notice of meeting of the audit committee · that the minutes of the meeting of the audit committee...

Notice of Meeting of the Audit Committee

NOTICE IS HEREBY GIVEN in accordance with Section 87 of the Local Government Act 1999, that a meeting of the

MEETING OF THE AUDIT COMMITTEE

of the

CITY OF BURNSIDE

will be held in the Boardroom at the Civic Centre 401 Greenhill Road, Tusmore

on

Monday 16 June 2014 at 6.00 pm.

Light refreshments will be available in the Boardroom from 5.30 pm.

Paul Deb Chief Executive Officer

1

Audit Committee Meeting Agenda

Monday 16 June 2014 at 6.00 pm Boardroom, 401 Greenhill Road, Tusmore

Members: Councillor Osterstock - Chair Mayor, David Parkin Councillor Cornish Mr Andrew Blaskett Ms Lisa Scinto

1. Apologies 2. Leave of Absence 3. Confirmation of the Minutes

That the Minutes of the meeting of the Audit Committee held on 15 April 2014 be taken as read and confirmed.

4 Governance Critical Dates Report p 4

Forward Agenda p 7Action List p 8 Internal Audit – Status Report p 16Council Policy Review Tracking p 19

5. Reports 5.1 Audit Committee Terms of Reference (Strategic) p 31

Attachment A p 33

5.2 Review Draft Treasury Management Policy (Strategic) p 45 Attachment A p 49 Attachment B p 58 Attachment C p 68 Attachment D p 74

5.3 Business Service Review – Finance (Operational) p 89 Attachment A p 92 5.4 Business Service Review – Finance Structure (Operational) p 109

Attachment A p 112

5.5 External Auditor’s Interim Report 2013/14 (Operational) p 145 Attachment A p 149 5.6 Good Governance Assessment Program – Progress Report (Operational) p 157 Attachment A p 160 Attachment B p 171

2

Audit Committee Agenda 16 June 2014

5.7 Procurement Policy Review (Strategic) p 173 Attachment A p 177 Attachment B p 188

Attachment C p 202

6. Confidential Items Nil

7. Date of Next Meeting Meeting to be held during the week commencing 18 August 2014

8. Other Business

9. Closure

3

GOVERNANCE CRITICAL DATES TABLE

July 2013 – June 2014 Note: Reference to the Act refers to the Local Government Act 1999 and Local Government (General) Regulations 1999 unless otherwise indicated.

Date Task Act Reference Action/comment 30 September – 31 May (Inclusive) Next due February 2014

Period during which a regional subsidiary must at least twice consider a report showing a revised forecast of operating & capital investment activities for the relevant financial year. Regional subsidiaries:

Eastern Health Authority Eastern Waste Management Authority Highbury Landfill Authority

Regulation 9(1)(a) of the Local Government (Financial Management) Regulations 2011

Most recent material will be provided at the February 2014 Audit Committee meeting.

30 September – 31 May (Inclusive) Next due February 2014

Period during which a Council must at least twice consider a report showing a r evised forecast of operating & capital investment activities for the relevant financial year.

Regulation 9(1)(a) of the Local Government (Financial Management) Regulations 2011

30 November – 15 March (inclusive)

Period in which a council, council subsidiary or regional subsidiary must consider a report showing a revised forecast of each item shown in its budgeted financial statements for the relevant financial year compared with the estimates set out in the budget presented in a manner consistent with the Model Financial Statements. The report must also include revised forecasts for the relevant financial year of the council’s operating surplus ratio, net financial liabilities ratio and asset sustainability ratio compared with estimates set out in the budget presented in a manner consistent with the note in the Model Financial Statements entitled Financial Indicators

Regulation 9(1)(b) & (2) of the Local Government (Financial Management) Regulations 2011

4

Date Task Act Reference Action/comment Annually as part of Budget process - January

Commence preparation of draft annual business plan and budget. Meet the adoption requirements of Section 123(8); an annual business plan and budget must be adopted after 31 March but before 31 August of the financial year.

Section 123(3) 2014/15 Budget Process to commence January 2014

Annually as part of Budget process - February

Undertake public consultation on annual budget to meet obligations under legislation.

Sections 123(3) and (4). 2014/15 Budget Process to commence February 2014. 2014/15 Budget Consultation to commence May 2014

Annually as part of Budget process - April

Audit Committee to propose and provide information relevant to the Council's annual business plan

Section 126(4)(ab) Audit Committee to review LTFP February 2014 Audit Committee to review draft ABP April 2014

Annually as part of Budget process

Declaration of general rate. Council to determine whether to fix maximum increases in general rates on principal place of residence

Section 153(3) & 153(5) After 1 June and before 31 August.

Annually as part of Budget process

Council to determine rate payment dates in September, December, March and June

Section 181(1)

Annually = May/June

Elected Members’ Annual Training Plan Section 80A Report to Council - February 2014 meeting Elected Members’ Annual Training Plan (Council Meeting in May)

Annually – 1 June Earliest date for regional subsidiaries to adopt budget for ensuing financial year

Schedule 2, clause 25

Annually as part of Budget process (June/July)

Government Gazette and local newspaper notice of adoption of valuations/declaration of rate

Section 167(6) and 170 Government Gazette notice July 2013 Eastern Courier July 2013

Annually =July All delegations instruments made pursuant to Section 44 should be reviewed at least once in every financial year.

Section 44(6) Reviewed in 27 August 2013; January 2014

5

Date Task Act Reference Action/comment February - April Preparation of maps and technical description for revised

ward boundaries from Elector Representation Review.

12 Certification was received from the Electoral Commission on the 8 January 2013.

12/12/2013 Gazettal of Elector Representation Review and maps of changed ward boundaries

12(15) Gazette notice was published on the 7, March 2013.

6

Dataworks/Audit Committee/Audit Committee - Forward Agenda

2014 Meeting Date Reports Resolution

Number Responsible Officer

June 2014 Good Governance Assessment Program – Progress Report

A0335 4/12/13

GO

External Auditor’s Report 2012/13 Procurement Policy MP Business Service Review – Finance 3 IAM Progress Update on Business Service

Review – 1 (Dept Structure) IAM

August Risk Management Framework CP & RC Internal Revenue Review A0304 CFO Scope of External Audit for 2014/15 CFO Comparative Fleet Management 2013/14 MP Progress Update on Business Service

Review – Payroll CFO

Progress Update on Business Service Review – Accounts Payable and Accounts Receivable

CFO

Progress Update on Business Service Review – Rates

CFO

GMCS General Manager Corporate Services Gov Governance Officer MCE Manager Community Engagement CFO Chief Finance Officer MODG Manager Organisational Development and Governance IAM Internal Audit Manager MIS Manager Information Systems MP Manager Procurement and Contracts CP & RC Corporate Planning and Risk Coordinator

7

J:\GMCCS\Agendas & Minutes\Audit Committee\2014\3) 16 June 20124\4 Action List.docx

AUDIT COMMITTEE MEETING – ACTIONS

MTG RESOLUTION//REQUEST WHO DUE RES NO.

COMMENT

6/10/2009 Regional Subsidiary Quarterly Financial Reports That the Audit Committee requests that each regional subsidiary provide a report on its financial status at quarterly intervals.

MF Ongoing A0117 • Report quarterly

• ongoing

7/2/2012 Risk Management Policy and Risk Management Framework (5.3) 1. That the Report be received. 2. That the updated Risk Management Policy be endorsed by the Audit

Committee. 3. That the updated Risk Management Framework be endorsed by the Audit

Committee. 4. That the Administration provide the updated Risk Assessment Register to the

Audit Committee in June 2012 and thereafter on an annual basis. 5. That the Administration report all new and emerging strategic and operational

risks that are rated as High or Extreme to the Audit Committee on an ongoing basis.

MODG April 2014

A0225

• Ongoing to be reported on an annual basis and when High and Extreme risks identified

3/4/2012 Internal Policy & Procedure Framework (5.5) 1. That the Report be received. 2. That Administration presents a revised Internal Policy & Procedure

Framework to the June 2012 meeting of the Audit Committee. 3. That the Council Policy Review Tracking is provided to the Audit Committee

as a standing agenda item until all Policies and Procedures are up to date.

MOD A0251 • Standing Item

5/12/12 Council Policy Review Tracking 1. That the Audit Committee recommends to Council that the Council Policies

that are currently overdue for review be updated as a priority. 2. That the Audit Committee not that Administration has mitigated the risk in

association with the Tree Management Policy and that the updated policy will be provided to the February 2013 meeting of the Audit Committee.

MODG Feb 2013

A0281

• Ongoing

8



COMMENT

5/12/12 Audit Management Letter 2011/12 (5.1)

1. That the Report be received. 2. That the Audit Committee recommends to Council that measures be taken to

ensure the external Auditor findings and recommendations are achieved. 3. That a progress report be brought back to each Audit meeting commencing

2013.

CFO A0282

• Ongoing

3/4/13 Risk Register (4.4) 1. That the Report be received. 2. That the Administration continues to provide a Risk Assessment Register to

the Audit committee on an annual basis. 3. That the Administration report all new and emerging strategic and operations

risks that are rated as High or Extreme to the Audit Committee in accordance with the Risk Policy.

4. The Internal Audit Plan be revised to ensure that the priorities of the risk register have been considered.

5. That the Strategic Risk Register be developed and brought back to the Audit Committee prior to revising the internal audit plan.

MODG A0296

• Ongoing

5/6/2013

Internal Revenue Review (4.2) 1. That the Report be received. 2. That Administration provides an update on the Internal Audit Fees & Charges

Review at the August 2013 meeting of the Audit Committee. Asset Revaluation Project – Progress Report (4.4)

CFO June A0304 • Report to Audit Committee in June 2014

7/8/13 Revision of Internal Audit Plan (4.6) 1. That the Report be received. 2 That the 3-Year Internal Audit Plan be amended as follows:

2.1 Re-schedule the following business service review from 2013/14 to 2014/15:

IAM A0317 • Noted

9



COMMENT

2.1.1 Procurement & Contracts 3 Re-schedule the following six internal audit projects from 2013/14 to 2014/15:

3.1 Contract Management 3.2 Grant-Funded Programs 3.3 Enterprise Risk Management 3.4 Council Subsidiaries (subsidiary to be selected) 3.5 Customer Management 3.6 Review of Non Full-Time Equivalent (FTE) Resources

4 Completely remove the following two internal audit projects: 4.1 Asset Management II; and 4.2 Development Application Process.

5 That the Procurement Internal Audit Project currently scheduled for future

years be undertaken in 2013/14.

7/8/13 Business Service Review – Finance Department – Report 1 Department

Structure (5.1) 1. That the Report be received. 2. That the Internal Audit Report – Business Service Review Finance

Department – Report 1: Department Structure be endorsed by the Audit Committee.

3. That the Internal Audit Report – Business Service Review Finance Department - Report 1: Department Structure be presented to the 27 August 2013 meeting of Council.

4. That a Report be presented to the Audit Committee at the December 2013 meeting detailing progress of the implementation of the recommendations outlined in the Internal Audit Report – Business Service Review Finance Department – Report 1: Department Structure.

CFO Dec revised date June

A0321 • Summary in December

• Further Report to Audit Committee in June 2014

4/12/13 Good Governance Assessment Program – Progress Report (5.8) 1. That the Report be received.

GMCS June 2014

A0335

• Further report to Audit

10



COMMENT

2. That a Report to provide an update on the Good Governance Assessment Program be presented to the Audit Committee meeting in June 2014.

Committee in June 2014

4/12/13 WHS Management System Objective Appraisal (5.9) 1. That the Report be received. 2. It is recommended an update on the progress of the Local Government

Association Workers Compensation Scheme Action Plan for Non-conforming Elements be presented to the April 2014 meeting of the Audit Committee.

GMCS April A0336

• Further report to Audit Committee in April 2014

• COMPLETE

4/12/13 Local Government Mutual Liability Scheme – Risk Management Review (5.10) 1. That the Report be received. 2. That an updated Local Government Association Mutual Liability Scheme -

Risk Management Review - Data and Profile Report 2013 be provided at the April 2014 meeting of the Audit Committee for consideration.

GMCS April A0340

• Report to Audit committee in April 2014

4/12/13 External Auditor’s Report 2012/13 (5.1) 1. That the Report be received. 2. That the Administration work with the External Auditors to finalise the draft

External Auditor’s Report. 3. That the revised External Auditor’s Report remains a standing item on the

Audit Committee Agenda to provide an update of progress until fully implemented.

CFO April A0341 • Report to Audit committee in April 2014

4/12/13 Performance of Independent Auditor That a Report on the performance of the Independent Auditor and any recommendations, to be provided to the Audit Committee at the February 2014 meeting.

GMCS April

A0343

• Report to Audit committee in April 2014

4/12/13

Status of the Internal Control Framework That a report on the status of the Internal Control Framework including feedback from the Auditor as to the effectiveness of the evidence of the internal controls be provided to the Audit Committee at the February 2014 meeting.

GMCS Feb A0344 • Report to Audit committee in Feb 2014

11



COMMENT

• Arrange meeting with Auditors

4/12/13 Audit Committee – Terms of Reference That the Audit committee informs Council that the Committee will review the Audit Committee Terms of Reference with the view of providing Council with a series of recommendations of proposed changes to be implemented at the end of the current Council term.

GMCS Feb A0345

• Report to Audit committee in Feb 2014

• Report to Council March.

• Further report to Audit Committee confirming change of Terms of Reference.

• COMPLETE 5/2/2014 External Auditor’s Report 2012/13 (5.3)

1. That the Report be received. 2. That the External Auditor’s Report remains a standing item on the Audit

Committee Agenda to provide an update of progress until fully implemented. 3. That the updated Attachment (B) be included in the minutes.

CFO A0351 • Ongoing

5/2/2014 Business Services Review Finance Department - Report 2 : Payroll (5.8) 1. That the Report be received. 2. That a Report be presented to the Audit Committee at the June 2014 meeting

detailing progress of the implementation of the recommendations outlined in the Internal Audit Report – Business Service Review Finance Department – Report 2: Payroll.

CFO April A0355 • Further Report to Audit Committee in April

• COMPLETE

5/2/2014 Business Services Review Finance Department - Report 6 : Accounts CFO April A0356 • Further report

12



COMMENT

Receivable and Account Payable Functions (5.9) 1. That the Report be received. 2. That a Report be presented to the Audit Committee at the June 2014 meeting

detailing progress of the implementation of the recommendations outlined in the Internal Audit Report – Business Service Review Finance Department – Report 6: Accounts Receivable and Accounts Payable Functions.

to Audit Committee in April

• COMPLETE

5/2/2014 Performance of Independent Auditor (6.1) That Pursuant to section 90(2) of the Local Government Act, 1999 the Committee orders that the public be excluded, with the exception of the Audit Committee Members, the Elected Members of the City of Burnside, the Acting Chief Executive Officer, the Acting General Manager, Corporate Services; the General Manager, Urban Services, the Acting Chief Financial Officer and the Executive Officer on the basis that it will receive and consider the Item 6.1 Performance of Independent Auditor and that the Committee is satisfied that the principle that the meeting should be conducted in a place open to the public has been outweighed in relation to the matter because pursuant to section 90(3)(d) of the Act, on the basis that it contains commercial information of a confidential nature (not being a trade secret) the disclosure of which could reasonably be expected to prejudice the commercial position of the person which supplied the information or confer a commercial advantage on a third party, and to do so would be contrary to the public interest. 1. Confidential Resolution. 2. Confidential Resolution. A0359 1. Pursuant to Section 91(7) and (9) of the Local Government Act, 1999, the Committee orders that: 1.1 the Report, Minutes and Attachments remain confidential on the basis that they contain commercial information of a confidential nature (not being a trade secret) the disclosure of which could reasonably be expected to prejudice the

GMCS A0358 • Further Report to Audit Committee

13



COMMENT

commercial position of the person which supplied the information and to do so would be contrary to the public interest. 1.2 the Report, Minutes and Attachments will not be available for public inspection for the period of five years at which time this order will be revoked/reviewed by the Audit Committee / Chief Executive Officer. 2. That if:

2.1 the period in respect of any order made under Section 91(7) of the Local Government Act 1999 lapses; or

2.2 Council resolves to revoke an order made under Section 91(7) of

the Local Government Act 1999; or the CEO determines pursuant to delegated authority that the order be revoked any discussions of Committee on that matter and any recording of those discussions are to no longer be treated as confidential.

15/4/2014 Adj to 16/4/2014

Audit Committee Terms of Reference (Operational) (5.1) 1. That the Report be received.

2. That Members note the amended Terms of Reference for the City of

Burnside Audit Committee.

3. The Audit Committee recommends to Council that the Terms of Reference be amended as follows: 3.1 Item 8.1 – The Committee shall meet at 6 pm on a day to be specified

by the Audit Committee in the third week of February, April, June, August, October and November each year or as otherwise determined by Council or the Audit Committee (whether as the result of a motion upon notice or an Officer’s Report to Council.)

3.2 Items 11.2 and 11.2.1 of the Terms of Reference to be amended by

GMCS

A0361 • COMPLETE

14



COMMENT

deleting the word “systems”.

15/4/2014 Adj to 16/4/2014

Draft Long Term Financial Plan 2015 – 2024 (Strategic) (5.2) 1. That the Report be received. 2. That the Audit Committee endorses the assumptions and drivers inherent in

the Draft Long Term Financial Plan 2015 – 2024. 3. That the Long Term Financial Plan be presented to the 22 April 2014 meeting

of Council for consideration.

FO A0362 • COMPLETE

15/4/2014 Adj to 16/4/2014

Regional Subsidiary 2013/14 Periodical Financial Results (Operational) (5.3) 1. That the Report be received.

2. That the Audit Committee notes the reports for the periods reported to date

for the three regional subsidiaries of the City of Burnside.

FO A0363

•

15/4/2014 Adj to 16/4/2014

Update to Risk Management Policy (Strategic) (5.6) 1. That the Report be received. 2. That the Audit Committee recommends to Council that it adopts the updated

Risk Management Policy.

A0366 • COMPLETE

15/4/2014 Adj to 16/4/2014

Policy Review – Complaint Handling Policy (Operational) (5.10) 1. That the Report be received. 2. That the Audit Committee recommends to Council that it adopts the revised

Complaint Handling Policy.

M A0370 • COMPLETE

15

INTERNAL AUDIT – STATUS REPORT (June 2014)

4 Internal Audit - Status Report Jun 14- PD FINAL .doc 1

The Internal Audit – Status Report provides a summary of the progress of internal audit projects (completed and in progress).

No. Projects Completed Date

Audit Committee Date

Status

2012-13 Internal Audit Projects 1 12-05 Business Service Review – Library,

Learning & Volunteers Apr 2012 Jun 2012

Feb 2013 Aug 2013

Status on the outstanding audit recommendations are provided below : • The Manager – Library, Learning and Volunteers has commenced developing a

succession plan. How ever, this w ill be f inalised together w ith the development of a standard template succession plan by the People and Culture Department for all departments across Council (w hich is expected by December 2014).

• The revision of w orkf low s for each core service w ill be undertaken w hen the extra w orkload due to 1LMS has been embedded into exist ing pract ices (w hich is expected by August 2014).

2 12-06 Internal Policy & Procedure Framew ork Mar 2012 Apr 2012 We w ere advised by the Execut ive Team that the audit recommendations w ere fully implemented.

3 12-07 Long-Term Financial Plan May 2012 Aug 2012 We w ere advised by the Execut ive Team that the audit recommendations w ere fully implemented.

4 12-08 Management of Consultancies May 2012 To be tabled. This audit report w ill be presented at a future Audit Committee meeting. 5 12-10 Fees and Charges Review Aug 2012 Jun 2013 We w ere advised by the Execut ive Team that the audit recommendations w ere fully

implemented. 6 12-11 External Compliance Jul 2012 To be tabled. This audit report w ill be presented at a future Audit Committee meeting. 7 13-01 Business Service Review – Finance 1

(Department Structure) Dec 2012 Aug 2013

June 2014 New structure has been implemented w ith the except ion of the Finance Business Partner role (delayed due to a lengthy WorkCover claim) and Finance Trainee role (postponed due to funding a temporary business support role). Recruitment for these tw o posit ions is planned for July 2014. Progress report presented to the Audit Committee in June 2014.

8 13-01 Business Service Review – Finance 2 (Payroll)

Dec 2012 Jun 2013 Aug 2013 Feb 2014

Internal Audit completed a follow -up on this project , which w as reported to the Audit Committee in April 2014. The outstanding recommendations w ill be captured under future follow -up review s w hich w ill occur quarterly.

9 13-01 Business Service Review – Finance 3 (Reconciliat ions, Processing of Journals, GST, FBT and Finance Systems)

Dec 2012 June 2014 Good progress made and many recommendations have been implemented. A temporary f inance resource has been engaged in this area. This report w ill be presented to the Audit Committee in June 2014.

10 13-01 Business Service Review – Finance 4 (Performance, Operat ional, Financial & Compliance Management)

Dec 2012 To be tabled. Good progress made and a number of recommendations have been implemented. Responses w ere drafted w ith assistance from Organisat ional Development and Governance and Procurement and Contracts. Management responses w ill be f inalised w hen the Strategic & Corporate Planner returns from maternity leave in July 2014.

11 13-01 Business Service Review – Finance 5 Dec 2012 To be tabled. Good progress made on t he report ing and presentat ion of the Annual Business Plan and

16





Status

(Financial Report ing) Long-Term Financial Plan at Workshops, Council and Audit Committee meetings. Work is ongoing as the restructure of the Finance Department is implemented. Management responses w ill be drafted in July 2014.

12 13-01 Business Service Review – Finance 6 (Accounts Receivable & Accounts Payable)

Dec 2012 Jun 2013 Aug 2013 Feb 2014

Internal Audit completed a follow -up on this project, which w as reported to the Audit Committee in April 2014. The outstanding recommendations w ill be captured under future follow -up review s w hich w ill occur quarterly.

13 13-01 Business Service Review – Finance 7 (Rates)

Dec 2012 Aug 2013 Feb 2014

The proposed audit recommendations w ere endorsed by the Execut ive Team, approved by Council and fully implemented. Internal Audit w ill conduct a follow -up review to be presented to the Audit Committee in August 2014.

14 13-02 Business Service Review - Engineering Services

Mar 2013 Feb 2014 The Engineering Services Department has made small advances in improvement areas since the last report . • A start has been made on the f low chart for services w ith City Development and

Safety. • Capitalisat ion of w ages included in the capital program. • Policy compliance review w as undertaken as part of the annual policy review and

primarily, through w ork on creat ion of the new Streetscape Strategy. • Succession planning has been incorporated into the latest vacancy. Areas of immediate focus include: • Report ing the scheduling of capital w orks to the Execut ive Team. • Formalising the monthly capital w orks report to the Execut ive Team. • Development relat ionship / assessment f low chart.

15 13-03 Project Management – Burnside Sw imming Centre

May 2013 Jun 2013 * We w ere advised by the Strategic Projects Off icer in October 2013 that the recommendations from this report w ere implemented.

16 13-04 Business Service Review – Development Services

Sep 2013 To be tabled. A w orkshop w as scheduled on 28 May for the department’s manager and team leaders to discuss the report and formulate management responses. The responses w ill be presented to the General Manager - Community and Development Services for f inalisat ion.

2013-14 Internal Audit Projects 17 14-01 Project Management – Glenunga

Community Hub Jul 2013 Jul 2013 * We w ere advised by the Strategic Projects Off icer in October 2013 that the

recommendations from this report w ere implemented. 18 14-04 Business Service Review –

Organisat ional Development Dec 2013 To be tabled. The Manager – People an Culture is preparing management responses to the audit report

w hich is expected to be submitted to the General Manager – Corporate Services by July 2014.

19 14-04 Business Service Review –Governance Dec 2013 To be tabled. 20 14-05 Business Service Review – Off ice of the Nov 2013 To be tabled. This project is now expanded to include the Community Engagement and Communicat ions

17





Status

CEO Team. A revised draft report w ith the expanded scope is expected by June 2014. 21 14-06 Enterprise Risk Management Dec 2013 To be tabled. The Manager – People and Culture is preparing management responses to the audit report

w hich is expected to be submitted to the General Manager – Corporate Services by July 2014.

22 14-07 Work Health & Safety Dec 2013 To be tabled. The Manager – People and Culture is preparing management responses to the audit report w hich is expected to be submitted to the General Manager – Corporate Services by July 2014.

