Agenda of Audit, Risk and Improvement Committee Meeting

CONFLICT OF INTERESTS

What is a “Conflict of Interests” - A conflict of interests can be of two types:

Pecuniary - an interest that a person has in a matter because of a reasonable likelihood or expectation of appreciable financial gain or loss to the person or another person with whom the person is associated.

Non-pecuniary – a private or personal interest that a Council official has that does not amount to a pecuniary interest as defined in the Local Government Act (eg. A friendship, membership of an association, society or trade union or involvement or interest in an activity and may include an interest of a financial nature).

Remoteness – a person does not have a pecuniary interest in a matter if the interest is so remote or insignificant that it could not reasonably be regarded as likely to influence any decision the person might make in relation to a matter or if the interest is of a kind specified in Section 448 of the Local Government Act.

Who has a Pecuniary Interest? - a person has a pecuniary interest in a matter if the pecuniary interest is the interest of the person, or another person with whom the person is associated (see below).

Relatives, Partners - a person is taken to have a pecuniary interest in a matter if:

§ The person’s spouse or de facto partner or a relative of the person has a pecuniary interest in the matter, or

§ The person, or a nominee, partners or employer of the person, is a member of a company or other body that has a pecuniary interest in the matter.

N.B. “Relative”, in relation to a person means any of the following:

(a) the parent, grandparent, brother, sister, uncle, aunt, nephew, niece, lineal descends or adopted child of the person or of the person’s spouse;

(b) the spouse or de facto partners of the person or of a person referred to in paragraph (a)

No Interest in the Matter - however, a person is not taken to have a pecuniary interest in a matter:

§ If the person is unaware of the relevant pecuniary interest of the spouse, de facto partner, relative or company or other body, or

§ Just because the person is a member of, or is employed by, the Council.

§ Just because the person is a member of, or a delegate of the Council to, a company or other body that has a pecuniary interest in the matter provided that the person has no beneficial interest in any shares of the company or body.

Disclosure and participation in meetings

§ A Councillor or a member of a Council Committee who has a pecuniary interest in any matter with which the Council is concerned and who is present at a meeting of the Council or Committee at which the matter is being considered must disclose the nature of the interest to the meeting as soon as practicable.

§ The Councillor or member must not be present at, or in sight of, the meeting of the Council or Committee:

(a) at any time during which the matter is being considered or discussed by the Council or Committee, or

(b) at any time during which the Council or Committee is voting on any question in relation to the matter.

No Knowledge - a person does not breach this Clause if the person did not know and could not reasonably be expected to have known that the matter under consideration at the meeting was a matter in which he or she had a pecuniary interest.

Participation in Meetings Despite Pecuniary Interest (S 452 Act)

A Councillor is not prevented from taking part in the consideration or discussion of, or from voting on, any of the matters/questions detailed in Section 452 of the Local Government Act.

Non-pecuniary Interests - Must be disclosed in meetings.

There are a broad range of options available for managing conflicts & the option chosen will depend on an assessment of the circumstances of the matter, the nature of the interest and the significance of the issue being dealt with. Non-pecuniary conflicts of interests must be dealt with in at least one of the following ways:

§ It may be appropriate that no action be taken where the potential for conflict is minimal. However, Councillors should consider providing an explanation of why they consider a conflict does not exist.

§ Limit involvement if practical (eg. Participate in discussion but not in decision making or vice-versa). Care needs to be taken when exercising this option.

§ Remove the source of the conflict (eg. Relinquishing or divesting the personal interest that creates the conflict)

§ Have no involvement by absenting yourself from and not taking part in any debate or voting on the issue as if the provisions in S451 of the Local Government Act apply (particularly if you have a significant non-pecuniary interest)

RECORDING OF VOTING ON PLANNING MATTERS

Clause 375A of the Local Government Act 1993 – Recording of voting on planning matters

(1) In this section, planning decision means a decision made in the exercise of a function of a council under the Environmental Planning and Assessment Act 1979:

(a) including a decision relating to a development application, an environmental planning instrument, a development control plan or a development contribution plan under that Act, but

(b) not including the making of an order under Division 2A of Part 6 of that Act.

(2) The general manager is required to keep a register containing, for each planning decision made at a meeting of the council or a council committee, the names of the councillors who supported the decision and the names of any councillors who opposed (or are taken to have opposed) the decision.

