A G E N D A - City of Prospect

Audit Committee Monday 19 December 2016

(Presiding Member: Mr Laurie Kozlovic)

The meeting of the Audit Committee will be held in the Civic Centre, 128 Prospect Road, Prospect commencing at 4:30pm

A G E N D A

1. On Leave – Nil. 2. Apologies – Nil. 3. Confirmation of the Minutes of the Audit Committee Meeting Held on 17 October

2016 4. Presiding Member’s Report – Nil.

5. Questions With Notice – Nil. 6. Deputations – Nil.

7. Notices Of Motion – Nil. 8. Declaration by Members of Conflict of Interest

9. Introduction of External Auditor – Galpins Lead Engagement Partner, Tim Muhlhausler 10. Protocol

The Council has adopted the protocol that only those items on Committee reports reserved by members will be debated and the recommendations of all items will be adopted without further discussion.

11. Reports

Reports of the Chief Executive Officer - Nil.

Reports of the Director Corporate Services

11.1 Work Health and Safety Report – KPI Action Plan (Pages 1-7, Recommendation Page 1)

11.2 Risk Management Report (Pages 8-17, Recommendation Page 8)

11.3 Emergency Management - Business Continuity Plan Strategy (Pages 18-31, Recommendation Page 18)

11.4 Update on Information Technology Disaster Recovery Plan (Pages 32-34, Recommendation Page 32)

11.5 First Budget Review 2016-2017 (Pages 35-55, Recommendation Page 35)

11.6 2016 External Audit Balance Day Management Letter (Pages 56-59, Recommendation Page 56)

11.7 Rating Audit Health Check – Annual Review (Pages 60-76, Recommendation Page 60)

11.8 Governance Audit - Assessment Update October 2016 (Pages 77-83, Recommendation Page 77)

11.9 Audit Committee Outstanding Resolutions (Pages 84-91, Recommendation Page 84)

11.10 Audit Committee Work Program Status Report December 2016 (Pages 92-110, Recommendation Page 92)

11.11 Internal Audit Report – Infringements (Pages 111-131, Recommendation Page 111)

11.12 Review of Long Term Financial Plan (Pages 132-148, Recommendation Page 133)

12. Questions Without Notice

13. General Business

Council has resolved that an Agenda Item “General Business” be included on Council and Committee Agendas for members to raise matters of a minor nature for action by the Administration, or to call for reports.

14. General Business – Urgent Matters

Council has resolved that an Agenda Item “General Business – Urgent Matters” be included on Council and Committee Agendas for members to raise matters of a genuinely urgent nature, is not a change to Council Policy and can not wait until the next Council or Committee meeting recognising that the leave of meeting will be required for each item on each occasion.

15. Confidential Items – Nil.

16. Closure

Ginny Moon Director Corporate Services

AGENDA ITEM NO.: 11.1 ON AGENDA TO: Audit Committee on 19 December 2016 DIRECTOR: Greg Georgopoulos, Director Infrastructure Assets and

Environment REPORT AUTHOR: Jacqui Kearsley, Work Health and Safety Coordinator SUBJECT: Work Health and Safety Report – KPI Action Plan

1. EXECUTIVE SUMMARY

1.1 The Work Health and Safety (WHS) Key Performance Indicator (KPI) Audit, conducted in 2015 by the Local Government Association Workers Compensation Scheme (LGAWCS), resulted in specific Audit recommendations and a number of key actions developed in consultation with the LGAWCS. The Action Plan’s purpose remains to ensure a systemic process is in place to consider and manage risk.

1.2 All Actions have been completed within the required timeframes. This has resulted in 100% Annual Rebate Performance Bonus provided to Council for WHS.

2. RECOMMENDATION

(1) That the Audit Committee, having considered the Item 11.1 receives and notes this Report.

3. RELEVANCE TO CORE STRATEGIES / POLICY

3.1. Work Health Safety Act 2012

3.2. Council’s Work Health and Safety Action Plan.

3.2.1. Corporate WHS & Risk Management Policy & associated Procedures.

3.3. Strategy 4 – Services - Leaders of the sector providing efficient, responsive, accessible services.

4.4 Accountable and people – focused services.

3.4. The annual WHS KPI Action Plan is implemented in consultation with the LGAWCS, and ensures that Council considers and develops targeted actions to ensure legislative compliance and to monitor the overall WHS system and Programme.

3.5. In order to fulfil Council’s commitment to services, a focus on people safety is paramount to the wellbeing of staff, creating a positive culture with organisational efficiencies.

4. COMMUNITY INVOLVMENT

4.1. There is no relevant community consultation requirement.

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5. DISCUSSION

5.1. Council’s KPI Action Plan is based on the outcomes of the 2015 KPI Audit process. The KPI process is an essential component of the LGAWCS Programme, and forms an important component of Councils internal monitoring review process. The WHS Key Performance Indicator (KPI) Action plan Attachments 1-4, was created and is aligned to timeframes.

5.2. The KPI Action Plan is developed in partnership with the LGAWCS. The process considers and evaluates specific action outcomes (combined with the Claims Performance over the period) resulting in the allocation of the Annual Rebate Performance Bonus. Further, an annual Special Distribution (based on the % net Contribution paid by an individual Council) has also been provided over the last 3 years.

5.3. The following (LGAWCS) financial incentives have been provided to Council over the last 3 financial periods:

2014 2015 2016

REBATE PERFROMANCE BONUS

$ 80,994

$ 79,092

$ 103 622

SPECIAL DISTIBUTION

$ 19,641 $ 14,902 $ 10,099 **

TOTAL $ 100,635 $ 93,994 $ 113,721

** The Special Distribution amount allocated to a Council is dependant entirely on the overall total being redistributed by the LGAWCS. This total amount for 2016 has decreased to $1m for distribution across the sector.

5.4. The Bonus Rebate and Special Distribution are provided to Council as separate stand-alone amounts for work undertaken in the previous 12 month period. A Special Distribution is not a guaranteed incentive and will depend entirely on the financial position of the LGAWCS at the end of a defined period.

5.5. Council has now achieved 100% (WHS) bonus, arising from the implementation WHS Action Plan Programme and recommendations from LGAWCS. The allocation of a 100% score is based on the systematic “close out” of (programmed) specific actions over the last 12 months. The LGAWCS will constantly review the Action Planning process and response.

5.6. The next proposed KPI Audit will not take place until October 2017 to accommodate Return to Work evaluations, taking place across Local Government, early 2017.

5.7. Priorities arising from the KPI Action Plan have continued to be:

5.7.1. Systematic (and continual) review of specific WHS (workplace) Procedures and Training Needs Analysis (TNA) to ensure skills and qualifications are maintained and refined across the organisation;

5.7.2. Review of Hazard Management process & profile, including updating the (hazard) Risk Register;

5.7.3. Tailored Implementation Programme (TIP) for workshops on emergency (workplace) management, task risk assessments and assistance in developing Training Plans;

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5.7.4. Evaluation of the Contractor Management procedure (WHS responsibilities), as part of the overarching Contract Management System (CMS) is currently in progress with a number of processes being reviewed.

5.8. Contractor Management Procedure (WHS) & associated system – review process:

REQUIRED ACTION TIMEFRAME

Consultation & Review of Contractor Management Procedure September 2016

Allocation of a Tailored Implementation Programme (TIP) which will specifically:

Undertake an education process for all relevant staff; Consider the current system in line with legislative

responsibilities and auditing requirements; Ensure that the Hazard Profile relating to Contractors is

developed.

November 2016

Review of the Pre-Qualified Register to ensure consistency and alignment to procurement requirements

September 2016

Review of Forms (WHS based) when contracting with third parties

September 2016

5.9. The KPI Audit Action Plan has a defined programme to ensure general compliance with the Performance Standards for Self Insurers (Local Government) and the WHS Legislation.

ATTACHMENTS

Attachments 1- 4: 2016 Summarised KPI Action Plan

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Standard Sub-Element Description Actions Completion Date Status

Review and Consult on Hot Work Procedure 29/02/2016 Completed

Implement Hot Work Permit 31/05/2016 Completed

Review and Consult on Plant Procedure 31/03/2016 Completed

Train key staff on Plant Procedure 11/04/2016 Completed

Review and Consult on Contractor Management Procedure 30/09/2016 Completed

Train key staff on Contractor Management Procedure 21/10/2016 Completed

Review and Consult on First Aid Procedure 30/04/2016 Completed

Train key staff on First Aid Procedure 31/05/2016 Completed

Review and Consult on Prevention of Falls Procedure 31/05/2016 Completed

Train key staff on Prevention of Falls Procedure 30/06/2016 Completed

Review and Consult on Isolation, Lock Out, Tag Out Procedure 30/06/2016 Completed

Train key staff on Isolation, Lock Out, Tag Out Procedure 31/07/2016 Completed

Train Key staff on Confined Spaces Register 31/08/2016Completed

Review and Consult on Workzone Traffic Management Procedure 31/07/2016 Completed

Train key staff on Workzone Traffic Management Procedure 30/09/2016 Completed

Review and Consult on Remote/Isolated Work Procedure31/08/2016 Completed

Train key staff on Remote/Isolated Work Procedure 11/10/2016 Completed

Local Government Association Workers Compensation Scheme KPI Audit ‐ 2016 ‐ Action Plan

1.2.1 The organisation must have supporting policies and/or procedures that show evidence of

policies and/or procedures to support the policy statement. Attachment

Attachment 14


Review and Consult on Asbestos Management Procedure 30/09/2016 Completed

Train key staff on Asbestos Management Procedure 18/10/2016 Completed

Review how legislative change is received, reviewed and disseminated throughout council

30/06/2016 Completed

Document how this process occurs in the WHS system 30/06/2016 Completed

Train key staff on this process 30/06/2016 Completed

Identify Elected Members training requirements 31/03/2016 Completed

Include identified Elected Members training in the TNA 31/03/2016 Completed

Train Elected Members in identified training as per the training plan 15/10/2016 Completed

Record mandated training in the training register. 20/01/2016 Completed

Include training attendance and non-attendance to ELT and relevant Managers


Volunteer training as per 3.8.6 Completed

3.3.1 The organisation must ensure defined responsibilities are communicated to relevant employees.

Review increasing levels of WHS responsibilities, accountabilities and KPI's for positions (i.e. Team Leader, Manager, Director, CEO) in Councils PD's


3.3.2 The organisation must ensure accountability mechanisms are being used when relevant.

Review increasing levels of WHS responsibilities, accountabilities and KPI's for positions (i.e. Team Leader, Manager, Director, CEO) in Councils PD's as per 3.3.1

Completed

Review Hazard Register with regard to prioritisation in order from High to Low


Identify High Risk Construction Work Activities and record in Hazard Register


Review Plant Register and undertake high risk priority risk assessments


Review Chemical Register Completed

2.1.1 The organisation’s system must ensure legislative compliance is addressed as part of the system, where relevant.Performance Standards glossary; Legislative compliance: Meeting the prescribed requirements of prevailing legislation.

The organisation must ensure a hazard management process that includes identification, evaluation and control is in place.

The organisation must ensure a relevant training program (in this context program means documented process including policies, procedures, TNA, schedule, records, etc.) is being implemented. Performance Standards glossary; Relevant: Connected with the matter in hand; pertinent (e.g., legislative requirements &/or other identified needs of the organisation). Program: A planned component of an organisation’s business management system for health, safety, rehabilitation and claims management.Program: A planned component of an organisation’s business management system for health, safety, rehabilitation and claims

3.2.1

3.8.1

Attachment

Attachment 25


Chemical Risk Assessments Completed

Complete Task Risk Assessments for High Risk (Six Identified) 31/07/2016 Completed

Complete Task Risk Assessments for Medium Risk (Four Identified) 30/09/2016 Completed

Review SOP's for Men's Shed 30/11/2015 Completed

Review SOP's for High Risk Equipment 30/09/2016 Completed

Review SWP's for High Risk Tasks 30/09/2016 Completed

Train key staff on medium Task Risk Assessments 25/10/2016 Completed

Train key staff on reviewed SOP's/SWP's 25/10/2016 Completed

Train key staff on SWI's25/10/2016 Completed

Review and consult on Contractor Management Procedure as per 1.2.1

30/04/2016. Date changed to 30/09/2016 Completed

Train key staff in Contractor Management 30/04/2016. Date changed to 08/11/2016 Completed

Review Contractor site induction process 30/04/2016. Date changed to 30/09/2016 Completed

Check that the review of Contractor Management documentation is occurring.

30/04/2016. Date changed to 30/09/2016 Completed

Conduct Volunteer induction for Volunteers who were engaged prior to 2012 on the New WHS Legislation


4.2.1 The organisation must ensure programmed internal audits are performed objectively by competent personnel to ensure performance of systems and programs and employees directly affected by the results, or their representatives, are consulted.

Internal Audits is parked due to work on Standards 1, 2 and 3. Parked Parked

3.8.6 The organisation must ensure program(s) in the context programs means policies and procedures are in place to meet the organisations duty of care for all persons in the workplace.

Attachment

Attachment 36


5.1.1 The organisation must ensure it reviews the scope and content of the policy statement and supporting policies and procedures in consultation with employees or their representatives to ensure continued suitability and effectiveness.

Conduct annual WHS Management System review with Executive Leadership Team include any review of Policies and Procedures that have occurred throughout the year.

31/4/2105 Completed

Attachment

Attachment 47


Environment REPORT AUTHOR: Victor Di Maria, Risk Management Officer SUBJECT: Risk Management Report


1.1 The objective of the annual Local Government Association Mutual Liability Scheme (LGAMLS) Risk Management Profile Review (“the Review”) is to profile and assess Council’s established risk, legislative and compliance protocols and to develop a tailored Action Plan, in partnership with Council.

1.2 The LGA’s Self-Insured Schemes, encompassing the LGA Mutual Liability Scheme (MLS), LGA Workers Compensation Scheme (WCS) and the LG Asset Mutual Fund (AMF), provide Incentives for the Local Government industry. The allocation of Special Distributions, dependant on the financial position of each Scheme in a defined period, are provided annually. Special Distributions totalling $ 63,419 have been provided to Council in October.

1.3 Council has been recognised with Certificates of Recognition in the 2016 LGRS Awards Programme.

2. RECOMMENDATION

(1) That the Audit Committee, having considered the item 11.2, receives and notes the Risk Management Report.


3.1 Local Government Act 1999

3.2 WHS Act 2012

3.3 Corporate Risk Management Policy & Framework

3.4 Strategy 4: Services – Leaders of the sector providing efficient, responsive, accessible services.

4.4 Accountable and people-focussed services

3.5 The annual Risk Management Review Action Plan is developed and implemented in partnership with the LGA Mutual Liability Scheme (“the LGAMLS”), and ensures that Council considers and develops targeted actions to ensure compliance with established legislation and/or best practice.

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3.6 The application of risk management as an integral component of decision making will provide efficiencies and assurance that Council considers relevant impacts to established Objectives.

4. COMMUNITY INVOLVEMENT

4.1 There is no relevant community consultation requirement.

5. DISCUSSION

RM PROFILE REVIEW ACTION PLAN

5.1 As part of the Review process, a Data & Profile Report (September 2016) has been provided by the LGAMLS, with a number of key recommended actions to be considered. In partnership with the Council, the Risk Management Review Action Plan (attached) was developed with completion timeframes of mid-2017.

5.2 The annual Review outcomes, combined with the (liability) Claims performance of the Council, will make up the financial components of the annual Performance Bonus allocation, provided as a “discount” to the Gross Contribution each financial period.

5.3 The following (LGAMLS) performance based discounts have been provided to Council over the last 3 financial periods:

2014/15

2015/16

2016/17

PERFORMANCE BONUS ALLOCATION (MLS)

$ 15,756

$ 16,119

$ 22,895

5.4 The discount provided for 2016/17 period increased by 42% on the previous year and resulted in a reduction paid in the net Contribution of approximately 2.9%.

5.5 The Council’s Risk Management Action Plan has been developed (September 2016) to complement the requirements of the 2016 WHS KPI Action Plan and is provided in Attachments 1-5.

5.6 Key priorities arising from the RM Action Plan have included:

REQUIRED ACTION TIME FRAME

Review of the Corporate Risk Management Policy

Endorsement at Audit Committee and Council

April/May 2016

October 2016

Development of Risk Action Plan, in partnership with LGAMLS arising from results of the RM Profile Review

July/August 2016

Restructuring Council’s Risk Management Framework, including restructuring the assessment protocols and update of the Risk Management Register

Endorsement at Audit Committee and Council

May – Sept 2016

October 2016

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Strategic Risk Management Workshop with ELT/LT

Assessment process & allocation of strategic risks to Risk Register

September 2016

Nov-Dec 2016

Establish formal Reporting process to ELT/Audit Committee/Council October 2016

5.7 The Risk Management Action Plan will be reviewed mid December 2016 with the LGAMLS, to ensure that the programme of actions is scheduled and maintained. The tailored Action Plan is utilised as documented proof that Council is committed to applying prudent risk management to its functions and services.

LGRS SPECIAL DISTRIBUTIONS 2016/17

5.8 The Boards of the self-insured Schemes, in line with internal Surplus Policy requirements, will determine if a Special Distribution will be allocated at the end of a financial period. Special Distributions are provided to the entire (Council) industry and are allocated based on a Council’s net percentage paid in contributions.

5.9 For the 2016/17 period, LGRS have delivered a total Special Distribution of $5.75M (LGAMLS total $3M, LGAWCS total $1M & LGAAMF total $1.75M).

5.10 The total amount provided to City of Prospect is $ 63,419. The table below provides individual amounts provided by each Scheme:

LGAMLS LGAWCS LGAAMF

$ 39,749 $ 10,099 $ 13,571

5.11 As with previous Special Distributions, the “unbudgeted” incentive is provided to Councils on a general basis that the funds are invested back to nurturing risk and WHS processes and systems. The Council will consider the most appropriate (risk) initiative that would apply from a liability, asset and/or WHS perspective.

LGRS RISK AWARDS PROGRAMME

5.12 City of Prospect submitted to 2 nominations for the LGAWCS Award Programme. The Council has been recognised and was provided with 2 Certificates of Recognition. The nominations were:

o Inclusion of Elected Members into Council’s Training Needs Analysis;

o A modern and effective method to Sign In.

The Certificates are provided in Attachments 6-7.

ATTACHMENTS

Attachments 1-5: A Summarised 2016 (Council) Risk Management Action Plan

Attachments 6-7: LGRS Awards & Certificates of Recognition

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RISK MANAGEMENT (REVIEW) ACTION PLAN CITY OF PROSPECT OBJECTIVES

Priority Objectives

Reputation & Integrity - Category 1

Strategic Risk & Governance – Category 2

Emergency Management – Category 7

Use by other parties – facilities/land – Category 10

All Actions relate to the direct comments provided during the RM (Profile) Review.

Actions are developed in consultation with the LGAMLS.

Attachment

Attachment 1

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Reputation and Integrity

Question Comments/Recommendations Action to be Undertaken Date

1.1 Has your Council completed a Risk Assessment process, identifying Strategic Risks, in your Strategic Management Plan?

Council has a Strategic Plan (to end of 2016) and is now in the process of developing/endorsing a new Plan. Draft Plan is in the consultation phase (June 2016).

Document/Systems in place from risk management perspective:

Corporate Risk Management Policy. Corporate Risk Management Policy (Draft) – to be

endorsed by Council in 2016. Corporate Risk Management Framework (Draft) –

to be endorsed at Audit Committee in 2016. Risk Register includes strategic and operational

risks. Task Risk Assessment process

(operational/WHS). Bentleys Risk Assessment Workshop (2015) –

Strategic/Operational risks – TARGETS SET. Internal/External context reviewed.

New Risk Workshops to occur in 2016 – in line with revised Framework and Strategic Plan.

a) Review Strategic Management Plan objectives – identifying risks to opportunities/objectives

b) Review Corporate RM Policy to ensure:

Risks and opportunities are associated with strategic priorities

Mitigation process

Responsibilities/Resources considered

c) Risk Management Framework

Risk Management Workshop (ELT/LT)

d) Inclusion in (strategic) Risk Register

e) Internal/External Drivers created

f) Implement process of monitoring and review of strategic risks by ELT

September 2016

May – September 2016

July – October 2016

December 2016

1.2 As the Risk Management Framework ensures a consistent approach to Risk Management practices across Council – have your Elected Members been introduced to the Framework, if so how, and was this successful?

Document/Systems in place:

Corporate Risk Management Policy. Corporate Risk Management Policy (Draft) -

endorsed by Council in 2016 (by Audit Committee & Council).

Corporate Risk Management Framework (Draft) – to be endorsed at Audit Committee in 2016.

Council endorses all (risk based) Policies. Council will be educated and inducted into the new Corporate Risk Management Policy and Framework.

a) Include awareness of Council’s risk management framework for Elected Members & Audit Committee

b) Arrange awareness in risk management principles and application of Council’s risk management framework

c) Incorporate risk management principles into strategic decision making process, (e.g. inclusion of risk management considerations in all reports to Council)

March – December 2016 Audit Reports

Sept 2016 Risk Workshop with ELT &LT

Sept – December 2016 Workshop & Framework

Attachment

Attachment 2

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Strategic Risk and Governance

Question Comments/Recommendations Action to be Undertaken Date

2.1 How would you rate the value of your Risk Management Framework in underpinning Council’s operations?

Is the framework successfully utilised across all functions and activities of Council.

Task Risk Assessments are undertaken within all Business Units (Example: Tourific Event during Tour Down Under Event – January 2016);

2015 Risk Workshop undertaken to consider impacts to Council core functions/Strategic Objectives

Draft Framework to become overarching structure for risk management system.

Other

Task Risk Assessments undertaken at Business Unit level;

Universal Risk Assessment process to be defined in new Framework;

Education process will follow introduction of Framework;

2016 (Risk) Workshops to be undertaken (Sept) – alignment with new/revised Strategic Plan.

a) Develop Risk Management framework, (including policy, procedure, templates & operational/strategic risk register which includes risk treatment plans).

b) Identify Council employees who require an understanding of the risk management framework and include on training needs analysis

c) Arrange awareness in risk management principles and application of Council’s risk management framework

July – Sept 2016

Workshop Sept 2016

Workshop Sept 2016

2.2 A Strategic Risk Management plan that aligns with the Operational Risk plan is an essential tool for Council decision-making. Do the Council agenda reports insist on a risk assessment process to inform decision makers of opportunity vs risk?

Council/Audit Reports include risk assessment and linkage to Strategic Plan. Reports focus on “impacts” to requirements and an overall target / rating.

Links to Strategic objectives are highlighted in Reports;

Formal Quarterly Reporting to Executive Leadership Team (ELT);

Reports to Leadership Team (LT) Meetings; Revised Framework identifies opportunity Vs risk.

a) Implement/conduct risk management training across all business units and identified stakeholders

b) Include links to Risk Matrix(evaluation) into Council Reports in order for a consistent risk assessment process

c) Incorporate risk management into strategic decision making process, (e.g. inclusion of risk management considerations in all reports to Council), including alignment of activities to Council’s strategic plan(s)

September 2016

Oct - December 2016

Jan – March 2017

Attachment

Attachment 3

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Emergency Management

Question Comments/Recommendation Action to be Undertaken Date

7.1 How has Council planned for major community disruption as the result of an “emergency” utilising a Business Continuity Plan (BCP) or similar.

How effective/ responsive was the BCP in supporting both the Council internally and the community.

Disaster Recovery Plan (Organisational) Deals with a “major” disruption to services

across the City; Requires the CEO to declare a disaster for

the Plan to activate; Organisational process established/IT

systems in place.

Business Continuity Plan (BCP)

Created for each Business Unit; Identifies job critical roles/functions and

persons; Includes an “Actions” list for relevant role; Current process reviewed in 2014. BCP due

for an overarching (overlay) review for the entire Council.

a) Review Business Continuity to ensure that it meets the requirements of AS 5050:2010

b) Develop Business Continuity Plan that addresses key roles and responsibilities, critical functions and recovery strategies. Align to IT Disaster Recovery Plan

c) Endorse and implement Business Continuity Plan, (including identification of training needs)

d) Schedule testing of BCP

e) Schedule regular reviews/ updates of BCP to ensure currency and relevance

f) Develop a documented review process to capture opportunities for improvement, identified through the testing or enacting of the BCP

July – Sept 2016 (review)

Nov 2016 – February 2017 (revised BCP)

Feb – March 2017 (testing & implementation)

7.2 Please rate the success of the understanding and implementation of the iResponda programme within your Council (and Region).

Council has representation on the Eastern Alliance (ZEMC)

Undertaken a number of NERAG processes. Are awaiting training that does not have

bushfire as the central component – more applicable to urban local environment.

a) Review revised EM Legislation and i-Responda policy and framework – LGA/LGAMLS

b) Identify responsibilities & training needs for all relevant employees and include on training needs analysis

c) Arrange training/awareness/ refresher training sessions for all relevant employees

d) Develop and maintain registers of plant and employees available (and willing) to participate in i-Responda programme

Nov- December 2016

Dec 2016 – February 2017

Attachment

Attachment 4

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Use by Other Parties – Facilities / Land

Question Comments/Recommendation Action to be Undertaken Date

10.1 Event Management incorporates a number of significant risks and opportunities to Council. What resources do Council use to effectively manage Event Management? What tools are used?

Example Touriffic Event/Prospect (St Helens) Fair:

o Risk Management Plan for all major events;

o Includes management of third parties; o Insurance requirements for external

traders; o Volunteer management; o Street Party – security/emergency

management.

Individual Risk assessments for functions/activity.

a) Review event management process that incorporates application and evaluation of events on Council land or facilities

b) Review and include revised risks in event risk assessment/ management checklist

c) Identify Council events, (e.g. Christmas pageants and cultural events) that may require further risk management

d) Develop event risk management plans for Council events

e) Formalise a ‘fit for purpose’ decision making process

November 2016

Nov – February 2017

10.2 Has Council recently managed a Special Event Permit, if so how did this process go – can you give an example?

Special Events (non-Council):

Due to a lack of excess green space, no exclusive use of parks and reserves is generally allowed.

One example is Rotary Men’s Health Fair (one-off) event

o Permit with Conditions o Requirement for (adequate) insurances o RM Plan required/requested o Bump in/Bump out by Rotary (in kind

support from Council)

a) Review Council’s special event application and approval processes to make sure that risks are considered and addressed prior to approval, (e.g. inclusion of insurance/indemnity requirements, special conditions, compliance with relevant legislation, (e.g. liquor licensing)

b) Develop and implement (or review) a process for notification of persons responsible for management of Council land or facility of the proposed event and checking that it is fit for purpose prior to permitting access

Dec 2016 – February 2017

March 2017

(revised format)

Attachment

Attachment 5

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Attachment

Attachment 6

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Attachment

Attachment 7

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Environment REPORT AUTHOR: Victor Di Maria, Risk Management Officer SUBJECT: Emergency Management - Business Continuity Plan Strategy


1.1 Council is the provider of a number of core and critical services for and on behalf of its residents and general community. Council is committed to ensuring that critical functions remain (reasonably) available in the event of an (emergency/interruption) event.

1.2 An effective risk management strategy to ensure continued supply of critical functions, is the development and implementation of a plan to react and cater to events causing business interruption. An external provider (LGRS) has partnered with Council to develop, design and implement a fully integrated Business Continuity Plan (BCP) that creates an overarching Plan and process to deal with any business interruptions unique to Council and one which aligns to current IT & Disaster Recovery processes.

2. RECOMMENDATION

(1) That the Audit Committee, having considered the item 11.3, receives and notes the Emergency Management – Business Continuity Plan Report.


3.1 Local Government Act 1999

3.2 WHS Act 2012

3.3 Corporate Risk Management Policy & Framework

3.4 Strategy 4: Services – Leaders of the sector providing efficient, responsive, accessible services.

4.4 Accountable and people-focussed services

3.5 An effective Business Continuity Plan (BCP) is an essential (organisational) process that considers and assesses critical functions and provides a systematic procedure ensuring reasonable continuity in the event of a significant and defined interruption.

3.6 To meet the strategic and operational objectives of Council, planning and responding to an interruption to critical services is a crucial risk based strategy, ensuring continued connectivity with the community.

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5. DISCUSSION

5.1 Council has a number of integrated protocols that will deal with significant or defined disruptions.

These include:

Disaster Recovery Plan (organisational) – for declared (major) disasters;

IT Disaster Recovery Plan (finalised in July 2016, in consultation with an external provider) to ensure critical IT systems are restored;

Individually based Business Continuity Plans within all Departments;

Established Workplace Emergency Evacuation Planning (WEEP) to ensure that Council meets its WHS obligations in the event of an internal work based emergency.