23 14-08 Follow -Up on Business Service Review of the Finance Department – Accounts Payable and Accounts Receivable Funct ions

Feb 2014 April 2014 The majority of audit recommendations w ere implemented. The outstanding recommendations w ill be captured under future follow -up review s w hich w ill occur quarterly.

24 14-09 Follow -Up on Business Service Review of the Finance Department – Payroll Funct ion

Feb 2014 April 2014 The majority of audit recommendations w ere implemented. The outstanding recommendations w ill be captured under future follow -up review s w hich w ill occur quarterly.

25 14-10 Financial Internal Controls – Procurement & Purchasing

May 2014 n/a A draft audit report w as presented to the Execut ive Team in May 2014. A revised draft report is being review ed by management. T he draf t report w ill then return to the Execut ive Team for conf irmation in June 2014.

26 14-12 Business Service Review – Community Services

n/a n/a This project is present ly at planning stage.

* Direct to Council.

18

J:\GMCCS\Agendas & Minutes\Audit Committee\2014\3) 16 June 20124\4 Council Policy Review Tracking table for Audit Committee (ECM 1577677).docx 1

COUNCIL POLICY REVIEW TRACKING

As at 27 May 2014 As per Audit Committee Resolution A0251, 3/4/12 in part: That the Council Policy Review Tracking is provided to the Audit Committee as a standing agenda item until all Policies and Procedures are up to date.

KEY: GM CS = General Manager Corporate Services GM C&DS = General Manager Community & Development Services GM US = General Manager Urban Services M OD&G = Manager People & Culture CEO = Chief Executive Officer Review date or adopted date = date of Council Meeting NFA = no further action required Note all policies to be reviewed annually. As requested at the December 2012 meeting of the Audit Committee, an additional column to indicate where the policy is required under the Local Government Act has been added to this table. Policy title Required

under LG Act Responsibility Last

reviewed / adopted

Next review Date

Progress Comments or completed date

Access to development documentation

GM C&DS

25/09/2012 C8873

22/10/2013 C9447

October 2014 Last review completed October 2013

Aged Care

GM C&DS

28/08/2012 C8842

27/08/2013 C9360

Aug 2014 Last review completed August 2013

19


Policy title Required under LG Act

Responsibility Last reviewed / adopted

Next review Date


Arts and Recreation

GM C&DS

28/08/2012 C8842

May 2014 This policy is currently being reviewed and will most likely be split into two new policies – Arts and Cultural Development Policy and Physical Activity and Sports Policy

Asset Management GM US 09/07/2013 C9277

July 2014 Last review completed July 2013

Bin repair & replacement GM US 21/7/2009 O2554

June 2014 Policy to be revoked

Bluestone Kerbing GM US 19/6/2007 July 2014 To be subsumed into Public Domain Streetscape Strategy

Building Inspection

GM C&DS

26/6/2012 C8762

22/10/2013 C9448

October 2014 Last review completed October 2013

Bushfire hazard management (previously called Fire Prevention)

GM C&DS

25/9/2012 C8872

10/09/2013 C9400

27/05/2014 C9731

May 2015

Caretaker 91A GM CS 22/2/2011 C8116

April 2014 (before 2014 council election)

Currently being reviewed in line with Model LGA Caretaker Policy

Children, Youth and Families GM C&DS 28/8/2012 C8842

Aug 2014 Last review completed August 2013

20




Next review Date


27/08/2013 C9361

City of Burnside Flag Flying

GM US

17/2/2009 CS1654

13/08/2013 C9333

August 2014 Last review completed August 2013

Closed circuit television (CCTV) GM CS 27/7/2010 C7948

July 2014 Review currently being undertaken

Code of Conduct for Council Members (previously Code of Conduct for Elected Members`) (refer also Complaint Handling Procedures for Council Members)

63 GM CS 25/10/2011 C8465

Council review / adoption no longer required.

Legislated Code 1/9/2013 – Parliament reviews, not Council

Code of Conduct for Council Employees (previously Code of Conduct for Employees, Staff & Associates)

110 GM CS 25/11/2011

24/09/2013 C9409

Employees, Staff & Associates – Gifts and Benefits Policy adopted 24/09/2013 C9409 and 2.7 amended in the Code

Legislated Code 12/2/2014 – Parliament reviews, not Council

Any specific clauses not included in mandated code will need to be included in either an existing or new Protocol

21




Next review Date


Council review / adoption no longer required.

Code of Practice – Access to Meetings and Documents

Public consultation required. S.92.

GM CS 9/8/2011 Nov 2015 (within 12 months of election)

Last reviewed August 2011 (within12 months of last election)

Code of Practice – Meeting Procedures Meeting Regulations 7(2); Annual review mandatory.

GM CS

29/01/2013 C8998

July 2014

Community Gardens GM US 3/2/2010 S7313

May 2014 Last reviewed February 2010

Community Grants

GM C&DS

09/07/2013 C9274

8/04/2014 C9659

April 2015 Last reviewed April 2014

Complaint Handling 270(a1)(b)

GM C&DS

22/5/2012 C8719

15/04/2014 A0370

13/05/2014 C9710

May 2015

Complaint Handling Procedures for Council Members 63 GM CS 27/05/2014 May 2015

22




Next review Date


(refer Code of Conduct for Council Members) C9730 (within 12 months of election)

Council Working Party

GM CS

10/09/2013 C9402

25/02/2014 C9600 (Mayor exofficio / quorum only)

Sept 2014 Last complete review September 2013

Customer Service

GMCS

Review to be undertaken to amend policy from OD & G / Management Protocol to be a Council

Deputations GMCS

New Policy to be finalised following Elected Members Info Doc 24/04/2014.

Development Delegations GM C&DS 25/9/2012 C8877

24/09/2013 C9410

Sept 2014 Last reviewed September 2013

Discretionary Rebates of Rates

GM CS

25/9/2012 C8875

27/05/2014 C9723

May 2015

Elected Member Training and Development 80A – review plan annually

GM CS 26/6/2012 C8766 11/02/14 C9585

Feb 2015 Last reviewed February 2014

23




Next review Date


Elected Members (incorporating Elected Members Room and Mayors Parlour Policy)

GM CS 19/6/2007 F1565

Feb 2011 (CEO)

27/05/2014 C9732

May 2015

Elected Members’ Allowances and Benefits 76(9) Allowances table updated annually.

S.77(1)(b) policy lapses at each election.

GM CS 12/11/2012

12/11/2013

November 2014 (Allowances)

Dec 2014 (Complete Policy)

Last complete review November 2013

Election signs GM CS 22/2/2011

27/05/2014 C9733

May 2015

Employees, Staff and Associates – Gifts and Benefits (refer also Code of Conduct for Council Employees)

CEO 24/09/2013 C9409

27/05/2014 C9734

May 2015

Environment GM US 23/04/2013 C9148


Footpath GM US 14/8/2012 C8823

10/09/2013 C9401

July 2014 To be subsumed into Public Domain Streetscape Strategy

24




Next review Date


Fraud and Corruption Prevention GM CS 11/9/2012 C8858

11/2/14 C9590

February 2015 Last reviewed February 2014

Hedge Encroachment onto Road Reserve GM US 19/6/2007 July 2014 To be subsumed into Public Domain Streetscape Strategy

Hire of Community Open Space and Facilities GM CDS 12/11/2013 C9481

Nov 2014 Last reviewed November 2013

Internal Financial controls 125 GMCS 28/08/2012 C8846

Sept 2014 Last reviewed August 2012

Internal Review of Council Decisions Procedure 270(1) GM CS 18/1/2011 C8077

May 2014 Last reviewed January 2011

Kerbside Waste Management GM US 31/7/2012 C8810

June 2014 Include revoke Bin repair and Replacement Policy at same time as review

Leasing & Licensing of Community Facilities

GMUS 24/01/2012 IE0005

12/11/2013 C9481


Library

GM C&DS

28/8/2012 C8842

27/08/2013 C9376

Aug 2014 Last reviewed August 2013

Magill Cemetery GM US 19/6/2007 Sept 2014 Review delayed due to changes to the Burial & Cremation Regulations 2013..

25




Next review Date


Media

GM C&DS

27/11/2012, C8941

10/09/2013

C9391


Naming of Public Places (formerly Naming of Roads and Public Reserves)

219(5) GM US 27/7/2010 C7942

22/04/2014 C9696


Occupational Health, Safety & Welfare and Report on Occupational Health Experience & Performance

GM CS 19/6/2007 June 2014 This is to be revoked as it is covered by other formal reporting processes.

Open Space (includes Open Space Reserves Fund)

GM US 20/10/2009 F1732

Oct 2014 Last reviewed October 2009

Order Making May need public consultation. S.259(5)

GM C&DS 25/9/2012 C8876

12/11/13 C9479


Parking

GM C&DS

10/7/2012, C8787

23/07/2013 C9318

11/03/2014 C9623

March 2015 Last reviewed March 2014

Petitions GM CS

09/08/2011 May 2014 Review as part of Review of Code of Practice Access to documents. Policy to be finalised following Elected Members Info Doc

26




Next review Date


24/04/2014.

Proceeds from Economic Development Activity CEO 19/6/2007 Sept 2014 Last reviewed June 2007

Procurement 49 GM CS 24/4/2012 C8683

May 2014 Last reviewed April 2012

Prudential Project Management 48(aa1) GM CS 28/8/2012 C8847

5/2/2014 A0352 Audit

11/02/2014 C9588


Public consultation (formerly community consultation) 50 GM C&DS April 2013 (C9122)


Rating 123 GM CS 05/02/14 A0349 11/02/14 C9587


Records Management

GM CS 15/9/2011 CCS0036 April 2014

Last reviewed September 2011; Council Info Doc 15/05/2014 for comments

Regulated & significant tree assistance

GM C&DS

24/7/2012 C8802

24/09/2013 C9424

September 2014

Last reviewed September 2013

Request for service

270(a1)(a)

GM C&DS

22/5/2012, C8719

13/05/2014 C9714

May 2015

27




Next review Date


Risk Management

134(4)(b)

M P&C

14/02/2012 C8579

15/04/2014 A0366

13/05/2014 C9715

May 2015

Road & Traffic Management

GM US

12/03/2013 C9078

13/08/2013

C9334

August 2014 Last reviewed August 2013

Social media GM C&DS 25/9/2012, C8842

March 2014 Last reviewed September 2012

Sponsorship GM C&DS 28/08/2012 C8842

10/09/2013 C9392


Street Numbering GMCS Council report to t/f from Management Protocol to Council Policy

Swimming Pool 71AA Development Act 1993

GM C&DS 8/04/2014 C9664


Telecommunications Facilities on Council Land GM US 19/6/2007 Sept 2014 Last reviewed June 2007

Tree Management

GM US

26/02/2013 C9065 reviewed but not adopted

May 2015

28




Next review Date


27/05/2014 C9735

Use of Road Reserves for Commercial Purposes

GM C&DS

28/8/2012, C8842

8/10/2013 C9437

25/02/2014 C9612


Vehicles GM CS 11/10/2011 CCS0044

May 2014 Last reviewed October 2011

Verge Development GM US 19/6/2007 July 2014 To be subsumed into Public Domain Streetscape Strategy

Volunteers

GM C&DS

25/9/2012, C8876

27/08/2013

C9362

August 2014 Last reviewed August 2013

Ward Forums GM C&DS 11/9/2012, C8858

27/05/2014 C9724

May 2015

Water sensitive urban design GM US 27/9/2011 PHI0064

July 2014 Last reviewed September 2011

Watercourse Management GM US 28/05/2013 C9188

May 2014 Last reviewed May 2013

Whistleblower Protection GMUS 23/04/2013 C9140


29




Next review Date


GMCDS

GMUS

14/02/2014 C9586

30

Audit Committee Item 5.1 16 June 2014 Item No: 5.1 To: Audit Committee Date: 16 June 2014 Author: Louise Miller Frost – General Manager, Corporate Services General Manager and Division

Louise Miller Frost – General Manager, Corporate Services

Contact: 8366 4205 Subject: AUDIT COMMITTEE TERMS OF REFERENCE (STRATEGIC) Attachments: A. Audit Committee Terms of Reference Prev. Resolution: C8044, 14/12/10

C8220, 27/4/11 C8496, 22/11/11 A0279, 7/8/12 C8840, 28/8/12 C9530, 10/12/13 A0350, 5/2/14 C9616, 25/2/14 C9621, 11/3/14 C9622, 11/3/14 C9709, 13/5/14

Officer’s Recommendation

1. That the Report be received.

2. That members note the amended Terms of Reference for the City of Burnside Audit Committee.

Purpose

1. To provide the Audit Committee with the recently adopted Terms of Reference for the Audit Committee which includes a requirement for the minutes of each meeting to specify the date and time of the next meeting.

Strategic Plan

2. The following Strategic Plan provision is relevant:

“A financially sound Council that is accountable, responsible and sustainable”

Communications/Consultation

3. The following communication / consultation was undertaken during the review of the Audit Committee Terms of Reference:

3.1 The revised Terms of Reference was adopted by City of Burnside at the meeting of 11 May 2014 (C9709).

3.2 Discussions with one of the Independent Members, Mr Andrew Blaskett, identified that he would be unable to attend any meetings on the third week of

31

Audit Committee Item 5.1 16 June 2014

any month due to a prior commitment. The presence of both Independent Members is required in order to attain quorum.

Statutory

4. The following legislation is relevant in this instance:

Local Government Act, 1999, Sections 41 and 126

Local Government (Procedures at Meetings) Regulations, 2013

Local Government (Financial Management) Regulations, 2011

Policy

5. The minor change to the Terms of Reference are isn reported in the ‘Discussion’ section of this report.

Risk Assessment

6. There are no risks associated with the recommendation.

Finance

7. There are no financial implications for the City of Burnside in respect of this recommendation.

Discussion

Background

8. The Local Government Act, 1999 (the Act) at section 126, requires each Council to have an Audit Committee; however, they are actually established under section 41 of the Act. Audit Committees have no authority to act independently of Councils and can only act in areas covered by their Terms of Reference (see Attachment A for the current Audit Committee Terms of Reference).

9. At the meeting of 13 May 2014, Council resolved (C9709):

1. That the draft Audit Committee Terms of Reference be adopted.

2. That there be a new paragraph 8.2 inserted as follows;

The minutes of each meeting must specify the date and time of the next ordinary meeting of the Committee.

10. Attachment A is the Audit Committee Terms of Reference amended to reflect the changes indicated in C9709.

11. The Audit Agenda will now include an item the requires the determination of the next Audit Committee meeting, for inclusion in the Minutes.

32

ECM Tracking No. 1167336 Page 1 of 11

Audit Committee Terms of Reference

1. Establishment

1.1 Resolution C8044 of 14 December 2010: The Audit Committee of Council is established under Section 41 of the Local Government Act 1999 (the Act), for the purposes of Section 126 of the Act and in compliance with regulation 17 of the Local Government (Financial Management) Regulations 2011.

1.2 The Committee’s role is to report to Council and provide appropriate advice and recommendations on matters relevant to its Terms of Reference in order to facilitate decision making by the Committee and Council in relation to the discharge of its responsibilities.

1.3 The Audit Committee does not have executive powers or authority to implement actions in areas which management has responsibility and does not have any delegated financial responsibility. The Audit Committee does not have any management functions and is therefore independent from management.

1.4 Resolution C9622 of 11 March 2014

Clauses 3.1, 4.1 and 5.2 will discontinue from the first meeting of the new Council elected after the 2014 Council Election.

1.5 Resolution C9622 of 11 March 2014

Clauses 3.2 & 4.2 will commence at the first meeting of the new Council elected after the 2014 Council Election.

2. Objectives

2.1 The primary objective of the Audit Committee is to assist Council in the effective

conduct of its responsibilities for financial reporting, management of risk and maintaining a reliable system of internal controls.

2.2 The Audit Committee is established to assist the co-ordination of relevant activities of management, the internal audit function and the external auditor to facilitate achieving overall organisational objectives in an efficient and effective manner.

2.3 As part of Council’s Governance obligations to its community, Council has constituted an Audit Committee to facilitate:

2.3.1 the enhancement of the credibility and objectivity of internal and external

financial reporting;

2.3.2 effective management of financial and other risks and the protection of Council assets;

33

bortoluzzi

Attachment A

City of Burnside – Audit Committee – Terms of Reference


2.3.3 compliance with laws and regulations as well as use of best practice and Governance guidelines;

2.3.4 the effectiveness of any audit functions; and

2.3.5 the provision of an effective means of communication between the external auditor, management and the Council.

3. Membership

3.1 Members of the Committee are appointed by Council. The Committee shall consist of three members who shall be Members of Council (one of whom is the Mayor) and two members who are not members of Council (“the Independent Members”). (Refer 1.4)

3.2 Members of the Committee are appointed by the Council. The Committee shall be five of whom a majority shall be persons who are not members of Council (“the Independent Members”). (Refer 1.5)

3.3 Ideally, the non-Mayor Elected Member representative will have experience in business, legal, audit or financial management / reporting knowledge and experience.

3.4 That the Mayor is to be a member of the Audit Committee on an ex-officio basis. (C9600 25/02/14)

3.5 That the Mayor, if not a member on an ex officio basis, is to be a member of the

Audit Committee. (C9622 2.2 11/03/14)

3.6 The Independent Members of the Committee must have recent and relevant financial, risk management, internal audit experience relevant to the functions of Council’s Audit Committee as determined by Council.

3.7 Only members of the Committee are entitled to vote in Committee meetings. Unless otherwise required (by the conflict of interest provisions in the Act) not to vote, each member must vote on every matter that is before the Committee for decision. The Presiding Member has a deliberative vote but does not, in the event of an equality of votes, have a casting vote.

3.8 All decisions of the Committee shall be made on the basis of a majority decision

of the members present.

3.9 In the event of a tied vote the members have not made a decision, the question is neither carried nor lost. If a vote is tied the matter may be referred back to the Committee (either with or without additional information to inform the debate and decision making) or to referred to Council for resolution.

3.10 The Chief Executive Officer, General Manager Corporate Services, General

Manager Community & Development Services, General Manager Urban Services and other Council employees as directed by the Chief Executive Officer may attend any meeting as observers and/or be responsible for preparing papers for the Committee.

3.11 Council’s external auditors and internal auditor’s may be invited to attend

meetings of the Committee. Council’s external auditor must attend meetings considering the draft annual financial report and results of the external Audit.

34



3.12 Elected Member appointments to the Committee shall be for a period of twelve months from the date of appointment, or until the end of the term of the Council. Elected Members are eligible for reappointment at the end of their term.

3.13 The Independent Members shall be appointed for a period of 2 years,

commencing part-way through an election cycle, so that their terms overlap each Council election and provide some continuity. Independent Members are eligible for reappointment at the end of their term.

4. Presiding Member

4.1 The Presiding member of the Committee shall be appointed by the Council and shall be a member of the Council. (refer 1.4)

4.2 The Presiding Member of the Committee shall be appointed by Council and shall be an Independent Member.(Refer 1.5)

4.3 The Presiding Member’s appointment to the Committee shall be for a period of twelve months from the date of appointment, unless their term is due to expire within that period in which case the appointment will be until the date their appointment as an Independent Member is due to expire.

5. Sitting Fees

5.1 The Remuneration Tribunal Determination No. 6 of 2010 dated 23 August 2010 outlines various allowances for Council Members.

5.2 The annual allowance for an Elected Member who is the Presiding Member of one or more standing committees established by a council will be equal to one and a quarter (1.25) times the annual allowance for councillors of that council.(Refer 1.4)

5.3 The Independent Members are to be paid a sitting fee, per meeting, as

determined by Council.

5.4 The annual allowance for an Independent Member who is the Presiding Member of the Audit Committee will be equal to one and a quarter (1.25) times the Independent Member sitting fee per meeting, as determined by Council.

6. Secretarial Resources

6.1 The Chief Executive Officer shall provide sufficient administrative resources to the Committee to enable it to adequately carry out its functions.

7. Quorum 7.1 The quorum for a meeting of the Audit Committee shall be three, of whom at

least 2 must be independent members. If the Mayor is present, the quorum is to be four of whom at least two must be independent members.

35



8. Frequency of Meetings 8.1 The Committee shall meet at 6.00pm on a day to be specified by Audit

Committee within the third week of February, April, June, August, October and November or as otherwise determined by Council (whether as the result of a motion upon notice in or an Officer’s Report to Council).

8.2 the minutes of each meeting must specify the date and time of the next ordinary meeting of the Committee.

9. Notice of Meetings

9.1 A special meeting of the Committee may be called in accordance with the Act.

9.2 Notice of each meeting confirming the venue, time and date, together with an agenda of items to be discussed, shall be forwarded to each member of the Committee and observers, no later than three (3) clear days before the date of the meeting in accordance with Section 87 of the Act. Supporting papers shall be sent to Committee members (and to other attendees as appropriate) at the same time.

10. Minutes of Meetings

10.1 The Chief Executive Officer shall ensure that the proceedings and resolutions of all meetings of the Committee, including recording the names of those present and in attendance, are minuted and that the minutes otherwise comply with the requirements of the Local Government (Procedures at Meetings) Regulations 2000.

10.2 Minutes of Committee meetings shall be circulated within five (5) days after a meeting to all members of the Committee and members of the Council (in accordance with Section 91(3) of the Act).

11. Role of the Committee

11.1 Financial Reporting

11.1.1 The Committee shall monitor the integrity of the financial statements of the Council, including its Annual Report, reviewing significant financial reporting issues and judgements which they contain.

11.1.2 The Committee shall review and challenge where necessary:

a) the consistency of, and/or any changes to, accounting policies;

b) the methods used to account for significant or unusual transactions where different approaches are possible;

c) whether the Council has followed appropriate accounting standards and made appropriate estimates and judgements, taking into account the views of the external auditor;

d) the clarity of disclosure in the Council’s financial reports and the context in which statements are made; and

e) all material information presented with the financial statements.

Formatted: Font color: Red

36



11.2 Internal Controls and Risk Management

The Committee shall:

11.2.1 keep under review the effectiveness of the Council’s internal controls and risk management; and

11.2.2 review and recommend the approval, where appropriate, of any material to be included in the Annual Report concerning internal controls and risk management.

11.3 Whistle blowing

The Committee shall review the Council’s arrangements for its employees to raise concerns, in confidence, about possible wrongdoing in financial recording or reporting or other matters. The Committee shall ensure these arrangements allow independent investigation of such matters and appropriate follow-up action.

11.4 Strategic Management Plans and Annual Business Plans

The Committee shall propose and provide information relevant to, a review of the Council’s Strategic Management Plans or Annual Business Plan.

11.5 Other Investigations

The Committee shall, when necessary, propose and review the exercise of Council’s powers under Section 130A of the Local Government Act 1999, in relation to the conduct of Economy Audits that would not otherwise be addressed or included as part of an annual External Audit.

11.6 Internal Audit


11.6.1 monitor and review the effectiveness of the Council’s internal audit function in the context of the Council’s overall risk management system;

11.6.2 consider and make recommendation on the program of the internal audit

function and the adequacy of its resources and access to information to enable it to perform its function effectively and in accordance with the relevant professional standards;

11.6.3 review all reports on the Council’s operations from the internal auditors;

11.6.4 review and monitor management’s responsiveness to the findings and

recommendations of the internal auditor; and 11.6.5 where appropriate, meet the ‘head’ of internal audit at least once a year,

without management being present, to discuss any issues arising from the internal audits carried out. In addition, the head of internal audit shall be given the right of direct access to the Principle Member of the Council and to the Presiding Member of the Committee.

