Minutes of Audit and Risk Committee

Minutes – Audit and Risk Committee Meeting 15 May 2018 Page 0 of 1

5. Reports of Officers

Cr Mitchell entered the meeting at 3.12pm.

5.1 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: 4 May 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 Risk Management Improvement Plan prepared by the Audit Regulation 17 Technical Advisory Group, then report to Council on the result of the Committee’s review.

This report recommends that incomplete actions from the Risk Management Improvement Plan as outlined within this report be transferred to the organisational Risk Profile Register (Risk Register).

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

OMC 22 February 2018 Item 10.4

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 (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 Risk Management Improvement Plan (Improvement Plan) separated into the three main compliance areas; Risk Management (RM), Legislative Compliance (LC) and Internal Controls (IC).

The Shire’s Risk 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.

COMMENT

The biannual report has previously identified actioned items as detailed in the Improvement Plan with a report provided to the Committee in May and November each year, after endorsement by EMG. Due to the Ordinary Local Government election held in October 2017 and appointments to Committees not being considered until the November OMC, the presentation of the biannual report to the Committee was delayed until February 2018. This has meant that it has only been 3 months since this report was last presented. The following indicates action item progress made during this period:

Framework Component Improvements

LC1.1

Code of Conduct

Officer Comment: The Code of Conduct was reviewed and adopted by Council at the OMC held 26 April 2018. To complete this action a Statement of Business Ethics is to be developed for suppliers and contractors with an additional document being developed for Volunteers. These documents will outline the Shire’s ethical standards and make clear the expectation of standards that apply in dealings with the Shire.

LC2.1

Purchasing Policy

Officer Comment: Whilst no action was required under the Improvement Plan the policy is being reviewed following the release of the revised WALGA Model Purchasing Policy and will be presented to Council. A comprehensive review has also been undertaken of procurement activities and procedures.

In addition, the TAG reviewed the Improvement Plan and it is proposed that a number of actions be transferred to the organisational Risk Profile Register. This combines the Improvement Plan and Risk Profile Register to provide one reporting tool. By transitioning the Improvement Plan to the Risk Profile Register it ensures continued review of the Risk Profile Register as it focuses on organisational risks. The TAG will continue to identify and prioritise actions from the Risk Profile Register and biannual reports will be presented to the Committee.

The Risk Profile Register is separated into the following areas for the purpose of identifying, monitoring and reporting on progress of actions to address organisational risks including internal controls and legislative compliance.

Profile / Section	Risk Context
Asset Sustainability Practices	Failure or reduction in service of infrastructure assets, plant, equipment or machinery
Business and Community Disruption	Failure to adequately prepared and respond to events that cause disruption to the local community and/or normal business activities. This could be a natural disaster, weather event, or an act carried out by an external party
Compliance Requirements	Failure to correctly identify, interpret, assess, respond and communicate laws and regulations as a result of inadequate compliance framework
Document Management Processes	Failure to adequately capture, store, archive, retrieve, provide or dispose of documentation
Employment Practices	Failure to effectively manage and lead human resources
Engagement Practices	Failure to maintain effective working relationships with the Community, Stakeholders, Key Private Sector Companies, Government Agencies and/or Elected Members
Environment Management	Inadequate prevention, identification, enforcement and management of environmental issues
Errors, Omissions and Delays	Error, omissions or delays in operational activities as a result of unintentional errors or failure to follow due process including incomplete, inadequate or inaccuracies in advisory activities to customers or internal staff
External Theft and Fraud (inc Cyber Crime)	Loss of funds, assets, data or unauthorised access (whether attempted or successful) by external parties, through any means (including electronic)
Management of Facilities/Venues/Events	Failure to effectively manage the day to day operations of facilities, venues and/or events.
IT or Communication Systems and Infrastructure	Disruption, financial loss or damage to reputation from a failure of information technology systems
Misconduct	Intentional activities intended to circumvent the Code of Conduct or activities in excess of authority, which circumvent endorsed policies, procedures or delegated authority
Project/Change Management	Inadequate analysis, design, delivery and/or status reporting of change initiatives, resulting in additional expenses, time delays or scope changes
Safety and Security Practices	Non-compliance with the Occupational Safety and Health Act associated regulations and standards.
Supplier/Contract Management	Inadequate management of external suppliers, contractors, IT vendors or consultants engaged for core operations.

For future reporting it is proposed to transfer the following items from the Improvement Plan to the Risk Profile Register, with the first report being presented to the Committee in November. It is intended that the manner in which officers report against Regulation 17 will reflect a more risk based approach in determining our internal controls and legislative compliance and will provide more meaningful risk based reporting to the Committee and Council. Attached is the Risk Dashboard Report which will be provided to the Committee as an attachment to future reports.

