Finance Policy Committee

 

Agenda

 

3 December 2019

 

 

Notice is hereby given, in accordance with the provisions of the Local Government Act 1993 that a Finance Policy Committee meeting of ORANGE CITY COUNCIL will be held in the Council Chamber, Civic Centre, Byng Street, Orange on Tuesday, 3 December 2019.

 

 

David Waddell

Chief Executive Officer

 

For apologies please contact Administration on 6393 8218.

  

 


Finance Policy Committee                                                                       3 December 2019

Agenda

  

1                Introduction.. 3

1.1            Declaration of pecuniary interests, significant non-pecuniary interests and less than significant non-pecuniary interests. 3

2                Committee Minutes. 5

2.1            Minutes of the Audit and Risk Management Committee Meeting Held on 25 October 2019. 5

3                General Reports. 290

3.1            Proposed Internal Audit Outsourcing Service. 290

3.2            Requests for Financial Assistance - Quarter 3 of 2019/20 - Small Donations Program   297

3.3            Carols By Candlelight - Surplus Funds from Sale of Glowsticks - Orange Community Christmas Lunch. 377

 


Finance Policy Committee                                                                       3 December 2019

1       Introduction

1.1     Declaration of pecuniary interests, significant non-pecuniary interests and less than significant non-pecuniary interests

The provisions of Chapter 14 of the Local Government Act, 1993 (the Act) regulate the way in which Councillors and designated staff of Council conduct themselves to ensure that there is no conflict between their private interests and their public role.

The Act prescribes that where a member of Council (or a Committee of Council) has a direct or indirect financial (pecuniary) interest in a matter to be considered at a meeting of the Council (or Committee), that interest must be disclosed as soon as practicable after the start of the meeting and the reasons given for declaring such interest.

As members are aware, the provisions of the Local Government Act restrict any member who has declared a pecuniary interest in any matter from participating in the discussion or voting on that matter, and requires that member to vacate the Chamber.

Council’s Code of Conduct provides that if members have a non-pecuniary conflict of interest, the nature of the conflict must be disclosed. The Code of Conduct also provides for a number of ways in which a member may manage non pecuniary conflicts of interest.

Recommendation

It is recommended that Committee Members now disclose any conflicts of interest in matters under consideration by the Finance Policy Committee at this meeting.

 


Finance Policy Committee                                                                       3 December 2019

2       Committee Minutes

2.1     Minutes of the Audit and Risk Management Committee Meeting Held on 25 October 2019

RECORD NUMBER:       2019/2405

AUTHOR:                       Shephard Shambira, Internal Auditor    

 

 

EXECUTIVE Summary

The Committee had before it a management letter, submitted by the Auditor General NSW following the interim phase of the audit of the Council financial statements for the year ended 30 June 2019. The external auditor did not raise material issues of concern and the Committee acknowledged management responses to issues noted by the Auditor General NSW. The Committee also acknowledged an independent auditor’s report on “application for pensioner concession subsidy Orange City Council”; and requested for a further report explaining a variance on the concession on water and sewer between the 2018 and 2019 financial years.

The Auditor General NSW Closing Engagement Report on the audit of Council’s financial statements for the year ended 30 June 2019 was also acknowledged with the Committee commending the appropriate and professional relationship between the Auditor General NSW and Orange City Council.

A consolidated internal audit manual was presented to the Committee and recommended for adoption. The Committee considered a report by the Internal Auditor analysing the implications of the Office of Local Government (OLG) Discussion Paper on “A New Risk Management and Internal Audit Framework for Local Government”. The Committee acknowledged the work put into the project by the Internal Auditor and requested for a further update to be provided out of session and submitted to the Council. That following Council approval, a copy of the submission to the OLG regarding the discussion paper be shared with Local Government New South Wales. The OLG Discussion Paper proposes a number of changes to the way Councils resource and operate internal audit and risk management functions. The proposed legislative framework includes a requirement to expand the current scope of coverage by the Audit & Risk Management Committee. A copy of the proposed Council submission is at attachment 1.

The Committee noted that a new 4 year strategic internal audit programme was under development. That this strategic internal audit plan will be distributed to Committee members out of session for approval before the end of the calendar year.

No compliance breaches were reported to the Committee for the period July 2019 to August 2019. Management’s process improvement initiatives undertaken during the period under review were also noted.

An internal audit review plan on processes around contaminated land was approved.

 


 

The Committee reviewed and updated its Action List. The ARMC Action List enables the Committee to monitor implementation of its resolutions and progress in the implementation of internal and external audit recommendations. At the conclusion of the meeting, the Director Technical Services made a presentation on the Council’s water security risk management processes and current status of related strategic issues.

Link To Delivery/OPerational Plan

The recommendation in this report relates to the Delivery/Operational Plan strategy “17.2 Collaborate - Ensure financial stability and support efficient ongoing operation”.

Financial Implications

The Committee received a report on the proposed changes to the Office of Local Government on Internal Audit and Audit Committee processes. It was noted that these changes are likely to require additional resourcing for Councils to comply with the legislation once it becomes law. For example, a new position of a risk management coordinator will be mandatory. At this stage the potential financial impact of these changes is not known and it is also not known whether the legislative changes will be passed in their current form.

Policy and Governance Implications

The Audit and Risk Management Committee recommendations provide assurance on risk management activities of the Council and in some cases they give insight on matters of interest which can inform decisions on policy and governance.

The Committee also considered a report on the proposed New Risk and Internal Audit Framework being proposed by the Office of Local Government. This framework is proposing a number of changes. Internal Audit functions will become a mandatory requirement for all Councils. Audit and Risk Management Committee members will be required to register with a certain State Government panel to be eligible for appointment on a Council audit committee. The new framework is proposing to exclude Councillors from being members of audit committees.

 

Recommendation

1        That Council acknowledge the reports presented to the Audit and Risk Management Committee at its meeting held on 25 October 2019.

2        That Council determine the Audit and Risk Management Committee’s recommendation that Council should make a submission to the Office of Local Government in response to the Discussion Paper on A New Risk management and Internal Audit Framework in Local Government as set out in the document at attachment 1.

3        That the minutes of the Audit and Risk Management Committee at its meeting held on 25 October 2019 be adopted.

 

 

further considerations

Consideration has been given to the recommendation’s impact on Council’s service delivery; image and reputation; political; environmental; health and safety; employees; stakeholders and project management; and no further implications or risks have been identified.

SUPPORTING INFORMATION

A copy of the minutes of the meeting of the Audit and Risk Management Committee held on 25 October 2019 is attached.

Attachments

1        Minutes of the Meeting of the Audit and Risk Management Committee held on 25 October 2019

2        Attachment 1 - A New Risk Management and Internal Audit Framework for local councils in NSW - Proposed Council Submission to the Office of Local Government, D19/66641

3        ARMC 25 October 2019 - Agenda, D19/66694

4        ARMC 25 October 2019 Agenda Late Items, D19/66696

 



ORANGE CITY COUNCIL

 

MINUTES OF THE

Audit and Risk Management Committee

HELD IN Committee Room 3, Civic Centre, Byng Street, Orange

ON 25 October 2019

COMMENCING AT 9:30AM


 1      Introduction

Attendance

Voting Members: Mr P Burgett (Independent Chairperson), Mr B Gillooly AM (Independent Member), Cr R Kidd (Mayor), Cr J McRae

Non-Voting Members: Chief Executive Officer, Acting Director Corporate and Commercial Services, Manager Financial Services, Internal Auditor, Cr J Whitton (Alternate Committee member)

Invited: Ms Karen Taylor, Director Financial Audit - Audit Office (NSW) by telephone, Director Community Recreation & Cultural Services

 

 

1.1     Apologies and Leave of Absence

 

RECOMMENDATION

That the apologies be accepted from nil for the Audit and Risk Management Committee meeting on 25 October 2019.

