DISCLAIMER - Town of Claremont€¦ · supplier panel for provision of audit services to undertake a review of appropriateness and application of the Town’s policies, procedures,

DISCLAIMER

Persons present at this meeting are cautioned against taking any action as a result of any Committee recommendations until such time as those recommendations have been considered by Council and the minutes of that Council meeting confirmed.

AUDIT AND RISK MANAGEMENT COMMITTEE AGENDA 1 MARCH 2019

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TABLE OF CONTENTS

ITEM SUBJECT PAGE NO

1 DECLARATION OF OPENING/ANNOUNCEMENT OF VISITORS... 1

2 RECORD OF ATTENDANCE/APOLOGIES ...................................... 1

3 DISCLOSURE OF INTERESTS ......................................................... 1

4 CONFIRMATION OF MINUTES OF PREVIOUS MEETINGS ........... 1

5 BUSINESS NOT DEALT WITH FROM A PREVIOUS MEETING ...... 1

6 REPORTS OF THE CEO ................................................................... 2

6.1 PROCUREMENT AND DELEGATION AUDIT - ENGAGEMENT OF AUDITOR ........................................................................................... 2

7 COMMITTEE MEMBERS’ MOTIONS OF WHICH PREVIOUS NOTICE HAS BEEN GIVEN .............................................................. 7

8 OTHER BUSINESS ............................................................................ 7

9 FUTURE MEETINGS OF COMMITTEE ............................................. 7

10 DECLARATION OF CLOSURE OF MEETING .................................. 7


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AUDIT AND RISK MANAGEMENT COMMITTEE

AGENDA

1 DECLARATION OF OPENING/ANNOUNCEMENT OF VISITORS

2 RECORD OF ATTENDANCE/APOLOGIES

3 DISCLOSURE OF INTERESTS

4 CONFIRMATION OF MINUTES OF PREVIOUS MEETINGS

The Minutes of the Audit and Risk Management Committee, held on 8 February 2019 be confirmed.

5 BUSINESS NOT DEALT WITH FROM A PREVIOUS MEETING

https://www.claremont.wa.gov.au/MediaLibrary/TownOfClaremont/Documents/Minutes-February-8-2019-Audit-and-Risk-Management-Committee.pdf


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6 REPORTS OF THE CEO

6.1 PROCUREMENT AND DELEGATION AUDIT - ENGAGEMENT OF AUDITOR

File Ref: FIM00052

Attachments: Scope of Audit (Attachment 1) Restricted Attachments: Audit Proposal – Paxon Group (Attachment

1) Audit Proposal – Butler Settineri

(Attachment 2) Responsible Officer: Les Crichton

Director Corporate and Governance

Author: Hitesh Hans Manager Finance

Proposed Meeting Date: 1 March 2019

Purpose

For the Audit Committee to consider the submissions received for the provision of external audit services to review and report by the end of the 2018-19 financial year on the appropriateness, processes and application of the Town’s policies procedures, and associated record keeping (including sampling) in relation to procurement and delegations.

Background

The Audit and Risk Management Committee on reviewing progress on recommendations following completion of the 2017 Compliance Audit Return raised its concerns, at the increasing number of reports of non-compliance in the areas of procurement and delegations within the local government and public sector. The Office of the Auditor General had completed and published a review of local government procurement which highlighted weaknesses in procurement controls, processes and documentation across each the eight local governments it reviewed. The local governments ranged in size and location from a large metropolitan city, small country shire, and some in between. A number of state government agencies have also been found with deficiencies within their procurement processes, the most notable recently being the CCC’s investigation into the North Metropolitan Health Service expenditure. The committee considered it appropriate to undertake a more detailed review of the functions in light of the move of the local government audit function to the control of the Office of the Auditor General this year.


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In December 2018, Council on recommendation by the Audit and Risk Management (ARMC) resolved that it engage an external auditor to review and report by the end of the 2018-19 financial year on the appropriateness, processes and application of the Town’s policies procedures, and associated record keeping (including sampling) in relation to procurement and delegations. The scope of the review were endorsed by the ARMC chair with copies issued to all members of the ARMC. Quotes were sought through the WALGA preferred supplier panel for provision of audit services to undertake a review of appropriateness and application of the Town’s policies, procedures, systems and record keeping in relation to procurement and delegations. This panel is prequalified by WALGA for delivery of specialist Local Government audit services. The submission period closed on 20 February 2019 and of seven suppliers in this panel, two have submitted their proposals.

Discussion

The Request for Quotation was issued to the preferred suppliers’ panel for audit services on 6 February 2019 and closed 5.00pm 20 February 2019. Of the seven suppliers, four declined to respond, one did not respond, and two submitted proposals. A summary of the fixed price audit costs (GST inclusive) is detailed in Table 1.

Table 1 – Cost Summary

Audit Services Average hourly rate

Paxon Group $13,200 $110.00

Butler Settineri $10,780 $163.34

The proposals were assessed against the assessment criteria by Director Corporate and Governance and Manager Finance and summarised in the below Table 2.