(3) For the purpose of maintaining the register, a division is required to be called whenever a motion for a planning decision is put at a meeting of the council or a council committee.

(4) Each decision recorded in the register is to be described in the register or identified in a manner that enables the description to be obtained from another publicly available document, and is to include the information required by the regulations.

(5) This section extends to a meeting that is closed to the public.

BYRON SHIRE COUNCIL

Staff Reports - Corporate and Community Services 4.1 - Attachment 1

INFORMATION ABOUT THIS DOCUMENT
(INTERNAL USE ONLY)

Date Adopted by Council	23/10/08	Resolution No.	08-656
Responsibility	General Manager
Review Timeframe	Annual
Last Review Date:	August 2018	Next Scheduled Review Date	August 2019

Document History

Doc No.	Date Amended	Details Comments eg Resolution No.
#807046		Adopted 23/10/08 Res 08-656
#847308	9/4/09	Amended Res 09-189 Ord Meeting 9/4/09
#982110	10/6/10	Amended Res 10-422
#1162057	3/11/11	Amended Res 11-873
#E2012/25442	10/12/2012	27/9/2012 Res 12-769 – New Councillor Appointment 8/11/2012 – reference to WHS Policy
#E2017/17073	15/03/2017	Legislative amendments as per Local Government Amendment Act (Governance and Planning)l 2016 (NSW)
#E2017/17073	22/6/2017	Council adopted amended constitution as per the legislative requirements under the Local Government Amendment (Governance and Planning) Act 2016 NSW at its Ordinary Meeting 22 June 2017 (Resolution 17-233)
E2018/71315	27/08/2018	Included information regarding the Committee’s responsibilities relating to fraud and corruption prevention, as per recommendation from Council’s internal auditors.

Further Document Information and Relationships

Related Legislation

Section 355, Local Government Act (1993)

Local Government Amendment Act (Governance and Planning) Bill 2016 – Section 428A

Related Policies

Code of Conduct
Code of Meeting Practice
Business Ethics Policy
Work Health Safety Policy

Related Procedures/ Protocols, Statements, documents

Guide to Operations - Advisory Committees

Table of Contents

1. Authority. 4

2. Objectives. 4

3. Duties and Responsibilities. 4

3.1. Independence. 4

3.2. Secretariat 5

3.3. Financial reports. 5

3.4. Internal control 5

3.5. External Audit 6

3.6. Internal Audit 6

3.7. Risk Management & Improvement 6

3.8. Compliance. 6

3.9. Fraud and Corruption Prevention. 7

4. Membership. 7

4.1 Ex-officio members. 7

4.2 Independent member skills. 7

4.3 Independent member appointment process. 8

4.4 Obligations of members. 8

5 Powers. 8

6 Reporting. 8

7 Meetings. 9

8 Meeting agenda. 9

9 Assessing Performance. 9

10 Privacy, Conflict of interest & Code of Conduct 9

Audit, Risk and Improvement Committee

1. Authority

This Constitution establishes the authority and responsibilities conferred on the Audit, Risk and Improvement Committee (Committee) by Council and establishes the role of the Committee within Council.

The Committee is an advisory Committee of the Council and does not have executive power or authority to implement actions however, the Committee will at times make recommendations to Council

The role of the Committee is, independently of management, to report to Council and provide appropriate advice and recommendations on matters concerning the good corporate governance of Council including performance improvement and risk management.

The Council and Committee are expected to review the Constitution at least annually. Only Council can amend the Constitution.

2. Objectives

The objective of the Committee is to provide professional, independent advice and assistance to Council in assessing the organisation’s audit, compliance, risk and improvement performance.

The Committee assists the General Manager and Council to ensure Council maintains legal compliance and adheres to policy directions from the Office of Local Government.

The primary functions of the Committee are to ensure that:

· Business and governance systems and procedures have been established by the Executive Team and are effectively implemented;

· Appropriate risks and exposures are identified and effectively managed;

· A culture of adherence to Council policies and procedures is promoted;

· Identify and implement performance improvement measures and functions;

· Statutory compliance and fraud control is promoted and monitored;

· The audit processes (both internal and external) are effective;

· The external reporting is objective and credible;

· Monitor and review the implementation of the strategic plan, delivery program and strategies; and,

· Service reviews are conducted.

