Agenda of Audit and Risk Committee - Wednesday, 10 February 2021

NOTICE OF MEETING

Dear Council Member,

The next Audit and Risk Committee of Council will be held on Wednesday, 10 February 2021 in the Council Chambers, Corner Weld and Haas Streets, Broome, commencing at 2:00 PM.

Regards,

S MASTROLEMBO

Chief Executive Officer

10/02/2021

DISCLAIMER

The purpose of Council Meetings is to discuss, and where possible, make resolutions about items appearing on the agenda. Whilst Council has the power to resolve such items and may in fact, appear to have done so at the meeting, no person should rely on or act on the basis of such decision or on any advice or information provided by a Member or Officer, or on the content of any discussion occurring, during the course of the meeting.

Persons should be aware that the provisions in section 5.25 of the Local Government Act 1995 establish procedures for revocation or rescission of a Council decision. No person should rely on the decisions made by Council until formal advice of the Council decision is received by that person. The Shire of Broome expressly disclaims liability for any loss or damage suffered by any person as a result of relying on or acting on the basis of any resolution of Council, or any advice or information provided by a Member or Officer, or the content of any discussion occurring, during the course of the Council meeting.

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Agenda – Audit and Risk Committee Meeting 10 February 2021 Page 1 of 2

5. Report of Officers

5.1 2nd QUARTER FINANCE AND COSTING REVIEW 2020-21

LOCATION/ADDRESS: Nil

APPLICANT: Nil

FILE: FRE02

AUTHOR: Manager Financial Services

CONTRIBUTOR/S: Nil

RESPONSIBLE OFFICER: Director Corporate Services

DISCLOSURE OF INTEREST: Nil

SUMMARY:

The Audit and Risk 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 2020, including forecast estimates and budget recommendations to 30 June 2021.

BACKGROUND

Previous Considerations

OMC 25 June 2020 Item 9.3.2

OMC 19 November 2020 Item 10.1

Quarter 2 Finance and Costing Review

The Shire of Broome has carried out its 2nd Quarter Finance and Costing Review (FACR) for the 2020-21 financial year. This review of the 2020-21 Annual Budget is based on actuals and commitments for the first three months of the year from 1 July 2020 to 31 December 2021, and forecasts for the remainder of the financial year.

This process aims to highlight over and under expenditure of funds and over and under achievement of income targets 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, to assist Council to make an informed decision.

It should be noted that the 2020-21 annual budget was adopted at the Ordinary Meeting of Council on 25 June 2020 as a balanced budget.

COMMENT

The Quarter 2 FACR commenced on 27 January 2021. The results from this process indicate a deficit forecast financial position to 30 June 2021 of $311,093 should Council approve the proposed budget amendments.

The above 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 financial year's normal annual financial processes.

At the start of the Q2 FACR, a net deficit of $350,598 was forecasted which arose from past budget amendments adopted by Council, including Q1 FACR. The Q2 FACR identified net savings of $39,505, resulting in a cumulative net deficit forecast of $311,093.

There were a total of 146 budget amendments proposed at Q2 FACR which made up the $69,985 net surplus for the quarter. There is no single transaction to which this net surplus is attributed. However, the most significant amendments among these are as follows:

· $529K net deficit from reduced interest income on municipal funds deposit

· $584K of net savings from the Broome Golf Club Redevelopment

· $296K of income and expenditure for additional LRCI funding available to be utilised for the Town Beach Carpark Construction

· $219K of additional Blackspot funding for Gu Winckel project with a corresponding increase in expenditure of $136K

· $160K grants received from the ‘In The House’ grants to be utilised for Civic Centre shows

· $100K savings from Frederick Drainage (KBR Report) Project from undertaking the work internally.

The proposed budget amendments also included income and expenses of equal amount totalling $2,322,544 to recognise the transfer of Broome Motocross Complex by the Development WA to the Shire.

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

A summary of the results is as follows:

	SHIRE OF BROOME SUMMARY REPORT
	BUDGET IMPACT
	2020/21 Adopted Budget (Income) / Expense	YTD Adopted Budget Amendments (Income) / Expense	FACR Q2 Overall (Income) / Expense	YTD Impact
Executive - Total	0	(12,920)	42,750	29,830
Corporate Services - Total	0	0	366,521	366,521
Development and Community- Total	0	332	103,999	104,331
Infrastructure Services - Total	0	55,708	(552,774)	(497,066)
Impact of Council approved budget amendments	0	307,478	0	307,478
	0,000*	350,598	(39,505)	311,093

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

Nil.

It should be noted that according to the materiality threshold set at the budget adoption, should a deficit achieve 1% of Shire’s operating revenue ($394,804) the Shire must formulate an action plan to remedy the over expenditure.

FINANCIAL IMPLICATIONS

The net result of the Quarter 2 FACR estimates is a budget deficit position of $311,093 to 30 June 2021.

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 2021. 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 Organisation Goal – Continually enhance the Shire’s organisational capacity to service the needs of a growing community:

Responsible resource allocation

Improved systems, processes and compliance

VOTING REQUIREMENTS

Absolute Majority

REPORT RECOMMENDATION:

That the Audit and Risk Committee recommends that Council:

1. Receives the Quarter 2 Finance and Costing Review Report for the period ended 31 December 2020;

2. Adopts the operating and capital budget amendment recommendations for the year ended 30 June 2021 as attached; and

3. Notes a forecast end-of-year position to 30 June 2021 of $311,093 deficit position.

Attachments

1.	2020-2021 Quarter 2 Finance and Costing Review