notice of audit committee meeting - city of tea tree gully · notice of audit committee meeting ....

Notice of Audit Committee Meeting

Wednesday 27 July 2016

MEMBERSHIP Cr Justin Hanson - Presiding Member

Cr Robin Coleman

Mr Ross Haslam – Independent Member Mr Gary Button – Independent Member

NOTICE is hereby given pursuant to Sections 87 and 88 of the Local Government Act 1999 that the next AUDIT COMMITTEE MEETING will be held in the Civic Centre, 571 Montague Road, Modbury on WEDNESDAY 27 JULY 2016 commencing at 6.30PM

A copy of the Agenda for the above meeting is supplied as required

JOHN MOYLE CHIEF EXECUTIVE OFFICER

Dated: 21 July 2016

CITY OF TEA TREE GULLY

AUDIT COMMITTEE MEETING 27 JULY 2016

AGENDA 1. Opening and Welcome

Acknowledgement of Country Statement “The City of Tea Tree Gully recognises this City’s considerable natural and cultural heritage, including thousands of years of Traditional Ownership by the Kaurna people and the more recent contributions from all who live here. We build on this heritage today by respecting and listening to each other, being receptive to new ideas and acting wisely for the current and future well-being of our community”.

2. Attendance Record:

2.1 Present 2.2 Apologies 2.3 Record of Officers in Attendance 2.4 Record of number of persons in the Public Gallery 2.5 Record of media representatives in attendance

3. Confirmation of Minutes of the Previous Meeting

That the Minutes of the Audit Committee Meeting held on 25 May 2016 be confirmed as a true and accurate record of proceedings.

4. Public Forum

Available to the public to address the Committee on policy, strategic matters or items that are currently before the Committee. Total time 10 mins with maximum of 2 mins per speaker. For more information refer to Council’s website www.teatreegully.sa.gov.au

5. Deputations Requests from the public to address the meeting must be received in writing 5 days prior to the meeting and approved by the Presiding Member. For more information refer to Council’s website www.teatreegully.sa.gov.au

6. Presentations

Requests from the public to present to the meeting must be received in writing 5 days prior to the meeting and approved by the Presiding Member. For more information refer to Council’s website www.teatreegully.sa.gov.au

7. Petitions - Nil

Audit Committee Meeting - 27 July 2016 Page 3

http://www.teatreegully.sa.gov.au/



8. Declarations of Conflicts of Interest

Members are invited to declare any material, actual and/or perceived conflicts of interest in matters appearing before the Committee.

9. Adjourned Business - Nil 10. Motions Lying on the Table - Nil 11. Management Reports

Office of the Chief Executive Officer

*11.1 2016 Mid Year Report - Audit Committee Activities .............................. 7 *11.2 Review of Audit Committee Structure and Membership Options ........ 19

Assets & Environment

*11.3 Update to the Asset Financial Hierarchy............................................. 35 Organisational Services & Excellence

*11.4 Review of Council's Loan Portfolio ..................................................... 53 Community & Cultural Development - Nil

12. Notice of Motions - Nil 13. Motions without Notice 14. Questions on Notice - Nil 15. Questions without Notice 16. Information Reports

16.1 Local Government Indemnity Schemes Review Update ................................ 59 16.2 Internal Controls - Control Track - End of Financial Year Review ................ 109 16.3 Audit Committee Work Program 2016- 2017 Financial Year - July 2016 ...... 117


16.4 Outstanding Actions from Auditor Management Letters ............................... 119 16.5 Review of Asset Management Plans ........................................................... 123

17. Status Report on Council and Committee Resolutions

17.1 Status Report on Committee Resolutions .................................................... 125 18. Other Business 19. Section 90(2) Local Government Act – Confidential Items

A record must be kept on the grounds that this decision is made.

20. Date of Next Ordinary Meeting

28 September 2016 21. Closure

The Committee meeting shall conclude on or before 10.30pm unless there is a specific motion adopted at the meeting to continue beyond that time.


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REPORT FOR

AUDIT COMMITTEE MEETING

MEETING DATE

27 JULY 2016

RECORD NO: D16/42254 REPORT OF: OFFICE OF THE CHIEF EXECUTIVE OFFICER TITLE: 2016 MID YEAR REPORT - AUDIT COMMITTEE

ACTIVITIES PURPOSE

To present to the Audit Committee a summary of the Audit Committee’s activities for the period January 2016 – June 2016.

RECOMMENDATION

1. That after review and discussion, the Audit Committee notes the 2016 Mid

Year Audit Committee Activities Report as outlined in Attachment 1 of the report entitled “2016 Mid Year Report - Audit Committee Activities” and dated 27 July 2016.

2. That the Presiding Member of the Audit Committee provides a verbal report relating to the Committee’s activities to the Council as required by the Audit Committee’s Terms of Reference.


