remains under review

In Progress

1 October Rescission of Lands Under Roads Policy

Recommended rescission of Policy to Council.


To be provided to Council January 2015. Policy remains under review

In Progress

1 October Asset Management Plans

That a report / presentation is provided to the next Committee meeting regarding Council’s asset management plans.

Strategic Infrastructure Coordinator

Being presented at the 1 December 2014 meeting

Complete 01

December 2014


4.2 Audit Committee Governance Plan Assessment



Report Date: 31 March 2015 Prepared by: Acting Chief Executive Officer

Corporate Objective: 5.4 Effective strategic and performance management.

Purpose:

To provide the Committee with an update of actions within the Governance Plan (Attachment 1).

Recommendation 1:

“that the Committee having considered Item 4.2 Audit Committee Governance Plan Assessment dated 31 March 2015, notes and receives the report”.


Impact Summary


Financial Nil.

Legislation The Governance Plan is the focus of requirements within the Local Government Act 1999 and the implementation and actioning of the Plan will see Council comply with these requirements and best practice standards.

Risk It is important that areas identified within the Plan are actioned; ensuring Council has a focus on its risk mitigation and associated framework and practices.

Consultation The Plan was consulted upon with the Audit Committee and Senior Management prior to adoption in December 2013. The Plan has been provided and is available to all staff.

Asset Management Plans The Plan will assist in improved governance, asset, financial and risk management practices within Council.

Service Standards The Plan will ensure the continued specific management of Council’s governance, asset, financial and risk management practices with the view to achieving best practice standards.


Background

On 10 September Tony Lawson conducted an on-site audit utilising the LGAMLS Good Governance Audit template, which involved Tony reviewing a vast range of Council’s policies, procedures, related documents and practices. Tony also audited a range of associated documents within Council’s records management system and on Council’s website. Following the audit Tony compiled a comprehensive report. The Local Government Association Mutual Liability Scheme (LGAMLS) also completed a Risk Management Review earlier in the 2013 period; the focus of that review was also Council’s risk, financial and governance practices. That report and recommendations were also provided to the Audit Committee and Council. The Tony Lawson Consulting Report was assessed against the completed LGAMLS Risk Management Review for consistencies and has been developed into the one Plan – the Audit Committee Governance Plan 2014. The Plan was adopted by the Audit Committee meeting on the 4 December 2013.

Discussion After a review of the Governance Plan any item that had not been completely finalised the previous due date has been marked in red. A revised due date has been placed for consideration.

Summary The Audit Committee Governance Plan will be a valuable tool in improving Council’s governance practices and will be used to report progress to the Audit Committee in accordance with its Annual Program.


Attachment 1 to report 4.2 dated 31 March 2015

Audit Committee Governance Plan Assessment


Audit Committee

Governance Plan

The Audit Committee Governance Plan was adopted by the Audit Committee at its 4 December 2013 Meeting, it is a working document subject to change and reported against

in accordance with the Audit Committee Annual Program.


Governance Assessment Ratings The initial ratings were determined following an external Governance Audit conducted by Tony Lawson Consulting in September 2013. These ratings are reviewed and updated following reports against the Plan to the Audit Committee. The rating system used in this assessment is

Themes and Topics Independent Review Rating 0 1 2 3 4

1.Ethics, Values & Council Members

1.1 Code of Conduct - Council Members X

1.2 Code of Conduct - Council Staff X 1.3 Council Member Training and

Development X

1.4 Council Committees X 1.5 Council Meetings X 1.6 Council Members Access to

Information X

0 0 0 5 2 2.Risk Management & Internal Controls

2.1 Risk Management X 2.2 Internal Control X 2.3 Fraud and Corruption X 2.4 Legislative Compliance X 2.5 Purchasing X 2.6 Audit Committee X 2.7 Sale and Disposal of Assets X 0 0 2 5 0

3.Decision Making 3.1 Delegations - Council X 3.2 Delegations - Chief Executive Officer X 3.3 Statutory Policies X 3.4 Community Consultation X 3.5 Strategic Planning X 3.6 Complaints Management X 5 1 Adjudged Overall Rating 0 0 2 15 3

Level 0 Unsatisfactory No evidence of Required Elements.

Level 1 Poor Some evidence of Required Elements, but this is either informal or not reflected in practice.

Level 2 Satisfactory Evidence of basic system with Required Elements present and generally reflected in practice. Some Good Practice Elements evident.

Level 3 Good Clear evidence that all Required Elements are in place within a formal governance system. A significant and increasing number of Good Practice Elements are evident. Appropriate training has been arranged.

Level 4 Excellent Level 3 plus evidence of ongoing monitoring, review and reporting on the effectiveness of the various elements of the governance system leading to continuous improvement. Governance systems and related documentation have been well communicated to Members and staff, are well understood and evident in practice.


Blue - Denotes Updated Action and /or Completed

Green – Denotes progress from previous Audit Committee Meeting

Red – Denotes Past Completion Date

Title Required Action Responsible Person

Proposed Completion

Date

Completion Date

Elected Member Code of Conduct Has the Code been adopted by Council? The Mandatory Code of Conduct was noted by Council in

September 2013. Elected Members have received training on the requirements of the Code and its relationship to ICAC and Council’s roles and responsibilities.

CEO

30/09/2013 30/09/2013

Does the Code include evidence and links to other relevant policies (e.g. Communication Policy, Fraud and Corruption Policy, Gifts & Benefits Policy, Information & Technology Policy etc)?

The Code is a legislated document not subject to change by Council. As Council policies are reviewed reference will be made to the Code. Several Council policies already identified the Code of Conduct as a Related Document. 5/12/13 - Council’s suite of Governance Policies was reviewed on the 5/12/13 – references to the new Mandatory Code of Conduct were updated in all draft policies and will be adopted as per Council’s Policy Review Schedule.


30/06/2014 5/12/2013

Does the Code cover whether a breach of these other policies is a breach of the Code?

As per above. NA NA 30/09/2013

Code of Conduct – Council Staff Is a copy of the Code available at the Council’s principal office and on the Council's website?

The legislated Mandatory Code of Conduct is available on Council’s website. The Mandatory Code of Conduct – Council Employees was released in February 2014.


31/03/2014 28/02/2014


Does the Code distinguish between illegality and impropriety?

It is anticipated that illegality and impropriety will be identified within the Code however these exact terms may not be used but the intent will still be made. It is to be noted that the Code will be a Mandatory Code.


31/03/2014 13/02/2014

Does the Code identify whether a breach of organisational and governance policies is a breach of the Code?

The proposed Code is a legislated document not subject to change by Management. As Council policies are reviewed reference will be made in these policies to the Code of Conduct. All Council internal human resources policies have been updated to identify the Code of Conduct as a Related Document.


30/06/2014 31/03/2014

Is staff aware of the content of the Code and had training in the operation of the Code?

On the 17/2/14 all staff was provided a copy of the Code Staff received induction in the Code and its impact and expectations of their roles and responsibilities both individually and via departmental meetings with staff required to sign an Acknowledgement Form indicating such.

SMT 31/03/2014 31/03/2014

Has each staff member signed a copy of the Code to indicate that they have received, read and understood it?

While staff has not specifically signed a copy of the Mandatory Code of Conduct – Council Employees, staff have be asked to sign induction documents following induction to the new Code.