Formatted: Tab stops: 3.5 cm, Listtab + Not at 3.27 cm





37



11.7 External Audit


11.7.1 oversee the selection process for the external auditors and make a recommendation in this regard to the Council;

11.7.2 develop and implement a policy on the supply of non-audit services by

the external auditor, taking into account any relevant ethical guidance on the matter;

11.7.3 consider and make recommendations to the Council, in relation to the

appointment, re-appointment and removal of the Council’s external auditor. If an auditor resigns the Committee shall investigate the issues leading to this and decide whether any action is required;

11.7.4 oversee Council’s relationship with the external auditor including, but not

limited to:

a) recommending the approval of the external auditor’s remuneration, whether fees for audit or non-audit services, and recommending whether the level of fees is appropriate to enable an adequate audit to be conducted;

b) recommending the approval of the external auditor’s terms of

engagement, including any engagement letter issued at the commencement of each audit and the scope of the audit;

c) assessing the external auditor’s independence and objectivity

taking into account relevant professional and regulatory requirements and the extent of Council’s relationship with the auditor, including the provision of any non-audit services;

d) satisfying itself that there are no relationships (such as family,

employment, investment, financial or business) between the external auditor and the Council (other than in the ordinary course of business);

e) monitoring the external auditor’s compliance with legislative

requirements on the rotation of audit partners; and f) assessing the external auditor’s qualifications, expertise and

resources and the effectiveness of the audit process;

11.7.5 meet as needed with the external auditor. The Committee shall meet the external auditor at least once a year, without management being present; to discuss the external auditor’s report and any issues arising from the audit;

11.7.6 review and make recommendations on the annual audit plan, and in

particular its consistency with the scope of the external audit engagement;

11.7.7 review the findings of the audit with the external auditor. This shall

include but not be limited to the following:








38



• a discussion of any major issues which arose during the external audit;

• any accounting and audit judgements; and

• levels of errors identified during the external audit;

11.7.8 review the effectiveness of the external audit; 11.7.9 review any representation letter requested by the external auditor before

they are signed by management;

[Note that these representation letters are a standard practice of any audit and provide the auditor confirmation from management, (in particular the Chief Financial Officer) that, amongst other matters, accounting standards have been consistently applied, that all matters that need to be disclosed have been so disclosed and that the valuation of assets has been consistently applied.];

11.7.10 review the subsequent audit management letter from the external auditor and management’s proposed response, by the Council, to the external auditor’s findings and recommendations in that audit management letter.

11.8 Regional Subsidiaries

In accordance with Section 126(4) of the Act, the functions of the Audit Committee include, if the council has exempted a subsidiary from the requirement to have an audit committee, the functions that would, apart from the exemption, have been performed by the subsidiary’s audit committee.

12. Reporting Requirements

12.1 The Committee shall make recommendations to the Council as it deems

appropriate on any area within these Terms of Reference where in its view action or improvement is needed. The Presiding Member shall attend these meetings and talk on these matters, as and when required.

12.2 In accordance with Section 41(8) of the Act, the Committee shall after every meeting forward the minutes of that meeting to the next meeting of the Council.

12.3 The Committee shall report annually to the Council summarising the activities of

the Committee during the previous financial year.

13. Conduct and Disclosure of Interests

13.1 Members of the Committee must comply with the conduct and conflict of interest provisions of the Act. In particular Sections 62 (general duties), 63 (code of conduct) and 73-74 (conflict of interest, members to disclose interests) must be adhered to.

14. Register of Interest

14.1 Section 64 of the Act (interpretation) applies to the members of the Committee.



39



15. Delegations

15.1 Council may delegate additional matters that are within the scope of these Terms of Reference to the Committee in accordance with Section 41 of the Act.

16. Reimbursement of Expenses

16.1 Reimbursement of Expenses incurred by members of the Committee will be paid in accordance with the Council's "Elected Members' Allowances and Benefits Policy".

17. Public Access to Meetings

17.1 In accordance with the principles of open, transparent and informed decision making Committee meetings must be conducted in a place open to the public. Members of the public are able to attend all meetings of the Committee, unless prohibited by resolution of the Committee under the confidentiality provisions of Section 90 of the Act.

18. Public Access to Documents

18.1 Members of the public have access to all documents relating to the Committee unless prohibited by resolution of the Committee under the confidentiality provisions of Section 91 of the Act.

19. Other Matters The Committee shall:

19.1 Have access to reasonable resources in order to carry out its duties;

[Note that is subject to any budget allocation being approved by Council.]

19.2 Be provided with appropriate and timely training, both in the form of an induction programme for new members and on an ongoing basis for all members;

19.3 Give due consideration to the Act; and regulations made under the Act;

19.4 Make recommendations on co-ordination of the internal and external auditors;

19.5 Oversee any investigation of activities which are within its terms of reference; and

19.6 At least once a year, review its own performance, constitution and terms of

reference to ensure it is operating at maximum effectiveness and recommend changes it considers necessary to the Council for approval.

40



Document history

Date Resolution number 14/12/2010 C8044 27/04/2011 C8220 22/11/2011 C8496 28/08/2012 C8840 10/12/2013 C9530 25/02/2014 11/03/2014

C9600 C9622

41



Schedule 1

Audit Committee

Meeting Procedure Protocols

1. The Local Government (Procedures at Meetings) Regulations 2013 apply (as a matter of law) to all meetings of the Committee.

2. The decision of the person presiding at meetings of the Committee in relation to the interpretation and application of these Meeting Procedure Protocols shall be absolute and binding on the Committee.

3. A meeting of the Committee will commence as soon after the time specified in the notice of meeting as a quorum is present.

4. Subject to clause 10 of the Terms of Reference the minutes of proceedings at a meeting of the Committee must include:

(a) the names of the members present at the meeting;

(b) the names of the mover and seconder of each motion;

(c) each motion carried or lost at the meeting;

(d) any disclosure of interest made by a member;

(e) details of the making of an order (to exclude the public) under subsection (2) of section 90 of the Act (see subsection (7) of that section); and

(f) a note of the making of an order (to keep minutes, reports etc confidential) under subsection (7) of section 91 of the Act in accordance with the requirements of subsection (9) of that section.

5. The minutes of the proceedings at a meeting must be submitted for confirmation at the next meeting or, if that is omitted, at a subsequent meeting of the Committee.

6. Business may only be transacted at a meeting of the Committee as follows:

(a) by way of a motion without notice in support of a recommendation set out in an officer's report, or

(b) by way of a motion without notice which is accepted by the Presiding Member as suitable having regard to the 'Guiding Principles' at Regulation 4 of the Local Government (Procedures at Meetings) Regulations 2013, or

(c) by way of a motion without notice which has been given consent by the meeting, or

(d) by way of a notice of motion which has been provided in writing (together with a supporting short explanation) to the Committee support officer at least 7 clear days before the meeting at which it is to be considered.

7. Subject to clause 9 of the Local Government (Procedures at Meetings) Regulations 2013, any motion or amendment which is not seconded will lapse.

8. Only the mover of a motion has a right of reply.

9. A member may speak more than once to a motion with the consent of the Presiding Member of the Committee or the consent of the meeting.

42



10. Any member except the mover or seconder of a motion may move an amendment to a motion provided that if they have already spoken in the debate the consent of the Presiding Member of the Committee or the leave of the meeting has first been obtained.

11. Only one amendment may be moved in relation to any motion.

12. All other aspects of the meeting procedure at a Committee meeting will be determined at the discretion of the Principal Member of the Committee having regard to issues of equity and fairness and the Guiding Principles at Regulation 4 of the Local Government (Procedures at Meetings) Regulations 2013 or otherwise with the consent of the meeting.

43

Audit Committee Agenda Item 5.2 16 June 2014

Item No: 5.2 To: Audit Committee Date: 16 June 2014 Author: Martin Cooper – Chief Financial Officer General Manager and Division


Contact Subject:

8366 4202 POLICY REVIEW – TREASURY MANAGEMENT POLICY (STRATEGIC)

Attachments: Prev. Resolution:

A. Treasury Management Policy (ver. April 2011) B. Treasury Management Policy (track changes new version) C. Treasury Management Policy (new version) D. LGA Financial Sustainability Information Paper 15 Treasury

Management A0313, 7/8/13 C9377, 27/8/13 A0328, 6/11/13 C9516, 26/11/13



2. That the draft Treasury Management Policy be endorsed.

3. That the draft Treasury Management Policy be presented to Council for consideration and adoption.

Purpose

1. To provide the Audit Committee with a draft Treasury Management Policy for review and endorsement before presentation to Council for consideration and adoption.

Strategic Plan

2. The following Strategic Plan provisions are relevant:


“Delivery of good governance in Council Business”


3. The following communication / consultation was undertaken during the review of the Treasury Management Protocol:

3.1. LGA Information Paper 15 – Treasury Management Revised February 2012.

3.2. Discussion with Councillor Grant Piggott.

45


Statutory


Local Government Act, 1999

The Local Government Financial Management Regulations, 2011

Policy

5. The following Council Policies are relevant in this instance:

Risk Management; and

Proceeds from Economic Development Activity

Risk Assessment

6. Council borrowings and investments in the commercial marketplace are not without risk. The Administration manages these risks in accordance with the legislative requirements of the Local Government Act, 1999 and Council’s Treasury Management Policy.

7. The City of Burnside sets range limits for both fixed and variable rate borrowings and restricts the placement of investments to financial institutions that carry an acceptable low risk Standard and Poors credit rating.

Discussion

Background

8. The Investment Performance Review 2012/13 Report was provided to the Audit Committee at the 7 August 2013 meeting.

9. The Report contained a review of the interest rate return on investments for the financial year ending 30 June 2013 and a revised Treasury Management Protocol with the requirement not to exceed 75 per cent investment in one institution removed.

10. At the 7 August 2013 meeting, the Audit Committee resolved (A0313):


2. That the draft Treasury Management Protocol be endorsed.

3. That the Report be presented to Council for consideration at its 27 August 2013 meeting.

11. The Report was presented to the Council at the meeting of 27 August 2013. Council raised concerns over the decision to remove the requirement not the exceed 75 per cent investment in one institution and resolved (C9377):


2. That the Audit Committee review the draft Treasury Management Protocol in respect to investment of Council funds and return to Council for approval.

46


12. At the 6 November 2013 meeting, the Audit Committee considered the limitations of the Protocol; the definition of the word ‘total investments’ for use in calculating the ratio; and the risks associated with any modification to the protocol.

13. The Audit Committee took into consideration the following:

13.1. That Council would only invest in investments with a minimum Standard & Poor’s rating of ‘A-1’. This is rated in the highest category by Standard & Poor’s.

13.2. That the City of Burnside approach to not restrict investment to one institution is in line with the Local Government Association (LGA) Information Paper 15 on Treasury Management produced as part of their Financial Sustainability Program.

13.3. That the removal of the restriction would allow the Administration to enter into longer fixed term deposits and achieve greater interest returns as there would be no need to constantly reshuffle funds and potential break fixed term deposits to keep within ratios.

13.4. That the current Management Protocol be changed to a Council Policy. This will ensure that all changes to the Policy require Council approval and will be reviewed as such on a 12 monthly basis.

14. At the meeting on 6 November 2013, the Audit Committee again confirmed their decision to endorse the changes to the draft Treasury Management Protocol and resolved (A0328):


2. That the Audit Committee after considering the changes to the Draft Treasury Management Protocol with respect to investment of Council funds endorses the proposed changes.

3. That the Draft Treasury Management Protocol be changed from a Protocol to a Council Policy and be presented to the Council at the meeting 26 November 2013 for consideration.

15. The Report was presented to the Council at the meeting of 26 November 2013. Council resolved (C9516):


2. That the Treasury Management Policy be returned to the Administration for further review prior to Council approval.

16. The Administration has further reviewed the draft Treasury Management Policy with reference to the Local Government Association (LGA) Financial Sustainability Information Paper 15, Treasury Management, Revised February 2012 (Attachment D) and discussions with Councillor Grant Piggott.

17. In reviewing this Protocol, comparison has been made with a number of other metropolitan Council’s Treasury Management Policy statements to ensure consistency and appropriate coverage of all aspects of the treasury management process.

18. The current Treasury Management Protocol is shown in Attachment A with the proposed changes shown in Attachment B.

19. It is recommended that the current Management Protocol be changed to a Council Policy. This will ensure all changes will require the full Council approval for any changes and will be reviewed as on a regular basis.

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20. The draft Treasury Management Policy is shown in Attachment C. The document has been simplified and is more relevant to the needs of Council when making future treasury management decisions.

Conclusion

21. The Treasury Management Protocol has been reviewed and updated as a Policy to clearly specify how Council can consider and record its treasury management decisions.

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City of Burnside - Management Protocols & Procedures Page 1

Treasury Management Classification: Management Protocols & Procedures

Protocol Name: Treasury Management

First Issued / Approved: Audit Committee 05/04/2011 (A0195)

Last Reviewed: -

Next Review: April 2015

ECM Tracking No.: 1244151

Responsible Officer: General Manager Corporate Services

Relevant Legislation: Local Government Act 1999

Related Policies / Protocols:

Risk Management Policy Proceeds from Economic Development Activity Policy

1. Introduction This protocol provides direction to management, staff and Council in relation to the treasury management function to clearly define and communicate how Council undertakes treasury management practices. It underpins Council’s decision-making regarding the financing of its operations as documented in its annual budget and long-term financial plan and associated projected and actual cash flow receipts and outlays. Council is committed to adopting and maintaining a Lon g-term Financial Plan and operating in a f inancially sustainable and responsible manner. Prudent treasury management will assist in achieving Council’s long term strategic objectives

2. Legislative Requirements and Corporate Policy Context 2.1 The following legislative requirements will be adopted by Burnside Council for all

treasury management functions:

2.1.1 Borrowings

2.1.1.1 Local Government Act 1999 Section 44: Council to approve borrowings Section 122: Council’s Strategic Management Plans to include

assessment of debt levels Section 134: Council empowered to borrow

2.1.1.2 Regulations 5 & 5B of the Financial Management Regulations under the Act; Preparation of Cash flow Statements covering LTFP & Budgets.

2.1.2 Investments

2.1.2.1 The Local Government Act 1999 establishes Burnside Council’s abilities and responsibilities in the investment of funds. All investments are to be made in accordance with the provisions of the Local Government Act 1999, with particular attention to Sections 139 and 140.

2.1.2.2 Local Government Act 1999

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bortoluzzi

Attachment A


Section 47: Council prohibited from investing / acquiring shares in a company

Section 139: Council empowered to invest Section 140: Council required to review the performance of its

investments

3. Interpretation For the purpose of this protocol the following definitions have been outlined:

Bank or Authorised Deposit Taking Institution (ADI): Means the corporations which are authorised under the Banking Act 1959 (Cth). ADI's include banks, building societies and credit unions.

Debt: Refers to the amount of money owed by the debtor as a result of a transaction with Council.

Debtor: Refers to any party that transacts with the Council where goods are transferred or services are provided that will result in a future payment to the Council.

Deposits: The placement of cash either at call or for a fixed term that is not held in an operating account or invested in the investment pools.

Investment: The placement of centrally managed Council investment funds in assets or items with the intent of generating income, return or appreciation in value.

Loan: The temporary provision of money to another party, with the intent of recovering this principal amount at an agreed future point in time and also usually comprising an interest revenue component.

Local Government Act: Refers to the Local Government Act 1999 (SA).

4. Protocol 4.1 This Treasury Management Protocol establishes a decision framework to ensure

that financial sustainability is maintained via the following guidelines:

4.1.1 funds are available from multiple sources to provide the appropriate level of liquidity to meet ongoing operations;

4.1.2 funds are available as required to support approved outlays;

4.1.3 interest rate and other risks (e.g. liquidity and investment credit risks) are acknowledged and responsibly managed;

4.1.4 net interest costs associated with borrowing are minimised on average over the longer term;

4.1.5 net interest earned from investments is maximised over the term of the investment product;

4.1.6 investment restrictions imposed by the Local Government Act 1999 are strictly observed;

4.1.7 maximise returns on surplus funds whilst safeguarding those funds from any losses;

4.1.8 a summary statement of borrowings and investments is prepared annually for review to ensure that protocol guidelines are complied with

4.1.9 funds are invested in accordance with legislation and common law.

4.1.10 all investment decisions are to be made by exercising the care, diligence and skill that a prudent person of business would exercise in managing the affairs of other persons.

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4.2 Accountability

4.2.1 Responsibility for the treasury management function will be undertaken jointly by the General Manager Corporate Services and Chief Financial Officer. This function will include the formulation of the Treasury Management Strategy, the authorisation and review of the treasury management activities and the implementation of the agreed strategies.

4.3 Treasury Management Strategy

4.3.1 Burnside Council’s operating and capital expenditure decisions are made on the basis of:

4.3.1.1 identified community need and benefit relative to other expenditure options;

4.3.1.2 cost effectiveness of the proposed means of service delivery; and

4.3.1.3 affordability of proposals having regard to Council’s long-term financial sustainability (including consideration of the cost of capital and the impact of the proposal on Council’s Net Financial Liabilities and Interest Cover ratios).

4.3.2 The overall Treasury Management Strategy will be decided with appropriate

reference to risk and the level of risk tolerance adopted by Burnside Council. The Treasury Management Strategy will be reviewed by the General Manager Corporate Services on an annual basis to ensure that all risks are managed appropriate to Burnside Council’s strategic objectives.

4.3.3 Council manages its finances holistically in accordance with its overall financial sustainability strategies and targets. This means the Council will:

4.3.3.1 maintain the LTFP target for Council’s operating result as a surplus (in dollar terms) equivalent to between 0% and 15% of general and other rate revenue over any five year period.

4.3.3.2 maintain LGA recommended target ranges for both its Net Financial Liabilities and Interest Cover ratios;

4.3.3.2.1 Council’s Net Financial Liabilities to be no greater than total annual operating revenue and not less than zero.

4.3.3.2.2 Council’s Net Financial Liabilities Ratio is for Net Financial Liabilities divided by Total Operating Revenues less the NRM Levy to be greater than zero but less than 100%.

4.3.3.2.3 Council’s Interest Cover Ratio is for Net interest to be less than 10% of operating revenue but not below 0%.

4.3.3.3 not retain and/or quarantine money for particular future purposes unless required by legislation or agreement with other parties;

4.3.3.4 borrow funds in accordance with the requirements set out in its Long-term Financial Plan and Strategic Plan;

4.3.3.5 apply any funds that are not immediately required to meet approved expenditure (including funds that are required to be expended for specific purposes but are not required to be kept in separate bank accounts) to reduce its level of borrowings or to defer and/or reduce the level of new borrowings that would otherwise be required, unless resolved by Council to be treated as a separate cash back account.

4.3.4 Where capital expenditure requests exceed $1m, each such request must be supported by evidence of a s pecific Council resolution and an appropriate capital expenditure justification. This may include an opportunity cost evaluation, cost of capital calculation, calculations of

51


depreciation, operating and maintenance costs and impacts on Council cash flows and liquidity requirements.

4.3.5 All borrowings including leases must be reviewed and approved by the Chief Financial Officer to ensure that they comply with Council’s overall borrowing strategy.

4.4 Interest Rate Risk Exposures - Borrowings

4.4.1 Council has set range limits for both fixed and variable interest rate borrowings in order to minimise net interest costs on av erage over the longer term and a t the same time manage interest rate movement risks within acceptable limits.

4.4.2 Fixed Interest Rate Borrowings

4.4.2.1 To ensure an adequate mix of interest rate exposures, Council will restructure its portfolio of borrowings, as old borrowings mature and new ones are raised, to progressively achieve and t hereafter maintain, not less than 30% of its gross debt on average in any year in the form of fixed interest rate borrowings.

4.4.2.2 In order to spread its exposure to interest rate movements, Council will aim to have a variety of maturity dates on its fixed interest rate borrowings over the available maturity spectrum.

4.4.2.3 In circumstances where Council needs to raise new fixed interest rate borrowings it will consider using medium to long-term borrowings (3 years or more duration) that:

4.4.2.3.1 have a fixed interest rate;

4.4.2.3.2 require interest payments only; and

4.4.2.3.3 allow the full amount of principal to be repaid (or rolled over) at maturity.

4.4.2.4 Council also will ensure that, where possible, no more than 25% of

its fixed interest rate borrowings mature in any year.

4.4.3 Variable Interest Rate Borrowings

4.4.3.1 To ensure an adequate mix of interest rate exposures, Council will restructure its portfolio of borrowings, as old borrowings mature and new ones are raised, to progressively achieve and then maintain, not less than 30% of its gross debt on average in any year in the form of variable interest rate borrowings.

4.4.3.2 Council will establish, and make extensive use of, a Local Government Finance Authority Cash Advance Debenture facility that requires interest payments only and that enables any amount of principal to be r epaid or redrawn at call. The redraw facility will provide Council with flexibility and access to liquidity when needed.

4.4.4 Leases

4.4.4.1 Leases can generally be categorised as either finance or operating in nature. In accordance with Australian Accounting Standards, where all risk and benefits associated with ownership rest with the lessee then a finance lease is present. A lease of this nature is in essence a bo rrowing transaction and should be c onsidered holistically in accordance with Council’s overall borrowing strategy. An evaluation of Lease versus Debt will be performed to determine the best return to Council.

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4.4.4.2 Disclosure of leasing costs is to be provided in the annual financial statements in accordance with Australian Accounting Standards.

4.5 Investments

4.5.1 Council funds that are not immediately required for operational needs and cannot be applied to either reduce existing borrowings or avoid the raising of new borrowings will be invested. The balance of funds held in any operating bank account that does not provide investment returns at least consistent with ‘at call’ market rates shall be k ept at a l evel that is no greater than is required to meet immediate working capital requirements.

4.5.2 Council funds available for investment will be lodged ‘at call’ or, having regard to differences in interest rates for fixed term investments of varying maturity dates, may be invested for a fixed term. In the case of fixed term investments the term should not exceed a poi nt in time where the funds otherwise could be applied to cost-effectively either defer the need to raise a new borrowing or reduce the level of Council’s variable interest rate borrowing facility. When investing funds, Council will select the investment type which delivers the best value, having regard to investment returns, transaction costs and other relevant and objectively quantifiable factors.

4.5.3 Council administration may from time to time invest surplus funds in:

- deposits with the Local Government Finance Authority; and/or - bank interest bearing deposits.

4.5.4 Any other investment type or product should not be actively promoted but would nevertheless require the specific approval of Council. Where Council authorises any investments of a type or product outside of those specified above, the amount so invested will be cumulatively limited to no more than 20% of the average level of funds expected to be available for investment by Council each financial year.

4.5.5 Approved Investment Types

4.5.5.1 Approved investments may include:

Category A Investments 4.5.5.1.1 Deposits with the Local Government Finance

Authority 4.5.5.1.2 Bank accepted / endorsed bank bills 4.5.5.1.3 Bank negotiable Certificate of Deposits 4.5.5.1.4 Bank interest bearing deposits 4.5.5.1.5 State / Commonwealth Government Bonds

Category B Investments 4.5.5.2.1 Managed funds - Cash or Cash-Plus Funds 4.5.5.2.2 Floating Rate Note Securities

Category C Investments 4.5.5.3.1 Managed funds - Capital Stable Funds (Equities,

Property & Cash) 4.5.5.3.2 Managed funds - Balanced Funds (Equities, Property

& Cash) 4.5.5.3.3 Real Estate

4.5.6 Investment Term

4.5.6.1 Short Term Investments Only Category A & B Investments may be considered for a term to maturity of 12 months or less.

4.5.6.2 Long Term Investments

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Category A, B and C investments may be considered for investments of more than 12 months. Professional advice from an investment advisor licensed by the Australian Securities and Investment Commission will be sought for all investments of more than 12 months.

4.5.7 Investment Quality 4.5.7.1 To ensure that the price, credit, liquidity and cash flow risks

associated with investing activities are managed, only investments that meet the following criteria may be made:

4.5.8 Risk Exposure Limits – Short Term Investments

4.5.8.1 With the exception of investments with the Local Government Finance Authority, the following risk exposure limits will apply:

4.5.8.1.1 Total investments in any one product or institution will not exceed 75% of the value of short-term investments, when the value of Council’s short-term investments exceeds $1,000,000.

4.5.8.2 Investments will have the following minimum Standard & Poor’s rating:

4.5.8.2.1 Category A investments: A-1 4.5.8.2.2 Category B investments: AAm

A-1: A short-term obligation/obligor rated 'A -1' is rated in the highest category by Standard & Poor's. The obligor's capacity to meet its financial commitment on the obligation is strong. Within this category, certain obligations are designated with a plus sign '+'. This indicates that the obligor's capacity to meet its financial commitment on these obligations is extremely strong.

AAm: The fund exhibits a very strong capacity to meet its obligations to redeem investors' unit holdings at par or face value.

Type Min. S&P Rating – Cat. A

Min. S&P Rating – Cat. B

Max. Holding

(% of total short-term)

LGFA deposits

N/A N/A 100 %

Other products and institutions

A-1 AAm 75 %

4.5.9 Risk Exposure Limits – Long Term Investments

4.5.9.1 With the exception of investments with the Local Government Finance Authority, the following exposure limits will apply:

4.5.9.1.1 Total investments in any one product or institution will not exceed 75% of the value of long-term investments, when the value of Council’s long-term investments exceeds $1,000,000.

