Minutes of Audit and Risk Committee

Minutes – Audit and Risk Committee Meeting 13 February 2018 Page 1 of 4

5. Reports of Officers

5.1 COMPLIANCE AUDIT RETURN 2017

LOCATION/ADDRESS: Nil

APPLICANT: Nil

FILE: LCR02

AUTHOR: Manager Governance

CONTRIBUTOR/S: Nil

RESPONSIBLE OFFICER: Director Corporate Services

DISCLOSURE OF INTEREST: Nil

DATE OF REPORT: 1 February 2018

SUMMARY: The purpose of this report is to present to the Audit and Risk Committee the 2017 Compliance Audit Return for review, and for a recommendation to Council to adopt the 2017 Compliance Audit Return for submission to the Department of Local Government, Sport and Cultural Industries (DLGSC) by 31 March 2018.

BACKGROUND

Previous Considerations

OMC 23 March 2004 Item 9.1.3

OMC 22 March 2005 Item 9.1.2

OMC 11 April 2006 Item 9.1.4

OMC 15 March 2007 Item 10.4

OMC 13 March 2008 Item 10.1

OMC 24 March 2009 Item 10.3

OMC 18 March 2010 Item 10.1

OMC 17 March 2011 Item 10.2

OMC 15 March 2012 Item 9.4.2

OMC 21 March 2013 Item 10.2

OMC 27 February 2014 Item 10.4

OMC 26 February 2015 Item 10.1

OMC 25 February 2016 Item 10.3

OMC 23 February 2017 Item 10.3

Section 7.13(1)(i) of the Local Government Act 1995 requires that each local government carry out a compliance audit for the period 1 January to 31 December each year. The Compliance Audit is an in-house self audit that is undertaken by staff.

In accordance with Regulation 14 of the Local Government (Audit) Regulations 1996 the Audit and Risk Committee is to review the Compliance Audit Return (CAR), and is to report to Council the results of that review. The CAR is to be:

1. presented to an Ordinary Meeting of Council

2. adopted by Council; and

3. recorded in the minutes of the meeting at which it is adopted.

Following the adoption by Council of the CAR, a certified copy of the return, along with the relevant section of the minutes and any additional information detailing the contents of the return are to be submitted to the DLGSC by 31 March 2018.

The return requires the Shire President and the Chief Executive Officer to certify that the statutory obligations of the Shire of Broome have been complied with.

COMMENT

The Compliance Audit Return for the period 1 January to 31 December 2017 continues in a reduced format introduced in 2011 with questions focused on high risk areas of compliance and statutory reporting as prescribed in Regulation 13 of the Local Government (Audit) Regulations 1996. This year the CAR has been extended to include 7 additional questions relating to Integrated Planning and Reporting. These questions are optional.

The 2017 CAR includes a total of 94 questions and focuses on the following areas of compliance:

· Commercial Enterprises by Local Governments

· Delegation of Power/Duty

· Disclosure of Interest

· Disposal of Property

· Elections

· Finance

· Integrated Planning and Reporting (optional)

· Local Government Employees

· Official Conduct

· Tenders for Providing Goods and Services.

The 2017 CAR has been completed in consultation with officers responsible for the various areas contained in the return, and reviewed by the Executive Management Group and the Chief Executive Officer.

The 2017 Compliance Audit reveals a compliance rating of 100%. This compares to:

2016 Compliance Audit – 1 area of non-compliance of the 87 areas audited (98.8%)

2015 Compliance Audit – 0 areas of non-compliance of the 87 areas audited (100%)

2014 Compliance Audit – 1 area of non-compliance of the 78 areas audited (98.7%)

2013 Compliance Audit – 0 areas of non-compliance of the 78 areas audited (100%)

2012 Compliance Audit – 8 areas of non-compliance of 78 areas audited (89.7%)

2011 Compliance Audit – 1 area of non-compliance of 78 areas audited (98.7%)

2010 Compliance Audit – 1 area of non-compliance of 283 areas audited (99.6%)

2009 Compliance Audit – 4 areas of non-compliance of 347 areas audited (98.8%)

2008 Compliance Audit – 2 areas of non-compliance of 311 areas audited (99.4%

2007 Compliance Audit – 13 areas of non-compliance of 271 areas audited (96.1%)

2006 Compliance Audit – 21 areas of non-compliance of 271 areas audited (92.3%)

2005 Compliance Audit – 23 areas of non-compliance of 306 areas audited (92.5%)

2004 Audit – 18 areas of non-compliance and 147 areas audited (87.8%).

CONSULTATION

Nil

STATUTORY ENVIRONMENT

Local Government Act 1995

7.13 Regulations as to audits

(1) Regulations may make provision –

(i) requiring local governments to carry out, in the prescribed manner and in a form approved by the Minister, an audit of compliance with such statutory requirements as are prescribed whether those requirements are –

(i) of a financial nature or not; or

(ii) under this Act or another written law.

Local Government (Audit) Regulations 1996

13. Prescribed statutory requirements for which compliance audit needed (Act s. 7.13(1)(i))

For the purposes of section 7.13(1)(i) the statutory requirements set forth in the Table to this regulation are prescribed.

Table

*Local Government Act 1995*
s. 3.57	s. 3.58(3) and (4)	s. 3.59(2), (4) and (5)
s. 5.16	s. 5.17	s. 5.18
s. 5.36(4)	s. 5.37(2) and (3)	s. 5.42
s. 5.43	s. 5.44(2)	s. 5.45(1)(b)
s. 5.46	s. 5.67	s. 5.68(2)
s. 5.70	s. 5.73	s. 5.75
s. 5.76	s. 5.77	s. 5.88
s. 5.103	s. 5.120	s. 5.121
s. 7.1A	s. 7.1B	s. 7.3
s. 7.6(3)	s. 7.9(1)	s. 7.12A
*Local Government (Administration) Regulations 1996*
r. 18A	r. 18C	r. 18E
r. 18F	r. 18G	r. 19
r. 22	r. 23	r. 28
r. 34B	r. 34C
*Local Government (Audit) Regulations 1996*
r. 7	r. 10
*Local Government (Elections) Regulations 1997*
r. 30G
*Local Government (Functions and General) Regulations 1996*
r. 7	r. 9	r. 10
r. 11A	r. 11	r. 12
r. 14(1), (3) and (5)	r. 15	r. 16
r. 17	r. 18(1) and (4)	r. 19
r. 21	r. 22	r. 23
r. 24	r. 24AD(2), (4) and (6)	r. 24AE
r. 24AF	r. 24AG	r. 24AH(1) and (3)
r. 24AI	r. 24E	r. 24F
*Local Government (Rules of Conduct) Regulations 2007*
r. 11

[Regulation 13 inserted in Gazette 23 Apr 1999 p. 1722‑4; amended in Gazette 1 Jun 2004 p. 1917; 31 Mar 2005 p. 1042‑3; 30 Sep 2005 p. 4418-20; 21 Dec 2010 p. 6758-61; 30 Dec 2011 p. 5579-80; 18 Sep 2015 p. 3813.

14. Compliance audits by local governments

(1) A local government is to carry out a compliance audit for the period 1 January to 31 December in each year.

(2) After carrying out a compliance audit the local government is to prepare a compliance audit return in a form approved by the Minister.

(3A) The local government’s audit committee is to review the compliance audit return and is to report to the council the results of that review.

(3) After the audit committee has reported to the council under subregulation (3A), the compliance audit return is to be —

(a) presented to the council at a meeting of the council; and

(b) adopted by the council; and

(c) recorded in the minutes of the meeting at which it is adopted.

[Regulation 14 inserted in Gazette 23 Apr 1999 p. 1724‑5; amended in Gazette 30 Dec 2011 p. 5580-1.]

15. Compliance audit return, certified copy of etc. to be given to Executive Director

(1) After the compliance audit return has been presented to the council in accordance with regulation 14(3) a certified copy of the return together with —

(a) a copy of the relevant section of the minutes referred to in regulation 14(3)(c); and

(b) any additional information explaining or qualifying the compliance audit,

is to be submitted to the Executive Director by 31 March next following the period to which the return relates.

(2) In this regulation —

certified in relation to a compliance audit return means signed by —

(a) the mayor or president; and

(b) the CEO.

[Regulation 15 inserted in Gazette 23 Apr 1999 p. 1725.]

POLICY IMPLICATIONS

Nil

FINANCIAL IMPLICATIONS

Nil

RISK

The Local Government Act 1995 requires that each local government carry out a compliance audit for the period 1 January to 31 December each year. The Compliance Audit is an in-house self audit that is undertaken by staff and is to be submitted to the DLGSCI by 31 March each year.

The risk is Extreme if this date is not met as it results in non-compliance with the legislative requirements of the Local Government Act 1995 and Local Government (Audit) Regulations 1996, and loss of reputation with the DLGSCI. The likelihood of this occurring is rare as the Compliance Audit Return has been prepared well in advance for presentation to Council on the 22 February 2018.

