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Contact for apologies: Matthew LawrencePh: 83840126Email: [email protected]

HER WORSHIP THE MAYORAND ALL MEMBERS OF THE AUDIT, RISK, VALUE AND EFFICIENCY COMMITTEEFOR THE CITY OF ONKAPARINGA

18 September 2014

NOTICE OF MEETING

You are advised that a meeting of the Audit, Risk, Value and Efficiency Committee for the Cityof Onkaparinga will be held on Monday 22 September 2014 at the City of Onkaparinga inthe Council Offices and Civic Centre, Ramsay Place, Noarlunga Centre commencing at 10am.

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Mark DowdChief Executive Officer

Disclaimer: Please note that the contents of the Council and Committee Agendas have yet to be considered by the Committeeor Council and recommendations contained herein may be altered or changed by the Committee or Council in the process offormally making decisions of Council.

City of Onkaparinga

PO Box 1Noarlunga CentreSouth Australia 5168www.onkaparingacity.com

Noarlunga office

Ramsay PlaceNoarlunga CentrePh: 8384 0666Fax: 8382 8744

Aberfoyle Park office

The HubAberfoyle ParkPh 8384 0666Fax: 8270 1155

Willunga office

St Peters TerraceWillungaPh: 8384 0666Fax: 08 8556 2641

Woodcroft office

175 Bains RoadMorpheft ValePh: 8384 0666Fax: 08 8556 2641

City of Onkaparinga Agenda for the Audit, Risk, Value and Efficiency Committee meeting

to be held on 22 September 2014

Venue:

Meeting Room 1, Civic Centre Ramsay Place, Noarlunga Centre

Meeting commenced:

Present:

Apologies:

Absent:

City of Onkaparinga Agenda for the Audit, Risk, Value & Efficiency Committee meeting to be held on 22 September 2014.

1. Opening of meeting 5

2. Confirmation of minutes of the Audit, Risk, Value and Efficiency Committee meeting held on Monday 11 August 2014. 5

3. Adjourned business 5

4. Chairperson's report 5

5. Presentation 5

6. Deputation 5

7. Reports of officers 7

7.1 2013-2014 Internal control assessment 7

7.2 2013-14 External audit interim management report June 2014 21

7.3 Draft Financial Statements 30 June 2014 Report 49

8. Questions on notice 123

9. Motions 123

10. Petitions 123

11. Urgent business 123

12. Confidential items 123

13. Closure 123

4 Date Printed: 18 September 2014


1. Opening of meeting

2. Confirmation of minutes of the Audit, Risk, Value and Efficiency Committee meeting held on Monday 11 August 2014.

3. Adjourned business

Nil.

4. Chairperson's report

Nil.

5. Presentation

Nil.

6. Deputation

Nil.



7. Reports of officers 7.1 2013–14 Internal control assessment H2

This is a regular or standard report

Manager: Darren Styler, Manager Finance

Report Author: Diane Eckermann, Team Leader Management Accounting

Contact Number: 8384 0121

Attachments: 1. Comparison of 2013-14 to 2012-13 internal control assessment (12 pages)

This report is presented to the Audit, Risk, Value and Efficiency Committee during the caretaker period. As the matter being addressed in this report is not a designated decision as prohibited under section 91A of the Local Government (Elections) Act 1999 nor does it require a major policy decision that would significantly affect the Council area’s community as a whole or bind the incoming Council as cited in Council’s Caretaker policy; it is able to be considered by the Audit, Risk, Value & Efficiency Committee during the caretaker period.

1. Purpose

This report presents outcomes of the 2013-14 internal control assessment performed by Administration compared to outcomes from the 2012-13 review.

2. Recommendation That the Audit, Risk, Value and Efficiency Committee note the internal control assessment as detailed in this report and the Comparison of 2013-14 to 2012-13 internal control assessment, as attached to the agenda.

3. Background

This report was requested by the Audit, Risk, Value and Efficiency Committee at its meeting of 1 July 2013 following consideration of the Financial Management Update report and in particular findings from the initial 2012-13 internal control assessment. Amendments to the Local Government Act 1999 recently introduced require the internal controls of local government in the Adelaide metropolitan area to be subject to external audit as of 2013-14 and receive an audit opinion. To ensure effectiveness of the financial internal control environment administration review and assess controls bi-annually. The controls assessed are specified in the Better Practice Model – Internal Financial Controls published by the Local Government Association on 26 July 2012 and adopted by the Local Government (Financial Management) Regulations 2011 and are pursuant to section 303(4) of the Local Government Act 1999.