No.	Framework Components
RM2.2	Insurance Strategy or Policy Officer Comment: Development of an Insurance Strategy or Policy to provide clarity on issues such as the level of self insurance, the adequacy of cover and the basis of the valuation of insured assets. Proposed to be transferred to section 3 of the Risk Register as an outstanding action.
RM2.3	Staff Housing Policy Officer Comment: A review of the Staff Housing policy is in progress. Proposed to be transferred to section 5 of the Risk Register as an outstanding action.
RM3.3	Business Continuity Plan Officer Comment: Draft document requires final review and amendments to ensure suitability and effectiveness. Proposed to be transferred to section 2 of the Risk Register as an outstanding action.
RM3.6	Local Emergency Management Plan 2014 Draft Officer Comment: Following training provided on Managing Recovery Activities the Local Emergency Management Plan is being reviewed and will be tested once finalised. Proposed to be transferred to section 2 of the Risk Register as an outstanding action.
RM3.8	Workforce Plan Officer Comment: The Workforce Plan is under review. Proposed to be transferred to section 5 of the Risk Register as an outstanding action.
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. Proposed to be transferred to section 2 of the Risk Register as an outstanding action.
RM3.14	Information System Plans Officer Comment: Interim solution by relocating a replica of our current system to the Civic Centre. The backup is then copied offsite on a continuous basis. The development of Information System Plans will be considered as part of the Business Continuity Plan. Proposed to be transferred section 11 of the Risk Register as an outstanding action.
RM3.15	Volunteer and Contractor Inductions Officer Comment: LGIS contractor inductions completed, and future inductions will be conducted as required. Online staff contractor and volunteer inductions to be developed. Proposed to be transferred to section 14 of the Risk Register as an outstanding action.
RM4.2	Monitoring Compliance Officer Comment: As this is ongoing it is proposed to be transferred to section 3 of the Risk Register Controls to ensure continual monitoring.
RM5.2	Risk Management Training Officer Comment: Risk Management Training funds assigned through annual budget process for 17/18. As this requires annual consideration it is proposed to be transferred to section 5 of the Risk Register Controls.
LC1.1	Code of Conduct Officer Comment: A Statement of Business Ethics is to be developed for suppliers and contracts and a further document developed for Volunteers. Proposed to transfer document for Volunteers to section 3 and Statement of Business Ethics for business and service providers to section 15 of the Risk Register as outstanding actions.
LC2.1	Purchasing Policy Officer Comment: As previously indicated the purchasing policy is currently being reviewed following the release of the WALGA Model Purchasing Policy. Proposed to transfer to section 3 of the Risk Register.
LC3.1	Communications Officer Comment: This action relates to the obligation for contractors and volunteers to report compliance breaches. Proposed to transfer to section 3 of Risk Register as an outstanding action.
IC2.3	Internal Audit Officer Comment: As the level of documented procedures increases, an expanded internal audit function to confirm adherence to documented policies and procedures may be required. Proposed to be transferred to section 3 of the Risk Register to enable monitoring.
IC3.3	Documented Procedures Officer 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. Proposed to be transferred to section 4 of the Risk Register to monitor completion.
IC3.9	Workflow Diagrams Officer Comment: In conjunction with the development of documented procedures and checklists, development of workflow diagrams may assist in clearly identifying controls and processes to be followed. Proposed to be transferred to section 4 of the Risk Register to enable monitoring.
IC4.1	Monitoring Officer Comment: December 2016 review completed by external consultant. While internal review is recommended current 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. Proposed to be transferred to section 3 of the Risk Register to enable monitoring.

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

2.1.1 Legislative Compliance

2.1.4 Risk Management

2.2.1 Internal Controls

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 Risk Register 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 H Tracey Seconded: Cr C Mitchell

That the Audit and Risk Committee recommends that Council:

1. Notes the progress on Improvement Plan actions as contained within the report;

2. Endorses the transition from the Audit Regulation 17 Improvement Plan to the Risk Profile Register as detailed for future reporting; and

3. Notes a Risk Dashboard Report will be presented to subsequent Audit and Risk Committee Meetings.

CARRIED UNANIMOUSLY 3/0

Attachments

1.	Risk Dashboard Report

Item 5.1 - AUDIT REGULATION 17 IMPROVEMENT PLAN BIANNUAL PROGRESS REPORT

Shire of Broome Risk Dashboard Report
Asset Sustainability practices		Risk	Control
Asset Sustainability practices		Moderate	Adequate
Actions / Treatments	Due Date	Responsibility		Status of Actions / Treatments
All Improvement Plan actions have been completed for this risk profile. Actions will be populated from the Risk Profile Register