31/03/2014 31/03/2014

Has a record of the receipt of a copy of the Code by each staff member and training on the Code been retained by Council?

As above. Copies of Acknowledgement Forms have been placed with employee personnel files in accordance with Council’s records management requirements.


31/03/2014 31/03/2014

Is the Code referred to in the Council's standard contract of employment?

Standard Contracts of Employment and Induction Documents have been updated to reference the Mandatory Code of Conduct and an employee’s requirements with respect to the Code and other Council policies and procedures.

General Manager Corporate & Community

31/3/2014 31/03/2014

In completing the new staff code of conduct ensure it takes account of the Act, Award, EB and other employment rights are not diminished by the code.

The Code is a legislated document not subject to change by Management. As EB Agreements are reviewed the Mandatory Code of Conduct will be considered in the negotiation process. The Mandatory Code and new WHS Act 2012 requirements have been drafted into the EB Agreement in preparation for 2015 negotiations.


31/3/2015 31/03/2014


Council Member Training and Development To ensure greater accountability written reports should be provided by elected members who have attended training and seminars. The style and length of report to depend on the strategic value to the Council and could be a simple evaluation through to a comprehensive report.

Recommendation to be put to Council ratifying guidelines as to the method of reports to be present to Council following member training. Elected Member Training & Development Policy to be updated following any resolution of Council. Policy and associated application and review forms had been reviewed and were presented to the May Council meeting where they were ratified.


28/02/2014 26/05/2014

Council Committees Have external committee members received training in understanding their role, function, obligations and meeting procedures?

External training provider to be engaged to facilitate training following 2014 Elections. Council will be conducting a review of its Section 41 Committees in March / April 2015 in accordance with Council Report provided to 17/11/14 Council Meeting. Review conducted with Terms of Reference of identified committees adopted at March 2015 Council meeting Council currently seeking EOI from community members to become members of the committees. Training and induction will occur after they have been appointed


31/03/2015 30/04/2015 30/06/2015

Develop an induction processes for Section 41 Committee members and deliver at their first meeting and in event of change of membership.

Current Section 41 Committee Induction Book to be re-drafted and provided to Council for ratification. Council will be conducting a review of its Section 41 Committees in March / April 2015 in accordance with Council Report provided to 17/11/14 Council Meeting. Review conducted with Terms of Reference of identified committees adopted at March 2015 Council meeting Council currently seeking EOI from community members to become members of the committees. Training and induction will occur after they have been appointed


31/03/2015 30/06/2015


Council Meetings Does the Chair explain to any public present the reasons for and effect of a Section 90 resolution?

Public are advised Council is going into confidence, however there is no specific explanation regarding the legislation. No Action Required.

Completed Completed Completed

Risk Management Add Risk Management to Management meetings as a standing item.

Council’s current Report Template to be reviewed with the view to improving risk management requirements. Current Senior Management meetings include risk and audit as a standing agenda item. The current template has been reviewed and is adequate for this provision.


30/04/2014 31/03/2014

Develop risk categories to operations (e.g. legal, financial, environmental, health & safety, fraud & corruption, reputation and political) and link to relevant plans.

Risk categories have been identified and have been included into Council’s current organisational risk assessment template. It needs to be noted as part of the upcoming Business Continuity Plan (BCP) development this risk assessment template will be amended, however current risk category will be maintained. Councils BCP and Emergency Planning projected being completed by the LGAMLS is yet to be finalised and expected to be completed in November. Final session with LGAMLS conducted on 19 March 2015 with final report yet to be received


30/04/2014 30/06/2014 31/12/2014 31/05/2015

Council to provide training to staff/ elected members & volunteers. Incorporate within the training and induction procedures. Develop and provide training regarding a risk register for organisational risks.

To be completed as part of the BCP & Emergency Management Plan development being facilitated by the Mutual Liability Scheme. As above.


30/04/2014 30/06/2014 31/12/2014 28/02/2015 31/05/2015

Verify the BCP is in line with the requirements set out in AS 50:50:2010.

To be completed as part of the BCP & Emergency Management Plan development being facilitated by the


30/04/2014 30/06/2014


Finalise risk assessment process in consultation with relevant stakeholders.

Endorsement of the Business Continuity & Emergency Management Plan. Include in TNA and Training Program.

Provide induction and training to relevant staff re the BCP and Emergency Management Plans.

Mutual Liability Scheme. As above.

31/12/2014 31/05/2015

Conduct self assessment on an annual basis and schedule the process over a 12 month period.

Internal Governance Audit Tool endorsed by Council’s Audit Committee for commencement in the 2014-2015 financial year.


30/12/2014 1 May 2014

Internal Controls Does the Council have appropriate internal controls under Section 125 of the Local Government Act 1999 to achieve its objectives and ensure adherence to management policies and safeguard the assets of Council?

Council’s Internal Control Procedures to be finalised and reported to Council’s Audit Committee. Councils Draft Internal Controls have been provided to Councils External Auditor for review / comment. Council is currently liaising with The Barossa Council to review and audit these drafts also.

Finance Coordinator

31/03/2014 30/06/2015

Are internal control policies and procedures documented and systematically reviewed?

Internal Control Procedures to be reviewed annually or upon legislative changes. Internal Controls are part of the Committee’s Annual Program and to be reviewed at least annually.

Finance Coordinator

31/03/2014 30/06/2015

Does staff know and understand the reason for and how to apply the internal control policies and procedures?

Following adoption of Internal Control Procedures identified staff will be inducted / trained accordingly in their requirements and responsibilities.

Finance Coordinator

30/06/2014 30/06/2015

Is compliance with internal controls evidenced, as part of the Councils culture?

Internal Control practices have been included as part of Council’s internal audit program.


30/06/2014 30/06/2015

Are internal audits undertaken to test the validity of internal controls?

Following adoption of Internal Control Procedures on-going testing for compliance and improvement to be undertaken internally and by Councils External Auditors.

Finance Coordinator

30/06/2014 30/06/2015


Complete the development of internal controls using the Audit Committee for guidance and overview.

Council’s current DRAFT Internal Control Procedures to be presented to Council’s Audit Committee for consideration.

Finance Coordinator

31/03/2014 01/05/2014

Implement a training session of all relevant staff on internal controls.

Following adoption of Internal Control Procedures identified staff will be inducted / trained accordingly in their requirements and responsibilities.

Finance Coordinator

30/06/2014 30/06/2015

Undertake internal audits to test the validity of internal controls.

Following adoption of Internal Control Procedures on-going testing for compliance and improvement to be undertaken internal by Council’s External Auditors & Audit Committee.

Finance Coordinator

30/06/2014 30/06/2015

Any deficiencies in internal controls to be documented and consequential actions documented and signed off by CEO.

Deficiencies identified through the audit and testing processes are to be documented in the Audit Committee Governance Plan for action.


Finance Coordinator

30/09/2014 30/06/2015

Fraud & Corruption Has the Council adopted a Fraud & Corruption Policy and/or a Fraud & Corruption Prevention Plan? Ensure Policy links to other Governance Policies.

Draft Fraud & Corruption Policy to be reported to Council’s Audit Committee and Leadership for consideration prior to a report to Council for ratification. Council’s Finance Officer spoke with a range of different Council’s regarding Fraud & Corruption Plans to which none were in place. To be considered at a later time. Council adopted the Fraud and Corruption Policy at its Ordinary Meeting 28 July 2014.


