AUDIT COMMITTEE MEETING 21 AUGUST, 2018 For the calendar year to 1 August 2018, Internal Audit has completed 9 or 45%
On 20 April 2018 the Audit Office published their ‘Report on Local Government 2017’ which provides guidance, and includes recommendations to councils and
the Office of Local Government, aimed at strengthening financial reporting, asset management and governance and internal controls.
Link:
https://www.audit.nsw.gov.au/publications/latest-reports/report-on-local- government-2017Overall the observations of the AO were:
‘The quality and timeliness of financial reporting in the local government sector needs to improve,’ the Auditor-General said.
Qualified audit opinions were issued on the 2016−17 financial statements of three councils and a further 22 councils required material adjustments to correct errors in previous audited financial statements. Most of these matters related to the way councils value and account for assets.
Forty of the 140 councils required lodgement extensions past the 31 October 2017 statutory reporting deadline with one council yet to present their 2016−17 financial statements for audit’.
THSC’s 2016/17 financial statements were qualified because of matters relating to the way the council valued and accounted for its assets. It is expected that the 2017/18 financial statements will be unqualified.
Reports relevant to Local Government, issued by the AO during the period, are available at the following link. These include AO’s performance reports on Council Reporting On Service Delivery (issued February 2018), Shared Services in Local Government (issued 21 June 2018) and Fraud Controls in Local Councils (June 2018).
Link:
https://www.audit.nsw.gov.au/publications/performance-audit reports/2018-reportsAUDIT COMMITTEE MEETING 21 AUGUST, 2018
5. Regulatory Bodies
Office of Local Government (OLG)
During the period a number of OLG publications have been circulated concerning governance. These are detailed at: http://www.olg.nsw.gov.au/publications Currently a consultation draft of the Model Code of Conduct has been released (Circular 17-30). It is expected that the Code will be finalised by the end of 2018.
The OLG is also in the process of revising its 2010 guidelines concerning Internal Audit to support the implementation of s428A of the Act. It is expected that a discussion paper will be released by the OLG by the end of 2018.
Current OLG Investigations
For the information of the Committee, on 27 June 2018 the Minister for Local Government, the Hon. Gabrielle Upton MP announced a
formal Public Inquiry into Blue Mountains City Council to investigate serious allegations relating toasbestos management and organisational governance.
The public inquiry will examine:
The track record of both the council and the councillors in dealing with asbestos management issues since 2012 including funding and co- operation with State Government agencies;
The council’s processes surrounding the employment of certain staff and contractors including those engaged to conduct independent investigations into asbestos management and employment issues;
Whether the council and councillors are facilitating a consultative and supportive working environment;
The council’s compliance with its statutory responsibilities under the Local Government Act; and
The council’s organisational structure and allocation of resources.
Once these documents and investigations are finalised they will be forwarded to the Audit Committee for their information.
Independent Commission against Corruption (ICAC)
During the period the following investigation relating to Local Government was commenced. Once the investigation is finalised the resulting report will be referred to the Audit Committee.
Link: http://www.icac.nsw.gov.au/investigations/current-investigations
Canterbury City Council - allegations concerning former councillors and other public officials (Operation Dasha)
The public inquiry in this matter will continue from Monday 6 August 2018 at the Law Enforcement Conduct Commission hearing room, Level 3, 111 Elizabeth Street, Sydney.
The ICAC is investigating allegations concerning the former Canterbury City
Council, including whether, between 2013 and 2016, public officials including
former councillors Michael Hawatt and Pierre Azzi, the former general manager,
AUDIT COMMITTEE MEETING 21 AUGUST, 2018
Jim Montague, and the former Director City Planning, Spiro Stavis, dishonestly and/or partially exercised their official functions in relation to planning proposals and/or applications under the Environmental Planning and Assessment Act 1979 concerning properties in the Canterbury City Council local area.
The ICAC is also investigating the circumstances surrounding the appointment of Mr Stavis to the role of Director City Planning, including whether, between November 2014 and January 2015, Mr Montague exercised his official functions dishonestly or partially in relation to the appointment of Mr Stavis to that role.
Further, the Commission is examining whether, between November 2014 and January 2015, councillors Hawatt and Azzi engaged in conduct that, or could have, adversely affected, either directly or indirectly, the honest or impartial exercise of Mr Montague’s official functions by expressly or impliedly threatening to cause the termination of Mr Montague’s employment unless he appointed Mr Stavis as Director City Planning.
In February 2018 the ICAC also released its guidance material
Strengthening Employment Screening Practices in the NSW Public Sectorwhich reinforces that recruitment remains one the highest corruption risks to Councils. This guidance is available at the following link and is currently being reviewed by the Councils HR area.
Link:
http://www.icac.nsw.gov.au/documents/preventing-corruption/cp- publications-guidelines/5050-strengthening-employment-screening-practices-in- the-nsw-public-sector/fileAUDIT COMMITTEE MEETING 21 AUGUST, 2018
Part B Summary of the Internal Audit Activity in the 2018 period
B1. Part B summarises the internal audit activity undertaken in 2018 to the date of this report.