5.2 Recent reviews of current systems have concluded the following:

1. Endorsement of a number of protocols/processes that consider continuity during a major interruption and/or emergency event;

2. A comprehensive (IT based) recovery system has been established for IT disruptions, that provides integrity to processes and records;

3. The need for a comprehensive and overarching BCP that considers and incorporates current systems - to cater for all types of disruptions that could impact current core or critical services;

4. The requirement that a fully integrated BCP is designed and implemented to meet the servicing requirements of Council.

5.3 Council has a responsibility to ensure that essential systems and services are able to continue (to a reasonable and effective capacity) in the event of an emergency or specific disruption.

5.4 Council has developed and implemented plans and processes to deal with major disasters (Disaster Recovery Plan – Organisational and an IT Disaster Recovery Plan).

5.5 An overarching (and flexible) BCP must be considered to compliment current plans, with touch points across all Council operations, and include protocols to deal with any disruption, not necessarily one that has been declared a major emergency/disaster.

5.6 The annual Risk Management Profile Review, undertaken by the LGA Mutual Liability Scheme (“the LGAMLS”), noted Council’s comprehensive emergency and IT based (recovery) systems, but also advised that a holistic BCP should be designed and implemented across all structures.

5.7 To assist with the creation and implementation of the overarching BCP, Council has engaged the services of Local Government Risk Services (LGRS).

The following forms the scope of the BCP Programme to be provided between November 2016 and March 2017:

1. Identification and assessment of critical business processes and functions;

2. Business Impact Analysis workshop and evaluation;

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3. Creation of a Critical Function Sub Plan;

4. Design and formation of Council’s Overarching BCP – which will complement the Disaster Recovery Plan (IT & Organisational);

5. BCP Testing and Maintenance regime.

5.8 The BCP scope and information package is provided in Attachments 1- 11.

5.9 The BCP Programme will be delivered on the proviso that it caters to the critical functions of Council and is tailored to suit the needs of all relevant Business Units. The Programme is offered over 3 main workshops and a number of engagement/education meetings.

5.10 Following an initial (engagement) meeting with Executive Leadership Team (held mid-November), the following plan will be followed:

5.11 To measure the success of the Programme, a number of scheduled testing and validation processes will also be undertaken.

5.12 The BCP Programme is clear that it will inform the IT Disaster Recovery Plan, but will not develop a new (IT based) Plan. Hence the flexibility of the Programme to compliment current and required Plans.

5.13 The cost of structuring and delivering the BCP Programme (by LGRS) is normally $20,000, but due to the Council being a (continuing) Member of the Local Government Asset Mutual Fund a significant 37.5% discount is offered bringing the total cost to $12,500.

5.14 This Programme was funded from the funds received via the Special Distributions offered from the (Local Government) Schemes for the 2015/16 period. The cost of the Programme is therefore fully funded

ATTACHMENTS

Attachments 1- 11: Scope of BCP Programme (LGRS) – City of Prospect

20

BUSINESS CONTINUITY PLAN CITY OF PROSPECT

27 May 2016

Attachment

Attachment 1

21

TABLE OF CONTENTS LOCAL GOVERNMENT RISK SERVICES 1

BUSINESS CONTINUITY PLAN METHODOLOGY 2

DELIVERY EXPERIENCE 4

PROJECT DELIVERY 5

SCOPE OF SERVICES 6

FEE STRUCTURE 7

COUNCIL ACCEPTANCE 8

Attachment

Attachment 2

22

1 | P A G E

LOCAL GOVERNMENT RISK SERVICES

Local Government Risk Services (LGRS) was established 30 years ago to manage and service the unique risk management and insurance needs of Local Government in South Australia. Our extensive history of meeting the needs of Local Government has resulted in the evolution from our traditional insurance broking services to the establishment of very successful self insurance schemes such as the LGA Workers Compensation Scheme, LGA Mutual Liability Scheme, LG Income Protection Fund and the LGA Asset Mutual Fund.

As Local Government continues to develop in South Australia, LGRS is working with all Councils to ensure we can jointly identify opportunities to minimise risks by the introduction of proactive systems and processes in the area of risk management, claims management and insurance risk transfer. These services are available in both metropolitan and regional areas, which again reflects our commitment to service the needs of our entire local government client group.

Our services include:

Work Health and Safety

Risk Management Systems

Workplace Training

Business Continuity Programs

Workplace Emergency Management Programs/ Training

Community Group Insurance Programs

Injury Management

Risk Management Advice

Risk and Safety Audits

Income Protection Insurance

Attachment

Attachment 3

23

2 | P A G E

BUSINESS CONTINUITY PLAN METHODOLOGY

DEVELOPMENT OF BUSINESS CONTINUITY PLAN

Whilst the nature of any event that may cause business interruption can never be predicted, the strength of the analytical process used to develop the BCP lies in its flexibility. The resulting Business Continuity Program reflects this adaptability.

At the conclusion of this engagement Council will have:

1. A documented flexible Business Continuity Plan (BCP) that has been compiled using input from all relevant parties and incorporates any requirements that may be unique to your Council;

2. Supporting the Plan will be:

a documented whole of organisation “business process assessment”

3. Increased staff awareness of business continuity as it relates to their functions.

Senior Staff trained in the implementation of the program.

LGRS will guide Council through a number of key steps in the development of a business Continuity Plan and these include:

Identify and Assess Business Processes and Functions

In order to plan for an interruption event, the Council must firstly be clear on what processes & functions live within each of the individual business units/section/division. Identification of functions then allows for a detailed analysis at a whole of organisation level that enables criticality to be determined for business functions.

Conduct the Business Impact Analysis (BIA)

The BIA Is conducted on those functions identified as critical within the business process assessment. The BIA is intended to identify the impacts of the function loss on the business including penalties for non-delivery, functional interdependencies and organisational ownership. It also looks at the resources currently required to support the functions and assesses the minimum level of resources required to continue the availability. Importantly the BIA is the tool that is used to determine the Maximum Acceptable Outage (MAO).

Attachment

Attachment 4

24

3 | P A G E

Critical Function Sub Plan

The Critical Function Sub Plans identify the agreed actions that a business process owner will undertake to manage the loss through to resumption of a function once the outage has surpassed the maximum allowable outage (MAO).

Overarching Business Continuity Plan

The Overarching BCP identifies the responsibilities of key Executives, with particular emphasis on direction setting and the effective and timely communication to stakeholders. It is important to recognise that this document provides a flexible framework in which the organisation can plan for disruption of its critical functions. It does not attempt to identify and plan for every contingency or outage that could occur, it provides a flexible framework for the process owners to identify, plan and develop organisational resilience across its business processes.

Test and maintain the BCP

Testing of the overarching plan and the critical function sub plans is designed to ensure that currency in maintained within the plans and staff that have responsibility during implementation.

Key Outcome

An important element of the design of the program is the engagement that is established with staff to understand the connections between the functions of Council, and how continuity is appropriately applied to the delivery of your business activities.

Understand your

Business

Define the Must Do's

Develop Resilience

& Response Capacity

Rehearse & Practice

Maintain & Monitor

Attachment

Attachment 5

25

4 | P A G E

DELIVERY EXPERIENCE

The LGRS Business Continuity Management program is being delivered by a team that has over 20 years practical experience in the development and delivery of Continuity Management Programs. The program has been developed by continuity professionals that have long standing relationships with Local Government and is designed to specifically fit the local government industry.

The delivery team has experience in working with local governments nationally and we bring that experience to the table when facilitating the review of your continuity plan. The approach we have adopted is one that is designed to ensure it creates value by:

Being tailored to the needs of your Council;

Facilitated in a manner that encourages the development of early ownership over the plans by the organisation;

Delivered to facilitate knowledge transfer from the facilitators to your staff; and

Being a vehicle to develop continual improvement and build organisational resilience.

LGRS has a record of delivery within the Local Government sector tailoring plans to suit small Councils with just 25 staff to Councils with more than 1000 employees. References from local government clients that have engaged LGRS to facilitate and develop their Business Continuity Plans can be made available on request from the LGRS service team.

When you engage LGRS to develop your Business Continuity Plan, you are engaging

Local Government expertise to develop local government specific plans, backed up by

30 years of industry experience in South Australia.

Attachment

Attachment 6

26

5 | P A G E

PROJECT DELIVERY

The Development & Delivery process is designed to ensure that sufficient information is obtained to develop the plan(s) in an expedient manner. It is also structured to ensure that staff involved in the process are exposed to the concepts of Business Continuity Management throughout the program, as it directly relates to their work practices. This approach supports the early adoption and development of ownership of any response plans developed.

Stage Activity Deliver Participants

Meeting

One

Develop awareness, understanding and commitment of Business Continuity Management with Senior Management

Executive Briefing

Executive Team

Workshop

One

Undertake Business Process Assessment

Determine Critical & Non Critical Business Functions

Participant workshop

Manager/ Team Leaders

Workshop

Two

Conduct Business Impact Analysis for all

Critical Functions Development of critical function plans

Participant workshop

Manager/ Team Leaders

Workshop

Three

Develop overarching Business Continuity Plan

Executive workshop

Executive Team

Meeting

Two

Education of Senior Management, and other stakeholders conducted within a desktop exercise environment

Executive workshop

Executive Team

Note: Fee structure is based on the above services occurring as described. Where

additional workshops are required to complete the above they will attract additional

charges.

LGRS have the ability to tailor our program to meet the organisational structure of any Council as we understand that every Council is different. This can be discussed with our team at any stage during this process.

Attachment

Attachment 7

27

6 | P A G E

SCOPE OF SERVICES

The Scope of the Business Continuity Program is to:

Identify business functions that are critical to the business in meeting its business objectives

To develop resumption plans based the identified criticality of business functions rather than geographic location

Identify and document roles and responsibilities for key staff positions in responding to a business interruption event

To provide an opportunity for key players identified within the response plans to walk through the activation process by way of a facilitated desk top exercise

To provide a schedule for testing and validation of the Business Continuity Plan

For the purpose of this program the scope of works only relates to core functions of Council and does not include any independent business that may be occupying or leasing Council facilities.

The Business Continuity Planning process will inform the IT risk program but will not develop an IT Disaster Recovery Plan.

The Business Continuity Plan once developed becomes a strategic and operational risk planning document, which supports the objectives of the organisation’s risk management

framework.

Any variations or changes to the scope of services shall be advised in writing and

agreed to by both parties prior to implementations of any variations

Attachment

Attachment 8

28

7 | P A G E

FEE STRUCTURE

Development of Business Continuity Plan

The cost structure for the development of the Business Continuity Plan is as follows.

Development and Delivery of activities as described in the scope

$20,000 exclusive of GST this fee includes reasonable travel & expenses. It is based on the delivery of the project as described in the development and delivery process

Issue Date: 27th

May 2016

This program attracts a subsidy from the LGA Asset Mutual Fund. Please see the

payment schedule sheet for the level of subsidy to be applied

Any variations or changes to the fee structure shall be advised in writing and agreed to

by both parties prior to implementations of any variations

Attachment

Attachment 9

29

8 | P A G E

COUNCIL ACCEPTANCE

Acceptance of Business Continuity Program

City of Prospect accepts this proposal by Local Government Risk Services to deliver a documented Business Continuity Plan (BCP) as described in the Scope of Services.

Signature

Title

Date

Please sign and return this page by email to:

[email protected]

Attachment

Attachment 10

30

mailto:[email protected]

CONTACT

JOE WHITFORD Senior Risk Consultant T: 08 8235 6108 M: 0448 013 005 [email protected]

FRANK ANDREWS Manager - Risk T: 08 8235 6112 M: 0417 848 623 [email protected]

Attachment

Attachment 11

31

AGENDA ITEM NO.: 11.4 ON AGENDA TO: Audit Committee on 19 December 2016 DIRECTOR: Ginny Moon, Director Corporate Services REPORT AUTHOR: George Pajak, Manager Knowledge and Information SUBJECT: Update on Information Technology Disaster Recovery Plan


1.1 In 2014/15, City of Prospect commenced an Information Technology Disaster Recovery Project to address the concerns of the Audit Committee regarding the absence of a Disaster Recovery Plan.

1.2 In late 2015, Vintek was engaged to review the work completed to date and develop an Information Technology Disaster Recovery Plan (IT DRP).

1.3 The IT DRP discussed in this report has not been published, nor will be addressed in detail to ensure security is maintained.

1.4 The IT DRP provides steps that will be taken in the event of a disaster to restore IT functions and forms part of Council’s Business Continuity Plan.

1.5 Council’s disaster recovery solution ensures critical systems will be restored within one day.

1.6 The disaster recovery solution was implemented in July 2016.

2. RECOMMENDATION

(1) That the Audit Committee having considered Item 11.4 Update on the Information Technology Disaster Recovery Plan, receives and notes the report.


3.1 Strategy 4 – Services – Leaders of the sector providing efficient, responsive, accessible services.

4.4 Accountable and people-focused services.

3.2 An IT DRP will facilitate the restoration of IT functions in the event of a disaster and will ensure Council has access to systems to conduct their business, to assist in decision making and to meet the needs of the community, specifically the availability of on-line services.

32



5. DISCUSSION

5.1 In 2014/15, City of Tea Tree Gully commenced an Information Technology Disaster Recovery Project for City of Prospect. The IT disaster recovery solution and its implementation was not finalised at the time due to the impending transition to Council’s new IT Service Provider in August 2015.

5.2 In late 2015, Vintek was engaged to review the work completed to date and develop an Information Technology Disaster Recovery Plan (IT DRP) to ensure critical IT services can be re-established quickly and completely in the event of a disaster.

5.3 The primary objective of the IT DRP is to ensure business continuity by providing the ability to successfully recover computer services in the event of a disaster within the Council’s mandated Maximum Acceptable Outage period of one day.

The specific goals of this plan relative to an emergency include:

Detailing a course of action to follow in the event of a disaster.

Minimising confusion, errors and expense to the business.

Implementing a quick and complete recovery of services.

5.4 The secondary objectives of the IT DRP are:

Reducing risks of loss of services.

Providing ongoing protection of corporate assets.

Ensuring the continued viability of this plan.

5.5 The IT DRP outlines the critical systems that will be recovered, including email, corporate information systems and addresses the availability of internet and desktop services for key staff members. Key staff members will be able to access the disaster recovery environment from any location.

5.6 The IT DRP addresses response and recovery guidelines when a disaster is declared and the plan is enacted, including notifications to all key stakeholders, assessment of the level of IT systems degradation and recovery protocols.

5.7 Disaster recovery procedures, including the order of recovery of servers and services and contact details of key Council staff, technology providers, and key suppliers/vendors are documented.

5.8 The disaster recovery solution has been thoroughly tested over a period of weeks by Vintek and Council staff. Performing regular testing of the technical aspects of the plan can be actioned without direct interruption to Council’s operations and can be performed at any time during business hours with minimal pre-planning. Formal testing will be performed by Vintek on a regular scheduled basis.

33

5.9 Council’s disaster recovery solution has been operational since its implementation in July 2016.

ATTACHMENTS

Nil.

34

AGENDA ITEM NO.: 11.5 ON AGENDA TO: Audit Committee on 19 December 2016 DIRECTOR: Ginny Moon, Director Corporate Services REPORT AUTHOR: Chris Birch, Manager Financial Services SUBJECT: First Budget Review 2016-2017


1.1 The First Budget Review Report for 2016-2017 is provided for Council to receive feedback from the Audit Committee.

1.2 The First budget review projects an unfavourable adjustment of the Operating Result before Capital Amounts of $56,103. This results in a revised Operating Deficit before Capital Amounts of $339,727.

2. RECOMMENDATION

(1) The Audit Committee having considered item 11.5 First Budget Review 2016-2017, as being carried out in accordance with the Local Government Act 1999 S.123 and the Budget Framework Policy, receives and notes the report.



The annual budget and it’s mid year review are attuned to the process of achieving Council’s Strategic object 4.2 Sound Financial Management.

3.2 Section 123 (13) of the Local Government Act 1999 requires Council to reconsider its budget during the course of the financial year and, if necessary or appropriate, make any revisions.

3.3 Local Government (Financial Management) Regulations 2011, Regulation 9 – Review of Budgets at least twice, between 30 September and 31 May.

3.4 Budget Framework Policy.


4.1 There is no relevant community consultation requirement. Budget reviews are available to the public via Council’s website.

35

5. DISCUSSION

5.1 The First Budget Review 2016-2017 was presented to Council at its Meeting on 25 October 2016.

5.2 The full report and its attachments are provided in Attachments 1–19.

5.3 Reference to ‘Attachments’ within the First Budget Review 2016-2017 Report are all contained within Attachments 1–19.

5.4 A summary of the changes to the 2016-2017 Budget are included in Attachments 17-19.

ATTACHMENTS

Attachments 1-19: Council Report 25 October 2016 – First Budget Review for 2016-2017

36

AGENDA ITEM NO.: 19.4 TO: Council Meeting on 25 October 2016 DIRECTOR: Ginny Moon, Director Corporate Services REPORT AUTHOR: Chris Birch, Manager Financial Services SUBJECT: First Budget Review 2016-2017


1.1 The First Budget Review projects an unfavourable adjustment of the operating result before capital amounts of $56,103 from the Original Budget.

1.2 The Original Budget for 2016-2017 projected an operating deficit of $283,624.

1.3 The First Budget Review projects an unfavourable adjustment of the operating result (before capital amounts) of $56,103 from the Original Budget. This results in a revised operating deficit before capital amounts of $339,727.

1.4 Majority of the movement within the First Budget Review is items that have been previously resolved by Council and can be summarised in the following items:-

Favourable Items • LGA Workers Compensation Rebate $18,685 (#12)

Unfavourable Items • Carry forward of Capital Works from 2015-2016 $355,546 (#1,2,3,5,6,11) • Carry forward of Operating Projects from 2015-2016 $39,200 (#7,10) • Prospect Oval entry works – Clayton Homes $51,000 (#8) • Eastern Health Authority annual contribution $27,294 (#4) • Reduction in Financial Assistance Grants $9,794 (#13)

1.5 Total budget variations from the First Budget Review in 2016-2017 resulting in:-

• Unfavourable increase in operating deficit (before capital amounts) by $56,103 to an operating deficit of $339,727.

• Unfavourable increase in net deficit (after capital amounts) by $56,103 to a net deficit of $127,289.

• Unfavourable decrease in cash budget by $67,903 to a cash surplus budget of $242,402.

• Unfavourable increase of projected Net Borrowing by $431,454 to $2,815,029.

• Net increase in capital expenditure budget by $355,546 to $6,268,527.

• Net increase in operating projects by $39,200 to $3,220,589.

147

Attachment

Attachment 1

37

• Carry forward of operating project and capital expenditure of $394,746 from 2015-2015, comprising;

• Capital Expenditure $355,546 • Operating Expenditure $39,200

2. RECOMMENDATION

(1) Council approves the First Budget Review adjustments for the three month period to 30 September 2016.

(2) Council approves the revised projected operating deficit (before capital

amounts) of $339,727, a projected net deficit (total comprehensive income amounts) of $127,289, and a projected Net Borrowing position of $2,815,029.


3.1 Strategic Plan to 2020 Theme 4 – Services “Leaders of the sector providing efficient, responsive, accessible services”

Strategy 4.2 Sound Financial Management

3.2 Section 123 (13) of the Local Government Act 1999 requires Council to reconsider its budget during the course of the financial year and, if necessary or appropriate, make any revisions.

3.3 Local Government (Financial management) Regulations 2011, Regulation 9 – Review of Budgets at least twice, between 30 September and 31 May.


4.1 There is no relevant community consultation requirement. Budget reviews are available to the public via Council’s website.

5. DISCUSSION

5.1 The Original Budget for 2016-2017 projected an operating deficit of $283,624.

5.2 The First Budget Review projects an unfavourable adjustment of the operating result (before capital amounts) of $56,103 from the Original Budget. This results in a revised operating deficit before capital amounts of $339,727.

148

Attachment

Attachment 2

38

5.3 The following table is a summary of budget adjustments (that affects the operating result) presented to Council during the 2016-2017 financial year:-

Summary of Budget Review Adjustments for 2016-2017

Adopted Original Budget (Adopted 19/07/2016) ($283,624) Deficit Budget Review 1 Carry Forward from 2014-2015 ($39,200) Net Unfavourable Budget Adj ($16,903) ($339,727) Deficit

5.4 Attachments 10-12 confirm the effects of the variations on the accrual and cash

position projection for Council for the period ended 30 June 2017 as follows:

Operating Surplus/(Deficit) (before Capital

Revenue)

Refer Attachment 2

Total Comprehensive

Income – Surplus/(Deficit)

Refer Attachment 2

Capital Expenditure

Refer Attachment 7

Operating Projects

Refer Attachments

8-9

Cash Position Surplus/ (Deficit)

Refer Attachment

10 - 12

Original Budget (adopted by Council 19 July 2016)

($283,624)

($71,186)

$5,912,981

$3,181,389

$310,305

Budget Adjustments as per Budget Review 1

Unfav By

$56,103

Unfav By

$56,103

Increase in Cap Exp By

$406,546

Increase in Oper Exp By

$39,200

Unfav By

$67,903

Operating Surplus/(Deficit) (before Capital

Revenue)

Total Comprehensive

Income – Surplus/(Deficit)

Capital Expenditure

Operating Projects

Cash Position Surplus/ (Deficit)

Proposed Budget Review 1 Closing Balance

($339,727)

($127,289)

$6,319,527

$3,220,589

$242,402

Net Variation in %

Unfav By

19.78%

Unfav By

78.81%

Increase in Cap Exp By

6.88%

Increase in Op Project Exp By

1.23%

Unfav By

21.88%

149

Attachment

Attachment 3

39

5.5 In reviewing the budget, Council needs to focus on its four (4) Key Financial Sustainability Indicators as illustrated in the following table. The comparison of both the 2016-2017 Original Budget and the subsequent Budget Reviews are as follows:

2016-2017 Target

Adopted Original Budget

First Budget Review (Sep)

1 Operating Surplus/ (Deficit) $ 250k-650k ($283,624) ($339,727)

An operating deficit indicates the extent to which operating revenue is insufficient to meet all operating expenses including depreciation.

2 Operating Surplus Ratio % 2.0 – 5.0% (1.3%) (1.5%)

This ratio expresses the operating surplus (deficit) as a percentage of general and other rates, net of rebates. A negative ratio indicates the percentage of total rates insufficient to fund capital expenditure over and above the level of depreciation or does not have the ability to reduce the level of net financial liabilities.

3 Net Financing Liabilities %

10 – 50% 46%

30%*

43%

34%* The ratio indicates the extent to which net financial liabilities can be met by Council’s

total operating revenue. 4 Asset Sustainability Ratio % 100 – 120% 113% 127%

This ratio indicates whether Council is renewing or replacing existing non-financial assets at the rate of consumption (Capital Expenditure on Renewal/Optimal Level of Spend per Infrastructure Asset Management Plans)

*Amended Net Financial Liabilities Ratio excludes Secured Loan of $1.88M to North Adelaide Football Club

5.6 Analysis

5.6.1 Analysis of variations and their effect on Council’s financial position (Statement of Comprehensive Income & Cash Flow Statement) are given below under the following headings :-

A) Budget Variations affecting Operating Result as per Statement of Comprehensive Income

B) Budget Variations affecting Capital Expenditure

C) Budget Funding Summary/Cash Budget

(A) Budget Variations Affecting Operating Result as per Statement of Comprehensive Income (Attachment 2)

5.6.2 The First Budget Review projects an unfavourable operating result adjustment of $56,103. This results in a revised operating surplus before capital amounts of $339,727.

150

Attachment

Attachment 4

40

5.6.3 Significant budget variations presented in the Original Budget include (Attachments 10–12) :-

Significant Favourable Adjustments • LGA Workers Compensation Rebate $18,685 (#12)

Significant Unfavourable Adjustments • Prospect Oval entry works – Clayton Homes $51,000 (#8) • Eastern Health Authority annual contribution $27,294 (#4) • Reduction in Financial Assistance Grants $9,794 (#13)

Carry Forward Projects

Capital expenditure carry forwards • Prospect Rd Footpath Upgrade-Olive St to Gordon Rd – Contractors $156,055 • Memorial Gardens Playspace Stage 3 of 3 – Contractors $41,491 • Digital Economy Lighting and Signage $110,000 • LED Entry Signage $30,000 • Replace Core Switch $18,000 (Operating Project in 2015-2016)

Operating expenditure carry forwards • Prospect Rd Footpath Upgrade-Olive St to Gordon Rd – Contractors $20,000 • E-Services / CRM - Contractor Costs $19,200

5.6.4 Summary of Cash Budget review classifications (refer to Attachments 10-12)

Summary of Cash Budget Revision Classification Amount

Favourable/ (Unfavourable)

A Policy Change 0

B Revised Budget Estimates Approved by Council (51,000)

C Budget Savings/(Overruns) (16,903

D Internal Adjustment excluding budget overruns (inc grants, reallocation) 0

Total Adjustments (67,903)

B) Budget Variations Affecting Capital Expenditure

5.6.5 Increase in capital expenditure by $406,546 from $5,912,981 (original budget) to $6,319,527 (First Budget Review).

5.6.6 The increase in capital expenditure is due to the inclusion of the carry forward projects from 2015-2016 and addition of entry works to Prospect Oval.

151

Attachment

Attachment 5

41

C) Budget Funding Summary/Cash Budget

5.6.7 First Budget Review adjustments resulted in:-

• Unfavourable projected net borrowing of $431,424 to net borrowing of $2,815,029 ($2,383,605 Original Budget Review).

• Cash budget surplus decreased from $310,305 (First Budget Review) to a cash surplus of $242,402 (First Budget Review).

5.6.8 The First Budget Review’s Cash Flow Statement is provided in Attachment 5.

5.7 Summary of Net Variation in Statement of Comprehension Income including ALL variations - Attachment 2:-

Operating Income Amount Net Variation

Rate Revenue $29,371 Favourable

Statutory Income Nil No Change

User Charges Nil No Change

Grants, Subsidies and Contributions $4,664 Unfavourable

Investment income Nil No Change

Reimbursements 18,685 Favourable

Other Income Nil No Change

Share of Gain – Equity Accounted Council Businesses Nil No Change

Total Variation in Income $43,392 Favourable

Operating Expense Amount Net Variation

Employee Expense Nil No Change

Materials, Contracts & Other Expenses $99,495 Unfavourable

Finance Charge Nil No Change

Other – Depreciation Nil No Change

Share of Loss – Equity Accounted Council Businesses Nil No Change

Total Variation in Expense $99,495 Unfavourable

Asset disposal & fair value adjustments Nil No Change

Amounts received specifically for new or upgraded assets Nil No Change

Net Variation of Operating Result $56,103 Unfavourable

5.8 Uniform Presentation of Finances

5.8.1 Attachment 6 is the Statement of Uniform Presentation of Finances. The adjustments in the First Budget Review resulted in an increase in the net borrowing amount by approximately $431,454 to a borrowing of $2,815,029.

152

Attachment

Attachment 6

42

5.8.2 Having a net borrowing budget result means that Council does not have sufficient funds to cover operating expenses, extraordinary items and net capital investment and additional funding will need to be sourced via borrowings.

5.8.3 Council has included $3.5m in new loan borrowings in its 2016-2017 to cover this shortfall. The drawdown of the new borrowing will be deferred until such time that the funding is required.

5.9 Other Potential Adjustments

5.9.1 The First Budget Review brings to account, information and activities that have occurred since the preparation and subsequent adoption of the Original Budget.

5.9.2 At this stage, Council does not have sufficient information to make adjustment to its budget on a small number of items. These items will be monitored and adjusted where necessary in the subsequent reviews.

5.9.3 Items being monitored include:

• Depreciation of assets following revaluation of infrastructure assets in 2015-2016.

• Town of Walkerville contribution to Youth Services Shared Service.