STRATEGIC IMPLICATIONS

Our Organisation Goal – Continually enhance the Shire’s organisational capacity to service the needs of a growing community:

Improved systems, processes and compliance

VOTING REQUIREMENTS

Simple Majority

Committee Resolution:

(Report Recommendation)

Moved: Cr H Tracey Seconded: Cr C Mitchell

That the Audit and Risk Committee recommends Council:

1. Adopts the attached 2017 Compliance Audit Return as the official return for the Shire of Broome; and

2. Following certification of this document by the Shire President and Chief Executive Officer, forwards the return and a copy of the minutes relative to this report to the Department of Local Government, Sport and Cultural Industries prior to 31 March 2018.

CARRIED UNANIMOUSLY 3/0

Attachments

1.	Compliance Audit Return 2017

Minutes – Audit and Risk Committee Meeting 13 February 2018 Page 1 of 4

5.2 AUDIT REGULATION 17 IMPROVEMENT PLAN BIANNUAL PROGRESS REPORT

LOCATION/ADDRESS: Nil

APPLICANT: Nil

FILE: COA01

AUTHOR: Manager Governance

CONTRIBUTOR/S: Nil

RESPONSIBLE OFFICER: Director Corporate Services

DISCLOSURE OF INTEREST: Nil

DATE OF REPORT: 1 February 2018

SUMMARY: The Audit and Risk Committee is presented with a report for review on the progress of the Audit Regulation 17 Improvement Plan (Improvement Plan), which was adopted by Council at the Ordinary Meeting of Council held 23 February 2017. The Improvement Plan contains a list of items identified by the auditors as requiring action to improve the appropriateness and effectiveness of the Shire of Broome’s systems and processes in regard to risk management, internal control and legislative compliance.

The Audit and Risk Committee is required to review the attached updated Risk Management Improvement Plan prepared by the Audit Regulation 17 Technical Advisory Group, then report to Council on the result of the Audit and Risk Committee’s review.

BACKGROUND

Previous Considerations

SMC 27 June 2014 Item 9.4.6

OMC 28 August 2014 Item 10.2

OMC 27 November 2014 Item 10.3

OMC 2 June 2015 Item 10.1

OMC 26 May 2016 Item 10.3

OMC 23 February 2017 Item 10.3

OMC 25 May 2017 Item 10.1

The Local Government Audit Regulations 1996 (the Regulations) include reviewing the appropriateness and effectiveness of a local government's Risk management systems and procedures. Specifically, Audit Regulation 17 (Audit Reg. 17) requires the Chief Executive Officer (CEO) to conduct a review and report the results to the Audit and Risk Committee on the effectiveness of risk management, internal control and legislative compliance. The Department of Local Government and Communities Audit in Local Government Guideline No. 9 advises that the review can be undertaken either on an internal or external audit basis.

Initially the Shire of Broome appointed an external auditor to conduct a third party review of organisational practices in accordance with updated legislation contained within Audit Reg. 17. The Audit Reg. 17 Review Audit produced a comprehensive Improvement Plan separated into the three main compliance areas; Risk Management (RM), Legislative Compliance (LC) and Internal Controls (IC).

The Shire’s Technical Advisory Group (TAG) effect the framework components identified in the Improvement Plan. The TAG enables the Shire to fulfil its responsibilities in relation to reporting on risk management, internal control, and legislative compliance. The Improvement Plan action items contained within the Regulation 17 Review are allocated to members within the TAG and prioritised in accordance with organisational need and capacity. The TAG meets monthly to review and update specific actions contained in the Improvement Plan and report to the Executive Management Group (EMG) and Council.

The biannual report is to identify actioned items as detailed in the Improvement Plan. All actions are reported to the Audit and Risk Committee in May and November each year, after endorsement by EMG. Due to the Ordinary Local Government election being held in October 2017 and appointments to Committees not being considered until the November OMC the presentation of the biannual report to the Audit and Risk Committee was delayed.

IMPROVEMENT PLAN

There are a number of actions that are completed or in progress with full details contained in the attached Improvement Plan.

The following action items have been completed in accordance with the Improvement Plan:

No	Framework Component Improvements
RM 1.1	Agenda template for Council agenda
RM 1.2	Adopted policy work safety health
RM 2.1	Risk matrix amended in accordance with ISO 31000 (international best practice standards)
RM 2.1	Risk management strategy and procedure
RM 2.1	Risk management strategy and procedure adopted by Council
RM 2.1	Risk management strategy and procedure uploaded to corporate Intranet
RM 2.3	Staff Housing Policy – Staff Housing Bonds procedures updated
RM 3.1	Risk management working group (Audit Reg 17 TAG) has been established and monthly meetings initiated
RM 3.1	Risk agenda topic included on fortnightly EMG agenda
RM 3.3	Records of inductions maintained on personnel files
RM 3.3	Completed organisational training and development in risk management principles
RM 3.4	OSH committee risk based assessment business operating procedure
RM 3.5	Draft Crisis Management and Business Continuity Response Plan
RM 3.6	Adopted local emergency management plan
RM 3.7	Adopted local recovery plan
RM 3.8	Completed records disaster management plan
RM 3.9	Hazard and accident reporting business operating procedure updated
RM 3.10	Draft contractor management system includes business operating Procedure, Toolkit and corporate Induction.
RM 3.10	Completed risk management strategy and procedure endorsed by Council
RM 3.11	Project Specific Risk Assessments endorsed by Council
RM 3.12	Developing Civic Centre Emergency Response and Evacuation Plan
RM 3.12	Reviewing BRAC Emergency Response and Evacuation Plan
RM 3.13	Asset Management Risk Assessment incorporated into Infrastructure Asset Management Plans
RM 3.14	Events risk assessment undertaken in risk management plan for large scale events
RM 3.14	Events Toolkit being reviewed by Local Government Insurance Services and developing online applications
RM 3.15	Volunteer inductions completed
RM 3.16	Workforce plan version 2.0 redeveloped to include Risk Management
RM 4.1	Audit and Risk Committee Risk Profiles developed and have replaced Improvement Plan. Next biannual report will utilise Risk Profiles
RM 4.3	Occupational Safety and Health Register captured in SynergySoft
RM 4.5	Minutes of Executive Management Group Meetings recorded to the Synergy Central Records system
RM 5.2	Media Training completed for Senior Staff. Councillor training scheduled.
LC 1.1	Completed legislative compliance policy
LC 1.2	Completed Council policy for records management
LC 2.1	Framework developed comprising Policy 1.1.11 – Legislative Compliance (Action LC1.1), the Legislative Compliance Register (Action LC5.1) and the Monitoring and Reporting Procedures for Legislative Compliance BOP (Action LC5.4)
LC 2.1	WALGA advice supports suitability of current Purchasing policy
LC 2.2	Procurement via Panels of Pre-Qualified Suppliers Policy developed
LC 2.4	Legislative compliance working group (Audit Reg 17 TAG) has been established and monthly meetings initiated
LC 4.1	Experienced Staff completed through review of procedure and management directive requirements
LC 5.1	Developed Legislative Compliance register to record known breaches
LC 5.1	Increased prominence of credit card payments in List of Payments
LC 5.4	Developed draft BOP ‘Monitoring and Reporting Procedures for Legislative Compliance’
IC 1.1	Adopted policy internal control
IC 1.6	Council policy materiality in financial reporting adopted
IC 1.7	Council policy for Investment of surplus funds adopted
IC 2.1	Rate Exemption Charitable Use BOP developed
IC 2.1	Signatories Bank Transaction Processing BOP developed
IC 2.2	Internal controls working group (Audit Reg 17 TAG) has been established and monthly meetings initiated
IC 3.4	High risk Journals require approval and monitoring
IC 3.5	Trust Transfer procedures updated
IC 3.7	Links Training for BRAC and Civic Centre
IC 3.10	Completed review and update of End of Month checklist
IC 3.11	Debtors Reconciliation processes performed as part of end of month checklist
IC 6.1	BRAC receipting procedures documented
IC 6.2	Civic centre receipting included in staff manual for stock take
IC 6.2	Draft Cash Handling Business Operating Procedure
IC 6.3	Waste Facility banking procedures
IC 6.3	Developed Cash Handling BOP
IC 6.4	Developed BOP to control the authorised receipting points and establish processes to ensure appropriate controls at new, or ad hoc, points.
IC 6.5	Waste Facility debtor invoice captured in system
IC 6.6	Developed Bank Signatories BOP
IC 6.7	Separation of duties of debtors and creditors
Other	Reviewed the Technical Advisory Group Audit Regulation 17 Terms of Reference

The following items have been actioned from May 2017 to January 2018 in accordance with the Improvement Plan:

No.	Framework Components
RM1.1	Bi-Annual Risk Reporting Officer Comment: Bi-annual reports to EMG and Council are provided through the Audit and Risk Committee as per Risk Management Policy 2.1.4
RM3.3	Business Continuity Plan Officer Comment: Draft document requires final review and amendments to ensure suitability and effectiveness. To be presented to the Audit and Risk Committee in May 2018.
RM3.6	Local Emergency Management Plan 2014 Draft Officers Comment: Following training provided on Managing Recovery Activities the Local Emergency Management Plan is being reviewed and will be tested once finalised.
RM3.8	Workforce Plan Officer Comment: The Workforce Plan is under review. Please note organisational risks have been identified in the external analysis section 2.1.1-2.1.15 and internal analysis section 3.3.1-3.3.14 and again in Workforce Planning 4.1.1 page 47. In order to satisfy the auditors, the risk section will itemise the known risks under 4.5.9 organisational risk management. An organisational survey was completed in late 2017 and will be used to form the basis of the review. Revised completion date of November 2018.
RM3.9	Infrastructure Asset Management Plans Officer Comments: Plans prepared in 2017 and received by Council at the December 2017 OMC.
RM3.12	Emergency Response Procedures Shire Buildings Officer Comment: Organisational responsibility for this action currently being reviewed. Procedures have been drafted for the Administration Building however require a review following the refurbishment.
RM3.15	Volunteer and Contractor Inductions Officer Comment: Volunteer inductions provided. Contractor Induction documentation has been reviewed by LGIS. Existing contractors required to attend induction in February 2018.
RM4.1	Audit and Risk Committee Officer Comment: Risk Profiles implemented. External Risk Audit to be undertaken by external auditor in December 2018.
RM4.2	Monitoring Compliance Officer Comment: This has been amended to an ongoing action.
RM4.4	Risk Register Officer Comment: Risk Profiles have been developed and implemented. Electronic systems are being investigated to further streamline the process and provide improved visibility and management of identified risks.
RM4.5	EMG Minutes Officer Comment: Process in place to ensure that EMG Minutes are recorded to Synergy Central Records System. All 2017 meeting minutes have been recorded to Synergy. EMG minutes will continue to be recorded to Synergy.
RM5.2	Training Officer Comment: Risk Management Training funds assigned through annual budget process for 17/18.
LC1.1	Code of Conduct Officer Comment: Revised Code of Conduct is being drafted and will include volunteers and contractors. To be presented to Council in April.
LC 5.2	EMG Minutes Officer Comment: Process in place to ensure that EMG Minutes are recorded to Synergy Central Records System. All 2017 meeting minutes have been recorded to Synergy. EMG minutes will continue to be recorded to Synergy
LC5.3	Employee Complaints/Grievance Handling Officer Comment: Employee complaints are addressed by the Manager of HR. This action will be reviewed as a priority on commencement of the Manager People and Culture.
IC2.1	Management Policy – Internal Controls Officers Comment: Internal Control Framework developed and in operation however leaving open until process is firmly established and embedded in across the organisation.
IC2.2	Private and Community Works Policy Officer Comment: The Finance Department have developed an internal finance procedure to ensure private works are only undertaken after an appropriate written agreement (signed letter or purchase order) has been received.
IC2.3	Internal Audit Officers Comment: The Senior Procurement, Risk and Governance Officer will coordinate an internal audit.
IC3.2	Staff Training Officers Comment: Inductions and specific on the job training for internal control areas i.e. cash handling, stock control as required. Training programmes to be developed for specific areas e.g. BRAC, Civic Centre and others as identified. Financial Services developed an induction pack that includes relevant information for each function in Finance. Governance, Records and IT inductions are undertaken with designated employees on their commencement. Other inductions are undertaken as requested. Information sessions on local government and the Local Government Act were held with internal and external staff in November 2017.
IC3.3	Documented Procedures Officers Comment: Standard operating procedures exist for selected, but not all, financial procedures. Procedure documentation is being developed by officers where it does not currently exist.
IC3.7	Credit Card Procedures Officer Comment: Only members of the BEST team may utilise the credit cards and the details of the card are not to be shared with others.
IC3.8	Checklists Officer Comment: Checklists exist and are in use by staff as part of endorsed procedures.
IC4.1	Monitoring Officers Comment: December 2016 review completed by external consultant. While internal review is recommended current staff resources do not permit the development of an internal audit function. An external consultant will provide a biennial review as per the Audit Reg 17 regulations with ongoing risk management functions monitored by the Risk TAG. Next external audit review December 2018.
IC5.1	Ongoing Improvement Plan Officers Comment: This improvement plan forms the basis of an all inclusive continual improvement process for all three areas.
Other	Lone Worker Risk Management Officer Comment: Lone Worker Risk Management consultation paper finalised. Procedure to follow. CCTV Officer Comment: BRAC and Depot CCTV systems implemented to eliminate identified staff safety risks

This report recommends the Audit and Risk Committee receive the updated Improvement Plan, and adopts the reviewed actions, timelines and responsible officers contained within the document.

CONSULTATION

Nil

STATUTORY ENVIRONMENT

Local Government (Audit) Regulations 1996

16. Audit committee, functions of

An audit committee —

(a) is to provide guidance and assistance to the local government —

(i) as to the carrying out of its functions in relation to audits carried out under Part 7 of the Act; and

(ii) as to the development of a process to be used to select and appoint a person to be an auditor;

and

(b) may provide guidance and assistance to the local government as to —

(i) matters to be audited; and

(ii) the scope of audits; and

(iii) its functions under Part 6 of the Act; and

(iv) the carrying out of its functions relating to other audits and other matters related to financial management; and

(c) is to review a report given to it by the CEO under regulation 17(3) (the CEO’s report) and is to —

(i) report to the council the results of that review; and

(ii) give a copy of the CEO’s report to the council.

17. CEO to review certain systems and procedures

(1) The CEO is to review the appropriateness and effectiveness of a local government’s systems and procedures in relation to —

(a) risk management; and

(b) internal control; and

(c) legislative compliance.

(2) The review may relate to any or all of the matters referred to in subregulation (1)(a), (b) and (c), but each of those matters is to be the subject of a review at least once every 2 calendar years.

(3) The CEO is to report to the audit committee the results of that review.

POLICY IMPLICATIONS

Nil

FINANCIAL IMPLICATIONS

The Shire has received membership funds from the Local Government Insurance Scheme (LGIS) which has been allocated as a genuine rollover to fund organisational Risk Initiatives.

The financial implications of actioning individual items contained in the Improvement Plan in Attachment 1 will be implemented using existing, internal resources. If any additional resources are required they will be progressed via the quarterly Finance and Costing Review or presented to Council for consideration.

STRATEGIC IMPLICATIONS

Our People Goal – Foster a community environment that is accessible, affordable, inclusive, healthy and safe:

Effective communication

Affordable services and initiatives to satisfy community needs

Accessible and safe community spaces

A healthy and safe environment

Our Prosperity Goal – Create the means to enable local jobs creation and lifestyle affordability for the current and future population:

Affordable and equitable services and infrastructure

Our Organisation Goal – Continually enhance the Shire’s organisational capacity to service the needs of a growing community:

An organisational culture that strives for service excellence

Sustainable and integrated strategic and operational plans

Responsible resource allocation

Effective community engagement

Improved systems, processes and compliance

VOTING REQUIREMENTS

Simple Majority

Committee Resolution:

(Report Recommendation)

Moved: Cr C Mitchell Seconded: Cr H Tracey

That the Audit and Risk Committee recommends that Council:

1. Receives the updated Audit Regulation 17 Improvement Plan; and

2. Adopts the reviewed actions, timelines and responsible officers as detailed in the Audit Regulation 17 Improvement Plan.

CARRIED UNANIMOUSLY 3/0

Attachments

1.	Improvement Plan January 2018

Item 5.2 - AUDIT REGULATION 17 IMPROVEMENT PLAN BIANNUAL PROGRESS REPORT

Shire of Broome 2016 Audit Regulation 17 Review

RISK MANAGEMENT IMPROVEMENT PLAN

**Note shaded rows indicate that an item has been carried forward from the previous iteration of the Improvement Plan.

No.	FRAMEWORK COMPONENTS	PURPOSE/GOAL	IMPROVEMENTS	Officer	Timing	Comments	Est. Hours	Priority
RM 1.0 MANDATE AND COMMITTMENT
RM1.1	Council Policy ~~1.2.11~~ 2.1.4 Risk Management ~~Policy~~	To create an environment where Council, management and staff apply risk management, techniques through consistent and effective risk management practices.	That the Audit and Risk Committee be provided with a risk report bi-annually.	Director Corporate Services	April and November Annually	Report to be presented to ~~November 2016~~ bi-annually to the Audit and Risk Committee
		Policy to document the commitment and objectives regarding managing uncertainty that may impact the Shire’s strategies, goals or objectives.	Risk recording and reporting be undertaken in accordance with the Risk Management Policy.	~~Manager Human Resources~~ Director Corporate Services	Ongoing	~~Risk Management Policy~~ ~~Requires six monthly reports to EMG, MCG and Council~~ Bi-annual reports to EMG and Council are provided through the Audit and Risk Committee as per Risk Management Policy 2.1.4.