4. Financial Implications

Nil



5. Risk and Opportunity Management

Key risk Details and analysis

Financial Control Failure The financial control environment operated by council is inadequate exposing it to wide ranging financial, legal and reputational risks

External audit qualification An effective financial control environment cannot be demonstrated/evidenced for 2013-14 leading to a qualified audit opinion

6. Additional information

The 2013-14 assessment of the council’s internal controls was undertaken duringthe March 2014 to June 2014 period.

In brief, this process involved assessing 192 core internal controls covering six distinct service areas: strategic financial planning, assets, liabilities, revenues, expenses and external services.

Each control was rated by two officers, the initial assessment being made by theperson involved on an operational or daily basis and the second assessment beingundertaken by the individual in a related supervisory or managerial role.

The ratings range from 1 (low effectiveness) and 5 (high effectiveness). Actionplans are required for all controls scoring 3 (moderate effectiveness) or below.

The following outcomes were identified:

• 185 controls were assessed as effective (2012-13: 163 controls)

• 7 controls were assessed as moderately effective (2012-13: 26 controls)

• 0 controls were assessed as having low effectiveness (2012-13: 3 controls)

Attachment 1 identifies the effectiveness assessment of all controls for 2013-14 compared to 2012-13.

2013-14 reflects activities since the initial 2013 assessment. Action plans have been implemented in a number of areas (such as grants, cash handling, financial journals and reconciliations) so improving the effectiveness of controls in these areas.

Remaining action plans will continue to be monitored and progress managed. Regular progress reporting will be provided to the Audit, Risk, Value and Efficiency Committee.



Attachment 1



7.2 2013–14 External audit interim management report June 2014 H2



Report Author: Daniel Jaensch, Senior Accountant (Compliance & Control)


Attachments: 1. 2013-14 External Audit Management Letter (S.129a) (7 pages)

2. 2013-14 External Audit Management Letter (S.129b) (17 pages)

This report is presented to the Audit, Risk, Value and Efficiency Committee during the caretaker period. As the matter being addressed in this report is not a designated decision as prohibited under section 91A of the Local Government (Elections) Act 1999 nor does it require a major policy decision that would significantly affect the Council area’s community as a whole or bind the incoming Council as cited in Council’s Caretaker policy; it is able to be considered by the Audit, Risk, Value & Efficiency Committee during the caretaker period.

1. Purpose

This report presents the fourth external audit interim management letters for the 2013-14 financial year.

2. Recommendation That the Audit, Risk, Value & Efficiency Committee note the report received from Dean Newbery and Partners in relation to the 2013–14 external audit fourth interim visit and the response to the auditor’s findings and recommendations, detailed in 2013-14 External Audit Management Letters (S.129a and S.129b), as attached to the agenda.

3. Background

This report presents the external audit June interim management reports for 2013–14 and the response to the auditor’s findings and recommendations for review by the Audit, Risk, Value & Efficiency Committee (the Committee).

The Committee’s Terms of Reference require that the Committee review the auditor’s reports and the response to the auditor’s findings and recommendations.


None.




Key risk/opportunity Details and analysis

None There are no risks or opportunities related to this report as it is for noting. Risks and opportunities identified by the external auditors are noted and responded to in attachments 1 and 2.


The external auditors (Dean Newbery and Partners) have conducted their fourth interim visit in relation to the audit of the financial statements for the year ended 30 June 2014.

The reports received following the interim visit and the response to the auditor’s findings (including actions) are provided at attachment 1 and 2.

The external auditors commenced their final visit on the Wednesday 17 September 2014. Consistent with the Committee work plan for 2014 following approval of the financial statements by the Committee on 13 October 2014 the external auditors will issue their final report.



Attachment 1



Attachment 2



7.3 Draft Financial Statements 30 June 2014 Report H2



Report Author: Daniel Jaensch, Senior Accountant (Compliance & Control)


Attachments: 1. Draft General Purpose Financial Statements 30 June 2014(70 pages)

This report is presented to the Audit, Risk, Value & Efficiency Committee during the caretaker period. As the matter being addressed in this report is not a designated decision as prohibited under section 91A of the Local Government (Elections) Act 1999 nor does it require a major policy decision that would significantly affect the Council area’s community as a whole or bind the incoming Council as cited in Council’s Caretaker policy; it is able to be considered by the Audit, Risk, Value & Efficiency Committee during the caretaker period.

1. Purpose

This report presents the draft Financial Statements for 30 June 2014.