54


4.5.9.2 Investments will have the following minimum Standard & Poor’s rating: 4.5.9.2.1 Category ‘A’ investments: A-1 4.5.9.2.2 Category ‘B’ investments: AAm 4.5.9.2.3 Category ‘C’ investments: AA-

A-1: An obligation/obligor rated 'A -1' is rated in the highest category by Standard & Poor's. The obligor's capacity to meet its financial commitment on the obligation is strong. Within this category, certain obligations are designated with a plus sign '+'. This indicates that the obligor's capacity to meet its financial commitment on these obligations is extremely strong.


AA: An obligation/obligor rated 'AA' differs from the highest rated obligations only in small degree. The obligor's capacity to meet its financial commitment on the obligations is very strong.

Plus (+) or minus (-): The ratings from 'AA' to 'CCC' may be modified by the addition of a plus or minus sign to show relative standing within the major rating categories.



Min. S&P Rating – Cat. C

Max. Holding

(% of total long-term)

LGFA deposits

N/A N/A N/A 100 %

Other products

and institutions

A-1 AAm AA- 75 %

Calculation of Maximum Holding

The Maximum Holding is the amount of the investment, plus any other investments of the same type, at the time of making the investment, as a percentage of the current total of council investments.

Change in Credit Rating

If the S&P rating of any Council investments are downgraded, such that they no longer fall within these investment protocol guidelines, arrangements will be made to withdraw the deposit as soon as practicable.

Approved Investment Advisor

For all investments of more than 12 months, the professional advice of an investment advisor will be sought. Council’s investment advisor must be licensed by the Australian Securities and Investment Commission.

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Money to be invested

The bank account balance of Council is to be kept at a level no greater than is required to meet Council’s immediate working capital requirements. Any surplus funds will be applied to reducing debt or invested to maximise earnings.

Quotations on Investments

For Category A & B investments, no less than three quotations are to be obtained from authorised institutions whenever an investment is proposed. After taking into account all relevant factors, including the exposure limits set above, the quote which delivers best value to Council shall be successful. All things being equal (after taking into consideration the estimated annual bonus the LGFA distribute), Council will give preference to the LGFA due to indirect benefits it provides to the industry. Category C investments shall only be made after considering the recommendation of an approved investment advisor.

Benchmarks

The annual performance of the Investment Portfolio shall be compared to the official Reserve Bank of Australia cash rate.

4.5.10 Valuation and Measurement

4.5.10.1 Accounting Standards

The City of Burnside shall comply with the Australian Accounting Standards.

4.5.10.2 Investment Return

Investment returns are calculated as gross returns, including interest earned, premiums and discounts.

4.5.10.3 Investment Valuations

Investments will be carried at market valuations. Investments should not be sold for less than their market value without written approval from the Chief Executive Officer.

4.6 Reporting 4.6.1 Variations to Protocol

All variations to this protocol are to be reported to Council within 30 days.

4.6.2 Annual Review and Reporting

An annual review of the treasury management performance will be undertaken in accordance with section 140 of Local Government Act 1999. Each year a report will be prepared by the Finance and Administration Department which summarises the performance of each investment and the performance of the investment portfolio as a whole relative to this protocol document. Borrowings will also be reviewed.

4.6.3 The report will include:

4.6.3.1 for each Council investment – the name of the financial institution, the quantum of funds invested, the interest rate, the maturity date and the interest earned or paid;

4.6.3.2 comparison of the Investment Portfolio with exposure limits and comparison of annual performance with budget and performance benchmark;

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4.6.3.3 the proportion of fixed interest rate and variable interest rate borrowings at the end date of the reporting period along with key reasons for significant variances compared with the targets specified in this protocol;

4.6.3.4 Compliance with relevant financial ratio indicators (including Net Financial Liabilities, Net Financial Liabilities Ratio and Interest Cover Ratio) as documented in Council’s approved Long Term Financial Plan.

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City of Burnside - Management ProtocolsPolicies & Procedures Page 1

Treasury Management Classification: Management Protocols & ProceduresCouncil Policy

ProtocolPolicy Name: Draft Treasury Management


Last Reviewed: -August 2013




Relevant Legislation: Local Government Act 1999 Local Government Financial Management Regulations 2011

Related Policies / ProtocolsPolicy:

Risk Management Policy Proceeds from Economic Development Activity Policy

1. 1. Introduction This protocolpolicy provides clear direction to management, staff and Council in relation to the treasury management function to clearly define and communicate how Council undertakes treasury management practices. It underpins Council’s decision-making regarding the financing of its operations as documented in its annual budgetAnnual Budget and long-term financial planLong-Term Financial Plan (LTFP) and associated projected and actual cash flow receipts and outlays. It outlines how required borrowings will be raised and how cash and investments will be managed to fund Council is committed to adopting and maintaining a Long-term Financial Plan and operating in a financially sustainable and responsible manner. Prudent treasury management will assist in achieving Council’s long term strategic objectivesoperations.

2. 2. Strategic Plan Desired Outcomes

2.1 A financially sound Council that is accountable, responsible and sustainable.

2.2 Delivery of good governance in Council business.

3. Our Approach

3.1 Ensure the long-term financial sustainability of Council operations by monitoring and comparing to peak body indicators.

3.2 Provide sufficient resources to meet current and future needs of the community.

3.3 Regularly review, update and adopt leading governance, risk management and administrative practices.

4. Legislative Requirements and Corporate Policy Context 2.1 The following legislative requirements will be adopted by Burnside Council for all

treasury management functions:

2.1.1 Borrowings

Formatted: Font: Not Italic


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58

bortoluzzi

Attachment B


2.1.1.14.1 The Local Government Act 1999: Section 44: Council to approve borrowings Delegations. Section 48: Prudential requirements for certain activities. Section 122: Council’s Strategic Management Plans to include assessment of

debt levels. Section 134: Council empowered to borrowBorrowing and related financial

arrangements. 2.1.1.2 Regulations 5 & 5B of theSection 135: Ability of a Council to give

security.

4.2 The Local Government Financial Management Regulations under the Act; Preparation of Cash flow Statements covering LTFP &2011 Regulation 5 – Long Term Financial Plans Regulation 7 - Budgets.

2.1.2 Investments

2.1.2.1 The Local Government Act 1999 establishes Burnside Council’s abilities and responsibilities in the investment of funds. All investments are to be made in accordance with the provisions of the Local Government Act 1999, with particular attention to Sections 139 and 140.

2.1.2.2 Local Government Act 1999 The Local Government Act 1999: Section 47: Council prohibited from investing / acquiring shares in a

companyInterests in companies Section 139: Council empowered to investInvestment powers Section 140: Council required to review the performance of itsReview of

investments

5. 3. Interpretation For the purpose of this protocol the following definitions have been outlinedpolicy:

Bank or Authorised Deposit Taking Institution (ADI): Means the‘Bank’ refers to corporations which are authorised under the Banking Act 1959 (Cth). ADI's include) including banks, building societies and credit unions.

Debt: Refers‘Borrowing’ is where cash is received from another party in exchange for future payment of the principal, which normally includes interest and other finance charges.

‘Debt’ refers to the amount of money owed by the debtor as a result of a transaction with Council.

Debtor: Refers to any party that transacts with the Council where goods are transferred or services are provided that will result in a future payment to the Council.

Deposits: The‘Deposits’ refers to the placement of cash either at call or for a fixed term that is not held in an operating account or invested in the investment pools.

Investment: The“Finance Lease” means a lease taken out for use of an asset where all risk and benefits associated with ownership rest with the lessee.

‘Financial Sustainability’ is achieved where planned long-term service and infrastructure levels and standards are met without unplanned increases in rates or disruptive cuts to services.

‘Fixed Interest’ is where the interest rate for a loan is unchanged over the term of the loan.

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59


‘Interest Cover Ratio’ indicates the extent to which a Council’s operating revenues (excluding the Natural Resource Management Levy) are committed to net interest expenses.

‘Investment’ refers to the placement of centrally managed Council investment funds in assets or items with the intent of generating income, return or appreciation in value.

Loan: The temporary provision of money to another party, with the intent of recovering this principal amount at an agreed future point in time and also usually comprising an interest revenue component.

Local Government Act: Refers to the Local Government Act 1999 (SA).

4. Protocol 4.1 ‘Net Financial Liabilities’ equals total liabilities less financial assets, where financial assets for this purpose include cash, investments, receivables and prepayments, but excludes equity held in a Council subsidiary, inventories and assets held for sale.

‘Net Financial Liabilities Ratio’ indicates the extent to which net financial liabilities of a Council could be met by its operating revenue (excluding the Natural Resource Management Levy)‘Variable Interest’ is where the interest rate for a loan fluctuates over the life of the loan.

6. Policy Objectives 6.1 This Treasury Management ProtocolPolicy establishes a decision framework to

ensure that financial sustainability is maintained via the following guidelines:

4.1.14.1 funds are available from multiple sources to provide the appropriate level of liquidity to meet ongoing operations;funds are available as required to support

approved outlays;

4.1.36.1.2 interest rate and other risks (e.g. liquidity and investment credit risks) are acknowledged and responsibly managed;

6.1.3 4.1.4 net interest costs associated with borrowing are minimised on average over the longer term;

4.1.56.1.4 net interest earned from investments is maximised over the term of the investment product;

4.1.6 investment restrictions imposed by the Local Government Act 1999 are strictly observed;

4.1.76.1.5 maximise returns on surplus funds whilst safeguarding those funds from any losses;

4.1.8 a summary statement of borrowings and investments is prepared annually for review to ensure that protocol guidelines are complied with

4.1.9 funds are invested in accordance with legislation and common law.

4.1.10 all investment decisions are to be made by exercising the care, diligence and skill that a prudent person of business would exercise in managing the affairs of other persons.

5 4.2 Accountability

4.2.1 Responsibility for the treasury management function will be undertaken jointly by the General Manager Corporate Services and Chief Financial Officer. This function will include the formulation of the Treasury Management Strategy,


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60


the authorisation and review of the treasury management activities and the implementation of the agreed strategies.

6.3 4.3 Treasury Management Strategy

4.3.1 Burnside Council’s operating and capital expenditure decisions are made on the basis of:

4.3.1.1 identified community need and benefit relative to other expenditure options;

4.3.1.2 cost effectiveness of the proposed means of service delivery; and

4.3.1.3 affordability of proposals having regard to Council’s long-term financial sustainability (including consideration of the cost of capital and the impact of the proposal on Council’s Net Financial Liabilities and Interest Cover ratios).

4.3.2 The overall Treasury Management Strategy will be decided with appropriate

reference to risk and the level of risk tolerance adopted by Burnside Council. The Treasury Management Strategy will be reviewed by the General Manager Corporate Services on an annual basis to ensure that all risks are managed appropriate to Burnside Council’s strategic objectives.

6.3.1 4.3.3 Council manages its finances holistically in accordance with its overall financial sustainability strategies and targets. This means the Council will:

4.3.3.1 maintain the LTFP target for Council’s operating result as a surplus (in dollar terms) equivalent to between 0% and 15% of general and other rate revenue over any five year period.

maintain LGA 4.3.3.26.3.1.1 maintain Local Government Association (LGA)

recommended target ranges for both its Net Financial Liabilities and Interest Cover ratios;

4.3.3.2.16.3.1.1.1 Council’s Net Financial Liabilities to be no greater than total annual operating revenue and not less than zero.

4.3.3.2.26.3.1.1.2 Council’s Net Financial Liabilities Ratio is for Net Financial Liabilities divided by Total Operating Revenues less the NRM Levy to be greater than zero but less than 100%.

4.3.3.2.36.3.1.1.3 Council’s Interest Cover Ratio is for Net interest to be less than 10% of operating revenue but not below 0%.

4.3.3.36.3.1.2 not retain and/or quarantine money for particular future purposes unless required by legislation or agreement with other parties;

4.3.3.46.3.1.3 borrow funds in accordance with the requirements set out in its Long-term FinancialAnnual Business Plan and Strategic PlanBudget and LTFP;

4.3.3.56.3.1.4 apply any funds that are not immediately required to meet approved expenditure (including funds that are required to be expended for specific purposes but are not required to be kept in separate bank accounts) to reduce its level of borrowings or to defer and/or reduce the level of new borrowings that would otherwise be required, unless resolved by Council to be treated as a separate cash back account.


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4.3.4 Where capital expenditure requests exceed $1m, each such request must be supported by evidence of a s pecific Council resolution and an appropriate capital expenditure justification. This may include an opportunity cost evaluation, cost of capital calculation, calculations of depreciation, operating and maintenance costs and impacts on Council cash flows and liquidity requirements.

4.3.5 All borrowings including leases must be reviewed and approved by the Chief Financial Officer to ensure that they comply with Council’s overall borrowing strategy.

6.4 4.4 Interest Rate Risk Exposures - Borrowings

6.4.1 4.4.1 Council has set range limits for both fixed and variable interest rate borrowings in order to minimise net interest costs on average over the longer term and at the same time manage interest rate movement risks within acceptable limits.

4.4.2 Fixed Interest Rate Borrowings

6.4.2 4.4.2.1 To ensure an adequate mix of interest rate exposures, Council will restructurestructure its portfolio of borrowings, as old borrowings mature and new ones are raised, to progressively:

6.4.2.1 Progressively achieve and thereafter maintain, not less than 30% of its gross debt on average in any year in the form of fixed interest rate borrowings.

4.4.2.2 In order to spread its exposure to interest rate movements, Council will aim to have a variety of maturity dates on its fixed interest rate borrowings over the available maturity spectrum.

4.4.2.3 In circumstances where Council needs to raise new fixed interest rate borrowings it will consider using medium to long-term borrowings (3 years or more duration) that:

4.4.2.3.1 have a fixed interest rate;

4.4.2.3.2 require interest payments only; and

4.4.2.3.3 allow the full amount of principal to be repaid (or rolled over) at maturity.

6.4.2.2 4.4.2.4 Council also will ensure that, where possible, Progressively achieve and thereafter maintain no more than 25% of its fixed interest rate borrowings mature in any year.

4.4.3 Variable Interest Rate Borrowings

6.4.2.3 4.4.3.1 To ensure an adequate mix of interest rate exposures, Council will restructure its portfolio of borrowings, as old borrowings mature and new ones are raised, to progressively achieve and then maintain, Progressively achieve and thereafter maintain not less than 30% of its gross debt on average in any year in the form of variable interest rate borrowings.

6.4.3 4.4.3.2 Council will establish, and make extensive use of, a Local Government Finance Authority (LGFA) Cash Advance Debenture facility that requires interest payments only and that enables any amount of principal to be repaid or redrawn at call. The redraw facility will provide Council with flexibility and access to liquidity when needed.

6.4.4 4.4.4 Leases


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6.4.4.1 4.4.4.1 Leases can generally be categorised as either finance or operating in nature. In accordance with Australian Accounting Standards, where all risk and benefits associated with ownership rest with the lessee then a finance lease is present. A lease of this nature Where Council enters into a Finance Lease this is in essence a borrowing transaction and should be considered holistically in accordance with Council’s overall borrowing strategy. An evaluation of Lease versus Debt will be performed to determine the best return to Council.

6.4.4.2 4.4.4.2 Disclosure of leasing costs is to be provided in the annual financial statements in accordance with Australian Accounting Standards.

6.5 4.5 Investments

6.5.1 4.5.1 Council funds that are not immediately required for operational needs and cannot be applied to either reduce existing borrowings or avoid the raising of new borrowings will be invested. The balance of funds held in any operating bank account that does not provide investment returns at least consistent with ‘at call’ market rates shall be kept at a level that is no greater than is required to meet immediate working capital requirements.

6.5.2 4.5.2 Council funds available for investment will be lodged ‘at call’ or, having regard to differences in interest rates for fixed term investments of varying maturity dates, may be invested for a fixed term. In the case of fixed term investments the term should not exceed a point in time where the funds otherwise could be applied to cost-effectively either defer the need to raise a new borrowing or reduce the level of Council’s variable interest rate borrowing facility.

6.5.3 When investing funds, Council will select the investment type which delivers the best value, having regard to investment returns, transaction costs and, other relevant and objectively quantifiable factors and the requirements of this Policy.

6.5.4 4.5.3 Council administration may from time to time invest surplus funds in either:

- - deposits with the Local Government Finance Authority; and/ or - - bankBank interest bearing deposits.

4.5.4 Any other investment type or product should not be actively promoted but would nevertheless require the specific approval of Council. Where Council authorises any investments of a type or product outside of those specified above, the amount so invested will be cumulatively limited to no more than 20% of the average level of funds expected to be available for investment by Council each financial year.

4.5.5 Approved Investment Types

6.5.5 4.5.5.1 Approved investments may include: Category A Investments

6 4.5.5.1.1 Deposits with the Local Government Finance AuthorityLGFA 4.5.5.1.2- Bank accepted / endorsed bank bills - 4.5.5.1.3 Bank negotiable Certificate of Deposits - 4.5.5.1.4 Bank interest bearing deposits - 4.5.5.1.5 State / Commonwealth Government Bonds

Category B Investments 4.5.5.2.1 Managed funds - Cash or Cash-Plus Funds 4.5.5.2.2 Floating Rate Note Securities

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Category C Investments 4.5.5.3.1 Managed funds - Capital Stable Funds (Equities,

Property & Cash) 4.5.5.3.2 Managed funds - Balanced Funds (Equities, Property

& Cash) 4.5.5.3.3 Real Estate

4.5.6 Investment Term

4.5.6.1 Short Term Investments Only Category A & B Investments may be considered for a term to maturity of 12 months or less.

4.5.6.2 Long Term Investments

Category A, B and C investments may be considered for investments of more than 12 months. Professional advice from an investment advisor licensed by the Australian Securities and Investment Commission will be sought for all investments of more than 12 months.

4 4.5.7 Investment Quality

4.5.7.1 To ensure that the price, credit, liquidity and cash flow risks associated with investing activities are managed, only investments that meet the following criteria may be made:

4.5.8 Risk Exposure Limits – Short Term Investments

4.5.8.1 With the exception of investments with the Local Government Finance Authority,LGFA, at the following risk exposure limits will apply:

6.5.6.1 4.5.8.1.1 Totaltime of making the investment, total investments in any one product or institutionbank will not exceed 75% of the value of short-term investments, when the value of Council’s short-term investments exceeds $1,000,000.

4.5.8.2 Investments will have the following minimum Standard & Poor’s rating:

6.5.6.2 4.5.8.2.1 Category of A investments: A-1.

4.5.8.2.2 Category B investments: AAm

A-1: A short-term obligation/obligor rated 'A -1' is rated in the highest category by Standard & Poor's. The obligor's capacity to meet its financial commitment on the obligation is strong. Within this category, certain obligations are designated with a plus sign '+'. This indicates that the obligor's capacity to meet its financial commitment on these obligations is extremely strong.




Max. Holding

(% of total short-term)

LGFA N/A N/A 100 %

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deposits Other

products and institutions

A-1 AAm 75 %

4.5.9 Risk Exposure Limits – Long Term Investments

4.5.9.1 With the exception of investments with the Local Government Finance Authority, the following exposure limits will apply:

4.5.9.1.1 Total investments in any one product or institution will not exceed 75% of the value of long-term investments, when the value of Council’s long-term investments exceeds $1,000,000.

4.5.9.2 Investments will have the following minimum If the Standard & Poor’s rating: 4.5.9.2.1 Category ‘A’ investments: A-1 4.5.9.2.2 Category ‘B’ investments: AAm 4.5.9.2.3 Category ‘C’ investments: AA-

A-1: An obligation/obligor rated 'A -1' is rated in the highest category by Standard & Poor's. The obligor's capacity to meet its financial commitment on the obligation is strong. Within this category, certain obligations are designated with a plus sign '+'. This indicates that the obligor's capacity to meet its financial commitment on these obligations is extremely strong.


AA: An obligation/obligor rated 'AA' differs from the highest rated obligations only in small degree. The obligor's capacity to meet its financial commitment on the obligations is very strong.

Plus (+) or minus (-): The ratings from 'AA' to 'CCC' may be modified by the addition of a plus or minus sign to show relative standing within the major rating categories.



Min. S&P Rating – Cat. C

Max. Holding

(% of total long-term)

LGFA deposits

N/A N/A N/A 100 %

Other products

and institutions

A-1 AAm AA- 75 %

Calculation of Maximum Holding

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The Maximum Holding is the amount of the investment, plus any other investments of the same type, at the time of making the investment, as a percentage of the current total of council investments.

Change in Credit Rating

6.5.6.3 If the S&P rating of any Council investments are downgraded, such that they no longer fall within these investment protocolpolicy guidelines, arrangements will be made to withdraw the deposit as soon as practicable.

Approved Investment Advisor

For all investments of more than 12 months, the professional advice of an investment advisor will be sought. Council’s investment advisor must be licensed by the Australian Securities and Investment Commission.

Money to be invested

The bank account balance of Council is to be kept at a level no greater than is required to meet Council’s immediate working capital requirements. Any surplus funds will be applied to reducing debt or invested to maximise earnings.

Quotations on Investments

6.5.6.4 For Category A & B For bank investments, no less than three quotations are to be obtained from authorised institutions whenever an investment is proposed. After taking into account all relevant factors, including the exposure limits set above, the quote which delivers best value to Council shall be successful. All things being equal (after taking into consideration the estimated annual bonus the LGFA distribute), Council will give preference to the LGFA due to indirect benefits it provides to the industry. Category C investments shall only be made after considering the recommendation of an approved investment advisor.

Benchmarks

6.5.6.5 The annual performance of the Investment Portfolio shall be compared to the official Reserve Bank of Australia cash rate.

6.5.7 4.5.10 Valuation and Measurement

4.5.10.1 Accounting Standards

6.5.7.1 The City of Burnside shall comply with the Australian Accounting Standards.

4.5.10.2 Investment Return

6.5.7.2 Investment returns are calculated as gross returns, including interest earned, premiums and discounts.

4.5.10.3 Investment Valuations

6.5.7.3 Investments will be carried at market valuations. Investments should not be sold for less than their market value without written approval from the Chief Executive Officer.

4.6 Reporting 4.6.1 Variations to Protocol

All variations to this protocol are to be reported to Council within 30 days.

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Formatted: Indent: Left: 3.25 cm,Hanging: 1.75 cm, Space After: 0 pt,Outline numbered + Level: 4 +Numbering Style: 1, 2, 3, … + Start at:1 + Alignment: Left + Aligned at: 3.25cm + Tab after: 4.52 cm + Indent at: 4.52 cm

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4.6.2


An annual review of the treasury management performance will be undertaken in accordance with section 140 of Local Government Act 1999. Each year a report will be prepared by the Finance and Administration Department which summarises the performance of each investment and the performance of the investment portfolio as a whole relative to this protocolpolicy document. Borrowings will also be reviewed.

4.6.3 The report will include:

6.5.8.1 4.6.3.1 for each Council investment – the name of the financial institution, the quantum of funds invested, the interest rate, the maturity date and the interest earned or paid;

4.6.3.2 comparison of the Investment Portfolio with exposure limits and comparison of annual performance with budget and performance benchmark;

4.6.3.36.5.8.2 the proportion of fixed interest rate and variable interest rate borrowings at the end date of the reporting period along with key reasons for significant variances compared with the targets specified in this protocolpolicy;

4.6.3.4 Compliance with relevant financial ratio indicators (including Net Financial Liabilities, Net Financial Liabilities Ratio and Interest Cover Ratio) as documented in Council’s approved Long Term Financial Plan.

6.5.8.3 full details and explanation of any instances of deviation from

this policy during the year.

7. Availability The Policy is available to be downloaded, free of charge, from Council’s internet site www.burnside.sa.gov.au

The Policy will be available for inspection without charge at the Civic Centre during ordinary business hours and a copy may be purchased at a fee as set annually by Council.

City of Burnside Civic Centre 401 Greenhill Road, Tusmore SA 5065 Telephone; 8366 4200 Fax; 8366 4299 Email: [email protected]

Office hours: Monday to Friday, 8.30am to 5.00pm (except public holidays)

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Formatted: Indent: Left: 3.25 cm



Formatted: Indent: Left: 3.25 cm,Hanging: 1.75 cm, Outline numbered+ Level: 4 + Numbering Style: 1, 2, 3,… + Start at: 1 + Alignment: Left +Aligned at: 3.25 cm + Tab after: 4.52cm + Indent at: 4.52 cm, Tab stops:Not at 4.52 cm

Formatted: Indent: Left: 3.25 cm,Hanging: 1.75 cm, Outline numbered+ Level: 4 + Numbering Style: 1, 2, 3,… + Start at: 1 + Alignment: Left +Aligned at: 3.25 cm + Tab after: 4.52cm + Indent at: 4.52 cm, Tab stops:Not at 4.52 cm + 4.95 cm

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http://www.burnside.sa.gov.au/

City of Burnside - Management Policies & Procedures Page 1

Treasury Management Classification: Council Policy

Policy Name: Draft Treasury Management


Last Reviewed: August 2013




Relevant Legislation: Local Government Act 1999 Local Government Financial Management Regulations 2011

Related Policies / Policy: Risk Management Policy Proceeds from Economic Development Activity Policy

1. Introduction This policy provides clear direction to management, staff and Council in relation to the treasury function. It underpins Council’s decision-making regarding the financing of its operations as documented in its Annual Budget and Long-Term Financial Plan (LTFP) and associated projected and actual cash flow receipts and outlays. It outlines how required borrowings will be raised and how cash and investments will be managed to fund Council operations.

