LGA Council Audit Committee Chairperson Forum Full

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					COUNCIL AUDIT COMMITTEE
     TITLE OF
CHAIRPERSON FORUM
     PRESENTATION
            Presented by:
         Date:         29 August 2007
            Date:
         Venue:        Mercure Grosvenor Hotel
            Venue:
Local Government Association
Council Audit Committee Chairperson Forum
               29 August 2007


               Michael Kelledy
                  Partner
              Wallmans Lawyers
Establishment
• Must have an audit committee
• Duty to establish – Section 126
• Power to establish – Section 41
   – presiding member
   – determine reporting/accountability
• Relevant provisions

   – Sections 126 and 41 of the Local Government Act

   – Regulation 13A Local Government (Financial
     Management) Regulations
Membership
• determined by Council
• subject to
   – any persons except Council employees
   – not external auditor
   – minimum 3 maximum 5 members
   – at least 1 independent (relevant financial experience)
• hold office at pleasure of Council
• indemnity from civil liability
Functions
• Statutory
   – reviewing annual financial statements
   – information for review of SMPs/ABP
   – exercise of Section 130A powers
   – liaising with external auditor
   – reviewing accounting, internal control, reporting and
     other financial management systems and practices
   – functions of Section 42 subsidiary audit committee
Functions
   – recommending appointment of external auditor
   – receiving annual audit report
   – receiving a Section 130A report

• Other
   – as determined by Council
Subsidiaries
• Sections 42 (single) and 43 (regional)
• Each must have audit committee unless exempted by
  Charter
• Section 42 exemption – Council audit committee performs
  the functions
Subsidiaries
• Membership
  – between 3 and 5
  – 1 independent (i.e. not a board member) with relevant
    financial expertise
  – not include council or the subsidiary external auditor
  – can include members of constituent council
Section 126(4)(ad) of the
Local Government Act 1999

•              “if the council has exempted a subsidiary from
    the requirement to have an audit committee, the functions
        that would, apart from the exemption, have been
        performed by the subsidiary’s audit committee;”
Other Considerations
• Section 62 duties
   – abuse of information/office
• Section 73 conflict of interest
• Sections 87-89
   – notice of meetings and procedure at
• Local Government (Proceedings at Meetings) Regulations
  2000
• Sections 90 and 91 – confidentiality
• Sections 93A and 94 – Ombudsman powers
Issues Arising
• Delegations
   – advisory/recommendations
• Interaction with external auditor
• Reports to Council
• Duty to undertake statutory functions
• Reporting obligation of external auditor
Issues Arising cont.
• Power to pay
   – allowances
   – independents
   – elected members
• Terms of reference and meeting procedure
 Wallmans Lawyers
www.wallmans.com.au



                      173 Wakefield Street
                        Adelaide SA 5000
                          P: 08 8235 3000
                          F: 08 8232 0926
              ROLE OF COUNCIL AUDIT
        COMMITTEES IN SUPPORTING
         FINANCIAL SUSTAINABILITY




                                 LGA Forum
John Comrie                     29 August 2007
 LG FINANCIAL
SUSTAINABILITY?

   n   many councils operating
       expenses exceed operating
       income
   n   need to increase revenue
       and/or efficiency or else
       service standards will
       gradually decline
   n   impact exacerbated if
       response delayed
              LG FS INQUIRY
                FINDINGS

over- emphasis on managing for the present
excessive willingness to spend more on services
infrastructure spending too low
lagging asset management practices
persistence of cash accounting as a basis for reporting
and decision-making
perception by councils of being in a better position
than they really are
      FS INQUIRY PROPOSALS


establish audit committees
financial governance education and training
better focus on operating bottom line
implement long-term financial plans and asset
management plans
use debt to address asset management
(councils’ net debt levels very low)
      COUNCIL MEMBERS’ FINANCIAL
      GOVERNANCE RESPONSIBILITIES

n   establish sound financial policies & targets
n   keep efficiency and effectiveness of service
    delivery under review
n   develop and maintain long-term financial plans
n   monitor on-going financial results and
    achievement of plans
n   ensure Annual Business Plan & budget
    consistent with Strategic Management Plan
n   ensure ongoing financial sustainability
                     AUDIT
                   COMMITTEE
                  WORK PROGRAM
n   Improving Financial Sustainability

n   review current financial performance, position &
    prospects
n   make suggestions to support future financial
    sustainability, eg
    n   Support council members in their financial governance
        responsibilities
    n   Assist council to address FS Inquiry findings &
        recommendations as appropriate
           IMPROVING FINANCIAL
              SUSTAINABILITY

nFinancial   Information

nreview & suggest improvements in format of
budget and actual financial performance info to
ensure:
n   succinct, simple & with strategic focus
n based on accrual accounting information
n financial targets reported against
           IMPROVING FINANCIAL
              SUSTAINABILITY


n   Annual Business Plan / Budget

n   comment on draft annual business plan prior to
    formal consideration for adoption by council, in
    terms of consistency of proposals with strategic
    plans and financial sustainability (eg
    achievement of financial targets)
           IMPROVING FINANCIAL
              SUSTAINABILITY