3. Duties and Responsibilities

The Committee’s duties and responsibilities include, but are not limited to:

3.1. Independence

a) Have unrestricted access to all relevant information for the conduct of audit, including documents and personnel, and have adequate resources in order to fulfil its oversight responsibilities.

b) Have the right to seek information from the General Manager, Executive Team, elected Councillors and to consult directly with the External Auditor.

c) External auditor to have the right of access to the Committee.

d) Circumstances where the Committee may exclude the General Manager from a meeting while it deals with any other matter, if it considers it appropriate to do so in the circumstances of the case, as per section 376 of the Local Government Amendment Act 2016.

3.2. Secretariat

Corporate and Community Services Directorate will provide Secretariat support to the Committee through undertaking tasks including ensuring the agenda for each meeting and supporting papers are circulated at least one week period to the meeting and ensuring minutes are prepared and circulated.

3.3. Financial reports

a) Review significant accounting, budget and reporting issues and understand their impact on the annual financial reports. These issues include:

i. Complex or unusual transactions and highly judgmental areas.

ii. Major issues regarding accounting principles and financial statement presentations, including any significant changes in the Council’s application of accounting principles.

iii. Review and recommend all significant accounting policy changes and consider whether policies reflect appropriate principles and purpose.

b) Review reports prepared by management setting forth significant financial reporting issues and judgments made in connection with the preparation of the financial report of the Council.

c) Review and monitor the delivery of Council’s Long Term Financial Plan.

d) Review with management and the external auditor the results of the audit, including any difficulties encountered. This review will include any restrictions on the scope of the independent auditor’s activities or on access to requested information, and any significant disagreements with management.

3.4. Internal control

a) Have the right to enquire of the General Manager about significant risks or exposures and assess the policies and procedures being taken to minimise such risks.

b) Review and consider whether management whether there are adequate controls and risk management procedures in place including over third parties such as contractors or advisors.

c) Consider the effectiveness of the Council’s internal control system, including information technology security and control.

d) Understand the scope of the external auditors’ reviews of internal control over financial reporting, and obtain reports on significant findings and recommendations together with management’s responses.

e) Investigate and report on any weakness in the method or system of control of Council procedures or practices.

f) Consider and make recommendations on the organisations approach to embedding an approach to compliance, professional and lawful behaviour.

3.5. External Audit

a) The Committee has no power of direction over external audit or the manner in which the external audit is planned or undertaken but will act as a forum for the consideration of external audit findings as well as management responses.

b) At the completion of the annual financial statements, the Committee shall meet to review the audited General Purpose Financial Report and the Audit Report before the documents are presented to Council.

c) The Committee shall provide input and feedback on the financial statements and performance audit proposed by external auditors.

d) Consider significant issues raised through external audit reports and monitor to ensure appropriate course of action is taken.

3.6. Internal Audit

a) The Internal Audit function shall be administered through the General Manager, however ultimate reporting responsibility is to the Audit Committee.

b) Review and approve the Annual Internal Audit Plan. This plan should be risk based and its preparation to the Audit Committee conducted in accordance with input from the Executive Team, External Audit and Internal Audit.

c) Monitor the progress of the Annual Internal Audit Plan and review all recommendations in audits completed and the General Manager’s implementation of recommendations.

d) Confirm that the systems, processes, operations and functions of Council are subject to internal audit evaluation, risk analysis and improvement highlighted and implemented.

3.7. Risk Management & Improvement

a) Review Council’s risk profile as developed by internal auditors.

b) The Committee is to progressively review and monitor Councils risk management framework (comprising a policy, guidelines and tools) and identify opportunity for improvement.

c) The Committee should encourage an attitude of continuous improvement throughout all aspects of business of the organisation.

d) The Committee, through working with the General Manager, will ensure a comprehensive risk management strategy, including the policy, is applied to manage all significant risks to the organisation.

3.8. Compliance

a) Review the effectiveness of the system for monitoring compliance with laws and regulations and the results of management’s investigation and follow-up of any instances of non-compliance.

b) Review the findings of any examinations by regulatory agencies, and any auditor observations.

c) Review the process of communicating the Council’s Code of Conduct and other corruption resistance controls to personnel, and for monitoring compliance.

d) Obtain regular updates from management and the Council’s legal representatives regarding compliance matters.

e) Consider whether management has included legal and compliance risks as part of risk assessment and management arrangements undertaken.

