MOVED BY COUNCILOR HASELDEN AND SECONDED BY PROFESSOR JIM TAGGART OAM THAT THE MINUTES OF THE AUDIT COMMITTEE MEETING HELD ON 21 NOVEMBER 2019 BE CONFIRMED. A MOTION WAS MOVED BY MR JOHNNY TEONG AND SECONDED BY COUNCILOR HASELDEN THAT THE RECOMMENDATION INCLUDED IN report to be approved.
AUDIT COMMITTEE MEETING 18 AUGUST, 2020
Revaluation of Assets
Fair Value as at
Movement FY19/20
Decrease due to
Fair Value
Increase / (Decrease)
30-Jun-20
This revaluation incorporates a 'discount factor' which must be applied to take into account land use restrictions. The Accounting Standards Board recognizes that this issue of accounting for restrictions on land needs to be addressed as it is common to both local and state governments.
IMPACTS Financial
Strategic Plan - Hills Future
RECOMMENDATION
The presentation from Council’s External Auditor be received
ATTACHMENTS
General Purpose Financial Report for year ended 30 June 2020, Special Purpose Financial Reports for year ended 30 June 2020 and Special Schedules for year ended
Statement required by Section 413 of the Local Government Act, 1993 (1 page)
Statement required by the Local Government Code of Accounting Practice (1 page)
AUDIT COMMITTEE MEETING 18 AUGUST 2020
ANNUAL FINANCIAL STATEMENTS
ATTACHMENT 1
GENERAL PURPOSE FINANCIAL STATEMENTS
- Primary Financial Statements
- Independent Auditor’s Reports
- The Income Statement
- The Statement of Comprehensive Income
- The Statement of Financial Position
- The Statement of Changes in Equity
- The Statement of Cash Flows
- Basis of preparation
- Basis of preparation (continued)
- Revenue from continuing operations
- Revenue from continuing operations (continued)
Hills Shire Council's notes to the financial statements for the year ended 30 June 2020, Note 2(a). Financial Statements 2020 Hills Shire Council's notes to the financial statements for the year ended 30 June 2020, note 2(a).
TOTAL GRANTS AND
Interest and investment income
The Council contributes to various defined benefit schemes and defined contribution schemes on behalf of its employees. The Council participates in a defined benefit plan under the Local Government Superannuation Scheme, however, sufficient information to account for the plan as a defined benefit is not available and therefore the Council accounts for its liabilities to the schemes defined benefits on the same basis as his obligations to the defined benefit plan. contribution plans, i.e.
Expenses from continuing operations
- Auditor remuneration
Prepaid contributions are recognized as an asset to the extent that a cash refund or a reduction in future payments is available. The Council participates in a defined benefit plan under the Local Government Superannuation Scheme, however sufficient information to account for the plan as a defined benefit is not available and therefore the Council accounts for its obligations towards defined benefit plans on the same basis as its obligations towards defined benefit plans. contribution plans, ie as an expense when it becomes payable – refer to Note 19 for more information.
Expenses from continuing operations (continued)
Impairment / revaluation decrease of IPP&E. Total gross IPP&E impairment / amortization expense revaluation /. Total IPP&E impairment / revaluation write-off costs /. reversals) charged to the income statement – 3,912.
TOTAL DEPRECIATION, AMORTISATION AND
Gain or loss from disposal of assets
TOTAL CASH ASSETS, CASH
- Receivables
- Receivables (continued)
- Inventories and other assets
- Inventories and other assets (continued)
- Infrastructure, property, plant and equipment (continued)
- Investment properties
- Contract assets and liabilities
- Contract assets and liabilities (continued)
- Leases
- Leases (continued)
These Rural Fire Service assets are recognized in these financial statements as assets of the Council. The lease obligation is initially recognized at the present value of the remaining lease payments at the inception of the lease.
TOTAL PAYABLES AND
Payables and borrowings
These amounts represent liabilities for goods and services provided to the council before the end of the financial year and which are unpaid.