31/03/2014 28/07/2014

Is there a regular review of fraud and corruption risks within the Council operations?

Fraud & Corruption while not formally identified is covered within the provision of Council’s Internal Controls.


30/06/2014 31/03/2014

Does the Council undertake an independent periodic assessment of its fraud and corruption framework, policies and/or plans?

Fraud & Corruption has been included as part of Council’s internal audit program.


30/06/2014 01/11/2014

28/07/2014

Does the Council’s Audit Committee consider, assess and make recommendations on fraud and corruption risks?

Findings and recommendations from Council’s auditing practices / testing and policy review (including those by Council’s External Auditor) to be reported to Council’s Audit Committee.


30/06/2014 28/07/2014

Has the Council conducted fraud and corruption To be included within the 2014 – 2015 Elected Member Governance Coordinator

30/06/2014


training for Council Members and staff? Training & Development Plan. Fraud and Corruption is included in the Induction / Training Plan for the new Council and will form part of the ongoing training and development of Council. Mandatory Elected Member Training has been offered and provided to elected members with most completing this aspect of the training

31/12/2014 31/10/2015

Does fraud and corruption training form part of the induction training program?

To be included within the 2014 – 2015 Elected Member Training & Development Plan. As Above


30/06/2014 31/12/2014

Implement process for staff and especially those exercising delegations to disclose a conflict of interest.

Conflict of Interest training to be considered for employee’s with delegated authority. Consideration of a report to Council identifying those employees who may be considered for completing an Ordinary Return. Draft Policy and associated documents provided to SMT in March. SMT determined to provide the policy and associated documents to the Audit Committee for guidance. To be provided to April Audit Committee Meeting. Policy and associated documents and induction completed 26 May 2014.

Chief Executive Officer

31/03/2014 26/05/2014

Develop and implement a fraud and corruption policy and expressly link to codes of conduct for members and staff.

Draft Fraud & Corruption Policy to be reported to Council’s Audit Committee and Leadership for consideration prior to a report to Council for ratification. The draft has direct links to both Codes.


31/03/2014 28/07/2014

Develop and implement a gifts and benefits policy and expressly link to codes of conduct for members and staff.

Gifts & Benefits Policy adopted by Council in accordance with the Mandatory Code of Conduct. Policy meets legislative requirements.


31/03/2014 28/02/2014

Add to Audit Committee Agenda as a standing item. Findings and recommendations from Council’s auditing practices / testing and policy review (including those by Council’s External Auditor) to be reported to Council’s Audit Committee. (No Action Required).


31/03/2014 28/02/2014


Consider conducting specific training program on fraud and corruption.

To be included within the 2014 Elected Member Training & Development Plan. Conflict of Interest training to be considered for employee’s with delegated authority. To be completed following the 2014 Local Government Elections. Mandatory Elected Member Training has been offered and provided to elected members with most completing this aspect of the training


31/03/2014 31/12/2014 31/10/2015

Legislative Compliance Does the Council maintain a key date’s diary to assist in complying with the requirements of the Local Government Act 1999?

Key Dates Diary provided to and available to all staff and monitored by SMT & Governance Coordinator.


31/03/2014 28/02/2014

Does Council conduct a self assessment of its legislative compliance, say every 6 months?

Internal Governance Audit Tool drafted, to be endorsed by Council’s Audit Committee for commencement in the 2014-2015 financial year. Audit Tool contains range of legislative requirements.


30/12/2014 05/12/2013

Are outcomes of legislative compliance assessments and audits reported to the Council’s Audit Committee?

Internal Governance Audit s, External Audits (including those by the Mutual Liability Scheme) and Generic Ombudsman Investigations to be reported to Council’s Audit Committee. Identified recommendations to be include in the Audit Committee Governance Plan.


30/12/2014 05/12/2013

Develop and implement a complete single point legislative, contract, lease, licence and other key dates diary.

Document Schedule has been developed which incorporates Council policies / procedures / leases / licences / delegations / by-laws and risk management.


That Council undertake regular reviews of policies and ensure there are linkages between policies as appropriate.

Policies are currently reviewed on a regular basis and where legislative changes dictate it. Council has a document register which facilitates this.


Purchasing Are provisions to prevent fraud and corruption present in the policy?

Council’s Tender & Purchasing Policy to be reviewed to ensure cohesion with the proposed Fraud & Corruption Policy.


31/03/2014 30/06/2014


When contracts are entered into without tenders are the reasons recorded?

Council’s Tender & Purchasing Policy indentifies where a tender will be used. No action required.


31/03/2014 28/02/2014

Implement process for staff and especially those exercising delegation to disclose a conflict of interest.

Conflict of Interest training to be considered for employee’s with delegated authority. Consideration of a report to Council identifying those employees who may be considered for completing an Ordinary Return. Policy and associated documents and induction completed 26 May 2014.


31/03/2014 26/05/2014

Implement process for ensuring purchases undertaken without tenders or where undertaken for valid reasons outside of the policy they are properly documented.

Clause to be included in Council’s Tender & Purchasing Policy when next reviewed to identify this requirement.


30/06/2014 30/06/2014

Ensure the use of a probity auditor for high value and high risk purchases is included in the Prudential Management Policy.

Draft Prudential Management Policy and consult with Audit Committee and Leadership Group before providing a final draft for Council consideration. No Action on this item. Governance Officer to investigate


31/03/2014 30/06/2015

Develop and implement a prudential policy which meets the requirements of Section 48 of the LG Act 1999.

Draft Prudential Management Policy and consult with Audit Committee and Leadership Group before providing a final draft for Council consideration. No Action on this item. Governance Officer to investigate


31/03/2014 30/06/2015

Review the contract and WHS contractor management policy and procedures to reflect WHS legislative changes. Provide additional training to relevant staff that manage contracts and engage contractors.

Review and adopt the LGAWCS One System Contractor Management Policy & Procedure. Provide required training on adoption of new policy / procedure. Extended to 30/06/2014 regarding staff movements and to coincide with the WHS&IM Plan. Contractor Management Policy and associated documents have been reviewed and adopted taking into consideration the WHS Act 2012 and LGAWCS requirements.

OHS Officer 30/06/2014 30/09/2014

Audit Committee Has a procedure been developed and adopted for the recommendation of Council’s Independent Auditor?

Develop a procedure for the recruitment, assessment and ratification by Council of Council’s Independent Auditor. It has been determined that a specific procedure is not required for the recommendation of Councils auditor and that


31/03/2014 01/05/2014


Council will comply with the requirements of Section 128 of the Local Government Act 1999 to ensure this process is managed accordingly.

Add a number of items as standing items for discussion and review at appropriate times as recommended e.g. fraud and corruption, risk management, strategic management plans and annual business plan, sale & disposal of assets etc.

These items are covered within the Governance & Financial Reports to the Audit Committee as identified. No action required.


31/03/2014 5/12/2013

That Council ensures the Audit Committee play a greater role in the governance review function.

Council’s Audit Committee is provided with a comprehensive Governance Report as a standard agenda item, , the Audit Committee is also provided all internal / external risk management / governance / finance reports. No action required.


31/03/2014 5/12/2013

Sale and Disposal of Assets Are provisions present in the Sale and Disposal of Assets policy to prevent fraud and corruption?

To be included as part of the Fraud & Corruption Policy with reference made within Related Documents to Sale & Disposal of Assets. This has been included within the Asset Financial Management Policy and Asset Management Policy.