Assessment Criteria Weighting

Value for money 25% Resources (capacity to complete) 20% Key personnel skills & experience 25% Methodology 30% Table 2 – Evaluation Summary

Value for money (25%)

Resources (20%)

Key personnel skills & experience (25%)

Methodology (30%)

Weighted Score

Paxon Group

10 8 9 9 8.55

Butler Settineri

8 8 8 8 8.00


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Options

A summary on each of the proposals is provided in support of the above scoring.

Paxon Group

This is the more expensive of the two proposals. However, provides double the hours provided.

An Australian advisory and consultancy firm with 50 professionals operating from offices in Perth, Sydney and Melbourne. They propose an audit team of four including the Executive Director, Senior Manager and two Senior Audit Consultants. Each of the audit team (above) have over 15 years auditing experience, including work within the local government sector. Each has been allocated 25% of allocated hours.

Paxon have recently completed full procurement auditing of three metropolitan and two regional local governments.

The methodology proposed, addresses the requirement of the scope, allocates 120 hours towards the review, and includes start up meeting with the ARMC and progress report after first fortnight. Paxon propose to present a final report by 25 March 2019.

While not requested, the Paxon Group’s advisory services provided by their operating divisions which comprise:

Assurance and advisory

Forensic accounting

Outsourced accounting services

Risk Management

Tax and compliance.

Butler Settineri

This is the least expensive proposal on a total cost basis.

A Perth (Subiaco) based CA firm comprising seven partners and 45 staff. The proposal indicates an audit team of five, comprising two Partners, two Audit Managers and an Audit Supervisor. The audit team have between 10 and 20 years of audit experience with the firm, currently the internal auditors for the City of Vincent and undertaking work for the Shire of Serpentine Jarrahdale and Town of Cottesloe. The team have been allocated 50% of task hours with the balance to be completed by support staff.

The audit methodology proposed, addresses the requirement of the scope. However, does not provide a specific timeline on implementation of the review. It allocates 60 hours to undertake the review and includes presentation of a final report to the ARMC.

Butler Settineri also provides the following services;


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i. Accounting (management & statutory account preparation, payroll, asset registers)

ii. Taxation (PAYG, CGT, new entity registrations, salary packaging)

iii. Business Advisory (Structure/Estate planning, accounting systems, strategic planning, budgeting, forecasting)

iv. Self managed super

v. Wealth management (financial/retirement planning, investment advice, life insurance, superannuation)

Recommendation

Based on the above assessment of the two proposals, it is recommended the ARMC endorse the engagement of the Paxon Group to undertake the audit of procurement and delegation processes as set out in their proposal. This proposal more thoroughly addresses the review objectives, demonstrating greater experience in, and examination of, the scope requirements.

Past Resolutions

Ordinary Meeting of Council 4 December 2018, Resolution 217/18: That Council engage an external auditor to review and report to the Audit and Risk Management Committee by the end of the 2018-19 financial year on the appropriateness, processes and application of the Towns policies, procedures, and associated record keeping (including sampling), in relation to;

i. Procurement, and ii. Delegations

CARRIED BY AN ABSOLUTE MAJORITY Ordinary Meeting of Council 4 December 2018, Resolution 217/18: That Council: 1. The Terms of Reference for the review and report be developed for

endorsement by the Audit Committee Chair, and 2. Council approve an unbudgeted allocation of $15,000 to fund the external

review of the procurement and delegation policies and procedures. CARRIED BY AN ABSOLUTE MAJORITY

Financial and Staff Implications

Council has allocated $15,000 within the 2018-19 Budget for the provision of this review.

Policy and Statutory Implications

Local Government Act 1995 – Division 2 Appointment of Auditors Local Government (Audit) Regulations 1996 Local Government (Financial Management) Regulations 1996 Town of Claremont Procurement Policy RCR226


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Communication / Consultation

Nil

Strategic Community Plan

Governance and Leadership

We are an open and accountable local government that encourages community involvement and strives to keep its community well informed.

Provide and maintain a high standard of governance, accountability, management and strategic planning.

Urgency

Engagement of the external auditor will enable this review to be completed with a report presented to the ARMC prior to commencement of the 2018-19 annual audit by of the OAG in May 2019.

Voting Requirements

Simple majority decision of Committee required.

OFFICER RECOMMENDATION

That the Audit Committee endorse engagement of the Paxon Group to undertake the audit of procurement and delegation processes as set out in their proposal.


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7 COMMITTEE MEMBERS’ MOTIONS OF WHICH PREVIOUS NOTICE HAS BEEN GIVEN

8 OTHER BUSINESS

9 FUTURE MEETINGS OF COMMITTEE

Audit and Risk Management Committee - Friday, 8.00am 5 April 2019.