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1 BACKGROUND

The Audit Committee’s Terms of Reference (TOR) and the Audit Committee’s Work Program require that the Committee review its performance at least annually. The TOR also specifies that the Presiding Member of the Audit Committee is required to verbally present at least twice yearly on the activities of the Committee to the Council. The last activities report was considered by the Committee at its meeting on 27 January 2016.

2 DISCUSSION

The 2016 Mid Year Audit Committee Activities Report (Attachment 1) has been compiled with the following objectives: • Provide a summary of the activities of the Audit Committee from the period

January 2016– June 2016 • Provide a mechanism for the Presiding Member to report the activities of the Audit

Committee to the Council

• To continuously improve the strength, efficiency, effectiveness, functionality and performance of the Audit Committee.

This information, together with information obtained from the Audit Committee Work Program and Audit Committee Minutes forms the 2016 Mid Year Audit Committee Activities Report as detailed within Attachment 1 of this report.

3 POLICY IMPLICATIONS 3.1 Financial / Budget

No additional finances have been required to formulate the 2016 Mid Year Audit Committee Activities Report.

3.2 Legal and Risk Management

There is no legislative requirement relating to the review of activities of the Audit Committee but it is an example of a good governance practice, and forms part of the Committee’s Terms of Reference.

The ongoing review of the activities of the Audit Committee provides greater assurance that the management systems and practices of Council are adequately reviewed to ensure a greater level of control / management of risk within the organisation.

3.3 Staffing / Work Plans The compilation of this information has had no major implications on the work load

of the Internal Auditor.


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3.4 Environmental

There is no environmental impact resulting from the 2016 Mid Year Audit Committee Activities Report.

3.5 Social

The report and presentation on the Audit Committees activities to Council will convey to the community that the organisation is delivering effective, efficient and robust governance practices, while providing an open and transparent account to the community about the roles, responsibilities and function of the Audit Committee.

3.6 Strategic Plan / Policy

It is considered the 2016 Mid Year Audit Committee Activities Report aligns with

the requirement of the Strategic Plan 2020 as outlined in areas 3 and 5 of the section entitled ‘Organisational Development of the Plan’;

3. Governance – we define roles, powers, and responsibilities within the organisation, with the aim of modelling best practice in local government.

5. Continuous improvement – we constantly look for opportunities to improve throughout incremental changes and an openness to new ways of doing things.

3.7 Stakeholder Engagement

Key organisational stakeholders have been actively involved in the 2016 Mid Year Audit Committee Activities Report process.

3.8 Promotion / Communications

The outcomes of the 2016 Mid Year Audit Committee Activities Report will be reported to the Council as a verbal presentation.

4 REPORT CONSULTATION

Staff have not been included in the consultation process in the preparation of this report, as it is a collection of information which has already been consulted with relevant people.


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Attachments 1. 2016 Mid Year Report - Audit Committee Activities .................................................. 11 Report Authorisers

James Brydson

Internal Auditor 8397 7353

Tanya Hook

Team Leader Governance and Policy 8397 7397

Ilona Cooper

Manager Governance and Policy 8397 7310

John Moyle

Chief Executive Officer 8397 7201


2016 Mid Year Report - Audit Committee Activities Attachment 1

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REPORT FOR


MEETING DATE

27 JULY 2016

RECORD NO: D16/42902 REPORT OF: OFFICE OF THE CHIEF EXECUTIVE OFFICER TITLE: REVIEW OF AUDIT COMMITTEE STRUCTURE AND

MEMBERSHIP OPTIONS PURPOSE

To invite the Audit Committee to review its structure and membership options and make recommendations to Council.

RECOMMENDATION

That the Audit Committee recommends to Council: That the Audit Committee having reviewed its structure and membership options, and associated required skill sets, resolves that the structure and membership of the Audit Committee remains unchanged. OR That the Audit Committee recommends to Council: That the Audit Committee having reviewed its structure and membership options, and associated required skill sets, resolves that the Audit Committee Terms of Reference be amended as follows: • ……………………. • ……………………


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1 BACKGROUND

On 23 June 2016, Cr Brian Massey resigned as an elected member for the City of Tea Tree Gully, effective immediately. Cr Massey held the position of Presiding Member of Audit Committee, and therefore a report was presented to Council at its meeting on 12 July 2016 to consider filling the vacancy of this position and to appoint a new Presiding Member. At its meeting on 12 July 2016 Council resolved to appoint Cr Hanson as Presiding Member of the Committee and also invite the Audit Committee to review its structure and membership options as follows:

“1. That Council appoints Cr Hanson as a member of the Audit Committee and appoints him to the position of Presiding Member for Audit Committee until such time as the Audit Committee structure (and potentially membership) is amended.