No.	FRAMEWORK COMPONENTS	PURPOSE/GOAL	IMPROVEMENTS	Officer	Timing	Comments	Est. Hours	Priority
RM 2.0 FRAMEWORK DESIGN
RM2.1	Enterprise-wide Risk Management Strategy and Framework	Defines and details the various practices to support Risk Management and establishes the risk management strategy and framework to be followed by all Shire staff.	That the Enterprise-wide Risk Management Strategy and Framework be made available to users of the Intranet.	~~Manager Human Resources~~ Director Corporate Services	Complete	~~Documents uploaded to corporate intranet~~ Complete	38	Extreme
RM2.2	Insurance Strategy or Policy	A policy to provide guidance to Officers as to the management of risk through insurance.	That an Insurance Strategy and Policy be developed to provide clarity on issues such as the level of self-insurance, the adequacy of cover and the basis of the valuation of the insured assets.	~~Director Corporate Services~~ Manager Governance	~~November 2017~~ November 2018	Draft document to be developed for presentation to the Audit and Risk Committee November ~~2017~~ 2018	16	Medium
RM2.3	~~2.2.2~~ 1.3.4 Staff Housing Policy	Policy to provide direction on the provision of staff housing.	To help prevent damage to Shire properties we suggest housing bonds be paid in full prior to occupation of the house and lodged with the Bond Administrator.	~~Manager HR~~ Director Corporate Services	~~Complete~~ This is not complete – April 2018	~~The Policy allows for the deduction of a housing bond from an employee’s payroll.~~ ~~Housing bonds are required to be lodged with the Bond Administrator.~~ ~~Housing bonds are now paid in advance to the Bond Administrator and Staff Housing BOP has been updated to reflect changes.~~ Policy requires rework and will be reviewed and presented to MCG, EMG and Council at the April OMC. BOP has been reviewed and issues surrounding Staff Housing Bonds have been addressed.	6	High

No.	FRAMEWORK COMPONENTS		PURPOSE/GOAL	IMPROVEMENTS	Officer	Timing	Comments	Est. Hours	Priority
RM 3.0 IMPLEMENTING RISK MANAGEMENT
RM 3.1		Executive Management Group	An effective Executive Management Group charged with implementation of Council policies.	That risks are regularly documented and monitored by the EMG in line with the RM Strategy and Framework and risk treatments are identified for events classified as high risk.	EMG	Ongoing	Risk is a discussion on the ~~weekly~~ monthly EMG agenda (complete).	Ongoing	Medium
RM 3.2		Insurance Strategy or Policy	A policy to provide guidance to Officers as to the management of risk through insurance.	That an Insurance Strategy and Policy be developed to provide clarity on issues such as the level of self-insurance, the adequacy of cover and the basis of the valuation of the insured assets.	~~Director Corporate Services~~ Manager Governance	November ~~2017~~ 2018	Draft document to be developed for presentation to the Audit and Risk Committee November ~~2017~~ 2018.	16	Medium
RM 3.3		Shire of Broome Business Continuity Plan	To plan for the prevention, response and recovery from events that may threaten the capacity of the Shire of Broome to continue to provide services and good governance to the District.	That, as high priority, an effective documented Business Continuity Plan be developed including relevant disaster recovery plans.	Director Corporate Services	April ~~2017~~ 2018	Draft document still requires final review and amendment to ensure suitability and effectiveness. Presented to Audit and Risk Committee May ~~2017~~ 2018.	76	High
RM 3.3		Shire of Broome Business Continuity Plan		That, once adopted, the Plan’s effectiveness be tested	Director Corporate Services	November ~~2017~~ 2018	Mock Exercise undertaken 16 June 2016. Further procedures required to ensure detailed operational testing is undertaken annually by responsible departments i.e. ICT, Health etc.	16	High
RM3.6		Local Emergency Management Plan 2014 Draft	A plan is prepared in accordance with the requirements of Emergency Management Act 2005 [s.41(4)] and State Emergency Management Policy 2.5	That the draft plan be finalised and once adopted, its effectiveness be tested in accordance with PART 5 of the plan.	Manager Environmental Health, Emergency and Rangers	November ~~2017~~ 2018	Following training provided on Managing Recovery Activities the Local Emergency Management Plan is being reviewed and will be tested once finalised. The current plan is compliant with the legislation. It is however considered inadequate by officers. Grant funding requests have been made to obtain a fixed term officer to assist in this project.	76	Extreme
RM3.8		Workforce Plan	A plan to make sure the Shire has the right people, in the right place, at the right time, to meet the objectives set out in the Strategic Community Plan.	Future reviews of the Workforce Plan contain an assessment and treatment plan for key identified risks in relation to the workforce.	~~Manager HR~~ Manager People and Culture	November ~~2017~~ 2018	The Workforce Plan is under review and will incorporate feedback. Please note organisational risks have been identified in the external analysis section 2.1.1-2.1.15 and internal analysis section 3.3.1 -3.3.14 and again in Workforce Planning 4.1.1 page 47. In order to satisfy the auditors, the risk section will itemise the known risks under 4.5.9 organisational risk management. CBP adopted December 2017; Organisational survey completed and will be used to form the basis of the next review.	76	High
RM3.9		Asset Management Plan	Plan prepared to assist the Shire to improve the way it delivers services from its infrastructure assets such as roads, drainage, footpaths, public open space and buildings.	Asset Management Plans be updated/ developed for all classes of assets and adopted by Council. Recording of risks identified within the plans in an appropriate risk register should help ensure follow up assessments of treated risks are undertaken.	Director Infrastructure	June ~~2017~~ Complete	Building and Transport Asset Management Plans were prepared in 20137. The plans were ~~not~~ received by Council as an informing strategy for the Shire’s Integrated Planning and Reporting Framework suite of documents. The Infrastructure Asset Management Plan will be continually updated based on works done. ~~and~~ ~~are marked ‘final draft’~~. The plans contain a risk assessment and treatment plan. ~~although no follow up assessment of treated risks has been undertaken.~~ ~~No formal asset management plans were available for other asset classes for review.~~	152	High
RM3.10		Risk Management Framework	A management framework to implement a risk management system throughout the Shire.	The development of consequence rating criteria based on the context of the risk assessment and inclusion of the criteria within the Risk Management Strategy and Procedures. This should assist in avoiding any need to redefine the risk assessment framework for each level of risk assessment.	~~Manager Human Resources~~ Director Corporate Services	Complete	A Risk Management Strategy and Procedures was ~~were adopted~~ endorsed by Council in November ~~2015~~ 2016 – Item 5.2. ~~The strategy and procedures include a risk assessment matrix however, no criteria for rating the consequence of identified risk is provided.~~ Consequence of risks (Risk Matrix) identified on Pages 14-16 ~~Item~~ of the document.	38	Extreme
RM3.11		Project Specific Risk Assessments	A risk assessment undertaken as part of a major project.	Future assessments be undertaken in accordance with an entity wide Risk Management Framework (to be developed).	Director Corporate Services	Complete	This framework has been endorsed and the relevant risk assessments have been incorporated within Council reports, policy and project plan templates.	76	High
RM3.12		Emergency Response Procedures – Shire Buildings	To ensure uniformity in the handling of building related emergency situations.	That emergency response procedures for all Shire buildings be developed and implemented.	~~Manager Health~~, ~~Rangers/~~ ~~Manager Community Development~~ Organisational responsibility for this action currently being reviewed.	~~December 2016~~ November 2018 ~~December 2016~~ November 2018	Update required for procedures at the Admin Centre, Depot and Waste Management Facility. ~~and Barker St Office.~~ Procedures have been drafted for Admin building however require reviewing following administration office refurbishment Civic Centre – emergency response and evacuation plan in existence – to be updated to reflect cyclone procedures.	3 5	High High
RM3.13		Asset Management Risk Assessment	Inclusion of a risk assessment undertaken as part of development and maintenance of the Shire of Broome Asset Management Plans (AMP)	That treatment plans be monitored to ensure risks are reduced to a medium level.	Asset Coordinator	~~July 2017~~ Complete	A risk assessment has been incorporated into the Infrastructure Asset Management Plan. ~~to be included when reviewing existing Asset Management Plans and developing new Asset Management Plans.~~	76	Medium
RM3.14		Information Systems Plans	Plans to ensure the secure provision of information systems in the event of a disaster.	IT Disaster Recovery Plan and IT Security Plan be developed and tested on a regular basis to gauge their effectiveness.	Manager Information Services	~~April 2017~~ November 2018	No IT Disaster Recovery Plan or IT Security Plan are in place. Interim protection by relocating a replica of our current system to the civic centre. The backup is then copied offsite on a continuous basis. The replica is working and we also now have a GenSet to maintain power. This has been tested and passed	76	High
RM3.15		Volunteer and Contractor Inductions	Inductions of contractors and volunteers, to ensure they have an understanding of their roles and responsibilities when undertaking works on Shire property.	All contractors and volunteers undertake a basic induction of their roles and responsibilities prior to commencing work.	~~Manager HR~~ Manager People and Culture	~~April~~ ~~2017~~ June 2018 - Ongoing	Induction of Volunteers are provided. Inductions of Contractors identified as risk and budget allocation to provide a free corporate induction service is being put through RFQ. Onsite induction paperwork has been updated. Roll out expected by commencement of new financial year. Volunteer inductions provided. Contractor Induction documentation has been reviewed by LGIS. Existing contractors required to attend induction in February 2018.	38	High

No.