30/06/2014 30/11/2013

Does the policy clearly define what "disposal" means? Does it include a lease over a particular period?

Next review of Sale & Disposal of Assets Policy to update and include with Definitions. This has been included within the Asset Financial Management Policies.


30/06/2014 30/11/2013

Does the Council have documented disposal procedures?

Disposal procedures to be drafted taking into consideration Council’s Asset Management Policy, Asset Management Financial Policy and Fraud & Corruption Policy. This has been included within the Asset Financial Management Policy and Asset Management Policy.


30/06/2014 30/11/2014

Do high risk and high value disposals require the use of a probity auditor? Does the policy provide for this?

To be considered and included at the next review of the Sale & Disposal of Assets Policy. This has been included within the Asset Financial Management Policy and Asset Management Policy.


30/06/2014 30/11/2013


Ensure the Sale and Disposal of Assets policy clearly defines what "disposal" means.

Next review of Sale & Disposal of Assets Policy to update and include with Definitions. This has been included within the Asset Financial Management Policy and Asset Management Policy.


30/06/2014 30/11/2013

Review the levels of authority for delegation by the CEO for disposal of assets to staff members.

To be considered with the Delegations Review. Delegations currently under review by Senior Management with a proposed report to Council November 2014. Delegations remain under review


30/06/2014 31/12/2014 30/06/2015

Ensure delegations for disposal of assets are appropriate and reflect actual practice.

To be considered with the Delegations Review. Delegations currently under review by Senior Management with a proposed report to Council November 2014. Delegations remain under review


30/06/2014 31/12/2014 30/06/2015

Ensure high risk and high value disposals requiring the use of a probity auditor are included in Prudential Management Policy and linked to the Sale and Disposal of Assets Policy.

Draft Prudential Management Policy and consult with Audit Committee and Leadership Group before providing a final draft for Council consideration. Currently under review


31/03/2014 30/06/2015

Implement process for ensuring sales undertaken without tenders or where undertaken for valid reasons outside of the policy they are properly documented.

Clause to be included in Council’s Tender & Purchasing Policy when next reviewed to identify this requirement. Currently under review


30/06/2014 31/12/2014 30/06/2015

Expressly link to Fraud and Corruption Policy To be included as part of the Fraud & Corruption Policy with reference made within Related Documents.


30/06/2014 28/07/2014

Delegations – Council Are delegations made under Council Policy included? To be considered with the Delegations Review.

Delegations currently under review by Senior Management with a proposed report to Council November 2014. Delegations remain under review


30/06/2014 31/12/2014 30/06/2015

Do the Council Members workshop the development of the delegations?

To be considered with the Delegations Review. Yes – this was conducted as part of the current delegations.


30/06/2014 28/02/2013

Are there any accountability mechanisms for Review Job Descriptions Template and include HR Officer 30/09/2014 22/09/2014


delegates? accountability mechanisms for employees with delegated authority.

Included as part of the revised and current JD Templates.

Develop accountability expectations as part of delegations to officers and have them reviewed through the Employee PD Reviews.

Included as part of the revised and current PDR Templates. HR Officer 30/09/2014 22/09/2014

Delegations – Chief Executive Officer Does the Council have a process in place to ensure that where a power or function is delegated to an employee of the Council, the employee is responsible to the CEO for the efficient and effective exercise or performance of that power or function?

Included as part of the revised and current PDR Templates and induction templates / forms completed by employees following delegated authority.

HR Officer 30/09/2014 28/02/2013

Do the purchasing delegations reflect actual practice?

Review of purchasing delegations by Finance staff proved that purchasing delegations are predominately adhered to

Finance Officer 30/06/2014 31/12/2014

31/12/2014

Does staff receive training in the operation of delegations and sub-delegations as a part of their induction program?

External training provider to be sourced as part of the 2014 Delegations Review. Review of HR policies and procedures over the last 6 months included adoption of new induction procedure. Review continuing


30/06/2014 31/12/2014 30/06/2015

Are there human resource management delegations for the appointment, dismissal and suspension of staff included? If so, are they appropriate?

Included in the Employee Performance Management Policy the appropriate delegations for the appointment, dismissal and suspension of staff. Review of HR policies and procedures over the last 6 months included adoption of new induction procedure. Review continuing

HR Officer 30/06/2014 31/12/2014 30/06/2015

Improve monitoring of delegations to ensure the qualifications and experience of staff match the delegations.

To be considered with the Delegations Review. Delegations remain under review


30/06/2014 31/12/2014 30/06/2015


Statutory Policies Internal Control Policy [s.125] Draft an Internal Control Policy in consultation with Finance

Staff and Council’s Audit Committee before providing a final draft to Council for consideration. Policy Review to continue


31/03/2014 30/06/2015

Order Making Policy [s.259] Adopted by Council September 2013. Governance Coordinator

31/03/2014 30/09/2013

Community Land Register [s.207] Review current Community Land Management Plans and provide to Council for adoption. Where significant changes are made provide for community consultation. Review of Community Lands currently underway


30/06/2014 30/06/2015

Public Roads Register [s.231] Review current Public Roads Register and provide to Council for adoption. Review of Council Asset Plans about to be conducted


30/06/2014 31/08/2015

Are all statutory policies, codes and registers reviewed on at least an annual basis?



31/03/2014 30/09/2013

Are all other policies, codes and registers (not required under statute) reviewed at least every 2 years?



31/03/2014 30/09/2013

Community Engagement Has the Council developed a community engagement model, in consultation with its community, that genuinely seeks to engage that community in all aspects of Council’s planning and operational activities?

Investigate and draft a Community Engagement Model in consultation with the Leadership Group before providing a draft for Council. Take into consideration requirements of Community Consultation Policy.


31/12/2014

Councils risk management process/ procedure does not assess the impacts of not achieving objectives arising from the strategic management plan at this stage.

Consider this requirement within the risk management framework and at the time of the next Strategic Plan review.


31/12/2014


Council hasn’t undertaken an assessment of planning and development activities as the framework has only just been adopted.

Conduct an assessment of risk exposure relating to planning and development activities in line with councils risk management framework.

General Manager Infrastructure &

Planning

30/09/2014

Complaints Management Does the Council meet with the Ombudsman to periodically monitor history and pattern of complaints to that Office?

Staff to consult with the Ombudsman to the effectiveness and requirement of this. Six monthly report now provided to Council by the State Ombudsman.


31/03/2014 28/02/2014

Land Assets and Roads Incorporate/ integrate/ align the Risk Management framework to asset management plans and activities. Continue developing the implementation strategies re the identified risks of extreme weather impacts and align to council’s strategic objectives and plans.

Following completion of Council’s Coastal Adaptation Study consider the recommendations in conjunction with Council’s Risk Management Framework, Strategic Plan Review, Asset Management Plans and Long Term Financial Plan. Corporate Plan Review to be conducted mid to late 2015


31/12/2014 30/11/2015

Develop and implement a procedure for the identification of utilities infrastructure below and above ground.

Review Council’s Utilities Infrastructure Permits and ensure inclusion of identification requirements. Review due to be conducted


30/06/2014 31/12/2014 31/08/2015

Tree Management Develop and implement a tree management policy and procedures. Include requirements as per s232 of the LG Act 1999 (Planting). Consider the appropriateness of trees within the council area which may impact roads, footpaths and community land. Consider tree management policies and procedures when developing climate/ extreme weather impact implementation strategies.