n   Education and Training

n   make recommendations / presentations to
    ensure council members and executive team
    have appropriate knowledge and skills to
    support financial sustainability in their decision -
    making
          IMPROVING FINANCIAL
             SUSTAINABILITY
nLong-Term   Financial Plan

ncomment    on draft long -term financial plan,
including underpinning model and assumptions,
prior to formal consideration for adoption by
council, particularly in terms of consistency with

n   strategic management plan
n   infrastructure and asset management plan
n   financial sustainability (eg achievement of
     financial targets)
          IMPROVING FINANCIAL
             SUSTAINABILITY


n   Financial Targets

n   review / help develop council targets for local
    government endorsed Financial Indicators (see
    Financial Sustainability Information Paper 12:
    Targets for Local Government Financial
    Indicators)
           IMPROVING FINANCIAL
              SUSTAINABILITY

n   Financial Targets

n   most councils prime financial target has been to
    balance rate determination statement – it is a
    poor (even dangerous) prime target

n   maintaining or progressing towards small on
    average underlying operating surplus is
    appropriate prime target to achieve for financial
    sustainability
            IMPROVING FINANCIAL
               SUSTAINABILITY

n   Financial Policies

n   appropriateness of range and content of
    council’s financial policies and practices (eg in
    particular in regard to treasury management
    having regard to Local Government Financial
    Sustainability Information Paper 10: Debt
    Management)

     (LGA currently developing simple model treasury
     management policy with support from LG Financial
     Management Group Inc.)
                 IMPROVING
                 FINANCIAL
               SUSTAINABILITY
n   Means of Service Delivery

n   LG Act requires councils to use their resources
    efficiently

n   FS Inquiry recommended councils canvass
    alternative methods of service delivery
    including further resource-sharing
n   Audit Committee could monitor efforts re above
    or propose initiatives
              ROLE OF COUNCIL AUDIT
        COMMITTEES IN SUPPORTING
         FINANCIAL SUSTAINABILITY




                                 LGA Forum
John Comrie                     29 August 2007
LOCAL GOVERNMENT
      TITLE OF
FINANCIAL AUDITS
      PRESENTATION
            Presented by:
         Presented by: Wendy Campana & David
            Date:      Hitchcock
            Venue:
         Date:       29 August 2007
         Venue:      Mercure Grosvenor
Local Government Financial
 Heading
Audits – Discussion Paper
 Content
 •   Members of Parliament and media
     seeking similar auditing processes used
     for State Government departments and
     authorities
 •   LGA Discussion paper prepared




                           LOCAL GOVERNMENT FINANCIAL AUDITS
Background
 Heading
• Resourcing Council Services (2004)
 Content
• 9 proposals including - relevant proposals:
    o   Independent Inquiry
    o   Review of performance measurement
        mechanism
    o   Review of complaints register
    o   Amendments to the Local Government Act
        1999
    o   Good financial management/rating practices

                          LOCAL GOVERNMENT FINANCIAL AUDITS
Background
    Heading
Joint LGA/OSLGR – Financial and Administrative
Accountability Report 2005
  Content
Financial Accountability Advisory Committee
•   Financial Governance code of practice
Local Government Act Amendments - LGA Proposals
•   Audit committees
•   Long term financial and asset management plans
•   Community consultation on Annual Business Plans


                            LOCAL GOVERNMENT FINANCIAL AUDITS
Background
Heading
• LGA initiatives
• Preparation audit specification
 Content
• Discussion papers
• Model work program - Council Audit Committees
• Standards Australia / LGA Governance Standards
   Advisory Committee
    o Governance, including financial governance
    o Audit Specifications
    o Audit Committees
    o Fraud & Corruption
• Strengthening Local Government Program
    o Local Government audits

                          LOCAL GOVERNMENT FINANCIAL AUDITS
Current Audit Framework
 Heading

 Content
Local Government Act 1999
•   Preparation and audit of financial statements
•   Internal controls, risk management,
    safeguarding assets
•   Theft or corruption, Criminal Law Consolidation,
    Freedom of Information, State Records Act,
    Ombudsman Act
Appendix F1


                           LOCAL GOVERNMENT FINANCIAL AUDITS
Comparisons
 Heading
Local Government Act 1999
 Content
Public Finance and Audit Act 1987
Issues for consideration between Acts
•   Independence and rotation of auditors
•   Relevant auditing standards
•   Auditors power to obtain information
•   Reporting requirements
•   Setting of Audit fees

                             LOCAL GOVERNMENT FINANCIAL AUDITS
Comparisons
 Heading
• Approaches to Auditing interstate
 Content
    o Role of Auditor-General
•   Local Government Financial Management
    Framework - Appendix B
•   Options
•   Appendix - F2,F3, F4,




                            LOCAL GOVERNMENT FINANCIAL AUDITS
Current update
 Heading
• LGA President letter to all CEO’s, including copy
 Content
   of discussion paper
•   Dr Bob Such Bill
•   Parliamentary Economic and Finance Committee
    Local Government Audit and Oversight Report
•   Senior Executive - preliminary LGA response to
    recommendations




                           LOCAL GOVERNMENT FINANCIAL AUDITS

				
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