ATTACHMENTS

Attachment 1: Financial Indicators

Attachment 2: Statement of Comprehensive Income

Attachment 3: Balance Sheet

Attachment 4: Statement of Changes in Equity

Attachment 5: Statement of Cash Flow

Attachment 6: Uniform Presentation of Finances

Attachment 7: Capital Projects Statement

Attachment 8-9: Operating Projects Statement

Attachments 10-12: Budget Variations

153

Attachment

Attachment 7

43

FINANCIAL INDICATORS 2016-2017

Target

Adopted

Original

Budget

First

Budget

Review

(BR1)

Actual

(Draft)Actual

2016-2017 2016-2017 2015-2016 2014-2015

Operating Surplus Ratio

Operating Surplus (Deficit) 2.0%-5.0% (1.3%) (1.5%) 0.5% 1.0%Operating Income

Net Financial Liabilities Ratio

Net Financial Liabilities 10%-50% 46% 43% 24% 24%Operating Income

Asset Sustainability Ratio

Net Asset Renewals 100%-120% 113% 127% 101% 115%IAMP Expenditure Requirement

(How significant is the net amount owned to others, compared with operating income?)

(By what percantage does the operating income vary from operating expenses?)

(Are assets being renewed and replaced in an optimal way?)

These Financial Indicators have been calculated in accordance with Information Paper 9 - Local Government Financial Indicators prepared as part of the LGA Financial Sustainability Program for the Local Government Association of South

Atta

chm

ent

Attachment 1 154

Attachment

Attachment 8

44

Original

Budget

2016-17

YTD Actual

as at

30 September

2016

Proposed

Revised

Budget

BR1 2016-17

End of

Financial Year

Forecast

$ $ $ $

INCOME

Rates 19,211,916 19,170,094 19,241,287 19,241,287Statutory charges 482,200 205,665 482,200 482,200User charges 223,101 41,647 223,101 223,101Grants, subsidies and contributions 1,989,298 321,997 1,984,634 1,984,634Investment income 242,790 38,547 242,790 242,790Reimbursements 170,900 143,269 189,585 189,585Other income 188,106 4,053 188,106 188,106Net gain - equity accounted Council businesses 0 0 0 0Total Income 22,508,311 19,925,271 22,551,703 22,551,703

EXPENSES

Employee Costs 7,853,946 1,853,664 7,853,946 7,853,946Materials, Contracts & Other Expenses 10,990,473 2,578,807 11,089,968 11,089,968Finance Costs 572,516 (86,185) 572,516 572,516Depreciation, amortisation & impairment 3,375,000 0 3,375,000 3,375,000Net loss - equity accounted Council businesses 0 0 0 0Total Expenses 22,791,935 4,346,286 22,891,430 22,891,430

Operating Surplus/(Deficit) (283,624) 15,578,985 (339,727) (339,727)

Asset disposal & fair value adjustments 92,438 63,182 92,438 92,438Amounts received specifically for new or upgraded assets 120,000 5,130 120,000 120,000

NET SURPLUS/(DEFICIT) transferred to Equity Statement (71,186) 15,647,297 (127,289) (127,289)

Other Comprehensive Income - - -

TOTAL COMPREHENSIVE INCOME (71,186) 15,647,297 (127,289) (127,289)

CITY OF PROSPECT

Statement of Comprehensive Income 2016-17

For the Period Ended 30 September 2016

Atta

chm

ent

Attachment 2 155

Attachment

Attachment 9

45

Original

Budget

2016-17

Proposed

Revised

Budget

BR1 2016-17

$ $

ASSETS

Current Assets

Cash and cash equivalents 4,617,277 3,765,927 Trade & Other Receivables 1,300,000 1,300,000 Financial Assets - Current Community Loans 147,344 147,344 Inventories 838 838 Total Current Assets 6,065,459 5,214,109

Non-Current Assets

Financial Assets - Non-Current Community Loans 1,749,626 1,749,626 Equity Acc Investments in Council Businesses(EHA & Waste Care) 24,183 24,183 Infrastructure, Property Plant & Equipment 143,718,254 144,073,800 Other Non-current Assets - 182,981 Total Non-Current Assets 145,492,063 146,030,590

Total Assets 151,557,522 151,244,699

LIABILITIES

Current Liabilities

Trade & Other Payables 5,755,296 5,354,086 Borrowings 1,123,440 1,123,440 Short-term Provisions 536,000 536,000 Total Current Liabilities 7,414,736 7,013,526

Non-Current Liabilities

Long-term Borrowings 9,441,337 9,441,337 Long-term Provisions 49,000 109,946 Total Non Current Liabilities 9,490,337 9,551,283

Total Liabilities 16,905,073 16,564,809

NET ASSETS 134,652,449 134,679,890

EQUITY

Accumulated Surplus 76,872,188 76,900,103 Asset Revaluation Reserve 57,533,059 57,533,059 Other Reserves 247,202 246,728 TOTAL EQUITY 134,652,449 134,679,890

Balance Sheet 2016-17

As at 30 September 2016

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Attachment 3 156

Attachment

Attachment 10

46

AssetAccumulated

SurplusRevaluation

Reserve Other Reserves Total Equity$ $ $ $

Original Budget 2015-16Balance at end of previous reporting period 76,991,853 57,533,059 231,202 134,756,114 Net Surplus / (Deficit) for Year (71,186) (71,186) Other Comprehensive Income (32,479) (32,479) Gain on revaluation of infrastructure, property, plant & equipment - - - - Transfers between reserves (16,000) 16,000 - Balance at end of period 76,872,188 57,533,059 247,202 134,652,449

Revised Budget (BR3)Balance at end of previous reporting period 76,991,853 57,533,059 246,728 134,771,640 Net Surplus / (Deficit) for Year (127,289) (127,289) Other Comprehensive Income 35,539 35,539 Gain on revaluation of infrastructure, property, plant & equipment - Transfers between reserves - - - Balance at end of period 76,900,103 57,533,059 246,728 134,679,890

CITY OF PROSPECTStatement of Changes in Equity 2016-17For the Period Ended 30 September 2016

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Attachment 4 157

Attachment

Attachment 11

47

Original

Budget

2016-17

YTD Actual

as at

30 September

2016

Proposed

Revised

Budget

BR1 2016-17

$ $ $

CASH FLOWS FROM OPERATING ACTIVITIES

Receipts

Operating Receipts 22,397,161 7,192,736 22,308,913 Investment Receipts 111,150 38,547 242,790 Payments

Operating payments to suppliers & employees (18,844,419) (10,718,654) (18,943,914) Finance payments (572,516) 86,185 (572,516) Net Cash provided by (or used in) Operating Activities 3,091,376 (3,401,186) 3,035,273

CASH FLOWS FROM INVESTMENT ACTIVITIES

Receipts

Amounts specifically for new or upgraded assets 120,000 5,130 120,000 Sale of Replaced Assets 318,000 63,182 318,000 Repayments of loans by community groups 131,640 33,100 131,640 Payments

Expenditure on Renewal/Replacement of assets (4,267,543) (111,244) (4,443,873) Expenditure on New/Upgraded assets (1,645,438) (42,561) (1,793,429) Loan To Community Groups - - -

Net Cash provided by (or used in) Investing Activities (5,343,341) (52,393) (5,667,662)

CASH FLOWS FROM FINANCING ACTIVITIES

Receipts

Proceeds from Borrowings 3,491,979 - 3,491,979 Payments

Repayments of Borrowings (798,069) (14,135) (798,069) Net Cash provided by (or used in) Financing Activities 2,693,910 (14,135) 2,693,910

Net Increase (Decrease) in cash held 441,945 (3,467,715) 61,521

CASH & CASH EQUIVALENTS AT BEGINNING OF PERIOD 4,175,332 3,704,406 3,704,406 CASH & CASH EQUIVALENTS AT END OF PERIOD 4,617,277 236,691 3,765,927

Cash Flow Statement 2016-17

For the Period Ended 30 September 2016

CITY OF PROSPECT

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Attachment 5 158

Attachment

Attachment 12

48

Original Budget

2016-17

Actual as at

30 June 2017

Proposed

Revised Budget

(BR1) 2016-17

$'000 $'000 $'000

OPERATING ACTIVITIES

Income 1 22,485 19,925 22,552Less Expenses 2 22,768 4,346 22,891

Equals Operating Surplus/(Deficit) a (284) 15,579 (340)

CAPITAL ACTIVITIES

Less Net Outlays on Existing Assets

Capital expenditure on Renewal/Replacement of Existing Assets 3 4,268 111 4,444

less Depreciation, Amortisation and Impairment Expenses 4 3,375 0 3,375

less Proceeds from Sale of Replaced Assets 5 318 63 318Net Outlays on Existing Assets b 575 48 751

Less Net Outlays on New & Upgraded Assets

Capital expenditure on New/Upgraded Assets 6 1,645 43 1,844less Amounts received specifically for New/Upgraded Assets 7 120 5 120

less Proceeds from Sale of Surplus Assets 5 0Net Outlays on New & Upgraded Assets c 1,525 37 1,724

Net Outlays on Existing, New and Upgraded

Assets2,100 85 2,475

Equals Net Lending/(Borrowing) for Financial Year

(d) = (a)-(b)-(c)d (2,384) 15,493 (2,815)

New borrowings

(Net off loan to Community Group)e 3,492 0 3,492

Less Repayment of principal on borrowings f 798 14 798

Less (Increase)/Decrease in level of cash and

investmentsg 442 (3,468) 62

Less Other h (132) 18,947 (183)

Equals Funding Transactions i 2,384 (15,493) 2,815

Add Cash brought forward from Previous Year k 0 0 52

Add Provision for LSL (non cash) l 0 0 0

Net Surplus/(Unfunded) Budget l=d+e-f+k+l 310 15,479 (69)

UNIFORM PRESENTATION OF FINANCES FOR THE PERIOD ENDED 30 JUNE 2017

CITY OF PROSPECT

Financing Transactions

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Attachment 6 159

Attachment

Attachment 13

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2016-2017 CAPITAL PROJECTS

Description

New/Upgrade

(N)

Renewal (R)

Original

Budget

2016-17

Budget

Variation

(BR1)

Budget

Review

1

2015-16

Actual to

30 September

2016

Image Management Solution N 25,000 - 25,000 - Football Parking Flip Sign Installation Program N 8,500 - 8,500 - Braund Road Bike Boulevard N - - - 3,630 Beautification Project for All Parks & Reserves N 180,000 - 180,000 1,549 Braund Road Street Lighting R 20,000 - 20,000 - Prospect Road Footpath Upgrade - Gordon to Regency R 731,193 - 731,193 640 Safe Routes to School N 35,000 - 35,000 - Driveway Upgrade Program R 108,748 - 108,748 16,873 Pedestrian Kerb Ramp R 25,850 - 25,850 - Bus Shelter Upgrades (DDA Compliance) N 12,000 - 12,000 - Road Design/Reconstruction (Capital) R 1,067,137 - 1,067,137 - Footpath Reconstruction Galway Ave(Collins-Rheims) R - - - 31 Footpath Construction - Miscellaneous R 637,636 - 637,636 19,697 Footpath Reconstruction Asquith Street R - - - 33,061 Prospect Rd Footpath - Olive St to Gordon Rd - Cap R - 156,055 156,055 1,280 Kerb and Gutter Constructions R 207,173 - 207,173 - Water Sensitive Urban Design for LATM Devices N 20,000 - 20,000 - Drainage Design/Construction N 752,938 - 752,938 - Connecting Prospect Oval to Main North Road N - 51,000 51,000 - Prospect Oval Irrigation Upgrade N 157,000 - 157,000 5,100 Upgrade of Playspace in Identified Parks R 200,000 - 200,000 29,778 Prospect Oval Retaining Wall Upgrade R 50,000 - 50,000 - Air Raid Shelter Stage One R 40,000 - 40,000 - St Helens Park Irrigation Upgrade N 163,000 - 163,000 - Council Buildings & Structures - Capital Works R 78,431 - 78,431 1,062 Galway Ave Median Strip Redevelopment Stage 1 of 3 R 100,000 - 100,000 - Fleet Management - Capital Acquisitions R 781,500 - 781,500 - Memorial Gardens Playspace Stage 3 of 3 N 240,000 41,491 281,491 9,512 Town Hall Upgrade R 22,100 - 22,100 8,353 Men's Shed Expansion N 27,000 - 27,000 - LED Signage System (Fitzroy Tce) N - 30,000 30,000 - Public Art - Capital N 25,000 - 25,000 - Library Capital Book Purchases R 111,275 - 111,275 469 Replace Core Switch R - 18,000 18,000 - PC Replacement R 86,500 - 86,500 - High Speed WiFi Social Zone Mainstreet & 3 Sites N - - - 22,770 Digital Economy - Lighting & Scope Design N - 50,000 50,000 - Digital Economy - Signage & Promotion N - 60,000 60,000 - Grand Total 5,912,981 406,546 6,319,527 153,805

CAPITAL SUMMARY

Total New / Upgrade Asset 1,645,438 232,491 1,877,929 42,561 Total Renewal Asset 4,267,543 174,055 4,441,598 111,244 Total Capital Expenditure as per Adopted Budget 5,912,981 406,546 6,319,527 153,805 At

tach

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Attachment 7 160

Attachment

Attachment 14

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2016-17 OPERATING PROJECTS

Description

Original

Budget

2016-17

Budget

Variation

(BR1)

Budget

Review

1

2016-17

Actual to

24 Sept 2016

Heritage Grant Program 10,000 - 10,000 - Development Plan Assessments (DPA) 60,000 - 60,000 - Dog Tidy Bags 28,500 - 28,500 - Animal Management Plan 800 - 800 - Community Safety Officer Weekend Overtime 25,000 - 25,000 6,429 Community Safety After Hours Temp Staff 28,500 - 28,500 4,340 Solar System Community Subsidy 10,000 - 10,000 - Environmental Initiatives 2,000 - 2,000 - Veggie Verges 4,000 - 4,000 - Street Parties 1,500 - 1,500 - Main North Central Precinct Concept Plan 200,000 - 200,000 207 Prospect Rd Footpath Upgrade - Gordon to Regency 160,000 - 160,000 - SCRamble - Safer Active Travel Project 10,000 - 10,000 - Narrow Street Traffic Management 5,000 - 5,000 - PLEC Undergrounding Prospect Road 875,000 - 875,000 478,732 Prospect Rd Footpath - Olive St to Gordon Rd - Cap - 20,000 20,000 - Increase in Footpath Maintenance 50,000 - 50,000 23,617 Local Area Traffic Management Review 30,000 - 30,000 - Street Lighting Upgrade Various Location 8,000 - 8,000 2,112 Open Space Strategy Community Engagement Stage 1 40,000 - 40,000 - Masterplan Charles Cane & George Whittle Reserves 45,000 - 45,000 3,460 Prospect Rd Precinct-Percy St & Regency Rd Gateway 45,000 - 45,000 - Green Neighbourhoods Connections & Attractions 35,000 - 35,000 - Village Heart & Surrounds Tree Project 59,500 - 59,500 - Adjustment of Planned Building Maint Allocation 58,000 - 58,000 - Prospect Oval Seating Repairs 14,000 - 14,000 - Urban Green Link Corridor 25,000 - 25,000 - White Cedar Tree Program 38,000 - 38,000 18,521 Community Waste Education Project 25,000 - 25,000 19,220 Pigeon Eradication Program 4,960 - 4,960 - Know Our Community 24,641 - 24,641 4,713 Publications - Prospect Magazine 101,000 - 101,000 14,307 Communications Strategy - Implementation Stage 1 60,000 - 60,000 - Broadview Oval Master Plan 50,000 - 50,000 - Community Support Fund 28,000 - 28,000 2,456 Town Hall Facilities (Project) 23,100 - 23,100 - Memorial Gardens Playspace 3/3 (Project) 8,000 - 8,000 - Priorities City Wide Public Art Advisory Board 25,000 - 25,000 1,978 Reconciliation Action Plan 8,000 - 8,000 1,234 Diwali Cultural Festival 7,000 - 7,000 7,700 Out of the Square Youth School Holiday Program 12,280 - 12,280 3,342 Prospect Art Collection Management 10,000 - 10,000 - Vine St Plaza Activation inc. Anime Festival 50,000 - 50,000 15,286 Club5082 New Initiatives 35,289 - 35,289 6,432 Culture Survey/Actions 7,280 - 7,280 2,500 Playwell Sport and Recreation Fair 6,500 - 6,500 - LibraryPLUS Project Management & Design 42,000 - 42,000 7,500 LibraryPLUS Consultation 25,000 - 25,000 590 Local History Digitisation 24,500 - 24,500 - Tourrific Prospect 236,812 - 236,812 16,935 Development of Strategic Plan - - - 1,680 Executive Leadership Training/Development/Planning 40,000 - 40,000 -

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Attachment 8 161

Attachment

Attachment 15

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2016-17 OPERATING PROJECTS

Description

Original

Budget

2016-17

Budget

Variation

(BR1)

Budget

Review

1

2016-17

Actual to

24 Sept 2016

Eastern Region Alliance 25,000 - 25,000 10,000 Digital Transformation Project - - - 16 Livechat for Customer Services 2,300 - 2,300 - Investigation of Costing of Service Levels 10,000 - 10,000 - Applications Roadmap 32,000 - 32,000 - Review - Internal Governance Processes 10,000 - 10,000 - Scope Design & Delivery of an Extranet 20,000 - 20,000 - Digital Transformation 15,000 - 15,000 - E-Services / CRM - 19,200 19,200 24,075 NBN Digital Hub 124,007 - 124,007 21,555 Eastside Business Enterprise Centre 7,600 - 7,600 15,100 Radio 5082 Podcast Production 30,000 - 30,000 - Prospect Food & Art Experience Trail - - - (70) Digital Economy Strategy Implementation 130,320 - 130,320 21,995 Celebrating Good Design 11,000 - 11,000 - Community Panel 10,000 - 10,000 - Prospect China Engagement Action Plan 32,000 - 32,000 267 Grand Total 3,181,389 39,200 3,220,589 736,228

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Attachment 9 162

Attachment

Attachment 16

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`

Legend: Classification of budget revision

a Policy Change

b Revised Budget Estimates Approved by Council

c Budget Overruns/Savings

d Internal Adjustment Excluding Budget Overruns (inc Grants, Reallocation)

e Operational Efficiency Gain / Productivity Saving

Operating

Surplus/(Deficit) before

Capital Revenue

Operating Surplus/

(Deficit) after Capital

Revenue

Cash Budget

Favourable/

(Unfavourable)

(Increase)/

Decrease in Capital

Exp

Capital Item Carry

Forward from 2015-16

(Increase)/

Decrease in

Operating Projects

Surplus/(Deficit) From Original Budget (Adopted 23/8/2016 Council Meeting) (283,624) (71,186) 310,305 (5,912,981) (3,181,389)

b Carry Over from 2015 - 16 : adopted 23 August 2015 Council Meeting 394,746 Favourable 394,746

Refer to item 1, 2, 3, 5, 6, 7, 10, 11

Various Budget Adjustments with alteration to bottom line (Items 1-13)

BUSINESS & INNOVATION

1 b Digital Economy - Lightling & Scope Design

Recognition of 2015/16 Carry Forward, Refer Resolution 125/16, Council Meeting 23/8/16

(10,000) Unfavourable (10,000) (10,000) 10,000

b Digital Economy - Lightling & Scope Design


(40,000) Unfavourable (40,000) (40,000) 40,000

2 b Digital Economy - Signage & Promotion


(10,000) Unfavourable (10,000) (10,000) 10,000

b Digital Economy - Signage & Promotion


(50,000) Unfavourable (50,000) (50,000) 50,000

3 b LED Signane System (Fitzroy Terrace)


(30,000) Unfavourable (30,000) (30,000) 30,000

BUSINESS & INNOVATION NET UNFAVOURABLE CASH ADJUSTMENT OF $140,000

COMMUNITY, PLANNING & COMMUNICATIONS

4 c Eastern Health Authority

Annual Contribution for 2016-17 higher than expected

(27,294) Unfavourable (27,294) (27,294) (27,294)

COMMUNITY, PLANNING & COMMUNICATIONS TOTAL NET UNFAVOURABLE CASH ADJUSTMENT OF $27,294

First Budget Review 2016-17 (For the Period Ended 30 September 2016)

Attachment

Attachment 10 163

Attachment

Attachment 17

53

`


a Policy Change





Operating


Capital Revenue

Operating Surplus/


Revenue

Cash Budget

Favourable/

(Unfavourable)

(Increase)/

Decrease in Capital

Exp

Capital Item Carry


(Increase)/

Decrease in

Operating Projects


INFRASTRUCTURE, ASSETS & ENVIRONMENT

5 b Prospect Road Footpath Upgrade - Olive Street to Gordon Road


(156,055) Unfavourable (156,055) (156,055) 156,055

6 b Memorial Gardens Playspace Stage 3 of 3


(41,491) Unfavourable (41,491) (41,491) 41,491

7 b Prospect Road Footpath Upgrade - Olive Street to Gordon Road


(20,000) Unfavourable (20,000) (20,000) (20,000) 20,000 (20,000)

8 b Connecting Prospect Oval to Main North Road by Development Calyton Church Homes site.


(51,000) Unfavourable (51,000) (51,000)

9 Braund Road Bicycle Boulevard

c Payment received from DPTI on 4/8/16 for for Braund Road Bike Boulevard 5,130 Favourable 5,130 5,130 5,130

c Tonkins invoice received 19/7/16 for Braund Road Bike Boulevard (3,630) Unfavourable (3,630) (3,630) (3,630)

INFRASTRUCTURE, ASSETS & ENVIRONMENT TOTAL NET FAVOURABLE CASH ADJUSTMENT OF $267,046

CORPORATE SERVICES

10 b E Services / CRM - Contractor costs


(19,200) Unfavourable (19,200) (19,200) (19,200) 19,200 (19,200)

11 b Replace Core Switch


(18,000) Unfavourable (18,000) (18,000) 18,000

12 c LGA Workers Compensation Scheme Rebate 2015/16 following an improved audit score 18,685 Favourable 18,685 18,685 18,685

13 c Revised Financial Assistance Grant for 2016-17, following advice from Government of SA. (9,794) Unfavourable (9,794) (9,794) (9,794)

CORPORATE SERVICES TOTAL NET UNFAVOURABLE CASH ADJUSTMENT OF $28,309Attachment

Attachment 11 164

Attachment

Attachment 18

54

`


a Policy Change





Operating


Capital Revenue

Operating Surplus/


Revenue

Cash Budget

Favourable/

(Unfavourable)

(Increase)/

Decrease in Capital

Exp

Capital Item Carry


(Increase)/

Decrease in

Operating Projects


Various Budget Adjustments with NO alteration to bottom line (Item 14)

CORPORATE SERVICES

14 c Additional NRM Levy collected to meet gazetted payment to the NRM Board 29,371 Favourable 29,371 29,371 29,371

c Additional NRM Levy to paid to Government SA to meet gazetted payment to the NRM Board (29,371) Unfavourable (29,371) (29,371) (29,371)

Budget Adjustments with alteration to bottom line - Sub Total (56,103) (56,103) (67,903) (406,546) 394,746 (39,200)

Budget Adjustments with NO alteration to bottom line - Sub Total 0 0 0 0 0 0

Net Budget Adjustments (56,103) (56,103) (67,903) (406,546) 394,746 (39,200)

(Surplus)/Deficit From First Budget Review (339,727) (127,289) 242,402 (6,319,527) 394,746 (3,220,589)

Operating Surplus/

(Deficit) before Capital

Revenue Summary

Operating Surplus/


Revenue Summary

Cash Budget

Summary

Summary of Budget Revision Classification Depreciation 0 0 0

a 0 Operating (8,609) (8,609) 386,137

b (51,000) Project (39,200) (39,200) (39,200)

c (16,903) Project Revenue (9,794) (9,794) (9,794)

d 0 Capital 1,500 1,500 (405,046)

e 0 Capital Revenue 0 0 0

(67,903) (56,103) (56,103) (67,903)

Policy Change

Revised Budget Estimates Approved by Council

Budget Overruns/Savings

Operational Efficiency Gain / Productivity Saving

Internal Adjustment excluding budget overruns (inc grants, reallocation)

Attachment

Attachment 12 165

Attachment

Attachment 19

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AGENDA ITEM NO.: 11.6 ON AGENDA TO: Audit Committee on 19 December 2016 DIRECTOR: Ginny Moon, Director Corporate Services REPORT AUTHOR: Chris Birch, Manager Financial Services SUBJECT: 2016 External Audit Balance Day Management Letter


1.1 Council’s External Auditors, Dean Newbery & Partners have completed their external audit work.

1.2 The External Audit Management Report received from the External Auditor has been included in Attachments 1-2.

1.3 Council has once again received an unqualified audit opinions on both its financial statements and internal controls.

2. RECOMMENDATION

(1) That the Audit Committee having considered item 11.6, 2016 External Audit Balance Day Management Letter receives and notes the 2016 External Audit Balance Day Management Letter from Council’s External Auditor, Dean Newbery and Partners.


3.1 Strategic Plan to 2020 Theme 4 – Services “Sound Financial Management”

The undertaking of an external audit, while required under the Local Government Act, works to provide both Council and the community with the independent review of Council’s Sound Financial Management (Strategy 4.2).



5. DISCUSSION

5.1 Council’s External Auditors, Dean Newbery & Partners have completed their external audit work.

5.2 The External Audit Management Report received from the External Auditor has been included in Attachments 1-2.

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5.3 Council has once again received an unqualified audit opinions on both its financial statements and internal controls.

5.4 This concludes the external balance day audit from 2015-2016.

5.5 As Dean Newbery and Partners contract concluded as at 30 June 2016, this also concludes the engagement of their contract.

ATTACHMENTS

Attachments 1-2: Dean Newbery & Partners – 2016 External Audit Balance Date Management Letter

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Attachment

Attachment 1

58

Attachment

Attachment 2

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AGENDA ITEM NO.: 11.7 ON AGENDA TO: Audit Committee on 19 December 2016 DIRECTOR: Ginny Moon, Director Corporate Services REPORT AUTHOR: Chris Birch, Manager Financial Services SUBJECT: Rating Audit Health Check – Annual Review


1.1 During 2015 Council undertook the following reviews of its Rating operations;

Peer review from a rates officer employee of another Council

Health Check from the software vendor Civica

Rating Health Check from KelledyJones Lawyers

1.2 The Rating Health Check from KelledyJones Lawyers is an update of the one undertaken by Wallmans in 2011. KelledyJones have outlined a number of recommendations for Council to consider in order to improve the rating operations of Council.

1.3 A copy of the report from KelledyJones Lawyers is included in Attachments 1 – 13.

1.4 The KelledyJones report was presented to the Audit Committee meeting December 2015. The Committee resolved that a 12 month update on progress be provided. This report now provides that update on the 9 recommendations.

2. RECOMMENDATION

(1) That the Audit Committee having considered Item 11.7 Rating Audit Health Check – Annual Review (as presented in Attachments 1 – 13) receive and note the report.

(2) That the Audit Committee receives the next annual review in December 2017.



As the largest source of income, rates is imperative to the Financial Sustainability of Council (Strategy 4.4). Compliance with the Local Government Act will best protect Council from challenges to this rating and subsequent income source.

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3.2 Local Government Act 1999, Chapter 10.


4.1 No community consultation was undertaken on this matter.

5. DISCUSSION

5.1 During 2015 Council has undertook the following reviews of its Rating operations;

Peer review from a rates officer employee of another Council

Health Check from the software vendor Civica

Rating Health Check from KelledyJones Lawyers

5.2 The Rating Health Check from KelledyJones Lawyers is an update of the one performed by Wallmans in 2011. KelledyJones have outlined a number of recommendations for Council to consider in order to improve the rating operations of Council.

5.3 A copy of the report from KelledyJones Lawyers is included in Attachments 1 – 13.

5.4 The purpose of the Health Check is to identify any legislative requirements relevant to rating processes and systems that are not being met.

5.5 KelledyJones highlighted 9 recommendations as a result of the Health Check. Action plans are being put in place to further improve legislative compliance. They are presented in the following paragraphs.

5.6 Recommendation 1 – The Council clearly identify and documents its policy relation to assessing objections to land use.

5.6.1 Actions Taken/Comments – the rating policy outlined in the Annual Business Plan 2016-2017 has been reviewed for currency and is to be formalised into a standalone policy prior to setting of rates for 2017.

5.7 Recommendation 2 – That the Council considers amending the information on the Rates Notice to include the discretion the Council has to determine objections to land use after the 60 day period has passed.

5.7.1 Actions Taken/Comments – The wording on the rate notices was amended during the recent redesign of Council’s rate notice for the implementation of Bpay View.

5.8 Recommendation 3 – The Council develop and utilise formal payment arrangement letters which set out clearly the terms and conditions of any payment arrangement entered into with the Council.