1.2     Acknowledgement of Country

 

1.3     Declaration of pecuniary interests, significant non-pecuniary interests and less than significant non-pecuniary interests

 


 

2       Previous Minutes

RECOMMENDATION                                                                  Mr B Gillooly AM/Cr J McRae

That the Minutes of the Meeting of the Audit and Risk Management Committee held on 30 August 2019 (copies of which were circulated to all members) be and are hereby confirmed as a true and accurate record of the proceedings of the Audit and Risk Management Committee meeting held on 30 August 2019.

 

3       General Reports

3.1     Management Letter on the Interim Phase of the Audit
for the Year Ending 30 June 2019

TRIM Reference:        2019/2171

Recommendation                                                                               Cr R Kidd/Cr J McRae

That the Auditor General Interim Audit Management Letter for the external audit for the year ended 30 June 2019 and related management responses be acknowledged.

 

 

3.2     INDEPENDENT AUDITOR’S REPORT:
Application for Payment of Pensioner Concession Subsidy
Orange City Council

TRIM Reference:        2019/2188

Recommendation                                                                  Cr J McRae/Mr B Gillooly AM

1               That the report by the Auditor General NSW Director of Financial Audit regarding the audit of Council’s Pensioner Concession Subsidy Claim for the period 20 September 2018 to 19 September 2019 be acknowledged.

2               That the Manager Financial Services be requested to provide an explanation to members out of session regarding the variance in the concession on water and sewer between the 2018 and 2019 financial years.

 

 


 

 

3.3     Verbal Update on the Audit of Council's Financial Statements for the year ended 30 June 2019

TRIM Reference:        2019/2289

Recommendation                                                                           Cr R Kidd/ Mr B Gillooly AM

1               That the Auditor General’s Engagement Closing Report and verbal report by the Director Financial Audit regarding progress on the audit of Council’s financial statements for the year ended 30 June 2019 be noted.

2               The Committee commended the appropriate and professional relationship between the Auditor General’s Office and the Orange City Council, and acknowledged the good work by Council staff involved with the preparation and audit of the financial statements.

 

 

Ms K Taylor left the meeting at 09:57 am.

 

3.4     Internal Audit Manual

TRIM Reference:        2019/2169

Recommendation                                                                     Cr R Kidd/Mr B Gillooly AM

1               That the report by the Internal Auditor on Internal Audit Manual be acknowledged.

2               That the Council adopt the Internal Audit Manual subject to amendments noted at the meeting regarding the clauses referencing to Dubbo Regional Council and the access to internal audit working papers by the External Auditor.

 

 

3.5     A New Risk Management and Internal Audit Framework for Local Councils in NSW – Discussion Paper

TRIM Reference:        2019/2283

Recommendation                                                                     Cr R Kidd/Mr B Gillooly AM

1               That the report by the Internal Auditor on a New Risk Management and Internal Audit Framework for Local Councils in NSW Discussion Paper be acknowledged.

2               The Committee acknowledged the work put into the project by the Internal Auditor.

3               That further feedback be provided to the Internal Auditor out of session, with the Internal Auditor distributing an updated submission document out of session to members.

4               That the updated document be submitted to the November 2019 Council meeting.

5               That a copy of this updated document be shared with Local Government NSW following adoption by Council.

 

Cr R Kidd left the meeting at 10:40 am.


 

 

3.6     Internal Audit Programme Status Report as at October 2019

TRIM Reference:        2019/2236

Recommendation                                                                  Mr B Gillooly AM/Cr J McRae

1               That the report by the Internal Auditor dated 8 October 2019 regarding the Internal Audit Programme Status Report be acknowledged.

2               That the Internal Auditor be requested to distribute an updated 4 year strategic internal audit plan out of session following finalisation of the risk registers review process.

 

 

3.7     Compliance Activities - 2019/20 Financial Year - Update - July 2019 to August 2019

TRIM Reference:        2019/2275

Recommendation                                                                  Cr J McRae/Mr B Gillooly AM

That the update on compliance activities be acknowledged.

 

 

3.8     Process Improvements - 2019/20 Financial Year - Update - July 2019  to August 2019

TRIM Reference:        2019/2274

Recommendation                                                                  Mr B Gillooly AM/Cr J McRae

That the update on process improvements be acknowledged.

 

 

3.9     ARMC Action List as at October 2019

TRIM Reference:        2019/2286

Recommendation                                                                  Mr B Gillooly AM/Cr J McRae

1        That the report by the Internal Auditor on ARMC Action List as at October 2019 be acknowledged.

2        That action items marked as completed (100%) be deleted from the ARMC Action List.

3        That the updates to target completion dates and further progress updates provided at the meeting be noted.

4        The Internal Auditor referred to responses provided to the Chair on his observations for continuing enhancement of this report which were circulated and endorsed by the Committee.

 

 

4       Closed Meeting

 In accordance with the Local Government Act 1993, and the Local Government (General) Regulation 2005, in the opinion of the General Manager, the following business is of a kind as referred to in Section 10A(2) of the Act, and should be dealt with in a Confidential Session of the Audit and Risk Management Committee meeting closed to the press and public.

In response to a question from the Chairperson, the Chief Executive Officer advised that no written submissions had been received relating to any item listed for consideration by the Closed Meeting of Audit and Risk Management Committee.

The Chairperson extended an invitation to any member of the public present at the meeting to make a presentation to the Audit and Risk Management Committee as to whether the meeting should be closed for a particular item.

Recommendation

That Audit and Risk Management Committee adjourn into a Closed Meeting and members of the press and public be excluded from the Closed Meeting, and access to the correspondence and reports relating to the items considered during the course of the Closed Meeting be withheld unless declassified by separate resolution. This action is taken in accordance with Section 10A(2) of the Local Government Act, 1993 as the items listed come within the following provisions:

4.1     Internal Audit Review Plan - Contaminated Land

This item is classified CONFIDENTIAL under the provisions of Section 10A(2) of the Local Government Act 1993, which permits the meeting to be closed to the public for business relating to (c) information that would, if disclosed, confer a commercial advantage on a person with whom the Council is conducting (or proposes to conduct) business, (d)i commercial information of a confidential nature that would, if disclosed prejudice the commercial position of the person who supplied it and (d)ii information that would, if disclosed, confer a commercial advantage on a competitor of the council.

 

 

The Chairperson declared the open meeting of the Committee adjourned for the conduct of the closed meeting at 10:30 am.

The Chairperson declared the open meeting of the Committee resumed at 10:40 am.

5       Resolutions from Closed Meeting

4.1     Internal Audit Review Plan - Contaminated Land

TRIM Reference:        2019/2258

Recommendation                                                                    Cr R Kidd/Mr B Gillooly AM

1               That the Internal Audit Review Plan – Contaminated Land be approved.

2               That a confidential report on the findings be submitted to the next meeting.

 

 

 The Committee noted that at the conclusion of the meeting a presentation will be made by the Director Technical Services regarding the Council’s water security risk management processes and current status of related strategic issues.

 

The Meeting Closed at 11:10 am.

 


Finance Policy Committee                                                          3 December 2019

Attachment 1      Attachment 1 - A New Risk Management and Internal Audit Framework for local councils in NSW - Proposed Council Submission to the Office of Local Government

A New Risk Management and Internal Audit Framework for local councils in NSW

Discussion Paper

 

Proposed Submissions

General Comments

The first 22 pages of the Discussion Paper clearly articulate the purpose of an internal audit function, risk management framework and the Audit, Risk and Improvement Committee, in addition to how these relate to the governing board and with executive management. However, the detailed provisions of the Discussion Paper includes some inconsistent descriptions of the role of the General Manager, the governing board and the ARIC.

