Item 12.2 - Attachment 1
Minutes of Audit Committee 26 November 2009
REPORT OF THE AUDIT COMMITTEE HELD IN MEETING ROOMS 1 AND 2, GROUND FLOOR, COUNCIL CHAMBER BUILDING ON THURSDAY, 26 NOVEMBER 2009 AT 6:47 PM
Mr Neil Adams in the Chair, Mike Barry and Councillor Michael McDermott.
Denis Banicevic –
External Auditor (arrived 7.51 pm),
Apologies were received and accepted for the absence of Councillors Julia Finn and Andrew Wilson and Greg Smith – Group Manager Corporate Services.
CONFLICT OF INTEREST DECLARATIONS
There were no conflict of interest declarations at this meeting.
19/09 Audit Committee Minutes – 1 October 2009
That the minutes of the Audit Committee Meeting held on 1 October 2009 be received and accepted as a true record of the meeting.
MATTERS ARISING FROM MINUTES
The Chairman sought an update on each of the Action Items arising out of the previous meeting:-
Action 1 - Operation of Audit Committee
Matter listed as Item 8 on current agenda.
Action 2 – Compliance with Council Resolutions
Work currently underway and will be reported to next meeting.
RESOLVED This Action remain open.
Action 3 – Provision of Audit Programs and Guidelines for Audit Committee
Matter listed for discussion on current agenda. In addition, the Charter of Operations has been listed as part of Item 5 on the current agenda.
Action 4 – Inclusion of Schedule 7 in Audit Program
Action 5 – Drainage Assets Program in Epping
Information supplied to Councillor Wilson by Manager City Assets and Environment.
Action 6 – Additional Expenses for New IT Systems Contract
Manager Finance indicated that staff were presently in the middle of the tender evaluation and exact figures will not be known until the evaluation is completed.
Estimated costs were provided to Councillors via report on 24 August and a copy of this report was tabled for the information of members. At this stage it was estimated that additional expenditures would take between 4 to 5 years to pay off.
The CEO indicated that there were considerable savings to be achieved by moving to a new contract.
ACTION 11 (Adams/Barry)
That summary advice on the payment and timing of payments to implement the new IT Systems contract and to achieve breakeven be provided to the next meeting of the Audit Committee.
Action 7 – Termination of IT Systems Contract
Matter dealt with in report to Council Meeting of 24 August 2009. A copy of this report tabled for members earlier in meeting. The Contract Advisory Group has only met once and will meet again shortly.
RESOLVED This action item to remain open.
Action 8 – Inclusion of note in Financial Statements - Civic Place Contingencies.
A note included as appropriate. It was also noted that Council had adopted the financial statements.
Action 9 – Depot Management Report
Matter listed as Item 7 on the current agenda.
Action 10 – Workshop on Contract/Procurement Review
Mr Quirk advised that the workshop had not taken place as yet as the contract/procurement audit was still in progress. On its completion, a workshop would be arranged.
It was agreed that members of the Audit Committee would be invited to attend this workshop.
RESOLVED This action item to remain open.
Replacement of Position in Service Audit and Review – Minute 17/09 refers
Mr Quirk advised that funds held against the previous senior auditor position would be utilised for the appointment of contractors to carry out job specific tasks within Audit.
The Committee agreed with the flexible approach and noted that the proposed outcome was satisfactory.
General Statistical Report – ICAC, Protective Disclosures etc – Minute No. 18/09 refers
Mr Quirk advised that the information was not available at present, however, information would be included in the regular reports to the Audit Committee.
ACTION 12 – A statistical report be provided to the next and all future meetings of the Audit Committee on the level of Section 11 reports, ICAC reports, protective disclosures and referrals to the Police over the past 3 years.
20/09 Approved Internal Audit Program and Charter of Operations
Internal Audit Program
A copy of Manager Service Audit and Review Memorandum dated 20 November 2009 enclosing the audit program and the Charter of Operations had previously been circulated to members.
Mr Quirk noted that the program and Charter had been updated as a result of the Committee’s previous discussions and the CEO had approved of the changes.
Mr Quirk added that the credit and cab charge audits together with the park committee grants audit had been placed on the 3 year rolling program rather than carried out annually.
The CEO noted, in response to a question from Councillor McDermott, that he had strong views on the use of credit cards and had reduced their number across the organisation. Any large expenditure items were required to be invoiced and accordingly, their usage had dropped off significantly.
Councillor McDermott asked whether there may be some risk in 3 yearly audits.
It was advised that all expenses were reviewed monthly by managers and whilst audits would be carried each 3 years, trends over the past few years would be examined.
Mr Barry sought further information on ‘man days’ for these audits and Mr Quirk responded that information on this issue would be built up over time.
Mr Adams advised that he, in conjunction with Mr Quirk, would expect that the audit program from next year will be based on risk profiles developed through the formal Enterprise Risk processes of Council and in line with the strategic objectives of Council, together with an explanation of how the objectives and profiles fitted together.
That the Internal Audit Program be endorsed.
Charter of Operations
The Committee sought the following changes:-
· Page 5 – Item 1.3 last dot point - inclusion of a more accurate statement indicating that the services are performed rather than facilitated.
· Page 7 – Item 3.1 – first dot point – Inclusion of a reference to the 3 year rolling program and adding that the information will be provided to the Audit Committee for endorsement.
· Page 10 – Item 7.3 – Inclusion of a reference as to how this issue will be communicated to the Audit Committee.