FRAMEWORK COMPONENTS

PURPOSE/GOAL

IMPROVEMENTS

Officer

Timing

Comments

Est. Hours

Priority

RM 4.0 monitoring and review

RM4.1

Audit and Risk Committee

An Audit Committee is required by the Local Government (Audit) Regulations 1996, and its composition and role is prescribed.

That the Committee receive bi-annual reports containing information on extreme and high risk ratings in accordance with the Enterprise-wide Risk Management Strategy and Framework.

~~Manager Human Resources~~

Director Corporate Services

April/November Annually

Working with LGIS to develop organisational profiles. Workshops by Directorate to capture corporate knowledge and use existing risk resources such as risk register to develop. Risk Register will be defunct when Profiles are fully operational.

Risk Profiles implemented.
External Risk Audit to be undertaken by external auditor in December 2018.

High

RM4.2

Monitoring Compliance

To ensure policies relating to risk management are adhered to by the organisation and their effectiveness is monitored.

That recording and reporting mechanisms to monitor risks be implemented in accordance with policy.

~~Manager Human Resources~~

Director Corporate Services

~~Pending~~

Ongoing

RM4.3

Occupational Safety and Health (OSH) Register

To maintain a hazard based register of OSH matters.

That the current outstanding OSH list be augmented by an OSH register capable of provide regular reports and identifying OSH trends.

~~Manager Human Resources~~

Manager People and Culture

Ongoing

~~Ongoing~~

OSH reporting has been included through electronic means and now captured in Synergy central records. In addition, a register is being developed to collate all outstanding items through the OSH Committee secretariat.

OSH Register remains a concern having been raised at the previous 2 OSH meetings. Apparent that Synergy solution is not working in its current form.

RM4.4

Risk Register

Provide for the ongoing monitoring and treatment of identified risks.

Identified risks documented within Council Meeting Minutes and other risk assessments are recorded within the risk register.

As a central register of identified risks, we suggest the risk register be available for all senior staff to update and review.

~~Manager Human Resources~~

Manager People and Culture

Ongoing

~~Development of Risk Profiles underway to replace defunct Risk Register.~~

Risk Profiles have been developed and implemented. Electronic systems are being investigated to further streamline the process and provide improved visibility and management of identified risks.

RM4.5

Minutes of Executive Management Group Meetings

To formally document identified risks, internal control and legislative compliance weaknesses raised by the Executive Management Group.

Minutes of the Executive Management Group meetings be maintained with risks, internal control and legislative compliance weaknesses identified in the minutes.

~~CEO PA~~ Executive Assistant to the CEO

~~April 2017 –~~ Ongoing (Complete)

~~No minutes of the Executive Management Group meetings were available for inspection during the review.~~

~~Minutes are taken at each meeting however, it is accepted that there has been a lack of effective record keeping in this area.~~

Process in place to ensure that EMG Minutes are recorded to Synergy Central Records System. All 2017 meeting minutes have been recorded to Synergy.

EMG minutes will continue to be recorded to Synergy.

High

No.		FRAMEWORK COMPONENTS	PURPOSE/GOAL	IMPROVEMENTS	Officer	Timing	Comments	Est. Hours			Priority
RM 5.0 CONTINUAL IMPROVEMENT OF THe FRAMEWORK
RM5.1	Ongoing Improvement Program		A program developed to plan and implement improvements in risk management practices and to guide the process of implementation.	That a risk management improvement plan be maintained into the future to support the process of continual improvement.	Audit Reg 17 TAG	Ongoing	This improvement plan forms the basis of an all inclusive continual improvement process for all three areas.
RM5.2	Training		Structured risk management training be available for elected members and senior staff.	That risk management training be available to elected members and all senior staff undergo relevant risk management training.	~~Manager Human Resources~~ Director Corporate Services	November – Annually	~~Media Training has been identified as a key priority and Councillors will be notified in May 2017.~~ Risk Management Training funds assigned through annual budget process for 17/18 however may be deferred due to vacancies in HR department.		38	High

LEGISLATIVE COMPLIANCE IMPROVEMENT PLAN

**Note shaded rows indicate an item has been carried forward from the previous iteration of the Improvement Plan.

No.

FRAMEWORK COMPONENTS

PURPOSE/GOAL

IMPROVEMENTS

Officer

Timing

Comments

Est. Hours

Priority

LC1.0 MANDATE AND commitment LEGISLATIVE COMPLIANCE

LC1.1

Code of Conduct

To provide a documented expectation for the behaviour of elected members, staff, contractors and volunteers when performing their duties.

An expansion of the scope of the Code of Conduct to include actions by volunteers and contractors. Alternatively, a separate Code of Conduct be developed for volunteers and contractors.

~~Manager HR~~

Director Corporate Services

April ~~2017~~ 2018

Volunteers and contractors are not bound by a Code of Conduct when performing functions on behalf of the Shire.

Revised Code of Conduct is being drafted and will include volunteers and contractors. To be presented to Council by April.

High

No.	FRAMEWORK COMPONENTS	PURPOSE/GOAL	IMPROVEMENTS	Officer	Timing	Comments	Est. Hours	Priority
LC2.0 FRAMEWORK DESIGN FOR LEGISLATIVE COMPLIANCE
LC2.1	~~2.3.7~~ 2.1.2 Purchasing Policy	Policy required by legislation to provide guidelines for a consistent approach for obtaining quotations and tenders for the provision of materials, services and consultants.	We suggest the Policy be amended to require each purchasing event to be considered independently when determining the thresholds, legislation prohibits the splitting of any contract for the purpose of avoiding the relevant purchasing threshold.	Manager Governance	Complete	No action required based on WALGA email advice dated 2 May 2017, however policy under review in line with release of revised WALGA Purchasing Policy Template.	6	High
LC2.2	~~1.1.12~~ 2.1.7 Procurement via Panels of Pre-Qualified Suppliers Policy	A Policy required by legislation to make provision in respect of the matters set out in paragraph 24AC (2) of the Local Government (Functions and General) Regulations 1996.	The existing Panel of Suppliers should be cancelled and tenders called to establish a new compliant Panel of Suppliers. Pending appointment of a Panel of Suppliers standard contracts should be awarded in accordance with the Procurement Policy.	Manager Governance	Complete	A Pre-Qualified Supplier Policy was adopted in December 2016, following the change in the regulations in September 2015. Contracts with a Panel of Suppliers established prior to the change in the Regulations were extended subsequent to the introduction of the requirement to have a Policy in place when utilising a Panel of Suppliers. Previous Panel contracts have expired. No further action required.	38	High

No.	FRAMEWORK COMPONENTS	PURPOSE/GOAL	IMPROVEMENTS	Officer		Timing	Comments		Est. Hours		Priority
LC3.0 SENIOR MANAGEMENT commitment TO LEGISLATIVE COMPLIANCE
LC3.1	Communications	To ensure staff, contractors and regular volunteers are aware of their obligation to report breaches of legislation to the appropriate Officer.	That the obligation to report compliance breaches be communicated to contractors and volunteers.	~~Manager HR~~ Manager People and Culture	May 2017			The Shires current process is undertaken through OSH reporting and the onsite induction process. Further works to be Included in the Shires corporate contractor induction process pending finalisation.		16	High

No.

FRAMEWORK COMPONENTS

PURPOSE/GOAL

IMPROVEMENTS

Officer

Timing

Comments

Est. Hours

Priority

LC4.0 STAFF EXPERIENCE AND TRAINING

LC4.1

Experienced Staff

To ensure staff engaged at a senior level and on technical roles have an understanding of the legislative requirements relevant to their role.

Experienced senior staff are expected to have a sound understanding of the requirements of their roles. Given the level of staff turnover, it is important new senior and technical staff possess the required experience or quickly acquire a sound understanding of their role.

CEO/~~Manager Human Resources~~ Manager People and Culture

~~Ongoing~~ Complete

HR practices include a merit based recruitment process based on experience, skills and qualification relevant to the position. This has been formalised through a review of the Recruitment BOP and HR Directive.