2. Strategic Plan Desired Outcomes



3. Our Approach

3.1 Ensure the long-term financial sustainability of Council operations by monitoring and comparing to peak body indicators.


3.3 Regularly review, update and adopt leading governance, risk management and administrative practices.

4. Legislative Requirements and Corporate Policy Context Borrowings 4.1 The Local Government Act 1999:

Section 44: Delegations. Section 48: Prudential requirements for certain activities. Section 122: Strategic Management Plans. Section 134: Borrowing and related financial arrangements. Section 135: Ability of a Council to give security.

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Attachment C


4.2 The Local Government Financial Management Regulations 2011 Regulation 5 – Long Term Financial Plans Regulation 7 - Budgets

Investments 4.3 The Local Government Act 1999:

Section 47: Interests in companies Section 139: Investment powers Section 140: Review of investments

5. Interpretation 5.1 For the purpose of this policy:

‘Bank’ refers to corporations which are authorised under the Banking Act 1959 (Cth) including banks, building societies and credit unions.

‘Borrowing’ is where cash is received from another party in exchange for future payment of the principal, which normally includes interest and other finance charges.

‘Debt’ refers to the amount of money owed by the debtor as a result of a transaction with Council.

‘Deposits’ refers to the placement of cash either at call or for a fixed term that is not held in an operating account or invested in the investment pools.

“Finance Lease” means a lease taken out for use of an asset where all risk and benefits associated with ownership rest with the lessee.

‘Financial Sustainability’ is achieved where planned long-term service and infrastructure levels and standards are met without unplanned increases in rates or disruptive cuts to services.

‘Fixed Interest’ is where the interest rate for a loan is unchanged over the term of the loan.

‘Interest Cover Ratio’ indicates the extent to which a Council’s operating revenues (excluding the Natural Resource Management Levy) are committed to net interest expenses.

‘Investment’ refers to the placement of centrally managed Council investment funds in assets or items with the intent of generating income, return or appreciation in value.

‘Net Financial Liabilities’ equals total liabilities less financial assets, where financial assets for this purpose include cash, investments, receivables and prepayments, but excludes equity held in a Council subsidiary, inventories and assets held for sale.

‘Net Financial Liabilities Ratio’ indicates the extent to which net financial liabilities of a Council could be met by its operating revenue (excluding the Natural Resource Management Levy)‘Variable Interest’ is where the interest rate for a loan fluctuates over the life of the loan.

6. Policy Objectives 6.1 This Treasury Management Policy establishes a decision framework to ensure

that:funds are available as required to support approved outlays;

6.1.2 interest rate and other risks (e.g. liquidity and investment credit risks) are acknowledged and responsibly managed;

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6.1.3 net interest costs associated with borrowing are minimised on average over the longer term;

6.1.4 net interest earned from investments is maximised over the term of the investment product;

6.1.5 maximise returns on surplus funds whilst safeguarding those funds from any losses;

6.2 Accountability

6.2.1 Responsibility for the treasury management function will be undertaken jointly by the General Manager Corporate Services and Chief Financial Officer.

6.3 Treasury Management Strategy

6.3.1 Council manages its finances holistically in accordance with its overall financial sustainability strategies and targets. This means the Council will: 6.3.1.1 maintain Local Government Association (LGA) recommended

target ranges for both its Net Financial Liabilities and Interest Cover ratios;

6.3.1.1.1 Council’s Net Financial Liabilities to be no greater than total annual operating revenue and not less than zero.

6.3.1.1.2 Council’s Net Financial Liabilities Ratio is for Net Financial Liabilities divided by Total Operating Revenues less the NRM Levy to be greater than zero but less than 100%.

6.3.1.1.3 Council’s Interest Cover Ratio is for Net interest to be less than 10% of operating revenue but not below 0%.

6.3.1.2 not retain and/or quarantine money for particular future purposes unless required by legislation or agreement with other parties;

6.3.1.3 borrow funds in accordance with the requirements set out in its Annual Business Plan and Budget and LTFP;

6.3.1.4 apply any funds that are not immediately required to meet approved expenditure (including funds that are required to be expended for specific purposes but are not required to be kept in separate bank accounts) to reduce its level of borrowings or to defer and/or reduce the level of new borrowings that would otherwise be required.

6.4 Borrowings

6.4.1 Council has set range limits for both fixed and variable interest rate borrowings in order to minimise net interest costs on average over the longer term and manage interest rate movement risks within acceptable limits.

6.4.2 To ensure an adequate mix of interest rate exposures, Council will structure its portfolio of borrowings, to:

6.4.2.1 Progressively achieve and thereafter maintain not less than 30% of its gross debt on average in any year in the form of fixed interest rate borrowings.

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6.4.2.2 Progressively achieve and thereafter maintain no more than 25% of its fixed interest rate borrowings mature in any year.

6.4.2.3 Progressively achieve and thereafter maintain not less than 30% of its gross debt on average in any year in the form of variable interest rate borrowings.

6.4.3 Council will establish, and make extensive use of, a Local Government Finance Authority (LGFA) Cash Advance Debenture facility that requires interest payments only and that enables any amount of principal to be repaid or redrawn at call. The redraw facility will provide Council with flexibility and access to liquidity when needed.

6.4.4 Leases

6.4.4.1 Where Council enters into a Finance Lease this is in essence a borrowing transaction and should be considered holistically in accordance with Council’s overall borrowing strategy. An evaluation of Lease versus Debt will be performed to determine the best return to Council.

6.4.4.2 Disclosure of leasing costs is to be provided in the annual financial statements in accordance with Australian Accounting Standards.

6.5 Investments

6.5.1 Council funds that are not immediately required for operational needs and cannot be applied to either reduce existing borrowings or avoid the raising of new borrowings will be invested. The balance of funds held in any operating bank account that does not provide investment returns at least consistent with ‘at call’ market rates shall be kept at a level that is no greater than is required to meet immediate working capital requirements.

6.5.2 Council funds available for investment will be lodged ‘at call’ or, having regard to differences in interest rates for fixed term investments of varying maturity dates, may be invested for a fixed term. In the case of fixed term investments the term should not exceed a point in time where the funds otherwise could be applied to cost-effectively either defer the need to raise a new borrowing or reduce the level of Council’s variable interest rate borrowing facility.

6.5.3 When investing funds, Council will select the investment type which delivers the best value, having regard to investment returns, transaction costs, other relevant and objectively quantifiable factors and the requirements of this Policy.

6.5.4 Council administration may from time to time invest surplus funds in either:

- Local Government Finance Authority or - Bank interest bearing deposits

6.5.5 Approved Investment Types may include: - Deposits with the LGFA - Bank accepted / endorsed bank bills - Bank negotiable Certificate of Deposits - Bank interest bearing deposits - State / Commonwealth Government Bonds

6.5.6 Investment Quality

To ensure that the price, credit, liquidity and cash flow risks associated with investing activities are managed, only investments that meet the following criteria may be made:

71


6.5.6.1 With the exception of investments with the LGFA, at the time of making the investment, total investments in any one bank will not exceed 75% of the value of short-term investments, when the value of Council’s short-term investments exceeds $1,000,000.

6.5.6.2 Investments will have the minimum Standard & Poor’s rating of A-1.

6.5.6.3 If the Standard & Poor’srating of any Council investments are downgraded, such that they no longer fall within these investment policy guidelines, arrangements will be made to withdraw the deposit as soon as practicable.

6.5.6.4 For bank investments, no less than three quotations are to be obtained from authorised institutions whenever an investment is proposed.

6.5.6.5 The annual performance of the Investment Portfolio shall be compared to the official Reserve Bank of Australia cash rate.

6.5.7 Valuation and Measurement

6.5.7.1 The City of Burnside shall comply with the Australian Accounting Standards.

6.5.7.2 Investment returns are calculated as gross returns, including interest earned, premiums and discounts.

6.5.7.3 Investments will be carried at market valuations.


An annual review of the treasury management performance will be undertaken in accordance with section 140 of Local Government Act 1999. Each year a report will be prepared by the Finance Department which summarises the performance of each investment and the performance of the investment portfolio as a whole relative to this policy document. Borrowings will also be reviewed.

The report will include:

6.5.8.1 for each Council investment – the name of the financial institution, the quantum of funds invested, the interest rate, the maturity date and the interest earned or paid;

6.5.8.2 the proportion of fixed interest rate and variable interest rate borrowings at the end date of the reporting period along with key reasons for significant variances compared with the targets specified in this policy;

6.5.8.3 full details and explanation of any instances of deviation from this policy during the year.

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7. Availability The Policy is available to be downloaded, free of charge, from Council’s internet site www.burnside.sa.gov.au

The Policy will be available for inspection without charge at the Civic Centre during ordinary business hours and a copy may be purchased at a fee as set annually by Council.

City of Burnside Civic Centre 401 Greenhill Road, Tusmore SA 5065 Telephone; 8366 4200 Fax; 8366 4299 Email: [email protected]

Office hours: Monday to Friday, 8.30am to 5.00pm (except public holidays)

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Financial Sustainability

Information Paper 15

Treasury Management

Revised February 2012

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Attachment D

LGA ‘Financial Sustainability’ Information Paper No. 15: Treasury Management - Revised February 2012

2

DME : 76985 LGA Financial Sustainability Program – www.lga.sa.gov.au/goto/fsp

Introduction This Information Paper is one of a series of Information Papers about Financial Sustainability and Financial Governance in Local Government. The series of Information Papers was originally published in 2006 to 2011 as part of the Financial Sustainability Program. The his tory of that program and a complet e list of Information Papers and other resources, including a glossary of terms an d abbreviations, is provided on the LGA’s “Financial Sustainability” web page: http://www.lga.sa.gov.au/goto/fsp. The entire series of Papers was revised in early 2012 to take account of legislative changes and other d evelopments. These Papers are addressed to, and written primarily for the benefit of Council Members and staff, but they are also available as a resource for th e general public and students of Local Government.

Background Most Councils have capacity to better serve communities by making greater use of debt and achieving financial savings and reductions in risk from a more holistic approach to managing their borrowings and investments. These benefits often can be ac hieved through some relatively simple improvements in financial governance. In the past it was commonly accepted practice for Councils to raise borrowings for specif ic purposes and at the same time set aside funds for s pecific future expenditures. The Local Government Act 1999 now requ ires a longer-term finan cial planning focus. This, and a requirement to use accrual accounting, have been catalysts for changes in recommended treasury management practices. This information paper discusses the key elements of treasury management and includes, at Attachment 1, a Model Treasury Management Policy that enables Councils to embrace the recommended treasury management practices. It also includes, at Attachment 2, some examples that illustrate the application of the treas ury management principles set out in the model policy. This information paper should be read in conjunction with the Local Government Act 1999 and other LGA Financial Sustainability information papers, including:

No. 9 - Financial Indicators No. 10 – Debt

available at http://www.lga.sa.gov.au/goto/fsp. This information paper pro vides support to Councils as they formulate their ow n policy framework for treasury management decisions. It provides a structure within which Councils can consider and record their treasury management decisions. Councils should consider the content of the paper an d adapt the Model Treasury Management Policy at Attachment 1 to suit their individual circumstances. In particular some text is italicised and included in square brackets. In these areas Councils should insert specific detail relevant to th eir own circumstances. Once adopted, Councils should review their treasury management policies on a regular basis (say annually).

What is treasury management? Treasury management refers to th e way in which borrowings are ra ised and cash and investments are managed. In addition to changes in the level of borrowings and changes in

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interest rates, a Council’s treasury management practices also can have a significant effect on its interest costs. Councils have flexibility with respect to the maturity of their borrowings (i.e. when borrowings are scheduled for repayment) and , more importantly, how frequently the interest rate on an individual borrowing is re-set. This flexibility enables Councils to manage their interest rate exposures in a deliberate fashion. Regardless of the level of a Council's borrowings, it is desirable that each Council undertakes treasury management to minimise interest costs, in a risk averse manner, over the medium to longer term.

What does legislation require? Borrowings

Councils in South Australia are virtually unconstrained in relation to th e source, q uantum, term and type of their borrowings. Section 134 of the Local Government Act 1999 (“the Act”) requires a Council to consider independent expert ad vice before entering i nto particularly complex and sophistica ted types of borrowing arrangements1 but Councils’ interest in such arrangements traditionally has been negligible. The Local Government Financing Authority (LGFA) and other fin ancial institutions ensure Councils have considerable choice of borrowing products. Section 48 of the Act requires a Council to develop and maintain prudential management policies, practices and procedures2 for the assessment of all “projects”. If a project requires financing arrangements, then the projec t must be co nsidered within the context of the Council’s prudential management policy. Ho wever the Act does not impo se limits on financing options. Under section 122 of the Act, a Council must have a long-term financial plan (LTFP) as part of its suite of strategic management plans (SMPs).3 These documents must include:

the sustainability of a Council’s financial performance and position; the maintenance, replacement or development needs for infrastru cture within its

area; proposals with respect to debt levels; and, the identification of any anti cipated or predicted changes that will have a significant

effect upon the costs of the Council’s activities/operations. Section 44 of the Act provides that a Council cannot delegate the power “to borrow money or to obtain other forms of financial accommodation”. Many Councils therefore, ensure that all proposed borrowings for a year are approved at the time the annual budget is adopted.

Investments

Under Section 47 of the Act a Council is prohibited from directly acquiring shares in a company. 1 (a) interest rate swaps; (b) forward interest rate agreements; (c) interest rate options; 2 See Local Government Financial Sustainability Information Paper No. 27: Prudential Management Requirements at www.lga.sa.gov.au/got/fsp. This paper contains as an attachment, a model Prudential Management Policy. 3 See LGA Financial Sustainability Information Paper 8: Long-term Financial Plans at http://www.lga.sa.gov.au/goto/fsp.

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Section 139 of the Act empowers a Council to invest and require s that the power of investment be exercised with the ca re, diligence and skill that a prudent person of business would exercise in managing the affairs of other persons. Section 139 also requires a Council to avoid investments that are speculative or hazardous in nature. Section 140 requires that a Council review the performance of its investments at least annually.

Treasury management and financial sustainability A Council should be committed to operating in a financially sustainable manner. It sho uld make expenditure decisions in line with the directions set out in its SMPs and the scheduled works in i ts Infrastructure and Asset Management Plan (I&AMP) while setting out its financing requirements in its LTFP. Whether a borrowing needs to be raised, and if so the nature of it, is a separate decision to the expenditure one and i t is made in accordance with the criteria speci fied in Councils’ Treasury Management policy. A Council should not make an operating or capital expenditure decision that would generate (or increase) an ongoing operating deficit without concurrently committing to other strategies that negate this impact (e.g. by increasing other revenue and/or decreasing other expenses). If a Council has an operating deficit it cannot normally afford more borrowings. If nothing else changes the financing costs alone exacerbate the existing operating deficit. If a Council has a projected long-run operating deficit it does not have the capacity to provide additional services and should not embark on such a course until it has de veloped a st rategy to address the deficit and reflected this in its LTFP. If a Council has a projec ted long-term operating surplu s then i t may be abl e to afford additional services without increased revenue but it would need to compare the proposal with the benefits and net costs of other alternatives, because there are a lways more demands and opportunities than available resources. Even when operating in a fi nancially sustainable manner, it will often be necessary for a Council to borrow money. This could occur for example in a year where the Council makes a decision, in accordance with i ts I&AMP, to increase its stock of assets or to replace/update existing assets. It also may be necessary for a Council to borrow for short periods during any year when operating outlays occur ahead of revenue inflows. Furthermore, a new borrowing may be affordable if the funds are required to help reduce a Council’s operating deficit (e.g. the borrowing has resulted from the need for abnormally high levels of expenditure on maintaining/replacing assets which will lead to a reduction in future operating expenses).

Financing decisions The traditional approach to determining expenditure affordability (based for example on cash costs of a project) and associated debt financing strategies has risks. These are often ‘hidden’ or under-recognised. If a Council undertakes a borrowing while at the same time holding surplus financial assets there is an opportunity cost arising from the difference between the borrowing an d investment interest rates achieved on each. If interest rates then fa ll (or in crease), after locking into a long-term fixed interest rate borrowing, there is a f urther effective (but unrecorded) opportunity cost (or gain).

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In general, it i s nearly always more cost effective for a Cou ncil to meet current expenditure needs by first using any surplus cash and investments currently available (even if these are surplus only for a short term) before undertaking a new borrowing (even if this simply defers the need to raise the borrowing for a short period of time).

Capital outlays There is a ‘co st of capi tal’ (interest paid on a borrowing or investment income forgone) associated with all capital outlays. Where a Council wishes to track all costs associated with a capital project (for example for reporting purposes or pricing dec isions) its costing information should recognise the ‘cost of capital’ utilised in the venture regardless of whether specific borrowings were raised for such purposes or not. In determining the impact of a capital outlay on Council’s f inances in the future it is best to ignore financing arrangements. An expenditure evaluation decision must come first and is always separate from the financing decision. A simp le and approp riate approach is to assess the affordability of capital projects in terms of the ir annual long-run impact on the Council’s operating result. This would involve estimating the annualised long-run costs (e.g. depreciation, cost of capital, operating and maintenanc e costs etc) and comparing this with the increase in rate or other operating re venue required to leave the Council’s operating result unaffected on average over time.

Financial indicators LGA Financial Sustainability Information Paper 9: ‘Financial Indicators’ provides information on the financial sustainability indicators recommended for use by South Australian Councils in monitoring their financial performance and position. Councils may adopt a more or le ss conservative target for the Net Financial Liabilities ratio than suggested in that pa per, depending on their fin ancial governance capabilities, current and proj ected needs and financial capacity (and the soundness of their LTFPs and I&AMPs). The target ratio chosen by a Council needs to be managed in the context of the other financial targets, and in particular the Operating Surplus ratio target. Adoption of the traditionally used ‘debt servicing ratio’ (interest or interest and p rincipal repayments expressed as a percentage of either rate revenue or total operating revenue) as a financial indicator or target) is strongly discouraged. It is far less meaningful in the context of Councils’ operating environment than the Net Financial Liabilities ratio. Furthermore its calculated result (when the numerator is based on both interest and principal repayments) is highly dependent on the term of duration and required pattern of repayment of borrowings raised.

Reserves Councils should manage their finances holistically and in a strategically optimum way rather than practicing ‘shoebox accounting’ whereby monies are earmarked for particu lar needs and therefore are not available for others. All unrestricted revenues and investments should be applied to meet planned expenditure outlays and extinguish borrowings where possible. Councils may, however, choose to use ‘reserve accounting’ as a useful means of recognising and planning for future proposals. A Council may therefore establish various equity accounts (or ‘reserves’) within its balance sheet to identify an allocation for future purposes. However, it should not have separate bank/investment accounts for these ‘reserves’ unless required to do so under law, or as a condition of funding provided by an external funding body.

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There are very few circumstances where a Council is legally required to quarantine funds. A typical case might involve some type of trust fund e.g. developer contributions for c ar parks. Councils can and should use funds traditionally earmarked, by way of example, for Community Wastewater Management Systems, Plant Replacement, Open Space Reserves, Long Service Lea ve and other typica lly cash backed balance sheet liability or equi ty accounts as part of their o verall financing strategies. Nothing prevents Councils from using these funds to “fi nance” other activ ities and thereby ac hieving savings (because of the margin between borrowing and in vestment rates) until they are requi red for the original purpose. At this time a new borrowing could be raised if required.

Interest rate risk exposures A Council is exposed to risk when ever it takes out a borrowing, reg ardless of whether it involves fixed or variable interest rates. Min imising exposure to interest rate risk requires a balance of both fixed and variable interest rate borrowings. Councils should set range limits for both fixed and variable interest rate borrowings having regard to cost effect iveness, risk management criteria and flexibility. Future interest rate mo vements (particularly over the medium and longer-term) are always uncertain. Locking into a long-term fixed interest rate borrowing, for example, effectively means that a Council is taking a view (effectively, a type of gamble) that variable rates over the period of the borrowing wi ll be hi gher than t he fixed rate negotiated. If a Cou ncil took ou t a fi xed interest loan and interest rates on average fell over the duration of the loan, then the Council would become worse off compared to the position it would have been in, if it had taken out a variable interest rate loan over the same period (and vice-versa). Such a Council might not have been intending to gamble on interest rate movements, or appreciate that it was doing so, but choosing a f ixed-interest rate borrowing does not remove risk. It removes only one risk; the risk of higher average rates for the term of the loan. It is not possible for Councils to structure their overall portfolio of borrowings and investments in a way which is ‘ neutral’ to interest rate chan ges. That is to sa y, Councils’ interest rate risks cannot be eliminat ed. Councils must therefore structure their portfolio of borrowings and investments to achieve a balan ce between interest costs and the risk of interest rate changes. This means having a mix of interest rate exposures. Fixed Interest Rate Borrowings On average over time, fix ed interest rate borrowings normally are slightly more e xpensive than variable rate ones because of the certainty they offer. Fixed interest rate borrowings mo st commonly c ome in t wo forms:- ‘credit foncier’ and ‘interest only’. Some lenders such as the LGFA also will structure fixed interest borrowings to suit the particular needs of a Council.

Credit Foncier Borrowings

In the publi c sector prior to the implementation of acc rual accounting, credit foncier borrowings were widely considered to be the most appropriate form of borrowing on grounds of inter-generational equity. They were often used to finance the acquisition of long-term assets. The regular repayment of princi pal on such borrowings was effectively treated as a surrogate for depreciation notwithstanding that the principal repayments on borrowings may not have borne any close rel ationship with ac tual depreciation (e.g. the li fe of as set may have been muc h longer than the borrowing period).

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Under accrual accounting, principal repayments are not tre ated as an ex pense. Intergenerational equity is achieved by accurately recognising all operating expenses (including depreciation) and pricing/taxing to match them with operating revenue. Where an accrual break-even operating result is being achieved, the cost of consumption of ass ets is being met by rate payers who benefit from their availability and use. While the use of credit foncier borrowings does ensure the repayment of an individual borrowing it does no t necessarily ensure a reduction in a Council’s overall indebtedness. Where existing borrowings are bei ng repaid, while at t he same time new borrowings are raised, the ov erall value of outstanding borrowings may not vary significantly from year to year. In thi s case, in effect, the new borrowings would be largely offsetting regular principal repay ments on the existing borrowings (although they would not have been explicitly intended for this purpose) because of the structure of the portfolio of borrowings. Councils should be mindful of the above issues in determining the extent of any credit foncier borrowings in their overall portfolio of fixed interest rate borrowings. Interest Only Borrowings

Interest only borrowi ngs avoid regular principal repayments i.e. instead, the tota l principal would be repayable at maturity, at which time the borrowing can be repaid or rolled over, depending on a Council’s projected cash flow needs. Interest-only borrowings are a simpler and more appropriate form of debt for a Council that manages its finances on an acc rual accounting basis. Such an approach avoids the need to c ontinually arrange new borrowing s to effectively provide finance to meet regular principal repayments on existing borrowings. It also results in significantly fewer borrowings, making the treasury management task easier.

Variable Interest Rate Borrowings A Council’s treasury management strategy should aim to keep debt levels both during a year and over periods of years as low as its budget and Long-term Financial Plan allow (and its budget and Long-term Financial Plan should be based on best meeting community needs in an equitable and financially sustainable manner). There is usually a margi n between borrowing and investment rates and Councils can generate savings by structuring their portfolios of borrowings so that cash inflows that are surplus to short or medium term needs can be applied in the first instance to reduce the level of borrowings that would otherwise be necessary. This means repaying borrowings wherever, and as soon as, surplus (even short-term) cash flow allows. This is more readily and effectively achievable with variable interest rate borrowings.