Provisions
Payables and borrowings (continued)
Provisions are measured at the present value of management's best estimate of the expenditure necessary to settle the present obligation at the reporting date. Obligations for wages and salaries (including non-monetary benefits, annual vacation and cumulative sick leave that are expected to be fully settled within 12 months after the end of the period in which the employees perform the related service) are recognized in respect of the services of the employees until the end of the reporting period and are measured at the amounts expected to be paid when the obligations are settled.
Provisions (continued)
The discount rate used to determine the present value reflects current market assessments of the time value of money and the risks specific to the liability. The liability for long service leave and annual leave that is not expected to be fully settled within 12 months after the end of the period in which the employees provide the related service is recognized in the provision for employee benefits and measured as the present value of expected future payments that will be made in respect of services rendered by employees up to the end of the reporting period using the projected unit credit method.
Accumulated surplus, revaluation reserves, changes in accounting policies, changes in accounting estimates and errors
Expected future payments are discounted using market yields at the end of the reporting period on sovereign government bonds with terms to maturity and currency that match as closely as possible the estimated future cash outflows. According to IAS 15, where the contract is enforceable and contains sufficiently specific performance obligations, revenue is either recognized over time when the work is performed, or it is recognized when control of the services passes to the customer.
Accumulated surplus, revaluation reserves, changes in accounting policies, changes in accounting estimates and errors (continued)
Accumulated profits, revaluation provisions, changes in accounting policies, changes in accounting estimates and errors (continued). Accumulated profits, revaluation provisions, changes in accounting policies, changes in accounting estimates and errors (continued) changes in accounting estimates and errors (continued).
Statement of cash flow information
Commitments
The funds within the subgroup are not separated according to the employees of the individual sponsoring employer. As noted above, each sponsoring employer (Council) is exposed to actuarial risks associated with current and former employees of other sponsoring employers and their share of profits and losses.
Contingencies
- Other liabilities
Benefits for employees of all sponsoring employers are determined according to the same formulas and independently of the sponsoring employer. Pooled employers are required to pay standard employer contributions and additional lump sum payments to the fund.
Contingencies (continued)
Interest rate risk – the risk that movements in interest rates may affect returns and income. Liquidity risk – the risk that the Council will be unable to pay its debts as and when they fall due.
Financial risk management
Price risk - the risk that the capital value of investments may fluctuate due to changes in market prices, regardless of whether the changes are the result of factors specific to individual financial instruments or their issuers, or are caused by factors affecting similar instruments with which trades in the market. Credit risk – the risk that an investment counterparty will fail to meet its obligations in relation to a financial instrument, resulting in a financial loss to the Council – whether of a capital or income nature.
Financial risk management (continued)
Debts, lease obligations and loans are both subject to liquidity risk - the risk that insufficient funds will be available to meet payment obligations as and when they fall due. Loans are also subject to interest rate risk – the risk that movements in interest rates could adversely affect borrowing costs and debt service requirements.
Material budget variations
Mainly due to decrease in subdivision income and treatment of compliance charge income which was recognized as a liability according to new accounting standard AASB 15. Mainly due to temporary road closure, insurance recoveries and sale of shares as per Board Resolution which was not originally budgeted for.
Material budget variations (continued)
Due to larger than expected grants and contributions income primarily from S711, Voluntary Planning Agreements and restoration activity. The fair value of assets and liabilities must be estimated in accordance with various accounting standards for either recognition and measurement requirements or for disclosure purposes.
Fair Value Measurement
The Council employs an external, independent and qualified valuer to determine the fair value of the Council's investment properties. The Council engages external, independent and qualified valuers to determine the fair value of the Council's buildings.
Fair Value Measurement (continued)
The Hills Shire Council Notes to the Financial Statements for the year ended 30 June 2020 Note 23. The Hills Shire Council Notes to the Financial Statements for the year ended 30 June 2020 Note 24.