2. That the Audit Committee be invited to review its structure and membership options plus consider any additional required skill sets in order for the Committee to perform its functions and responsibilities as matter of urgency, and that a report, including recommendations be presented to a future Council meeting.”

2 DISCUSSION

The Audit Committee has responsibility for monitoring the risk management and internal control environment of Council’s operations, as well as overseeing Council’s internal and statutory audit responsibilities and functions. Legislation requires that a council Audit Committee must be between three and five members, and must include at least one person who is not a member of the council (and who has financial experience relevant to the functions of an Audit Committee. The current Audit Committee Terms of Reference (provided as Attachment 1 to this report) specifies that the Committee will comprise of: • Four members appointed by the Council which includes:

o Two independent members (with the necessary skills, knowledge and experience to ensure the effective discharge of the duties of the Committee)

o Two members of the Council, one being the Presiding Member of the Committee.

The Audit Committee Terms of Reference also requires that independent members will be appointed for four (4) years with the term of office commencing mid-point of the Council term. The two independent members are currently appointed until December 2016. On this basis, prior to undertaking a new recruitment process for two new independent members, Council considered it timely to invite the Audit Committee to undertake a review of their structure and membership structure and options for Council going forward. This invitation was provided via Council resolution at its meeting on 12 July 2016.


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Structure and Membership The purpose of this report is to commence discussion with the Committee to allow for consideration of alternative Committee structure and membership options that they deem appropriate. If the Committee considers that retaining the existing Audit Committee membership of two elected members and two independent members is most appropriate, a recruitment process will then need to be undertaken to fill the vacant independent positions with a person that has sufficient skills and experience by end of December 2016. In the event that the Committee considers it beneficial to increase the membership of the Audit Committee to five or more Committee members, and appoint additional Elected Member(s) or Independent Member(s) to the Committee (or change the membership structure to another alternative within the prescribed requirements of the legislation), it is noted that this would require a change to the current Terms of Reference. Any recommendation form the Committee would need to be referred to Council for its consideration. Required Skills, Knowledge and Experience It is proposed that as part of this discussion, the Committee also considers any skills, knowledge and experience that Council may deem suitable for an Audit Committee member to have prior to appointing further members onto the Committee. The Committee Terms of Reference covers the following key areas: • Financial and business reporting • Internal controls and risk management systems • Internal Audit • External financial audit

It is therefore recommended that any discussion regarding proposed skills, knowledge and experience of Committee members is focussed around the key roles of the Committee. Any identified gaps could be filled by increasing the membership and recruiting to address any gaps in skill set identified.


Financial and budget implications will be dependent on the membership options recommended to Council. There are no financial implications if the membership remains unchanged or an additional Elected Member is added to the Committee. In the event that there are changes in number of Independent Members, this would result in a financial impact of $500 per Committee meeting (approx. $3,000 per year, without consideration of Special Meetings).


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Section 126 of the Local Government Act 1999 requires Council to have an Audit Committee, and the Local Government (Financial Management) Regulations 2011 require that membership must be between three and five members and must include at least one person who is not a member of the Council and who has financial experience relevant to the functions of an Audit Committee.

3.3 Staffing / Work Plans There are no impacts to staffing or work plans as a result of this report.

3.4 Environmental

There are no financial implications in relation to this report.

3.5 Social

There are no social implications in relation to this report.


Committees assist Council in delivering its Strategic Plan, Annual Business Plan objectives, and legislative responsibilities in a timely and professional manner.


No stakeholder engagement was undertaken in relation to this report. It is intended that this report provide an opportunity to commence a discussion with Audit Committee members on the most appropriate structure and membership for the Committee.


Any changes to membership or committee structure will need to be amended in the relevant Terms of Reference, which are made available on Council’s public website. There are no other promotion /communications planned as a result of this report, with the exception of any advertising required to be undertaken for subsequent recruitment process to appoint new independent members from 31 December 2016.


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Given the nature of this report, no internal consultation was undertaken. Attachments 1. Audit Committee Terms of Reference and Membership ........................................... 24 Report Authorisers

Ilona Cooper


John Moyle



Audit Committee Terms of Reference and Membership Attachment 1

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REPORT FOR


MEETING DATE

27 JULY 2016

RECORD NO: D16/20790 REPORT OF: ASSETS & ENVIRONMENT TITLE: UPDATE TO THE ASSET FINANCIAL HIERARCHY PURPOSE

To provide Council’s Audit Committee with the rationale and supporting information that supports the proposed changes to Council’s Asset Financial Hierarchy.

RECOMMENDATION

1. That the Audit Committee receives the report entitled “Update to the Asset

Financial Hierarchy” dated 27 July 2016 and supports the proposed Asset Financial Hierarchy described within this report thereby enabling a Financial Hierarchy data structure to be implemented in the new AMIS (Asset Management Information System).


