Notice of Meeting

 

 

 

 

 

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Audit, Risk and Improvement Committee Meeting

 

 

An Audit, Risk and Improvement Committee Meeting of Byron Shire Council will be held as follows:

 

Venue

Meeting Room 1, Station Street, Mullumbimby

Date

Thursday, 14 November 2019

Time

11:30am

 

 

 

 

 

 

 

 

Vanessa Adams

 Director Corporate and Community Services                                                                       I2019/1879

                                                                                                                                    Distributed 07/11/19

 

 


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 Code of Conduct for Councillors (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 the Code of Conduct for Councillors.

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.

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 of the provisions in the Code of Conduct (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 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

Audit, Risk and Improvement Committee Meeting

 

 

BUSINESS OF MEETING

 

1.    Apologies

2.    Declarations of Interest – Pecuniary and Non-Pecuniary

3.    Adoption of Minutes from Previous Meetings

3.1       Audit, Risk and Improvement Committee Meeting held on 10 October 2019

4.    Staff Reports

Corporate and Community Services

4.1       A New Risk Management and Internal Audit Framework - Discussion Paper................. 4

4.2       2018/2019 Financial Statements................................................................................... 126   

5.    Confidential Reports

Corporate and Community Services

5.1       Confidential - Update on IT Actions...................................................................... 242

5.2       Confidential - Audit Progress Report - November 2019....................................... 243

5.3       Confidential - Business Continuity and Risk Management - Update.................... 244

5.4       Confidential - Pay Parking Audit Review.............................................................. 245

5.5       Confidential - Grants Management Audit Review................................................ 246  

 

 


BYRON SHIRE COUNCIL

Staff Reports - Corporate and Community Services                                            4.1

 

 

Staff Reports - Corporate and Community Services

 

Report No. 4.1             A New Risk Management and Internal Audit Framework - Discussion Paper

Directorate:                 Corporate and Community Services

Report Author:           Heather Sills, Corporate Governance Officer

Emma Fountain, Strategic Risk & Business Continuity Coordinator

File No:                        I2019/1636

                                       

 

 

Summary:

 

The Local Government Act 1993 was amended in August 2016 to require each council and joint organisation in NSW to appoint an audit, risk and improvement committee (ARIC).

 

The Office of Local Government (OLG) has developed a draft internal audit and risk management framework to support and inform the operations of ARICs. The proposed framework is based on international standards and the experience of Australian and NSW Government public sector agencies who have already implemented risk management and internal audit and has been adapted to reflect the unique needs and structure of NSW councils and joint organisations.

 

OLG has issued a discussion paper, “A New Risk Management and Internal Audit Framework for Local Councils in NSW” which sets out the proposed framework in detail and a “snapshot” guide that summarises its key elements. The OLG are seeking submissions on the framework by 31 December 2019.

 

  

 

RECOMMENDATION:

That the Audit Risk and Improvement Committee:

 

1. Considers the discussion paper, “A New Risk Management and Internal Audit Framework for Local Councils in NSW”

2.       Makes a submission to the Office of Local Government during the submission period covering the considerations outlined in this report

 

 

 

Attachments:

 

1        A new risk management and internal audit framework for local councils in NSW - discussion paper, E2019/76198 , page 10  

2        A new risk management and internal audit framework for local councils in NSW - snapshot guide, E2019/76197 , page 116  

 

 


 

REPORT

 

The Local Government Regulation will provide for a Model Internal Audit Charter and Model Terms of Reference for Audit, Risk and Improvement Committees which all councils must adopt and comply with. The discussion paper describes the key requirements that will ultimately be prescribed by the Local Government (General) Regulation 2005.

 

The NSW Government’s objective is to ensure that councils have:

·    an independent ARIC that adds value to the council

·    a robust risk management framework

·    an effective internal audit function

 

Councils will have until March 2021 to establish their Audit, Risk and Improvement Committees in line with the regulatory requirements proposed in the discussion paper. It is proposed that councils will then have a further 18 months, until December 2022, to establish and resource their internal audit function and risk management framework (guided by the Audit, Risk and Improvement Committee).

 

It is expected that over time, as resources allow, the role of each Council’s Audit, Risk & Improvement Committee will be expanded to include compliance, fraud control, financial management, governance, integrated planning and reporting, service reviews and performance management, with full compliance achieved by 2026.