AUDIT COMMITTEE MEETING 18 AUGUST 2020 The Hills Shire Council
Local government industry indicators – consolidated
- Operating performance ratio
- Own source operating revenue ratio Total continuing operating revenue (1)
- Unrestricted current ratio Current assets less all external restrictions
- Debt service cover ratio
- Rates, annual charges, interest and extra charges outstanding percentage
- Cash expense cover ratio Current year’s cash and cash equivalents
- Own source operating revenue ratio
- Unrestricted current ratio
- Rates, annual charges, interest and extra charges outstanding percentage Purpose of rates,
- Cash expense cover ratio
- Council information and contact details
Statement of Developer Contributions without Internal Loans (continued) .11 CONTRIBUTION - UNDER A PLAN BUTION PLAN NUMBER 9 - Castle Hill Town Center pace her BUTION PLAN NUMBER 11 - Annangrove Industrial affic Facilities. Declaration of developer contributions without internal loans (continued) .11 CONTRIBUTIONS - NOT UNDER A PLAN king pace her.
Independent Auditor's Report
SPECIAL PURPOSE FINANCIAL STATEMENTS
Special Purpose Financial Statements
Significant Accounting Policies
However, where the Council does not pay certain taxes normally paid by private sector businesses, such as income tax, these equivalent tax payments have been applied to all Council-nominated business activities and are reflected in Special Purpose Financial Statements. The debt guarantee fee is designed to ensure that council business activities face 'true' commercial borrowing costs in line with private sector competitors.
Significant Accounting Policies (continued)
To calculate a debt guarantee fee, the Council has determined what the differential borrowing rate would be between the commercial rate and the Council's borrowing rate for its business activities. As a minimum, business activities must generate a return equal to the 10-year Commonwealth bond rate of 2.5% at 30/6/20.
SPECIAL SCHEDULES
Special Schedules
Benchmark:ʊ<2.00% Ratio achieves benchmark Source of benchmark: Code of Accounting Practice and Financial Reporting #28Ratio is out of benchmark Asset maintenance ratio Asset maintenance ratio Compares actual versus declaration by councilors and management made in accordance with the Local Government Code of Accounting Practice and Financial reporting.
STRATEGY
Ensure Council is accountable to the community and meets legislative requirements and support Council’s elected
MEETING DATE: 18 AUGUST 2020
INTERNAL AUDIT COMMITTEE
KERRIE WILSON RESPONSIBLE OFFICER: GENERAL MANAGER
MICHAEL EDGAR
EXECUTIVE SUMMARY The Internal Audit Report
REPORT
This report sets out the results of audit review of the Council's higher risk activities as identified in the Internal Audit Plan adopted by the Council. The recommendations arising from audit activities are aimed at ensuring that the Council's stated outcomes are achieved efficiently and effectively and meet the Council's legislative and management requirements.
RECOMMENDATION The report be received
Internal Audit Report to 1 August 2020 (21 pages);
Insurable Risk Profile Report and Insurable Gap Analysis – (distributed under separate confidential cover)
Councillors Workshop 4 August 2020– Briefing Report – Waves Redevelopment Update – (distributed under separate confidential cover)
Internal Audit Report
Period from 15 May to 1 August 2020(Quarter 3)
Contents
Section A: Executive Summary
General Information
Internal Audit Section B
Governance - Regulatory Bodies activities
KPI’s - Audit Committee and Internal Audit
Section B: Internal audit Update B.1 This part outlines the
B.2 .1 RMS (Terms of Access Agreement) Audit Number 16
Background
Audit Objective
The review of ‘A drive’ records identified that Council staff had accessed RMS records for valid reasons and can be supported in accordance with
Management Action
Audit Number 6
Reason for Audit
Objective)
Introduction and
AUDIT COMMITTEE MEETING 18 AUGUST 2020 Key information concerning THSC security arrangements
Scope and Method
Summary of Key Findings
Actions identified
Conclusion
Gap Analysis: ICAC Report Supplier Due Diligence: A guide for NSW Public Sector Agencies, June 2020
ICAC has issued its own publication to provide guidance on the conduct of public sector supplier due diligence. Since due diligence is carried out in different stages, it is usually divided between several experts.