 

We recommend that, so as not to limit attracting suitably qualified people to the ARIC that the ARIC be required to “provide independent advice” as under current professional standards a CPA (Certified Professional Accountants Australia) or CAANZ (Chartered Accountants Australia and New Zealand) member cannot form an opinion without having completed sufficient work to form that view. Therefore cannot “provide independent assurance”.

 

Observation 1

At page 29. The composition of the ARIC is to be made up of independent members only.

v This will increase the cost of running an ARIC for Council which currently operate with a maximum of 2 independent members.

v The exclusion of Councillors and the Mayor has been replaced by a new requirement for the Chief Audit Executive to consult with the governing board (see core requirement 5).

v Mayor is essential as they understand what is happening within Council and what management is reporting to council.                                                          The Mayor provide direct conduit from ARIC to Council in absence of ARIC attending Council meetings. The first paragraph under the heading “Decision-making” on page 87 of the Discussion Paper acknowledges this fact.  

v The absence of Councillors conflict with the proposed structure of a JO or Joint ARIC which is to be supervised by a committee of council.

 

Suggestion: Consider retaining the current model whereby the ARIC is composed of independent members and Councillors with a mandatory independent chair and a majority of independent voting members.

 

Observation 2

At page 31. The ARIC’s responsibility includes the following:

 

Endorsement of:

• the council’s Internal Audit Charter, internal audit strategic four-year plan and annual work plan, and

 

This role of the ARIC appears to be inconsistent with the role contemplated in paragraph 5(b).

 

(b) develop an annual risk-based internal audit work plan, based on the strategic plan, to guide the council’s internal audits each year. The work plan is to be developed in consultation with the governing body, general manager and senior managers and approved by the Audit, Risk and Improvement Committee, and….

 

Issue: The role of the ARIC is ambiguous. Does the ARIC endorse or approve the annual work plan?

Suggestion: It is recommended that this clause be amended to require the ARIC to endorse the annual work plan.

 

Observation 3

Control of internal audit work.

 

Issues: (i) There is no mention of how the ARIC controls the depth and breadth of any review or audit. (ii) At page 31 it is stated that “… ensuring the Council achieves maximum value from its internal audit activities”. This statement is unclear.

 

Suggestion: (i) We recommend that the ARIC should be required to approve, after consultation with management, the scope of all internal audits and reviews regardless of whether these are resourced internally or outsourced. (ii) we recommend that the statement “…ensuring the Council achieves maximum value from its internal audit activities” be deleted.

 

Observation 4

Starting at page 32, 33 and 34. The role of the ARIC appears to imply that the ARIC will carry out certain substantial activities and tasks to be able to form an opinion as to the status of the listed matters.

 

Providing independent assurance on the following internal controls implemented by the council to manage specific categories of risk:

- advising whether:

·    the council is complying with all necessary legislation, regulations, policies and procedures

·    management has appropriately considered all legal and compliance risks as part of the council’s risk assessment and management arrangements

 

The NSW Treasury Department previously issued a Circular providing guidance on the nature of assurance and meaning of different phrases used when describing the nature of assurance required. Essentially, this Circular is based on provisions of ASAE3000 (Australian Standard on Assurance Engagements). The nature of work required in each assurance engagement depends on the nature of assurance sought. A reasonable assurance engagement would require more testing than what is expected in a limited assurance engagement. An attestation engagement has different requirements. The level of confidence provided by each assurance opinion is depended on the nature and volume of tests carried out. In all cases, the criteria on which the assurance opinion is based should be clearly and comprehensively defined for users of the assurance opinion to form an objective and balanced view of the opinion.

 

Issue:

1.   The current wording implies that a significant amount of work will be required to achieve the intended objectives. The above quotations suggest that the ARIC is expected to give absolute assurance on the matters identified which may be impossible to achieve without an intensive investment in additional resources to help provide a basis for this assurance. The ARIC is unlikely to be able to provide even reasonable assurance on the subject matter specified, considering that they meet only 4 or 5 times per annum.

 

2.   under current professional standards such as ASAE3000 and APES110 it is not possible for a CPA or CAANZ member to form an opinion without having completed sufficient work to form that view. This is not the purpose of the ARIC, who should focus on keeping under review the systems (processes) in place to reduce risk exposure.

 

Suggestion:

Essentially, the ARIC should be able to form an opinion that “Based on the information and presentations made to the ARIC, the ARIC formed a view that, the Council has demonstrated that it has an appropriate framework to achieve the stated objectives.”

 

Observation 5

The following would require comprehensive work and procedures to be carried out before the ARIC can provide independent assurance.

§ At page 32, the first sentence under “Control framework”.

§ At page 33, the first bullet point under the second heading.

o And the last 3 bullet points under the sentence “reviewing council’s financial statements, including: …

Issue: Resourcing the ARIC to achieve this is unlikely to be practical.

Suggestions: (i) We recommend that the words “Providing independent assurance on…” at page 32 should be replaced with “Providing independent advice on…”. (ii) We recommend that these sentences be deleted.

 


 

Observation 6

At page 41 the role of the ARIC requires that the Committee should be allowed access to information and staff or resources as necessary for the ARIC to perform its duties.

The Audit, Risk and Improvement Committee is to have direct and unrestricted access to the general manager, senior management and staff and contractors of the council in order to perform its role.

The Audit, Risk and Improvement Committee is also to have direct and unrestricted access to the council resources and information it needs to perform its role.

 

The ARIC is likely to only require information from senior staff and the General Manager with access to other staff being possible with the prior approval of the General Manager.

 

Issue: The way in which the ARIC is to achieve the required access to resources and staff is not specified. Is the ARIC subject to budgetary constraints? How does the role of the General Manager interact with this function of the Committee in terms of Council staff?

 

Suggestion: We recommend deletion of references to “staff and contractors” from the above clause.

 

Observation 7

At page 43 the Discussion Paper states that an “Annual Assurance Report” will be published by the ARIC. The Discussion paper does not specify the level of assurance which the ARIC should provide under the attestation. The nature of assurance expected will determine the resourcing requirements and whether the expectation is practical. As part of the overall quality assurance program, Council gets an external quality assurance audit once in each council term but the ARIC is expected to provide an annual assurance report.

 

Issue: It is unlikely that in a 4 year cycle, each of the requirements of the Local Government Act 1993 (NSW) Section 428A will be adequately addressed in each and every year to enable the ARIC to “provide assurance” annually on all the provisions.

Suggestion: We recommend that the ARIC be required to carry out “an annual assessment” and “provide advice” and not “provide assurance” on the items identified in section 428A.

 

Observation 8

At page 44, the Discussion Paper addresses the issue of ARIC independent members’ performance.

 

Issue: It is not clear how performance will be measured.

Suggestion: Consider providing additional guidance on how the performance of the ARIC members can be objectively assessed.

 

 

Core Requirement 2:

Establish a risk management framework consistent with the current Australian risk management standards

 

Observation 8

At page 57-58, item (g) the ARIC is required to provide assurance regarding the risk management framework. What level of assurance is expected and how is this going to be resourced?

 

The following 2 paragraphs appear to be inconsistent, or unrealistic. The second paragraph is not realistic to the extent that it implies that the Committee may be able to provide assurance to the General Manager and the governing board more than once a year. The first paragraph appears to suggest that the ARIC and the governing board and the General Manager have a choice as to the nature and frequency of assurance. Yet, the second paragraph clearly prescribes annual reporting. In any event, it is not clear how the ARIC will “assess the risk management framework” with a view to provide assurance.

