Minutes 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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Minutes – Audit and Risk Committee Meeting 10 February 2021 Page 0 of 1

MINUTES OF THE Audit and Risk Committee Meeting OF THE SHIRE OF BROOME,

HELD IN THE Council Chambers, Corner Weld and Haas Streets, Broome, ON Wednesday 10 February 2021, COMMENCING AT 2:00 PM.

1. Official Opening

The Chair welcomed Councillors and Officers and declared the meeting open at 2:09PM.

2. Attendance And Apologies

ATTENDANCE

Members:	Cr D Male	Chair / Deputy Shire President
	Cr C Mitchell	Deputy Chair
	Cr H Tracey	Shire President

Apologies:	Nil

Leave of Absence:	Nil

Officers:	Mr S Mastrolembo	Chief Executive Officer
	Mr J Watt	Director Corporate Services
	Mr A Graffen	Director Infrastructure
	Mr N Cain	Director Development and Community
	Mr A Santiago	Manager Financial Services
	Mr D Kennedy	Manager Governance Strategy and Risk

3. Declarations Of Financial Interest / Impartiality

Committee Member	Item No	Item	Nature of Interest
Nil.

4. Confirmation Of Minutes

Committee Resolution:

(Recommendation) Minute No. AR/0221/001

Moved: Cr D Male Seconded: Cr C Mitchell

That the Minutes of the Audit and Risk Committee held on 2 December 2020, as published and circulated, be confirmed as a true and accurate record of that meeting.

CARRIED UNANIMOUSLY 3/0

Minutes – Audit and Risk Committee Meeting 10 February 2021 Page 0 of 1

5. Reports of Officers

5.2 COMPLIANCE AUDIT RETURN 2020

LOCATION/ADDRESS: Nil

APPLICANT: Nil

FILE: LCR02

AUTHOR: Manager Governance, Strategy and Risk

CONTRIBUTOR/S: Nil

RESPONSIBLE OFFICER: Director Corporate Services

DISCLOSURE OF INTEREST: Nil

SUMMARY:

The purpose of this report is to present to the Audit and Risk Committee (ARC) the 2020 Compliance Audit Return (CAR) for review, and to request that the ARC recommend that Council adopt the 2020 CAR for submission to the Department of Local Government, Sport and Cultural Industries (DLGSC) by 31 March 2021.

BACKGROUND

Local governments are required to complete a compliance audit for the previous calendar year by the 31 March. The DLGSC provides the questions each year with the compliance audit being an in-house self audit that is undertaken by the appropriate responsible officer.

In accordance with Regulation 14 of the Local Government (Audit) Regulations 1996 the ARC is to review the 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 2021.

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 DLGSC continues to focus on high risk areas of compliance and statutory reporting as prescribed in Regulation 13 of the Local Government (Audit) Regulations 1996.

The CAR for the period 1 January to 31 December 2020 comprises a total of 102 questions, down from 104 questions the previous year. Whilst the number of questions is similar the DLGSC has updated the wording of many questions and combined questions of a similar nature. New questions have appeared for the first time to reflect the legislative changes that are occurring, and this trend is expected to continue.

The key focus areas covered in the CAR are as follows:

Focus Area	2019 Qu’s	2020 Qu’s	Comments
Commercial Enterprises by Local Governments	5	5	· No changes.
Delegation of Power/Duty	13	13	· No change.
Disclosure of Interest	19	21	· Several questions amalgamated. · New questions relating to public access to information, participation rights and adoption of a code of conduct added.
Disposal of Property	2	2	· No change.
Elections	2	3	· New question relating to public access to the electoral gift register.
Finance	14	11	· Amalgamation of questions relating to Audit Reg 7 into one question.
Integrated Planning and Reporting	7	3	· Questions relating to Asset Management Plan(s), Long Term Financial Plan and Workforce Plan removed.
Local Government Employees	5	6	· New question relating to council rejecting a CEO’s recommendation to employ or dismiss a senior employee.
Official Conduct	6	4	· Several questions amalgamated. · New question in regard to public access to complaints register for minor breaches.
Optional Questions	4	10	· New questions regarding the gift provision changes, · New questions relating to the attendance of elected members and the CEO at events policy · New questions regarding the continuing professional development of elected members policy. · New question regarding report on training completed by elected members in the 2019/2020 financial year.
Tenders for Providing Goods and Services	27	24	· Several questions amalgamated. · Two new questions in relation to the Shire’s purchasing policy.
Total	104	102

During 2020, responsible officers monitored compliance in each of the focus areas through a new cloud-based compliance application – RelianSys. This has increased the awareness of compliance obligations and allowed the capture of compliance evidence in one central repository throughout the year. The new compliance system reduces the risk of noncompliance and streamlines compilation of the annual return.

A compliance rating of 100% has been reported for 2020.

This continues the Shire’s strong history of compliance with the requirements of the Local Government Act (1995), with minimal non compliances reported over the last 5 years and none of a significant risk nature.

It is important to emphasis that the CAR is limited in scope.

Local Governments are also required to comply with upwards of 200 other pieces of legislation. The implementation of RelianSys during 2020 provides the ability to continually improve the monitoring and assurance of other significant pieces of legislation on a prioritised basis. The RelianSys system can also be developed to assist in addressing the compliance focus of the Office of the Auditor General (OAG) that is apparent since the OAG took over the responsibility for Local Government financial and performance audits.

CONSULTATION

Department of Local Government, Sport and Cultural Industries

STATUTORY ENVIRONMENT

Local Government (Audit) Regulations 1996

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.

15. Compliance audit return, certified copy of etc. to be given to Departmental CEO

(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 Departmental CEO by 31 March next following the period to which the return relates.

POLICY IMPLICATIONS

Nil.

FINANCIAL IMPLICATIONS

Nil.

RISK

There is a reputational risk with the DLGSC should the CAR not be completed on time or if significant non compliances are reported.

The likelihood of this occurring is rare.

STRATEGIC IMPLICATIONS

Our Performance Aspiration – We will deliver excellent governance, service and value, for everyone.

Deliver best practice governance and risk management.

VOTING REQUIREMENTS

Simple Majority

Committee Resolution:

(Report Recommendation) Minute No. AR/0221/002

Moved: Cr C Mitchell Seconded: Cr H Tracey

That the Audit and Risk Committee recommends that Council:

1. Adopt the attached 2020 Compliance Audit Return as the official return for the Shire of Broome; and

2. Requests the Chief Executive Officer to submit the certified 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 2021.

CARRIED UNANIMOUSLY 3/0

Attachments

1.	2020 Compliance Annual Return

Minutes – Audit and Risk Committee Meeting 10 February 2021 Page 0 of 1

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

Committee Resolution:

(Report Recommendation) Minute No. AR/0221/003

Moved: Cr D Male Seconded: Cr C Mitchell

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.

CARRIED UNANIMOUSLY BY ABSOLUTE MAJORITY 3/0

Attachments

1.	2020-2021 Quarter 2 Finance and Costing Review