Summary of Key Findings
It is largely the responsibility of the delegated procurement officer to ensure that the due diligence is carried out. The level of due diligence required is largely influenced by the type of purchase and the budget associated with the purchase (as outlined in the purchasing guidelines).
Management
Although an increased level of due diligence has been observed for some major projects (eg Waves/Columbia Court), there does not appear to be a process for carrying out a formal documented risk assessment in accordance with the process recommended by ICAC to determine the type of due diligence. necessary or time. Conducting a procurement risk assessment would ensure the consistency and structure of the procurement due diligence process.
B2. 4 Other audit activities undertaken by Internal Audit in the period
Section C: Governance Update
Better practice/Investigation reports etc. and other information released by the Councils regulatory bodies in the period
C1. External Audit (Audit Office)
Local Government (2020-2021 period)
This review will involve the Department of Premier and Cabinet, NSW Treasury and the eight local councils that are partners in the Western Sydney City Deal. This review will consider the role of the NSW Government and local councils in contributing to the planning and implementation process.
C2. Independent Commission against Corruption (ICAC)
In 2018-19 we completed an audit which focused on the 'pre-submission' and 'submission' stages of the development assessment process in two local councils. This audit could assess the extent to which the level of 'grading' in selected local councils is aligned with relevant legislation and relevant DPIE and Independent Anti-Corruption Commission guidelines.
C3. Office of Local Government (OLG)
ICAC's new supplier due diligence guide to help the public sector do good business https://www.icac.nsw.gov.au/media-centre/media-releases/2020-media-releases/new-icac-supplier - careful-guide-to-help-the-public-sector-take-good-care-when-doing-business. ICAC finds University of Sydney security operations manager and contractors engaged in serious corruption.
D1 Service Delivery Benchmarks
The following indicators were developed to measure the performance of internal audit and the audit committee:
Councils KPI
Other
D2 Cost Control benchmarks
Link: http://www.thehills.nsw.gov.au/Council/Meeting-Agendas-Minutes/Audit-Committee Task Planned WorkInitial IA Risk Rating ERM Risk Rating.
D5 Audit Committee Forward Plan (Status)
Action to be taken to clean up broken appliances has yet to be addressed, postponed to August 2020 and will be included in the Operation Gerda asset management audit: risk assessments for procurement are not formalized and are not reflected in the procurement process. Coordinator Risk Management and Manager-GovernanceSeptember 2020 Procurement risk assessments are not formalized and are not reflected in the procurement process, therefore appropriate supplier due diligence processes may not be in place.
AUTHOR: MANAGER INFORMATION TECHNOLOGY BEN WONG
RESPONSIBLE OFFICER
GROUP MANAGER - CUSTOMER SERVICES, CUSTOMER COMMUNITY SERVICES & TECHNOLOGY
JOHN DEAN
ATTACHMENTS Nil
MICHAEL EDGAR RESPONSIBLE OFFICER: GENERAL MANAGER
MICHAEL EDGAR HISTORY
The General Manager’s expenses to be reviewed and approved by the Mayor prior to payment
After Approval, the expense be submitted to the Audit Committee for notation
RECOMMENDATION 1. The report be received
The expenses tabled of $Nil be noted
ITEM-6 STATUS REPORTS - AUDIT COMMITTEE MEETING - 18 JUNE 2020
MICHAEL EDGAR REPORT
The Hills Future - Community Strategic Plan
Questions & Answers – 18 June 2020 (2 pages)
COUNCILLORS QUESTIONS WITHOUT NOTICE
JUNE 2020
16 AUDIT COMMITTEE STRUCTURE GENERAL MANAGER
17 COMMUNITY REPRESENTATIVES GENERAL MANAGER