3.9. Fraud and Corruption Prevention

Oversee Council’s fraud and corruption prevention arrangements and:

a) Review and discuss with management their philosophy with respect to business ethics and corporate conduct, including Council’s Code of Conduct and the programme it has in place to promote and monitor compliance with that code.

b) Monitor the level of and issues raised in relation to Public Interest Disclosures, customer complaints, and internal and external conduct investigations (for example by the Independent Commission Against Corruption).

c) Review Council’s assessment of the level of exposure to fraud and corruption.

d) Receive and review management’s strategies and controls to manage fraud and corruption risks.

4. Membership

The Committee shall comprise six members, consisting of three councillors and three relevantly qualified external representatives.

4.1 Ex-officio members

Council’s General Manager and External Auditor shall be available to attend all Audit Committee meetings but are not members of the Committee and do not have voting rights.

All independent members will be appointed by Council for a term of four years.

4.2 Independent member skills

Independent members must have appropriate skills and time to fulfil their role on the Committee with skills and experience in the following areas required:

a) Financial systems, processes and reporting;

b) Risk Management;

c) Governance and Compliance; and

d) Corporate management and performance.

4.3 Independent member appointment process

Independent members shall be requested to nominate their services through a public invitation process. The initial evaluation of potential members will be undertaken by the General Manager, taking into account the experience of the nominees and their ability to apply appropriate analytical and strategic management skills. The General Manager will then nominate selected independent members to Council for approval.

The Chairperson shall be an external member elected by a majority vote by the members of the Committee. The Committee is required to adhere to Council’s Code of Conduct and Code of Meeting Practice.

4.4 Obligations of members

Members of the Committee will at all times in the discharge of their duties and responsibilities exercise honesty, objectivity and probity and not engage knowingly in acts or activities that have the potential to bring discredit to the Council.

Members must also refrain from entering into any activity that may prejudice their ability to carry out their duties and responsibilities objectively and must at all times act in a proper and prudent manner in the use of information acquired in the course of their duties. Members must not use Council information for any personal gain for themselves or their immediate families or any manner that would be contrary to law or detrimental to the welfare of the Council.

Further, members must not publicly comment on matters relative to activities of the Committee other than as authorised by Council.

5 Powers

a) The Committee can propose and/or request that the General Manager conduct investigations into any matters within the Committee’s scope of responsibilities.

b) The Committee may invite ex-officio members, members of the Executive Team, other Council personnel or external parties to attend any meeting and provide pertinent information within the Committee’s scope of responsibilities.

c) The Committee has no line responsibilities for the audit function, except for the Chairperson of the Committee liaising with the General Manager on the establishment of the meeting agenda or discussion on sensitive matters and issues contained in Internal Audit Reports to the Committee.

6 Reporting

a) The reports of meetings (Minutes) are to be circulated to members of the group within 7 days of the meeting so that members can provide feedback through the Chair on the draft unconfirmed minutes.

b) Subject to section a) above, the Minutes, recommendations and a status update on the recommendations will be reported to the next Council meeting.

c) The Committee can at any time consider any other matter it deems of sufficient importance to do so.

7 Meetings

a) The Committee will meet at least four times per year or more frequently as circumstances require. Matters that must be discussed at a meeting include:

i. Review and recommendation of the Annual Internal and External Audit Plan;

ii. Review the Annual General Purpose and Special Purpose Financial Reports;

iii. Review and assess Internal Audit Progress Reports;

iv. Review and assess External Audit management letters;

v. Review and monitor Councils Risk Management Framework; and

vi. Any other matters within the responsibility of the Committee.

b) The Chairperson may call a meeting if requested to do so by the General Manager, Committee member, the Internal or the External Auditor.

c) Minutes will be taken at these meetings, detailing matters discussed and action agreed.

d) A quorum shall be four Committee members.

e) If the Chairperson is absent from a meeting, the first business of the meeting will be to elect a Chairperson for that meeting from the independent members present.

8 Meeting agenda

a) It is the responsibility of the Chairperson of the Committee to set the Committee meeting agenda. Meeting agendas will be prepared and provided in advance to members, along with appropriate briefing materials.

b) Agenda items for consideration at a Committee meeting can be referred to the Chairperson of the Committee by Council, the General Manager, Committee members, the Internal or External Auditor.

9 Assessing Performance

The Committee shall be subject to a review annually. The review shall be conducted by Council and the General Manager. The conduct of the assessment will be undertaken in accordance with the criteria determined by Council.