No.	FRAMEWORK COMPONENTS	PURPOSE/GOAL	IMPROVEMENTS	Officer	Timing	Comments	Est. Hours	Priority
LC5.0 MONITORING AND REVIEW OF LEGISLATIVE COMPLIANCE
LC5.1	List of Payments	List of payments presented to Council monthly.	To ensure transparency of payments made all payments made utilising credit cards are presented to Council along with the list of payments.	Manager Financeial Services	Complete	Details of credit card payments have always been presented together with direct debit transactions on the Monthly Payment Listing presented to the Council. Credit card payment details will be given increased prominence in the report.	6	High
LC5.2	Minutes of Executive Management Group Meetings	To formally document identified risks, internal control and legislative compliance weaknesses raised by the Executive Management Group.	Minutes of the Executive Management Group meetings be maintained with risks, internal control and legislative compliance weaknesses identified in the minutes.	~~CEO PA~~ Executive Assistant to the CEO	April 2017 – ~~Ongoing~~ Complete	**Refer RM4.5 & IC4.3 Process in place to ensure that EMG Minutes are recorded to Synergy Central Records system. All 2017 meeting minutes have been recorded to Synergy. EMG minutes will continue to be recorded to Synergy.	6	High
LC5.3	Employee Complaints/Grievance Handling	Procedures for the handling of employee complaints and grievances.	Staff Complaints Register to be established and maintained.	~~Manager HR~~ Manager People and Culture	~~April 2017~~ November 2018	Employee complaints are addressed by the Manager of HR. A Staff Complaints Register was not available for review. This action will be reviewed as a priority on the commencement of the Manager People and Culture.	6	High

No.	FRAMEWORK COMPONENTS	PURPOSE/GOAL	IMPROVEMENTS	Officer	Timing	Comments	Est. Hours	Priority
LC6.0 CONTINUAL IMPROVEMENT OF LEGISLATIVE COMPLIANCE
LC6.1	Ongoing Improvement Program	A program developed to plan and implement improvements in legislative compliance practices and to guide implementation.	That the improvement program contained within this report be used as an initial improvement program.	Audit Reg 17 TAG	Ongoing	This improvement plan forms the basis of an all inclusive continual improvement process for all three areas.

INTERNAL CONTROLS IMPROVEMENT PLAN

**Note shaded rows indicate an item has been carried forward from the previous iteration of the Improvement Plan.

No.	FRAMEWORK COMPONENTS	PURPOSE/GOAL	IMPROVEMENTS	Officer	Timing	Comments	Est. Hours	Priority
IC1.0 MANDATE AND COMMITTMENT
IC1.1	~~2.1.1~~ 2.2.2 Materiality in Financial Reporting Policy	Policy to clarify the Council’s view on the tolerable threshold of material variances and to limit the volume of variance reporting to significant information.	To avoid confusion all risks be rated using one context based risk level matrix and assessment criteria.	Manager Financeial Services	~~April~~ ~~2017~~ Complete	The Policy contains risk ratings for material variances which differ from those contained within the Risk Matrix attached as an Appendix to the Policy. The Risk Rating for Material Variances as per policy ~~2.1.1~~ 2.2.2 is intended in assessing the nature and magnitude of the material variance and the associated explanations. This threshold considers only financial factors. The Risk Matrix on the other hand is intended for overall risk assessment of projects to be undertaken. This matrix considers financial and non-financial factors. These two thresholds are therefore not designed to be the same.	6	High
IC2.0 INTERNAL CONTROL FRAMEWORK DESIGN
IC2.1	Management Policy - Internal Controls	To establish a risk based Internal Control Framework, Systems and practices to support the internal control environment.	That an internal control framework be developed reflecting a risk based approach to internal controls and providing the monitoring and reporting systems.	TAG	~~October 2017~~ November 2018	Internal Control Framework developed and in operation however leaving open until process is firmly established and embedded in across organisation.	10	Medium
IC2.2	~~3.1.5~~ 4.2.1 Private and Community Works Policy	Policy to set out the requirements for undertaking private works.	To ensure appropriate control and minimise potential liability, we suggest private works only be undertaken after an appropriate written agreement has been signed with the landowner.	Manager Infrastructure	~~April~~ ~~2017 -~~ Complete	The Policy provides for works to be undertaken on private land with no requirement for a signed agreement detailing the scope of works and responsibilities to be in place or any other controls to be in place. The Finance Department have developed an internal finance procedure to ensure private works are only undertaken after an appropriate written agreement (signed letter or purchase order) has been received.	6	High
IC2.3	Internal Audit	Internal audit monitors the level of compliance with internal procedures and process along with assessing the appropriateness of these procedures.	As the level of documented procedures increases, an expanded internal audit function to confirm adherence to documented policies and procedures may be required.	Director Corporate Services	~~November 2017~~ December 2018	Currently, no internal auditors have been appointed, and limited internal audit functions have been undertaken. The Senior Procurement, Risk and Governance Officer will coordinate an internal audit.	76	High

No.	FRAMEWORK COMPONENTS	PURPOSE/GOAL	IMPROVEMENTS	Officer	Timing	Comments	Est. Hours	Priority
IC3.0 IMPLEMENTATION OF INTERNAL CONTROLs
IC3.1	Experienced Staff	To ensure all senior staff have an understanding of the inherent risks internal controls are addressing associated with, and relevant to, their role.	Refer to LC4.1	Manager Financial Services	~~November 2014~~ – ~~Ongoing~~ Complete	Implemented as part of the Internal Control Policy & BOP through all employees. In addition to Internal Control Policy and BOPs, we take advantage of relevant training activities available.	7	High
IC3.2	Staff Training	To ensure the staff have access to ongoing training in internal controls and attend appropriate training sessions.	Refer to LC 5.2	Manager Governance/Manager Financial Services	Ongoing	Inductions and specific on the job training for internal control areas ie cash handling, stock control as required. Training programmes to be developed for specific areas eg BRAC, Civic Centre and others as identified. Financial Services developed an induction pack that includes relevant information for each function in Finance. Governance, Records and IT inductions are undertaken with designated employees on their commencement. Other inductions are undertaken as requested. Information sessions on the local government and the Local Government Act were held with internal and external staff in November 2017.	22	High
IC3.3	Documented Procedures	Use of documented procedures by officers helps establish a standard methodology and identifies key controls for processes undertaken by officers.	Opportunity exists to improve and document standard operating procedures with key controls clearly identified. Once these procedures are developed and implemented, they require constant monitoring for adherence and efficiency.	Director Corporate Services	November 2017 - Ongoing	Standard operating procedures exist for selected, but not all, financial procedures. Procedure documentation is being developed by officers where it does not currently exist.	152	High
IC3.4	Journals	Controls around the passing of journals between accounts.	Given the high level of risk associated with journals we suggest documented controls be developed to ensure the monitoring and approval of journals processed within the accounting system.	Manager Financeial Services	Complete	It would be impracticable to document the authorisation and approval of all journals processed within the accounting system. ~~and this will create inefficiency particularly on journal entries that are considered as mere "housekeeping" journal entries (e.g. reclassification entries among accounts).~~ In our view, the independent review of the period-end account balances~~, regardless of any accruals, reversals, minor correction and reclassification entries that occurred in between, would~~ ~~remain to be~~ is the most efficient and effective control to prevent misstatements ~~either~~ due to fraud or error. Finance staff will ~~however~~ continue to utilise the Account Memos prepared in documenting journal entries involving account balance write-offs which affect the P&L, debtor balances, creditor balances and property balances such as: - Reversal of rates penalty charges raised in error - Credits applied to sundry debtors for identification of previously unallocated collections. - Write-off of assets disposed. We agree that journals should be monitored and approved but this should be directed towards high-risk areas and not ~~to every single~~ all journals.	6	Medium
IC3.5	Trust Transfers	Controls in relation to the transfer of funds between the Municipal and Trust Funds.	Unidentified deposits in the Municipal Fund remain within the Fund and are listed on the debtors’ reconciliation until such time as they are identified and allocated to the appropriate debtor.	Manager Financeial Services	Complete	~~We acknowledge that the aforementioned practice of temporarily transferring unidentified deposits to trust had occurred in the past but this practice has long been discontinued.~~ Subsequent to the discontinuance of such practice, we have since cleared off significant amount unallocated deposits temporarily transferred to the Trust account with only a few ageing and legacy items which we are continually investigating and following up with sundry debtors. Controls implemented to prevent unidentified funds from being deposited in the Municipal Fund	6	Medium
IC3.6	Payroll System	A system for the recording and processing of employee timesheets and effecting payments to employees.	Processing of payroll should be undertaken in accordance with documented procedures and controls with system errors/issues reported. Systems or documented procedures should be in place for the pre-authorisation of all staff absentee time. In the circumstances where staff are not able to obtain pre-authorisation (sick leave) documented procedures should be developed to ensure staff acknowledge their absence as soon as practicable.	Manager Financeial Services	~~November 2017~~ Complete and continuously monitored	~~In relation to leave procedures, a draft~~ A Leave Management Business Operating Procedure (Leave BOP) has ~~since~~ been drafted which addresses: • OSH and work life balance • Manage and control leave balance and associated costs • Define excessive leave • Ensure any leave taken is recorded • Provide guidance for employees and managers The next step is to have the BOP reviewed by MFS and HR for recommendation for EMG review and approval. In relation to incorrect account numbers being charged by the online timesheet program, a Service Request (SR) has been raised to the software service provider (IT Vision) to resolve the issue with entities 00 and 62 being charged. For reference, the related SR is number SR161996. This has been prioritised with IT Vision.	76	High
IC3.7	BOP ~~1.4.0~~ 2.1.6 Credit Card Procedures	To outline the approval process to be undertaken for use of the Corporate Credit Card and to ensure the appropriate handling and application of the card details	As credit cards are issued in the name of the signatory, we suggest credit cards purchases are only utilised by the Officers to whom they are issued.	Manager Financeial Services	~~November 2017~~ Complete	BOP ~~1.4.0~~ 2.1.6 has ~~since~~ been developed to outline the approval process in the use of Corporate Credit Cards. Only members of the BEST team may utilise the credit cards and the details of the card are not to be shared with others.	6	High
IC3.8	Checklists	Checklists document the completion of multiple steps within an overall process.	Creation of standard checklists may assist in evidencing key points of control.	Director Corporate Services	~~November 2017~~ Complete	~~Whilst some checklists are utilised by various staff, formal checklists for key functions are not always maintained.~~ Checklists exist and are in use by staff as part of endorsed procedures.	152	High
IC3.9	Workflow Diagrams	Workflow diagrams create a visual representation of a process, clearly identifying key points of control and responsibility.	In conjunction with the development of documented procedures and checklists, development of workflow process diagrams may assist in clearly identifying controls and processes to be followed.	Director Corporate Services	~~November 2017~~ April 2019	Workflow diagrams have not been compiled.	228	High
IC3.10	Procedures for the preparation of Monthly Reports	Documented procedures and checks for the preparation of the Monthly Statement of Financial Activity for presentation to Council.	All primary reconciliations be completed signed and reviewed prior to finalisation of the Monthly Statement of Financial Activity for presentation to Council.	Manager Financeial Services	Complete	We developed an End of Month Checklist setting out the activities to be completed to achieve fully reconciled Balance Sheet GL accounts and cut-off procedures for Income Statement GL accounts. This checklist is continually developed for any new steps introduced or modified. This checklist and any resulting reconciliations is reviewed and approved by the Manager Financial Services prior to preparation of the Monthly Financial Reports.
IC3.11	Debtors Reconciliation	Reconciliation of outstanding debtors listing to the debtors’ ledger.	Credit amounts should be fully investigated and resolved to help ensure individual debtor balances are accurately reflected.	Manager Financeial Services	Complete	As part of the End of Month Checklist, reconciliations of general ledger with the subsidiary ledgers, identification and investigation of unusual balances such as credit balances in debtors are now performed on a regular basis.	76	High