 

 

Core Requirements

 

The discussion paper outlines nine core requirements that councils will be required to comply with when establishing their Audit, Risk and Improvement Committee, risk management framework and internal audit function.

 

Core requirement 1:   Appoint an independent Audit, Risk and Improvement Committee (must be independent members from prequalified panel (i.e. no Councillors))

Core requirement 2:   Establish a risk management framework consistent with current Australian risk management standards

Core requirement 3:   Establish an internal audit function mandated by an Internal Audit Charter

Core requirement 4:   Appoint internal audit personnel and establish reporting lines

Core requirement 5:   Develop an agreed internal audit work program

Core requirement 6:   How to perform and report internal audits

Core requirement 7:   Undertake ongoing monitoring and reporting 

Core requirement 8:   Establish a quality assurance and improvement program

Core requirement 9:   Councils can establish shared internal audit arrangements

 

Key considerations from the discussion paper

 

Implications for Joint Organisation

 

The framework will apply to councils, county councils, and joint organisations, therefore there will be a requirement for the Northern Rivers Joint Organisation to have an ARIC. There are potential opportunities to establish a shared ARIC with the joint organisation and its member councils.

 

Implications for Membership

 

The ARIC is to comprise of three to five independent members who are prequalified via the NSW Government’s Prequalification Scheme: Audit and Risk Committee Independent Chairs and Members.

 

ARIC members and the Chair are to serve a three to five-year term. A member’s term cannot exceed eight years and the Chair’s term cannot exceed five years

 

All ARIC members must be independent. To be classified as ‘independent’, a member must be:

1.   Free of any relationships that could be perceived to result in bias or a conflict of interest or interfere with their ability to act independently

2.   Selected from the panel of prequalified audit and risk committee independent chairs and members administered by the NSW Government.

 

Further details on specific exclusions and requirements are provided on page 36-37 of attachment 1, but notably, under the new regulations, Councillors would not be members of the Audit, Risk, and Improvement Committee.

 

The discussion paper outlines recommended fees to be paid to Audit, Risk, and Improvement Committee members, while noting that members will be able to serve on Audit, Risk, and Improvement Committees on a voluntary basis. The suggested member fee for a council the size of Byron Shire is $1,621 per meeting date including preparation time and $16,213 per annum for the Chair.

 

Reporting Lines

 

ARIC is to have direct and unrestricted access to the General Manager, senior management and staff and contractors of the council in order to perform its role. ARIC is also to have direct and unrestricted access to the council resources and information it needs to perform its role.

 

The General Manager is to appoint a Chief Audit Executive to oversee internal audit activities. CAE is to report functionally to ARIC and administratively to the GM.

 

An Annual Assurance Report to the governing body of the council is to be prepared and be assessed by an external party at least once each council term.

 

Implications for Risk Management

 

Council is required to establish a risk management framework that is consistent with current Australian standards for risk management which includes the implementation of a risk management policy, risk management plan and risk management process.

 

Council is to fully integrate risk management into its decision making, operational and integrated planning and reporting processes and formally assign risk management responsibilities to the GM, senior managers and other council staff and ensure accountability.

 

The General Manager is to appoint a Risk Management Coordinator who will be responsible for the operational activities required to implement the risk management framework and provide specialist risk management skills and knowledge. The Risk Management Coordinator will report directly to the GM or other member of senior management of Council in relation to Council’s risk management function.

 

The risk management framework is to be regularly monitored and reviewed, with ARIC providing independent assurance of risk management activities. 

 

The GM is to attest to Council’s compliance with the risk management requirements in the Annual Report.

 

Next steps

 

Submissions to the Office of Local Government (OLG) are to be made in writing by 31 December 2019. OLG has suggested consideration of the following questions to inform submissions:

·    Will the proposed framework achieve the outcomes sought?

·    What challenges do you see for your council when implementing the proposed framework?

·    Does the proposed framework include all important elements of an effective internal audit and risk framework?

·    Is there anything you don’t like about the proposed framework?

·    Can you suggest improvements to the proposed framework?

 

Subject to comments from the Committee, the following draft feedback is proposed:

 

Will the proposed framework achieve the outcomes sought?

·    The proposed framework will assist Council in developing an effective internal audit and risk management framework, noting that Byron already has a number of the measures in place

What challenges do you see for your council when implementing the proposed framework?

