notice of special meeting - westtorrens.sa.gov.au · notice of special meeting notice is hereby...

Notice of Special Meeting

NOTICE IS HEREBY GIVEN in accordance with Sections 87 and 88 of the Local Government Act 1999, that a meeting of the

AUDIT AND RISK COMMITTEE

Members: Cr A Mangos (Presiding Member),

Cr M Farnden, Mr R Haslam, Mr M Harris, Mr A Bolaffi.

of the

CITY OF WEST TORRENS

will be held in the George Robertson Room, Civic Centre 165 Sir Donald Bradman Drive, Hilton

on

TUESDAY, 27 SEPTEMBER 2011

at 6.00 PM Declan Moore Chief Executive Officer (Acting) City of West Torrens Disclaimer

Please note that the contents of this Committee Agenda have yet to be considered by Council and recommendations may be altered or changed by the Council in the process of making the formal Council decision.

AUDIT AND RISK COMMITTEE 27 September 2011

I N D E X

1. MEETING OPENED .............................................................................................. 1

1.1 Evacuation Procedure ............................................................................... 1

2. PRESENT .............................................................................................................. 1

3. APOLOGIES .......................................................................................................... 1

4. DISCLOSURE STATEMENTS .............................................................................. 1

5. CONFIRMATION OF MINUTES ............................................................................ 1

6. COMMUNICATIONS BY THE CHAIRPERSON ................................................... 1

7. PRESENTATIONS ................................................................................................ 1

8. OUTSTANDING REPORTS/ACTIONS ................................................................. 1

9. REPORTS OF CHIEF EXECUTIVE OFFICER (ACTING) .................................... 2

9.1 Annual Financial Statements - Year Ended 30 June 2011 ..................... 2

10. OTHER BUSINESS ............................................................................................. 73

11. NEXT MEETING .................................................................................................. 73

12. MEETING CLOSE ............................................................................................... 73

AUDIT AND RISK COMMITTEE Page 1 27 September 2011

1. MEETING OPENED

1.1 Evacuation Procedure 2. PRESENT

Mr Ian Painter and Mr Sam Hilbink of PKF Chartered Accountants and Business Advisors will be in attendance to brief the Committee and respond to questions as to the preliminary findings of the audit of the financial statements. 3. APOLOGIES

4. DISCLOSURE STATEMENTS

The following information should be considered by Committee Members prior to a meeting: 1. Consider Section 73 of the Local Government Act and determine whether they have a conflict

of interest in any matter to be considered in this Agenda; and

2. Disclose these interests in accordance with the requirements of Sections 74 and 75 of the Local Government Act 1999.

The following disclosures of interest have been made in relation to:

Item Committee Member 5. CONFIRMATION OF MINUTES

RECOMMENDATION

That the Minutes of the meeting of the Audit and Risk Committee held on 23 August 2011 be confirmed as a true and correct record. 6. COMMUNICATIONS BY THE CHAIRPERSON

7. PRESENTATIONS

Nil 8. OUTSTANDING REPORTS/ACTIONS

Nil


9. REPORTS OF CHIEF EXECUTIVE OFFICER (ACTING)

9.1 Annual Financial Statements - Year Ended 30 June 2011 Brief

This report proposes that the Audit and Risk Committee review the annual financial statements of the Council for the year ended 30 June 2011 to ensure that they present fairly the state of affairs of the Council. RECOMMENDATION(S)

It is recommended to Council that: 1. In accordance with Regulation 22(5) of the Local Government (Financial Management)

Regulations 2011, it be noted that a draft unsigned statement has been received from Ian Painter, Partner of PKF, certifying his independence.

2. In accordance with Section 126(4)(a) of the Local Government Act 1999, the annual

financial statements as contained in Attachment 1 to this report be reviewed, and on being satisfied that they present fairly the state of affairs of the Council, they be referred to PKF for finalisation and the provision of an independent audit opinion.

3. In accordance with Regulation 22(3) of the Local Government (Financial Management)

Regulations 2011, the Chief Executive Officer and Presiding Member of the Audit and Risk Committee each sign the statement contained in Attachment 1 to this report certifying that the Council has not engaged PKF to provide any services outside of the scope of their function as external auditor.