Table 1: Outlines Year 2 (2018) of the 2017-2020 adopted Strategic Internal Audit Plan (adopted by the Audit Committee on 12/12/2016) which is the current year internal audit program:
2018 Audit Program Risk
Planned Timing (quarter
ending)
Status of the Planned Audit
at 1 August 2018
1
Governance
Aim: Undertake the annual Governance Health Check to ensure that Councils governance practices meet acceptable standards and comply with recommendations resulting from ICAC/OLG and NSW Ombudsman and other regulatory bodies. The overall rating that results from this review is reported as a quality of life indicator in the annual community report. This review has been
undertaken annually since 2005. H March 2018
2
Risk Management
Aim: Time has been allocated to allow the independent review of the key controls identified by Management in the Risk Management Module. The key controls to be
tested are those identified by Management as effective
and are therefore ‘relied upon’ to mitigate identified risk.
Testing undertaken is aimed at ensuring that the Councils reliance on the control and its assessment by
management is valid (i.e. control is effective). H Ongoing
3
Key Governance Structures i.e. Policies/
Procedures/ GIPA/ Resolutions/ Delegations/
classifications (reporting)/ complaints handling/other.
Aim: Review Councils key governance structures to ensure that they are current, implemented, are effective
and meets legislative requirements. H September
4
KPI’s (including Enterprise Agreement (EA) implementation)
Aims: Ensure that the KPI’s reported to the Community periodically are accurate and based on verifiable data.
Ensure that the Council is able to take prompt and effective action in light of changes to its environment or variation from its planned activity. Annually time will also be allocated to the review of KPI’s outlined in the Councils Enterprise Agreement to ensure that calculations are
complete, accurate and valid H September
5
Financial Statement Review
Aim: Review of the Councils Draft Financial Statements –
referred to the Audit Committee. H September
6
Special Projects/Assignments
Aim: This time is provided to ensure that Internal audit can provide a comprehensive and proactive service to the Council. The use of time is dependent on the issues that may be faced by Council or activities requested by the
General Manager/Audit Committee. H June
AUDIT COMMITTEE MEETING 21 AUGUST, 2018
7
Investigations
Aim: This time is provided to undertake any investigations
that may be required by Councils regulatory bodies etc. H June
8
Information Technology/Systems
Aim: Implementation of the Councils 4 year ITprogram.
Auditable areas identified in the plan:
Information Security; Business Continuity Management;
Mobile computing technology; cloud technology; IT Risk
Management; Program Risk; Software/IT asset
management; Social media risk management; segregation of duties/identity and access management; data loss
prevention and privacy. H Ongoing Refer B2.
9
Contract Management
Ensure contracts are appropriately managed and
legislatively compliant. H September Refer B2.
10
System Audits
Aim: To ensure that the Council activities are legislatively compliant through the implementation of robust systems/
key controls and reconciliations are in place/ segregation of duties in place.
2018: Payroll
Systems
Audit June
11
Revenue Activities (implementation of adopted fees and charges document)
Aim: To ensure that the Council activities are legislatively compliant by ensuring that the Councils adopted fees and charges document is complete and appropriately authorised, reflected in Councils systems, and is the basis of Councils revenue activities. Review to be undertaken
following the financial year end. M September
12
Payroll
Aim: to ensure monies are paid to valid employees, are accurate and reflects the Councils EA/award and employment conditions. Will include the review of
allowances, higher grade and overtime payments. H June
13
Credit Cards/Procurement Cards/ Reimbursement of expenses incurred by staff/ Petty Cash
Aim: To ensure that the Councils general procurement activities satisfy the Councils purchasing guidelines and its legislative requirements. Inclusion- high risk identified in
numerous reports by the ICAC H September
14
Recruitment and Terminations
Aim: to ensure that Councils recruitment and termination practices are efficient and meet Councils legislative requirements and reflect best practice. Identified as a
high risk by the ICAC. H June
15
Leave Management
Ensure that key governance structures are in place, are
effective and reflect better practice. H September
16 RMS
Aim: Audit Councils use of the RMS Drives System. This
audit is an annual requirement of the RMS agreement
which allows the Council to have access to the RMS Drives System required in undertaking Councils regulatory
functions. H June
17
Ordinance and enforcement/Inspections Aim: to ensure the integrity of Councils regulatory
functions. The power of regulators to grant significant H September
AUDIT COMMITTEE MEETING 21 AUGUST, 2018
benefits to, or impose restrictions or penalties on, members of the public can increase the risk that they will be exposed to corruption.
18
Use of Discretion/DAU
Ensure that the use of discretion by Councils officers is appropriate and in accordance with their delegated authority. This review will also look at the use of discretion with respect to rezoning or
development applications H September
19
Development Applications/Development assessment and Monitoring/Subdivisions
Ensure legislative compliance and that the
processes are efficiently and effectively managed H September
20
Management of the SDRO/Pins system/ Compliance Ensure legislative compliance and that the processes are
efficiently and effectively managed H September
Other
Training and Development
Audit Committee
Annual Planning and Reporting
Liaison
Reports previously issued.
Legend to the Table 1.
Status of the Audit Activity
In progress
Completed
Not yet commenced