 

The frequency and nature of the Committee’s assurance to the general manager and governing body is to be determined by the Committee in consultation with the general manager and governing body of the council.

 

At a minimum, the Audit, Risk and Improvement Committee is to be required to provide an annual assessment of the council’s risk management framework as part of its annual assurance report to the governing body of the council. This will ensure that the governing body of the council receives the Committee’s independent and objective opinion about the risk management activities conducted each year. It will also support the governing body in the exercise of its oversight role under the Local Government Act.

 

If the intention is for the ARIC to rely on representation by the internal audit function, it is not possible to provide annual assurance if the expectation is that the internal audit function will report to the ARIC as follows:

 

an independent strategic review by the internal audit function or an external party at least once each council term (i.e. four years) assessing adequacy of the risk management framework.

 

Suggestions: (i) Consider providing additional guidance on how this requirement will be achieved. (ii) We recommend that the ARIC be required to “provide advice” and not “provide assurance” annually.

 

Observation 9

At page 58 it states that the ARIC can rely on the following information:

 

annual advice from the senior management group about the implementation of the council’s risk management framework - for example, whether it conforms with AS ISO 31000:2018, the risk process has been implemented effectively, there is a positive risk culture, the council’s risk register and profile are appropriate, the council’s risk management policy and procedures are being complied with, and/or

 

Core Requirement 2 (g)

The Audit, Risk and Improvement Committee and the council’s internal audit function are to provide independent assurance of risk management activities, and

 

Core Requirement 2(h) at page 59

The Chair of the Audit, Risk and Improvement Committee is to also sign the attestation statement where he/she agrees that it is a true and accurate reflection of the council’s compliance status against statutory requirements. There is no guidance on what is required if they are not in agreement. 

 

Issue: If this is the basis on which the ARIC is expected to form “an independent professional opinion” about the risk management framework, there is a self-review threat to objectivity and the ARIC’s opinion is unlikely to be objectively independent. The General Manager’s certification is likely to be based on advice from the Risk Officer who is also responsible for creating and managing the risk management framework. The attestation by the ARIC Chair is of no value or misleading as it is not informed with independent advice other than that received following the review which is expected to occur at least once every council term.

Suggestions: (i) We recommend that the ARIC and ARIC Chair be required to “provide advice” and not “provide assurance”. (ii) We recommend that the proposed legislation be amplified to explain what happens where the ARIC Chair does not agree with the general manager regarding the annual attestation statement.

 

Core Requirement 3:

Establish an internal audit function mandated by an Internal Audit Charter

No comment

 

Core Requirement 4:

Appoint internal audit personnel and establish reporting lines

No comment

 

Core Requirement 5:

Develop an agreed internal audit work program

 


 

 

Observation 10

The following will be a challenge to agree, benchmark and measure:

·    Internal audit work plans have performance indicators that can be measured against goals and objectives

·    a data collection or performance management

·    system is established and maintained to collect the data needed to measure the impact of the

·    internal audit function.

Suggestion: We recommend that this clause be deleted, as the subject matter cannot be objectively evaluated.

 

Core Requirement 6:

How to performing and report internal audits

No comment

 

 

Core Requirement 7:

Undertake ongoing monitoring and reporting

No comment

 

Core Requirement 8:

Establish a quality assurance and improvement program

 

Observation 11

At page 79, the Annual review will require the ARIC to provide an assurance report covering all aspects of the provisions of Section 428A.

Issue:

1.   The level of assurance expected is not clear. Absolute assurance, reasonable assurance or limited assurance?

2.   The assurance report is annually which means the requirement of S428A are annually, which means the audit plan is too broad and will need substantial IA resources or will have a very narrow scope and depth.

 

Suggestion:

1.   We recommend that the ARIC be required to “provide independent advice” and not “provide independent assurance”.

 

Observation 12

At page 81, the Chief Audit Executive is expected to carry out the following task:

The general manager and senior managers are to be advised of the findings and outcomes of the annual review and the Chief Audit Executive is to develop an action plan for the Audit, Risk and Improvement Committee, governing body of the council and general manager to address any issues identified in the annual review.

 

Issue: the Chief Audit Executive does not have executive powers and is unlikely to be able to set priorities for the General Manager and Council.

Suggestion: We recommend that this role be assigned to the General Manager, with the ARIC monitoring progress and responses to issues identified.

 

Observation 13

 

The management of potential self-review threat where the CAE is the only IA personnel is not addressed.

Suggestion: We recommend that Councils utilising a single internal audit resource be required to establish an ARIC with at least one Committee member with suitable qualifications and experience in order to provide appropriate oversight and advice.

 

Core Requirement 9:

Councils can establish shared internal audit arrangements

 

Observation 14

At page 86, the ARIC role includes the following:

endorsing each council’s Internal Audit Charter, annual work plan and four-year strategic plan

 

Core Requirement 5(a) states that:

The Chief Audit Executive is to develop a four-year strategic plan to guide the council’s longer term internal audits in consultation with the governing body, general manager and senior managers. The strategic plan is to be approved by the Audit, Risk and Improvement Committee.

 

Issue: The role of the ARIC in terms of the strategic plan approval process is not clear.

Suggestion: We recommend that to ensure the ARIC has control of the internal audit function the ARIC approve the 4 year strategic internal audit plan and the annual work plan.

 

Observation 15

At page 87, the Discussion Paper covers “unique requirements for joint/regional organisation shared arrangements”, covering the composition of a “Decision-making body”.

 

Issue: Creation of a sub- committee of councillors will not be effective as the councillors have no knowledge, role or interaction with ARIC and will take the advice of GM.

Suggestion: We recommend that the legislation require councillors to be engaged with the ARIC governance process and that the Mayor be included as a member of the ARIC.

 

Observation 16

Issue: At page 89 - JO as decision making body. Is it best practice for one entity to be reporting to an external body on governance?

 

The role of the section 355 Committee (which includes Councillors) appears to conflict with the role of the General Manager. The General Manager is the employer and the only one responsible for staff issues and related industrial relations matters. It is therefore inconsistent with this position for a Committee made up of Councillors to be charged with the role of managing operational issues as is stated under this section.                                                      

 

Suggestion: We recommend that (i) the shared internal audit resource be accountable to the Executive Officer of the joint organisation for all administrative purposes but report operationally to the respective ARIC for the member councils. (ii) That the whole section referring to the establishment of a section 355 committee be deleted from the legislation. 

 

Observation 17

At page 90, the councils are categorised into 3 classes. Medium, large and large.

 

Issue: The decision to share CAE and IA function is with council who will usually take the cheapest allowable option, which is to share.

Suggestion: We recommend that, using the classification criteria provided on page 51, the proposed legislation should define the requirement for councils as follows:

§ large councils - must have CAE & IA function,

§ Medium Councils - must have CAE but can share IA function &

§ small Councils can share CAE & IA function.

 

Observation 18

At page 90 ARIC is to act as the ARIC of the JO (a separate entity) as well. JO now require ARIC & IA function, charter, audit plan, independent members etc.

 

Issue: Governance is an individual issue for each council, they may share IA resources but issues will need to be addressed individually by each council.

This section implies the ARIC appointed by the JO will be responsible for the risk management of the JO functions.

 

Suggestion: We recommend that this section be amended to ensure that the council remains responsible for its own risk management and governance framework.

 

Observation 19

At page 90 Fees for members are per meeting per entity.

 

Issue: the effectiveness of a joint (3 or 4 councils) ARIC will be limited as the depth of the audits will be limited, the breadth of audits will remain the same (ie each council will need to conduct the same audits) only savings will be economy of scale.