Introduction

The annual financial statements for the year ended 30 June 2011 have been prepared in accordance with the requirements set out in the model financial statements pursuant to Regulation 13 of the Local Government (Financial Management) Regulations 2011 (the Regulations) and must now be reviewed by the Audit and Risk Committee. A key function of the committee is to review the annual financial statements of the Council to ensure that they present fairly the state of affairs of the Council (section 126(4)(a) of the Local Government Act 1999) (the Act). In order to facilitate an effective review, the following information is supplied: 1. In accordance with Section 127(1) of the Act, the draft financial statements for the City of

West Torrens, shown as Attachment 1 to this report and comprising: A statement of comprehensive income; A balance sheet; A statement of changes in equity; A cash flow statement; and Appropriate notes and other explanatory documentation to be read in conjunction

with these statements.


2. In accordance with Regulation 22(3), an unsigned statement by the Chief Executive Officer,

Mr Terry Buss and the Presiding Member, Councillor Arthur Mangos (page 43 of Attachment 1 to this report), certifying that the external auditor, Mr Ian Painter of PKF, is independent of the Council and has not been engaged by Council for any services outside of the scope of the external audit function as prescribed in the Act. It is recommended that the Chief Executive Officer and Presiding Member sign the ‘independence statement’ following the review of the financial statements in discussion with the external auditor.

3. In accordance with Regulation 22(5), a draft unsigned statement by Mr Ian Painter of PKF

certifying his independence (page 44 of Attachment 1 to this report). 4. The draft financial statements of the Western Region Waste Management Authority

(WRWMA) shown as Attachment 2 to this report. The General Manager, Corporate and Regulatory and other finance staff will attend the meeting to answer any questions about the information provided. Mr Ian Painter and Mr Sam Hilbink will be in attendance to brief the Committee and respond to questions as to the preliminary findings of the audit of the financial statements. Following formal Committee consideration of these statements, they will be referred to PKF to be finalised and for a final independent audit opinion to be provided. Referral to Council on 18 October 2011 is then intended. Discussion

Operating Surplus The year to 30 June 2011 ended with Council showing a favourable operating surplus before capital and other items of $4,109,776 as below:

$ $ 2011 2010 Income 53,505,389 50,803,353 Less Expenditure 49,395,613 47,614,596 Operating Result 4,109,776 3,188,758 Add Net Gain / (Loss) on Disposal 204,094 811,377 Amounts received for New / Upgraded Assets 182,404 576,260 Physical Resources Donated 753,161 244,116 Net Surplus / (Deficit) 5,249,435 4,820,510


Council’s operating surplus ratio has increased slightly from 9.0 per cent to 11.0 per cent, ratios for the last three years being:

Financial Year

Operating Surplus Ratio

2007/08 8.0% 2008/09 15.0% 2009/10 2010/11

9.0% 11.0%

LGA Information Paper 12 Targets for Local Government Financial Indicators (March 2007) suggests an operating break even position, or better, over any five year period and an operating surplus ratio of between zero and 15 per cent over any five year period. Sustainability The asset sustainability ratio shows the extent to which capital expenditure on the renewal and replacement of assets matches the rate at which these assets are used or consumed, with the amount spent divided by the total depreciation expense. Achieving a break even result of 100 per cent or better demonstrates that the cost of consumption of assets in any one year is being met by current rates and current ratepayers. LGA Information Paper 12 suggests an asset sustainability ratio greater than 90 per cent but less than 110 per cent over a rolling 3 year period. This was achieved in the three financial years to 2010/11, as shown in note 15 of the accounts.

Financial Year

Asset Sustainability Ratio

2007/08 106.9% 2008/09 102.9% 2009/10 2010/11

109.5% 102.0%

Loan Servicing Capacity Loan repayments as a percentage of rates is the benchmark that is best used to assess a Council’s relative indebtedness. The actual percentages for West Torrens were as follows:

Financial Year

Loan Repayments Ratio

2007/08 10.3% 2008/09 8.6% 2009/10 2010/11

7.5% 6.5%

A percentage between zero and 25 per cent would normally be considered as being reasonable and manageable.