Long-term Interest Only Borrowings

Councils will have periods during a year when they have significant funds available for investment and may have significant amounts that are available on an ongoing basis. If a Council includes in its debt structure, a long-term interest only bo rrowing where interest rates are re-set every three or six months, a proportion of principal will be able to be repaid if any surplus funds are available at the time rates are reset. An even more flexible product is the LGFA Cash Advance Debenture. (Other financial institutions offer similar products.) Such a borrowing fa cility will typically have a long-

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term maturity date, the interest rate will vary from time to time (e.g. when there is a movement in official short term interest rates) and the amount of principal outst anding at any ti me would not be repayable until maturity. The outstanding balance on the facility may vary significantly during a year and between y ears with the timing and extent of cash inflows and outflows. A Council may repa y or redraw funds up to the maximum value of the borrowing facility at any time. It effectively enables the Council to earn an implicit rate of in terest on i ts surplus funds equal to the borrowing rate (typically more than 1.25% higher than rates earned on investing surplus funds) and draw additional funds whenever required. The savings that are able to be generated from utilising variab le interest rate borrowings in this way are likely over time to far more than offset interest rate risks from having a large proportion of Councils’ debt portfolios at variable interest rates.

Proportion of Fixed Interest Rate and Variable Interest Rate Borrowings Councils may choose, from time to time, to va ry the proportions of their debt taken up by fixed or variable interest rate b orrowings. In so doing they should have a clear understanding of the likely impact on net interest co sts and their exposure to interest rate risks. For example a Council may prefer to in crease its proportion of variable interest rate borrowings because this should, on average over the longer term, reduce its overall net interest costs and the Council is comfortable (having regard to its financial capacity and position) with the additional cost volatility from interest rate movements that this will bring. If a Council has variable interest rate borrowings, a rise in interest rates will have a negative budget impact (and vice versa). However when compared with total operating costs, the impact normally will be small. If a Council aims to achieve, say, a 50:50 s plit on average between the value of fixed and variable interest rate borrowings, it is inevitable that there will be specific short periods of time where the weighting will be he avily in favour of either fixed or variable rate borrowings (e.g. particularly where a large receipt is received earlier than expected or a large payment is delayed). I n some instances this will be unavoidable (and may be to Council’s financial advantage). Councils should therefore establish a target range within which the proportions of their fixed and variable rate borrowings will lie. Good cash flow planning and good treasury management will minimise the duration of periods where the weighting of borrowings is outside of this target range. A policy of having at least 30% of borrowings (say on a verage over a year) with a fixed interest rate and at leas t 30% wi th a variable interest rate can be represented diagrammatically as follows:

OPTIMUM fixed fixed or variable variable 0% 30% 70% 100%

PROPORTION OF TOTAL BORROWINGS

Investments As there usually is a margin between borrowing and investment rates, a Council should seek to avoid holding investments (and particularly considerable investments over extended periods of time) if the Council has outstanding borrowings. The Council should instead apply

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the funds to retire some of its outstanding borrowings. A Council’s ability to achieve this will depend on the nature of both its borrowings and its investments. Interest rates offered on medium/longer term investments are often slightly higher than for short-term investments, but the difference is not usually significant enough to offset the difference between borrowing and in vestment rates. For this reason it is important that a Council ensures that funds are invested only for a short-term period, so that the funds can be applied, whenever possible, to cost-effectively defer the need to raise a new borrowing or reduce the le vel of a Council’s variable interest-rate borrowing facility. Unle ss there is considerable understanding and certainty about the timing and value of future cash inf lows and outflows, the most practical and cost-effective strategy is likely to be to invest any funds ‘at call’.

What are the issues for Councils? Every Council should consider developing and adopting a pol icy about treasury and debt management. Such a policy should have regard to issues raised in this paper, balanced against the needs and preferences identified in the Council’s strategic management plans.4

Reporting Councils may choose to report on their treasury management performance more frequently than annually e.g. biannually or quarterly in line with budget reviews. More frequent reporting than this is unlikely to prove worthwhile. The report on a Counci l’s treasury management performance should be submitted through its Audit Committee.

Qualification This paper is intended to provide a general overview of the principles of sound treasury and debt management in the context of the typical current operating en vironment of the South Australian Local Government sector. Some described concepts and situations have been simplified to meet the needs of a general audien ce and in order to k eep the paper brief. Councils should not rely on the propos als suggested in this paper wh en making t reasury management decisions without comprehensive consideration of their spec ific circumstances and needs.

Acknowledgements This paper has been prepared with the benefit of contributions from:

Mr John Comrie of JAC Comrie Pty Ltd; and Mr John Wright of the Office for State/Local Government Relations

supported by a referen ce group from the SA Local Government Financial Management Group. The development of this information paper has been assisted by funding from the Local Government Research and Development Scheme.

4 A model draft Treasury Management Policy is provided as Attachment 1 to this Information Paper.

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http://www.salgfmg.org.au/

http://www.lga.sa.gov.au/site/page.cfm?u=276

http://www.lga.sa.gov.au/site/page.cfm?u=276

1 DME : 76985 LGA Financial Sustainability Program – www.lga.sa.gov.au/goto/fsp

Attachment 1: Model Treasury Management Policy

[Council Name] POLICY NAME: Treasury Management APPROVED BY: [Council] DATE: [Date] SUBSEQUENT AMENDMENTS DATE: [Date] AUTHORISATION: [Authorisation] SECTIONS AMENDED: [Reference to aspects amended] REVIEW DATE: [Date of next review] DOCUMENT OWNER: [Position responsible for maintenance of the

document] 1. INTRODUCTION This policy provides clear direction to management, staff and Council in relation to the treasury function. It und erpins Council’s decision-making regarding the financing of i ts operations as documented in its annual budget and long-term financial plan and associated projected and actual cash flow receipts and outlays. Council is committed to to operatin g in a f inancially sustainable manner and maintains a Long-term Financial Plan (updated at least annually) to assist it to determine affordable service levels and re venue raising needs. This Plan also provides projections of future cashflow availability and needs. 2. POLICY OBJECTIVES This Treasury Management Policy establishes a decision framework to ensure that:

funds are available as required to support approved outlays; interest rate and other risks (e .g. liquidity and investment credit risks) are

acknowledged and responsibly managed; the net interest costs associated with borrowing and investing are reasonably likely to

be minimised on average over the longer term. 3. POLICY STATEMENTS

3.1 Treasury Management Strategy Council’s operating and capital expenditure decisions are made on the basis of:

identified community need and benefit relative to other expenditure options; cost effectiveness of the proposed means of service delivery; and

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affordability of propo sals having regard to Council’s long-term financial sustainability (including consideration of the cost of capital and the impact of the proposal on Council’s Net Financial Liabilities ratio5).

Council manages its finances holistically in accordan ce with its overall financial sustainability strategies and targets. This means Council will:

maintain target ranges for its Net Financial Liabilities ratio; not retain and quarantine money for particular future purposes unless required

by legislation or agreement with other parties; borrow funds in accordance with t he requirements set out in it s Long-term

Financial Plan; apply any funds that are not immediately required to meet approved expenditure

(including funds that are required to be expended for specific purposes but are not required to be kept in separate bank acco unts) to reduce its level of borrowings or to defer and/or reduce t he level of new borrowing s that would otherwise be required.

3.2 Interest Rate Risk Exposures Council has set range limits for both fixed and variable interest rate borrowings in order to minimise net interest costs on a verage over the longer term and at the s ame time manage interest rate movement risks within acceptable limits.

3.2.1 Fixed Interest Rate Borrowings To ensure an adequate mix of in terest rate exposures, Council will restructure its portfolio of borrowings, as o ld borrowings mature and n ew ones are raised, to progressively achieve and thereafter maintain on average in any year, not less than [x% - Council to determine percentage but may wish to consider a value of the order of 30%] of its gross debt in the form of fixed interest rate borrowings. Decision Required: Council will need to determine the minimum proportion of its gross debt that it wishes to hold, at any time, in the form of fixed interest rate borrowings. In determining this minimum proportion, Council will need to take account of, and achieve its preferred balance between: interest costs; the risk of interest rate changes; flexibility. In order to spread its exposure to interest rate movements, Council will aim to have a variety of maturity dates on it s fixed interest rate borrowin gs over the available maturity spectrum. In circumstances where Council needs to raise new fixed interest rate borrowings it will consider using medium to long-term borrowings (3 years or more duration) that:

have a fixed interest rate; require interest payments only; and allow the full amount of principal to be repaid (or rolled over) at maturity.

5 The LGA’s Financial Sustainability Information Paper No 9 Financial Indicators at http://www.lga.sa.gov.au/goto/fsp provides further information on this (and other) financial sustainability indicators and associated targets.

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Council also will ensure that no more than [x% - Council to determine percentage but may wish to consider a value of the order of 25%] of its fixed interest rate borrowings mature in any year. Decision Required: Council will need to determine the maximum proportion of its fixed interest rate borrowings that it wishes to have maturing in any year in order to spread its exposure to interest rate movements. 3.2.2 Variable Interest Rate Borrowings Council will restructure its portfolio of borrowings, as old borrowings mature and new ones are raised, to prog ressively achieve, and then maintain, not less t han [x% - Council to determine percentage but may wish to consider a value of the order of 30%] of its gross debt on average in any year in the form of v ariable interest rate borrowings. Decision Required: Council will need to determine the minimum proportion of its gross debt that it wishes to hold, at any time, in the form of variable interest rate borrowings. In determining this minimum proportion, Council will need to take account of, and achieve its preferred balance between: interest costs; the risk of interest rate changes; flexibility. Council will establish, and make extensive use of, a [long-term variable interest rate borrowing facility / LGFA’s Cash Advance Debenture facility] that requires interest payments only and that enables any amount of principal to be repaid or redrawn at call. The redraw facility will provide Council with access to liquidity when needed.

3.3 Investments Council funds that are not immediately required for operati onal needs and c annot be applied to either reduce existing borrowings or avoid the raising of new borrowings will be invested. The balance of funds held in any operating bank account that does not provide investment returns at least consistent with ‘at call’ market rates shall be kept at a level that is no greater than is required to meet immediate working capital requirements. Council funds available for in vestment will be lodged ‘at call’ or, h aving regard to differences in interest rates for fixed term investments of varying maturity dates, may be invested for a fix ed term. In the cas e of f ixed term i nvestments the term sho uld not exceed a p oint in time where the funds otherwise could be applied to cost-effectively either defer the need to raise a new borrowing or reduce the level of Council’s variable interest rate borrowing facility. When investing funds Council will select the investment type that delivers the best value, having regard to investment returns, transaction costs and other relevant and objectively quantifiable factors. Council management may from time to time invest surplus funds in:

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deposits with the Local Government Financing Authority; and/or bank interest bearing deposits.

Any other investment requires the specific approval of Council. Where Council authorises any investments of a type outside of those sp ecified above, the amount so invested will be cumu latively limited to no more than [x% - Council to determine percentage but may wish to consider a value of the order of 20%] of the average level of funds expected to be available for investment by Council over the duration of the specific authorised investments. Decision Required: Council will need to determine the proportion of its investment funds that will be placed in various investment types. In determining this proportion Council will need to take account of: investment risk; likely return; relevant legislative requirements.

3.4 Reporting At least once a year Co uncil’s Audit Committee shall receive a specif ic report regarding treasury management performance relative to this policy document. The report shall highlight:

for each Council borrow ing and investment - the quantum of funds, its interest rate and maturity date, and change s in the quantum since the previous report; and,

the proportion of fixed interest rate and variable interest rate borrowings at the end date of the reporting period and an estimate of the a verage of these proportions across this period along with key reasons for si gnificant variances compared with the targets specified in this policy.

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Attachment 2

Illustrative Questions and Answers on the Application of the

Model Treasury Management Policy QUESTION 1 Most Councils currently have outstanding a lot of small value fixed interest rate borrowings (typically taken out for 5 to 15 year periods). They also hold various (often numerous) investments that are ‘ear-marked’ for specific purposes. What sort of structure of borrowings should such a Council aim to progressively achieve? Answer: Ideally the Council would, o ver time, move to a reduc ed number of fixed interest rate borrowings. These borrowings could, for example, be of similar value with maturity dates spread over a period of, say, ten years. Only one v ariable interest rate borrowing facility would be necessary and with a suggested maturity date of at least ten years. The amount of the facility could be set at, say, 70 per cent or more of the ma ximum level of the Council's estimated net financial liabilities as shown in its Long-term Financial Plan. QUESTION 2 How should a Council go about phasing in changes in practices consistent with the model treasury management policy? Answer: If the value of a Council’s borrowings exceeds the value of its investments it is likely to be better off b y applying surplus funds to reduce th e level of outstanding principal under i ts variable interest rate borrowing f acility (such facilities, e.g. the LGFA’s Cash Advance Debenture, typically allow part or full repayment of the outstanding principal at any time without penalty). A ccordingly, many Councils may find it unnecessary to hold any investments. If the value of a Council’s investments exceeds its variable interest borrowings it should use the investment funds to pay do wn its variable interest borrowings to ze ro and retain the balance as an investment until these funds can be applied to a void new borrowings that would otherwise be ne cessary. There is no value in seeking to ‘cash out’ outstanding fixed interest rate borrowings. This will not generate savings as any lender that agrees to do so would seek to be financially compensated and be left no worse off. Councils that have utilised their investments and still require additional borrowings should look first to ensure that their l evel of variable interest rate borrowings is in line with the suggested target (between, say, 30% and 70% of total borrowings on average over a 1 2 month period) rather than raise additional fixed interest rate borrowings. Where a Council’s existing level of variable interest rate b orrowings is already within the target range and/or proposed new borrowings are relatively large the Council should look to raise a combination of fixed and variable interest rate borrowings to ensure that the proportions of both are expected to remain within its target ranges in future. Nevertheless in so doing it may find it simpler to raise all of the new borrowing as a variable interest rate one in the first instance and then convert a proportion to a fix ed interest rate by adding it to an existing fixed interest rate borrowing whe n it matures an d needs to be rolled over. Thi s would help the Council to avoid building up a large portfolio of small value fixed interest rate borrowings.

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Councils are requi red to prepare Long-term Financial Plans which wil l show the e xtent of expected movements in their forecast stock of borrowings for the budg et year and for each year of the Long-term Financia l Plan. Councils should use this information to help plan the timing, duration, magnitude and mix of new f ixed and v ariable interest rate borrowi ngs (including any necessary as a result of the maturing of existing borrowings). In addition to managi ng borrowing needs between years, Councils also ne ed to optimise treasury management within a budget year. Each year they will have periods where they have high levels of ne t cash inflows (e.g. at ti mes when rates or Grants Co mmission payments are due) and other times where they hav e net cash outflows. Their portfolio of borrowings should be structured to enable surplus funds received during periods of net cash inflows to be used to repay borrowings (even if for only a short periods) rather than to be invested if borrowings also exist. This can best be achieved by repaying variable interest rate borrowings during periods of net cas h inflow and dra wing additional such borrowings during periods of net cash outflow. As a result a Council that averages a 50:50 split between fixed and variable interest rate borrowings over a year may experience periods where there is a hea vy weighting of fix ed or variable interest rate borrowings in its total po rtfolio and periods where its portfolio of borrowings is considerably higher or l ower than its budgeted end of year position.

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Item No: 5.3 To: Audit Committee Date: 16 June 2014 Author: Kenneth Ng – Internal Audit Manager General Manager and Division

Paul Deb – Chief Executive Officer Office of the Chief Executive

Contact: 8366 4263 Subject: BUSINESS SERVICE REVIEW – FINANCE (OPERATIONAL) Attachments: A. Finance Department Report III: Reconciliations, Processing of

Journals, Goods and Services Tax, Fringe Benefits Tax and Finance Systems

Prev. Resolution: N/A



2. That the Business Service Review of Finance Department Report III: Reconciliations, Processing of Journals, Goods and Services Tax, Fringe Benefits Tax and Finance Systems be endorsed by the Audit Committee.

3. That the Business Service Review of Finance Department Report III: Reconciliations, Processing of Journals, Goods and Services Tax, Fringe Benefits Tax and Finance Systems be presented to the 8 July 2014 meeting of Council.

Purpose

1. To provide the Audit Committee with the Business Service Review on the Finance Department in the area of reconciliations, processing of journals, Goods and Services Tax (GST), Fringe Benefits Tax (FBT) and Finance systems.

Strategic Plan


“Delivery of good governance in Council business”



3. The following communication / consultation has been undertaken:

3.1. Discussions with management and staff of the Finance Department.

Statutory



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Policy

5. There are no policy implications or requirements associated with this recommendation.

Risk Assessment

6. The following risks have been identified:

6.1. Failure to implement the recommendations arising from the Business Service Review may result in lost opportunities to achieve performance improvement opportunities in effectiveness and efficiency.

Finance

7. The following financial issues have been identified:

7.1. Failure to implement the recommendations arising from the Business Service Review may result in lost opportunities to strengthen internal controls that may potentially lead to financial losses.

Discussion

Background

8. The audit reports from the business service review of the Finance Department are listed in the table below. The remaining audit reports will be provided to the Audit Committee in due course.

No Scope Audit Committee

1 Department Structure August 2013 June 2014

2 Payroll June 2013 August 2013

February 2014

3 Reconciliations, Processing of Journals, GST, FBT and Finance Systems

June 2014

4 Performance, Operational, Financial and Compliance Management

To be tabled

5 Financial Reporting To be tabled

6 Accounts Payable and Accounts Receivable June 2013 August 2013

February 2014

7 Rates August 2013 February 2014

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Analysis

9. The main objective of this Business Service Review of the Finance Department was to review the Department’s structure, operations and processes in order to:

9.1 Identify improvement opportunities in effectiveness and efficiency; and

9.2 Enhance internal controls.

10. The Business Service Review recommended business improvement opportunities as listed below (refer to the relevant sections of the attached report for details):

10.1 Reconciliations;

10.2 Processing of journals;

10.3 Electronic submissions for GST and FBT;

10.4 Tax invoices and remittance advices;

10.5 Approval of official submissions to external authorities;

10.6 Finance systems; and

10.7 Automation of timesheets within CHRIS21 payroll system.

Conclusion

11. Management responses and action plans have been updated into the attached audit report.

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Business Service Review Finance Department

Report III:

Reconciliations, Processing of Journals, Goods and Services Tax (GST), Fringe Benefits Tax

(FBT) and Finance Systems

Ref: 13-01 (C) October 2012

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Attachment A

Contents Executive Summary 2

Recommendations - Reconciliations 2

Recommendations – Processing of Journals 5

Recommendations – GST & FBT 9

Recommendations – Finance Systems 12

Appendix 1:Classification of Audit Findings 15

Appendix 2:Responsibility Statement 15

Distribution

For action For information

Nigel Morris General Manager – Corporate Services

Paul Deb Chief Executive Officer

Louise Miller-Frost General Manager – Community & Development Services

Graeme Brown General Manager – Urban Services

Audit Committee

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Business Service Review – Finance Department

13 01 BSR Finance B Internal Audit Report C Reconciliations.doc 2

Executive Summary Objective In accordance with the 2013-15 Internal Audit Plan approved by the Council, we have conducted a business service review of the Finance Department. The main objective of this business service review of the Finance Department was to review the department’s structure, operations and processes in order to: Identify performance improvement opportunities in effectiveness and efficiency; and Enhance internal controls. Scope Due to the comprehensive scope of coverage, the outcomes of the business service review of the Finance Department will be released in several reports. T his report focused on the following areas: Reconciliations; Processing of Journals; Goods & Services Tax (GST) and Fringe Benefits Tax (FBT);and Finance Systems. Previously released reports covered the following areas of the Finance Department: Value of the Finance Department to Council; Preparation of the Annual Business Plan, Budget and Long-Term Financial Plan; Resourcing and Structure; Interrelationships with Other Departments; Benchmark Comparison with Other Councils; and Payroll. Future reports are expected to cover the following areas of the Finance Department: Legislative Compliance Requirements; Internal Compliance Requirements; Accounts Receivable; Accounts Payable; Fixed Assets; Banking; Loans; Treasury; Rates; Other Functions; Monthly Reports; Council Reports; Financial Management; Operational Issues; and Performance Management.

Recommendations - Reconciliations

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1. Reconciliations Findings and impact The reconciliations process (balance sheet and ancillary modules) is controlled through a spreadsheet maintained by the Financial Accountant. E ach worksheet on this spreadsheet represents an account to be reconciled. Reconciliations are performed by members of the Finance Department and reviewed by the Financial Accountant as part of the month-end reporting process. We were advised by the Financial Accountant that the Manager – Finance only reviews the reconciliations as part of the year-end statutory audit process.

In general, all reconciliations are completed by the end of the second or third week of the following month after month-end. Some reconciliations, particularly of ancillary modules, are dependent on data to be p rovided by other departments, and some departments are often late in updating the required information. This has led to the reconciliations being outstanding for two to three months on occasions.

The root cause of this is an organisational culture where individual departments believe that all financial-related issues should be wholly managed by the Finance Department so that the Finance Department is essentially performing finance-related tasks and addressing finance-related enquiries for other departments.

This has resulted in a lack of sufficient knowledge amongst departments on how to manage the financial-related issues of their departments’ business processes, activities, projects and programs (e.g. where to retrieve financial information, how to interpret such information, how to understand the financial impact of departmental processes or operating decisions, how to manage actual expenditure against budget, how to forecast potential cost overruns, and how to refrain from covering budget overruns by allocating expenditure from deficit to surplus accounts).

Recommendations 1. We recommend that executive transform the organisational culture so that each department is

responsible for managing the financial-related implications, issues and tasks associated with the day-to-day business processes of the department. This is to eliminate or minimise the departments transferring all financial-related responsibilities to the Finance Department. It is more effective and efficient for the individual department to retain these duties particularly as the departments themselves are best equipped to assess the total picture of strategic, operational and financial implications together.

It is the objective of the Finance Department to provide initial and regular training and support so that there is a transfer of sufficient financial knowledge to the department manager or other relevant staff member so that the department is able to manage financial-related tasks that fall under that department’s responsibility.

Management Response Agreed. The recently agreed restructure of the Finance Department, the establishment of the Finance Business Partner role and the implementation of monthly monitoring of departmental performance against budget will facilitate this recommendation.

2. We recommend that the Manager – Finance periodically review the reconciliations throughout the year in addition to the year-end statutory audit process. This is to ensure that any issues in account reconciliations are identified and resolved well before the end-of-year audit.

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Management Response Agreed. The Chief Financial Officer reviewed all reconciliations in May 2013. This resulted in a complete overhaul of the reconciliation process for the 2012/13 financial end-of-year. This review process will continue on quarterly process under the responsibility of the Finance Manager.

Responsibility Chief Financial Officer (Martin Cooper).

Target date Completed July 2013.

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Recommendations – Processing of Journals 2. Processing of Journals Findings and impact The Finance Department is required by other department managers to create correction journals to remedy errors mostly due t o misallocation of account numbers by other departments – many of which are for immaterial amounts. The Finance Department estimated that they processed approximately 400 correction journals in 2011-12 – some journals contained hundreds of line items. Due to the significant volume of these journals, it may not be efficient to process such journals particularly if they are immaterial for accounting and budget reporting purposes.

Again, the root cause of this is an organisational culture where individual departments believe that all financial-related issues should be managed or resolved by the Finance Department. This has resulted in the departments not focusing upon obtaining sufficient knowledge on how to manage the financial-related issues of their departments’ business processes, activities, projects and programs.

The occurrence of errors relating to misallocation of account numbers is expected to be reduced by BasWare for the implementation of the Invoice Ready System as pre-validated account number options will be determined for the departments.

Recommendations 3. We recommend that the Manager - Finance determine a materiality threshold of $1,000 for

processing correction journals. The determination of this threshold should consider that departments are required to report on only permanent (not timing) variances above $5,000 as part of their monthly financial reporting process. An allowance may be necessary for the Home and Community Care (HACC) program which may dictate more prescriptive requirements.

Management Response The Chief Financial Officer would prefer to fix the problem rather than set a materiality threshold in order to preserve the integrity of COB’s General Ledger. Work is ongoing to rationalise Cost Centres and address ongoing problem areas through the work of the Finance Business Partner role.

4. We recommend that the Finance Department provide a list of account numbers to all staff members in other departments who are responsible for allocating account numbers.

Management Response Agreed – this will be assisted through the creation of the Finance Business Partner role.

5. We recommend that the Finance Department provide training to all staff members in other departments who are responsible for allocating account numbers. This training should focus on the most common errors committed. Training should be repeated on an annual basis.