Suggestion: IA resources, contractors, staff could be shared but each entity Council needs to have its own ARIC, controls its own agenda and meeting practice, even if the membership is shared.

Observation 20

At page 91, it appears that joint arrangements have been taken to mean that councils will also have a joint ARIC.

Issue: Councils can have a joint arrangement sharing internal audit resources but operate different ARICs.

Suggestion: Consider providing further guidance on scenarios where the joint internal audit function arrangement does not include a shared ARIC.

 

General Comments in response to the OLG Questions

General Comments about shared services

The Bathurst Regional Council, Orange City Council and Dubbo Regional Council (BOD Alliance) shared an internal audit resource for a period of ten years. The three councils operate their own risk management programmes and internal audit plans and separate Audit Committees. While the Audit Committee members were common in the beginning, their membership was based on three separate contracts. The experience with the BOD Alliance indicated that maintaining separate structures at each of the three councils works well and in cases where it is possible to hold meetings at a common venue on the same date, the arrangement can be cost effective for regional councils which may struggle to fund the process if each council has to fund the importation of skills to the local government area. Issue: The proposed framework appears to be cumbersome and unlikely to be efficient. Suggestion: We are recommending a simplified and flexible framework whereby the sharing of internal audit resources and ARIC members can be achieved without unnecessary structures and involvement of parties who may not add value to the process.

Ø will the proposed framework achieve the outcomes sought?

Comments

§ to the extent that the proposed framework seeks to align the Local Government Sector internal audit and risk management framework with best practice it achieves the intended outcome of reforming the audit and risk management processes in the sector.

§ However, there are still some areas of the Local Government Act which do not conform with the general governance framework applicable to other sectors. For an example, the ASX Principles of corporate governance and separation of responsibility between the executive and the governing board are not fully applicable to the Local Government sector under the current Local Government Act (NSW) 1993. The proposed prescription using Enterprise-wide Risk Management principles as per ISO31000 as the standard approach to risk management ignores other models for managing risk that could inform a more rounded approach.

§ The proposed framework appears to be very prescriptive on how councils should run their audit and risk management functions. A principles based regulation is likely to achieve an optimum result based on each council’s risk management framework maturity level and resourcing level. The regulations can then define a minimum standard of requirements. For an example, instead of requiring that ALL aspects of the Council operations should be reviewed and signed off by the ARIC on an annual basis, the Guidelines may require that certain key risks are considered at least once every year and/or Council term subject to risk status. It is not practical to audit every aspect of Council operations on an annual basis due to resource constraints.

§ The Local Government Sector has unique processes and procedures which are not always similar to the State Government processes and procedures nor to the private sector. Therefore, the requirement that ARIC members should not have recent local government experience is likely to deprive the councils of current and relevant skills. The proposed framework should consider defining alternative risk treatment strategies to address the risk of any conflict of interests which may arise from an ARIC member having recent experience in Local Government.

 

Ø what challenges do you see for your council when implementing the proposed framework?

Comments

§ The proposed framework is likely to impose a substantial amount of costs on Council. Costs associated with the provision of information to the ARIC. The costs associated with the work required for the ARIC to provide assurance on the broad range of requirements stated under section 428A. The work involves the assurance provider’s cost or carrying out the work and the cost of staff time in responding to the assurance provider’s enquiries. This should be understood in the context of the recent changes to the sector whereby the Auditor General (NSW) is also carrying out service review from time to time on various aspects of council operations. While this process can be useful, it inevitably imposes an additional compliance burden on councils.

§ The proposed timeline for implementing the new framework does not appear to take into account transitional arrangements for council which currently have an existing audit and risk management framework with contracts for independent members of the Committees still running.

§ Ability to attract suitably qualified independent members to regional areas.

§ Without Councillors involvement in the governance process they will assume the ARIC is responsible, which it cannot be.

 

Ø does the proposed framework include all important elements of an effective internal audit and risk framework?

Comments

§ The proposed framework appears to be comprehensive and relevant.

§ As discussed above, there are areas where the responsibility of the ARIC, the General Manager and the Council ought to be further clarified.

§ Internal Audit’s role in governance is to provide assurance that internal controls (mitigation strategies) are operating as expected. This needs to be clarified.

 

Ø is there anything you don’t like about the proposed framework?

Comments

§ As noted above, the risk management methodology suggested in the new framework appears to rule out the use of any other model.

§ The Councillors appointed to the section 355 committee are protected by council’s professional indemnity insurance policy. What protection is proposed for independent members of the Committee? This question does not appear to have been addressed in the Discussion Paper.

 

 

Ø can you suggest any improvements to the proposed framework?

Comment

§ As noted above.

§ Enforcement – what are the penalties for non-compliance and who will enforce the Act?

§ Is the Audit Office NSW going to review the compliance as a part of the annual external audit process?

§ Risk based auditing required an assessment of risk, however S428A prescribes the areas of review irrespective of risk rating. This may cause areas of higher risk i.e. commercial activities to not be reviewed.

§ Provide definition of the following terms:

o “Assurance”, &

o “attestation”

§ With specific reference to provisions of ASAE3000.

§ This includes providing clarification on the desired level of assurance whenever these terms are used throughout the legislation

o "review",

o “endorsement”

o “approval”

o “Thorough",

o “Internal audit function”

 

 

 

 


Finance Policy Committee                                                                                               3 December 2019

Attachment 2      ARMC 25 October 2019 - Agenda

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

 

PDF Creator


PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


PDF Creator


PDF Creator


 

 

PDF Creator


PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

 

PDF Creator


PDF Creator


 

PDF Creator


PDF Creator


 

PDF Creator


 

PDF Creator


PDF Creator


PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


PDF Creator


 

PDF Creator


 

PDF Creator


Finance Policy Committee                                                                                               3 December 2019

Attachment 3      ARMC 25 October 2019 Agenda Late Items

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator

 


Finance Policy Committee                                                                       3 December 2019

3       General Reports

3.1     Proposed Internal Audit Outsourcing Service

RECORD NUMBER:       2019/2552

AUTHOR:                       Samantha Freeman, Acting Director Corporate and Commercial Services    

 

 

EXECUTIVE Summary

The Local Government Act (NSW) 1993 as amended proposed a mandatory requirement for all councils to establish an internal audit and risk management framework which conforms with best practice. The Orange City Council has been working collaboratively with Bathurst regional Council and Dubbo regional Council in developing a suitable internal audit and risk management framework. This process has been tested and it can now be duplicated to extend a service to smaller Councils which are not able to set up a suitable framework on their own due to capacity constraints.

The Office of Local Government published a Discussion Paper which outlines the nature of the proposed New Framework on Risk Management and Internal Audit in Local Councils. The proposed framework includes a recognition that sharing of internal auditors is a potential solution for some councils. On this basis, Orange City Council is proposing to establish an arrangement whereby additional internal auditors will be recruited to support the outsourcing of internal audit services to other Councils for a minimal return which marginally exceed the cost of offering the service. This report outlines the proposed concept and projected cost structure for the venture.

Link To Delivery/OPerational Plan

The recommendation in this report relates to the Delivery/Operational Plan strategy “16.1 Collaborate - Work in partnership with other Councils, regional organisations and State and Federal Governments”.

Financial Implications

The proposed service will achieve a projected annual net return of $50,000 per individual internal auditor to be recruited. The initial proposal is to recruit 1 internal auditor to provide a service to 2 identified Councils and a further 2 Councils to be signed up in due course.

Policy and Governance Implications

Nil

 

Recommendation

1        That the Council approve the proposed internal audit outsourcing arrangement.

2        That the Chief Executive Officer be authorised to enter into negotiations with entities requiring to procure internal audit services from Orange City Council and sign off appropriate legal agreements to effect the outsourcing plans.