·    Councillors have a valuable role on ARIC which provides them with opportunities to understand the audit and risk process and monitor outcomes. Council believes that to lose this opportunity would be detrimental 

·    Sourcing ARIC members that meet the independence and prequalification requirements

·    Rotating ARIC members

·    What is the process if Council rejects recommendations from the ARIC?

Does the proposed framework include all important elements of an effective internal audit and risk framework?

·    Council considers the proposed framework covers all important elements of an effective internal audit and risk management framework  

Is there anything you don’t like about the proposed framework?

·    Council is supportive of the proposed framework and is on track to meet the requirements within the proposed timeframes

Can you suggest improvements to the proposed framework?

·    Council submits that consideration should be given to creating a sliding scale for payment of fees to ARIC members during the transition phase, commensurate with the actual functions performed. There is an expectation that the role of the ARIC will expand over time to cover a range of functions with full compliance achieved by 2026 but there is no differentiation in the fees between an established ARIC that is or will be fully compliant ahead of the proposed timelines and an ARIC that has a limited focus whilst Council is developing its internal functions in line with its resources and capabilities.

 

 

STRATEGIC CONSIDERATIONS

 

Community Strategic Plan and Operational Plan

 

CSP Objective

L2

CSP Strategy

L3

DP Action

L4

OP Activity

Community Objective 5:  We have community led decision making which is open and inclusive

5.6

Manage Council’s resources sustainably

5.6.7

Develop and embed a proactive risk management culture 

5.6.7.4

Manage Audit, Risk and Improvement program including coordinating committee recommendations

 

 

Legal/Statutory/Policy Considerations

 

The operation of sections 428A and 428B of the Local Government Act will be supported by new regulations in the Local Government (General) Regulation 2005.

 

Financial Considerations

 

Not applicable at this stage.

 

Consultation and Engagement

 

ET considered this report at its 30 October 2019 meeting and noted the above feedback.


BYRON SHIRE COUNCIL

Staff Reports - Corporate and Community Services                                 4.1 - Attachment 1

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BYRON SHIRE COUNCIL

Staff Reports - Corporate and Community Services                                 4.1 - Attachment 2

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BYRON SHIRE COUNCIL

Staff Reports - Corporate and Community Services                                            4.2

 

 

Report No. 4.2             2018/2019 Financial Statements

Directorate:                 Corporate and Community Services

Report Author:           James Brickley, Manager Finance

File No:                        I2019/1843

                                       

 

 

Summary:

 

This item provides the Audit, Risk and Improvement Committee with a report on the external audit for the financial year ended 30 June 2019. It covers the financial results for Council for the 2018/2019 financial year and the 2019 Audit Engagement Closing Report in respect of the audit provided by the NSW Audit Office.

 

The 2018/2019 Financial Statements were to be considered by the Audit, Risk and Improvement Committee on 10 October 2019 but as the audit was not finalised by this date, the Meeting was cancelled.  Council adopted the 2018/2019 Financial Statements at its Ordinary Meeting held on 24 October 2019  through resolution 19-542 and will be presenting them to the public at the Ordinary Meeting to be held on 28 November 2019.

 

  

 

RECOMMENDATION:

That the Audit, Risk and Improvement Committee notes the report on the 2018/2019 Financial Statements and the 2019 Audit Engagement Closing Report received from the NSW Audit Office.

 

 

Attachments:

 

1        Published 2018/2019 Financial Statements, E2019/78804 , page 135  

2        Confidential - 2019 Audit Engagement Closing Report, E2019/80719  

 

 


 

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 2019. The report covers the financial results for Council It covers the financial results for Council for the 2018/2019 financial year and the 2019 Audit Engagement Closing Report in respect of the audit provided by the NSW Audit Office.

 

The 2018/2019 Financial Statements were to be considered by the Audit, Risk and Improvement Committee on 10 October 2019 but as the audit was not finalised by this date, the Meeting was cancelled.  Council adopted the 2018/2019 Financial Statements at its Ordinary Meeting held on 24 October 2019 via resolution 19-542 and will be presenting them to the public at the Ordinary Meeting to be held on 28 November 2019.  Council received a presentation from the External Auditor at its Ordinary Meeting held on 24 October 2019. The presentation was made by Mr Adam Bradfield from Thomas Noble and Russell as the representative firm for the Audit Office of NSW.

 

The 2018/2019 Financial Statements were lodged with the Office of Local Government on 25 October 2019.