Continue with the current surveying of trees in identified areas such as playgrounds, parks & reserves (including ovals) and cemeteries. Review due to be conducted

Senior Horticultural Officer

30/09/2014 31/12/2014 31/08/2015





Report Date: 31 March 2015 Prepared by: Finance Coordinator

Corporate Objective: 5.5.2 Develop and maintain long term financial planning, management and reporting to ensure resources are provided to deliver services and manage Council’s assets.

Purpose:

To formally obtain endorsement from Council to apply for a Cash Advance Debenture Facility (CAD) from the Local Government Finance Authority (LFGA) for the management of short term cash flow.

Recommendation 1:

“that the Committee, having considered Item 4.3 LGFA Cash Advance Debenture – Cash Flow, dated 31 March 2015, recommends to Council that it endorses that it secure a Cash Advance Debenture to the value of one and half million dollars ($1,500,000) from the Local Government Finance Authority. The facility should be for a term of fifteen years (15 years) at the variable interest rate ruling over the period of the CAD on the balance of funds drawn. The purpose of the Facility is to manage short term cash flow.”

Recommendation 2:

“that the Committee having considered Item 4.3 LGFA Cash Advance Debenture – Cash Flow, dated 31 March 2015, recommends to Council that it endorses that authorisation be given for the Council Seal to be placed on the Debenture Documents and the Mayor and Chief Executive Officer be authorised to sign on Council’s behalf.”


Impact Summary


Financial Debenture loan through the LGFA as per the Long Term Financial Plan

Legislation Nil

Risk Without the CAD Facility to fund programmed expenditure, Council would experience a cash flow shortfall

Consultation Nil

Asset Management Plans Nil

Service Standards Nil


Background

As part of the adopted 2014/2015 Budget were a range of Capital Projects that were to be funded through the existing Cash Advance Debenture. This report seeks approval to apply for a further Cash Advance Debenture Facility to facilitate the management of short term operational cash flow.

The benefits of Cash Advance Debenture (CAD) are that the facility has no cost until drawn upon, it can be repaid when surplus funds are available and withdrawn as the need arises. Council currently has access to a LGFA Cash Advance Debenture to the value of five million dollars ($5,000,000) as per a resolution of Council from 27 May 2013 meeting.

A Facility term of 15 years is recommended as it provides the flexibility required to reasonably manage the cash requirements of Council operations without exerting too much pressure on Council’s resources and financial Key Performance Indicators (KPI’s). The Long Term Financial Plan also includes a term of 15 years for this loan.

The current indicative interest rate on variable loans from the LGFA is 4.5%.






Corporate Objective: 5.4.2 Plan for, and manage Council’s strategic and operational risk.

Purpose:

As per Section 128 of the Local Government Act 1999 the appointment of an external auditor can not exceed 5 years. This is the final year under the current auditor and Council is required to tender for a new auditor.

Recommendation 1:

“that the Committee, having considered Item 4.4, External Auditor – Expression of Interest report, dated 31 March 2015, receive and note the invitation to submit Proposal for Audit Services.”


Impact Summary


Financial Nil

Legislation Section 128 of the Local Government Act 1999.

Risk Nil

Consultation Nil

Asset Management Plans Nil



Background

Council is required to appoint an external auditor for a term not exceeding 5 years.

The current auditor, Mr Ian McDonald FCA is currently in the last of the 5 year term, an invitation to submit Proposal for Audit Services will be sent to a selection of Local Government experienced external auditors.

A draft invitation is attached (Attachment 1) for the Committee to review.



External Auditor – Expression of Interest


Date

Invitation to submit Proposal for Audit Services

Council invites your firm to submit a proposal seeking appointment as Council’s auditor for a term of up to 5 years commencing immediately and effective for the 2015/16 financial year. Your firm’s proposal must address the issues detailed further in this letter of invitation, and to assist you in formulating your submission, Council provides the following information concerning its depth of operations. Background Information Number of employees 54 Number of employees (FTE) 47 2014/15 Total budgeted operating expenditure $10,692,381 2014/15 Budgeted capital expenditure $4,545,483 2014/15 Budgeted total operating income $9,639,714 2014/15 Budgeted rates income $7,400,609 Council administration office locations 2 2013/14 Total Actual operating expenditure $9,495,889 2013/14 Total Actual operating income $8,828,869 2013/14 Total Actual rates income $7,131,555 Key Performance Indicators 2015

Budget 2014 2013

Operating Surplus (Deficit) (1,052,667) (667,020) 271,719 Operating Surplus Ratio (14%) (10%) 4% Net Financial Liabilities 9,380,000 7,744,000 7,408,000 Net Financial Liabilities Ratio 96% 89% 69% Interest Cover Ratio 4.8% 3.8% 3.9% Asset Sustainability Ratio 40% 22% 56% Asset Consumption Ratio 71% 71% 76% Council has established a number of active committees pursuant to section 41 of the Local Government Act, which consist of a mix of elected members and community members, and which are responsible to Council for the management of properties and other functions. All financial transactions of these committees are incorporated in the books of Council, and all funds are held in a Council bank account and managed internally. Council operates two administration offices with Mallala being the principal one and the other at Two Wells.


1. Objectives of the Audit The objective of Council’s audit is to provide an independent audit opinion of the accounts and annual financial records of the District Council of Mallala for each financial year covered by the term of the audit appointment. The audit must meet both statutory requirements and Australian audit standards. 2. Term of appointment Council is seeking to make an appointment for a period of five years commencing 1 July 2015 through to 30 June 2020. 3. Scope of the audit The auditor is to: - 3.1 Carry out such work as is necessary to form an opinion as to whether: (a) The accounts are properly kept; and

(b) The annual financial statements: (i) are prepared in accordance with the financial records; and

(ii) represent fairly the results of the operations and cash flows for the financial year and the financial position of the Council at 30 June in accordance with the Australian accounting standards, the Local Government Act 1999 (as amended) and other mandatory professional reporting requirements.

3.2 Include in his or her audit report any matters identified during the normal audit

procedures such as:-

(a) Any significant adverse trends in the financial position or the financial management practices of the Council;

(b) Any material irregularities in the Council’s accounting practices or in the management of the Council’s financial affairs identified during the course of the audit;

(c) Any weaknesses in the internal controls in operation. (d) Any factors impacting on the adequacy of the depreciation charge for the year.

This is after due consideration of an assessment of the depreciation methodology principles adopted by Council and the consistency of the accounting principles applied.

4. Audit Methodology and Approach 4.1 The auditor is required to comply with the requirements of the Local Government Act

1999 and the Local Government (Financial Management) Regulations 1999. 4.2 An audit is to be carried out in accordance with “Auditing Standards” and “Auditing

Guidance Statements” adopted from time to time by CPA Australia and the Institute of Chartered Accountants in Australia.

4.3 The auditor is to provide the Council with a general outline of his or her methodology. This may include the proposed analysis and review of internal controls and the extent


to which these controls lead to reliance on the Council’s administration and financial system to provide accurate reports.