2. Recommendations1. That the Audit, Risk, Value & Efficiency Committee note draft General

Purpose Financial Statements 30 June 2014 as detailed in both this reportand the draft General Purpose Financial Statements 30 June 2014, asattached to the agenda.

2. That the Audit, Risk, Value & Efficiency Committee review the draft GeneralPurpose Financial Statements 30 June 2014, and provide feedback forconsideration by Administration in preparing the final documents.

3. Background

This report presents the draft General Purpose Financial Statements 30 June 2014(the Statements) for the year ended 30 June 2014 for the consideration of theAudit, Risk, Value & Efficiency Committee (the Committee).

The Local Government Act 1999 requires that the Committee review the Statementsof council to ensure ‘they present fairly the state of affairs of the council’ as at 30June each year.


None.




Key risk/opportunity Details and analysis

External audit qualification The Statements do not fairly present the state of affairs of council at 30 June 2014, giving rise to a qualified auditors opinion

Failure to comply with requirements of the Local Government Act 1999 and associated standards/regulations

Delay or non-production of annual financial statements may result in a breach of the Act and/or associated standards/regulations


An initial draft of the Statements for the year ended 30 June 2014 is attached for review and comment. These have been prepared in accordance with the Local Government Act 1999 and the Local Government (Financial Management) Regulations 2011. Consistent with prior years the 2014 statements have been presented with figures rounded to the nearest thousand dollars.

Financial Statements

The Financial Statements include the four principal statements:

• Statement of Comprehensive Income

• Statement of Financial Position

• Statement of Changes in Equity

• Cash Flow Statement.

Early payment of Financial Assistance Grants (FAGs)

For 2014-15 the Federal Governments five year practice of early payment of the FAGs ceased. This results in 2014-15 FAGs being accounted for in 2014-15 rather than 2013-14 as required under the Government Grant Standard (AASB 1006). Consequently a reduction in grant income is shown in 2013-14 actual results of $4.3 million.

Change in the Employee Benefits Accounting Policy

In preparation of the 2014 financial statements council has adopted the changes to AASB 119 Employee Benefits. This has resulted in council undertaking an actuarial review of the annual leave adjusting the provision accordingly.

New accounting standard AASB 13 Fair Value Measurement

In preparation of the 2014 financial statements council has adopted the new accounting standard AASB 13 Fair Value Measurement. This adoption has led to a review of the inputs and assumptions behind the financial instruments carried by council and the fixed assets recorded at fair value. In addition, additional information has been gathered in order to prepare the relevant note disclosures.



To assist in complying with AASB 13 we undertook a full comprehensive revaluation of our land and building assets using the assumptions and inputs as determined under the accounting standard. This work was carried out by APV Valuers and Asset Management Ltd and has resulted in a $63 million land asset revaluation increase, and a $9.8 million building assets revaluation decrease.

Status of current draft

The statements (as attached) are in a format suitable for presentation to the external auditors for finalisation of the 2013-14 balance date audit.

We are currently finalising three asset class desktop revaluations, and note four being operating segments. The relevant changes will be communicated to the auditors and form part of the final set of annual financial statements presented to the Committee on the 13 October 2014.

Next steps

The external auditors conducted the 2013–14 balance date audit from 17 to 19 September 2014. Results will continue to be refined until final audit sign-off. Any significant disclosure or presentation issues identified by the external auditors will be presented as an update to this report at the Committee meeting of 22 September 2014.

Subsequent to outcomes of the Committee’s consideration of this report and the external audit we will prepare a final draft set of statements for presentation to the Committee at its meeting on 13 October 2014.

At that meeting the Committee will be requested to recommend that:

• the external auditor be advised that the Committee is satisfied that the statements present fairly the state of affairs of the organisation

• the chair of the Committee sign a statement to certify the independence of the external auditors

• the Mayor and CEO certify the statements in the format prescribed in Section 14 of the Local Government (Financial Management) Regulations 2011.

The external auditor will issue an audit opinion following the Committee’s consideration and recommendations and once all requirements are satisfied. The audited statements will then be presented to Council for noting at its next meeting following the Committee’s 13 October 2014 meeting.



Attachment 1



8. Questions on notice

Nil.

9. Motions

10. Petitions

Nil.

11. Urgent business

12. Confidential items

Nil.

13. Closure



Declarations of Interest

Council Meeting Date: Councillor:

Item No. (e.g. 3.1)

Declaration of Interest (where a member has an interest that does not lead to a conflict)

Declaration of Conflict of Interest (where a member has an interest that leads to a conflict)


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