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1 BACKGROUND

Local Government Act 1999 Section 127 of this Act provides that Council must prepare Financial Statements in accordance with the Act, Local Government (Financial Management) Regulations 2011 and the Local Government (Financial Management) Variation Regulations 2013. Expenditure is to be correctly classified – i.e. as either operating or capital in Council’s Financial Statements. Section 125 of this Act provides that council must ensure that appropriate policies, practices and procedures of internal control are implemented and maintained in order to assist the council to carry out its activities in an efficient and orderly manner to achieve its objectives, to ensure adherence to management policies, to safeguard the council's assets, and to secure (as far as possible) the accuracy and reliability of council records. In order to ensure expenditure on assets is correctly classified, a Capitalisation Thresholds table in Council’s “Asset Capitalisation Policy” provides guidance when determining whether expenditure is both capital and material in nature. 1.1 Current Asset Management Systems Council’s current asset management system – AIM is not used for the financial management of Council’s assets. and therefore the asset data maintained through this system has not been implemented with the existing financial hierarchical structure. Currently Council’s financial management of maintenance and capitalisation of assets is performed through a combination of spreadsheets with information derived from Authority Work Order, Accounts Payable, Accounts Receivable, AIM and General Ledger components.

2 DISCUSSION

The implementation through the MACK (Managing Assets through Capability and Knowledge) AMIS (Asset Management Information System) project of a new asset management system within The City of Tea Tree Gully, specifically the Assetic MyData software has necessitated a review of the financial operations that are associated with asset creation, maintenance and capitalisation. It has been identified early in the project that the system functionality provided by the new AMIS provides opportunities for changes to Council’s existing financial business practices and processes to ensure efficiency, consistency and best practice are achieved as a consequence of the delivery of the MACK AMIS project. This involves the transfer of all asset data into the Assetic MyData software. It was identified early in the project that there will need to be changes to Council’s current business processes due to new system requirements and best practices.


http://marketing.assetic.com/assetic-website/docos/products/au/Assetic-myData.pdf

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1.1 Financial Asset Hierarchy The MACK AMIS project team, (consisting of Finance, Information Technology Services and Assets & Environment staff) have identified a number of changes to Council’s current Asset Financial Hierarchy that support the implementation of a best practice Asset Financial Hierarchy within the new Asset Register and that enhances the Capitalisation Thresholds in Councils Capitalisation Policy. The proposed asset financial hierarchy has been developed using the best practice from Local Government (Financial Management) Regulations 2011, LGA South Australia Model Financial Statements - 2016 and the IPWEA Australian Infrastructure Financial Management Manual - 2015. 2.1.1 Financial Asset Classes The MACK AMIS has 2 category levels available to enable the creation of a financial asset hierarchy within the system. The categorisations are stored in the financial features fields against each asset and are titled ‘Financial Class’ and ‘Financial Sub-Class’. Each asset within the MACK AMIS will be assigned a financial asset hierarchy, enabling simple and accurate financial reporting from the system. The recommended ‘Financial Class’ within the MACK AMIS has been aligned to the IPWEA Australian Infrastructure Financial Management Manual - 2015; where it is recommended that the asset classes for infrastructure assets be depicted as;

• Infrastructure • Plant & Equipment or • Property

This will provide a parent level grouping to the financial sub-class, where the financial sub-class depicts the assets at a more granular level. The recommended ‘Financial Sub-Class’ within the MACK AMIS has been aligned to Note 7 (Fixed Assets) of the LGA South Australia Model Financial Statements - 2016 and the IPWEA Australian Infrastructure Financial Management Manual – 2015. The recommended ‘Financial Sub-Classes’ are:

• Bridges • Off street car parks • Sewerage (CWMS) • Fencing • Footpaths • Irrigation systems • Playground equipment • Sporting field formation • Roads • Sporting courts and facilities • Stormwater drainage • Traffic control devices • Fixtures, fittings and furniture • Leased plant & equipment • Library books


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• Plant, machinery and equipment • Information Technology • Buildings and other structures • Land – Community • Land – Other

The relationship between Financial Class and Financial Sub-Class is depicted in the below table.

Financial Class Financial Sub-Class Infrastructure

Bridges Fencing Footpaths Irrigation systems Off street car parks Playground equipment Roads Sewerage (CWMS) Sporting courts and facilities Sporting field formation Stormwater drainage Traffic control devices

Plant & Equipment

Fixtures, fittings and furniture Information Technology Leased plant & equipment Library books Plant, machinery and equipment

Property

Buildings and other structures Land – Community Land – Other

Table 2.1.1 – Recommended financial asset hierarchy

2.1.2 Financial Asset Hierarchy Reporting

Currently the preparation of the financial statements and the Note 7 report requires significant work within the Finance team. The implementation of the above recommendations will simplify and improve efficiencies in financial reporting, with the Note 7 report for the Financial Statements being able to be extracted from the system in a simple and accessible report, thereby providing efficiencies and cost savings to this process.