4.4 The auditor is to provide the Council with a plan for the audit including:

(a) Timing of interim audit visits; (b) Final audit visit (within 60 days of being advised that the accounts and annual

financial report are available for audit); and (c) The method to be used to communicate with, and provide advice and

information to, the Council. 4.5 The auditor is required to produce an audit report as required by Section 129 of the

Local Government Act 1999 and a report on particular matters arising from the audit. 5. Critical Matters to be Audited

Council is of the view that the following matters are important to the proper maintenance and reporting of its financial accounts. They are also important to the auditor’s responsibility for providing an audit opinion and an audit report. The auditor should include in his or her proposal the extent to which the matters outlined below will be examined in the course of forming his or her independent audit opinion of the accounts and annual financial reports of the District Council of Mallala.

5.1 Governance and Control

(a) Roles and Responsibilities (b) Delegated Authorities (c) Council/Committee Minutes and Directions (d) Strategic/Business/Risk Planning (e) Budget Management (f) Internal Controls

5.2 Financial Accounting and Reporting

(a) Income

• Rates revenue • Government and other grants • User pays revenue • Profit on sale of non-current assets • Other income

(b) Expenses

• Salary and wages costs • Depreciation • Materials and contract expenditure • Loss on sale or revaluation of non-current assets • Insurances • Bad debts • Other expenses


(c) Current Assets

• Cash at bank and short term investments • Receivables and prepayments • Inventory

(d) Non-Current Assets

• Property, plant, furniture and equipment • Infrastructure and accumulated depreciation thereon • Other receivables

(e) Liabilities (Current and Non-Current)

• Creditors and accruals • Loan borrowings • Provisions for employee entitlements

(f) Other

• Statement of changes in equity • Disclosure of contingent liabilities • Disclosure of capital commitments • Accounting policies and notes to the financial statements • Statement of cash flow • Key financial indicators as endorsed by the LGA Financial Sustainability

Advisory Committee or by a Local Government Association General Meeting

6. Hours, Fees and Expenditure The auditor is to provide the following detail:

(a) an estimate of the hours to be spent on the audit; (b) fees for completing the audit in accordance with this specification including any

increase over the term of the appointment; (c) the nominated auditor and registered company audit number; and, (d) the experience of the nominated auditor in completing Local Government audits

7. Terms and Conditions The following conditions should be noted by auditors:

(a) The auditor shall not sub-contract to a third party without Council approval; (b) The auditor shall not, and has no right to, assign the audit contract to third

parties; (c) The auditor shall not be engaged by the Council to undertake any financial and

accounting work that results in financial information that will be the subject of the annual audit;

(d) The auditor shall confirm that he or she has, and will maintain during the duration of the audit term, professional indemnity insurance covering the legal liability arising out of any neglect, default, error, or omission of at least $5 million in aggregate or $2 million on an “each and every claim” basis with a two year run-


off, plus public liability insurance to a minimum of $10 million. 8. Termination of appointment The appointment as auditor is terminated if:

(a) the auditor (being a natural person) dies; (b) the auditor ceases to be a registered company auditor; (c) the auditor is a disqualified person under Section 128 (5) of the Local

Government Act 1999; (d) the auditor otherwise ceases to be eligible for appointment as auditor; (e) the auditor accepts remunerated office or employment from the Council; (f) the auditor resigns by notice in writing to Council; (g) Council serves notice in writing to the auditor terminating the appointment for

reasonable cause; (h) the term of the appointment expires.

9. Auditor Independence The auditor is required, annually to provide a declaration that he/she is independent of Council and nothing has transpired that would compromise his or her independence during the conduct of the audit. 10. Other matters to be addressed in your firm’s proposal Other than demonstration of your firm’s ability, experience and scope to provide those services listed above, your proposal must also provide the following detail:

• A brief background and outline of the firm submitting the proposal

• Name of the partner responsible for the audit

• The names and addresses of at least three organisations for whom similar work has been undertaken and who would be prepared to act as referee.

• Your firm’s views on the major issues of a financial / sustainability nature to be

faced by Local Government over the next three to five years. Further Information In the event that you require further information or clarification on aspects of this brief, please contact Council’s General Manager Corporate and Community Services, Mr Peter Sellar,


[email protected] or Finance Coordinator, Mr Gary Graham, [email protected] or by Telephone 8527 0200. Evaluation of Proposal Proposals will be evaluated against a set of predetermined criteria that have been selected to assess the relative ability of each proposal to perform the services stated in the proposal brief. These would include

• The firm’s previous audit experience, both general and in a Local Government context;

• The qualifications and experience of the staff who will undertake the audit; • Demonstration of understanding of the task; • The proposed audit methodology; • Ability to meet timeframes; and • Cost and value for money.

Lodgement of your Proposal Council will receive written proposals addressed to the Chief Executive Officer, District Council of Mallala PO Box 18 Mallala SA 5502 no later than 5.00pm DATE TBC


mailto:[email protected]

mailto:[email protected]%7C





Corporate Objective: 5.5.2

Develop and maintain long term planning, management reporting ensuring resources are provided to deliver services and manage Council’s assets

Purpose:

Council is required under Sec. 9 of the Local Government (Financial Management) Regulations 2011 to reconsider its budget at least twice, between 30 September and 31 May (both dates inclusive) in the relevant financial year.

Recommendation 1

“that the Committee having considered Item 4.5 2014/15 Annual Budget Review as at 28 February 2015 dated 31 March 2015, recommends that Council endorse the list of changes to be included in the Current Annual Budget for the year ending 30 June 2015:”

- Statutory Charges increase $25,000 - Other Revenue increase $14,000 - Employee Costs decrease $150,000 - Materials increase $8,500 - Recruitment costs increase $20,000 - Regional Procurement Shared Service increase $6,100 - Two Wells roundabout construction decrease $500,000 - Plant replacement net decrease $42,000

Recommendation 2 “that the Committee having considered item 4.5 2014/15 Annual Budget Review as at 28 February 2015, dated 31 March 2015 recommends that Council receive and adopt as the Current Budget for the year ending 30 June 2015.”


Impact Summary


Financial Agreed alterations to the 30 June 2015 Budget as reported and outlined in the Budget Review Statements

Legislation Requirement according to Section 9 of the Local Government (Financial Management) Regulations 2011

Risk Nil

Consultation Nil

Asset Management Plans Asset Management Plans to be updated to reflect adjustments proposed in Capital Projects



Background

This is the second review of Councils Budget for the year ending 30 June 2015. The review has been conducted as at 28 February 2015. Summary Items to be considered as part of the Budget Review for inclusion in the 2014/2015 budget. Statutory Charges $25,000 Other Revenue $14,000 Employee Costs ($150,000) Materials, contracts & other expenses ($465,400) Plant Replacement ($42,000) In regard to the movements in the attached financial statements compared to the October revised 2014/2015 budget. Increase in Operating Revenues of $39,000 Decrease in Operating Expenditure of $615,400 Decrease in Capital Expenditure of $42,000 Summary Report The budget review provides a financial comparison of the original budget against actual results to 28 February 2015 and proposes a revision to the budget forecast with the above adjustments. These reports assist in monitoring the delivery of services to the community along with the roll-out of the capital works program. The table below shows the changes to key financial outcomes as a result of changes made/proposed from the original budget at this review. Budget Estimates

Original Budget ($,000)

Review as at 31 Oct 2014 ($,000)

Review as at 28 Feb 2015 $,000)

Operating Income $ 9,504 $ 9,601 $9,640 Operating Expenditure $ 11,308 $ 11,363 $10,692 Operating (Deficit) ($ 1,804) ($1,762) ($1,053) Capital Expenditure $ 3,470 $ 4,587 $4,545 Capital Grant Income $ 681 $ 958 $958 Capital Sale of NCA $ 210 $ 210 $136 New Loans $ 2,000 $ 2,700 $0


Statutory Financial Reports

The budget financial statements (Attachment 2) are presented in the required statutory format, and consist of:

• Budget Income Statement • Budget Balance Sheet • Budget Statement of Changes in Equity • Budget Cash Flow Statement • Budget Uniform Presentation of Finance • Budget Financial KPI’s 2014-2015



2014/15 Annual Budget Review as at 28 February 2015


Changes from adopted October Reviewed budget for February 2015 budget review.