Management Response Agreed within resource constraints. The Finance Business Partner role will be best placed to identify training requirements.

6. We recommend that executive consider reducing the maximum dollar limit of $1 million for journal transactions within Finance One / Technology One. Amounts higher than the revised

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limit should only be processed by the system with online authorisation from the Executive Team. T his is to reduce the materiality of processing errors as well as the impact of any fraudulent transactions.

Management Response The Chief Financial Officer has questioned the practicality of this recommendation and whether it will reduce risk. A number of journals of this magnitude have been required recently e.g. as a result of the asset revaluation project. All journal transactions must be fully documented and available to be audited externally.


Target date In progress. Expected to be completed by October 2014.

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3. Processing of Journals Findings and impact Requests to initiate journals from other departments to the Finance Department were submitted through a myriad of options: • The Finance Request System on the intranet site; • The Journal Request Form; • E-mails; or • Telephone calls.

Due to the variety of methods, there is some concern over the validity of journals requested by other departments as approval from department managers or team leaders may not be clear through these processes.

Our review of journals noted that the description is often not sufficiently detailed to explain its nature without further investigation. For example, there were two journals in account no. 534 ‘Other Contractors’ with the notation “Tfr to correct a/c code GL a/c 532 has no budget” and “Reallocation from 145.532 to .534 As per T Amato req Dec Chameleon comment” for $14,335 and $13,327 respectively. We noted many journals with brief descriptions such as “Land Services” and “Technology One”.

Recommendations 7. We recommend that the Manager – Finance implement the formal requirement that all journal

requests from other departments should be submitted as the Journal Request Form attached with supporting documents via the Finance Request System. The Journal Request Form requires the signatures of the responsible officer and the team leader or manager. It ensures that all journals processed by the Finance Department are authorised by the initiating department.

Management Response Agreed and actioned 29 April 2013.

8. If compliance is low, we recommend that executive reinforce this stipulated process to all department managers. In addition, we recommend department managers to communicate this requirement during team meetings on a regular basis.

Management Response Agreed but this has not been required.

9. We recommend that the Manager – Finance instruct all team members to ensure that descriptions for journal transactions are reasonably detailed to provide an explanation as to its nature. This is good practice that better enables someone to review listings of journal transactions or search for a particular journal transaction.

Management Response Agreed and actioned 29 April 2013.

Unfortunately, narrative generated from the Proclaim interface (i.e. all journals from Property & Rating) is still unhelpful i.e. “ProClaim Journal”. User Fields 4 and 5 need to be ad ded to default screens to provide more information.

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Target date Completed May 2013.

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Recommendations – GST & FBT 4. GST & FBT – Electronic Submissions Findings and impact There were several issues of processing inefficiencies related to the electronic submissions of the monthly Business Activity Statement (BAS) for Goods and S ervices Tax (GST) and the Fringe Benefits Tax (FBT) annual return.

Recommendations 10. We recommend that the Manager – Finance co-ordinate with the Information Systems and

Records Management Department to investigate practical and cost-effective solutions for the following issues:

• As the BAS does not split taxable and non-taxable sales, it leads to discrepancies between the BAS and the general ledger spreadsheet. This requires the Financial Accountant to extract the list of transactions from BAS, perform data sort by GST amount, deduct non-taxable sales from BAS and recalculate GST on sales. If there is still a discrepancy after deducting non-taxable sales, the Financial Accountant investigates the cause by comparing two transaction lists from BAS and the general ledger through tracing the transaction number. After determining the cause of the discrepancy, the Financial Accountant reverses the incorrect transactions then runs both the BAS and general ledger again.

• When retrieving transactions in the BAS, the system requires users to exit and refresh the page to retrieve a new transaction.

• We were advised by the Financial Accountant that the City of Burnside is not able to electronically lodge FBT returns due to the fact that the City of Burnside is unable to be registered. However, we are aware that other Councils are able to electronically lodge FBT returns.

Management Response The Business Partner role will follow up these recommendations.


Target date In progress. Expected completion date October 2014.

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5. Tax Invoices and Remittance Advices Findings and impact The City of Burnside has a standard template for tax invoices which was set-up in 2004 that met the requirements of the Australian Taxation Office. However, our review of 50 tax invoices identified that the document number and debtor number are misallocated in the Remittance Advices for all tax invoices.

Recommendations 11. We recommend that the Manager – Finance request the assistance of the Information Systems

and Records Management Department to amend the templates for tax invoices and remittance advices.

Management Response Agreed the Remittance Advice swaps the Doc Number and Debtor number around. This requires a correction to a Crystal Report which IT has returned to Finance for actioning. This action was completed in September 2013.


Target date Completed September 2013.

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6. Approval of Official Submissions to External Authorities Findings and impact The Manager – Finance approves the annual FBT return but does not review the monthly BAS submissions to the ATO. I t is considered good governance practice for all official submissions by the City of Burnside to external authorities to be reviewed and approved by appropriate management.

Our review of the timeliness of the last five BAS submissions are indicated below:

Month Deadline Date Submitted

April 21 May 22 May

May 21 June 5 June

June 21 July 26 July

July 21 August 22 August

August 21 September 3 October

Recommendations 12. We recommend that the Manager - Finance reviews the BAS and FBT as these represent legal

submissions from the City of Burnside to the ATO.

Management Response Agreed and implemented in March 2013.

13. We remind the Manager – Finance to ensure that BAS submissions are lodged on-time to avoid any financial penalties from the ATO.

Management Response Agreed, however on 14 June 2013 COB received a letter from the ATO stating the COB FBT Return was submitted late but we were not going to be charged a penalty. This was the subject of a staff performance management review.

All BAS submissions have been lodged on-time.


Target date Completed June 2013.

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Recommendations – Finance Systems 7. Finance Systems Findings and impact Our review of finance systems revealed that there were opportunities to effect systems improvements that may potentially result in processing efficiencies which would free up additional time for members of the Finance Department to devote to other tasks.

The asset registers maintained by the Finance Department and the Engineering Services Department are reconciled but there is no permanent or physical link between the two registers. The Manager – Asset Services is leading the project to implement the asset management recommendations proposed by Deloitte to review and enhance asset management methodology, data and processes to generate line-by-line depreciation within an integrated asset register.

Chameleon is the program solution to generate internal management reporting. This includes reporting on operational and r ecurrent budgets. S harePoint is the proposed solution to build functionality for project budgeting and reporting for 2013-14 onwards.

Chameleon is being adapted to capture data fields from CHRIS21 to be used as a management reporting tool that produces projected salaries and wages based on dynamic and updated live data for the annual budget preparation process.

Recommendations 14. We recommend that the asset management project including the integration of the operational

asset register maintained by the Engineering Services Department with the Finance One asset register to continue.

Management Response Agreed and completed as part of the Asset Revaluation project in 2013.

15. We recommend that the Finance Department continue to enhance Chameleon to generate the required suite of reports for internal management reporting. This should include training and education to department managers and staff to effectively utilise Chameleon.

Management Response Agreed. Work will continue on this during 2013/14 and 2014/15 with the establishment of the new Finance structure.

16. We recommend that the Finance Department continue to develop SharePoint as the project budgeting and reporting tool for 2013-14.

Management Response Agreed – this has been done with the BBC.

17. We recommend that the Finance Department continue to adapt Chameleon with CHRIS21 to generate the salaries and wages expenditure for the annual budget.

Management Response Agreed. Issues with Chameleon required the Finance Manager to use spread sheets to complete the 2014/15 Budget Salaries and Wages computations. Recent work on Chameleon should facilitate this facility in future. The final QA on the Chameleon views and any changes to

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CHRIS21 to get the reconciled figures is still to be completed (target end of June 2014).


Target date Ongoing work throughout 2013/14.

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8. Automation of Timesheets with CHRIS21 Payroll System Findings and impact Our review raised the potential of processing efficiencies from automating timesheets with the CHRIS21 Payroll System. We were advised by the Manager – Information Systems and Records Management that the generic timesheets within CHRIS were deficient in that they did not meet the requirements of the City of Burnside and utilising these timesheets would be more time consuming than using the current timesheets. The Manager – Information Systems and Records Management has pursued Frontier, the providers of the payroll system, for enhanced timesheets within CHRIS21 since April 2011.

Recommendations 18. We recommend that executive continue to assertively pursue Frontier to automate timesheets

within CHRIS21 if this enhanced solution does result in more efficient timesheet processing.

Management Response Agreed, however the priority (for 1 July 2014) is to implement flexi-time capability in order to meet the outcome of the current EB negotiations.


Target date June 2014.

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Appendix 1: Classification of Audit Findings

Rating Definition Examples of Impact Action Required

High Issue represents a control weakness, which could have or is having major adverse effect on the ability to achieve process objectives.

• Major impact on operations of functions.

• Major decline in the quality and value of service delivery.

• Probable decrease in the community’s confidence in the Council.

• Breach of legislation or contractual non-compliance with probable litigation, prosecution and / or penalty.

• Potential to cause life threatening or extensive injuries.

Reported to Chief Executive Officer and General Managers for prompt management action (immediate – 1 month).

Moderate Issue represents a control weakness, which could have or is having moderate adverse effect on the ability to achieve process objectives.

• Moderate impact on operations of functions.

• Moderate decline in the quality and value of service delivery.

• Possible decrease in the community’s confidence in the Council.

• Breach of legislation or contractual non-compliance with threat of litigation, prosecution and / or penalty.

• Potential to cause moderate injuries.

Reported to General Managers and line managers for management action within 3 months.

Low Issue represents a minor control weakness, with minimal but reportable impact on the ability to achieve process objectives.

• Minor impact on operations of functions.

• Minimal decline in the quality and value of service delivery.

• Should not decrease the community’s confidence in the Council.

• Breach of legislation or contractual non-compliance with unlikely litigation, prosecution and / or penalty.

• Unlikely to cause injuries.

Reported to line managers for management action within 6 months (subject to competing priorities and cost / benefit analysis).

Appendix 2: Responsibility Statement

This report was prepared in accordance with the terms and conditions of the project brief signed by management and Australian auditing standards subject to the following limitations:

Our procedures were designed to provide reasonable / limited assurance as defined by Australian auditing standards, which recognises that absolute assurance is rarely attainable due to such factors as the use of judgement in gathering and evaluating evidence and forming conclusions, and the use of selective testing, and because much of the evidence available to the auditor is persuasive rather than conclusive in nature.

Because of the inherent limitations of any internal control structure, it is possible that errors or irregularities may occur and not be detected. Our procedures were not designed to detect all weaknesses in control procedures as they were not performed continuously throughout the period and the tests performed are on a sample basis.

Any projection of the evaluation of the control procedures to future periods is subject to the risk that the systems may become inadequate because of changes in conditions, or that the degree of compliance with them may deteriorate.

The matters raised in this report are only those which came to our attention during the course of performing our procedures and are not necessarily a comprehensive statement of all the weaknesses that exist or improvements that might be made. We cannot, in practice, examine every activity and procedure, nor can we be a substitute for management’s responsibility to maintain adequate controls over all levels of operations and their responsibility to prevent and detect irregularities, including fraud. Accordingly, management should not rely on our report to identify all weaknesses that may exist in the systems and procedures under examination, or potential instances of non-compliance that may exist.

Any reliance placed on internal audit reports and associated working papers, by a third party, excluding the City of Burnside and its officers, including but not limited to the external auditor, is that party’s sole responsibility.

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Item No: 5.4 To: Audit Committee Date: 16 June 2014 Author: Martin Cooper – Chief Financial Officer General Manager and Division


Contact: 8366 4202 Subject: BUSINESS SERVICE REVIEW – FINANCE STRUCTURE

(OPERATIONAL) Attachments: A. Finance Department Report I: Department Structure Prev. Resolution: N/A



2. That the Business Service Review of Finance Department Report I: Department Structure be endorsed by the Audit Committee.

Purpose

1. To provide the Audit Committee with the Business Service Review on the Finance Department structure for endorsement.

Strategic Plan






3.1. Discussions with management and staff of the Finance Department.

Statutory



Policy


Risk Assessment


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6.1. Failure to implement the recommendations arising from the Business Service Review may result in lost opportunities to achieve performance improvement opportunities in effectiveness and efficiency.

Finance

7. The following financial issues have been identified:

7.1. Failure to implement the recommendations arising from the Business Service Review may result in lost opportunities to strengthen internal controls that may potentially lead to financial losses.

Discussion

Background

8. The audit reports from the Business Service Review of the Finance Department are listed in the table below. The remaining audit reports will be provided to the Audit Committee in due course.

No Scope Audit Committee

1 Department Structure August 2013 June 2014

2 Payroll June 2013 August 2013

February 2014

3 Reconciliations, Processing of Journals, GST, FBT and Finance Systems

June 2014

4 Performance, Operational, Financial and Compliance Management

To be tabled

5 Financial Reporting To be tabled

6 Accounts Payable and Accounts Receivable June 2013 August 2013

February 2014

7 Rates August 2013 February 2014

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Analysis

9. The main objective of this Business Service Review of the Finance Department was to review the Department’s structure, operations and processes in order to:

9.1 Identify improvement opportunities in effectiveness and efficiency; and

9.2 Enhance internal controls.

10. The Business Service Review recommended business improvement opportunities as listed below (refer to the relevant sections of the attached report for details):

10.1 The value of the Finance Department to Council;

10.2 Resourcing and structure;

10.3 Interrelationships w ith other departments; and

10.4 Benchmark comparison w ith other Councils.

Conclusion

11. Management responses and action plans have been updated into the attached audit report.

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Business Service Review

Finance Department

Report I: Department Structure

Ref: 13-01 (A) October 2012

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Attachment A

Contents Executive Summary 1

Level 3 Recommendations 8



Appendix 1:Classif icat ion of Audit Findings 29

Appendix 2:Responsibility Statement 29

Distribution

For action For information

Nigel Morris General Manager – Corporate Services

Paul Deb Chief Execut ive Off icer

Louise Miller-Frost General Manager – Community & Development Services

Graeme Brow n General Manager – Urban Services

Audit Committee

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5.4 Attach A - BSR Finance Dept Report I Department Structure .doc 1

Executive Summary Objective In accordance w ith the 2013-15 Internal Audit Plan approved by the Council, w e have conducted a business service review of the Finance Department. The main object ive of this business service review of the Finance Department w as to review the department’s structure, operat ions and processes in order to: Identify performance improvement opportunit ies in effect iveness and eff iciency; and Enhance internal controls. Scope Due to the comprehensive scope of coverage, the outcomes of the business service review of the Finance Department w ill be released in several reports. T his report covered the follow ing areas: Value of the Finance Department to Council; Resourcing and structure; Interrelat ionships w ith other departments; and Benchmark comparison w ith other Councils. Future reports are expected to cover the follow ing areas of the Finance Department: Legislat ive Compliance Requirements; Internal Compliance Requirements; Accounts Receivable; Accounts Payable; Processing of Journals; Reconciliat ions; Fixed Assets; Banking; Loans; Treasury; Goods & Services Tax (GST) and Fringe Benefits Tax (FBT); Rates; Payroll; Other Functions; Finance Systems; Monthly Reports; Council Reports; Annual Business Plan, Budget, Long-Term Financial Plan (LTFP) and Annual Financial

Statements; Financial Management; Operat ional Issues; and Performance Management.

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Background The vision of Finance Department is to manage the f inancial services requirements of the City of Burnside in a comprehensive, eff icient and professional manner. The mission is to create and maintain a sustainable f inancial platform for the Council and the Community. Finance Department w ill achieve this by: (i) maintaining f inancial integrity, transparency and accountability, (ii) complying w ith relevant f inancial policies, Australian Accounting Standards and Government legislat ion, (iii) processing and managing f inancial transactions in a manner w hich supports both short and long-term f inancial sustainability, and (iv) adopting the f inancial rat io targets set by the Local Government Associat ion of South Australia. Expected service outcomes of Finance Department are: (i) the provision of t imely, accurate and relevant f inancial information and reports, and (ii) all information is prepared in accordance w ith relevant legislat ive and accounting standards requirements. Core funct ions of the department are: • Finance; • Accounts Receivable; • Accounts Payable; • Payroll; and • Rates. In 2011-12, the department presented 50 reports to Council and 6 elected member w orkshops. The Finance Department comprises 7.2 full-t ime equivalent (FTE) employees: • Manager – Finance (vacant); • Financial Accountant ; • Systems Accountant; • Finance Off icer; • Payroll Off icer; • Rates Co-Ordinator; • Rates Off icer (0.8); and • Accounts Payable Off icer (0.4). An outline of the key duties of the Finance Department is provided below .

Title Duties Financial Accountant General journal inputs daily;

Clearing suspense accounts daily; Manage, allocate and follow -up on f inance requests daily; Authorise and cross-checking invoices to Electronic Funds Transfer

(EFT) runs; End-of-month report ing; End-of-month reconciliat ions – set-up all reconciliat ions, perform own

allocated reconciliat ions, and review all other reconciliat ions performed by other staff ;

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Title Duties ‘Go-to-person’ for Finance related queries from management and staff ; Authorise electronically dow nloaded invoices (SA Water, custom f leet ,

BP, cab charges, courier, etc.) monthly; Business Activity Statement (BAS) monthly; Maintenance of grants register quarterly; Fleet analysis report bi-annually; Fringe Benefits Tax (FBT) yearly; Fees and charges schedule yearly; Commercial and operat ing lease schedule yearly; Grants acquit tal (8 Home & Community Care (HACC), proceeds of

crime, childcare links, family connections, roads to recovery, open space and environment, biodiversity, etc.);

Assist Payroll Off icer on payroll related enquiries; ‘Go-to-person’ for w ork process queries from other staff w ithin

Finance Department; Ad hoc input into Council reports and w orkshops; Previously assist Manager – Finance in complet ion of Annual Business

Plan (ABP), Annual Budget and Long-Term Financial Plan (LTFP); and Day-to-day management of the department’s operations.

Systems Accountant Assist Manager – Finance in complet ion of ABP, Annual Budget and LTFP;

Assist Manager – Finance in complet ion of annual statutory f inancial statements;

Assist Manager – Finance in managing external auditors and addressing their requests and queries such as co-ordinating responses to management letters;

Assist General Manager – Corporate Services and Manager – Finance in preparing f inance-related Council reports and workshops;

Ad-hoc special purpose projects; Credit card reconciliat ions; Management of f inance internal controls; Design, implementation and reconciliat ion of f ixed asset registers; and End-of-month and end-of-year maintenance of f inance systems.

Finance Off icer Manage the accounts receivable funct ion for debtors including leases; Assist the Manager – Finance as liaison w ith f inancial inst itut ions on

managing excess funds through transfers or investment of surplus funds w ith the Local Government Finance Authority (LGFA) or Commonwealth Bank;

Manage bank account signatories; Manage and co-ordinate cash f lows; Draw ing-dow n on Cash Advance Debenture (CAD) prior to rates

season; Co-ordinate rates received from the Rates Team; Communicate w ith Customer Service Off icers and cashiers to receive

banking daily; Journalise petty cash dockets received from cashiers for journals into

General Ledger; Perform monthly bank reconciliat ions;

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Title Duties Perform banking and reconciliat ions for the sw imming centre; Reconcile cash creditors and debtors; Manage electronic creditors – download electronic invoices; Follow -up on obtaining or cancelling invoices for purchase orders from

departments on a quarterly basis through system reports on orders pending delivery or invoicing;

‘Go-to-person’ for creditors and purchasing enquiries; Manage allocation of credit cards; Journalise payroll runs; Maintain records of elected members’ allowances; Reimburse Council’s committees; and Produce transaction reports on elected members; allowances and

other payments such as airfares and conference fees quarterly.

Payroll Off icer Manage the payroll funct ion. Maintaining staff records. Working under current Enterprise Bargaining. Processing t imesheets and overt ime claim forms. Liaison w ith Local Super. Monthly creditors payments. Apply increments. Apply salary increases.

Rates Co-Ordinator Manage the rates funct ion including generat ion, issuance, collect ion, receipt and follow -up; and

Maintain the property and rat ing database.

Rates Off icer Manage the rates funct ion including generation, issuance, collect ion, receipt and follow -up; and

Maintain the property and rat ing database.

Accounts Payable Off icer

Manage the accounts payable / disbursement funct ion; and Assist in mail distribut ion, downloading of electronic invoices, and

payroll runs.

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Assessment of the Value of the Finance Function A crit ical focus of this business service review w as to assess the level of value that the f inance funct ion provides to Council. In general, there are three levels in a b est pract ice f inance department w hich are commonly applied to public-listed companies, and w e have applied this guideline to the City of Burnside. The first level is a department that ef fect ively and eff icient ly performs its various funct ions (f inance, accounts receivable, accounts payable, payroll and rates) in a complete and accurate manner. The Finance Department has achieved the f irst level to an extent. How ever, our review identif ied opportunit ies to further improve process effect iveness and eff iciency. T hese opportunit ies represented operat ional issues that w e w ould have expected Finance management to have previously identif ied and resolved as part of their day-to-day management of the department but this w as not the case (refer to the sect ion t it led ‘ level 1 recommendations’ ). The improvement opportunit ies that w e identif ied arose from our high-level review of the allocation of responsibilit ies of staff in the department. D etailed review s of the individual funct ions w ill be covered in other reports pertaining to this business service review . W hen these detailed review s are completed, w e w ould expect further recommendations to bridge performance gaps. The second level is a department that acts as a business partner to all other departments w ithin the organisat ion. T his is achieved through the Finance Department providing advisory services to other departments to assist them in interpret ing, analysing and using f inancial information for performance review and decision-making purposes. This is beyond merely producing monthly f inancial reports for departments. This extends to assist ing departments to use f inancial data in review ing performance, ident ifying operat ional issues requiring resolut ion, and decision-making processes. T his role is usually performed by management or senior level staff members of the Finance Department. The Finance Department has achieved the second level to an extent but it has not fully achieved the expectat ions required for this level. There remains opportunit ies to enhance the department ’s role as business partner to other departments (refer to the sect ion t it led ‘ level 2 recommendations’ ). This is expected to broaden the Finance Department’s know ledge of the operat ions of other departments w hich w ould improve the department’s ability to provide complete and accurate f inancial reports. The third level is a d epartment that provides strategic advice to the Chief Executive Off icer and the Executive Team in managing the organisat ion. This involves the Finance Department providing advisory services to the Executive Team on the f inancial impact of strategic, operat ional and business decisions considered by the Executive Team. This role is usually performed by management of the Finance Department. Therefore, the Finance Department is required to play an act ive and important role in the strategic direct ion of the City of Burnside. This represents a transit ion from core f inance to organisat ional strategy. Based on our review , the Finance Department is not providing

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the desired level of value to the City of Burnside in these key responsibilit ies as there are signif icant performance gaps in the department’s contribut ion (refer to the sect ion t it led ‘ level 3 recommendat ions’ ). The recommendations arising from our business service review are presented as levels 3, 2 and 1 recommendations in accordance w ith the three levels assessed as comprising a best pract ice f inance funct ion. Therefore, the recommendations arising from our business service review represent the pathway for the City of Burnside’s Finance Department to achieve a best practice finance function.

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Level 3 Provides strategic advice to the Chief Executive Off icer

and the Executive Team in managing the organisat ion. Provides advisory services to the Executive Team on the

f inancial impact of strategic, operat ional and business decisions considered by the Executive Team.

This role is usually performed by management of the Finance Department.

Therefore, the Finance Department plays an act ive and important role in the strategic direct ion of the City of Burnside.

This represents a transit ion from core f inance to organisational strategy.

Level 2 Acts as a business partner to all other departments

w ithin the organisat ion. Provides advisory services to other departments to

assist them in interpret ing, analysing and using monthly f inancial reports for performance review and decision-making purposes.

Beyond merely producing monthly f inancial reports for departments.

Extends to assist ing departments to use the monthly f inancial reports in review ing performance, identifying operational issues requiring resolut ion, and decision-making purposes.

This role is usually performed by management or senior level staff members of the Finance Department.

Level 1 Effect ively and eff icient ly performs its various funct ions

(such as accounts receivable, accounts payable, f ixed assets, reconciliat ions, report ing and budget ing) in a complete and accurate manner.