10 DECLARATION OF CLOSURE OF MEETING


TOWN OF CLAREMONT

A T T A C H M E N T S

1 MARCH 2019


6. REPORTS OF THE CEO


ATTACHMENT 1 – SCOPE OF AUDIT

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AUDIT OF PROCUEMENT AND DELEGATION PROCESS 1

Town of Claremont

Audit of Procurement and Delegation Processes

1. Background

2. Objectives of the Audit

3. Term of Audit (Timing)

4. Scope of the Audit

5. Audit Methodology and Approach

6. Price Schedule

7. Terms

8. Termination of Employment

1. Background

An invitation is extended to submit through the WALGA Preferred Supplier Panel a quotation to provide the following audit service for the Town of Claremont:

To undertake a review of appropriateness and application of the Town’s policies, procedures, systems and record keeping in relation to

the procurement, and delegations.

This audit is sought by Council on recommendation by its Audit and Risk Committee (ARMC). The ARMC has noted the increasing number of reports of non-compliance in these areas over the past two year within local government and public sector.

The Office of the Auditor General (OAG) recently completed and published a review of procurement practices across eight local governments which highlighted varying levels of procurement controls, processes and documentation across each.

The OAG recommended that all Local Government’s should review their policies, processes and controls surrounding procurement.

The Town of Claremont employs 100 staff, manages community assets of over $134M and made 4,478 payments of over $30M in 2017-18 financial year.

https://audit.wa.gov.au/reports-and-publications/reports/local-government-procurement/


2. Objectives of the Audit

2.1 The objective of this audit is to evaluate the effectiveness of the internal control

framework over the Towns procurement and delegation processes. Specifically, the audit to review whether:

a) The Town has policies, systems, and controls in place to enable transparent, efficient and effective procurement and exercise of delegation that are in

accordance with relevant Local Government Act and associated regulations;

b) Mechanisms are in place to help ensure compliance with Town’s procurement and delegation policies and practices;

c) Effective monitoring and reporting mechanisms are in place to provide with accurate, relevant, and reliable information for decision-making regarding the

delivery of procurement services and exercise of delegations;

2.2 To provide any recommendations for the improvements of procurement and delegation functions as a result of this review.

3. Timing of Audit

3.1 A draft report is to be completed for review by the ARMC on or before four weeks of appointment

4. Scope of the Audit

4.1 The auditor is to carry out such work as is necessary to review procurement

policy, procedures and practices of Town of Claremont. This is to include review of procurement and delegation transactions for most recent twelve-month period.

4.2 The auditor is to include in the audit report:

i) Any matters that indicate significant adverse trends in procurement and delegation practices of the Town of Claremont;

ii) Any matters indicating non-compliance with requirements of the Act,

Regulations, policies and any other written law relating to procurement and

delegation.


5. Audit Methodology and Approach

Additional requirements of the Auditor: 5.1 The auditor is required to comply with the requirements of Local Government Act 1995 and the Local Government (Audit) Regulations 1996;

5.2 An audit is to be carried out in accordance with “Auditing Standards” and “Auditing Guidance Statements” adopted from time to time by the Australian Society of Certified Practicing Accountants and the Institute of Chartered Accountants in Australia;

5.3 The auditor is to provide the local government with a general

outline of his/her methodology;

5.4 The auditor is to provide the local government with a plan for the audit including:

- Attendance at the first meeting of the ARMC following their appointment to outline their approach to the audit assignment;

- The method to be used to communicate with, and provide advice and information to, the local government;

- Attendance at ARMC meetings as and when required;

6. Price Schedule

Prices quoted must include all related fees & charges including travel and accommodation.

Any change not stated in the price schedule will not be allowed as a charge for any transaction under any resultant contract

$ (a) Audit of Procurement and Delegation Processes

$

(b) Number of Hours Allocated

TOTAL (Excluding gst)

$


7. Terms

Conditions to be noted by auditors:

- The auditor shall not subcontract to a third party;

- The auditor shall not, and has no right to, assign the audit contract to third

parties;

- The auditor shall not be engaged by the local government to undertake any

financial consultancy with the local government that requires the preparation

of financial information that will be the subject of the annual audit; and

- The auditor shall confirm that he or she has, and will maintain during the

duration of the audit term, professional indemnity insurance covering the legal

liability arising out of any neglect, default, error, or omission.

8. Termination of Appointment

The appointment as auditor is terminated if:

(a) The auditor ceases to be a registered company auditor;

(b) The auditor ceases to be an approved auditor under Section 7.5 of the Local

Government Act 1995;

(c) The auditor is a disqualified person under Section 7.4((2) of the Local Government

Act 1995;

(d) The auditor resigns by notice in writing to Council; or

(e) Council serves notice in writing to the auditor terminating the appointment.



6.1 PROCUREMENT AND DELEGATION AUDIT -

ENGAGEMENT OF AUDITOR

ATTACHMENT 1 (RESTRICTED) – AUDIT PROPOSAL – PAXON GROUP

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ATTACHMENT 2 (RESTRICTED) – AUDIT PROPOSAL – BUTLER SETTINERI

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