 

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 2018/2019 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 2019 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 taxes and charges where not physically incurred into the financial results to measure the results on 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 (now called a Report on Infrastructure) 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.

 

The Special Schedules are no longer published from the 2018/2019 financial year following revision of the Local Government Code of Accounting Practice.  They are still prepared but lodged separately to the Office of Local Government via the Financial Data Return.  Given they are no longer published, they are not included in Attachment 1. Aside from Special Schedule 2, they have never been subject to external audit.

 

Auditors Reports on the Financial Statements

Council’s auditors, the Auditor General of NSW (NSW Audit Office) and its representative firm Thomas Noble and Russell, have completed their audit of the  2018/2019 Financial Statements. All matters identified during the audit have been adjusted and included in the 2018/2019 Financial Statements (if required) included at Attachments 1. The Auditor’s 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 2019 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.

 

·    An Audit Engagement Closing 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 2018/2019 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 10 October 2019 Audit, Risk and Improvement Committee. 

 

Specific Items relating to 2018/2019 Financial Statements

 

The 2018/2019 Financial Statement results have been impacted by the following items that require explanation:

 

·     Operating Result from Continuing Operations

 

The 2018/2019 financial year has seen a positive overall financial result. Council recorded a $13.022million surplus which, while less than the $35.295million surplus in 2017/2018, is still nevertheless a surplus. This result incorporates the recognition of capital revenues such as capital grants and contributions for specific purposes and asset dedications amounting to $21.109 million compared to $37.314million in 2017/2018. Capital grants and contributions in 2017/2018 were significantly influenced by the transfer of assets to Council from the Old Pacific Highway that was not repeated in 2018/2019.

 

A more important indicator is the operating result before capital grants and contributions. This result was a deficit of $8.087 million in 2018/2019 compared to a deficit of 2.018million in 2017/2018 representing a decrease of $6.069million between financial years.  This indicates Council’s operating expenditures exceeded its operating revenues. Whilst operating revenues excluding capital grants and contributions grew by $2.383million, overall operating expenses grew by $8.452million.

 

With reference to the Income Statement to the General Purpose Financial Reports included at Attachment 1, the following table indicates the major changes between 2018/2019 and 2017/2018 by line item:

 

Item

Change between 2018/2019 and 2017/2018 $’000

Change

 Outcome

Comment

Income

 

 

 

Rates & Annual Charges

+$2,681

Increase

Reflects imposition of the second year of the 7.50% Special Rate Variation and changes in annual charges from Council’s adopted 2018/2019 Revenue Policy

User Charges and Fees

+$626

Increase

Major changes include additional $1,026k revenue for water and sewer user charges, increase in waste fees $229K and a decline in statutory/regulatory fees of $229k. Further information is available in Note 3(b) to Attachment 1.

Interest and Investment Revenue

+$368

Increase

Council’s cash position did not decline as expected which enabled more funds to be invested even though interest rates have continued to decline. Council also realised a $290k fair value gain on its investments.

Other Revenues

-$1,224

Decrease

Increase of $176k for fines, but major change was the once off recognition of share in Richmond Tweed Regional Library $1,157k in 2017/2018 that was not repeated in 2018/2019.

Grants & Contributions – Operating

-$68

Decrease

Overall operating grants increased by $257k including 205k increase in the Financial Assistance Grant but contributions reduced by $325k.  Further information is available in Note 3€ and Note 3(f) to Attachment 1.

Grants & Contributions – Capital

-$16,204

Decrease

Capital grants increased $6,767k mainly for roads and bridges funding but capital contributions revenue decreased $22,971k.  Reduction in capital contributions is due to reduced asset dedication revenue that was significant in 2017/2018 from the dedication of former Pacific Highway assets.

Total Income Change

-$13,821

Decrease

 

 

 

 

 

Expenditure

 

 

 

Employee Benefits and Oncosts

+$774

Increase

Increased leave entitlement expenses of $959k reflecting emphasis on controlling leave balances and impact of declining interest rates on present value of liability calculations. There was a decrease of $371k of employee costs capitalised on capital works in 2018/2019 compared to 2017/2018 and gross salary and wages $657k.  More information is provided at Note 4(a) to Attachment 1.

Borrowing Costs

-$14

Decrease

Results from Council gradually repaying loans and not borrowing significant new loans.  New loans of $7.669million borrowed at end of 2018/2019 financial year.  Interest impact of this loan will be realised commencing in 2019/2020 and refinancing of significant sewerage loan in December 2019.