That the Service Audit and Review Charter of Operations be accepted with the changes as outlined above.
21/09 Report of Internal Audit Activities
A copy of Manager Service Audit and Review Memorandum dated 13 November 2009 regarding the Internal Audit Activities had previously been circulated to members.
Mr Quirk noted that Credit Card and Cabcharge Audits had been completed and whilst no significant issues had arisen, a number of improvements were recommended. Copies of both Audits were available for members.
The only outstanding audit from 2008/09 related to Council resolution compliance. Audit had also been involved in a number of Inquiries. Information on these issues will be tabled at the next meeting.
The Committee discussed whether it would be appropriate for those issues which are affected by organisation or system changes to be best dealt with by accepting the position and deleting from the Implementation Schedule with further consideration being given in the Audit Program.
Ms Fett advised that a member of the Finance Team had been working with the Development Unit to assist in the recommendations relating to the Section 94 Audit. This matter will be reviewed over the forthcoming years to see how the changes are working and hence the issue has been left open.
Mr Adams noted that Contract Management had been rated as 2 – Below Acceptable Standards.
Mr Quirk indicated that this was a recent audit and significant work had been carried out in relation to the building of policies and in relation to procurement; however, there were areas available for improvement in relation to the management of contracts. When combined with the inherent risk in procurement, the rating became quite significant.
Ms Fett noted that Finance had placed a budget bid for the employment of a procurement position in the contract area and work was progressing on other identified issues.
The information be noted.
ACTION 13 – As agreed with the CEO, that, on an ongoing basis, the CEO will establish arrangements so that the Audit Committee is notified of any significant Council related issues that arise in the media.
Action 14 – That electronic copies of the Cabcharge and Credit Card audits be supplied to all members within the next week.
22/09 Depot Management Improvement Program
A copy of Chief Executive Officer’s Memorandum dated 2 November 2009 regarding the update on the Depot Process and Business Improvements had previously been circulated to members.
The CEO noted that there had been further savings and reforms at the Depot since the date of his Memorandum.
Mr Adams sought details on incentives given to staff and also whether any corrupt practices had been discovered.
The CEO advised that a responsible approach had been undertaken including engagement with staff, the mapping of processes and the removing of bottlenecks or redundant processes.
He added that no corrupt practice had been discovered though in instances, a segregation of duties had been implemented to remove any opportunity for mismanagement. Also, certain practices, such as the ordering of concrete by phone, had been changed to ensure that better documentation was available.
Councillor McDermott asked whether any rorts had been discovered perhaps pertaining to sick leave, time sheets or use of equipment.
The CEO advised these areas had been checked and no evidence had been detected. He added that practices had been improved including staff now being required to clock in at the depot each day, rather than starting on site, which made any inappropriate conduct more difficult.
Mr Banicevic arrived at the meeting at 7.51 pm during consideration of this matter.
Further, the CEO commented that Council’s processes had been made inherently more robust.
The report be received and it be noted that the Committee is pleased to see the positive changes.
23/09 Review of Audit Committee Operations
A copy of Manager Service Audit and Review Memorandum dated 19 November regarding the assessment of the Audit Committee had been circulated previously to Members.
The Committee discussed each of the areas, as indicated on the circulated assessment, where the Committee did not meet the guidelines issued by the Department of Local Government.
Majority of Independents
The Committee discussed the possibility of having a majority of independents on the Audit Committee in line with the Model Charter.
Councillor McDermott indicated that whilst this suggestion could be recommended to Council, Councillors were answerable to the rate payers and might wish to retain the majority. Mr Adams indicated that an independent majority is today regarded generally as ‘best practice’.
Mr Banicevic noted that he was aware of Sydney, Wyong and Penrith Councils that had a majority of independents on their respective Audit Committees. He added that Council should not feel threatened by such a composition as the Committee only made recommendations to the Council who could then accept or refuse those recommendations as it saw fit.
Final Outcome – That a recommendation be prepared for a majority of independents to be appointed to the Audit Committee with all Councillors welcome to attend and to participate in meetings.
Calling of Audit Meetings by Chair, Member, CEO or Member
Final Outcome – No objection to amendment of Charter to comply with Guidelines.
Ability for Members to Internal and External Auditors Privately
The Committee desired a direct line between the Chair and Auditor though any such meeting did not need to be structured.
Final Outcome – Charter may be amended to permit private access between the Chair and the auditors.
Approval of Internal Audit Charter
It was noted that it was unlikely Council would be willing to relinquish approval of the Audit Charter. The Committee could, however, make recommendations to the Council and endorse the Charter.
Input into Appointment and Remuneration of Auditor
The CEO noted that this could not occur under the Local Government Act, however, a level of consultation could take place.
Ms J Fett retired from the meeting at 9.17 pm during consideration of this matter.
Assessment of Internal Audit and Audit Committee Performance
Mr Adams advised that it was desirable to have an annual
deadline for the self assessment requirements for the Committee and, in line
ACTION 15 (Adams/Barry) – That the Manager Service Audit and Review prepare a draft submission to Council for consideration at the next meeting which reflects the above discussions and recommends changes where the current Charter does not meet the Model Charter.
24/09 Future Meeting Dates
That the following dates for the Audit Committee be endorsed:-
Thursday, 25 February 2010
Thursday, 27 May 2010
Thursday, 26 August 2010
Thursday, 7 October 2010 (Special Meeting to consider Audited Financial Reports)
Thursday, 25 November 2010
The meeting terminated at 8.30 pm.