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5.8.1 Actions Taken/Comments – Council is looking to implement the debt collection module as part of the Civica suite of products. In order to automate the letter production step, templates have been developed with the assistance of Council’s collection agency. A number of key staff changes in this area have delayed the final stages implementation which will be completed in the new year.

5.9 Recommendation 4 – That the Council reviews and updates the existing ‘user manual’ to ensure it is up to date with current procedures and programs. Further, that the Council periodically reviews this information to ensure the Council’s practices, procedures and knowledge is not ‘lost’ due to staff turnover.

5.9.1 Actions Taken/Comments – Council staff have considerable procedures for undertaking the rates activities within the Authority software package. These have been reviewed since the latest software upgrade. In addition, Council has access to the eLearning training system provided by Civica which hosts a range of video training guides on how to use the software.

5.10 Recommendation 5 – If there are outstanding rates and the property is occupied by a tenant, the Council serve a rental order in accordance with Section 178(4) of the Act.

5.10.1 Actions Taken/Comments – This process was initiated following a long outstanding amount of Rates. While the notice was never actually served, the process for doing so was drafted. Initial investigations enable Council to make connection with the Owner who has since paid the outstanding rates. Should the situation arise again, Council staff have this step included in their procedures as an option.

5.11 Recommendation 6 – The Council ensures that it does not attempt to recover its debt collection costs outside of those pursuant to a Court Order.

5.11.1 Actions Taken/Comments – Officers are aware of their limitations on recovery of costs. This question was raised during the interview by Council staff to ensure that the rules had changed. The questioning confirmed that Council is already compliant with this recommendation. No further action required.

5.12 Recommendation 7 – The Council establishes robust guidelines for assessing any application requesting a variation to details on the Assessment Record, whether that request is received from the principal ratepayer or any other third party.

5.12.1 Actions Taken/Comments – Council’s process for the development of the assessment book remains very manual. Improvements have been made in the automation of suppressed records. Council is discussing with Civica the need for a generating report while investigating the option of an electronic register being publically available, rather than the current paper based on.

5.13 Recommendation 8 – That the Council develop the information presently contained in its Rating Strategy and Structure document to form a Rebates Policy which reflects all rebates (i.e. mandatory and discretionary) and for it to expressly identify the land that is eligible for a mandatory rebate in accordance with sections 160-165 of the Act.

5.13.1 Actions Taken/Comments – To be included as part of a formalised Rating Policy that will be presented for adoption before June 2017. Currently, Council’s rating policy is only presented in Annual Business Plan.

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5.14 Recommendation 9 – That the Council considers the publication in the Gazette of the Adoption of Valuations and Declaration of Rates include only information that is required under the Act.

5.14.1 Actions Taken/Comments – Gazette notice has traditionally been a copy of the Messenger notice. Additional information is included in the Messenger advert as a communication tool for the community. No further action to be taken.

5.15 As not all of the recommendations resulting from the Rating Health Check have been completed, it is recommended that a report update is presented to the December 2017 Audit Committee meeting.

ATTACHMENTS

Attachments 1-13: KelledyJones Lawyers – Rating Audit Health Check Final Report

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1

pros0001_150351_003.docx v10

RATING AUDIT HEALTH CHECK

CITY OF PROSPECT

REPORT

1. INTRODUCTION

1.1 The City of Prospect (“the Council”) has commissioned KelledyJones Lawyers to perform a Rating Audit Health Check. The purpose of this health check was to identify the Council’s level of compliance with legislative requirements relevant to

rating, to determine any such requirements that are not being met, and to provide any ‘best-practice’ recommendations.

1.2 The Council undertook this process in about 2011 and has determined to review its practices and procedures again to ensure the highest standard is being maintained. Further, we acknowledge that this is an opportune time for such a review as the Council’s Rating Officer is due to retire from his position at the time of writing this report.

1.3 As part of this Rating Audit Health Check, we carefully reviewed the processes the Council follows compared to the requirements of the Local Government Act 1999 (“the Act”), including any internal control mechanisms the Council employs.

1.4 The methodology adopted for this review included our attendance at the Council’s

offices in order to obtain information from the Council regarding its processes and procedures, and to interview relevant Council staff, being the Rates Officer and the Finance Manager. As mentioned above, the information obtained was then assessed against the provisions of Chapter 10 of the Act. We have undertaken a section-by-section review of Chapter 10 to assess compliance. By way of example, we have reviewed the Council’s existing relevant policies, the Annual Business Plan

and procedures relating to the application of rebates, remissions and postponement of rates, objections to land use, adoption of valuations, changes in non-rateable and rateable land and amendments to the assessment record.

Below is a list of the documents, information and examples provided to us by the Council.

We consider that the Council’s system in respect of rating practices is legislatively compliant unless we have stated otherwise in this report.

Consistent with established practice, we recommend a review of this nature be conducted once every five years, or more frequently if circumstances demand.

2. DOCUMENTS & INFORMATION PROVIDED

The Council provided to us the following material:

2.1 Report to Council regarding the Annual Business Plan and Budget dated 1 May 2015;

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2.2 Report to Council regarding Community feedback on the draft Annual Business Plan dated 23 June 2015;

2.3 Report to Council regarding the CEO Statement on Financial Sustainability regarding the Annual Business Plan dated 23 June 2015;

2.4 Report to Council regarding the Adoption of the Annual Business Plan and Declaration of Rates dated 23 June 2015;

2.5 Annual Business Plan including the 2015-16 Rating Strategy and Structure;

2.6 Example of a land use objection received by the Council, including email correspondence with complainant and screen printed information from the Rates Enquiry Authority system;

2.7 Example of a rates record where the owner is the principal ratepayer;

2.8 Example of the rates record where the ratepayer’s details are suppressed;

2.9 Copy of the Messenger Newspaper advertisement regarding the adoption of the Valuation and Declaration of Rates dated 8 July 2015;

2.10 Copy of a standard rates notice and a copy of a previous version prior to amendments;

2.11 Copy of a written request regarding the suppression of ratepayer details;

2.12 Copy of the Council’s Suppressed Names listing;

2.13 Copy of the Council’s Delegations Manual;

2.14 Copy of email correspondence outlining the terms of a payment arrangement plan for outstanding rates;

2.15 Copy of the Council’s Community Engagement and Consultation Policy;

2.16 Copy of correspondence regarding the postponement of rates for seniors;

2.17 Standard form – Application to waive rates fines and interest;

2.18 Standard form – application for customer details change;

2.19 Standard form – Direct Debit request;

2.20 Standard Form – Freedom of Information Application;

2.21 Template Statutory Declaration form;

2.22 Printed list of all the Council’s debt collection agency (NCML) claims;

2.23 Copy of tax invoice from NCML to the Council;

2.24 Copy of correspondence regarding an application to waive fines/interest;

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2.25 Copy of a request to have a name entered on to the Assessment Record;

2.26 Copy of Council Report regarding application for discretionary rebate including a copy of the application.

Following the interview with the Rates Officer and Finance Manager, the following additional documents were provided:

2.27 Copies of mandatory rebates records;

2.28 List of all non-rateable land;

2.29 Rates Officer’s “End of Year Procedures and Live Rates Generation” user

guide/checklist;

2.30 Examples of Certificate of Liabilities.

3. DISCUSSION

3.1 For the 2015/2016 financial year, the Council is, in our view, legislatively compliant with respect to the adoption of its budget following the adoption of the Annual Business Plan and the adoption of the valuations (as issued by the Valuer-General’s

Office) prior to the declaration of rates. This is confirmed by the Minutes and Agenda of the Council meeting of 23 June 2015.

3.2 We acknowledge that the Council’s consultation process and general community

engagement far exceeds the minimum standards required. The Council has been actively seeking methods to engage the community and encourage participation. The Council commenced its public consultation strategy by conducting a survey during its Tour Down Under Street Party in January. The purpose of this survey was to identify where residents would prefer to see their rates allocated as part of the budget. The results of this survey were provided to Elected Members as part of the annual budget process. The Council’s official consultation period commenced in

April 2015 for a period of 28 days. This meets the minimum 21 day requirement stipulated in section 151(7) of the Act. Advertisements were placed in both the Messenger Newspapers and The Advertiser in accordance with section 151(7). It was acknowledged that it is not standard procedure to place an advertisement in The Advertiser, however this was a one-off instance for this financial year resulting from an error on the part of the publisher. It did not come at an increased cost to the Council.

3.3 The Council received submissions online through its website and the Community Online Panel which is a survey group coordinated through the University of South Australia, as part of the consultation process and organised a public meeting and workshop to receive further submissions. One member of the public attended that public meeting and workshop. The Council also coordinated (through the services of an independent research company) a focus group of 15 randomly selected residents of various demographics. This focus group sessions ran for approximately 2 hours. This resulted in feedback to the Council by the participants. The Council also held meetings with the Resident’s Association regarding the budget. In addition, the

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Council involved local primary schools by asking them to prioritise various discretionary projects the Council proposed to implement during the financial year.

3.4 The Council adopts the valuations for both rateable and non-rateable land. This allows the Council to apply a valuation for non-rateable land in the event that it becomes rateable during a financial year, without the need for a further resolution of the Council. Currently, the Council has approximately 93 non-rateable properties on its register. The majority of these properties relate to land that is occupied or held by the Crown or by the Council. The Rates Officer stated that he was solely responsible for any change in ownership being reflected in the Assessment Record, and usually becomes aware of when a property changes from non-rateable to rateable. This process, however, relies heavily on the familiarity that the Rates Officer has with the Council’s area along with regular (i.e. monthly) reports provided by the Land Services Group in respect of transfer of ownership. It is not common for the Council to receive any notification from a real estate agent involved in a sale or other dealing with land. Consequently, therefore, some time may pass before a change in classification becomes known to the Rates Officer and the Assessment Record updated accordingly. Further, unless the Council is specifically made aware of a lease arrangement, it may not receive any notification at all.

3.5 The Council relies on the capital valuations made by the Valuer-General for its rating purposes in accordance with section 167(2) of the Act. The most recent valuations were available to the Council at the time the Council adopted its budget and these valuations were relied upon for processing rates for the financial year.

3.6 The Council’s Annual Business Plan for 2015-16 includes the Council’s rating

strategy and structure, and provides information on how the valuation of land is determined and the method the Council uses. The Council uses capital value as the basis for valuing land. It appears as though this method provides the fairest option for distributing the rate burden across all ratepayers in the Council’s area. This accords with the equity principle of taxation, being that ratepayers of similar wealth pay similar taxes and ratepayers of greater wealth pay more tax. This approach, and the Council’s deliberate application of it, is reflected in the Council’s Annual

Business Plan. The Council considers that the Valuer-General’s capital valuations

are consistent across the Council’s area and are a suitable basis for assessment.

3.7 The Council considers that the rate in the dollar should be the same for all properties, other than when it is clear that a different level of service applies to some ratepayers, or other exceptional circumstances demand variation. In the Council’s

view, this maintains the fundamental principle of equity for the community regarding the imposition of rates.

3.8 The Council formally declared its rates on 23 June 2015 and that declaration was published in the Government Gazette on 9 July 2015 in accordance with section 170 of the Act.

3.9 As reflected in the Declaration of Rates, the Council based its rating on the value of land with a differential rate imposed according to the use of the land. However, in the case of vacant land, the differential rate is based on both land use and locality.

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The Council relies upon all the categories identified in the Local Government

(General) Regulations 2013. The minutes of the Council meeting held on 23 June 2015 confirm the Council relied upon the correct land use categories in declaring its differential rates. The Declaration of Rates as published in the Government Gazette declares differential rates based on land use only. The Council minutes or Gazette notice do not identify the basis of differential rating to include both land use and locality for the purposes of vacant land.

3.10 The Council has fixed a minimum amount payable, in accordance with section 158(1) of the Act, which is $1090 for the 2015/16 Financial Year. According to the Rates Officer, the minimum amount affects approximately 21% of rateable properties in the Council’s area, which is a permissible amount pursuant to section 158(2) of the Act, being under the 35% upper limit.

3.11 In applying the minimum amount, the Council levies it against the whole of an allotment (including land that is under a separate lease or licence). In circumstances whereby land comprises less that the whole of the allotment the minimum amount is not applied. The Council will only apply one minimum amount against two or more pieces of adjoining land (whether intercepted by a road or not) if they are owned by the same owner and occupied by the same occupier, in accordance with the contiguous land requirements under section 158 of the Act. We note that the Council is cognisant of its obligations in this regard following a section 270 review previously conducted in relation to rates levied during the 2012/13 financial year in respect of a property at 274B Main North Road, Prospect. Specifically, whether rates were correctly issued against 10 separate occupancies at the property following renovations undertaken by the owner, and based on the Valuer-General’s valuations

for the property, and whether the minimum amount was correctly applied in respect of the vacant tenancies.

3.12 Pursuant to section 153(3) of the Act, the Council must determine whether it will fix a maximum increase in the general rate when it is declaring a general rate to be charged on rateable land that constitutes a ratepayer’s principal place of residence.

For the 2015/16 Financial Year the Council determined not to fix a maximum increase. The reasons for this are outlined in its Annual Business Plan.

3.13 The Council imposes a separate rate for the purpose of collecting the Natural Resources Management levy. For the 2015/16 Financial Year this amount is set at 0.009275 cents in the dollar on the capital valuation of all rateable properties. This amount applies to all ratepayers in the Council’s area.

3.14 The Council does not impose a service rate or annual service charge under section 155 of the Act.

3.15 The Rates Officer and Finance Manager acknowledge that the Council is the body responsible for dealing with objections to land use, whereas the Valuer-General’s

Officer handles objections to valuations of land. However, it was acknowledged that the Council is in the practice of referring objections to land use to the Valuer-General’s Office and simply accepting the recommendation that is provided by that office.

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3.16 The Council’s Assessment Record is collated using the Civica Authority database system, which relies on a manual collation of requisite fields by the Rates Officer. This collated data is then printed to form the hard-copy assessment record. In this regard, the Rates Officer must have a clear understanding of the requirements under section 172 of the Act for the Assessment Record to ensure necessary detail is not missing. The Council’s Assessment Record was recently reviewed as part of a

‘peer review’ conducted by another Council which identified that some required detail was omitted. This error has been corrected and the Assessment Record now contains all the relevant information as required under the Act.

3.17 Further, in respect of the Assessment Record, the Council advised that it requires any amendment to the record to be provided in writing, and the Council does have a standard form for the addition of a person’s name on the Assessment Record,

however it did acknowledge that once a request to vary the record is received in writing, the requested change will be made. There does not appear to be any robust system in place for assessing the validity of such a request or if appropriate authorities have been obtained. The Council does not make any enquiries with the applicant regarding the knowledge or consent of the principal ratepayer (if the applicant is not the principal ratepayer) to any requested change prior to making the change; it simply acts on the written request received.

3.18 The Council has a number of persons with suppressed details on the Assessment Record. Further, the Council has received a number of enquiries from ratepayers regarding the suppression of details which have not satisfied the criteria for suppression. The Council’s Rates Officer and Finance Manager recognise that the

determination in respect of suppression of details rests with the Council CEO. An initial application for suppression must be in writing and will be received by Customer Service staff. It is then forwarded to the Council Records Management officers who will engage with the Rates Officer. After the Rates Officer has reviewed the application it is forwarded to the CEO for determination. The decision of the CEO is then provided to the Rates Officer, and if the decision supports a suppression, the Rates Officer will amend the Assessment Record accordingly.

3.19 The Council understands that a person’s name or address (or both) may be suppressed depending on the circumstances giving rise to the suppression. There is no set criteria developed for the assessment of an application, but the Council acknowledged that the risk to safety of a person is the primary consideration. The Council has received requests for suppression for the purpose of preventing unsolicited contact by advertisers or real estate agents, and on each occasion such requests have been refused. Further, the Council understands that a person may have details suppressed on the Electoral Roll and that the CEO has an obligation (pursuant to section 172(5) of the Act) to suppress either the person’s residential

address or the person’s name (dependent on whether the person occupies the rateable property or not). The Rates Officer confirmed that he receives regular records from the Electoral Commission and confirmed that, if needed, clarification from the Commission will be sought as to whether any particular person has his or her details suppressed.

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3.20 The Council utilises a standard application for a mandatory or discretionary rebate. While there is no separate discretionary rebate policy, assessments of such applications are guided by the provisions of the Act, specifically section 166, and the criteria set out in section 1.13 of the Council’s Rating Strategy and Structure as

attached to the Annual Business Plan. Section 1.13 of the Rating Strategy and Structure outlines the factors that will be considered in assessing an application for discretionary rebate. Additionally, these considerations are supplemented by the experience of the staff making the assessment such as the Rates Officer or other Senior Managers. This process is triggered by the Council writing to the ratepayers in about April or May each year in order to determine whether there has been any change to their circumstances giving rise to a change to the rebate. The Council presently has five properties subject to a discretionary rebate.

3.21 The Council demands the payment of rates by its ratepayers in four equal (or approximately equal) instalments in September, December, March and June of each year. This is consistent with the provisions of section 181 of the Act. Rates notices are sent not less than 30 days and not more than 60 days before the due date of the instalment. This is consistent with the requirements of section 181(7) of the Act. The Council has not entered into any agreement to vary the period in which notice may be given pursuant to section 181(7a). A copy of the Council’s rates notice was

provided as part of the provision of documents listed above, and we have reviewed the notice against the requirements set out in the Local Government (General)

Regulations 2013. The rates notice is compliant with the regulations.

3.22 The Council is in the process of establishing electronic distribution of rates notices for those ratepayers who agree to this method, in accordance with section 181(6) of the Act. The Council has commenced trialling this option with staff who also live within the Council area. The Council recognises that there are benefits to utilising digital format when possible and, it has had a number of ratepayers express an interest in receiving notices electronically. The intent of the Council is to progress with electronic issuing of notices provided the initial trial is successful and the technology available to the Council supports such a process.

3.23 The Council does have in place procedures available for ratepayers to allow for the postponement of rates for either hardship (in accordance with section 182 of the Act) or for seniors (in accordance with section 182A of the Act). There are currently no ratepayers subject to a postponement for hardship. The Council currently has four ratepayers under a postponement for seniors. This is put in place by the submission of a standard form which requires the provision of evidence demonstrating the entitlement of the senior to the postponement. Such evidence includes the provision of the person’s seniors card number and a declaration that

the application relates to the person’s principal place of residence and that no other

person (other than a spouse) has interest in the property. Those subject to a postponement for seniors are issued with a quarterly statement outlining the total accrued postponement. A copy of such a statement was provided to us as part of the documents described at paragraph 2.13 above.

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3.24 It is the responsibility of the Rates Officer to apply the fines and interest to outstanding rates. The Rates Officer stated that he does not own property in the Council’s area. The Rates Officer and the Finance Manager acknowledged

generally that it would be inappropriate for the person responsible for applying fines and interest to rates to also own property in the Council’s area. The Rates Officer is

not responsible for the collection of payments in respect of rates. The Council’s

Customer Service staff are responsible for receipt of payments, including rates. The Council’s Finance Manager and Rates Officer stated that if a customer service officer owns property within the Council’s area, another customer service officer

must receipt payments in respect of that property. We consider that this constitutes appropriate internal controls.

3.25 The Council imposes a fine of 2% in accordance with the Act on the amount of each instalment payable and then imposes interest on the expiration of each full month from the date the instalment was due. This is consistent with section 181(8) of the Act. This process is clearly identified in the Council’s Annual Business Plan.

3.26 The Council complies with its duty of considering the remission of penalties for late payment of rates in certain circumstances. The Council outlined the internal processes it has in place which operate to allow a ‘grace period’ before fines and

interest are imposed. The Council also outlined the considerations it takes into account when assessing an application to waive fines and interest. It was noted that the Rates Officer and the Finance Manager have delegation to a set limit in respect of waiving fines and interest, before it must be determined by the CEO.

3.27 The Council has in place a minimum three-working-day ‘grace period’ as mentioned

above before fines and interest will be applied. This enables ratepayers to pay in the few days immediately following the due date without penalty. Where an amount of rates remains outstanding after the expiration of the final due date, and overdue notice is issued to the ratepayer which allows an additional two-week period for the amount to be paid (including the 2% fine). If, following the overdue notice period, the amount remains outstanding, the Council will send a letter requesting payment within 7 days. If, at the conclusion of that 7 day period, the amount has still not been paid, the matter is referred to the Council’s debt collection agency who will send a

“legal action letter” demanding payment within 7 days. If no payment is received in

this time, the Council may commence legal action to recover the outstanding amount through its debt collectors. The Council has stated that it is its practice to pursue legal action if the amount outstanding exceeds $300. For lesser amounts , it is added to the next instalment notice. This process is outlined in detail in the Council’s Annual Business Plan, as is the process regarding the sale of land for

non-payment of rates under section 184 of the Act.

3.28 The process identified above, and the process in respect of section 184 proceedings provides ratepayers with ample opportunity to pay the amount owing prior to commencing a sale process. We note that the sale of land for non-payment of rates is not a common process within the Council and the last property sold pursuant to section 184 of the Act was approximately 5 – 6 years ago. This was the result of an

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abandoned property. As such, the Council does not have a standard letter template or procedure in place for initiating and progressing this process.

The Council is in the practice of entering into payment arrangements with ratepayers in order to accommodate personal circumstances and to also ensure that rates liabilities are cleared. The Council provided us with a copy of a payment arrangement agreement that it had entered into with a ratepayer. This agreement was confirmed in writing via email, however we note that the terms and conditions were not outlined with particular clarity.

3.29 If the Council receives a request for a certificate of liabilities under section 187 of the Act, it requires that such a request be made in writing. The Council does not provide any information in this respect over the phone. The Council utilises a template certificate of liabilities which has been provided to us.

4. RECOMMENDATIONS

Recommendation 1

The Council clearly identify and document its policy in relation to assessing objections to land

use.

As mentioned in the body of the report, when the Council receives an objection to a valuation of land it refers it to the Valuer-General’s Office for determination. However, the Council is

responsible for determining the objections to land use. It appears as though the general practice of the Council relating to these two distinct objection processes is somewhat the same. The Valuer-General does not have power to deal with objections to land use, it is entirely the responsibility of the Council.

Accordingly, the Council should determine and adopt its own program of site inspections or other relevant enquires when an objection to land use is received in order for such an objection to be properly assessed by the Council as the appropriate authority.

Recommendation 2

That the Council considers amending the information on the Rates Notice to include the

discretion the Council has to determine objections to land use after the 60 day period has

passed.

The Council utilises a standard rates notice based on the template version issued by the Local Government Association. The rates notice is compliant with the requirements under the Act and Local Government (General) Regulations 2014. The “Objection to Valuation” and “Objection to

land use” sections have been included, and the objection to valuation includes reference to the

Valuer-General’s discretion to accept an objection outside of the 60 day period. There is no

equivalent reference to the Council’s ability to exercise a discretion and accept an objection to

land use outside the 60 day period. Consistent with previous recommendations of the Ombudsman, we recommend reference to this discretion be included.

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Recommendation 3

The Council develop and utilise formal payment arrangement letters which set out clearly the

terms and conditions of any payment arrangement entered into with the Council.

The example of a payment arrangement provided to us was email correspondence between the Council and a ratepayer which outlined the terms of the payment arrangement generally. Also, there does not appear to be any requirement that current and future rates liabilities are met while the arrears is being paid off. Such a term will prevent a ratepayer falling into arrears in respect of current rates.

Any payment arrangement letter should set out (at a minimum):

The duration of the payment arrangement;

The total rates liability;

The amount to be paid;

The frequency of each payment;

When (precisely) each payment is to be made;

That all current and future rates liabilities are paid on or before the due date; and

That if any of the conditions are not met, the ratepayer will be in breach of the agreement and the Council may demand the total amount in full.

Recommendation 4

That the Council reviews and updates the existing ‘user manual’ to ensure it is up to date with

current procedures and programs. Further, that the Council periodically reviews this information

to ensure the Council’s practices, procedures and knowledge is not ‘lost’ due to staff turnover.

The Council’s recently retired Rates Officer was the only person within the Council dealing with rates matters. Much of the daily practices appear to have been developed over an extended period of time working within the area (for multiple councils) and are often based on experience and familiarity. Although some of the procedures have been documented, there is a risk that some of the practices or processes have not been retained as a result of the Rates Officer’s

retirement. A ‘user manual’ has been collated over time which includes instructions on Civica programs and general guides for process required to be completed each month and year. However, a detailed review of this ‘user manual’ is required. We note that many of the instructions and guidelines have been added to (or deletions made) by the Rates Officer in the form of hand written notes, or by placing copies of relevant emails with the accompanying documents. The documents are operational in nature and will provide assistance to persons provided they are familiar with the particular programs used by the Council. However, we note that some of the guides and amendments are dated as far back as 2006 and we anticipate that the relevant program may have undergone some form of upgrade since that time. By reviewing and updating this information concerning the various processes undertaken by the Rates Officer, the transition to a new Rates Officer will be assisted by ensuring the information is accurate.

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Recommendation 5

If there are outstanding rates and the property is occupied by a tenant, the Council serve a

rental order in accordance with section 178(4) of the Act

We understand that the Council does not issue rental orders pursuant to section 178(4) of the Act based on the apparent recommendation of the Council’s collection agency. In

circumstances where there is difficulty in locating the owner, or in receiving payment from the owner, the Council may issue a rental order upon the tenant in accordance with section 178(4) of the Act. Such an order requires the tenant to pay the rental amount due under the lease to the Council rather than the owner, in satisfaction of the outstanding rates.

Recommendation 6

The Council ensures that it does not attempt to recover its debt collection costs outside of those

pursuant to a Court Order.

The question was raised as to whether the Council can recover the amount it is charged by the collection agency to issue initial letters and undertake a recovery process other than through Court. The Council cannot recover the amounts charged by the collection agency other than court costs following legal proceedings or pursuant to an order of the Court.

The Council should have in place a system which allows for the allocation of legal costs to the assessment record, only after court proceedings have taken place or if the Court makes an order for costs, being two circumstances when the Council is legally entitled to recover such costs.

The recovery of costs outlined by the Supreme Court in [2009] SASC 140 should be used as a guide for when costs can be recovered. That case establishes that costs may be recovered either:

voluntarily, by payment by the ratepayer pursuant to section 184(9) of the Act; or

compulsorily by the Council after a sale has been effected under section 184 of the Act by operation of section 184(11); or

by virtue of a Court Order or other right of recovery by Court proceedings; or

voluntarily by the ratepayer either of their own volition or pursuant to an agreement with the Council.

Recommendation 7

The Council establishes robust guidelines for assessing any application requesting a variation to

details on the Assessment Record, whether that request is received from the principal ratepayer or

any other third party.

The Council’s Assessment Record contains the information as required by section 172 of the Act. It

is collated by the Rates Officer using the Council’s electronic database. However, there is no checklist in place that is to be used when an application is made to vary the detail contained on the Assessment Record in respect of any one property. It is therefore possible for a person’s name to

be added or removed from the Assessment Record without their knowledge on the request of a

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third party. The Council does require that all such requests be made in writing, however the process does not demand the authorization or consent of the existing ratepayer , or a declaration that a person has the authority to act on behalf of the relevant party.

Guidelines should, therefore, be develop to ensure that if a request is received by a principal ratepayer to include an occupier’s name on the Assessment Record such a request is duly

authorized by the principal ratepayer, or if a request is received from another party (e.g. a real estate agent), that person has appropriate authority to request the change.

Recommendation 8

That the Council develop the information presently contained in its Rating Strategy and

Structure document to form a Rebates Policy which reflects all rebates (i.e. mandatory and

discretionary) and for it to expressly identify the land that is eligible for a mandatory rebate in

accordance with sections 160-165 of the Act.

Such a Rebate Policy will be more comprehensive than the existing Rates Strategy and Structure document and will provide greater detail for members of the public to ensure they are clear on their entitlements under the Act. Such a policy should also address:

Circumstances when the Council will exercise its discretion to increase the mandatory rebate of 75% up to 100%;

Whether a grant of a rebate is made for a period in excess of one year under section 166(1)(a), (b), (k) or (l) of the Act; and

Whether a person will be required to apply each financial year as a means of proving the ongoing need for a rate rebate.

Recommendation 9

That the Council considers the publication in the Gazette of the Adoption of Valuations and the

Declaration of Rates include only information that is required under the Act.