Materials & Contracts

+$6,991

Increase

Raw materials and contracts increased of $6,414k. Major contributor to this was former Mullumbimby Hospital demolition $2,025k, natural disaster works $1,886k and capital expenditure $3,300k not capitalised. Other changes can be found at Note 4(b) to Attachment 1.

Depreciation

+$397

Increase

Respective changes between asset classes are outlined at Note 4(d) to Attachment 1.  Essentially small incremental increases in each asset class.

Other Expenses

+$334

Increase

Overall increase but there were variations in line items as disclosed at Note 4(e) to Attachment 1. Most significant item was street lighting $108k.

Net Losses from Disposal of Assets

-$34

Decrease

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 2018/2019, Council has more disposals than gains including the disposal of infrastructure $2,668k, plant and equipment $42k gain and gain on sale of land $308k. Further details can be found at Note 5 to Attachment 1

Net share of interests in associates

+4

Increase

Recognition of Council’s share of the operating result of Richmond Tweed Regional Library for 2018/2019

Total Expenditure Change

+$8,452

Increase

 

 

 

 

 

Change in Result

-$22,273

Decrease

Decrease in overall surplus between financial years.

 

Following from the operating results, are the performance ratios at Note 25 to the General Purpose Financial Statements.  These 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 present either a stable or improving result for Council except for the following:

 

1.   Operating Performance Ratio is a reflection of the operating result of Council. The benchmark is to be greater than 0% but in 2017/2018 Council’s ratio was -1.01% and in 2018/2019 it was -7.11%.  This ratio was impacted by some one-off items i.e. demolition costs of the former Mullumbimby Hospital, however Council will look to improve this result back towards the benchmark.

 

2.   Outstanding, Rates and Annual Charges – Whilst still well within benchmark ,this ratio has increased given the compounding from the ongoing implementation of the 2017/2018 Special Rate Variation. This means that the increasing annual charges, as well as the current economic climate, are impacting the capacity of ratepayers to pay.  Council also changed its Debt Recovery Policy during the 2018/2019 financial year and this ratio will be closely monitored going forward.

 

·    Asset Revaluations

 

During 2018/2019, there was no revaluation of assets except for the indexation of Water and Sewerage Assets which is compulsory. Council also indexed the valuation of its buildings even though this was not compulsory.

 

For the upcoming 2019/2020 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 due for revaluation.

 

·    Asset Recognition

 

As indicated at Note 10 to the Council’s financial statements, Council expended $27.007million on asset renewals and $9.792million on new assets. The extent of asset renewals is significant and demonstrates ongoing commitment in that area. The depreciation expense of Council’s assets for 2018/2019 was $15.012million so it is pleasing to see the extent of asset renewal recognised was significantly more then the financial realisation via depreciation of the consumption of Council’s assets.

 

·    Cash and Investments

 

As at 30 June 2019 (detailed at Note 6 to the financial statements) Council has maintained $1.000million in unrestricted cash and investments being a reduction of $0.145million compared to 2017/2018.  This is an ongoing pleasing result and Council has been able to maintain another one of its short term financial goals of reaching an unrestricted cash balance of $1million.  All other cash and investments totalling $77.370million are restricted for specific purposes. Overall the cash and investment position of Council increased by $0.970million during the year.

 

·    Receivables

 

As at 30 June 2019 (detailed at Note 7 to the financial statements) Council was due $11.187million in receivables. Of this amount $1.535million was due from Roads and Maritime Services for expenditure claims, $0.866million from the Commonwealth Government for Goods and Services Tax and $1.581million in Government grants and subsidies. Overall receivables increased by $1.083million compared to the 2017/2018 financial year.

 

 

 

·    Payables and Provisions

 

At 30 June 2019 (detailed at Note 11 for payables and Note 12 for provisions) total payables by Council were $10.603million including $4.283million held in security bonds, deposits, retentions, payments received in advance, $0.529million in accrued expenses and $5.791million payable to suppliers. In addition at 30 June 2019, Council has accrued employee leave entitlements valued at $5.852million. Specific employee leave entitlements include $2.044million for annual leave, $3.654million for long service leave and $0.154million for gratuities. In comparison to 2017/2018, total payables increased $0.593million whereas total provisions for employee leave entitlements increased $0.334million.