 

further considerations

Consideration has been given to the recommendation’s impact on Council’s service delivery; image and reputation; political; environmental; health and safety; employees; stakeholders and project management; and no further implications or risks have been identified.

SUPPORTING INFORMATION

Preamble

This report aims to provide a background to the case for an outsourced internal audit function to be delivered by Orange City Council to other councils in NSW. The memorandum gives an insight into the purpose of an internal audit function. The legislative setting and the operational considerations relevant to support a decision to establish an internal audit function and related governance structures. An outline of typical services which can be offered is shown and linked to an indicative pricing model for the proposed business operations. As the business model matures, it is expected that the services offered can also be extended to cover other governance aspects of Council operations such as the provision of an internal ombudsman function and possibly probity reviews and limited in-house legal support.

Potential Payoffs

·    Additional revenue streams for Orange City Council

·    Widening skills base for the internal audit function as the exposure to systems and processes at the other Councils will boost the technical knowledge and understanding of the Council business.

·    Succession planning as the increase in staff will create an opportunity for continuity in the event of any of the team members leaving Council. Organisational knowledge retention.

Types of internal audit tasks and proposed services

1)   Risk management framework. A comprehensive review of policies covering risk management and governance.

2)   Risk assessments and creation of risk registers for all Council operations including a corporate risks register

3)   Testing controls claimed in the risk registers.

4)   Internal audit reviews. A list of specific generic audits and ad hoc audit topics is shown below:

5)   Probity reviews on procurement processes and high value transactions

6)   Project management processes reviews

7)   Training of Audit, Risk and Improvement Committee members

8)   Internal Ombudsman services to other Councils

Target market

·    Local government Councils in the former CENTROC and ORANA Regions and other areas in New South Wales.

·    Joint Organisation of Councils.

·    Other Public Sector entities in the local Government Area. E.g. DPI, CSU, Housing Plus etc.


 

Marketing Approach

·    Work with the network of Executive Officers at the Joint Organisation of Councils

·    Influence the General Managers network and the Directors of Corporate Services network

o Arrange to make presentations on service offering at the General Managers Meetings and at Directors of Corporate Services meetings.

·    Utilise other personalised networks on Linkedin to reach out to other public sector entities which may be interested in this service.

 

Resource Requirements

·    1 additional internal auditor or more. Appropriate work experience, tertiary and professional qualifications are necessary. Preferably a strong IT background.

·    Pool of casuals to be called in on an ad hoc basis.

·    Access to a pool car as required

·    The internal audit team will be operating under the strategic guidance of the Manager Corporate Governance at Orange City Council.

·    An internal audit manager will provide guidance to the technical audit team and determine strategic internal audit plans in consultation with the individual Councils’ General Managers and Audit Committees.

 

Pricing

·    The pricing of services will depend on the size and complexity of the tasks.

·    The standard charge out rate will be $170 per hour plus travel and subsistence.

·    Generally as a guide, the following indicative fixed cost packages are proposed:

o Audit tasks will generally be carried out at a cost of $170 per hour plus accommodation and travel where required.

o Training staff and management on risk management process to facilitate the creation of risk registers - $170 per hour plus travel and accommodation.

o Training of Audit, Risk and Improvement Committee members $1,650 plus GST per day. Typical training programme may take 2 days but most sessions will be completed in 1 day.

o A fixed cost package can be established per task based on agreed terms of reference.

§ A typical comprehensive and complex audit can take between 14 and 20 days with an attributable estimated total cost of $23,000.

§ An audit of a simple and straight forward process can be completed in much less time depending on agreed terms of reference.

 

Timeline

It is expected that the new outsourcing service will be operational with effect from 1 July 2020 subject to Council approval of this proposal.

 


 

WHAT IS INTERNAL AUDIT?

The Internal Audit Function Purpose

Internal auditing is an independent, objective assurance and consulting activity designed to ADD VALUE and improve an organisation’s operations. (Institute of Internal Auditors of Australia, IPPF).

The internal audit function’s value proposition has 3 dimensions:

Improving effectiveness and efficiency by providing insight.

Providing assurance as required on various matters

objectivity

 

The function can be utilised in a number of ways. Internal auditors can be involved with work aimed at providing

 

1.   Operational audits

2.   Financial audits

3.   Compliance audits

4.   Information technology audits

5.   Integrated audits

6.   Consulting activities

a.   Process re-engineering and design

b.   Control self-assessment

c.   Other advisory/operational tasks as required by management

Factors influencing the level of resources allocated to the Internal Audit function

There are many factors which influence the size of an organisation’s internal audit function. Essentially, the matter is largely influenced by the perceptions of decision makers regarding the role and benefits of the function. In some situations having an internal audit function is a matter of legislative compliance, as such some organisations will simply do the bare minimum required under legislation while others might take a different approach. The following list of relevant factors to consider is not exhaustive but it gives an indication of key considerations:

 

·    The scope of work expected to be covered by the internal audit function based on the 6 areas listed above. Some organisations may elect to focus on some but not all of these areas.

o The scope of work in terms of the level of assurance is also important when determining the resourcing of an internal audit function. For an example, where the internal audit function is expected to carry out very detailed testing it is likely that the level of resourcing should also be increased to cope with this expectation. The pricing of proposed service offerings will be based on the nature of assurance required by the target Council. Each engagement will either be a high level review or a substantive test of detailed transactions. This will be agreed with the client upfront.


 

·    Maturity of an organisation’s risk management framework has a significant impact on the nature and volume of internal audit work required. An organisation with a well-developed risk management framework is likely to do well with less internal audit staff when compared to an organisation with a less developed risk management framework.

o The model suggested in this proposal is that, Orange City Council will initially assist the target Council in developing a robust risk management framework and related risk registers. This process will also include a comprehensive training process involving the whole Council to ensure that the target Councils’ adopt a risk based decision making model.

o The risk management framework includes considerations such as the governance set up in place at Council. It also considers the 3 lines of defence and how the policies and procedures in place achieve effective risk treatment under the 3 lines of defence in place at the Council.

·    The amount of resources allocated to the internal audit function can also be based on management requirements. Management may require specific audit tasks to be carried out by an internal auditor. However, it is important to ensure that such requirements do not compromise professional independence and objectivity of the internal auditors.

·    Legislative requirements. The current position is that the internal audit function is a recommended option to councils but not a mandatory requirement. Amendments to the Local Government Act 1993 (NSW) which were enacted in August 2017 – are not yet in force. It is expected that these amendments will be effective by the end of 2021 after supporting Office of Local Government Guidelines have been published. The new legislation proposes to make it mandatory for Councils to have an internal audit function even though it does not specify the expected minimum level of resourcing for the function or method for determining optimum size of the function. The proposed changes to the Local Government Act (NSW) 1993 will make it compulsory for most Councils to establish an internal audit function. The nature of this function and scope of work required by the legislation will have an impact on the level of resourcing which each target Council has to allocate to this function.

·    Partial or outright outsourcing determines the nature and volume of internal audit work required by the target Councils. The outsourcing can either be outright as in the outsourcing of the whole function or partial. Partial outsourcing involves the use of an in-house resource who determines the areas of interest and engages appropriate external consultants to carry out the required reviews. This model gives the Council the benefit of an in-house professional with knowledge of the business and the opinion and skills of an independent consultant who might also have more specialised skills. For an example, this model would be very beneficial to Council in the area of IT audit. Information technology is always changing and it may not be easy to maintain the latest skills and knowledge while at the same time one is responsible for many other general audit issues.