The publication by the Council made on 9 July 2015 includes additional information not required under the Act. For instance, the notice includes detail under the heading “Payment of Rates” and states that notice is given pursuant to section 181 of the Act. There is no requirement under section 181 for any such publication in the Government Gazette. Further the majority of the detail preceding the heading “Adoption of Valuations” is not necessary. The inclusion of this

information results in increased costs to the Council in publishing the notice.

Under the heading “Declaration of Differential General Rates”, Regulation 10(2) of the Local

Government (General) Regulations 1999 is cited. These Regulations are no longer in force. This reference should be to Regulation 14 of the Local Government (General) Regulations 2013.

In its Declaration of Differential General Rates, the Council has stated that rates vary by reference to land use, and cites section 156(1)(a) as the authority for this purpose. The Council does, however, use land use and locality for the purpose of differential rates for vacant land. Reference needs to, therefore, be made to section 156(1)(c) when making the declaration.

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Further, it does not appear the Council has a legal basis for relying upon differentiating according to locality unless the Council has previously relied upon differentiating on this basis in previous financial years and, for the 2015/2016 financial year, it is an inadvertent error. If, however, reliance on the basis of locality for vacant land is a change from previous years then public consultation under section 151(5) of the Act must be undertaken.

Yours sincerely KELLEDYJONES LAWYERS

NATASHA JONES Direct Line: 08 8113 7102 Mobile: 0419 864 531 Email: [email protected]

Attachment

Attachment 1376

AGENDA ITEM NO.: 11.8 ON AGENDA TO: Audit Committee on 19 December 2016 DIRECTOR: Ginny Moon, Director Corporate Services REPORT AUTHOR: Jo-Ann Tanti, Manager Governance & Administration SUBJECT: Governance Audit - Assessment Update October 2016


1.1 The powers conferred on Audit Committee by the Council are contained within the committee Terms of Reference. A key objective of the committee is to act as a source of advice to the Council and Chief Executive Officer, in matters facilitating audit initiatives such as the Governance Assessment Program.

1.2 The Governance Audit was undertaken in June 2015 with a progress update to the Committee in March 2016. Since the program commencement Council administration have closed out a significant proportion of compliance items, therefore progress advice is provided on an exception basis of those items that were not previously reported as having attained full compliance.

1.3 Outstanding items are planned for completion as follows: Process for changes to the Assessment Record – 30 June 2017 Prudential management policies, practices and procedures – 31 March 2017 Community Land Management Plans to be reviewed – 30 June 2017 Process for the writing off of bad debs under delegation – 30 June 2017 Employee Training and Development Program – 31 March 2017

1.4 A final report demonstrating completion of all outstanding action items is expected to

be tabled at the first Audit Committee of 2017-2018.

2. RECOMMENDATION

(1) That the Audit Committee having considered Item 11.8 Governance Audit - Assessment Update October 2016 (as presented at Attachments 1-4) receives and notes the report.


3.1 Local Government Act 1999 Local Government (Financial Management) Regulations 2011 Corporate Governance & Internal Control Framework City of Prospect Audit Committee Terms of Reference

77


Evaluating a process or set of activities and providing a transparent platform of continuous improvement; instils integrity and raises confidence in the provision of services to the community. Council strategy 4.4 accountable and people-focused services, seeks visibility and improved systems, the governance audit supports the delivery of these outcomes.

The Audit Committee is responsible for the calling of internal audits and monitoring improvement progress. The establishment of good governance principles ensures Council meets its legislative compliance as outlined within Council’s Corporate Governance Framework.


4.1 Not applicable for this item.

5. DISCUSSION

5.1 The Audit Committee Work Program 2015-2016 – Corporate Governance includes the activity, Governance Assessment Program and Continuous Improvement Plan. In June 2015 a Governance Audit was undertaken and presented to the Committee on 25 August 2015.

5.2 An improvement progress update was tabled in March 2016 outlining the main areas of attention to be:

Process for changes to the Assessment Record (Section 172, 173)

Prudential management policies, practices and procedures (Section 48)

Community Land Management Plans to be reviewed (Section 196, 199)

Process for the writing off of bad debs under delegation (Secion 143)

In addition the following three areas were either partial or non-compliant at that time:

Register of community land, includes current management plans, available for public inspection (Section 207)

Register of public roads, includes required information, available for public inspection (Section 231)

Employee Training and Development Program (Code of Conduct for Employees)

5.3 Council administration has continued to address those areas identified for improvement, reporting on an exception basis and indicating progress as provided at Attachments 1-4. The previous format known to the committee as a coloured rating system has been abandoned to allow for a more descriptive updating process.

5.4 A final report demonstrating completion of all outstanding action items is expected to be tabled at the first Audit Committee of 2017-2018.

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ATTACHMENTS

Attachments 1-4: Governance Audit - Assessment Update as at October 2016

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GOVERNANCE AUDIT – ASSESSMENT UPDATE as at October 2016

1 | P a g e

Local Government Act 1999

Section What is required Status Audit Comment Action Progress

48(aa1) Council has developed and maintained prudential management policies, practices and procedures in accordance with the section.

In Progress

Manager Financial Services confirmed the Procurement Policy references Prudential Review in section 4.3 – but there is no further detail in the policy.

Procurement Framework to be considered at December 2016 meeting; Drafting of the Prudential Policy has commenced, expected for Committee consideration by March 2017.

143(2) Bad debts are not written off unless the Chief Executive Officer has made the certification required under this subsection

No Progress

Manager Financial Services advises that a Memo is provided to the CEO seeking the write-off. The writing off process does not specifically show that such a certification has been made.

Bad debts are written off under limited delegation, it is proposed to review the process for inclusion in policy and documented process. Expected completion 30 June 2017.

172(1) The Assessment Record is kept by the Chief Executive Officer in accordance with the subsection

Complete Extract sighted did not include rateable value (but did include valuation number) or land use. Clarification is required on whether land use is actually is recorded in another designation.

The assessment record includes rateable value and a land use code. A key to the land use coding is displayed with the hard record for public viewing.

172(2) The Chief Executive Officer has determined the manner and form for an occupier of land to make an application under this subsection

In Progress

No standardised process in place

Existing process includes the completion of an advice with supporting documents; further work is expected on the handling of this information. Expected completion by 30 April 2017.

173(2) The Chief Executive Officer has determined the manner and form for application to alter the assessment record

In Progress


Current process includes receipt of a request in writing, either via email or by completion of a form. A formal procedure is under

Attachment

Attachment 1

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2 | P a g e


development. Expected completion by 30 April 2017.

173(5) The Council has determined a procedure for the review of decisions under this section

No Progress


On completion of the forms and process to be undertaken for an application of change to the Assessment Record, a procedure for review of the decision will be progressed. Expected completion by 30 June 2017.

196(1), (7)

Council has prepared and adopted management plans for its community land where required by the section

In Progress

Plans are very old Draft management plans are programmed for Council Workshop in early 2017.

196(3), (5)

The Council’s management plans meet the requirements of this subsection

In Progress

Due to the age of the plans, there is little obvious alignment between the plans and other Council plans and policies

Draft management plans will be tabled at Council for public consultation, expected by 31 March 2017.

199 Community land is managed in accordance with any management plan for the relevant land

In Progress

It appears that land is largely managed in accordance with the plans with respect to leases and licences, but the plans are old and there are now other plans and policies affecting land management

Proceeding public consultation and dependent on feedback received; the draft plans will either go to another workshop or council for adoption. Expected completion 30 June 2017.

207(2) The register contains the information set out in this subsection

Complete An Excel spreadsheet was provided as the Register. This did not have attached the Management Plans as required by the Regulations. A separate Excel spreadsheet contains details of leases/licences

Current land management plans and details of leasing are linked to the register of community land. Detail provided as regulated.

Attachment

Attachment 2

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3 | P a g e


207(3) The register is available for inspection (without charge) by the public at the principal office of the Council during ordinary office hours

Complete Few documents are held at the front counter and there is no process in place for ready access

The register has been provided as a hard version to customer service for public viewing.

207(4) An extract of the register is available for purchase on payment of a fee fixed by the Council


The register has been captured in a soft form to able an extract for purchase.

231(2) The register contains the information required by this subsection

Complete Register was not sighted and this could not be confirmed

Public Roads data is provided in the regulated form.

231(3) The register is available for inspection (without charge) by the public at the principal office of the Council during ordinary office hours


The register has been provided as a hard version to customer service for public viewing.

231(4) An extract of the register is available for purchase on payment of a fee fixed by the Council


The register has been captured in a soft form to able an extract for purchase.

Attachment

Attachment 3

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4 | P a g e

Local Government (Procedures at Meetings) Regulations 2013

Regulation What is required Status Audit Comment City of Prospect Comment

6(1) Council has adopted a code of practice for varied meeting procedures that has been passed by a two-thirds majority

In Progress

Council has adopted a Code of Practice (25/11/14) but it has not been documented that it was passed by two-thirds majority

Code of Practice – Meeting Procedures review programmed for Council Workshop December 2016. Expected completion 31 March 2017.

Code of Conduct for Council Employees

Clause What is required Status Audit Comment City of Prospect Comment

1 Council has provided training and education opportunities to assist employees to meet their responsibilities under the Local Government Act

In Progress No standardised approach, although this is under development. Relies on individual discussions between staff and Managers.

2017 Development Plans in progress, identify essential & desirable qualifications & skills, advance training needs resourcing through budget process. Expected completion 31 March 2017.

Attachment

Attachment 4

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AGENDA ITEM NO.: 11.9 ON AGENDA TO: Audit Committee on 19 December 2016 DIRECTOR: Ginny Moon, Director Corporate Services REPORT AUTHOR: Ginny Moon, Director Corporate Services SUBJECT: Audit Committee Outstanding Resolutions


1.1 The Audit Committee Outstanding Resolutions are provided for noting.

2. RECOMMENDATION

(1) Council notes the Audit Committee Outstanding Resolutions Report and associated scheduled action items for the period ending 19 December 2016.



4.2 Sound Financial Management.


By recording, checking the progress and actively programing activities, provide an accountability to ensure that Council’s decisions are carried out accordingly.

Many of the activities of the resolutions lead to improved financial management and financial practices, which will also satisfy Strategy 4.4 Accountable and people-focused services.



5. DISCUSSION

5.1 The following table contains Audit Committee Outstanding Resolutions and a tentative date for actioning.

5.2 The associated scheduled action items have been aligned with the Audit Committee Work Program September 2015 – December 2016.

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Audit Committee Minutes (Outstanding Resolutions) AC

Meeting Agenda

Item Resolution Status Comments

03/12/2012 10.5 Community Engagement and

Consultation Policy

(2) The Audit Committee recommends consideration is given to using the on-line community panel to provide comparable analysis to the McGregor Tan Biennial Resident Satisfaction Survey.

(3) An annual report be provided to evidence compliance with the Community Engagement and Consultation Policy.

Refer AC Work

Program Oct 2016 – Sep 2018

& Resolution 22/08/16 Item 10.3

#OpSrv9

Noted

Per Internal Audit Plan June 2016

Scheduled for

2017

14/10/2013 10.9 Service Delivery/Customer Service Review

(1) A further report be tabled at a future Audit Committee meeting to consider and make recommendations to Council.

Refer AC Work


#OpSrv12

Service Std Review to be conducted in 2016/2017

pending adoption of

New Strategic Plan.

Scheduled for

May 2017 17/03/2014 10.11 Business Continuity, Disaster

Recovery and Emergency Management Planning

(1) The Audit Committee to be presented progressively the various documents making up the Emergency Management. Framework.

Refer AC Work

Program Sep 2015 – Oct 2016 # G.BCP1

Scheduled for December

2016

Delayed to coincide with finalisation of IT DRP and

BCP exercise

18/08/2014 10.7 Review Accounting Policies & Procedures Manual (1) Audit Committee request for a

review of the Procurement Policy and Procedures and the relationship to the Accounting Policy and

Refer AC Work


Scheduled

for March 2017 pending Council

Workshop in October 2016

85


Meeting Agenda


Procedures Manual, including:

a) Preferred vendors list. b) Process for approving new

vendors. c) Ensuring vendor insurances

are sufficient and current. d) Review of non active

vendors. e) Appropriate segregation of

duties for establishing new vendors.

#F.POL1 Review Policies

(1) Procurement

Policy (in conjunction with Internal

Audit of Procurement

and Tender by Bentley)

(To Council Workshop

before resubmitting the report to

the AC)

(2) Budget Framework

adopted March 2017

Also Refer 16/05/2016 Item 10.2

15/12/2014 10.1 Information Technology Managed

Service Review – Bentleys Final Report (2) A clear Information and

Communication Technology Strategy be developed that documents the appropriate service delivery environment for City of Prospect for the next 5 years.

Refer AC Work


#G.IT2

Scheduled December

2016

Referencing to Council’s Strategic Direction

(community consultation in

2016).

86


Meeting Agenda


17/08/2015 10.5 Risk Assessment Report (5) Council adopts the 2 Year Audit

Plan and provide appropriate resources in each budget cycle for the audits.

2 Year Audit

Plan included in AC Work Program

Sep 2015 – Oct 2016

& AC Work Program

Oct 2016 – Sep 2018

# G.CG4

IA Report - Assurance Mapping #G.CG2

IA Report - Procurement & Contract Management Processes (June 2015) #OpSrv2 & #OpSrv3

IA Report - Business Planning

and Budget Process

(Mar 2015/16) #F.RPT2

IA Report - Asset

Management Plan and Long Term Financial Plan (Oct 2015/16) #F.SUS1

Presented To Aug & Sep AC

2015 Completed

Scheduled for Oct 16 Council WS & AC Dec

2016

Scheduled for Aug 2016

Completed

Presented To May 2016 Completed

87


Meeting Agenda


IA Report - Communications (June

2016 - 2015/16 2017)

#OpSrv9

IA Report - Infringement

s (Aug 2016/17) #OpSrv8

IA Report - Payroll (Oct

2016/17) #F.PAY1

IA Report - Strategic Planning

Alignment #S.SP1

Scheduled for 2017

Scheduled for Dec 16

Scheduled for March 2017

Audit Scheduled for

Mar 2017 Report

Scheduled for May 2017

07/12/2015 10.1 Work Health and Safety Report

(3) The Administration to determine

best practice in managing external contractors, with regards to management of WHS.

(4) This Report to be presented to Audit Committee on an annual basis in conjunction with the Mutual Liability Scheme Annual Review.

Refer AC Work

Program Oct 2016 – Sep 2018 #G.WHS2

Refer AC

Work Program

Oct 2016 – Sep 2018 #G.WHS3



07/12/2015 10.4

Rating Audit Health Check – Annual Review (2) An annual review be presented

to the Audit Committee identifying completed and outstanding action items and assessment of risk undertaken.

Refer AC Work



88


Meeting Agenda


#OpSrv10

29/03/2016 10.2 Risk Management Report –

LGAMLS Risk Management Profile Review and Council Action Plan (2) Relevant Executive staff and

Leadership Team staff be identified and added to the responsibility section in the Council Action Plan.

Refer AC Work

Program Oct 2016 – Sep 2018 #G.RM2

To incorporate in the next

review report Mar 2017

29/03/2016 10.5 Governance Audit Assessment Update

(2) A further report to be provided to Council via the Audit Committee in six months advising of action taken to address any remaining non-compliances including public access to documents.

Refer AC Work

Program Sep 2015 – Oct 2016 #G.CG6


29/03/2016 10.7 Internal Controls Review 1 July 2015 – 31 December 2015 (3) An Executive Summary to be

reported to the Audit Committee with the next progress report.

Refer AC Work

Program Oct 2016 – Sep 2018 #F.CTRL1

Scheduled for Mar 2017

16/05/2016 10.1 Work Health and Safety Report – KPI Action Plan (1) The Committee notes the

elements of the comprehensive WHS Framework, based on the sector’s “One System” Model, adopted and adapted to suit the local WHS needs of Council and the ongoing process to mature the framework as per legislative and PSSI requirements.

(2) The Committee notes the Work

Health and Safety Key Performance Indicator (KPI) Action Plan arising from the 2015 LGAWCS Audit recommendations and the

Noted

Noted

89


Meeting Agenda


undertakings to ensure that Council is in a position to achieve a rebate of 100%, late 2016.

(3) An interim report to be

presented to the December 2016 Audit Committee meeting addressing the Action Plan.

Refer AC Work

Program Sep 2015 – Oct 2016 #G.WHS2


16/05/2016 10.2 Procurement Policy (1) The Audit Committee notes the

deference of the Procurement Policy to a Council Workshop.

Refer AC

Work Program

Sep 2015 – Oct 2016 #F.POL1

Also Refer 18/08/2014 Item 10.7

Workshop

conducted on 4 Oct 2016.

To AC in March 2017

16/05/2016 10.3 Internal Audit Report – Long

Term Financial Plan and Asset Management Plan (1) Council notes Bentleys Internal

Audit Report – Long Term Financial Plan and Asset Management Plan.

(2) A further report be presented to

the Audit Committee identifying the steps completed to address the findings identified in the Bentleys report.

Refer AC Work

Program Oct 2016 – Sep 2018 #F.SUS1

Noted


22/08/2016 10.1 Business and Economic Development Update (1) This report be noted.

(2) Key Performance Indicators

be developed around each of the initiatives to help measure the outcomes achieved.

(3) The future program of works

Refer AC Work

Program Oct 2016 – Sep 2018 # OpSrv5

Noted

To be Scheduled

Noted

90


Meeting Agenda


for the Business and Economic Development Portfolio continue to be informed by Council’s Strategic Economic Development Plan 2014 - 2018 and Next Generation Digital Economy Strategy 2014 – 2018.

22/08/2016 10.2 Human Resource Management Roadmap Update (1) The progress of the Human

Resource Management System be noted.

(2) The Audit Committee to

review the progress of the Human Resources Management Strategy and Standards Plan and Policies and Procedures Framework every six months.

Refer AC Work


#HR2

Noted

Scheduled for March 2017

22/08/2016 10.3 Internal Audit Report - Business Planning and Budget Process (1) Council notes Bentleys

Internal Audit Report – Business Planning and Budget Process.

(2) The Public Consultation Policy is to be presented to Council for review to ensure consultation practices are in accordance with the Local Government Act 1999.

Refer AC Work


& Resolution

3/12/12 Item 10.5

# OpSrv9

Noted

To be Scheduled for

2017

17/10/2016

No Outstanding Resolutions

ATTACHMENTS: NIL

91

AGENDA ITEM NO.: 11.10 ON AGENDA TO: Audit Committee on 19 December 2016 DIRECTOR: Ginny Moon, Director Corporate Services REPORT AUTHOR: Ginny Moon, Director Corporate Services SUBJECT: Audit Committee Work Program Status Report December 2016


1.1 The Audit Committee Work Program Status Report for December 2016 is provided as Attachments 1 –13 for noting.

1.2 A new Audit Committee Work Program Status Report for the period January 2017 – December 2018 will be presented to the March 2017 Audit Committee Meeting.

2. RECOMMENDATION

(1) Council notes the Audit Committee Work Program Status Report for December 2016 as presented in Attachments 1-13 of the Audit Committee Work Program Status Report December 2016.



4.2 Sound Financial Management.


By having a program of activities that covers a range of financial audits, risk management and benchmarking, provides the Audit Committee a level of comfort that Council is complying with statutory requirements and promote and demonstrate corporate fairness, transparency and accountability.

Many of the activities lead to good financial management and financial practices, which will also satisfy Strategy 4.4 Accountable and people-focused services.



92

5. DISCUSSION

5.1 Implementing a Work Program assists with ensuring Council is delivering services in an effective and relevant manner, and that Council is complying with its statutory and legal requirements. It also assists Council to promote and demonstrate corporate fairness, transparency and accountability, and provides Council and the community with a level of assurance the organisation is managing its risks within the context of its Risk Management Policy.

5.2 The Audit Committee’s Work Program must include the principal functions and extent of authority for an Audit Committee as set out in Section 126 (4) of the Local Government Act as follows:

(a) reviewing annual financial statements to ensure that they present fairly the state of affairs of the council; and

(ab) proposing, and providing information relevant to, a review of the council’s strategic management plans or annual business plan; and

(ac) proposing, and reviewing, the exercise of powers under section 130A; and

(ad) 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; and

(b) liaising with the council's auditor; and

(c) reviewing the adequacy of the accounting, internal control, reporting and other financial management systems and practices of the council on a regular basis.

5.3 In relation to sub-section (c) above, Council has an Internal Audit Function. This function, along with a number of areas identified during the Audit Committee’s Risks Workshop on 16 March 2015, has provided a foundation in formulating the Revised Audit Committee’s Work Program.

5.4 Council’s Internal Auditor, Bentleys was engaged to conduct an assurance mapping review in June 2015, in line with the Audit Committee Internal Audit program.

5.5 The Audit Committee is satisfied with the process undertaken to provide an overview of the types of assurance in place, gaps and overlaps in accountability arrangements.

5.6 The results of the Risk Assessment and Assurance Mapping will help inform the Audit Committee of the activities for the next two years and the Audit Committee has revised its own Work Program based on the findings.

5.7 Following the Assurance Mapping exercise, the following activity areas have been considered appropriate for inclusion in an Audit Committee Work Program:-

5.7.1 Strategy

1. Business Plan

2. Strategic Plan

3. Stakeholder Engagement

93

5.7.2 Governance

1. Corporate Governance

2. Risk Management

3. WHS Compliance

4. Business Continuity/Disaster Recovery

5. Fraud (fraud risk management, whistleblowing)

6. Information Security

5.7.3 Finance

1. Financial Budget and Management Reporting

2. Financial Sustainability /Asset Management Plan and Long Term Financial Plan

3. Accounting Policies & Procedures

4. Statutory Reporting

5. Financial Treatment of Fixed Assets

6. Control Self-Assessment / Internal Controls over financial reporting

7. Payroll

5.7.4 HR

1. Workers Compensation Scheme

2. Retention / multi skilling of staff

5.7.5 Operational Services

1. Purchasing & Procurement

2. Contract Management

3. Infrastructure Integrity

4. Business and Economic Development – Rate of Return to Council

5. ICT Shared Service Initiatives

6. Conflict of Interest

7. Infringements

8. Communications

9. Rating Health Check

10. Fringe Benefit Tax Review

94

11. Service Delivery/Customer Service Review

5.8 The Audit Committee should address issues which fall within the activity areas determined by its terms of reference. Some issues may be addressed on a once-off basis and others on a regular basis.

5.9 This Work Program will be resourced by Council and needs to be budgeted accordingly. The consultation between the Audit Committee and Council and its Chief Executive Officer should balance the needs identified in the Work Program against the level of resources required.

Some of the key areas are:-

Financial Reporting

5.10 The Audit Committee needs to be satisfied that practices adopted by Council and supported by its external auditor (unless otherwise indicated by a qualification to the audit or commented on in the accompanying management letter) are appropriate having regard to its circumstances and practices elsewhere and are reflected in formal Council policies as appropriate.

Internal Controls and Risk Management Systems

5.11 The Local Government Act 1999 (Section 125) requires Councils to maintain effective internal controls. The Audit Committee needs to ensure that Council and its management team have in place locally appropriate plans, policies and arrangements to manage and mitigate the organisation’s business risks.

Internal Audit

In the context of Council’s overall risk management system, the Audit Committee needs to monitor and review the effectiveness of Council’s internal audit function.

External Audit

5.12 The Audit Committee needs to;

5.12.1 meet as necessary, and monitor Council’s relationship, with its external auditor;

5.12.2 consider and make recommendations to Council in relation to all aspects of the appointment, re-appointment, remuneration, and removal or resignation of Council’s external auditor;

5.12.3 assess the effectiveness of the external audit process and outputs relative to the scope of the engagement; and,

5.12.4 review management’s response to the external auditor’s findings and recommendations.

Reporting

5.13 In addition to receiving minutes of Audit Committee meetings, Council also needs to have significant, urgent findings of the Audit Committee promptly brought to its attention. The Audit Committee should also review its charter and performance annually (either by self assessment or through an external reviewer) and report these conclusions and its overall activity outputs to, and invite comment from, Council.

95

Other Matters

5.14 A key role of Council Audit Committees, recognised in the Local Government Act and arguably warranting special emphasis based on the findings of the Financial Sustainability Inquiry, is to identify areas where Council’s financial governance policies and practices can be improved. In particular Audit Committees have a role in ensuring Council’s strategic management and annual business plan development, management and reporting processes take account of, and support, Council’s future financial sustainability.

Resources

5.15 Resource for the Audit Committee (2016/2017) includes:-

5.15.1 an amount of $15,000 to fund the Audit Committee’s Work Program, including the conduct of any Internal Audits (by external person(s)), Service Reviews, etc. Council resolved the entire $15,000 budget be committed for an internal audit function for 3 years (2014/2015, 2015/2016 and 2016/2017) as a priority. Refer Minutes of Audit Committee on 18 August 2014, Agenda Item 10.11.

5.15.2 a separate budget appropriation for Audit Committee sitting fees.

5.15.3 a separate budget appropriation for the External Audit (currently performed by Dean Newbury and Partners), and

5.15.4 salary budgets that cover staff time consumed in supporting the Audit Committee.

5.16 The $15,000 may not be sufficient to fund all of the internal audits dependent on the scope of the proposed Work Program to be undertaken by external person(s), taking into account additional internal audits required as a result of S128 of the Local Government Act 1999, “The Auditor”.

5.17 Internal resources can be used to minimise the additional cost of the internal audit function. A number of ‘areas of interest’ could be identified for “Review” (as opposed to ”Audit”). A Review will generally be undertaken by the Administration, either with or without the assistance of an Internal Auditor, with a report submitted to the Audit Committee for consideration outlining the review methodology, findings and recommendations. Whilst not conducted by an independent person, such reviews will enable the Audit Committee to obtain a level of comfort Council is managing the risks associated that it functions adequately.

5.18 Should further resources be required, a request for budget adjustment will be submitted to Council for consideration.

Audit Committee Work Program Status Report September 2015 – December 2016

5.19 The Audit Committee Program Status Report will be refined over time to take account of variables such as budget available, scope of the internal audits to be undertaken and potential collaboration with other councils.

5.20 The results of the Risk Assessment and Assurance Mapping helped informed the Audit Committee of the activities for the two years. The Revised Audit Committee Work Program Status Report for September 2015 – December 2016 is presented at Attachments 1–13.

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5.21 A revised Audit Committee Work Program Status Report for the period January 2017 – December 2018 will be presented to the March 2017 Audit Committee Meeting.

ATTACHMENTS

Attachments 1-13 Audit Committee Work Program Status Report – September 2015 – December 2016

97

City of Prospect Audit Committee Work Program September 2015 - December 2016

Code #

Yellow highligh

t - referenc

e to Outstan

ding Resoluti

ons

Man

agem

ent

revi

ew

Sys

tem

Co

ntr

ol

Pro

ced

ure

s

Seg

reg

atio

n a

nd

Acc

ess

Co

ntr

ols

Tra

inin

g

Exe

cuti

ve M

anag

emen

t T

eam

(E

MT

)

Po

lici

es

Inte

rnal

Au

dit

(IA

)

Ext

ern

al A

ud

it (

EA

)

Ext

ern

al C

on

sult

ant/

Law

yer

Strategy 3 0 0 0 0 3 0 1 1 1

S.BP1

Business Plan 1.2, 7.3, 7.4,

BP1.1

Ensure that financial information included in publications for external audiences (eg. annual report, Council newspaper, brochure to all ratepayers etc) accurately reflects key accrual based financial information and where appropriate sector-endorsed financial indicators.

Comment on the draft annual business plan prior to its formal consideration for adoption by Council, particularly in terms of consistency with Council’s strategic management plans, recognising that Council is responsible and accountable for policy positions and service level decisions but mindful also that the audit committee has responsibilities to ensure Council is aware of the impact on ongoing financial sustainability of its proposals.

Annual Business Plan

Annually Annually

√ √

Maintain current plan

√ABP

Resol 18/05/2015 Item 10.4

Resol 17/08/2015 Item 10.2

√Adopted ABP

No Report - Annual

Business Plan 2016-2017 distributed

under separate

cover

S.SP1

Strategic Plan 4.3.5 Aligning Strategic Plan with community expectations (eg McGregor Tan survey results)Lessons learned from major projects – impact on community & benefits to Council.