10 Privacy, Conflict of interest & Code of Conduct

a) Committee members must declare any conflict of interest at the start of each meeting or before discussion of a relevant agenda item.

b) The Committee will comply with Council policies in relation to confidentiality, privacy and reporting. Members of the Committee will not disclose matters dealt with by the Committee to third parties except with approval of the Committee.

c) Committee members will act in accordance with Council’s Code of Conduct at all times during their appointment to the Committee.

BYRON SHIRE COUNCIL

Staff Reports - Corporate and Community Services 4.2

Report No. 4.2 2017/2018 Financial Statements

Directorate: Corporate and Community Services

Report Author: James Brickley, Manager Finance

File No: I2018/2139

Theme: Corporate Management

Financial Services

Summary:

This item provides the Audit, Risk and Improvement Committee with a report on the external audit for the financial year ended 30 June 2018. It covers the financial results for Council for the 2017/2018 financial year and provides the opportunity to consider the Draft 2018 Engagement Closing Report in respect of the audit provided by the NSW Audit Office.

RECOMMENDATION:

That the Audit, Risk and Improvement Committee notes the report on the 2017/2018 Financial Statements and the Draft 2018 Client Service Report received from the NSW Audit Office.

Attachments:

1 Published 2017/2018 Financial Statements, E2018/85029 , page 6 ⇩

2 Confidential - Draft 2018 Engagement Closing Report, E2018/89287

Report

This report has been prepared to brief the Audit, Risk and Improvement Committee on the external audit for the financial year ended 30 June 2018. The report covers the financial results for Council for the 2017/2018 financial year and provides the opportunity to consider the Draft 2018 Engagement Closing Report in respect of the audit provided by the NSW Audit Office.

The 2017/2018 Financial Statements were to be considered by the Audit, Risk and Improvement Committee on 11 October 2018 but as the audit was not finalised by this date, the Meeting was cancelled. Council adopted the 2017/2018 Financial Statements at its Ordinary Meeting held on 18 October 2018 via resolution 18-678 and will be presenting them to the public at the Ordinary Meeting to be held on 22 November 2018. Council received a presentation from the External Auditor at its Ordinary Meeting held on 18 October 2018 by Mr Kevin Franey from Thomas Noble and Russell as the representative firm for the Audit Office of NSW.

The 2017/2018 Financial Statements were lodged with the Office of Local Government on 19 October 2018.

The Financial Statements and Auditor’s Reports are a statutory requirement and provide information on the financial performance of Council over the previous twelve-month period.

The Final 2017/2018 Financial Statements are provided at Attachment 1 with brief explanations for the contents of Attachment 1 as follows:

General Purpose Financial Statements

These Statements provide an overview of the operating result, financial position, changes in equity and cash flow movement of Council as at 30 June 2018 on a consolidated basis with internal transactions between Council’s General, Water and Sewerage Funds eliminated. The notes included within these reports provide details of major items of income and expenditure with comparisons to the previous financial year. The notes also highlight the cash position of Council and indicate which funds are externally restricted (i.e. may be used for a specific purpose only), and those that may be used at Council’s discretion.

Special Purpose Financial Statements

These Statements are a result of the implementation of the National Competition Policy and relate to those aspects of Council’s operations that are business oriented and compete with other businesses with similar operations outside the Council. Mandatory disclosures in the Special Purpose Financial Reports are Water and Sewerage. Additional disclosure relates to Council business units that Council deems ‘commercial’. In this regard Council has traditionally reported its Caravan Park Operations (Suffolk Beachfront Holiday Park and First Sun Holiday Park) on a combined basis. These financial reports must also classify business units in the following categories:

· Category 1 – operating turnover is greater than $2million

· Category 2 – operating turnover is less than $2million

All of Council’s business units are classed as Category 1 with all having operating turnover greater than $2 million.

Another feature of the Special Purpose Financial Reports is to build in taxes and charges where not physically incurred into the financial results to measure the results in the sense of a level playing field with other organisations operating similar businesses, who are required to pay these additional taxes and charges. These taxes and charges include:

· Land tax – Council is normally exempt from this tax so notional land tax is applied.

· Income tax – Council is exempt from income tax and in regard to these reports, company tax. Any surplus generated has a notional company tax applied to it.

· Debt guarantee fees – Generally due to the low credit risk associated with Councils, Councils can often borrow loan funds at lower interest rates then the private sector. A debt guarantee fee inflates the borrowing costs by incorporating a notional cost between interest payable on loans at the interest rate borrowed by Council and one that would apply commercially.