The 3 Lines of Defence Model at Orange City Council

https://www.iia.org.au/sf_docs/default-source/member-services/thethreelinesofdefenseineffectiveriskmanagementandcontrol_Position_Paper_Jan_2013.pdf?sfvrsn=0

 

First Line of defence - Operational Management

·    The governance framework for Council is set out in legislation. Mainly the Local Government Act 1993 (NSW) and related regulations.

·    A Council ought to have a comprehensive policy framework and procedures

o Council policy manual

o Management policy manual

·    Comprehensive risk registers in place for every function.

Second Line of Defence – Risk Management and Compliance Function

·    Corporate Risks Register in place

·    Individual function risk registers in place.

·    There should be an independent review of the Council’s risk management framework including the related risk registers.

·    Management reviews of various processes such as regular reviews of the Council’s compliance framework. For an example, the Office of Local Government Compliance Calendar and other requirements ensure that the Councils comply with set regulations.

Third Line of Defence: Internal Audit

·    Each Council ought to have an independent and professional internal audit function in place.

·    The internal audit function should be driven by a disciplined internal audit programme based on a strategic 3 year plan informed with the results of a council-wide risk assessment process.

·    In line with the OLG Internal Audit Guidelines of October 2010,

o Council should establish an Audit, Risk and Improvement Committee whose terms of reference should be clearly defined in line with the OLG model Charter. As the ARIC is a Committee of Council, the ARIC Charter should be approved by the Council as a Council Policy, and

o An Internal Audit Activity Charter (Management Policy governing operations of the internal audit function), to be approved by the General Manager considering advice from the ARIC.

o The ARIC should be made up of voting and ex-officio members. The voting members should predominantly be independent appointees as set out in the OLG Guidelines. An independent member being the Committee Chair.

o The OLG Guidelines recommend that the ARIC should meet at least 4 times a year. Depending on the nature of activities of the target Council, these meetings can be less than 4 or more.

o As at November 2019, the Office of Local Government had released a Discussion Paper on a Proposed New Risk and Internal Audit Framework for Local Councils. It is expected that the legislative framework in place will be changed once this proposed framework is finalised and the new law comes into force. Yet, it is not expected that the above key provisions will be significantly amended.

 

 

  


Finance Policy Committee                                                                       3 December 2019

3.2     Requests for Financial Assistance - Quarter 3 of 2019/20 - Small Donations Program

RECORD NUMBER:       2019/2165

AUTHOR:                       Samantha Freeman, Acting Director Corporate and Commercial Services     

 

 

EXECUTIVE Summary

Council can only assist other organisations financially (in cash or in kind) in accordance with section 356 of the Local Government Act 1993.

Council has in place a policy for Small Donations to be made under section 356 of the Act and annually advertises for applications under this policy. This report provides the applications received in this quarter.

Link To Delivery/OPerational Plan

The recommendation in this report relates to the Delivery/Operational Plan strategy “15.2 Collaborate - Support community organisations and groups to deliver services and programs”.

Financial Implications

The overall Small Donations budget for 2018/19 is as follows:

Small Donations Program

Adopted Budget

Actual or

Committed

Remaining

Balance

Quarter 1

$35,000.00

$33,705.42

See Note 1

Quarter 2

School Prize Giving

$11,000.00

$4,000.00

$9,262.87

$4,000.00

See Note 2

Quarter 3

$15,000.00

$0.00

$18,031.71

Quarter 4

$15,000.00

$0.00

$15,000.00

Orange Harness Racing Club - Annual to 2025/26

$20,000.00

$20,000.00

$0.00

TOTAL

$100,000.00

$66,968.29

$33,031.71

Notes

1        Balance of Quarter 1 ($35,000.00 - $33,705.42 = $1,294.58) rolled over to Quarter 2.

2        Balance of Quarter 2 ($16,294.58 - $13,262.87 = $3,031.71) rolled over to Quarter 3.

Policy and Governance Implications

Nil

 

Recommendation

1        That a donation of $2,000.00 be made from the Small Donations Program to the Spring Hill Activities Group (Whistle Stop Festival 2020).

2        That a donation of $2,000.00 be made from the Small Donations Program to Orange and District Historical Society ("Wearing the Green" - book on the Dalton Family).

3        That a donation of $1,249.90 be made from the Small Donations Program to Put Orange First (Put Orange First banners).

4        That an in-kind donation of $500.00 be made from the Small Donations Program to Housing Plus (Paint the Orchard Butterfly on the Orange Regional Museum Roof).

5        That a donation of $2,000.00 be made from the Small Donations Program to Rotary Club of Orange North (Peter Darley Memorial Driver Training Simulator).

6        That a donation of $2,000.00 be made from the Small Donations Program to the Orange Small Schools Association (OSSA School Spectacular).

7        That a donation of $1,500.00 be made from the Small Donations Program to Spring Hill Recreation Trust (Enhancement of the Spring Hill Recreation Reserve).

8        That a donation of $5,027.42 be made from the Small Donations Program to Rotary Club of Orange North (as the Lead the Way donation was not paid last financial year).

 

further considerations

Consideration has been given to the recommendation’s impact on Council’s service delivery; image and reputation; political; environmental; health and safety; employees; stakeholders and project management; and no further implications or risks have been identified.

SUPPORTING INFORMATION

Summary

Shaded cells in the $Request columns shows requests outside the maximum of the category.

QUARTER 3 ($15,000.00 plus $3,031.71 from Quarter 1 = $18,031.71)

No

Applicant

$Request

$Recommended

 

76

Spring Hill Activities Group

$2,000.00

$2,000.00

 

79

Orange and District Historical Society

$2,000.00

$2,000.00

 

80

Put Orange First

$1,249.90

$1,249.90

 

81

Housing Plus

$500.00

$500.00

 

82

Rotary Club of Orange North

$21,550.00

$2,000.00

 

83

Orange Small Schools Association

$2,000.00

$2,000.00

 

84

Spring Hill Recreation Trust

$2,000.00

$1,500.00

 

-

Guide Dogs Application Revisited

$5,027.42

$5,027.42

 

TOTALS

$36,277.42

$16,277.32

 

 

Application No 76

Spring Hill Activities Group

Not for Profit

Yes.

Purpose of the Request

Whistle Stop Festival 2020.

This festival promotes the Village and its businesses and brings people into the Village. It also helps families to go outside so that they can become active and so that they can enjoy the Spring Hill residents' hospitability.

Amount Requested

$2,000.00

Policy Category

Small Donations - Community Events (not being Event Sponsorship) - maximum $2,000.00.

Comment and Recommendation

In line with the policy. $2,000.00 recommended.

 

Application No 79

Orange and District Historical

Not for Profit

Yes.

Purpose of the Request

"Wearing the Green" - coffee-table book about the remarkable story of the Dalton family.

This project adds to the historical collection for our City, putting information in one area for this family that goes back to the 1860s.

Amount Requested

$2,000.00

Policy Category

Small Donations - Projects - maximum $2,000.00

Comment and Recommendation

In line with the policy. $2,000.00 recommended.

 

Application No 80

Put Orange First

Not for Profit

Yes. Put Orange First is a Community Project.

Purpose of the Request

Put Orange First Street Banners.

These banners are for building a stronger relationship between local businesses and consumers by building a stronger sense of connected community where people can see the benefits of keeping money local.

Amount Requested

$1,249.90

Policy Category

Small Donations - Projects - maximum of $2,000.00.

Comment and Recommendation

In line with the policy. $2,000.00 recommended.

 

Application No 81

Housing Plus

Not for Profit

Yes.

Purpose of the Request

Stop Violence Against Women - Paint The Orchard Butterfly on the Regional Museum Roof.

This project is to raise awareness of and to protest against violence against women.