IA Report - Strategic Planning Alignment (Mar 2017 - 2016/17)

Audit Scheduled for Mar 2017 Report Scheduled for May 2017

as request as request

√ √ √ √


S.STKH1

Stakeholder Engagement

4.3.3 Community Service – Program Review – Are we getting Value for Money? Communications/Stakeholder Engagement

Benchmarking – Key Services :-“Council engage with other Councils to establish reliable and effective benchmarking data for assessing the efficiency of the provision of key services by the City of Prospect.”A list of services to be provided to AC to enable AC to prioritise what services to benchmark and appropriate timeframe

Banking Services Review

Community Service – Program Review Report


√ √ √


Assurance Provision -

Current Plan

SummaryCurrent Practice Increasing Assurance

Business Management(First Line)

Corporate Oversight

Current Status / Action to be taken ReportsFrequency Proposed

Independent Assurance

Frequency by CoP

Audit Committee Work Program (September 2015 - December 2016)

Bentleys Recommendat

ionsActivity / Process

ACWP & BPM

Ref16-May-16 15-Aug-16 10-Oct-16 19-Dec-1628-Sep-15 7-Dec-15 14-Mar-162-Nov-15

1

Attachment 1

Attachment

98


Code #

Yellow highligh

t - referenc

e to Outstan

ding Resoluti

ons

Man

agem

ent

revi

ew

Sys

tem

Co

ntr

ol

Pro

ced

ure

s

Seg

reg

atio

n a

nd

Acc

ess

Co

ntr

ols

Tra

inin

g

Exe

cuti

ve M

anag

emen

t T

eam

(E

MT

)

Po

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es

Inte

rnal

Au

dit

(IA

)

Ext

ern

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ud

it (

EA

)

Ext

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on

sult

ant/

Law

yer Assurance

Provision - Current

Plan



Corporate Oversight



Frequency by CoP




ACWP & BPM


Governance 7 2 1 1 0 10 4 3 1 5G.CG1 6.1 Report annually to Council;

• outlining outputs relative to the audit committee’s work program and the results of a self-assessment of performance for the preceding period including whether it believes any changes to its charter are appropriate;• outlining any identified training needs;• advising future work program proposals; and,• invite comment from the Council on all of the above

Audit Committee’s Work Program

Annually Annually

√

Maintain current plan √

AC Self Assessment

G.CG2 4.2 Map assurance activities of the Council to reduce the risk/cost of over auditing and regulation council activities.

IA Report - Assurance Mapping (June - Presented To Aug AC 2015)


√ √


G.CG3 6.2 Review Audit Committee Membership• appoint Chair of Audit Committee• commence process - appoint/review Audit Committee Member(AC Membership expires March)• inform Audit Committee Elected Member appointment to the Audit Committee

Audit Committee Membership

Annually - Commence Dec Report to Mar

Annually - Commence Dec Report to Mar


√ Commence Recruitmen

t of Ind Member - This is a report to Council

instead of AC.

G.CG4 4.1 Recommend to Council the internal audit annual work program, and monitoring the implementation of this program and provide feedback as appropriate.

3 Year Internal Audit Plan

Annually Annually

√ √


Review and Update Internal

Audit Work Program

√ Annual Audit Plan Report

G.CG5 4.3.7 The Corporate Governance Framework incorporating the Risk Management and Internal Control Framework. To be reviewed annually.

The Corporate Governance Framework

AC 9/12/2013 Item 10.2 Review of Council’s Risk Management policy - Withdrawn

This item was withdrawn pending further amendments.

Annually Annually

√ √


√ √

To be reviewed

2018

G.CG6 4.3.8 Governance Assessment Program/Continuous improvement Plan/Governance Audit

Governance Assessment Program Status Report

Annually Annually

√ √


√ Resol

17/08/2015 Item10.4 (2)

√Resol

29/03/2016 Item 10.5(2)

√Resol

29/03/2016 Item 10.5(2)

Corporate Governance

2

Attachment 2

Attachment

99


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G.CG7 5.2 Ensure that appointment arrangements for the external auditor conform to legislative provisions. Ensure compliance with new regulation 16A of the Local Government (Financial Management) Regulations 1999 which prevent a Council from engaging its auditor to provide any services to the Council outside the scope of the auditor's functions under the Local Government Act.

Annual Review of Audit Specification

Annually Annually Maintain current plan

√ √

G.CG8 5.3 Appointed Auditors for a new term 2011/12-2015/16 (May 2011)

Keep oversight of the Council’s relationship with its external auditor and develop an appropriate timeframe to address all matters requiring consideration in the appointment/re-appointment of the external auditor and manage this process when it falls due [note: an amendments to section 128 provide that the Council’s auditor must be rotated after no more than five years.

Appointed Auditors as request as request Maintain current plan

√√

Request for Audit Tender

√

Audit Tender Recommend

ation

Resol 16/05/2016 Item 10.7

G.RM1

5.1 Meet with the Council’s external auditor to:• invite presentation of his/her audit methodology and risk assessments within the audit plan;• discuss any qualifications raised in the most recent audit or comments made in the accompanying management letter;• assess the appropriateness of the Council’s response to matters so raised; and,• invite comment on the financial systems and affairs of the Council having regard to comparable benchmarks.

Risk Assessment ReportRisk Management Policy

Annually Annually

√ √ √ √


√ Year end outcome

√ Year end outcome

G.RM2

2.2 LGA Mutual Liability Scheme – Risk Management Review

LGA Mutual Liability Scheme – Risk Management Review Report

Annually Annually

√


√ Resol

19/12/13Item 10.1(3)

G.RM32.2 LGA Risk Services – Presentation LGA Risk Services –

Presentationas request as request

√Maintain current plan

G.RM4 -duplica

ted - same

as G.CG5

4.3.7 The Corporate Governance Framework incorporating the Risk Management and Internal Control Framework. To be reviewed annually.

The Corporate Governance Framework

Annually Annually

√ √


G.WHS1 - Also

refer HR1

WHS Compliance

2.2 WHS Presentation (processes, reporting incidents, assessed risks, implementation of changes to mitigate risks, determine residual risks)

WHS Compliance Report

Annually Annually

√ √ √ √


√ Resol

17/08/2015 Item10.1

(3) √

Risk Management

3

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100


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G.WHS2

WHS Compliance

New

Work Health and Safety Report (Resol7/12/15 Item 10.1(3)

(3) The Administration to determinebest practice in managing externalcontractors, with regards to managementof WHS.

WHS Compliance Report

√ Resol

7/12/2015 Item 10.1 (3)

Resol 16/05/2016 Item 10.1

G.WHS3

WHS Compliance

Risk Management

New Work Health and Safety Report (Resol 7/12/15 Item 10.1(4)

4) This Report to be presented to Audit Committee on an annual basis in conjunction with the Mutual Liability Scheme Annual Review.

WHS Compliance Report √

Resol 7/12/2015

Item 10.1 (4)

G.BCP1

Business Continuity/Disaster Recovery

2.2 Emergency Management Briefing – includes:-• Disaster Recovery• Emergency Response• Business Continuity Plan

Disaster RecoveryEmergency ResponseBusiness Continuity Plan

Annually Annually

√ √ √ √ √


√Resol

17/03/2014 Item 10.11

Deferred to October 2016

to be presented in conjunction

with the outcome of

the BCP Exercise

√Resol

17/03/2014 Item 10.11

Include Outcome of

BCP Exercise

√Resol

17/03/2014 Item 10.11

Include Outcome of

BCP Exercise

G.FRD1

Fraud (fraud risk management, whistleblowing)

3.1, 3.2

Identify whether the Council has in place simple, readily accessible arrangements for employees to confidentially raise concerns of alleged malpractice in accord with legislative provisions.

Anti Fraud/Anti Corruption Policy, Whistleblowing Policy

Tri-annually Tri-annually

√ √ √ √ √


Next review should be planned for 2017.

G.IT1

Information Security

Part of the Managed IT services agreement.

None Last

Reported to AC

18/05/2015

as request

√ √ √

Potential to increase assurance in this area

Essential to increase information security assurance in response to the upcoming IT managed service agreement

√?

As part of IT Managed Service Review

Report Refer G.IT4

G.IT2

IT Strategic Plan New IT Strategic Plan A clear Information and Communication Technology Strategy be developed that documents the appropriate service delivery environment for City of Prospect for the next 5 years.

√ Dec (in o/s list)

Resol15/12/2014 Item 10.1

4

Attachment 4

Attachment

101


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G.IT3

Managed IT Services

New Report on New Managed IT Services - Vintek

Note a post implementation report to be presented to Audit Committee by end of 2015.

√ Resol

18/05/2015 Item10.5(2)

G.IT4

Managed IT Services

New Report on New Managed IT Services - Vintek

Progress of the new Information Technology Service Agreement to be reported to the Audit Committee one year after commencement.

Resol 02/11/2015

Item10.3 (2)&(3)

Also refer G.IT1

5

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Finance 37 27 26 27 26 13 25 3 30 0F.RPT1 Financial Budget

and Management Reporting

Budget Review Reports

Quarterly Quarterly

√ √


√BR4

Resol 17/03/2014 Item 10.9(5)

√BR1

Resol 17/03/2014

Item 10.9(5)

√BR2

Resol 17/03/2014 Item 10.9(5)

√BR3

Resol 17/03/2014 Item 10.9(5)

√BR4

√BR1

F.RPT2 Financial Budget and Management Reporting

IA Report - Business Planning and Budget Process (Mar 2015/16)


√ √ √


√

√

Resol 17/08/2015 Item 10.5

F.RPT3 Financial Budget and Management Reporting

Potential Emerging Issus/Budget Pressure. Regular Status Report


√ √


Review, and where warranted suggest improvements in, the formats of budget and actual financial performance information reported to the Council to ensure they:• are succinct, easy to follow and pitched with a strategic focus;• are based on accrual accounting information and include the material required by Regulation 5B and Regulation 7(3) of the Local Government (Financial Management) Regulations 1999; and,• incorporate key financial sustainability information including comparison of actual and budgeted performance against targets, where they have been set by Council, for sector-endorsed financial indicators.

Review the Council’s financial governance arrangements and their effectiveness including:• the processes in place to ensure;o all Council Members and the executive team have appropriate knowledge of key financial governance principles, issues and reporting tools in the context of Local Government financial sustainability; and,o where warranted, existing knowledge and skills are augmented with locally appropriate training and support;• the appropriateness of existing strategic financial decision-making models and processes underpinning Council’s long-term financial plan (or assist with its development if necessary) and annual business plan;• the appropriateness of targets established by Council for sector-endorsed Local Government Financial Indicators having regard to Financial Sustainability Information Paper 12: Targets for Local Government Financial Indicators (or assist with the development of these as necessary); and,• the appropriateness of the range and content of Council’s financial policies and practices (and in particular in regard to treasury management having regard to Local Government Financial Sustainability Information Paper 10: Debt Management).

7.1, 7.2,

BP1.1, 1.4

6

Attachment 6

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F.SUS1 The audit committee should satisfy itself regarding the:• consistency of Council’s strategic plan with its long-term financial plan;• consistency of Council’s long-term financial plan with its infrastructure and asset management plan (I&AMP);• soundness of the I&AMP; e.g. Is it supported by engineering and other professional assessments regarding the condition of Council’s infrastructure assets;• likely impact on Council’s ongoing financial sustainability of implementation of its suite of strategic management plans.


Budget Review Report Covered above

IA Report - Asset Management Plan and Long Term Financial Plan (Oct 2015/16)

Annually Annually

√ √ √


Periodic Review of

Key Financial Indicator Targets

+

Bentley's Review LTFP & IAMP

√

Resol 17/08/2015 Item 10.5

√Resol

16/05/2016 Item 10.3

F.SUS2 Sensitivity Analysis on major budget itemsTo review operating and capital budget to identify areas required further sensitivity analysis


Annually Annually

√ √


Resol 17/03/2014 Item 10.10

Benchmarking - Fees

and Charges (by BRM)

√

Resol 17/03/2014 Item 10.10

Part of ABP Review

F.SUS3 Efficient use of resources:-Review of subsidiaries (EHA) - as part of Year End review of financial Statements- Subsidiaries to present to AC

Annual Financial Statements Audit Report

Annually Annually

√ √


Part of Year end

F.POL1Also refer

OpSrv1

Accounting Policies & Procedures

5.6 Review Accounting Policies & Procedures

Accounting Policies & Procedures

Annually Tri-annually

√ √

Opportunity to remove / refocus effort

Accounting Policies & Procedures to be reviewed Tri-annually. Ad hoc change to be reviewed as requested

√ Resol

18/08/14Item 10.7

Review Policies

(1) Procureme

nt Policy (take into account

results of Internal Audit of

Procurement and

Tender by Bentley)

(2) Budget Framework

√ Resol 18/08/14

Item 10.7Review Policies

(1) Procurement Policy (take into account

results of Internal Audit of

Procurement and Tender by

Bentley)Items not

discussed due to lack of time. Resubmit May

16 with a recommendation to a Council

Workshop.

√ Resubmit

May 16 with a

recommendation to a Council

Workshop in the first

instance.

Resol 16/05/2016 Item 10.2

√ Resol

16/05/2016 Item 10.2

Reporting Outcome of

Council Workshop in

Oct 2016 To Audit

March 2017

Financial Sustainability /Asset Management Plan and Long Term Financial Plan

4.3.2

7

Attachment 7

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F.SR1

Statutory Reporting

1.1, BP1.3

Identify areas of accounting treatment that are open to discretion, and in particular have material impact on reported financial performance and position.(e.g. assumed asset lives, depreciation methodology, asset revaluation frequency and techniques, capitalisation policies and overhead accounting treatments all can have material effect on the operating result and net asset values)


Annually Annually

√ √ √


√ Part of Year

end

√ Part of Year

end

F.FA1

Financial Treatment of Fixed Assets

1.3, 4.5(2), BP2.7

Ensure that asset values and depreciation rates are up to date and soundly based, including that they have particular regard to local conditions and do not just reflect common practice elsewhere e.g.• whether land values reflect the current local market;• whether infrastructure asset values reflect local replacement costs and the condition of existing assets;• whether an infrastructure asset condition audit been undertaken recently to assist in making this judgement.Asset Accounting - AASB13 - Fair Value Asset RevaluationAsset Accounting - Review Asset Sustainability Ratio, Operating Surplus Ratio & Net Financial Liabilities Ratio


Annually as request

√ √ √ √ √ √ √


Assurance overlap exists. Review Asset Sustainability Ratio, Operating Surplus Ratio & Net Financial Liabilities Ratio as part of the year end AFS review

√ Part of Year

end

√ Part of Year

end

F.CTRL1

Financial Internal Control Status Report (Control Track - Deloitte) Adopt ‘Best Practice Model’

Annually Annually

√ √ √ √ √


√

F.CTRL2

Interim Audit Report March & June

March & June

√ √ √

Maintain current plan √ depending

on receipt of Audit Report

from Auditors

√Interim Report

(Feb 2016 Audit)

√Interim

Report (June 2016 Audit)

2.1, BP1.2

Ensure a thorough review is undertaken to identify locally appropriate internal control and risk management policies and procedures using formal tools and processes such as the Internal Financial Controls – Best Practice Manual, 2002 (produced by the SA Local Government Financial Management Group, with funding from the Local Government Research and Development Scheme) and/or other locally appropriate reference tools. Ensure that identified improvement opportunities can be appropriately addressed. [Note – this could be undertaken progressively in stages with the locally most important and highest risk areas tackled first.]

Identify whether weaknesses in internal controls have been previously identified, e.g. by management or Council’s external auditor, and if so whether action has been taken to have them addressed

Control Self Assessment / Internal Controls over financial reporting

8

Attachment 8

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F.CTRL3

Audit Management letter as part of AFS process.

Annually Annually

√ √ √


√ Part of Year

end

√ 2014/15 Final Fin

Statements &

Wastecare

√ √ Part of Year

end

F.CTRL4

General Ledger BP1.2 √ √ √ √ √ √ √

F.CTRL5

Cash Flow and Petty cash

BP2.1 √ √ √ √ √ √ √

F.CTRL6

Banking BP2.2 √ √ √ √ √ √ √F.CTRL

7Investments BP2.3 √ √ √ √ √ √ √

F.CTRL8

Debtors BP2.4 √ √ √ √ √ √ √F.CTRL

9Inventory BP2.5 √ √ √ √ √ √ √

F.CTRL10

Prepayment BP2.6 √ √ √ √ √ √ √

F.CTRL11

Project Costing BP2.8 √ √ √ √ √ √ √

F.CTRL12

Loans/Grants to Clubs/Community Groups

BP2.9 √ √ √ √ √ √ √

F.CTRL13

Accounts Payable BP3.1 √ √ √ √ √ √ √

F.CTRL14

Accrued Expenses BP3.2 √ √ √ √ √ √ √

F.CTRL15

Borrowings BP3.3 √ √ √ √ √ √ √

F.CTRL16

Employee Provisions BP3.4 √ √ √ √ √ √ √

F.CTRL17

Taxation BP3.5 √ √ √ √ √ √ √

F.CTRL18

Rates/Rates Rebates BP4.1 √ √ √ √ √ √ √

F.CTRL19

Grants BP4.2 √ √ √ √ √ √ √

F.CTRL20

User Pay Income/Fee for Services

BP4.3 √ √ √ √ √ √ √

F.CTRL21

Investment/Interest Income BP4.4 √ √ √ √ √ √ √

F.CTRL22

Receipting BP4.5 √ √ √ √ √ √ √

F.CTRL23

Other Revenue BP4.6 √ √ √ √ √ √ √

F.CTRL24

Elected Members’ Expenses

BP5.3 √ √ √ √ √ √ √

F.CTRL25

Credit Cards BP5.4 √ √ √ √ √ √ √

F.CTRL26

Employee Reimbursements

BP5.5 √ √ √ √ √ √ √

F.CTRL27

Other Expenses BP5.6 √ √ √ √ √ √ √

has been taken to have them addressed.

9

Attachment 9

Attachment

106


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F.PAY1

Payroll

BP5.2

Payroll process review including payroll master file, leave policy, EBA compliance, etc.

IA Report - Payroll (Oct 2016/17)

Annually Annually

√ √ √ √ √ √ √ √ √


√

To March 2017

HR 2 0 0 0 0 2 0 0 0 2HR1 also refer

G.WHS1

Workers Compensation Scheme

2.2 LGA Workers Compensation Scheme Audits (SA Partnership Visit) – Review to 19/08/2013 AC Review annually

LGA Workers Compensation Scheme Review Report

Annually Annually

√ √ √


√ Resol 19/08/2013 Item 10.7

√ Resol 29/03/2016 Item 10.3

√Presented to

AC on 16 May 2016

HR2

Retention / multi skilling of staff

4.3.9 Employee relationships Human Resource Function Audit Report


√ √ √


√Resol

18/08/2014 Item 10.9

√Resol

18/08/2014 Item 10.9

10

Attachment 10

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Operational Services

11 5 7 5 0 11 3 5 2 2

OpSrv1Also refer

F.POL1

High level review of budget process and project tracking to ensure Cap & operating expenditure appropriately captured and classified

Procurement Policy Annually Tri-annually

√ √ √ √ √ √ √


Suggest to review the policy Tri-annually √

Review Policies

Procurement Policy (in conjunction

with Internal Audit of

Procurement and

Tender by Bentley)

√

Review Policies

Procurement Policy (in

conjunction with Internal

Audit of Procurement and Tender by Bentley)

√ Resubmit

May 16 with a



instance.

√ To Audit

March 2017

OpSrv2

Process level review IA Report - Procurement & Contract Management Processes (June 2015)


√


√

√ Resol

7/12/15 Item 10.2 (2), (3)& (4)

Not discussed due to lack

of time.

√Resubmit

May 16 with a



instance.

OpSrv3

Contract Management

4.5(6), BP5.1

Review on the adequacy of tender processes and the management and reporting of contract costs in accordance with contractual requirements.

IA Report - Procurement & Contract Management Processes (June 2015)


√ √ √ √ √ √


√

√ Resol

7/12/15 Item 10.2 (2), (3)& (4)

Not discussed due to lack

of time.

√Resubmit

May 16 with a



instance.

OpSrv4

Infrastructure Integrity

4.3.1 key issues for assets, ‘no surprises’ approach to AMP, Depreciation rates, Condition assessment, Analysis of the impact of infrastructure assets revaluation & impact on 10 year financial plan (roads, kerbs, footpaths & stormwater) - 6 monthlyLand & Building revaluation - 6 monthly

Annual Business PlanAsset Management Plan

Annually Annually

√ √ √


Assurance overlap exists. Annual Business Plan and Asset Management Plan to be reviewed annually

√ Part of Year

end

√ Part of Year

end

Purchasing & Procurement

4.3.4

11

Attachment 11

Attachment

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OpSrv5

Business and Economic Development – Rate of Return to Council

4.3.6 Report to update progress towards achieving economic growth targets

Business and Economic Development Progress Report (Last Reported 17/08/2015)

Six Monthly Quarterly Request to

alter to Annually √ √

Potential to increase assurance in this area

Business and Economic Development Progress Report to be reviewed quarterly

√

OpSrv6

ICT Shared Service Initiatives - Project completed

4.3.10 ERA / ITReview IT Shared ServicesProgress of the new Information Technology Service Agreement be reported to the next Audit Committee.

Information Technology Service Agreement

Project Completed

Project Completed

√ √ √ √ √ √


OpSrv7

Conflict of Interest

4.3.11 Develop Conflict of Interest Policy to aid procurement, investment, development assessment and other Council decision making paths. Working with LGA in developing model policy following the review of Conflict of Interest provision in LG Act.

Conflict of Interest Policy & Progress Report

Annually Tri-annually

√ √ √ √ √ √


Policy to be reviewed tri-annually

√ Resol

16/03/2015 Item 10.5

√ Resol

16/03/2015 Item 10.5Resubmit

OpSrv8

Infringements from proposed IA Plan

Analysis of documents including strategies, plans, policies, guidelines and reports and a review of outstanding fines. In addition, it would include a review of the writing off/waiving of infringement process.

IA Report - Infringements (Aug 2016/17)


√ √ √ √ √ √


√

Audit conducted in

Aug/Sep. Report not likely to be finalised for

Oct 16 Meeting

√

OpSrv9

Communications from proposed IA Plan

Review of current policies, procedures and staff awareness relating to how and when to respond in the event of media misrepresentation and potential of reputation damage.

IA Report - Communications (June 2016 - 2015/16 - Rescheduled to 2017 After adoption& implementation of Communication Strategy)


√ √ √ √


√ Resol 3/12/12

Item 10.5

Audit rescheduled to

2017

Resol

03/12/12 Item 10.5 &

22/08/16 Item 10.3

Audit rescheduled

to 2017

OpSrv10

Rating Health Check

5.4 Rating Health Check Rating Health Check Report (October)

Annually Annually

√ √ √ √


√ Resol

15/12/2014 Item 10.5

√ Resol

15/12/2014 Item 10.5

√ Resol

7/12/2015 Item 10.4

OpSrv11

Fringe Benefit Tax Review

5.5 Fringe Benefit Tax Review Fringe Benefit Tax Review Report

as request as request√ √ √ √


12

Attachment 12

Attachment

109


Code #

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ons

Man

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Co

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Pro

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Po

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Inte

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Ext

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Ext

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Law

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Provision - Current

Plan



Corporate Oversight



Frequency by CoP




ACWP & BPM


OpSrv12

Service Delivery/Customer Service Review

5.7 Review Service Delivery/Customer Service

Service Delivery/Customer Service Review Report. Service Std Review to be conducted in 2016/2017 pending adoption of New Strategic Plan. Scheduled for May 2017.


√ √


13

Attachment 13

Attachment

110

AGENDA ITEM NO.: 11.11 ON AGENDA TO: Audit Committee on 5 December 2016 DIRECTOR: Ginny Moon, Director Corporate Services; and Greg Georgopoulos, Director Infrastructure Assets and

Environment REPORT AUTHOR: Chris Birch, Manager Financial Services SUBJECT: Internal Audit Report – Infringements


1.1 As part of the Internal Audit Contract, Bentleys have been engaged to undertake a number of key internal audits during the current financial year.

1.2 Bentleys have completed a review of Council’s Infringement processes. The updated Bentleys report is included in Attachments 1 – 18.

1.3 In summary, the auditor identified that the current processes were compliant with the relevant Acts. Recommendations all relate to the documentation of decisions and processes. While some updates are immediate changes to processes and have been easily changed already, some will require policy changes that can be implemented in 2017.

1.4 An update report on the completion of identified actions will be presented to the Audit Committee within 12 months.

2. RECOMMENDATION

(1) That the Audit Committee having considered Item 11.11 Internal Audit Report – Infringements (as presented in Attachments 1 – 18) receive and note the report.

(2) That the Audit Committee receives an update of progress on recommendations in December 2017.



While Infringements provide a stream of Income and support strategy 4.3 (Sound Financial Management) in doing so, their primary focus is to assist in deterring negative activities that reduce the quality of life of our community. As such, they assist in the achievement of 4.4 (Accountable and People Focused Services) also.

111


4.1 No community consultation was undertaken on this matter.

5. DISCUSSION

5.1 As part of the Internal Audit Contract, Bentleys have been engaged to undertake a number of key internal audit during the current financial year.

5.2 Bentleys have completed a review of Council’s Infringement processes. The Bentley’s report is included in Attachments 1 – 18.

5.3 Overall, on Attachment 5 Bentleys identified Council has a number of good practices in place for the processing of infringements.

5.4 The Bentleys report highlighted 4 findings from the review. They are presented in the following paragraphs, along with comments/response from management. Both are included in the report form Bentleys.

5.5 Finding 1 – Policies and Procedures not formalised and reviewed (low risk).

5.5.1 Proposed Actions/Comments – Current policies and procedures were last reviewed in 2013 and are due for review to ensure they align with our current strategic objectives. An action will be developed to prioritise policies and procedures to be reviewed and update by December 2017.

5.6 Finding 2 – Expiations waived without a description recorded in Authority (moderate risk).

5.6.1 Proposed Actions/Comments – Since the audit, all involved staff have been advised that explanations are to be entered into the system when expiations are waived. Mandating input of this field will be invested with the software vendor by 30 December 2016.

5.7 Finding 3 – High number of disputed parking infringements (low risk).

5.7.1 Proposed Actions/Comments – Further investigation of details behind why a high volume of disputes in to be undertaken by 31 March 2017.

5.8 Finding 4 – High level of discretion over waiving of expiation notices (low risk).

5.8.1 Proposed Actions/Comments – Relevant policies and procedures will be reviewed and updated to ensure consistent information in provided regarding the issuing of expiations and warnings by 30 June 2017.

5.9 In addition to the 4 findings listed above, the Bentleys report identified three opportunities for improvement that they saw value in incorporating into Council’s processes. Opportunities for improvement are not non-compliances but rather value adding opportunities that Bentley’s have identified in their independent review process. The opportunities for improvement identified are:

Internal management reporting

Review expiation withdrawal reason category

Conflict of Interest register review

112

5.10 An update report on the completion of identified actions will be presented to the Audit Committee within 12 months.

ATTACHMENTS

Attachments 1-18: Bentleys – Internal Audit Report – Infringements

113

Infringements Internal Audit Report

September 2016

City of Prospect

Attachment

Attachment 1114

Bentleys (SA) Pty Ltd

Level 2 139 Frome Street Adelaide SA 5000

GPO Box 939 Adelaide SA 5001

ABN 39 582 939 963

T +61 8 8372 7900 F +61 8 8372 7999

[email protected] bentleys.com.au

2 November 2016 Ginny Moon Director, Corporate Services City of Prospect PO Box 171 PROSPECT SA 5082 Dear Ginny, Internal Audit Report Please find attached our report on the Infringements for the City of Prospect. We would like to take this opportunity to thank management and staff for the assistance provided to us during the course of our audit. If you have any queries please feel free to contact me on 08 8372 7900 at any time. Yours sincerely,

DAVID PAPA PARTNER Enclosure

Attachment

Attachment 2115

City of Prospect Page 2 of 17 Internal Audit Report Infringements September 2016

CONTENTS

EXECUTIVE SUMMARY ...................................................................................................... 3

Background ...................................................................................................................... 3

Audit Objectives ............................................................................................................... 3

Audit Scope and Approach ............................................................................................... 3

Good Practices Observed................................................................................................. 4

Key Findings and Observations ........................................................................................ 4

Controls Assessment ........................................................................................................ 4

Risk Assessment .............................................................................................................. 5

Benchmarking .................................................................................................................. 6

Acknowledgement ............................................................................................................ 7

APPENDIX 1 Detailed Findings and Agreed Action Plan ...................................................... 8

APPENDIX 2 Improvement Opportunities ........................................................................... 12

APPENDIX 3 Documents Accessed and Consultation ........................................................ 14

APPENDIX 4 Controls Assessment .................................................................................... 15

APPENDIX 5 Risk Ratings .................................................................................................. 16

© 2016 Bentleys (SA) Pty Ltd Inherent Limitations

Due to the inherent limitations of any internal control structure, it is possible that fraud, error or non-compliance with laws and regulations may occur and not be detected. Further, the internal control structure, within which the control procedures that have been subject to this review operate, has not been reviewed in its entirety and, therefore, no opinion or view is expressed as to its effectiveness of the greater internal control structure. This review is not designed to detect all weaknesses in control procedures as it is not performed continuously throughout the period and the tests performed on the control procedures are on a sample basis. Any projection of the evaluation of control procedures to future periods is subject to the risk that the procedures may become inadequate because of changes in conditions, or that the degree of compliance with them may deteriorate. We believe that the statements made in this report are accurate, but no warranty of completeness, accuracy or reliability is given in relation to the statements and representations made by, and the information and documentation provided by City of Prospect management and personnel. We have indicated within this report the sources of the information provided. We have not sought to independently verify those sources unless otherwise noted within the report. We are under no obligation in any circumstance to update this report, in either oral or written form, for events occurring after the report has been issued in final form unless specifically agreed. The findings expressed in this report have been formed on the above basis.