In regard to the Special Purpose Financial Reports, these are prepared on a non consolidated basis or in other words grossed up to include any internal transactions with the General Fund.

Special Schedules

These schedules are prepared essentially for use by the Australian Bureau of Statistics, the NSW Grants Commission, the Office of Local Government, and are primarily used to gather information for comparative purposes. Special Schedules 3 to 6 are also used by the Department of Primary Industries (NSW Office of Water) in analysing the performance of the Water and Sewer Funds and are also non consolidated and grossed up including internal transactions. Special Schedule 7 provides an approximate value of what funds are needed for the maintenance and renewal of Council assets in comparison to what is currently allocated in the budget. Special Schedule 2 is also included, which is a disclosure regarding Council’s compliance with General Rate revenue raising and rate pegging. Special Schedule 2 is also subject to separate external audit aside from the financial statements.

Auditors Reports on the Financial Statements

Council’s auditors, the Auditor General of NSW (NSW Audit Office) and their representative firm Thomas Noble and Russell, have completed their audit of the Draft 2017/2018 Financial Statements. All matters identified during the audit have been adjusted and included in the 2017/2018 Financial Statements (if required) included at Attachments 1. The Auditors Reports cover:

· A report on the conduct of the audit. This report states the financial statements have been audited with an opinion. For the year ended 30 June 2018 the opinion is unmodified. In addition, this report outlines significant audit issues and observations, and an analysis of the major aspects of the financial statements.

· A Closing Engagement Report. This report (Confidential Annexure 2) does not form part of the Financial Statements but is provided to assess audit findings, usually prior to signing the Audit Representation Letter and the Statements by Council and Management. This report is provided specifically for the Audit, Risk and Improvement Committee for consideration but given the sequence of events for the 2017/2018 Financial Statements, this was not able to be achieved prior to signing the Financial Statements. Confidential Annexure 2 would normally have been provided to the 11 October 2018 Audit, Risk and Improvement Committee.

Specific Items relating to 2017/2018 Draft Financial Statements

The 2017/2018 Financial Statement results have been impacted by the following items that require explanation to Council:

· Operating Result from Continuing Operations

The 2017/2018 financial year has seen a further improvement in the overall financial result of Council. Overall Council recorded a $35.295million surplus compared to a $21.174million surplus in 2016/2017. This represents a positive change of $14.121million between financial years. This result incorporates the recognition of capital revenues such as capital grants and contributions for specific purposes and asset dedications including part of the Old Pacific Highway that amounted to $37.314million in 2017/2018 compared to $18.767million in 2016/2017.

A more important indicator is the operating result before capital grants and contributions. This result for Council was a deficit of $2.019million in 2017/2018 compared to a surplus of $2.407million in 2016/2017 representing a decrease of $4.426million between financial years. This indicates Council’s operating expenditures exceeded its operating revenues. Whilst operating revenues excluding capital grants and contributions grew by $2.708million, overall operating expenses grew by $7.134million.

If reference is made to the Income Statement to the General Purpose Financial Reports included at Attachment 1, the following table indicates the major changes between 2017/2018 and 2016/2017 by line item:

Item	Change between 2017/2018 and 2016/2017 $’000	Change Outcome	Comment
Income
Rates & Annual Charges	+$1,883	Increase	Reflects imposition of the first year of the 7.50% Special Rate Variation and changes in annual charges from Council’s adopted 2017/2018 Revenue Policy
User Charges and Fees	+$1,482	Increase	Major changes include additional $173k revenue for holiday parks, $779k increase in parking fees, and $669k in waste fees. Further information is available in Note 3(b) in Attachment 1.
Interest and Investment Revenue	-$225	Decrease	Decrease in revenues due to further decline in interest rates reflective of economic conditions. Council’s cash position though did not decrease as expected which enabled more funds to be invested which minimised the extent of the decline.
Other Revenues	+$1,934	Increase	Increase of $242k for fines, sale of closed roads $422k and recognition of share in Richmond Tweed Regional Library $1,157k.
Grants & Contributions – Operating	-$2,366	Decrease	Decrease in financial assistance grant $1,326k as 2016/2017 received 1.5 years grant. Decrease of $2,299k Roads to Recovery Grant as Council spent current allocation by 2017/2018. $1,500k increase in Natural Disaster Revenue due to restoration works.
Grants & Contributions – Capital	+$18,547	Increase	Decline of $684k in developer contribution revenue and $326k in capital grants but $19,392k increase in asset dedication revenue stemming mainly from former Pacific Highway assets.
Total Income Change	+$21,255	Increase