No.	FRAMEWORK COMPONENTS	PURPOSE/GOAL	IMPROVEMENTS	Officer	Timing	Comments	Est. Hours	Priority
IC4.0 MONITORING AND REVIEW OF INTERNAL CONTROLS
IC4.1	Monitoring	To ensure policies and other controls relating to internal controls are adhered to within the organisation and their effectiveness is monitored.	That an internal audit function be developed to monitor the appropriateness and effectiveness of financial and non-financial internal controls.	Audit Reg 17 TAG	November -~~Annually~~ Biennially	December 2016 review completed by external consultant. While internal review is recommended current staff resources do not permit the development of an internal audit function. An external consultant will provide a biennial review as per the Audit Reg 17 regulations with ongoing risk management functions monitored by the Risk TAG. Next external audit review December 2018.
IC4.2	Breach monitoring	To ensure a process exists to track breaches of internal controls and effectiveness of changes to internal controls.	That a process to track control breaches be developed as part of the wider risk management process.	Audit Reg 17 TAG	Ongoing	Monitoring processes to be developed.
IC4.3	Minutes of Executive Management Group Meetings	To formally document identified risks, internal control and legislative compliance weaknesses raised by the Executive Management Group.	Minutes of the Executive Management Group meetings be maintained with risks, internal control and legislative compliance weaknesses identified in the minutes.	~~CEO PA~~ Executive Assistant to the CEO	~~April 2017 – Ongoing~~ Complete	**Refer RM4.5 & LC5.2 Process in place to ensure that EMG Minutes are recorded to Synergy Central Records system. All 2017 meeting minutes have been recorded to Synergy. EMG minutes will continue to be recorded to Synergy.		High
IC5.0 CONTINUAL IMPROVEMENT OF INTERNAL CONTROLS
IC5.1	Ongoing Improvement Program	A program developed to plan and implement improvements in internal controls practices and to guide the process of implementation.	That a documented program to implement improvements to internal controls be established as part of the wider risk management process.	Audit Reg 17 TAG	Ongoing	This improvement plan forms the basis of an all inclusive continual improvement process for all three areas.

No.	FRAMEWORK COMPONENTS	PURPOSE/GOAL	IMPROVEMENTS	Officer	Timing	Comments	Est. Hours	Priority
IC6.0 INTERNAL CONTROLS IMPROVEMENT PLAN
IC6.1	BRAC Receipting	To ensure that all funds received at the BRAC are receipted to the correct account in a timely manner.	That documented control procedures be developed and compliance with these procedures monitored.	Manager Financial Services/ ~~Manager Community Development~~ Manager Sport and Recreation, BRAC	~~Ongoing~~ Complete ~~Ongoing~~ Complete	Procedures documented and monitored by BRAC Manager. BOP accepted in July 2016. Financial Services working with BRAC regarding continuing receipting and balancing issues. The Revenue Officer monitors BRAC activities after each month-end closing activities in order ensure completeness of revenue.	22	High
IC6.2	Accounting Control Procedures	To ensure all financial transactions are appropriately recorded/ reported and the risk of fraud or error is minimised.	That the accounting procedures be expanded to more fully describe the task and its associated consequences and lines of authority.	Financial Services Team	~~December 2017~~ Complete and continuously monitored	Detailed tasks lists have been developed which identify activities that are performed on a daily, weekly, fortnightly, monthly, quarterly and annual basis. Related procedures are being developed. Detailed procedures are however continually produced and developed.

APPENDIX 1: RISK MATRIX

Shire of Broome Measures of Consequence
Rating	Health	Financial Impact	Service Interruption	Compliance	Reputational	Property	Environment
Insignificant 1	Near miss / minor injuries	Less than $10,000	No material service interruption	Minor regulatory or statutory impact	Unsubstantiated, localised low impact on community / stakeholder trust, low profile or no media item	Inconsequential damage	Contained, reversible impact managed by on site response
Minor 2	First aid injuries/ Lost time injury <30 Days	$10,001 - $250,000	Short term temporary interruption – backlog cleared < 1 day	Some temporary non compliances	Substantiated, localised impact on community / stakeholder trust or low media item	Localised damage rectified by routine internal procedures	Contained, reversible impact managed by internal response
Moderate 3	Medical type injuries/ Lost time injury >30 Days	$250,001 - $2,000,000	Medium term temporary interruption – backlog cleared by additional resources < 1 week	Short term non-compliance but with significant regulatory requirements imposed	Substantiated, public embarrassment, moderate impact on community/stakeholder trust or moderate media profile	Localised damage requiring external resources to rectify	Contained, reversible impact managed by external agencies
Major 4	Long-term disability / multiple injuries	$2,000,001 - $4,000,000	Prolonged interruption of services – additional resources; performance affected< 1 month	Non-compliance results in termination of services or imposed penalties	Substantiated, public embarrassment, widespread high impact on community / stakeholder trust, high media profile, third party actions	Significant damage requiring internal & external resources to rectify	Uncontained, reversible impact managed by a coordinated response from external agencies
Extreme 5	Fatality, permanent disability	More than $4,000,000	Indeterminate prolonged interruption of services – non-performance> 1 month	Non-compliance results in litigation, criminal charges or significant damages or penalties	Substantiated, public embarrassment, widespread loss of community/stakeholder trust, high widespread multiple media profile, third party actions	Extensive damage requiring prolonged period of restitution	Uncontained, irreversible impact