Third Party Reliance

This report is solely for the purpose set out in the Official Order and for City of Prospect information, and is not to be used for any other purpose or distributed to any other party without Bentleys (SA) Pty Ltd’s prior consent. This summary report has been prepared at the request of City of Prospect management or its delegate. Other than our responsibility to the management of City of Prospect, neither Bentleys (SA) Pty Ltd nor any member or employee of Bentleys (SA) Pty Ltd undertakes responsibility arising in any way from reliance placed by a third party, including but not limited to City of Prospect external advisors, on this summary report. Any reliance placed is that party’s sole responsibility. Liability limited by a scheme approved under Professional Standards Legislation.

Attachment

Attachment 3116


EXECUTIVE SUMMARY

Background The Council has engaged Bentleys SA Pty Ltd to conduct an internal audit project – Infringements review in August 2016 in line with the Audit Committees Internal Audit Program.

This report outlines findings and recommendations in respect of Infringements process.

Audit Objectives The overall objective of the audit was to review the system of internal controls and related management processes, providing reasonable assurance that adequate management controls exist to mitigate risk and maximise opportunity.

The specific objectives of the audit were to determine:

compliance with the Local Government Act and regulations;

compliance with internal policies and procedures;

review and assess the controls over existing processes for the issuing, reviewing, monitoring and waiving of parking and other infringements

perform testing on a sample basis to ensure adequacy and effectiveness of key controls; and

identify business process improvement opportunities.

Governance objectives, where relevant, were considered. This included an assessment of whether governance processes were in place, including:

defined roles and responsibilities;

segregation of duties;

appropriate levels of delegated authority;

monitoring and reporting of abnormal activity; and

records management and documented audit trails.

Audit Scope and Approach The audit scope includes:

Interviews and patrol with staff managing parking and animal infringements to gain an understanding of the end to end processes;

Analysis of documents including strategies, plans, policies, guidelines and reports;

Data analytics on selected data sets;

Review expiation notices to ensure it is issued within the relevant guidelines;

Review register of outstanding fines;

Review and agree with the Council management any potential deliverables based on the identified improvement opportunities

Attachment

Attachment 4117


Prepare the assurance report summarising the results of work done and the Agreed Actions to address any control/process improvement areas identified.

The audit includes infringements activities from 1 July 2015 to 30 June 2016. The audit scope excludes Infringements activities other than parking and animal management.

The approach involved reviewing the process, procedures, policies and documentation; interviewing key staff; observation, walkthrough and substantive testing.

The audit reviewed the key processes and documents which drive the Council Infringements process. Refer to Documents Accessed and Consultation (Appendix 3) for detailed information.

Bentleys conducted this audit in accordance with the International Standards for the Professional Practice of Internal Auditing of the Institute of Internal Auditors.

Good Practices Observed Throughout this review we compared the Council’s processes to our knowledge and understanding of

Local Government Association guidance and good business practice. The following good practices were observed during the review:

Training was periodically provided to the inspectors to support their competence and compliance with Acts, Legislations and by law;

Monthly team meeting is held to discuss infringements matters and take agreed actions.

Weekly plan is prepared to provide guidance to Community Safety Officers on where to patrol.

Key Findings and Observations A summary of the risk rated findings are provided below:

Ref # Description of Findings Risk Rating

1 Policies and procedures not formalised and reviewed Low

2 Expiations waived without a description recorded in Authority Moderate

3 High number of disputed parking infringements Low

4 High levels of discretion over waiving of expiation notices Low

Ref # Improvement Opportunities

1 Information reported to Senior Management

2 Review expiation withdrawal reason category

3 Conflict of interest review

Refer to Detailed Findings and Agreed Action Plan (Appendix 1), Improvement Opportunities (Appendix 2) for detailed information.

Each key finding is rated based on the impact to the process considered. Refer to Risk Framework (Appendix 5) for detailed information.

Controls Assessment The control effectiveness assessment below is an indicator of the current state of the control environment within business operations and its ability to mitigate against the risk exposures.

Attachment

Attachment 5118


Key controls were identified during the audit. Refer to Controls Assessment (Appendix 4) for detailed information.

Based on the internal audit work completed, documents inspected and interviews with key stakeholders, it is the view of Bentleys SA that the control environment of Infringements is effective and there is opportunities for improvement.

Overall Controls Assessment (1)

Adequate Opportunities for

Improvement Inadequate

(1) Limited to audit scope and based on test results.

Risk Assessment Provided below is an audit assessment of the residual risk (based on the Council’s risk framework) in

respect of the process reviewed, having regarding to the issues identified by the audit.

Key inherent risks (before controls) include:

Non-compliance with regulation and Council by-laws;

Non-compliance with policies and procedures;

7

0

0 1 2 3 4 5 6 7 8

Adequate

Opportunities forImprovement

Inadequate

Number of Controls

Control Effectiveness

5 (Almost Certain)

4 (Likely)

3 (Possible)

1; 3; 4 2

2 (Unlikely)

1 (Rare)

1 (Insignificant)

2 (Minor)

3 (Moderate)

4 (Major)

5 (Critical)

L

ike

lih

oo

d

Consequence

Attachment

Attachment 6119


Errors in recording supporting details of infringements;

Loss of data integrity and inconsistency in the review and waiving of infringements;

Inconsistent decision making in the issuing of expiation notices; and

Additional time spent on analysing disputes with no basis.

Benchmarking In the period from 1 July 2015 to 30 June 2016, a total of 1218 expiation notices (including parking and animal expiations) were issued with a total fine amount $173,829. As at 18 August 2016, there was $36,427 of outstanding fines (19.6% of total). During this period 177 tickets were waived (14.5% of total). 394 tickets were disputed (32.3% of total). During this period 993 warnings (including parking and animal expiations) were issued (44.9% of total incidents identified).

We summarised this data and compared it with average data obtained from East Region Alliance Councils and peer Councils. Please refer to the chart below.

We recommend management analyse this data and take actions to control infringements activities in an appropriate level comparing to peers.

Note: Waived Expiation, Disputed Expiation and Outstanding Fine % is based on Expiation issued. Warning % is based on total incidents identifed.

WaivedExpiation %

DisputedExpiation %

OutstandingFine % Warnings %

City of Prospect 14.7% 29.5% 17.5% 46.6%Average 9.0% 18.0% 10.9% 25.8%

0.0%5.0%

10.0%15.0%20.0%25.0%30.0%35.0%40.0%45.0%50.0%

Parking Infringements

WaivedExpiation %

DisputedExpiation %

OutstandingFine % Warnings %

City of Prospect 12.7% 63.7% 50.9% 15.0%Average 13.1% 35.3% 30.8% 8.1%

0.0%10.0%20.0%30.0%40.0%50.0%60.0%70.0%

Animal Infringements

Attachment

Attachment 7120


Acknowledgement We appreciate the assistance and cooperation received from management and staff of City of Prospect in completing this review.

Attachment

Attachment 8121


APPENDIX 1 Detailed Findings and Agreed Action Plan

Finding 1. Policies and procedures not formalised and reviewed

Impact: Minor

Likelihood: Possible

Risk Rating: Low

Finding(s)

Documented policies and procedures provide efficient and accurate guidance to the processing of parking and animal infringements. Our review found that there is no policy for infringements process. There are a large number of procedures that staff rely on for guidance when issuing, monitoring and waiving expiation notices. However, these procedures are not formalised with version controls and not reviewed in a timely manner.

Risk

Lack of formalised and reviewed policies and procedures could result in errors when staff unfamiliar with the process are required to undertake this function. It also increases the risk of error where there is a change of staff. This could lead to a breach in legislation.

Recommendation Management Response

We recommend management develop a formalised policy and procedure for the infringements process to ensure that staff who may need to perform the function can do so correctly and efficiently.

All policies relating to parking and animal infringements should be reviewed, cross-referenced or (potentially) consolidated to make their use simpler.

Management should consider combining documents or creating a master list to make cross reference of documents easier and more user friendly. Relevant policies and guidelines could include but not limited to: Policy:

Expiation Notice Review Policy Evidence Collection Policy Prosecution and Enforcement Policy

Procedures: Procedure for Issue of Expiation Notices Procedure for Review of Expiation Notices Procedure for Reviewing and Withdrawing an

Expiation Notice

Current policies and procedures were last reviewed in 2013 and are due for review to ensure they align with our current strategic objectives.

An action plan will be developed to prioritise policies and procedures to be reviewed and updated.

A master list for policies and procedures will be established using Council’s intranet so that staff

can easily access the current version of all policies and procedures.

Responsible Officer Target Date

Helen Robins 30 December 2017

Attachment

Attachment 9122


Finding 2. Expiations waived without a description recorded in Authority

Impact: Moderate


Risk Rating: Moderate

Finding(s)

Our analysis of the infringements data indicated that there were 76 instances out of 164 tickets waived (46.3% of total) with no reason or memo provided in Authority, the expiation management and accounting system.

Risk

Loss of data integrity and inconsistency in the review and waiving of infringements.


We suggest that there should always be a valid description provided when the Council’s

Compliance Officer has made a decision to waive an expiation ticket.

Management should mandate this data field and investigate the reason no detail was recorded for the expiation tickets. Quantity of waived tickets should form part of monthly reporting.

Implemented. All community safety staff have been advised that explanations are to be entered into the system when expiations are waived.

Mandating this data field in Authority will be investigated with IT to determine whether this is possible.

Staff previously responsible for waiving applications are no longer employed at City of Prospect therfore it is difficult to determine why explanations were not entered into the system.


Inger Cassidy 30 December 2016

Attachment

Attachment 10123


Finding 3. High number of disputed parking infringements

Impact: Minor


Risk Rating: Low

Finding(s)

Our analysis of the parking infringements data identified:

A total of 1116 infringements for the period 1 July 2015 to 30 June 2016

329 disputed infringements (29.5% of total)

164 infringements waived following dispute

329 disputed infringements appears relatively high given that 164 (50%) of disputed infringements are successful. Management were unable to explain the main reasons for the number of disputed infringements.

Risk

High number of disputed parking infringements can result in financial loss and/or indicate incorrectly expiation notices issued.


We recommend management assess the reason for the number of disputes and take appropriate corrective action.

An audit will be undertaken to assess the reason for the number of disputes and appropriate corrective action will be taken.


Inger Cassidy 31 March 2017

Finding 4. High levels of discretion over waiving of expiation notices

Impact: Minor


Risk Rating: Low

Finding(s)

Our analysis of the parking infringements data identified:

A total of 975 warnings for the period 1 July 2015 to 30 June 2016 issued to 938 vehicles, comparing to a total of 1116 infringements for the period (44.9% of total offence occurred).

939 warnings were given to first offences (96.3% of total)

32 warnings were given to second offences by the same vehicle registration (3.3% of total)

4 warnings were given to third offences by the same vehicle registration (0.4% of total)

Under the Council’s current “Waiving of Parking Expiation Notice Procedure”, it requires that officers issue warnings for first offences involving vehicles parked partly on the footpath or nature strip and that vehicles parked wholly on the footpath or nature strip and/or significantly obstructing the footpath be issued with an offence expiation notice. However, there is a lack of clarity and guidance to support the determination of whether an expiation notice or a warning should be issued.

The reason for issuance of warning is generally not recorded in the parking infringement system by the Community Safety Officer.

Risk

Inconsistent decision making in the issuing of expiation notices may result in financial loss and possibly

Attachment

Attachment 11124


damage the council’s public image/reputation.


Policies, procedures and guidelines regarding the issuance of warnings should be reviewed and updated to ensure that they clearly state when a warning should be issued.

Additional training for Community Safety Officer and should be provided to ensure that all officers understand the circumstances in which discretion is required.

Parking officers should be instructed to record the reason for all warnings issued.

Relevant policies and procedures will be reviewed and updated to ensure consistent information is provided regarding the issuing of expiations and warnings.

Staff will be trained in an procedural changes which will include the requirement to record reasons for all warnings issued.


Helen Robins 30 June 2017

Attachment

Attachment 12125


APPENDIX 2 Improvement Opportunities

1. Opportunity – review expiation withdrawal reason category

Observation(s)

Our review found that there is no data analysis of monthly, quarterly or annual results by Management. There is no analysis or reporting to Management of:

the number of tickets issued

number of tickets disputed and waived

reasons for tickets being disputed and waived

identification of high risk areas within the Council

outstanding fines balance and follow up

This data could be used by the Council to improve performance of the infringements process, which can identify where problem areas are and where improvements may be required. It could also be used to establish KPI’s with respect to the Council’s education, encouragement and enforcement objectives.

Opportunity(ies) Management Response

We recommend that a regular monthly report, along with appropriate commentary, be sent to management to enable them to more effectively monitor parking and animal infringements to adapt Council operations to better the Community.

We also recommend that management establish KPI’s for the parking and other infringements to

monitor and identify opportunities or problems associated with the processes.

Expiation income is monitored and reported fortnightly to the Infrastructure Assets & Environment Management Meeting.

Expiation income is also reviewed as part of Council’s formal budget review process on a

quarterly basis with any variance reported at this time.

Reports on Community Safety activities are formally provided to Council on a quaterly basis.

An improvement to be implemented will be to provide Management with these reports on a monthly basis and for reports to include addition information as recommended above.


Helen Robins 31 March 2017

Attachment

Attachment 13126


2. Opportunity – review expiation withdrawal reason category

Observation(s)

The expiation withdraw (waive) reason code and category are maintained in the Authority. It allows officers to select from the reason list when withdraw an expiation.

However, the current category contains reasons that are either general or not applicable. For instance, the reason “Expiation Fee Waived” is general and is not a valid reason. The officer normally select this category and does not record the specific reason for withdrawal in Authority. Refer to Finding 3 for detailed information. Therefore, this category list is not fit for purpose and is due for review.


We recommend management review and update the expiation withdrawal (waive) reason category in Authority.

Additional training for officers and should be provided to ensure that all officers understand the circumstances in withdrawal of expiation.

Officers should be instructed to record the reason for all expiation withdrawal.

The expiation withdrawal (waive) reason category will be reviewed and updated.

IT will be engaged to assist with updating the system.

Training will be provided to community safety staff as required.


Inger Cassidy 30 December 2016

3. Opportunity - conflict of interest review

Observation(s)

Conflict of interest is dealt with in the Local Government Act 1999, Division 3, Section 120. Staff are also bound by ICAC and the Code of Conduct in how to deal with these issue when they arise.

Where a personal association or relationship with the alleged offender or any other person involved exists, an alternative person should make decisions where possible, and the facts about any conflict/relationship will be recorded in accordance with Council’s Records Management protocols. However, there is no control or mechanism for review staff to identify or disclosure any conflict.


We recommend that management establish the mechanism for review staff to identify or disclosure any conflict in the enforcement process.

Policies and procedures will be undated to include the need for staff to disclose any conflicts of interest in relation to the enforcement process.

Officers and staff will be trained in any new procedures.


Helen Robins 30 June 2017

Attachment

Attachment 14127


APPENDIX 3 Documents Accessed and Consultation

Documents provided by the Council and accessed include:

Policy and procedures Authority expiation report Outstanding balance report Offence code list Information Report - CS1 Our Community - 26/07/2016

We would like to extend our appreciation to the following individuals who participated in, and provided information during this internal audit review.

Helen Robins, Manager City Maintenance and Community Safety Peter Smith, Community Safety Officer Nicolle Lanyon, Administration Officer

Attachment

Attachment 15128


APPENDIX 4 Controls Assessment Key Controls

Key controls identified during the audit include:

No. Control Name Control Effectiveness

1 Defined policies and procedures Opportunities for Improvement

2 Defined roles and responsibilities Adequate

3 Segregation of duties Adequate

4 Delegated authority Adequate

5 Expiation Issuance and Evidence Collection Adequate

6 Expiation Review and Withdraw (Waive) Opportunities for Improvement

7 Prosecution and Enforcement Adequate

8 Performance monitoring and reporting Adequate

9 Records management Adequate

Control Assessment Table

Control / Mitigating Factor

Description

Adequate 1. The controls address the identified risk and there is little scope for improvement.

2. There is no convincing cost/benefit justification to change the approach.

Opportunities for Improvement

1. The controls contain some inadequacies and scope for improvement can be identified.

2. There is some cost/benefit justification to change the approach.

Inadequate 1. The controls do not appropriately address the identified risk and there is an immediate need for improvement actions.

2. There is a significant cost/benefit justification to change the approach.

Attachment

Attachment 16129


APPENDIX 5 Risk Ratings

The following framework for Assurance ratings was developed by the Council to prioritise findings according to their relative significance depending on their impact to the process.

Likelihood

Consequences

Insignificant 1

Minor 2

Moderate 3

Major 4

Catastrophic 5

E (Almost Certain) Moderate High High Extreme Extreme

D (Likely) Low Moderate High Extreme Extreme

C (Possible) Low Low Moderate High Extreme

B (Unlikely) Low Low Low High Extreme

A (Rare) Low Low Low Moderate High

Measures of Corporate Risk Likelihood The likelihood of a risk eventuating must be identified in the context of existing controls using the following as a reference: Likelihood Rating Description Indicative Frequency Values

E - Almost Certain Is expected to occur in most circumstances Greater than one or more per annum

D - Likely Will probably occur in most circumstances

Will probably occur on one occasion in the coming year. 20%-90% probability the event will occur in the next year

C - Possible Might occur at some time Between 3-10 years

B - Unlikely Could occur at some time Between 10-50 years

A - Rare May occur only in exceptional circumstances

Every 50-100 years

Attachment

Attachment 17130

City of Prospect Page 17 of 17 Internal Audit Report - Infringements September 2016

Measures of Corporate Risk Consequence or Impact

Where a risk has implications across a number of areas of impact, the highest rating should be used to determine the overall level of risk. However each identified risk should be assessed from a mitigation / action.

Consequence

Rating Infrastructure and Assets

Business Continuity and

Business Systems

Legal Compliance and

Liability

Financial and

Economic

Political Social Environmental Customer/Citizen Reputation Partnership Staff WHS&IM

Catastrophic

5 Widespread, long term loss of substantial key assets, infrastructure and/or IT network/hardware. Critical loss, irreversible damage property / infrastructure

The continuing failure of Council to deliver essential services. The Removal of key revenue generation.

Regulatory or contract breaches causing very serious litigation, including major class action. An event occurring outside City of Prospect's Insurance cover.

Above 60% of City of Prospect's annual revenue (excluding capital revenue).

Loss of power and influence restricting decision making and capabilities. Dismissal of Council by State Government.

Widespread loss of trust across the community.

Widespread and irreversible environmental damage attributed by the courts to be negligent or incompetent action of City of Prospect.

Significant demographic and economic changes impact on recruitment and retention. Operational availability deteriorates below published service standards. Programs/projects not delivered, resulting in significant decline in community outcomes. Significant damage to reputation.

Loss of State Government support with scathing criticism and removal of the Council. National media exposure.

Resignation and or removal of major contractors and senior staff.

Staff issues cause continuing failure to deliver essential services.

Fatality or significant irreversible disability. Fatality of a member of staff or public. Critical loss, irreversible damage property / infrastructure

Major 4 Widespread, short to medium term loss of key assets, infrastructure and/or IT network/hardware. Serious structural damage.

Widespread failure to deliver several major strategic objectives and service plans. Long-term failure of Council causing lengthy service interruption.

Major regulatory or contract breaches and litigation. Liability implications and fines for CEO/Directors/Managers.

Between 2%-6% of City of Prospect's annual revenue (excluding capital revenue).

Adverse impact and intervention by State Government.

Tangible expressions of mistrust amongst some community members with significant influence on decision-makers.

Severe environmental impact requiring significant remedial action. Penalties and/or direction or compliance order incurred.

Major economic changes impact on recruitment and retention. Department cannot meet service demand. Public confidence in the organisation undermined. Outcome of a major program/project not achieved resulting in decline of community outcomes. Significant review of implementation of program required. Interrupt the development of essential infrastructure.

State media and public concern/exposure with adverse attention and long-term loss of support from City of Prospect residents.

Community dissatisfaction.

Persistent questions in

Council, external inquiry. Industrial action affecting service delivery.

Staff issues cause widespread failure to deliver several major strategic objectives and long-term failure of day to day service delivery.

Serious & extensive injuries requiring hospitalisation/rehabilitation. Lost time of more than 4 working days. Serious structural damage.

Moderate 3 Short to medium term loss of key assets, infrastructure and/or IT network/hardware. Moderate loss or infrastructure damage.

Failure to deliver minor strategic objectives and service plans. Temporary & recoverable failure of Council causing intermittent service interruption for a week.

Regulatory or contract breaches causing investigation / report to authority and prosecution and moderate fines.

Between 1%-2% of City of Prospect's annual revenue (excluding capital revenue).

Adverse impact and intervention by the ALG.

Tangible expression of mistrust amongst some community members with moderate influence on public opinion and decision-makers.

Moderate impact on the environment; no long-term or irreversible damage. May incur cautionary notice or infringement notice.

Major workforce development strategy changes cause employment contracts not able to meet Service needs. Complaints increase and cause local media long-term adverse publicity. Significant effect on staff morale and public perception of the organisation. Delivery of community program/project outcomes compromised for identified groups. Significant review/changes to programs required.

Significant state wide concern /exposure and short to mid term loss of support from City of Prospect residents.

Short term damage, public embarrassment of organisation.

Local-wide industrial action

(e.g. Bans)

Staff issues cause failure to deliver minor strategic objectives and temporary and recoverable failure of day to day service delivery.

Medical treatment/hospitalisation required. Lost time of up to 4 working days. Moderate loss or infrastructure damage.

Minor 2 Minor loss or infrastructure damage. Repairs required.

Temporary and recoverable failure of Council causing intermittent service interruption for several days.

Minor regulatory or contract breaches causing likely prosecution and minor fines.

Between 0.2%-1% of City of Prospect's annual revenue (excluding capital revenue).

Adverse impact by another local government.

Tangible expressions of mistrust amongst a few community members with some influence on public opinion and decision-makers.

Minor environmental damage such as remote temporary pollution.

Minor workforce development strategy changes cause minor financial and economic pressure effect the quality of customer service. Some public embarrassment. Local media coverage short term. Minor effect on staff morale / public attitudes. Community program/project outcome compromised. Minor impact on deficiency or effectiveness, managed internally.

Minor local community concern manageable through good public relations.

Local adverse publicity. Visible dissatisfaction from public,

limited/localised partnership

interest., specific internal

reporting. Local industrial action.

Staff issues cause several days interruption of day to day service delivery.

First aid treatment required resulting in lost time >1 day. Minor loss or infrastructure damage.

Insignificant

1 Damage where repairs are required however facility, infrastructure, network/hardware is still operational. Negligible loss or damage to property or infrastructure.

Negligible impact of Council, brief service interruption for several hours to a day.

Negligible regulatory breaches that are detected early and rectified. Insignificant legal issues & non-compliance.

Less than 0.2% of City of Prospect's annual revenue (excluding capital revenue).

Negligible impact from another local government.

Tangible expressions of mistrust amongst a handful of community members with no influence on public opinion and decision-makers.

Brief, non hazardous, transient pollution or damage.

Lack of appropriate consultation. Rumours, no media coverage. Little effect on staff morale. Community program/project outcome compromised. Resolved by routine operations.

Transient matter, e.g. Customer complaint, resolved in day-to-day management.

Little or no publicity.

Attention from minor

stakeholder with no publicity, only routine internal

reporting.

Staff issues cause negligible impact of day to day service delivery.

No injuries. No lost time. Negligible loss or damage to property or infrastructure.

Attachment

Attachment 18131

AGENDA ITEM NO.: 11.12 ON AGENDA TO: Audit Committee on 19 December 2016 DIRECTOR: Ginny Moon, Director Corporate Services REPORT AUTHOR: Chris Birch, Manager Financial Services SUBJECT: Review of Long Term Financial Plan


1.1 Preparation for the annual revision of the Long Term Financial Plan (LTFP) and Annual Budget 2017-2018 has now commenced. As a first step in this process, Council should revisit its Budget Assumptions, Key Performance Indicators (KPI) and set KPI targets.

1.2 The calculation method, suggested targets and explanations have been provided by the Local Government Association (LGA) via Financial Sustainability Information Paper 9. A copy has been provided in Attachments 2–11.

1.3 Information Paper 9 was last reviewed by the LGA and the SA Local Government Financial Managers Group (FMG) in May 2015. The document recommends setting target ranges for three (3) financial KPI’s. These are;

Operating Surplus Ratio; Net Financial Liabilities Ratio; Asset Sustainability Ratio.

All three KPI’s are a mandatory reporting requirement of the Model Financial Statements used in Council’s Financial Reporting.

1.4 Council has consistently used the same Key Performance Indicator targets for many years now. Adjustments have only been made where the calculation methods have been altered. At these times, targets were amended to be reflective of the same outcome. For example, when the Operating Surplus Ratio was amended to have the Total Income instead of Rates Income as the denominator, the target was amended to have the same target Operating Surplus ($250k-$650k).

1.5 The LTFP is formulated on a number of base assumptions. These assumptions have been updated with the latest information including:

Audited Financial Statements as at 30 June 2016

Local Government Price Index

Proposed Enterprise Agreement Increases

1.6 Proposed assumptions are included in Attachment 1.

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1.7 Council undertook a conditional assessment of Infrastructure Assets (excluding Stormwater) during its revaluation process in 2015-2016. The updated assessment has not yet been updated to the asset management plans. As this information and the amendments to useful lives is key to the timing of capital expenditure it is recommended that a full review of the asset management plans is undertaken before finalisation of the 2017 LTFP.

2. RECOMMENDATION

(1) That the Audit Committee having considered Item 11.12 Periodic Review of Key Financial Indicator Targets receives and notes the report.

(2) That the Audit Committee endorse the Long Term Financial Plan Assumptions for the years ending 30 June 2018-2027 (as provided in Attachment 1) for use in drafting the Long Term Financial Plan.

(3) That the Audit Committee review the current Key Financial Indicator’s, providing a proposed target range for Council’s consideration and inclusion in the Long Term Financial Plan at a proposed special meeting of the Audit Committee in January 2017.



The Long Term Financial Plan (LTFP) is a pivotal document used in the long term forecasting of Council’s budget and financial sustainability. By definition, the document highlights gaps and measures Council’s ability to achieve Strategy 4.2 “Sound Financial Management”.

3.2 Australian Accounting Standards.

3.3 Accounting Policies and Procedural Manual.

3.4 Local Government (Financial Management) Regulations 2011.

3.5 Local Government Association Financial Sustainability Information Paper 9 (Financial Indicators).


4.1 Community involvement regarding this item is not required; however consultation will be required on the Draft 2017-2018 Annual Business Plan and Budget which will be framed on these targets.

5. DISCUSSION

5.1 Preparation for the annual revision of the Long Term Financial Plan and Annual Budget 2016-2017 has now commenced. As a first step in this process, Council should revisit its Key Performance Indicators (KPI) and set targets.

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5.2 The calculation method, suggested targets and explanations have been provided by the Local Government Association (LGA) via Financial Sustainability Information Paper 9 (refer Attachments 2-11).