Further reporting is available within the system through the ‘Fair Value’ tab, where the assets are componentised as per the Australian Accounting Standards Board (AASB); in addition the asset hierarchy, an asset management hierarchy, and the asset attributes are also available for reporting to the required levels.


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In the future the updated Asset Financial Hierarchy will inform the development of a new Capitalisation Thresholds Table in the “Assets Capitalisation Policy”, there will be no budget implications to adopting the new asset financial hierarchy.


Local Government Act 1999 Section 127 of this Act provides that Council must prepare Financial Statements in accordance with the Act, Local Government (Financial Management) Regulations 2011 and the Local Government (Financial Management) Variation Regulations 2013. Expenditure is to be correctly classified – i.e. as either operating or capital in Council’s Financial Statements. Section 125 of this Act provides that council must ensure that appropriate policies, practices and procedures of internal control are implemented and maintained in order to assist the council to carry out its activities in an efficient and orderly manner to achieve its objectives, to ensure adherence to management policies, to safeguard the council's assets, and to secure (as far as possible) the accuracy and reliability of council records.

3.3 Staffing / Work Plans

Nil 3.4 Environmental

Nil 3.5 Social

Nil

3.6 Strategic Plan / Policy This document makes reference to D15/36190 – Asset Capitalisation Policy


The MACK AMIS project implementation team consists of the following staff: • Andrew Craig – Manager, Strategic Assets • Martin Pullan – IT Project Manager, IT Solutions • Jonathan Crook – Accountant, Finance and Rating Operations • Ben Clark – Assets Business Administrator, Strategic Assets • Sam Ballantine – Assets Technical Officer, Strategic Assets • Rhyss Cook – Assets Technical Officer, Strategic Assets


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The proposed Asset Financial Hierarchy will be discussed and agreed with external auditors, if required.


The following staff has been included in the consultation process in the preparation of this Report. Name Position Issue Joy O’Keefe-Craig

Governance Officer Recommendation and Purpose

Anna Draper Manager Finance & Rating Operations Financial / Budget (3.1) Jon Herd Environmental Officer Environmental (3.4) Carla Leversedge Manager Community Development &

Engagement Social (3.5) Stakeholder Engagement (3.7)

Ingrid Wilkshire Manager City Strategy Strategic Plan (3.6) Elissa Graves Manager Customer & Communications Promotions /

Communications (3.8) Jonathon Crook Assets Accountant Financial / Budget (3.1) Sam Ballantine Assets Technical Officer Asset Finance

Hierarchy (2.1) Attachments 1. Asset Financial Hierarchy ...................................................................................... 42 Report Authorisers

Martin Pullan

MACK AMIS Project Manager 83977347

Anna-Lucia Draper

Manager Finance and Rating Operations 8397 7229

Ryan McMahon

Director Organisational Services & Excellence 8397 7297


Asset Financial Hierarchy Attachment 1

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REPORT FOR


MEETING DATE

27 JULY 2016

RECORD NO: D16/39160 REPORT OF: ORGANISATIONAL SERVICES & EXCELLENCE TITLE: REVIEW OF COUNCIL'S LOAN PORTFOLIO PURPOSE

To review Council’s loan portfolio

RECOMMENDATION

That the Audit Committee recommends to Council: That Council notes that the Audit Committee has completed its annual review of the loan portfolio on behalf of Council and requests no change to the current facilities.


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1 BACKGROUND The Local Government Act 1999 requires that Council completes an annual review of its investment portfolio. This review is typically in the form of a review during the quarterly budget review process. As at the end of the 30 June 2015 Council’s borrowings were $22.6 million. The current forecast for borrowings as at quarter three budget review for the 2015-2016 financial year is $17.4 million, a reduction of $5.2 million. Due to cash flow requirements throughout the year Council also holds an additional $5 million in working capital to cater for low cash periods.

2 DISCUSSION

The current borrowings are made of 6 loans that are able to be placed into four categories. These being:

1. Overdraft facility with NAB 2. Plant and Fleet Equipment finance arrangements (Financed through NAB) 3. Fixed loan arrangements (Financed through the Local Government Finance

Authority (LGFA)) 4. Cash Advance Debenture (CAD) agreements variable loans. The table below provides a summary of these facilities and the current outstanding balances as at 30 June 2016.