The Director Community, Recreation and Cultural Services advises that the Orchard Butterfly can be painted on the Regional Museum roof. Council staff will do the painting and the donation request is for the cost of the paint.

Amount Requested

$500.00 (in-kind donation)

Policy Category

Small Donations - Projects - $2,000 maximum

Comment and Recommendation

In line with the policy. $500.00 recommended.

 

Application No 82

Rotary Club of Orange North

Not for Profit

Yes.

Purpose of the Request

Peter Darley Memorial Driver Training Simulator

This driver simulator (with a mobile trailer) will give all Year 10 and Year 11 students the opportunity to experience the effects of alcohol, drugs, texting, drowsy and distracted drivers. It is also intended to make the driver simulator available to other community organisations.

Amount Requested

$21,550.00

Policy Category

Small Donations - Equipment Purchase - $2,000 maximum.

Comment and Recommendation

In line with the policy (except with the requested amount). $2,000 recommended.

The Donations and Grants policy now allows service clubs that have a large-cost, eligible project to expend their donation over a three-year period and to apply for another donation for the same project in Years 2 and 3.

It is also recommended that the donation for the Lead the Way project be now paid and this will allow the Club to transfer money to this project (see below).

 

Application No 83

Orange Small Schools Association (OSSA)

Not for Profit

Yes.

Purpose of the Request

OSSA Schools Spectacular 2019.

The outcomes of this spectacular is for leadership, confidence, team work and resilience for students from Orange small schools.

Most of these small schools are outside our LGA but many of the students in these small schools will go on to attend high schools in Orange. The event is being held in Orange and most of the students' parents work and/or shop in Orange.

Amount Requested

$2,000.00

Policy Category

Small Donations - Project - Maximum $2,000.00

Comment and Recommendation

In line with the policy. $2,000.00 recommended.

 

Application No 84

Spring Hill Reserve Trust

Not for Profit

Yes.

Purpose of the Request

Enhancement of the Spring Hill Recreation Reserve

This project will improve the environment of this Reserve and will lead to more use of the Reserve by the Spring Hill community and visitors to the Village.

Amount Requested

$2,000.00

Policy Category

Small Donations - Projects - $2,000.00 maximum

Comment and Recommendation

In line with the policy. $1,500.00 recommended.

The Spring Hill Reserve Trust has already received a small donation (for equipment purchase) for this Recreation Reserve in this financial year (in the amount of $488.98).

 

Rotary Club of Orange North - Lead the Way Concert for the Guide Dogs

Purpose of the Request

In the last financial year, Council resolved a conditional donation to the Rotary Club of Orange North for the Lead the Way Concert for the Guide Dogs at a total of $5,027.42 if the Club did certain things. This donation was rejected by the contact person on the application.

After that rejection, the Club attempted to contact Council several times to discuss this conditional donation but a meeting was not able to be set before the end of that financial year.

The Club has now raised all money for this project itself, but at the cost of forwarding projects (such as the Driver Simulator).

Given that Council did intend to give this donation, the Board would not have rejected the conditional donation and the money has been raised at the opportunity cost of other projects, it is recommended that Council now give this donation to the Club.

 

 

Attachments

1          Application 76 - Small Donations - Spring Hill Activities Group, D19/67225

2          Application 79 - Small Donations - Orange and District Historical Society, D19/67227

3          Application 80 - Small Donations - Put Orange First, D19/67228

4          Application 81 - Small Donations - Housing Plus, D19/67229

5          Application 82 - Small Donations - Rotary Club of Orange North, D19/69959

6          Application 83 - Small Donations - Orange Small Schools Association, D19/69960

7          Application 84 - Small Donations - Spring Hill Recreation Trust, D19/69833

8          Request to Revisit Guide Dogs Application From Last Financial Year - Orange North Rotary Club, D19/69908

9          Database - Donations in 2019/20, D19/69956

  


Finance Policy Committee                                                                                               3 December 2019

Attachment 1      Application 76 - Small Donations - Spring Hill Activities Group

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


Finance Policy Committee                                                                                               3 December 2019

Attachment 2      Application 79 - Small Donations - Orange and District Historical Society

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


Finance Policy Committee                                                                                               3 December 2019

Attachment 3      Application 80 - Small Donations - Put Orange First

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


Finance Policy Committee                                                                                               3 December 2019

Attachment 4      Application 81 - Small Donations - Housing Plus

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


Finance Policy Committee                                                                                               3 December 2019

Attachment 5      Application 82 - Small Donations - Rotary Club of Orange North

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


Finance Policy Committee                                                                                               3 December 2019

Attachment 6      Application 83 - Small Donations - Orange Small Schools Association

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


Finance Policy Committee                                                                                               3 December 2019

Attachment 7      Application 84 - Small Donations - Spring Hill Recreation Trust

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


Finance Policy Committee                                                                                               3 December 2019

Attachment 8      Request to Revisit Guide Dogs Application From Last Financial Year - Orange North Rotary Club

PDF Creator


Finance Policy Committee                                                                                                 3 December 2019

Attachment 9      Database - Donations in 2019/20

PDF Creator


PDF Creator



Finance Policy Committee                                                                       3 December 2019

3.3     Carols By Candlelight - Surplus Funds from Sale of Glowsticks - Orange Community Christmas Lunch

RECORD NUMBER:       2019/2571

AUTHOR:                       Samantha Freeman, Acting Director Corporate and Commercial Services    

 

 

EXECUTIVE Summary

At the Carols by Candlelight event, glowsticks are sold for fundraising.

It is intended to donate the surplus funds to the Orange Community Christmas Lunch event (currently coordinated by the Orange Baptist Church) on an ongoing, reviewable status.

Link To Delivery/OPerational Plan

The recommendation in this report relates to the Delivery/Operational Plan strategy “15.2 Collaborate - Support community organisations and groups to deliver services and programs”.

Financial Implications

Nil. The money, which is a donation from the public, is surplus to the cost of the glowsticks.

Policy and Governance Implications

Nil

 

Recommendation

That the surplus funds raised from the sale of glowsticks at the annual Carols By Candlelight event be donated to the Orange Community Christmas Lunch event; with this donation to be ongoing but able to be reviewed in any future year if needed.

 

further considerations

Consideration has been given to the recommendation’s impact on Council’s service delivery; image and reputation; political; environmental; health and safety; employees; stakeholders and project management; and no further implications or risks have been identified.

SUPPORTING INFORMATION

Council staff organise for the purchase of glowsticks for the community to buy and use during the Carols by Candlelight event as a fundraising activity.  After covering costs from purchase of the glowsticks, Council is left with a surplus of funds. A decision is required to be made on the cause to donate the surplus to.

Currently the Orange Baptist church runs the Orange Community Christmas lunch commencing at 11:30am on Christmas Day with lunch served from 12.00pm.

The Christmas lunch provides an opportunity for members of the community to come together and participate in a meal, where in some cases they may not have had such an opportunity.

The Community Christmas Lunch operates by way of fundraising money and products throughout the year from the donations of local businesses and individual contributions from sponsors, sought and collected, by Orange Baptist Church. 

Volunteers from both the Orange Baptist Church and individuals outside the organisation part with their own time to prepare and serve meals on the day in order to facilitate the function. Similarly without the support of donations both monetary and in kind such as food, the luncheon would not be possible in its current form.  The Orange Baptist Church currently covers any shortfall in funds attributed to the day.

In accordance with Council’s adopted fees and charges, Council provides the facility for the Community Christmas Lunch at Orange Function Centre, Eyles Street.

The Carols by Candlelight is a Christmas event and the Orange Community Christmas Lunch event is also a Christmas event, so is seems to be the right event to give this donation to.