Business & Community disruption		Risk	Control
Business & Community disruption		High	Adequate
Actions / Treatments	Due Date	Responsibility		Status of Actions / Treatments
RM 2.2 Insurance Strategy or 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.	Nov-18	Manager Governance		Draft document to be developed for presentation to the Audit and Risk Committee November 2018.
RM 3.3 Finalise & communicate Business Continuity policy, procedures & plans	Nov-18	DCS		Under review - to be presented to Audit Committee in November.
RM 3.6 Local Emergency Management Arrangements & recovery plans	Nov-18	MHER		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.
RM 3.12 Emergency Response Procedures – Shire Buildings	Nov-18	MCED/WC		Update required for procedures at the Admin Centre, Depot and Waste Management Facility. 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.
RM 3.14 Information Systems Plans	Nov-18	MIS		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
RM 3.3 BCP - That, as high priority, an effective documented Business Continuity Plan be developed including relevant disaster recovery plans. That, once adopted, the Plan’s effectiveness be tested	April-18 for doc. Nov-18 for exercise	DCS		Draft document still requires final review and amendment to ensure suitability and effectiveness. Presented to Audit and Risk Committee May 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.

Failure to fulfil Compliance requirements (statutory, regulatory)		Risk	Control
		Moderate	Adequate
Actions / Treatments	Due Date	Responsibility		Status of Actions / Treatments
LC 1.1 Code of Conduct	Apr-18	MG		Code of Conduct reviewed and adopted by Council at the OMC held 26 April 2018. Volunteers and contractors are not bound by a Code of Conduct when performing functions on behalf of the Shire. Separate documents to be developed for Volunteers and business and service providers. These have been identified as separate actions on this register.
LC 1.1 Code of Conduct or similar to be developed for Volunteers	Nov-18	MPC		Being developed with MPC.
LC 2.1 Purchasing Policy	Apr-18	SPRGO		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.
LC 3.1 Communications - ensure staff, contractors and regular volunteers are aware of their obligation to report breaches of legislation to the appropriate Officer.	May-17	MPC		The Shire's current process is undertaken through OSH reporting and the onsite induction process. Staff Survey conducted in Dec 17 confirms employees are aware of OSH reporting and induction process. Further works to be Included in the Shire's corporate contractor induction process pending finalisation.
IC 2.1 Management Policy - internal control framework be developed reflecting a risk based approach to internal controls and providing the monitoring and reporting systems.	Nov-18	Risk TAG		Internal Control Framework developed and in operation however leaving open until process is firmly established and embedded across organisation. Framework to be presented to Audit and Risk Committee November 2018.
IC 2.3 Internal audit - as the level of documented procedures increases, an expanded internal audit function to confirm adherence to documented policies and procedures may be required.	Dec-18	DCS		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.

Document Management processes		Risk	Control
Document Management processes		Moderate	Adequate
Actions / Treatments	Due Date	Responsibility		Status of Actions / Treatments
IC 3.3 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.	November 17 - Ongoing	DCS		Standard operating procedures exist for selected, but not all, financial procedures. Procedure documentation is being developed by officers where it does not currently exist.
IC 3.9 workflow diagrams - 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.	Apr-19	DCS		Workflow diagrams have not been compiled.

Employment practices		Risk	Control
Employment practices		High	Not Rated
Actions / Treatments	Due Date	Responsibility		Status of Actions / Treatments
RM 2.3 Staff Housing Policy	Apr-18	DCS > MPC		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.
RM 3.8 Workforce Plan	Nov-18	MPC		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.
RM 5.2 Risk management training be available to elected members and all senior staff undergo relevant risk management training.	November - Annually	DCS		Risk Management Training funds assigned through annual budget process for 17/18 however may be deferred due to vacancies in HR department.

Engagement practices		Risk	Control
Engagement practices		Moderate	Adequate
Actions / Treatments	Due Date	Responsibility		Status of Actions / Treatments
All Improvement Plan actions have been completed for this risk profile. Actions will be populated from the Risk Profile Register

Environment management		Risk	Control
Environment management		Moderate	Adequate
Actions / Treatments	Due Date	Responsibility		Status of Actions / Treatments
All Improvement Plan actions have been completed for this risk profile. Actions will be populated from the Risk Profile Register

Errors, omissions & delays		Risk	Control
Errors, omissions & delays		Moderate	Adequate
Actions / Treatments	Due Date	Responsibility		Status of Actions / Treatments
All Improvement Plan actions have been completed for this risk profile. Actions will be populated from the Risk Profile Register