Borrowing purpose Reference

Maturity/ Amount Borrowed

or CAD Limit

Interest Rate at

30/06/2016

Principal Outstanding

as at 30/06/2016

Unutilised Loan

Funds as at

30/062016 Expiry Date

$,000 % $,000 $,000

Capital Works for 2010 LGFA 195 15/06/2020 10,300 6.8 8,019 0

Capital Works for 2013 LGFA 197 15/05/2022 8,000 4 4,200 3,800

Short term facility LGFA 194 2/06/2020 5,000 4 0 5,000

Short term facility LGFA 196 5/01/2026 17,000 4 0 17,000

NAB Overdraft Facility

300 7.97 0 300

Total 40,600 12,219 26,100


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Borrowing purpose

Reference Maturity Date

Facility limit

Interest Rate

Principal & Interest

Outstanding as at

30/06/2016

Principal & Interest

Outstanding as at

30/06/16 Plant and equipment leases NAB Various 4,000 Various 75 75

Overdraft facility with NAB

This facility is in place to cover for unforeseen events including when LGFA may have a delay in transferring our cash into Council’s operating account with NAB.

Plant and Fleet Equipment finance arrangements (Financed through NAB) The Council, through the Audit Committee, approved the establishment of additional CAD loan facilities in 2013. Since this time all plant and fleet acquisitions has been financed through these facilities and/or cash reserves rather than through individual finance leases on the basis that the CAD facilities are typically between 1.5-2.5% cheaper than the equipment finance interest rates. In addition, the leasing of major information technology equipment has been ceased on the same basis. This decision is reviewed on a regular basis when major plant and fleet is acquired but no offer of cheaper interest than offered by the LGFA has warranted changing this approach.

Fixed loan arrangements (Financed through the LGFA)

There are two loans that have been fixed in 2005 and 2010. There are no savings in paying these out early and replacing them with a variable loan.

CAD agreements variable loans

Council has three available CAD facilities made up of $17 million (approved by Council on 14 December 2010), $8 million (approved by Council) and a further $5 million (approved by Council in 2012) for short and long term borrowing requirements. The current LGFA variable CAD rate is 4.00%. Council staff have requested some indicative short term fixed rates for these facilities and have been advised that they will be 3.9% for terms 30 days to 180 days and 3.4% for terms 12 months to 3 years. The table below provides Council’s cash resources during financial year ending 2015-2016.


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Graph 1: Facility availability 2015-2016

Council’s cash requirements have a pattern which is influenced by:

• Rates payments • Capital expenditure • Grant funding

Rates are due the 1st of September, December, March and June and this can be seen in the graph peaks in the lead up to these dates. Traditionally 75% of the capital program spend has occurred in the last three months of the financial year with payments for this expenditure occurring between April and July. The last 12 months have seen this expenditure brought forward to occur somewhat earlier with approximately 60% of the spend occurring in the period February to July. We should not experience in July 2016, the same low that occurred in July 2015. This impacts on cash flow with additional funds being required in the latter half of the year in comparison to the first half of the year. Council receives Financial Assistance Grants, Roads to Recovery Grants, Commonwealth Home Support Program Grants and other grants that we have been successful in gaining. The timing of these grants is not always able to be predicted. To date we have not received the financial assistance grant first payment, which in financial year ending 2015-2016 was received in advance on 30 June 2015. There are two items which will affect our cash flow requirements this year and will impact on our available cash. These are:

• $3 million grant funding provided to Council for the Footpath program over the next three years. These funds were received in July 2016

• $6 million payment for the purchase of the depot site estimated to occur in the second quarter of the financial year.


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Based on our requirements and the lower balance of the variable loans Council, has no requirement in the short term to lock any funds in a fixed loan. With the expected capital project spend for the 2016-2017 year, this position will be required to be reviewed when funds are necessary later in the financial year and savings can be obtained by fixing a portion of the CADS.


There will be no impact to the 2016-2017 financial year.


N/A

3.3 Staffing / Work Plans

Any additional work required to carry out the changes detailed in this report will be completed with existing staffing resources.

3.4 Environmental

N/A 3.5 Social

N/A


N/A


N/A


N/A


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The following staff have been included in the consultation process in the preparation of this Report. Name Position Issue Joy O’Keefe-Craig

Governance Officer Recommendation and Purpose

Anna Draper Manager Finance & Rating Operations Financial / Budget (3.1) Jon Herd Environmental Officer Environmental (3.4) Carla Leversedge Manager Community Development &

Engagement Social (3.5) Stakeholder Engagement (3.7)

Ingrid Wilkshire Manager City Strategy Strategic Plan (3.6) Elissa Graves Manager Customer & Communications Promotions /

Communications (3.8) Attachments N/A Report Authorisers

Anna-Lucia Draper


Ryan McMahon



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INFORMATION REPORT AUDIT COMMITTEE 27 July 2016 Office of the Chief Executive Officer Local Government Indemnity Schemes Review Update (D16/38106) As reported to Audit Committee at the 30 September 2015 meeting, an examination of the Local Government Association (LGA) Indemnity Schemes was undertaken by the SA Auditor General to determine whether the schemes were being managed efficiently and cost effectively with regard to sound governance administration and financial arrangements.

From this investigation the Auditor General made a number of recommendations in the report to the LGA regarding contract management.