Expenditure
Employee Benefits and Oncosts	+$2,886	Increase	Increased salary and wages $2,117k including Award increase of 2.35% and additional staffing. Increased leave entitlement expenses of $626k and workers’ compensation insurance premium increase of $86k. There was a decrease of $68k of employee costs capitalised on capital works in 2017/2018 compared to 2016/2017.
Borrowing Costs	-$159	Decrease	Results from Council gradually repaying loans and not borrowing significant new loans. New loan of $1.665million borrowed at end of 2017/2018 financial year. Interest impact of this loan will be realised commencing in 2018/2019.
Materials & Contracts	+$3,783	Increase	Raw materials and contracts increased of $2,962k. There were decrease in agency temporary staff of 289$k, increase in legal expenses $292k, operating lease expenses increased $172k mainly relating to parking meters, and waste contract $606k
Depreciation	+$579	Increase	Major change is due to roads $103k increase, buildings $252k and increase of $204k for water infrastructure.
Other Expenses	+$109	Increase	Overall increase but there were variations in line items as disclosed at Note 4(e) in Attachment 1. Most significant item was electricity and heating $126k.
Net Losses from Disposal of Assets	-$65	Increase	Reflection of the written down value of assets disposed at the end of financial year and is contingent upon the extent of assets disposed and their written down value at the time of disposal which can vary. For 2017/2018, Council has more disposals than gains including the disposal of infrastructure $2,166k, plant and equipment $14k and loss on sale of land $222k.
Total Expenditure Change	+$7,134	Increase

Change in Result	+$14,121	Increase	Increase in overall surplus between financial years.

Following on from the operating results, performance ratios are disclosed at note 24 to the General Purpose Financial Statements and in Special Schedule 7. These ratios have been derived following the financial assessments undertaken by NSW Treasury Corporation on all NSW Councils in 2012, and are now incorporated into the latest update to the Code of Accounting Practice and Financial Reporting that determines the content of Council’s Financial Statements. These ratios generally look to be presenting either a stable or improving result for Council in Note 24. Note however that in relation to the ratios for Special Schedule 7 in terms of Asset Management, whilst showing some improvement generally, Council still has a way to go to meet the required benchmarks.

It is also important to note that the ratios and benchmarks outlined in Note 24 to the General Purpose Financial Statements and Special Schedule 7 are on an annual basis. Whilst some of these ratios were also benchmarks in Council’s now historical ‘Fit for the Future’ response, these were reported as a three year average as required. Therefore direct comparison cannot be made based on these reported benchmarks.

· Asset Revaluations

During 2017/2018, there was no revaluation of assets except for the indexation of Water and Sewerage Assets which is compulsory.

For the upcoming 2018/2019 financial year, Council will need to consider the revaluation of Roads and Drainage assets given these assets have not been revalued since 2015 and are becoming due. Council is conducting a condition assessment of the road network so it would be logical to link that to the revaluation.

· Asset Recognition

During the year Council recognised assets transferred from Roads and Maritime Services relating to the former Pacific Highway in the Brunswick to Yelgun section of the Highway. These assets were under a maintenance agreement that has expired and are now the responsibility of Council. This caused the recognition of asset dedications amounting to just over $26million. This was the major contributor to the overall surplus Council achieved in 2017/2018. Council will now be responsible for the ongoing maintenance and eventual replacement of these assets.

For the first time Council has also recognised a total $1.157million share in the financial statements relating to the Richmond Tweed Regional Library(RTRL). This recognition relates to Council’s 25% share of RTRL following signature during the financial year of the RTRL agreement with the other member Councils.

· Cash and Investments

As at 30 June 2018, Council has maintained $1.145million in unrestricted cash and investments being the same level as 2017. This is an ongoing pleasing result and Council has been able to maintain another one of its short term financial goals of reaching unrestricted cash balance of $1million. All other cash and investments totalling $76.254million are restricted for specific purposes. Overall the cash and investment position of Council decreased by $1.440million during the year.

· Receivables

As at 30 June 2018, Council was due $10.103million in receivables. Of this amount $0.657million was due from Roads and Maritime Services for expenditure claims, $0.791million from the Commonwealth Government for Goods and Services Tax and $2.481million in Government grants and subsidies. Overall receivables decreased by $0.205million compared to the 2016/2017 financial year.