 

·    Loan Borrowings

 

During 2018/2019 Council borrowed new loans of $7.669million and continued to make normal loan repayments. 

 

Council’s outstanding loans as at 30 June 2019 are $64.15million. Total loan expenditure for 2018/2019 included interest of $4.252million and principal payments of $2.758million. Total expenditure in 2018/2019 related to loan repayments was $7.010million or 8.20% of Council’s revenue, excluding all grants and contributions.

 

The outstanding loans by Fund totalling $64.150million are as follows:

 

·   General Fund           $21.492million

·   Water Fund              $0 – Water Fund is debt free

·   Sewerage Fund        $42.658million

 

Liquidity

 

Council’s Statement of Financial Position (balance sheet) indicates net current assets of $63.537million. 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 11.02 months whereas the minimum benchmark is 3 months.  Council exceeds this benchmark by nearly four times.

 

Council’s Unrestricted Current Ratio has improved to 3.65 demonstrating Council has $3.65 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. Nevertheless in isolation, the financial results for 2018/2019 continue to present a ‘stable’ financial position. Every effort will be made to manage the trend towards operational deficits before capital grants and contributions.

 

STRATEGIC CONSIDERATIONS

 

Community Strategic Plan and Operational Plan

 

 

CSP Objective

L2

CSP Strategy

L3

DP Action

L4

OP Activity

Community Objective 5:  We have community led decision making which is open and inclusive

5.5

Manage Council’s finances sustainably

5.5.2

Ensure the financial integrity and sustainability of Council through effective planning and reporting systems (SP)

5.5.2.2

Complete annual statutory financial reports

 

 

 

Legal/Statutory/Policy Considerations

 

Section 413(2)(c) of the Local Government Act 1993 and Regulation 215 of the Local Government (General) Regulation 2005 require Council to 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 2019.

 

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 of the Auditor’s Reports on the Council’s Financial Statements, together with a copy of the Council’s audited Financial Statements, to the Departmental Chief Executive before 7 November 2019.

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 2019.

 

Financial Considerations

 

There are no direct financial implications associated with this report as the report does not involve any future expenditure of Council funds but it is a report advising of Council’s financial outcomes  during the 2018/2019 financial year which are identified in this report and attachments.

 

 

 

Consultation and Engagement

 

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 2018/2019 Financial Statements, the closing date for submissions will be 5 December 2019.


BYRON SHIRE COUNCIL

Staff Reports - Corporate and Community Services                                 4.2 - Attachment 1

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BYRON SHIRE COUNCIL

Confidential Reports - Corporate and Community Services                            5.1

 

 

Confidential Reports - Corporate and Community Services

 

Report No. 5.1             Confidential - Update on IT Actions

Directorate:                 Corporate and Community Services

Report Author:           Phil Pountney, Manager Business Systems and Technology

Colin Baker, Business Systems and Technology Coordinator

File No:                        I2019/1691

                                       

 

 

Summary:

 

 

This report provides a summary of all open actions with their current status and expected due dates.

 

 

RECOMMENDATION:

1.       That pursuant to Section 10A(2)(f) of the Local Government Act, 1993, Council resolve to move into Confidential Session to discuss the report Update on IT Actions.

 

2.       That the reasons for closing the meeting to the public to consider this item be that the report contains:

a)      details of systems and/or arrangements that have been implemented to protect council, councillors, staff and Council property

 

3.       That on balance it is considered that receipt and discussion of the matter in open Council would be contrary to the public interest, as:

 

Exposes information security risk an vulnerabilities that could assist threats in the environment to expose Council data and systems to those without authorisation.

 

  

 

 

 

 


BYRON SHIRE COUNCIL

Confidential Reports - Corporate and Community Services                            5.2

 

 

Report No. 5.2             Confidential - Audit Progress Report - November 2019

Directorate:                 Corporate and Community Services

Report Author:           Heather Sills, Corporate Governance Officer

File No:                        I2019/1841

                                       

 

 

Summary:

 

This report presents the Internal Audit Outstanding Actions Report – November 2019 prepared by Council and the Internal Auditor, O’Connor Marsden and Associates (OCM).

 

The activity report contains the remaining outstanding recommendations from each audit review conducted by Council’s previous internal audit provider as well as recommendations from recently completed audit reviews conducted by OCM.

 

 

 

RECOMMENDATION:

1.       That pursuant to Section 10A(2)(d)i of the Local Government Act, 1993, Council resolve to move into Confidential Session to discuss the report Audit Progress Report - November 2019.