Council’s interest cover ratio, being net interest expense as a percentage of total operating revenue, has been low for a number of years and was -0.8 per cent for 2010/11 (0.1 per cent in 2009/10), as shown in note 15 of the accounts. Liquidity Council’s balance sheet and cash flow statement indicate a strong end of year cash flow position, with cash down from $17,195,888 to $17,804,338. Three factors have largely contributed to this cash flow position:

Entry contributions for the St Martins aged care facility; Asset sales yet to be used to fund community hub development; and Slippage on the capital expenditure program.

A small budget surplus has been achieved in 2010/11 based on the end of year cash balance net of cash reserves. Other Matters Other items of note include: The most recently available full actuarial investigation conducted by the actuary for the

Local Government Superannuation Scheme as at 30 June 2008, indicated that the defined benefit fund was in an unsatisfactory financial position, with advice provided that contribution levels at the time were insufficient to cover guaranteed benefits to members. Options available to restore the fund to a satisfactory financial position have since been considered, with decisions taken to (1) close the defined benefit fund to new members from 25 November 2009 and (2) increase Council's contribution to 9.3 per cent for defined benefit fund members from 1 July 2010 (refer note 18).

Footpath and pathway asset condition assessments last undertaken in 2004/05 have been completed by Tonkin Consulting as at 30 June 2011.

Unspent funds carried forward have increased to $10,929,905, including $4,829,169 for community hub development, $2,364,878 for the Mile End / Cowandilla drainage project, and $1,317,052 for the upgrade of Galway Avenue Marleston. Carried forward funds since the year ended 30 June 2002 have been as follows:

Year Ended 30th June

Amount

2002 4,071,226 2003 7,164,560 2004 7,314,083 2005 2,575,1302006 10,081,5012007 7,200,5732008 7,145,9172009 9,992,3162010 8,797,4272011 10,929,905

Work in progress has increased from $2,373,296 to $3,423,216, largely due to the

recognition of Mile End / Cowandilla drainage works.


The Western Region Waste Management Authority results are summarised at note 19, with more detailed information presented in Attachment 2. Further provisioning to cover the remediation of Garden Island has not been necessary in 2010/11, as the provision which was actuarially assessed as at 30 June 2008 is considered to be sufficient.

Depreciation expense increased by $254,159 or 2.7 per cent to $9,712,524 (refer note 3). 2011/12 grants from the commonwealth government totalling $443,830, which were

received in advance, are recognised as income in 2010/11 ($424,292 in 2009/10) (refer note 2).

Council’s loan liability has decreased from $14,264,992 to $12,913,277 (refer note 8), with

the trend since 1987 as follows:

Aged care deposits recognised in the accounts of the Council total $21,582,262 ($19,373,555 at 30 June 2010) (refer note 8).

Mendelson Foundation wealth increased by $63,672 to $1,097,655 during the course of the year, a portfolio gain of 6.2 per cent (6.6 per cent in 2010).

Council did not make use of its cash advance debenture facility in 2010/11 (last used in 2005/06 when $3,000,000 was drawn).

Notes comparing budget and actual expenditure and income for the year are excluded from the accounts, following changes to the Local Government (Financial Management) Regulations 2011, but these will be reported to Council in October 2011.

Full cost attribution has been used in preparing the financial statements, and this is reflected at note 12.

Segment information is shown for the St Martins aged care facility (refer note 21), as required for ongoing funding purposes by the Commonwealth Department of Health and Ageing.

Conclusion

This report proposes that the Audit and Risk Committee review the annual financial statements of the Council for the year ended 30 June 2011 to ensure that they present fairly the state of affairs of the Council. It is intended that they be presented to Council for adoption on 18 October 2011.


ATTACHMENT 1


ATTACHMENT 2


10. OTHER BUSINESS

11. NEXT MEETING

25 October 2011, 6.00pm in the Mayor's Reception Room. 12. MEETING CLOSE

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