District Council of MallalaFebruary 2015 Budget Review

Satutory Charges increased by $25,000, development fees are expected to be higher than originally budgeted by $25,000.

Employee Costs decreased by $150,000, the timing of the replacement of the CEO, their personal assistant, governance officer and outdoor staff has resulted in a decrease in employee costs.

Plant replacement of $42,000 net of trade-ins has been deferred until next financial year.

Materials, contractors & other expenses decrease of $465,400, the Two Wells roundabout construction has been delayed and is still in the planning stage, the origin amount of $600,000 has been reduced by $500,000. An additional $20,000 for the recruitment of the new CEO and small increases in other materials.

Other Revenue increased by $14,000, recovery of legal costs on development disputes $8,000 and a special distribution from the Local Government Finance Authority $6,000.


OriginalBudget

October ReviewBudget

February ReviewBudget

2014-15 2014-15 2014-15$’000 $’000 $’000

REVENUERates 7,441 7,441 7,441 Statutory Charges 361 361 386 User Charges 72 72 72 Grants, subsidies and contributions 1,218 1,314 1,314 Investment Income 1 1 1 Reimbursements 372 372 372 Other Revenues 39 39 53 TOTAL REVENUES 9,504 9,601 9,640

EXPENSESEmployee Costs 4,740 4,740 4,590 Materials, contracts & other expenses 3,915 3,915 3,450 Finance Charges 455 455 455 Depreciation, amortisation & impairment 2,197 2,197 2,197 Loss of Revaluations 0 0 0 TOTAL EXPENSES 11,308 11,308 10,692

Operating Surplus(Deficit) before (1,804) (1,707) (1,053)Capital Amounts

Share of profit - joint ventures & associates 0 0 0 Share of loss - joint ventures & associates 0 0 0 Net gain/(loss) on disposal or revaluation of assets (6) (6) (6)Amounts specifically for new or upgraded assets 681 958 958 Physical Resources Received Free of Charge 0 0 0

NET SURPLUS/(DEFICIT) (1,129) (755) (101)


Budgeted Income Statement for the year ended 30 June 2015


OriginalBudget


2014-15 2014-15$’000 $’000

ASSETSCurrent AssetsCash and Cash Equivalents 157 177 Trade and Other Receivables 870 868 Other financial assets 0 0 Inventories 81 81 TOTAL CURRENT ASSETS 1,108 1,126

Non-current AssetsEquity accounted for Regional Subsidiaries 4,383 4,966 Land 13,169 13,168 Buildings 14,901 14,802 Road Infrastructure 40,973 42,185 Other Infrastructure 3,213 3,442 Equipment 3,659 3,648 Other Assets 268 61 TOTAL NON-CURRENT ASSETS 80,565 82,273 TOTAL ASSETS 81,673 83,399

LIABILITIESCurrent LiabilitiesTrade and Other Payables 1,642 922 Borrowings 528 5,047 Short Term Provisions 454 1,017 TOTAL CURRENT LIABILITIES 2,624 6,986

Non-current LiabilitiesLong Term Provisions 66 34 Long Term Borrowings 8,035 3,406 TOTAL NON-CURRENT LIABILITIES 8,101 3,440 TOTAL LIABILITIES 10,725 10,426

NET ASSETS 70,948 72,973

EQUITYAccumulated Surplus 26,527 27,952 Asset Revaluation Reserve 44,330 44,926 Other Reserves 91 95

TOTAL EQUITY 70,948 72,973


Budgeted Balance Sheet as at 30 June 2015


OriginalBudget


2014-15 2014-15$’000 $’000

CASH FLOWS FROM OPERATING ACTIVITIESReceiptsOperating Receipts 9,503 9,639 Interest Receipts 1 1 PaymentsPayments (8,663) (8,040)Finance Payments (455) (455)

NET CASH PROVIDED BY (OR USED IN) OPERATING ACTIVITIES 386 1,145

CASH FLOWS FROM INVESTMENT ACTIVITIESReceiptsGrants specifically received for new or upgraded assets 500 627 Sale of replaced assets 98 66 PaymentsExpenditure on renewal/replacement of assets (622) (531)Expenditure on new/upgraded assets (2,018) (3,574)

NET CASH PROVIDED BY (OR USED IN) INVESTING ACTIVITIES (2,042) (3,412)

CASH FLOWS FROM FINANCING ACTIVITIESReceiptsProceeds from Borrowings 2,000 2,700 PaymentsRepayments from Borrowings (622) (622)

NET CASH PROVIDED BY (OR USED IN) FINANCING ACTIVITIES 1,378 2,078

NET INCREASE (DECREASE) IN CASH HELD (278) (189)

CASH and CASH EQUIVALENTS AT BEGINNING OF PERIOD 435 366

CASH and CASH EQUIVALENTS AT END OF PERIOD 157 177


Budgeted Cash Flow Statement for year ended 30 June 2015


OriginalBudget


2014-15 2014-15$’000 $’000

ACCUMULATED SURPLUSBalance at end of previous reporting period 27,664 28,053 Net Result for Year (1,137) (101)Transfers from Other ReservesTransfers to Other Reserves Balance at end of reporting period 26,528 27,952

ASSET REVALUATION RESERVEBalance at end of previous reporting period 44,330 44,926 Gain on revaluation of infrastructure, property, plant & equipmentTransfer from/to Accumulated Surplus on sale of infrastructure, property, plant & equipment Balance at end of reporting period 44,330 44,926

GENERAL RESERVE SUMMARYBalance at end of previous reporting period 91 95 Transfers from Accumulated SurplusTransfers to Accumulated Surplus Balance at end of reporting period 91 95

TOTAL EQUITY AT END OF REPORTING PERIOD 70,948 72,973


Budgeted Statement of Changes in Equity for year ended 30 June 2015


OriginalBudget


2014-15 2014-15$’000 $’000

Operating Revenues 9,504 9,640 Less Operating Expenses 11,316 10,692

Operating Surplus/(Deficit) (1,812) (1,053)

Less: Net Outlays on Existing AssetsCapital Expenditure on renewal and replacement of Existing Assets 622 531 Less: Depreciation 2,197 2,197 Less: Proceeds on Sale of Replaced Assets 98 66

(1,674) (1,733)

Less: Net Outlays on New and Upgraded assetsCapital Expenditure on New and Upgraded Assets 2,018 3,574 Less: Amounts received specifically for New and Upgraded Assets 500 627 Less: Proceeds from Sale of Surplus Assets 0 0

1,518 2,947

Net Lending / (Borrowing) for Financial Year (1,656) (2,267)


Budgeted Uniform Presentation of Finances for year ended 30 June 2015


2011-12Actual

2012-13Actual

2013-14Actual

2014-15BudgetOriginal

2014-15Budget

FebruaryIndicator 1: Operating Surplus ('000) (378) 272 (667) (1,812) (1,053)Indicator 2: Operating Surplus Ratio (6%) 4% (10%) (25%) (14%)Indicator 3: Net Financial Liabilities ('000) $5,700 $7,408 $7,744 $10,568 $9,380Indicator 4: Net Financial Liabilities Ratio 60% 69% 89% 109% 96%Indicator 5: Interest Cover Ratio 3.1% 3.9% 3.8% 4.9% 4.8%Indicator 6: Asset Sustainability Ratio 163% 56% 22% 22% 40%Indicator 7: Asset Consumption Ratio 67% 76% 71% 84% 71%

Indicator 1: Operating Surplus To achieve a breakeven operating position or better over any 5 year period.