 

2.       That the reasons for closing the meeting to the public to consider this item be that the report contains:

a)      commercial information of a confidential nature that would, if disclosed prejudice the commercial position of the person who supplied it

 

3.       That on balance it is considered that receipt and discussion of the matter in open Council would be contrary to the public interest, as:

 

nature and content of audit report is for operational purposes

 

   

Attachments:

 

1        Internal Audit Activity Report - November 2019, E2019/81972  

 

 

 


BYRON SHIRE COUNCIL

Confidential Reports - Corporate and Community Services                            5.3

 

 

Report No. 5.3             Confidential - Business Continuity and Risk Management - Update

Directorate:                 Corporate and Community Services

Report Author:           Emma Fountain, Strategic Risk & Business Continuity Coordinator

File No:                        I2019/1853

                                       

 

 

Summary:

The purpose of this report is to provide an update on the Business Continuity and Risk Management frameworks.

 

 

RECOMMENDATION:

1.       That pursuant to Section 10A(2)(f) of the Local Government Act, 1993, Council resolve to move into Confidential Session to discuss the report Business Continuity and Risk Management - Update.

 

2.       That the reasons for closing the meeting to the public to consider this item be that the report contains:

a)      details of systems and/or arrangements that have been implemented to protect council, councillors, staff and Council property

 

3.       That on balance it is considered that receipt and discussion of the matter in open Council would be contrary to the public interest, as:

 

Risk management

 

  

Attachments:

 

1        Risk management strategy, E2019/81410  

2        Risk management action plan, E2019/74957  

3        DRAFT Strategic Risk Register, E2019/75039  

4        DRAFT Operational Risk Register, E2019/75045  

 

 

 


BYRON SHIRE COUNCIL

Confidential Reports - Corporate and Community Services                            5.4

 

 

Report No. 5.4             Confidential - Pay Parking Audit Review

Directorate:                 Corporate and Community Services

Report Author:           Anna Vinfield, Manager Corporate Services

File No:                        I2019/1857

                                       

 

 

Summary:

 

Council’s Internal Auditors, O’Connor Marsden and Associates (OCM), conducted an internal audit review of Pay Parking during October 2019. Their report is at Confidential Attachment 1.

 

This audit received a review rating of ‘weak’ and it identified one high and three medium risks. Agreed recommendations and actions are included in the Confidential Attachment.

 

 

RECOMMENDATION:

1.       That pursuant to Section 10A(2)(d)i of the Local Government Act, 1993, Council resolve to move into Confidential Session to discuss the report Pay Parking Audit Review.

 

2.       That the reasons for closing the meeting to the public to consider this item be that the report contains:

a)      commercial information of a confidential nature that would, if disclosed prejudice the commercial position of the person who supplied it

 

3.       That on balance it is considered that receipt and discussion of the matter in open Council would be contrary to the public interest, as:

 

nature and content of audit report is for operational purposes

 

   

Attachments:

 

1        Pay Parking Audit Review, E2019/81748  

 

 

 


BYRON SHIRE COUNCIL

Confidential Reports - Corporate and Community Services                            5.5

 

 

Report No. 5.5             Confidential - Grants Management Audit Review

Directorate:                 Corporate and Community Services

Report Author:           Anna Vinfield, Manager Corporate Services

File No:                        I2019/1858

                                       

 

 

Summary:

 

Council’s Internal Auditors, O’Connor Marsden and Associates (OCM), conducted an internal audit review of Grant Management during October 2019. Their report is at Confidential Attachment 1.

 

This audit received a review rating of ‘satisfactory’ and it identified two medium risks. Agreed recommendations and actions are included in the Confidential Attachment.

 

 

 

RECOMMENDATION:

1.       That pursuant to Section 10A(2)(d)i of the Local Government Act, 1993, Council resolve to move into Confidential Session to discuss the report Grants Management Audit Review.

 

2.       That the reasons for closing the meeting to the public to consider this item be that the report contains:

a)      commercial information of a confidential nature that would, if disclosed prejudice the commercial position of the person who supplied it

 

3.       That on balance it is considered that receipt and discussion of the matter in open Council would be contrary to the public interest, as:

 

nature and content of audit report is for operational purposes

 

   

Attachments:

 

1        Review of Grant Management - October 2019, E2019/81617