A copy of the report which incorporates the LGA responses to the recommendations is detailed in Attachment 1 of this report. On 13 June 2016, Council was provided with an update of the review of the Mutual Liability and Workers Compensation Schemes. The outcome of the review process included:

• The establishment of an LGA Audit Committee • The development of a detailed project plan • Engagement of external advisors to assist with the review and to provide insurance,

commercial and legal expertise. This also involved assessing the current arrangements and make recommendations for future improvements in terms of:

• Legislative and contractual arrangements • Financial outcomes for councils, LGA and service providers • Operational issues relating to the services provided • Governance arrangements

A copy of the project plan, detailing the purpose of the plan is shown in Attachment 2 of this report Further to this information supplied by the LGA on in June 2016, an additional update on the review process has been provided. The external advisors, together with the Schemes Boards, LGA Audit Committee and a Leadership Group (comprising CEO’s from five councils) are working collaboratively on the review. The Leadership Group acts as a reference group for inputting their knowledge as to council’s needs in terms of insurance, risk products and services, together with input into recommendations regarding future models for the delivery of these services.


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On 17 June 2016 a workshop was held by the Leadership Group to discuss:

• What does the local government need and value from insurance arrangements • Perspectives on the current services and schemes overall • Current thoughts on future directions

A copy of the outcome of this workshop is presented in Attachment 3 of this report. Attachments 1. Report of the Auditor-General - Examination of the local government indemnity

schemes - September 2015 ..................................................................................... 61 2. LGA Schemes Review Project Plan ......................................................................... 99 3. Schemes Review - Leadership Group - Summary Observations - 17 June 2016 ... 107 Report Authorisers

James Brydson


Tanya Hook


Ilona Cooper


John Moyle



Report of the Auditor-General - Examination of the local government indemnity schemes - September 2015

Attachment 1

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Attachment 1

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LGA Schemes Review Project Plan Attachment 2

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Schemes Review - Leadership Group - Summary Observations - 17 June 2016 Attachment 3

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INFORMATION REPORT AUDIT COMMITTEE 27 July 2016 Organisational Services & Excellence Internal Controls - Control Track - End of Financial Year Review (D16/39169) Section 125 of the Local Government Act 1999, states that: “Council must ensure that appropriate policies, practices and procedures of internal control are implemented and maintained in order to assist the council to carry out its activities in an efficient and orderly manner to achieve its objectives, to ensure adherence to management policies, to safeguard the council's assets, and to secure (as far as possible) the accuracy and reliability of council records.” Section 129 of the Local Government Act 1999, states that: “(1) The auditor of a council must undertake an audit of—

(a) the council's financial statements within a reasonable time after the statements are referred to the auditor for the audit (and, in any event, unless there is good reason for a longer period, within 2 months after the referral); and

(b) the controls exercised by the council during the relevant financial year in relation to the receipt, expenditure and investment of money, the acquisition and disposal of property and the incurring of liabilities.

(2) An audit must be carried out in accordance with standards prescribed by the regulations. (3) The auditor must provide to the council—

(a) an audit opinion with respect to the financial statements; and (b) an audit opinion as to whether the controls audited under subsection (1)(b) are

sufficient to provide reasonable assurance that the financial transactions of the council have been conducted properly and in accordance with law.”

For the Financial Year Ending June 2014, Council’s auditors, Bentleys and Partners were required to provide an audit opinion which gives due consideration to Council’s policies, practices and procedures of internal controls in accordance with Section 125 and 129 of the Local Government Act 1999. Bentleys and Partners invested time in identifying how key controls are implemented, monitored and updated to maintain an effective control environment. Their approach considered the control environment at Council. Internal controls testing was part of the standard audit process, and they linked the tests and independently identified findings to the controls identified by management in Control Track (Council’s internal control tool).


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Approximately 85% of controls were addressed in their planned audit testing, with the remaining 15% being addressed through other procedures deemed reasonable to obtain sufficient and appropriate audit evidence to form their opinion. Bentleys & Partners found that the implementation of controls for Council is strong. Council’s internal controls are monitored in many ways including but not limited to the following: • Audit Committee; • Comprehensive policy and procedure framework; • Risk register which is reviewed by Council staff regularly and presented to the audit

committee every six months; • Governance and Policy committee which is responsible for the review of Council’s

policies; • A comprehensive process in place to review procedures and policies including internal

financial control procedures every two years. Council has ensured that internal controls are monitored as per the legislation and has put in place the following: • Staff training to complete assessments of internal financial controls using the Deloitte

Control Track software system; • Assessed controls using the Deloitte Control Track software system prior to

commencement of the new legislation; • Developed action plans of internal financial control improvements from the assessment

of controls using the Deloitte Control Track software system; • Engaged UHY Haines Norton, Chartered Accountants to undertake an Independent

Review of internal financial controls using the Better Practice Model; • An assessment of the internal controls twice per year using the Deloitte Control Track

software system.