Indicator 2: Operating Surplus RatioTo achieve an operating surplus ratio of between (5%) to 10%

Indicator 3: Net Financial LiabilitiesTo achieve net financial liabilities no greater than annual operating revenues and not less than zero.

Indicator 4: Net Financial Liabilities RatioNet Financial Liabilities Ratio greater than zero but less than 100% of operating revenues.

Indicator 5: Interest Cover RatioNet interest greater than zero but less than 8% of operating revenues.

Indicator 6: Asset Sustainability RatioCapital outlays on renewing/replacing assets net of the proceeds from sale of replacedassets is greater than 75% but less than 110% of depreciation over a rolling 3 year period.

Indicator 7: Asset Consumption RatioThe average proportion of "as new condition" left in assets is greater than 40% and lessthan 80%.


Budget Financial KPI's 2014- 2015

Indicator

Targeted ratios


4.6 Review of Internal Financial Controls

Status Update




Corporate Objective: 5.5 Effective financial management that ensures Council’s financial sustainability.

Purpose:

To provide Audit Committee members with an update on the progress of a set of Internal Financial Controls for Council.

Recommendation:

“that the Committee, having considered Item 4.6 - Internal Financial Controls Status Update, dated 31 March 2015, recommends to Council that it receives and notes the report.”


Impact Summary


Financial The continued drafting, implementation and assessment of Council’s Internal Controls will ensure sound financial management.

Legislation The continued drafting, implementation and assessment of Council’s Internal Controls will ensure it meets the requirements of the Local Government Act 1999 and associated regulations associated with Local Government responsibilities.

Risk It is important that Council implement effective Internal Controls and that they are managed effectively; ensuring Council has a focus on risk mitigation. The implementation of Internal Controls will help Council identify areas for improvement and negate the need for a reactive approach in addition to minimising the risk associated with poor financial practices.

Consultation The Draft Internal Controls has been consulted upon with identified employees prior to coming to the Senior Management Team. Further consultation and review has been conducted by the Senior Management Team and Finance staff before providing this report to the Audit Committee.


The implementation of Internal Controls will assist in improved financial management practices within Council.

Service Standards The implementation of Internal Controls will ensure the continued specific management of Council’s asset, financial and risk management practices with the view to achieving best practice standards.


Background The Local Government Association recommends the implementation of Internal Financial Controls by the 2015-2016 financial year, in recognition of this practices moving from a Transaction Certified process to a Control Certified process are currently being undertaken. The recommended ‘financial procedures that should be documented’ provided by Ian McDonald, The Better Practise Model along with our existing Internal Control format, has formed the basis of the current review, redesign and implementation. Discussion The existing draft internal controls have been cross referenced with the recommended controls to ensure basic standards are met with approximately an additional forty (40) internal controls that have been reviewed as part of this process. The existing controls have been provided to relevant staff for review and feed back to assist with identifying those controls that are implemented or not yet adopted. This information has been collated and placed into the ‘Internal Control’ tables to assess risk, review and responsible officers. Further consultation and review of drafted Internal Controls has been conducted by the Senior Management Team and Finance staff before providing this report to Audit Committee members. Given the nature and extend of the attached Draft Internal Controls it is anticipated that there will be flow-on changes to Council’s financial management practices, codes, polices and procedures. It would be good practice to include recommendations identified through the development and assessment of Council’s internal controls into the Audit Committee Governance Plan. This will allow for a structure and transparent approach in actioning and monitoring identified actions while keeping the Audit Committee informed of Council’s progress on a quarterly basis. In addition it would allow for a central point for assessment and review by Council’s External Auditor. Summary The Internal Controls documentation is split up into separate Business Activities and functions and has been given a risk rating prior to any controls and a follow up risk rating if the documented controls were implemented. Given that the Internal Controls document is quite large in size being just under 150 pages, the actual Internal Controls will be sent to members via a separate email upon request. A copy of the Internal Controls will be available at the meeting on Tuesday 31 March 2015.


Finance staff have generated a review schedule and log system to allow the “Checking Officer” to verify each of the controls at set periods based on risk and priority. The review schedule will be adjusted based on the results of the previous controls check to ensure the system remains both robust and relevant. It is anticipated that some changes may be made to the proposed process when the new external auditor has been appointed after their initial review.


4.7 Asset Management Plan Review

Status update




Corporate Objective: 5.5 Effective financial management that ensures Council’s financial sustainability.

Purpose:

To provide Audit Committee members with an update on the sustainability of Council’s fixed assets and renewal program.

Recommendation:

“that the Committee, having considered Item 4.7 Asset Management Plan Review Status Update dated 31 March 2015, recommends to Committee that it receives and notes the report.”


Impact Summary


Financial To ensure that assets are maintained at appropriate service levels.

Legislation Nil

Risk To provide sufficient budget to meet asset renewal requirements.

Consultation Nil


To align the expenditure require for renewals with the asset management plan to maintain service standards.

Service Standards To maintain Councils assets at preferred service standard levels.


Background In Councils 2013/14 annual financial statements the asset sustainability ratio was 22% as compared with the preferred target range of between 75% and 110 %. The Audit Committee has asked for a report on the condition of Councils assets to insure that renewal expenditure is adequate and budgeted renewals are aligned with the current asset management plans. Methodology For the purposes of this report it has been assumed that the items in the detailed asset register are similar within each asset class so that a percentage of each condition can be based on the total number of assets in each class as opposed to individual value. Only the main asset classes that have been recently inspected are included in the analysis being roads, kerbing, footpaths, buildings and stormwater. Summary Road Assets Total number 1,408 Condition: As new 737 Very Good 418 Good 94 Fair 97 Poor 62 Percentage at fair condition or better 96% It is noted that the majority of poor condition assets are kerbing and the current renewals budget has addressed these items. Building Assets Total number 351 Condition: As new 76 Minor deterioration 84 Fair 113 Poor 78 Percentage at fair condition or better 78%


Stormwater Assets Total number 1,602 Condition: Very Good 475 Good 754 Fair 288 Poor 58 Very Poor 27 Percentage at fair condition or better 95% Conclusion Based on the methodology and analysis used Council is maintaining an adequate if not good level of sustainability. The calculated asset sustainability ratio of 22% had not included a component of renewal expenditure on assets that had been classified in the financial statements as upgraded assets and used depreciation as the base denominator. The use of the asset management plans as the denominator and the correct classification in this and subsequent years will ensure a more accurate sustainability ratio in the future.



Items:

5. GENERAL BUSINESS

5.1

6. NEXT MEETING

6.1 Mid May 2015

7. CLOSURE