External theft & fraud (Inc. Cyber Crime)		Risk	Control
External theft & fraud (Inc. Cyber Crime)		Moderate	Adequate
Actions / Treatments	Due Date	Responsibility		Status of Actions / Treatments
All Improvement Plan actions have been completed for this risk profile. Actions will be populated from the Risk Profile Register

Management of Facilities / Venues / Events		Risk	Control
Management of Facilities / Venues / Events		Moderate	Adequate
Actions / Treatments	Due Date	Responsibility		Status of Actions / Treatments
All Improvement Plan actions have been completed for this risk profile. Actions will be populated from the Risk Profile Register

IT or communication systems and infrastructure		Risk	Control
IT or communication systems and infrastructure		Moderate	Adequate
Actions / Treatments	Due Date	Responsibility		Status of Actions / Treatments
RM 3.14 Information Systems Plans	Nov-18	MIS		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

Misconduct		Risk	Control
Misconduct		Moderate	Adequate
Actions / Treatments	Due Date	Responsibility		Status of Actions / Treatments
All Improvement Plan actions have been completed for this risk profile. Actions will be populated from the Risk Profile Register

Project / Change management		Risk	Control
Project / Change management		Moderate	Adequate
Actions / Treatments	Due Date	Responsibility		Status of Actions / Treatments
All Improvement Plan actions have been completed for this risk profile. Actions will be populated from the Risk Profile Register

Safety and Security practices		Risk	Control
Safety and Security practices		High	Adequate
Actions / Treatments	Due Date	Responsibility		Status of Actions / Treatments
RM 3.15 - Volunteer and Contractor Inductions	Nov-18	MPC		LGIS contractor inductions complete. Will be conducted as required. Volunteer inductions to be developed.

Supplier / Contract management		Risk	Control
Supplier / Contract management		Moderate	Adequate
Actions / Treatments	Due Date	Responsibility		Status of Actions / Treatments
All Improvement Plan actions have been completed for this risk profile. Actions will be populated from the Risk Profile Register

Minutes – Audit and Risk Committee Meeting 15 May 2018 Page 0 of 1

5.2 3rd QUARTER FINANCE AND COSTING REVIEW 2017-18

LOCATION/ADDRESS: Nil

APPLICANT: Nil

FILE: FRE02

AUTHOR: Manager Financial Services

CONTRIBUTOR/S: Coordinator Financial Services

RESPONSIBLE OFFICER: Director Corporate Services

DISCLOSURE OF INTEREST: Nil

DATE OF REPORT: 7 May 2018

SUMMARY: The Audit Committee is requested to consider results of the 3rd Quarter Finance and Costing Review (FACR) of the Shire’s budget for the period ended 31 March 2018, 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

OMC 22 February 2018 Item 10.4

Quarter 3 Finance and Costing Review

The Shire of Broome has carried out its 3rd 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 nine months of the year from 1 July 2017 to 31 March 2018, 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 $113,897 deficit upon the Shire of Broome’s forecast end of year position.

At the March OMC, Council approved a budget amendment of $22,500 for renewal of drainage in the Broome Townsite, leaving a final deficit of $136,397 forecast end-of-year position.

COMMENT

The 3rd Quarter FACR commenced on 24 January 2018. The FACR process has identified, through careful scrutiny, a surplus of $500,400 and net organisational savings of $360,892.

It is recommended that any surplus funds identified as Organisational Savings throughout the FACR process be quarantined to reserve. This amounts to $360,892 for the quarter ended March 2018.

The results from this process, coupled with the current $136,397 deficit, indicate a surplus forecast financial position to 30 June 2018 of $3,111 should Council approve the proposed budget amendments and transfers to Reserve.

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:

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 3rd Quarter FACR estimates is a budget surplus position of $3,111 to 30 June 2018 with organisational savings of $360,892.

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 H Tracey

That the Audit and Risk Committee recommends that Council:

1. Receive the 3rd Quarter Finance and Costing Review Report for the period ended 31 March 2018;

2. Adopts the operating and capital budget amendment recommendations for the period ended 31 March 2018 as attached;

3. Notes a forecast end-of-year position to 30 June 2018 of a $3,111 surplus position;

4. Approves a budget transfer to the Public Open Space Reserve of $353,892 to quarantine potential surplus funds at the end of the financial year; and

5. Approves a budget transfer to the Equipment Reserve of $7,000 to quarantine potential surplus funds at the end of the financial year.

CARRIED UNANIMOUSLY BY ABSOLUTE MAJORITY 3/0

Attachments

1.	Finance & Costing Review Report

Committee Member	Item No	Item	Nature of Interest
Nil