· Payables and Provisions

At 30 June 2018, total payables by Council were $10.010million including $4.204million held in security bonds, deposits, retentions, payments received in advance, $0.623million in accrued expenses and $5.182million payable to suppliers. In addition at 30 June 2018, Council has accrued employee leave entitlements valued at $5.518million. Specific employee leave entitlements include $1.958million for annual leave, $3.410million for long service leave and $0.150million for gratuities. In comparison to 2016/2017, total payables decreased $1.393million whereas total provisions for employee leave entitlements decreased $0.050million.

· Loan Borrowings

During 2017/2018 Council borrowed new loans of $1.665million and continued to make normal loan repayments.

Council’s outstanding loans as at 30 June 2018 are $59.238million. Total loan expenditure for 2017/2018 included interest of $4.439million and principal payments of $2.555million. Total expenditure in 2017/2018 related to loan repayments was $6.994million, or 9.42% of Council’s revenue excluding all grants and contributions.

Outstanding loans by Fund totalling $59.238million are as follows:

· General Fund $14.767million

· Water Fund $0 – Water Fund is debt free

· Sewerage Fund $44.471million

Liquidity

Council’s balance sheet indicates net current assets of $66.983million. It is on this basis in the opinion of the Responsible Accounting Officer that the short term financial position of Council remains in a satisfactory position and that Council can be confident it can meet its payment obligations as and when they fall due. That is, there is no uncertainty as to Council being considered a ‘going concern’. In addition, Council’s cash expense cover ratio is at 12.33 months whereas the minimum benchmark is 3 months. Council exceeds this benchmark by four times.

Council’s Unrestricted Current Ratio has improved to 3.40 demonstrating Council has $3.40 in unrestricted current assets compared to every $1.00 of unrestricted current liabilities.

On a longer term basis Council will need to consider its financial position carefully but in isolation, the financial results for 2017/2018 continue to present what could be described as a ‘stable’ financial position.

Financial Implications

There are no direct financial implications associated with this report as it does not relate to any future expenditure. Attachments 1 to 3 and the Auditor’s Reports to be circulated prior to the 18 October 2018 Ordinary Council Meeting

Statutory and Policy Compliance Implications

Section 413(2)(c) of the Local Government Act 1993 and Regulation 215 of the Local Government (General) Regulation 2005 require Council to specifically form an opinion on the financial statements. Specifically Council needs to sign off an opinion on the Financial Statements regarding their preparation and content as follows:

In this regard the Financial Statements have been prepared in accordance with:

· The Local Government Act 1993 (as amended) and the Regulations made thereunder.

· The Australian Accounting Standards and professional pronouncements.

· The Local Government Code of Accounting Practice and Financial Reporting.

And the content to the best of knowledge and belief:

· Presents fairly the Council’s operating result and financial position for the year.

· Accords with Council’s accounting and other records.

· Management is not aware of any matter that would render the Financial Statements false or misleading in any way.

Section 416(1) of the Local Government Act 1993, requires a Council’s annual Financial Statements to be prepared and audited within four (4) months of the end of that financial year i.e. on or before 31 October 2018.

Section 417(4) of the Local Government Act 1993 requires, as soon as practicable after completing the audit, the Auditor must send a copy of the Auditor’s Reports to the Departmental Chief Executive and to the Council.

Section 417(5) of the Local Government Act 1993 requires Council, as soon as practicable after receiving the Auditor’s Reports, to send a copy, together with a copy of the Council’s audited Financial Statements, to the Departmental Chief Executive before 7 November 2018.

Section 418(1) of the Local Government Act 1993 requires Council to fix a date for the Meeting at which it proposes to present its audited Financial Statements, together with the Auditor’s Reports, to the public, and must give public notice of the date so fixed. This requirement must be completed within five weeks after Council has received the Auditors Reports i.e. prior to 5 December 2018.

Section 420 of the Local Government Act 1993 requires Council to provide the opportunity for the public to submit submissions on the Financial Statements. Submissions are to be submitted within seven days of the Financial Statements being presented to the public. In the case of the 2017/2018 Financial Statements, the closing date for submissions will be 30 November 2018.

Venue	Conference Room, Station Street, Mullumbimby
Date	Thursday, 15 November 2018
Time	11.30am