5.3 Information Paper 9 was last reviewed by the LGA and the SA Local Government Financial Managers Group (FMG) in May 2015. The document recommends setting target ranges for three (3) financial KPI’s. These are;

Operating Surplus Ratio;

Net Financial Liabilities Ratio;

Asset Sustainability Ratio.

All three KPI’s are a mandatory reporting requirement of the Model Financial Statements used in Council’s Financial Reporting.

5.4 Council’s current KPI’s were reported in its Annual Business Plan 2016-2017. The existing targets were used in reporting the Long Term Financial Plan (LTFP), also included in the Annual Business Plan 2016-2017. The extract below from the Annual Business Plan 2016-2017 highlights in pink, indicators that are outside Council’s current target ranges;

5.5 Council has included the commitment to replace the Thomas Street Centre (Community Hub Library and Innovation Centre – CLIC) at a cost of $8m. This is an indicative figure at the present time with site location, design and costing work yet to be completed. This project is likely to be the largest in Council’s LTFP with particular attention being made to the impacts on the LTFP during the decision making process. As per the Local Government Act 1999, S.48, Council will be required to undertake a prudential review on this project.

Operating Surplus

5.6 The operating surplus is designed to demonstrate Council’s control of its total revenue source and how it varies from its operating expenses.

5.7 During the latest review of information paper 9, this calculation method was amended to include total operating income, instead of just rate income. At the time of the calculation change, Council amended its target range from 2% - 5% to 1% - 3%. This amendment meant that the target operating surplus (in dollars) was still the same.

City of ProspectLong Term Financial Plan 2016-2026Financial Indicators Dashboard

Proposed Average Residential Rate Increase 2.60% 2.50% 2.50% 2.50% 2.50% 2.50% 2.50% 2.50% 2.50% 2.50%Proposed Development Growth 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00%Total Rate Revenue Increase (Including Growth) 3.60% 3.50% 3.50% 3.50% 3.50% 3.50% 3.50% 3.50% 3.50% 3.50%

0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%

‐ Above Acceptable Target Range‐ Within Acceptable Target Range‐ Below Acceptable Target Range

Year Ended 30 June: 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026

Financial Indicator Description Target Actual Estimate Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10

Indicator 1 - Operating Surplus Ratio - % 1%‐3% 1.8% 0.2% (1.3%) 2.6% 3.3% (0.7%) (0.2%) 0.4% 1.7% 4.7% 5.6% 3.8%

Indicator 2 - Net Financial Liabilities Ratio - % 10%‐50% 33% 37% 46% 76% 67% 67% 64% 56% 45% 33% 24% 13%

Indicator 3 - Asset Sustainability Ratio - % 100%‐120% 118% 93% 113% 92% 89% 125% 87% 84% 80% 73% 87% 90%

Note: Dashboard Targets are fixed and do not vary from year to year.

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Net Financial Liabilities

5.8 The net financial liabilities demonstrate Council’s net debt as a percentage of its operating revenue.

5.9 Council currently has a target range of 10 – 50%.

5.10 The net financial liabilities have been reducing in recent years with Council repaying existing debt and not needing to draw down on new loans.

5.11 A significant borrowing is included in the plan in order to fund the completion of a replacement for the Thomas Street Centre (CLIC) and undergrounding of powerlines on Prospect Road (PLEC).

5.12 The current model assumes that the funding of CLIC will occur completely in the 2017-2018 financial year. As Council moves closer to finalising the scope of the project and site selection, costing and timing will become more accurately inserted into the plan.

5.13 Council has previously raised concern at the misrepresentation of this indicator as a large portion of Council’s current borrowings are reimbursed by a third party. As the model statements cannot be amended this will not change for external reporting. Internal (including Elected Members’) management reporting will now include both the model statements calculation method and a second KPI adjusted to remove the secured loan. This is referred to as the Amended Net Financial Liabilities Ratio.

5.14 The ten year average Amended Net Financial Liabilities Ratio is 55%.

Asset Sustainability Ratio

5.15 The asset sustainability ratio demonstrates Council’s investment into the replacement and renewal of its existing Asset Stock.

5.16 Council currently operates a target range of 100% – 120%.

5.17 The ratio measures Council’s actual spend against the twenty year average of its required spend as identified in the Infrastructure Asset Management Plans (IAMP). This target spend is identified in order to ensure Council’s infrastructure assets are maintained to a desired level of service.

5.18 Council’s required spend has not been updated following the recent conditional assessment process undertaken during the latest round of asset revaluations. Most importantly, the unit rate for the valuation of footpaths was updated in order to include the removal and disposal cost of the old asset. This updated costing now needs to be updated in the IAMP documents in order to represent the required spend.

Budget Assumptions

5.19 In order to draft the long term financial plan, Council needs to consider the assumptions built into the plan.

5.20 The method for calculating the assumptions is consistent with the method used in 2016. This assumes the 10 year average of the Local Government Price Index (LGPI) will be used to measure the cost increases applied to Contractual, Material and Other Costs.

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5.21 Where known (not necessarily confirmed), information has been included to tailor the LTFP to the best known outcome. This is specifically evident in items such as Wage increases (including SGL changes), grant funding and grant timing.

5.22 A conservative assumption that the Roads to Recovery program will not be renewed in also included.

5.23 The LTFP does not include any allowances for unconfirmed large projects where Council has not already resolved to do so. This includes the Broadview Oval Master plan, whereas Council has specifically resolved to include $8m for the CLIC (Community Hub, Library and Innovation Centre).

5.24 Although the philosophy of assumptions has not been changed, some individual assumptions have been updated with the most recent information. This include:

Local Government Price Index

Future Enterprise Agreement Increases

Interest rate on future borrowings

Infrastructure asset useful lives from most recent revaluation

Inclusion of the most recent Audit Financial Results (30 June 2016)

5.25 The assumptions have not had any amendment to the anticipated rate revenue increases of 2.5% plus Growth of 1%. This will be reconsidered with the other assumptions during the February workshops.

5.26 A list of proposed assumptions is included in Attachment 1.

5.27 Council will be drafting the Long Term Financial Plan at its workshops during February 2017. The draft Long Term Financial Plan will be presented to the March Audit Committee meeting for feedback, prior to Adoption by Council.

5.28 Following the adjustments identified in item 5.24 and use of the most current information on hand, the revised draft dashboard currently reports as follows:

5.29 Council currently has an Operating Surplus Ratio target range of 1% - 3%. As an average, Council will achieve this over the life of the LTFP, however peaks and troughs exist within individual years. Council’s current target looks at years individually with no multi period target in place.

5.30 The current LTFP reports the average operating surplus across the whole plan (10 years) of 1.0% which is at the minimum of the target range. As an average, Council will achieve this over the life of the LTFP; however peaks and troughs exist within individual years. Councils current target looks at years individually with no multi period target in place

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ATTACHMENTS

Attachment 1: Draft Long Term Financial Plan Assumptions 2018 to 2027

Attachments 2-11: Local Government Association – Information Paper 9 – Financial Indicators

137

Long Term Financial Plan Assumptions for years ending 30 June 2018–2027

Long Term Financial Plan (LTFP) Assumptions

Year Ending 30 June 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027

Increase in CPI / LG Price Index for expenditure. Calculated using incremental historic average of LGPI

1.0% 1.3% 1.6% 1.9% 2.3% 2.5% 2.6% 2.8% 2.9% 3.0%

CPI Affecting: User Charges, Contractual Exp, Materials, Utilities, Fuel

Projected increase in Total Rate Revenue

3.5% 3.5% 3.5% 3.5% 3.5% 3.5% 3.5% 3.5% 3.5% 3.5%

Grant: New Roads to Recovery

$146K $146K 0 0 0 0 0 0 0 0

Increase in Grants Commission Grant Revenue

0% 1% 1% 1% 1% 1% 1% 1% 1% 1%

Grants Commission Grant

Assumed four instalments of Financial Assistance Grants

Community Housing Support Funding CHSP (formerly HACC)

No adjustments made in the Long Term Financial Plan

Increase in Enterprise Agreement (Salaries) MOA (ASU) LGE (AWU)

3% 3%

2% 2%

2% 2%

2% 2%

2% 2%

2.5% 2.5%

2.5% 2.5%

2.5% 2.5%

2.5% 2.5%

2.5% 2.5%

Legislative Requirement - Superannuation Guarantee stepped increase to 12%

0 0 0 0 0.5% 0.5% 0.5% 0.5% 0% 0%

Potential additional Rates

Significant investment is anticipated at 250 Churchill Road sites within next 5 years. Additional rate revenue from this site alone may be significant. Given the uncertain nature regarding timing and value of rate revenue increases, this additional revenue has not been brought to account.

Surplus/(Deficit) of Asset Disposal

Not factored into the Long Term Financial Plan

Asset Valuation Fluctuation in Asset Valuation is linked to cpi in the Long Term Financial Plan

Depreciation Depreciation Methodology remained consistent with 2016-2017.

Capital Expenditure Refer to the Infrastructure Asset Management Plan

Capital Expenditure Budgets is linked to cpi in the Long Term Financial Plan

Compounded Local Government Price Index has been factored into the Asset Management Plan

Assumes No Policy Change

The ongoing depreciation and material increases in maintenance expenses associated with capital projects on new/upgraded assets have been factored into the Council’s Long-term Financial Plan.

Loan Principal & Interest Repayment

As per the Loan Schedule. In order to deliver the undergrounding of Powerlines (PLEC) along Prospect Road, it is necessary for Council to borrow 1.3M in the first year of the plan. In addition, Council has resolved to include borrowings of an additional $8.0M for the proposed construction of a new CLIC (Community Hub, Library and Innovation Centre). The facility will replace the current leased premises at 1 Thomas Street Nailsworth which houses Council’s Library, History Room, Art Gallery and Digital Hub. Timing of new borrowings are expect as follows and repaid over a 15 year term from the individual drawdown dates:

2017-2018 - $9.3M

Attachment

Attachment 1 138

Financial Sustainability

Information Paper 9

Financial Indicators

Revised May 2015

Attachment

Attachment 2 139

LGA ‘Financial Sustainability’ Information Paper No. 9: Financial Indicators - Revised May 2015

Page 2

ECM 626413 LGA Financial Sustainability Program – www.lga.sa.gov.au/FSP

Introduction This Information Paper is one of a series of Information Papers about Financial Sustainability and Financial Governance in Local Government. The series of Information Papers was originally published in 2006 to 2011 as part of the Financial Sustainability Program. The history of that program and a complete list of Information Papers and other resources, including a glossary of terms and abbreviations, is provided on the LGA‟s “Financial Sustainability” web page: www.lga.sa.gov.au/FSP. The entire series of Papers was revised in early 2012, and again in early 2015 to take account of legislative changes and other developments. These Papers are addressed to, and written primarily for the benefit of Council Members and staff, but they are also available as a resource for the general public and students of Local Government. This Information Paper combines what were originally published as two separate Information Papers:

No 9 – Local Government Financial Indicators; and No 12 – Targets for Local Government Financial Indicators.

The previous Information Paper No. 12 was discontinued in 2012 and its contents were merged into this Information Paper. Financial Indicators – background Financial statements, prepared under Australian Accounting Standards, contain a wealth of information. Unfortunately their detail and format often mean it is hard for people without specific training (like accountants and auditors) to readily ascertain an entity‟s financial health and performance from this data. As a consequence, financial indicators and associated targets have been developed both in the public and private sectors to assist organisations and others who are interested in an entity‟s financial performance, to understand the messages that its financial statements contain. For example, the South Australian Government sets targets for its key financial indicators to guide revenue and expenditure decisions and overall budget strategies. Corporate boards in both the public and private sectors do the same. Many of these people are not finance experts but they can readily ascertain the financial health of their organisations and the impact of decisions under consideration by reference to simple financial indicators. The 2005 Independent Inquiry into the Financial Sustainability of Local Government recommended greater use of financial indicators by Councils. This prompted considerable work, much led by the SA Local Government Financial Management Group (SALGFMG) to develop and subsequently review a set of standardised financial indicators applicable to all Councils. More recently, with encouragement by the Australian Centre of Excellence for Local Government (ACELG), all jurisdictions in Australia have agreed, in principle, to adopt three nationally consistent financial indicators. Going forward, the LGA is confident that the three indicators described in this paper will be agreed by all jurisdictions. The only change required for South Australian Councils is the existing denominator of the operating surplus ratio.

Attachment

Attachment 3 140

http://www.lga.sa.gov.au/FSP


http://www.lga.sa.gov.au/page.aspx?c=8801

http://www.salgfmg.com.au/

http://www.acelg.org.au/

http://www.acelg.org.au/


Page 3


This paper promotes an approach whereby each Council would determine locally appropriate targets or target ranges for each indicator. Reporting actual results against targets helps the public assess the degree of accomplishment of a Council‟s objectives. If reported alone, indicators do not provide a basis or context for assessing performance. The use of these financial indicators and associated targets determined by a Council are intended to act like a road map to assist Council Members and senior staff to steer their Council‟s financial performance and sustainability (and to enable the public to judge their success). What does legislation require?

The Local Government (Financial Management) Regulations 2011 require a Council to use three specific indicators:

an operating surplus ratio; a net financial liabilities ratio; and an asset sustainability ratio;

in the Council‟s: long-term financial plan;1 annual budget;2; mid-year review of the annual budget.3; and report on annual financial results4

The Regulations also require a Council‟s long-term financial plan to include target ranges adopted by the Council for each indicator.5 In these documents, Councils effectively are required to evaluate past performance and project the future impact of strategies under consideration against financial indicators. Section 122(1)(d) of the Local Government Act 1999 (the Act) requires a Council when preparing and adopting its strategic management plans to “state the measures (financial and non-financial) that are to be used to monitor and assess the performance of the council over the relevant period”.

1 Local Government (Financial Management) Regulations 2011 Regulation 5(1)(c) 2 Local Government (Financial Management) Regulations 2011 Regulation 7(d) 3 Local Government (Financial Management) Regulations 2011 Regulation 9(2) 4 Local Government (Financial Management) Regulations 2011 Regulation 10 (2)

5 Local Government (Financial Management) Regulations 2011 Regulation 5(1)(c)

Attachment

Attachment 4 141


http://www.legislation.sa.gov.au/LZ/C/R/LOCAL%20GOVERNMENT%20(FINANCIAL%20MANAGEMENT)%20REGULATIONS%202011.aspx


http://www.legislation.sa.gov.au/LZ/C/A/LOCAL%20GOVERNMENT%20ACT%201999.aspx






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SA Local Government Financial Indicators Most Councils have used and reported on various financial indicators over many years but until the 2005 Independent Inquiry Into Local Government Financial Sustainability (“the Inquiry”) no consistent approach had evolved. Some commonly used indicators were developed during the cash accounting6 era, or have been drawn from what is used in the corporate sector, and are less relevant in an accrual accounting7 and Local Government environment. Councils have often also used a large number of indicators and the myriad of data generated has not necessarily helped to clarify focus on key issues concerning their financial performance and position. The LGA‟s General Meeting in 2007 endorsed the sector-wide use of a consistent set of seven financial indicators, which many Councils then adopted. Several years later, informed by a comprehensive review by the SALGFMG, it was agreed to focus on only three key financial indicators. Reporting on a smaller rather than a larger number of indicators helps decision-makers and stakeholders more readily focus on and comprehend key outcomes and implications. Although the indicators provide a robust ready assessment of financial performance and sustainability, they need to be interpreted in the context of a Council‟s operating environment. They do not replace the need for sound judgement. It is particularly important to consider trend data, both historic and that projected from a Council‟s long-term financial plan in decision-making and in reviewing financial performance. Looking at one year‟s data or in movements between two or even three years in isolation could lead to misleading conclusions. For each of its Annual General Meetings, the LGA assembles an update report providing the latest values, history and comparisons of the three indicators for the Local Government sector as a whole.8

6 Cash accounting recognises events as having occurred only when payments are made or received. 7 Accrual accounting recognises revenues when they are earned and expenses as they are incurred. 8 See, for example, the latest Financial Indicators report available at http://www.lga.sa.gov.au/FSP

Attachment

Attachment 5 142


http://www.lga.sa.gov.au/page.aspx?c=8801

http://www.lga.sa.gov.au/site/page.cfm?u=250&c=12655



Page 5


Indicator 1: Operating Surplus Ratio

(By what percentage does the operating income vary from operating expenses?) An operating surplus (or deficit) arises when operating income exceeds (or is less than) operating expenses for a period (usually a year). Just like any household or other organisation, a Council‟s long-term financial sustainability is dependant upon ensuring that, on average over time, its expenses are less than associated income. In essence this requires current day citizens to fully meet the cost of services provided for them by their Council. If a Council is not generating an operating surplus in most periods, then it is unlikely to be operating sustainably. It means that the cost of services provided to the community exceeds income generated. The change of an operating deficit into a operating surplus can occur only by ensuring in future that income is increasing and/or that expenses are reduced (at least relative to income increases, either by reducing service levels or improving productivity). If a Council was operating with a significant deficit over several years and its strategic management and long-term financial plans did not provide clear proposals for this to be turned around then it would be inevitable that the Council would face major financial shocks in the future. The Council effectively would be in the same position as an individual or family living beyond their means. Sooner or later they would be caught by the consequences. For a Council the problem would likely come to a head when existing major assets failed. The Council would then need to choose between large rate rises or not replacing assets thereby effectively lowering its standards of service to its community. The operating surplus ratio is the operating surplus (deficit) expressed as a percentage of operating income. A positive ratio indicates the percentage of operating income available to help fund proposed capital expenditure. If the relevant amount is not required for this purpose in a particular year, it can be held for future capital expenditure needs by either increasing financial assets or preferably, where possible, reducing debt in the meantime. A negative ratio indicates the percentage increase in operating income or the approximate decrease in operating expenses required to achieve a break-even operating result. When preparing budgets, budget reviews and long-term financial plans, some Councils may choose to calculate an operating surplus ratio over a rolling three or five year period, in addition to showing the ratio calculated on the standard annual basis. For annual financial statements, as a minimum, data for the reporting year would be reported. This would at least ensure consistency among all Councils and enable the LGA to continue to publish annual sector-wide information on financial indicators. This indicator is by far the most important financial indicator for Councils. If a Council consistently achieves a modest positive operating surplus ratio, and has soundly based projections showing that it can continue to do so in future, having regard to asset management and its community‟s service level needs, then it is financially sustainable. Favourable trend results measured against the other financial indicators described below will assist, but not in themselves ensure, that a Council operates sustainably.

Attachment

Attachment 6 143



Page 6


Rationale The setting of a lower target would be hard to justify. A negative operating surplus ratio target (i.e. where a Council is incurring an operating deficit) might be appropriate in the short-term to cater for fluctuations that occur in the normal course of business in the timing of substantial income and/or expenses or if a Council‟s community was widely and significantly adversely affected by economic conditions. Similarly an annually diminishing negative operating surplus ratio target might be an appropriate „roadmap‟ to progressively achieve financial sustainability for a Council that had previously incurred large operating deficits. Targeting a negative operating surplus ratio over a long-term could be justified only if the Council and its community had worked out, and accepted, where this course would lead them. That is, that the Council‟s stock of assets, net of liabilities, would progressively decline in value and that the Council would increasingly over time be unable to fund required rehabilitation or replacement of assets. This would not normally be acceptable but may be, for example, in cases where there has been very significant demographic or service preference change over time and some assets are not intended to be replaced at the end of their economic life. Should a Council wish to target a very large operating surplus ratio it needs to be equally clear about, and articulate, its reasons for doing so. This course of action would mean that the Council would be setting rates and/or other fees and charges at levels well in excess of its operating expenses. Accordingly, careful consideration needs to be given to the impact of large operating surpluses on intergenerational equity. There may nevertheless be compelling reasons for such a strategy. For example the Council may have run significant operating deficits in the past and have impending major asset replacement needs in excess of a prudent borrowing level. The Council might wish to build up financial assets or reduce existing liabilities to help it, in the future, finance this impending need. Another example may be that a Council expects relatively consistent capital expenditure on new and upgraded assets over an extended period and has decided that it is appropriate to finance some of that capital expenditure from operating surpluses. The setting of an appropriate target range for the operating surplus ratio is the most important financial decision that a Council must make. It is essential that the elected Council and staff involved in making this decision are provided with sufficient information and training to fully understand all relevant issues and implications. Like targets determined locally for other indicators described in this paper, a Council should set targets, or preferably target ranges, for its operating surplus ratio for each year of its long-term financial plan. Again at their option, some Councils may also prefer to establish targets for this ratio in their budgets and long-term financial plans over a rolling three or five year period.

Generally suggested target range for Indicator 1: Operating Surplus Ratio: To achieve, on average over time, an operating surplus ratio of between 0% and 10%

Attachment

Attachment 7 144



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Indicator 2: Net Financial Liabilities Ratio

(How significant is the net amount owed to others, compared with operating income?)

Net financial liabilities equals total liabilities less financial assets (excluding equity accounted investments in Council businesses). Often too much focus is placed on the level of a Council‟s borrowings. This number has little meaning without also considering the Council‟s available financial assets and other liabilities. It would make no sense for individuals, in assessing their financial positions, to look at one pile of bills and ignore others and disregard how much money they have in the bank. The same holds true for Councils.9 Net financial liabilities is a broader and more appropriate measure of indebtedness than the level of borrowings, because it includes items such as employee long-service leave entitlements and other amounts payable in future as well as taking account of a Council‟s cash holdings and invested monies. Before considering an increase in its indebtedness, a Council needs to recognise that interest associated with borrowings will impact negatively on its operating result. However Councils with significant asset rehabilitation and replacement backlogs may find that their financial sustainability is improved if they raise borrowings to finance the works needed to address these backlogs. I.e. if the operational savings achieved from addressing these backlogs exceed the additional interest costs resulting from the borrowings raised, financial sustainability would be improved. For example, it may be a financially better option for a Council to borrow money to undertake the reseal of a deteriorating road sooner than originally planned and thus avoid having to fully reconstruct the road within a few years at a cost two or three times the cost of the timely reseal. The net financial liabilities ratio is calculated by expressing net financial liabilities at the end of a financial year as a percentage of operating income for the year. If the ratio falls, over time, this indicates that the Council‟s capacity to meet its financial obligations from operating income is strengthening. An increase in the net financial liabilities ratio will sometimes mean that a Council is incurring higher operating expenses (e.g. as a result of additional maintenance and depreciation costs associated with purchasing new assets). This will detract from the Council‟s overall operating result. Nevertheless a Council with a healthy operating surplus could quite appropriately decide to allow its net financial liabilities ratio to increase in order to provide additional services to its community through acquisition of additional assets without detracting from its financial sustainability. There is no optimal single number or even narrow range for this indicator. What is important is that a Council understands and is comfortable with its ratio and that it has been determined based on future community needs and long-term financial sustainability.

9 For more detailed discussion of this issue and other debt related matters highlighted elsewhere in

this paper, refer to the LGA Financial Sustainability Information Paper No. 10 - Debt at www.lga.sa.gov.au/FSP

Attachment

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Rationale There is no right or wrong target range for the net financial liabilities ratio. Different Councils (or the same Council at different points of time in its long-term financial plan) could appropriately have very different target ranges and each could be equally responsible and financially sustainable, depending upon their circumstances. A target range should be set by a Council having regard to the target for its operating surplus ratio and the needs that are identified in its long-term financial plan and its infrastructure and asset management plan. The target ratio should normally be (especially over the medium to longer–term) greater than zero. If not, that is likely to imply that a Council places a higher priority on accumulating financial assets than applying funds generated from ratepayers to the provision of services including infrastructure renewal. It is suggested that in normal circumstances the target ceiling for a net financial liabilities ratio be generally no more than 100% of operating income to ensure the ratio remains within conventionally prudent limits. However, a well-managed Council committed to sound financial strategies (particularly during a time of significant development) could comfortably allow a higher net financial liabilities ratio. Also, while any target ratio should effectively provide a guide to influence income and expenditure decisions and to constrain borrowing, it would make sense to borrow to fund the replacement of an asset at the end of its „economic life‟ if funds were not available from other sources (and assuming that existing service levels were considered affordable). All other things being equal, a Council that provides Community Wastewater Management System (CWMS) services is likely to need to have a higher level of net financial liabilities, as a result of financing needs associated with CWMS asset provision, relative to a Council that does not provide such services. This should not cause concern, because a CWMS has a separate associated income stream and associated rates or charges should be based on recovering full costs. A Council with a CWMS could choose to also establish a net financial liabilities ratio target exclusive of operating income and net financial liabilities associated with CWMS activity and report its performance against same. If a Council has not yet fully researched its likely medium to longer-term asset rehabilitation and replacement needs, it may be appropriate to set a more modest ceiling until this information is available and its funding implications assessed. The breadth of the suggested range highlights the considerable discretion associated with sound management of net financial liabilities. What is important is that a Council understands and is comfortable with its ratio and that it has been determined based on future community needs and long-term financial sustainability.

Generally suggested target range for Indicator 2: Net Financial Liabilities Ratio: Net financial liabilities ratio is between zero and 100% of total operating income, but possibly

higher in some circumstances.

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Indicator 3: Asset Sustainability Ratio10 (Are assets being renewed and replaced in an optimal way?) This ratio indicates the extent to which existing non-financial assets are being renewed and replaced, compared with the asset renewal and replacement expenditure identified as warranted in a Council‟s infrastructure and asset management plan (I&AMP). It is calculated by measuring capital expenditure on renewal or replacement of assets for a period, divided by the optimal level of such expenditure proposed in a Council‟s I&AMP. At their option, some Councils may choose to calculate their asset sustainability ratio in budgets, budget reviews and long-term financial plans over a rolling three or five year period, in addition to showing the ratio calculated on the standard basis. For annual financial statements, at a minimum, data for the reporting year would be reported. This would at least ensure consistency among all Councils and enable the LGA to continue to publish annual sector-wide information on financial indicators. If capital expenditure on renewing or replacing existing assets is at a level consisted with proposed in a soundly prepared I&AMP that is based on long-run affordable service levels, then it is likely that a Council is reasonably optimising timing of asset renewal activity. Any material underspending on renewal and replacement over the medium term is likely to adversely impact on the cost-effective achievement of preferred, affordable service levels and could potentially progressively undermine a Council‟s financial sustainability. For example, additional maintenance costs associated with assets that have exceeded their economic life might be higher than costs that would be associated with renewal or replacement. Eventually a Council will be confronted with failed assets, and potentially significant renewal and replacement expenditure needs that cannot be accommodated without sudden large rate increases. Rationale Achievement of the suggested target would mean that a Council was reasonably optimising the timing of capital outlays on the renewal/replacement of assets (for its specified and preferred level of service from assets). Failure to achieve the target would most likely mean that a Council was not optimising its financial sustainability and in order to do so may need to consider revising service levels. Again at their option, some Councils may prefer to establish targets for this ratio in their budgets and long-term financial plans over a rolling three or five year period, in addition to showing targets on the standard basis.

10 As part of the ACELG initiative to encourage three nationally consistent financial indicators, the name of the ‘Asset Sustainability Ratio’ might change in the future to ‘Asset Renewal Funding Ratio’. Any such change would need to be reflected in a corresponding change to the Regulations.

Suggested target for Indicator 3: Asset Sustainability Ratio

Capital outlays on renewing/replacing assets are greater than 90% but less than 110% of the level proposed in the Infrastructure and Asset Management Plan (I&AMP).

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What are the issues for Councils? Councils should review their past practices in relation to the use of financial indicators. All Councils are encouraged to use the financial indicators recommended in this paper to guide future decision-making. Every Council also should consider setting target ranges for aspired performance against these indicators and consider whether any of its policies warrant subsequent revision (e.g. policies on rating, and service levels11). A Council‟s long-term financial plan should highlight projected performance using these indicators and include targets for each year of the plan. Where targeted performance is not being achieved, the plan should be restructured with incremental targets set based on a strategy of progressive improvement and achievement of appropriate ongoing targets by a reasonable point in time in future. The annual budget also should disclose projected performance using these financial indicators and associated targets established by the Council. Acknowledgements Development of this paper benefitted from contributions by:

Mr John Comrie of JAC Comrie Pty Ltd; Mr John Wright; the SA Local Government Financial Management Group; and funding from the Local Government Research and Development Scheme.

11 See LGA Financial Sustainability Information Paper No. 26: - Service Ranges and Levels at www.lga.sa.gov.au/FSP.

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http://www.jaccomrie.com.au/

http://www.salgfmg.org.au/

http://www.lga.sa.gov.au/site/page.cfm?u=276