Measures of Likelihood
*Rating*	*Definition*	*Frequency*	*Chance of Occurrence*
*Almost Certain (5)*	The event is expected to occur in most circumstances	More than once per year	> 90% chance of occurring
*Likely* *(4)*	The event will probably occur in most circumstances	At least once per year	60% - 90% chance of occurring
*Possible (3)*	The event should occur at some time	At least once in 5 years	40% - 60% chance of occurring
*Unlikely (2)*	The event could occur at some time	At least once in 10 years	10% - 40% chance of occurring
*Rare* *(1)*	The event may only occur in exceptional circumstances	Less than once in 15 years	< 10% chance of occurring

Risk Matrix
Consequence Likelihood		Insignificant	Minor	Moderate	Major	Extreme
Consequence Likelihood		1	2	3	4	5
Almost Certain	5	Moderate (5)	High (10)	High (15)	Extreme (20)	Extreme (25)
Likely	4	Low (4)	Moderate (8)	High (12)	High (16)	Extreme (20)
Possible	3	Low (3)	Moderate (6)	Moderate (9)	High (12)	High (15)
Unlikely	2	Low (2)	Low (4)	Moderate (6)	Moderate (8)	High (10)
Rare	1	Low (1)	Low (2)	Low (3)	Low (4)	Moderate (5)

Minutes – Audit and Risk Committee Meeting 13 February 2018 Page 1 of 4

5.3 2nd QUARTER FINANCE AND COSTING REVIEW 2017-18

LOCATION/ADDRESS: Nil

APPLICANT: Nil

FILE: FRE02

AUTHOR: Manager Financial Services

CONTRIBUTOR/S: Senior Finance Officer

RESPONSIBLE OFFICER: Director Corporate Services

DISCLOSURE OF INTEREST: Nil

DATE OF REPORT: 29 January 2018

SUMMARY: The Audit Committee is requested to consider results of the 2nd Quarter Finance and Costing Review (FACR) of the Shire’s budget for the period ended 31 December 2017, including forecast estimates and budget recommendations to 30 June 2018.

BACKGROUND

Previous Considerations

OMC 29 June 2017 Item 9.4.4

OMC 19 Oct 2017 Item 9.4.3

Quarter 2 Finance and Costing Review

The Shire of Broome has carried out its 2nd Quarter Finance and Costing Review (FACR) for the 2017/18 Financial Year. This Review of the 2017-2018 Annual Budget is based on actuals and commitments for the first three months of the year from 1 July 2017 to 31 December 2017, and forecasts for the remainder of the financial year.

This process aims to highlight over and under expenditure of funds for the benefit of Executive and Responsible Officers to ensure good fiscal management of their projects and programs.

Once this process is completed, a report is compiled identifying budgets requiring amendments to be adopted by Council. Additionally, a summary provides the financial impact of all proposed budget amendments to the Shire of Broome’s adopted end-of-year forecast, in order to assist Council to make an informed decision.

It should be noted that the 2017/2018 annual budget was adopted at the Ordinary Meeting of Council on 29 June 2017 as a balanced budget. There have been further amendments adopted by Council as part of the Annual Financial Statements for the use of additional carried forward surplus and as part of 1^st Quarter FACR. The result of all amendments prior to the 2^nd Quarter FACR is $43,601 deficit upon the Shire of Broome’s forecast end of year position.

COMMENT

The 2nd Quarter FACR commenced on 24 January 2018. The FACR process has identified a deficit of $70,296 and net organisational savings of $nil.

The results from this process indicate a deficit forecast financial position to 30 June 2018 of $113,897 should Council approve the proposed budget amendments. This deficit is predominantly associated with the aforementioned drainage works estimated to cost $400,000.

It is recommended that any surplus funds identified throughout the FACR process be quarantined to reserve which is $nil for the quarter ended December 2017. This will carry a deficit of $113,897 forward to the next FACR meetings to be held in April 2018.

It should also be noted that this figure represents a budget forecast should all expenditure and income occur as expected. It does not represent the actual end-of-year position which can only be determined as part of the normal Annual Financial processes at the end of the financial year.

A comprehensive list of accounts (refer to Attachment 1) has been included for perusal by the committee and summarised by Directorate.

A summary of the results follows:

	BUDGET IMPACT
	2017/18 Adopted Budget (Income) / Expense	FACR Q2 Overall (Income) / Expense (Org Savings not subtracted)	FACR Q2 Org Savings (by Dept.)	FACR Q2 Impact (Income) / Expense (Org Savings subtracted)	YTD Adopted Budget Amendments (Income) / Expense	YTD Impact (Org Savings Subtracted)
Executive - Total	0	50,000	0	50,000	0	0
Corporate Services - Total	0	(109,825)	(95,000)	(14,825)	0	(14,825)
Development & Community - Total	0	(71,748)	(34,000)	(37,748)	43,601	5,853
Infrastructure Services - Total	0	201,869	129,000	72,869	0	122,869
	0,000*	70,296	0	70,296	43,601†	113,897

CONSULTATION

All amendments have been proposed after consultation with Executive and Responsible Officers at the Shire.

STATUTORY ENVIRONMENT

Local Government (Financial Management) Regulation 1996

r33A. Review of Budget

(1) Between 1 January and 31 March in each financial year a local government is to carry out a review of its annual budget for that year.

(2A) The review of an annual budget for a financial year must —

(a) consider the local government’s financial performance in the period beginning on 1 July and ending no earlier than 31 December in that financial year; and

(b) consider the local government’s financial position as at the date of the review; and

(c) review the outcomes for the end of that financial year that are forecast in the budget.

(2) Within 30 days after a review of the annual budget of a local government is carried out it is to be submitted to the council.

(3) A council is to consider a review submitted to it and is to determine* whether or not to adopt the review, any parts of the review or any recommendations made in the review.

*Absolute majority required.

(4) Within 30 days after a council has made a determination, a copy of the review and determination is to be provided to the Department.

Local Government Act 1995

6.8. Expenditure from municipal fund not included in annual budget

1) A local government is not to incur expenditure from its municipal fund for an additional purpose except where the expenditure —

(a) is incurred in a financial year before the adoption of the annual budget by the local government;

(b) is authorised in advance by resolution*; or

(c) is authorised in advance by the mayor or president in an emergency.

(1a) In subsection (1) —

“additional purpose” means a purpose for which no expenditure estimate is included in the local government’s annual budget.

POLICY IMPLICATIONS

2.1.1 Materiality in Financial Reporting

It should be noted that according to the materiality threshold set in Policy 2.1.1 Materiality in Financial Reporting, should a deficit achieve 1% of Shire’s operating revenue ($376,296) the Shire must formulate an action plan to remedy the over expenditure.

FINANCIAL IMPLICATIONS

The net result of the 2nd Quarter FACR estimates is a budget deficit position of $113,897 to 30 June 2018 with organisational savings of $nil.

RISK

The Finance and Costing Review (FACR) seeks to provide a best estimate of the end-of-year position for the Shire of Broome at 30 June 2018. Contained within the report are recommendations of amendments to budgets which have financial implications on the estimate of the end-of-year position.

The review does not, however, seek to make amendments below the materiality threshold unless strictly necessary. The materiality thresholds are set at $10,000 for operating budgets and $20,000 for capital budgets. Should a number of accounts exceed their budget within these thresholds, it poses a risk that the predicted final end-of-year position may be understated.

In order to mitigate this risk, the CEO enacted the FACRs to run quarterly and executive examine each job and account to ensure compliance. In addition, the monthly report provides variance reporting highlighting any discrepancies against budget.

It should also be noted that should Council decide not to adopt the recommendations, it could lead to some initiatives being delayed or cancelled in order to offset the additional expenditure associated with running the Shire’s operations.

STRATEGIC IMPLICATIONS

Our People Goal – Foster a community environment that is accessible, affordable, inclusive, healthy and safe:

Effective communication

Affordable services and initiatives to satisfy community need

Our Prosperity Goal – Create the means to enable local jobs creation and lifestyle affordability for the current and future population:

Affordable and equitable services and infrastructure

Key economic development strategies for the Shire which are aligned to regional outcomes working through recognised planning and development groups/committees

Our Organisation Goal – Continually enhance the Shire’s organisational capacity to service the needs of a growing community:

An organisational culture that strives for service excellence

Sustainable and integrated strategic and operational plans

Responsible resource allocation

Improved systems, processes and compliance

VOTING REQUIREMENTS

Absolute Majority

Committee Resolution:

(Report Recommendation)

Moved: Cr D Male Seconded: Cr C Mitchell

That the Audit and Risk Committee recommends that Council:

1. Receive the 2nd Quarter Finance and Costing Review Report for the period ended 31 December 2017;

2. Adopts the operating and capital budget amendment recommendations for the period ended 30 June 2018 as attached; and

3. Notes a forecast end-of-year position to 30 June 2018 of a $113,897 deficit position.

CARRIED UNANIMOUSLY BY ABSOLUTE MAJORITY 3/0

Attachments

1.	QUARTER 2 FINANCE AND COSTINGS REVIEW REPORT 2017-18

Committee Member	Item No	Item	Nature of Interest
Nil.