The Better Practice Model – Financial Internal Controls is supported by the Deloitte’s Control Track software which assists our Council to review our controls. The tool requires that staff members review the effectiveness of our controls. This initial assessment is then reviewed by another staff member. Any items whereby a control is assessed as being partially effective requires an action plan to be developed to improve the control by mitigating risk. An assessment and review process has just been completed using the following rating scale: 1. Ineffective 2. Requires Significant Improvement 3. Partially Effective 4. Majority Effective 5. Effective


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The effectiveness of internal controls at Council has been assessed at 4.9 from a possible score of 5 using the Control Track tool. This compares to a result of 4.8 in the internal controls assessment held 6 months prior. This result verifies that Council’s internal controls are effective in mitigating the risk to an acceptable level for Council.

Attachment 1 provides a summary of the assessments for each category. Attachments 1. Control Track Assessment Results June 2016 ....................................................... 112 Report Authorisers

Anna-Lucia Draper


Ryan McMahon



Control Track Assessment Results June 2016 Attachment 1

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INFORMATION REPORT AUDIT COMMITTEE 27 July 2016 Office of the Chief Executive Officer Audit Committee Work Program 2016- 2017 Financial Year - July 2016 (D16/40334) The Audit Committee Work Program is a document which is used by Council staff and the Audit Committee as a guide to the planned activities of the Audit Committee throughout the financial year and to ensure the key activities are reported, reviewed and actioned by the specific target dates. A review of the Audit Committee Work Program is undertaken by the Internal Auditor every two months with the reviewed program presented at each Audit Committee meeting, thus ensuring that all programme items are carried out when due. The Work Program for July 2016 is presented in Attachment 1 of this report entitled ‘Audit Committee Work Program 2016-2017 Financial Year – July 2016’ which shows those items due to be reported to the Audit Committee in July 2016. Attachments 1. Audit Committee Work Program 2016 - 2017 Financial Year - July 2016 ............... 118 Report Authorisers

James Brydson


Tanya Hook


Ilona Cooper


John Moyle



Audit Com

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Attachment 1

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INFORMATION REPORT AUDIT COMMITTEE 27 July 2016 Organisational Services & Excellence Outstanding Actions from Auditor Management Letters (D16/41809) Bentleys and Partners have been appointed as external auditors by Council for the Financial Year Ending (FYE) June 2014 through to FYE June 2016. Action plans have been prepared (in consultation with the relevant staff members, Managers and Directors) in response to the findings and recommendations contained in each audit management letter. Council staff work to address the agreed actions arising from each audit as outlined in the Action Plan. Attachment 1 of this report provides an update to the Audit Committee on the status of all agreed actions (outstanding and completed) arising from external audits conducted from October 2010 to May 2016. For FYE 2016, an interim audit visit occurred the week beginning 18 April 2016 and actions from the interim visit management letter were included in the May report to the audit committee. The final audit visit for FYE 2016 will commence the week beginning 22 August 2016. Attachments 1. Outstanding Actions from Auditors Management Letters July 2016 ....................... 120 Report Authorisers

Anna-Lucia Draper


Ryan McMahon



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INFORMATION REPORT COUNCIL 27 July 2016 Assets & Environment Review of Asset Management Plans (D16/42439) Asset Management Plans form part of Council’s suite of strategic management plans. The Local Government Act 1999 requires Council to undertake a comprehensive review of its strategic management plans within two years after each general election of the Council. Council must also adopt a process or processes to ensure that members of the public are given a reasonable opportunity to be involved in the development and review of its strategic management plans. As discussed at the Audit Committee meeting of 23 March 2016 the approach for Community Engagement will include an Information Sheet, a new Asset Management Strategy, reviewed AMPs (Roads, Footpaths, Buildings, Stormwater and Community Wastewater Management) and a new Information Technology AMP. The Community Engagement process will be undertaken in accordance with Council Policy and feedback from the Audit Committee will be requested, with the relevant documents being sent under separate cover. The proposed timelines are – Audit Committee - update 27 July 2016 Council - Community Engagement Strategy 13 September 2016 Community Engagement 28 September to 27 October 2016 Council 8 November 2016 Attachments N/A Report Authorisers

Andrew Craig

Manager Strategic Assets 8397 7378

Thornton Harfield

Director Assets & Environment 8397 7283


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Status Report on Committee Resolutions 27 JULY 2016 RECOMMENDATION

That Audit Committee Meeting notes the report entitled “Status Report on Council or Committee Resolutions” and dated 27 July 2016 noting that all completed actions from this report will be removed from future reports. Note: Confidential actions have been removed from the Status Report.

Pending Actions

Nil

Completed Actions

Nil


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