Best Practice Finance Function

Key Features City of Burnside – Finance Department (Status)

Where We Are At

Where We Need To Be

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Level 3 Recommendations 1. Transition from Core Finance to Organisational Strategy Findings and impact

Whilst f inancial management is a fundamental responsibility of the posit ion of the Manager – Finance, the role of strategic advisor to the Executive Team represents the highest value that the finance function provides to the City of Burnside. This involves the Manager – Finance providing complete, accurate, relevant and reliable financial information to Council and the Executive Team in a time-efficient manner to ensure that strategic and business decisions are grounded on solid financial data. This f inancial information generally takes the follow ing forms: • Annual Business Plan (ABP); • Budget; • Long-Term Financial Plan (LTFP); • Finance-related reports to Council and Executive; • Finance-related presentat ions to Elected Member workshops; • Presentat ions at Council meetings; and • Presentat ions at Audit Committee meetings.

To facilitate this, it is imperative that the Manager – Finance is surrounded by a high-performing finance team to enable the manager to shift focus from core finance to organisational strategy.

Based on our review , the Finance Department is not providing the desired level of value to the City of Burnside in these key responsibilit ies as there are signif icant performance gaps in the department’s contribut ion.

We were advised by the General Manager – Corporate Services that the strategic documents such as ABP, Budget and LTFP were completed only prior to the deadlines for presentat ion to Elected Members – this allowed minimal t ime for review and revision by the Executive Team. Signif icantly, these strategic documents as well as other f inance-related reports to Council and Executive contained numerous errors by the Finance Department (some examples below). We use the term ‘ reports’ below to include ABP, Budget, LTFP and f inance-related reports to Council and executive. • Some reports were completed almost three weeks past deadline; • Some reports were completed up to the day prior to distribut ion to Council; • Some reports did not capture the f igures passed by Council resolut ions; • Some reports contained outdated information or failed to capture the latest information; • Some errors were f inancial data whilst other errors related to paragraphs or sentences of

text; • Some reports contained incomplete, inaccurate or incorrect ly classif ied f inancial data; • Some reports contained incorrect support ing details that led to misleading conclusions

made by Council and Executive; • Some errors referred to summary f inancial data that did not match the total of support ing

data;

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• Some reports alluded to adjustments required but these adjustments were not captured in the f inancial data;

• Some reports contained incorrect resolut ion of previously identif ied errors; • The majority of the abovementioned errors w ere identif ied and resolved by the General

Manager – Corporate Services (and not the Finance Department); • Many reports were wholly completed by the General Manager – Corporate Services; and • All f inance –related workshops to Elected Members were w holly completed by the General

Manager – Corporate Services. Failure to provide complete and accurate reports represents an effect iveness improvement opportunity. Failure to provide reports in a t imely manner represents an eff iciency improvement opportunity. Therefore, the value of the City of Burnside’s Finance Department was focused on core f inance w ith impaired contribut ion to organisat ional strategy and decision-making.

Recommendations

1. We recommend that executive adopt the prescribed three-level best pract ice f inance funct ion as the model for assessing the value that the Finance Department provides to the City of Burnside.

Management Response

Agreed.

A Chief Financial Off icer commenced employment w ith the City of Burnside on 10/12/12. A proposed restructure of the Finance funct ion (01/07/13) w ill facilitate the adoption of the three-level best pract ice f inance function.

Update 28/4/14: Implemented August 2013.

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Current Finance Structure

Finance Officer (Level 3/4)

Rates Officer (0.8) + (0.2) (Level 3/2)

Finance Clerk (0.4) (Level 3/4)

General Manager Corporate Services

CFO (6 Direct Reports)

Systems Accountant (Level

6/3)

Financial Accountant (Level

6/3)

Payroll Co-ordinator (Level 4/3)

Rates Co-ordinator (Level 4/4)

City of Burnside Finance Department - August 2013

MO8

MO6

MO5

MO4

MO3

Trainee

Level 3

Accounts Payable Officer (0.4)

Rates Officer (0.8) & (non FTE 0.2)

Trainee Accountant

Level 1

General Manager Corporate Services

CFO (2 Direct Reports)

Finance Manager

Finance Business Partner

Coordinator Rates & Finance

Payroll Officer Finance Officer

Level 2

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2. We recommend that executive adopt the follow ing report ing model for f inance-related reports to Council and Executive and f inance-related w orkshops to Elected Members (the term ‘ report ’ is used below to refer to both responsibilit ies):

• Whilst some of these tasks may be delegated to senior members of the Finance Department, the Manager – Finance is chief ly responsible for collat ing all data and w rit ing the executive summaries of f inance-related reports for Council and executive;

• There is a high level of data integrity as there are minimal or insignif icant errors or omissions in the f inance-related reports;

• The vast majority of these errors or omissions (we propose a benchmark standard of 90%) are identif ied and resolved on a prompt basis by the Manager – Finance prior to releasing the reports to the General Manager – Corporate Services;

• The Manager – Finance is accountable for releasing the f inance-related reports to the General Manager – Corporate Services w ith suff icient t ime allowed for review and revision by the Executive Team;

• The General Manager – Corporate Services should not be required to prepare data or spend an excessive amount of t ime review ing the accuracy of data;

• Only minimal errors or omissions (we propose a benchmark standard of 10%) are identif ied by the General Manager – Corporate Services;

• The errors identif ied by the General Manager – Corporate Services are resolved correct ly and promptly by the Manager – Finance;

• The General Manager – Corporate Services should not be required to prepare the executive summaries of f inance-related reports as his focus should be enhancing the executive summaries prepared by the Manager - Finance;

• At an overall level, the f inance-related reports prepared by the Manager – Finance should signif icantly (w e propose a benchmark standard of 90%) meet the needs of Council and executive w ith moderate to minimal (we propose a benchmark standard of 10%) enhancement by the General Manager – Corporate Services; and

• The Manager – Finance is chief ly responsible for presenting f inance-related reports at meetings of Council and Audit Committee. The General Manager – Corporate Services is responsible for providing the strategic context in w hich the f inancial information is presented.

It is expected that these recommendations would enable the Finance Department to produce quality, relevant and reliable f inance-related reports in an ef f icient manner that meets the information needs of Council and Executive that assists them in their strategic planning and decision making. Through this, the Finance Department has enhanced its value to the City of Burnside.

Management Response

Agreed - w ith the exception of the benchmarking of errors or omissions. This w ill be dif f icult to measure as recommended. The General Manager – Corporate Services should receive t imely, high-quality reports from the Finance Department (via the Chief Financial Off icer) w ith zero/minimal errors or omissions. Performance on this matter can be assessed by the General Manager – Corporate Services w ith appropriate feedback to the

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Chief Financial Off icer.

Update 28/4/14: The Chief Financial Off icer role has replaced all of the above references to The Manager – Finance and is responsible for the quality of all f inancial report ing to the General Manager Corporate Services and Executive.

3. We recommend that executive target and appoint a new Manager - Finance who has the experience and expert ise to fulf il the above requirements in addit ion to the standard prerequisites for this role. Whilst the abovementioned report ing model ref lects a best pract ice f inance funct ion, this would only be achievable if the appropriate people are engaged in meeting these requirements.

Management Response

Agreed – Chief Financial Off icer commenced employment w ith the City of Burnside on 10/12/12.

4. We recommend that executive appoint a Team Leader w ho must possess the capabilit ies to support the Manager – Finance in discharging the abovementioned requirements in order for the f inance funct ion to transit ion from core f inance to organisat ional strategy.

Management Response

Agreed – the Chief Financial Off icer has covered this recommendation in the proposed Finance restructure (01/07/13).

Update 28/4/14: A Finance Manager was appointed in August 2013. Responsibility Chief Financial Off icer (Mart in Cooper).

Target date Completed August 2013

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Level 2 Recommendations 1. Finance Business Partnership Model Findings and impact

In theory, the Finance Department is posit ioned as a support funct ion to all other departments. This model involves the Finance Department performing the core f inancial processes whilst providing advisory services to assist other departments in understanding, review ing and analysing the f inancial impact of the departments’ operat ions.

In pract ice, we were advised by the Finance Department that the department is essentially performing all f inance-related tasks and addressing all f inance-related enquiries for other departments, i.e. the departments hold the view that all f inance-related issues should be wholly managed by the Finance Department.

We were advised by the Finance Department that there appears to be a lack of basic know ledge amongst department managers on where to retrieve f inancial information, how to interpret such information, how to understand the f inancial impact of departmental processes or operat ing decisions, how to manage actual expenditure against budget, how to forecast potential cost overruns, and how to refrain from covering budget overruns by allocating expenditure from deficit to surplus accounts.

Whilst this was not raised by the Finance Department, our review identif ied that on the other side of the relat ionship, there are also opportunit ies to enhance the Finance Department ’s know ledge and understanding of the business operations of other departments.

We were advised by the General Manager – Corporate Services that the Annual Business Plan (ABP), Budget and Long-Term Financial Plan (LTFP) as well as f inance-related reports for Council and executive were completed only prior to deadlines, and these strategic documents and reports contained numerous errors. Many of these errors should have been identif ied and resolved by management of the Finance Department as a reasonable know ledge and understanding of the business operations of other departments would have resulted in the elimination or reduction of most of these errors.

Recommendations

5. We recommend that executive implement the Finance Business Partnership Model through the follow ing formalised arrangements between the Finance Department and other departments:

• Every department should be allocated to a member of the Finance Department as their Finance Business Partner. Depending on executive’s decision as to which members w ithin the Finance Department possess the experience and expert ise for this role, some members of the Finance Department may be responsible for one or more departments.

• Each department should endeavour to refer to their Finance Business Partner for advisory services on f inance-related matters pertaining to their department.

• The Finance Business Partner should formally meet w ith the department manager every month to review that department’s statement of income and expenditure, review

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actual against budget performance, determine the operat ional cause of signif icant variances, understand the nature of major cost drivers, forecast potential cost overruns, identify act ion plans to mit igate cost overruns, provide advice on mechanisms to monitor costs, and any other relevant issue.

• It is the object ive of the Finance Business Partner to educate the department manager on the f inancial impact of key decisions being considered or made relat ing to that department’s funct ions as well as its projects and programs. This is to avoid operational decisions being made w ithout full understanding and considerat ion of its f inancial implicat ions. This is expected to enhance management decision-making processes.

• It is the object ive of the Finance Business Partner to transfer suff icient f inancial know ledge to the department manager or other relevant staff member so that the department is able to manage f inancial-related tasks that fall under that department’s responsibility. This is to eliminate or minimise the departments transferring all f inancial-related tasks to the Finance Department w hen it is more effect ive and eff icient for the department to retain these duties.

• This model should be init ially reviewed after 6 months to ensure that it delivers the benefits expected. Subsequently, this model should be reviewed on an annual basis for continuous improvement.

It is expected that the Finance Business Partnership Model would deliver the follow ing benefits: • Strengthen the relat ionship between the Finance Department and other departments; • Enhance the effect iveness of the Finance Department in providing advisory services to

other departments; • Enhance the Finance Department ’s know ledge of other departments; • Enhance the other departments’ know ledge of f inancial implicat ions on their

departments’ functions; • Enhance the other departments’ ownership of f inance-related issues arising from their

departments’ act ivit ies; • Enhance the effect iveness of the Finance Department in producing complete and

accurate ABP, Budget and LTFP as well as f inance-related reports to Council and Executive; and

• Enhance the eff iciency of the Finance Department in producing the ABP, Budget and LTFP as well as f inance-related reports to Council and executive in a t imely manner.

Through this, the Finance Department has enhanced its value to the City of Burnside.

Management Response

Agreed but w ithin exist ing resourcing constraints.

As it stands, the Finance funct ion is not suff icient ly resourced to provide allocated Business Partners to every department. Suitable experience and expert ise is also a key requirement to perform this role well and add real value to Council.

The proposed restructure of the Finance function provides for a Finance Business Partner (see the Finance Department July 2013 organisat ion structure in the response to Recommendation 1. and the attached Posit ion Descript ion) for implementation from

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01/07/13.

Update 28/4/14: The full implementation of the Finance Business Partner role was hampered by an 8-month long WorkCover claim. This was f inalised in March 2014 w ith the resignation of the Financial Accountant. Contract cover for the role is in place w ith a view to permanent recruitment after the 2013/14 Financial Year End. Recruitment for the Trainee Accountant role has been postponed until July 2014 to fund a temporary Finance Business Support Project role until 27/6/14.

6. Whilst the abovementioned requirements ref lect a best pract ice f inance funct ion, this would only be achieved if the appropriate people are engaged in meeting these requirements. Therefore, w e recommend that executive assess which members of the Finance Department possess the capabilit ies to discharge the requirements of the Finance Business Partnership Model.

Management Response

Agreed.

As part of the Finance function restructure consultat ion and implementat ion a training needs analysis w ill be undertaken.

Appropriate training, management overview and performance management w ill be undertaken to ensure that the requirements of the Finance Business partnership model are fully discharged.

Update 28/4/14: This w ill be addressed through the Finance Business Partner contractor and permanent recruitment process in September/October 2014.

Responsibility Chief Financial Off icer (Mart in Cooper).

Target date In progress. Expected to be completed by October 2014

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2. Preparation of Annual Business Plan, Budget and Long-Term Financial Plan Findings and impact

There are signif icant opportunit ies to improve the effect iveness and ef f iciency of the Finance Department ’s preparat ion, review and presentat ion of the Annual Business Plan (ABP), Budget and Long-Term Financial Plan (LTFP) to Executive, Elected Members and the Community.

• We were advised by the General Manager – Corporate Services that signif icant components of the ABP, Budget and LTFP were w holly completed by the General Manager – Corporate Services.

• We were advised by the General Manager – Corporate Services that he had detected many errors in various drafts of the ABP, Budget and LTFP. This ineffect iveness resulted in rushed rect if icat ion of these errors w hich compromised the t ime available to the Executive Team to review the ABP, Budget and LTFP to the level of depth desired.

• We were advised by the General Manager – Corporate Services that various drafts of the ABP, Budget and LTFP were completed only prior to the deadlines. This ineff iciency resulted in insuff icient t ime for Executive to review the ABP, Budget and LTFP to the level of depth desired.

Whilst there is no indication that there are exist ing signif icant errors w ithin the ABP, Budget and LTFP, this ineff iciency may have adversely impacted the Executive Team’s ability to enhance the completeness, accuracy, quality and reliability of the ABP, Budget and LTFP.

Recommendations

7. We recommend that executive formally review the entire process of completing the ABP, Budget and LTFP w ith the follow ing object ives:

• Determine w hich personnel in the Finance Department possess the experience and expert ise to prepare the strategic documents;

• Develop a formal program detailing the procedures to be performed and the information to be obtained so that the process is documented, systematic, orderly and eff icient;

• Formalise pre-determined milestone targets;

• Ensure that there is suff icient t ime for errors to be identif ied and resolved, and for Council and Executive to review these documents to the level of depth desired; and

• Manage procedures against deadlines in a disciplined manner.

Management Response

Agreed.

The 2013/14 Annual Business Plan and Budget was prepared for the General Manager – Corporate Services by the Strategic & Corporate Planner (Belinda Portelli) and the Chief Financial Off icer (Mart in Cooper).

The Long Term Financial Plan was updated in January 2013 by the Chief Financial

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Off icer.

A review of lessons learnt / improvements w ill be undertaken w ith the General Manager – Corporate Services in Quarter 1 2013/14.

Update 28/4/14: In line w ith the previous year, the 2014/15 Draft Annual Business Plan and Budget was prepared for the General Manager – Corporate Services by the act ing Strategic & Corporate Planner, the Strategic Community Engagement Off icer, the Finance Manager and the Chief Financial Off icer.

The Long Term Financial Plan was updated in April 2014 by the Chief Financial Off icer.


Target date Completed April 2014

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Level 1 Recommendations 1. Structure of the Payroll Function Findings and impact

The structure of the payroll funct ion w ithin the Finance Department or the Organisational Development and Governance Department (equivalent of Human Resources Department) varies across Councils. The main benefit of structuring the payroll funct ion w ithin the Finance Department is the expectat ion that there w ould be appropriate and robust controls over payroll risks due to the funct ion being managed by a manager w ith f inancial expert ise (this does not imply that management of the Organisat ional Development and Governance Department do not have suff icient know ledge of internal controls over payroll risks). The main benefit of structuring the payroll funct ion w ithin the Organisat ional Development and Governance Department is the improved co-ordination of w ork processes due to the close linkage between human resources and payroll act ivit ies:

• Interpretat ion and applicat ion of the terms and condit ions of the enterprise agreements for administrat ion and depot staff ;

• Addressing enquiries from employees part icularly relat ing to the enterprise agreement, t imesheets and other issues; and

• Appointment of new employees, transfers between departments, salary increments, annual salary revision, appointment of higher duties and their associated administrat ion and paperwork.

Recommendations

8. We recommend that executive re-assess and determine the most appropriate structure for the payroll function, i.e. whether to retain the funct ion w ithin the Finance Department or whether to transfer the funct ion to the Organisat ional Development and Governance Department.

Management Response

Duplicat ion of Recommendation 19. Business Service Review Finance Department Report II: Payroll. Response presented to Audit Committee 5 June 2013 and to Council 25 June 2013.



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2. Ownership of the Annual Business Plan Findings and impact

The 2012-13 Annual Business Plan & Budget contained the follow ing sect ions: • Our Vision and Strategic Direct ion; • Our Commitment to Financial Sustainability; • Annual Financial Budget Overview ; • Departmental Summaries; • Rating Strategy; and • Statutory Financial Statements.

Section 123 (1) of the Local Government Act, 1999 states that a Council must have for each f inancial year (a) an annual business plan; and (b) a budget.

Section 123 (2) of the Local Government Act, 1999 states that each annual business plan of a Council must (a) include a summary of the Council' s long-term object ives (as set out in its strategic management plans); and (b) include an outline of (i) the Council' s object ives for the f inancial year; and (ii) the act ivit ies that the Council intends to undertake to achieve those object ives; and (iii) the measures (f inancial and non-f inancial) that the council intends to use to assess the performance of the Council against its object ives over the f inancial year; and (c) assess the f inancial requirements of the Council for the f inancial year and, taking those requirements into account, set out a summary of its proposed operating expenditure, capital expenditure and sources of revenue; and (d) set out the rates structure and policies for the f inancial year; and (e) assess the impact of the rates structure and policies on the community based on modelling that has been undertaken or obtained by the Council; and (f ) take into account the Council' s long-term f inancial plan and relevant issues relat ing to the management and development of inf rastructure and major assets by the Council; and (g) address or include any other matter prescribed by the regulat ions.

Section 123 (7) of the Local Government Act, 1999 states that each budget of a Council must (a) be considered in conjunction w ith the council' s annual business plan (and must be consistent w ith that plan, as adopted); and (b) be adopted by the Council after the Council has adopted its annual business plan.

Sections 123 (3), (4), (5), (5a) and (6) refer to distribut ing the Annual Business Plan and Budget for public consultat ion prior to approval by the Council.

Recommendations

9. On the basis that a signif icant component of the Annual Business Plan is related to the domain of strategic management, we recommend that executive consider allocating the primary responsibility for preparing the Annual Business Plan to the Strategic & Corporate Planner. The Finance Department should cont inue to provide all f inance-related data.

Management Response

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Agreed & implemented for 2013/14 Annual Business Plan and Budget process.

10. On the basis of the linkage between the Annual Business Plan and Budget, the Finance Department should retain its responsibility for preparing the Annual Budget.

Management Response


11. On the basis of the public consultat ion, the Corporate Communications Off icer should be responsible for the consultat ion process for the Annual Business Plan and Budget.

Management Response




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3. Back-Up Findings and impact

Whilst we were advised that the issue of back-up was raised by staff of the Finance Department, there was no act ion from management to identify and t rain a back-up for each team member.

Recommendations

12. We recommend that executive implement a back-up act ion plan that considers the follow ing requirements:

• Identify a back-up for each team member including the manager of the Finance Department;

• Ensure that the back-up receives adequate and suff icient init ial training from the incumbent;

• Schedule subsequent regular refresher updates for the back-up w ith the incumbent;

• Identify urgent tasks of each team member including the manager of the Finance Department;

• Develop procedures to manage the urgent tasks in the event that the staff responsible for these tasks has planned or unplanned absence from w ork; and

• As the payroll function is dif f icult to process if the back-up is not regularly responsible for payroll act ivit ies, it may be more feasible to appoint a contractor from CHRIS (the suppliers of the payroll system) whenever a back-up is required.

Management Response

Agreed. The Chief Financial Off icer has worked w ith the members of the Finance team to identify urgent tasks that need to be covered during planned or unplanned absence from work. Posit ion Descript ions have been updated to facilitate formal back-up arrangements. Training has and w ill be provided as required.

A contractor w ith CHRIS experience was recruited temporarily to provide Payroll cover for planned leave and other options are being considered for the future.

It is planned that all crit ical tasks undertaken by members of the Finance team w ill be covered by one or more members of the team by the start of October 2013.

Update 28/4/14: The only crit ical task that cannot be covered in-house is the payroll funct ion. Currently, the department would be reliant on a temporary contractor w ith Chris 21 experience to cover long periods planned or unplanned leave.


Target date Completed October 2013

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4. Senior Finance Team Members Findings and impact

The Financial Accountant and the Systems Accountant are the senior members of the team that assist the Manager – Finance in managing the department, its act ivit ies and its staff .

Our review of the responsibilit ies of the Financial Accountant and the Systems Accountant identif ied that there was lack of clarity as to their responsibilit ies, some responsibilit ies have changed over t ime, and there were opportunit ies to reallocate duties to ensure improved eff iciency part icularly in the higher-level departmental processes such as report preparat ion, provision of advisory services to department managers, and review of w ork performed by the team. This was confirmed by discussions w ith the Financial Accountant and the Systems Accountant .

Recommendations

13. We recommend that executive review and re-define the responsibilit ies of the Financial Accountant and the Systems Accountant to ensure (i) clarity in their responsibilit ies, (ii) more eff icient execution of dut ies, and (iii) bet ter matching of duties w ith their experience and skills. T his process should consider (i) the responsibilit ies and duties of the new Manager – Finance, (ii) the new Team Leader and (iii) the future structure of the department. Executive should note that the confirmation of responsibilit ies of the Financial Accountant and the Systems Accountant w ill be dependent on the outcome of other recommendations contained w ithin this report.

Management Response

Agreed. Clarif icat ion of the responsibilit ies of the Financial Accountant and Systems Accountant was a key component of the July 2013 Finance Restructure. Two new Posit ion Descript ions have been created to address this and the other recommendations contained w ithin this report:

• Finance Manager replaces the Systems Accountant role (see attached Posit ion Descript ion)

• Finance Business Partner replaces the Financial Accountant role (see attached Posit ion Descript ion).


Target date Completed July 2013

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5. Position Descriptions Findings and impact

The Posit ion Descript ions of staff of the Finance Department are outdated and do not ref lect their present responsibilit ies and duties.

We confirmed w ith the Organisat ional Development and Governance Department that there is no exist ing procedure to regularly review and update Posit ion Descript ions. The Organisational Development and Governance Department are aware of this, and have updated Posit ion Descript ions as a mandatory process whenever a new employee is recruited since the past 12 months. We were advised by the department that approximately 30-40% of all Posit ion Descript ions in the organisat ion were updated through this process. However, the Posit ion Descript ions for the remainder of continuing employees have not been updated.

Recommendations

14. We recommend that executive implement the requirement for all management and staff Council-w ide to update their Posit ion Descript ions as part of the annual Performance Development Review (PDR) process. This w ill ensure that Posit ion Descript ions remain relevant to each role. Updating the Posit ion Descript ions on an annual basis is not considered to be onerous as most roles may only have changed slight ly w ithin the year so any revision required w ould be minimal. If roles have changed signif icantly, then this in itself warrants updating the Posit ion Descript ions.

Management Response

Not agreed. Posit ion Descript ions are reviewed on an ongoing basis whenever there is Organisat ional Change, Recruitment or reclassif icat ion.

The Posit ion Descript ion is about the ‘posit ion’ The Performance Development Review is about the persons ‘Performance’ . The person’s performance is being reviewed so that is can be modif ied / addressed to meet the requirements of the posit ion, not the posit ion being modif ied to meet the ability of the person.

The Posit ion Descript ions of each member of the Finance Team have been reviewed and updated as part of the July 2013 Finance Restructure (see attached Posit ion Descript ions).


Target date Completed July 2013.

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6. Efficiencies in Payroll Findings and impact

There are opportunit ies to enhance the eff iciency of the follow ing payroll processes:

The Payroll Off icer spends approximately four hours every payroll run on follow ing-up w ith (i) staff who failed to submit t imesheets, (ii) managers and team leaders who failed to approve t imesheets and (iii) staf f w ith inconsistencies between their t imesheets and the Employee Self Service (ESS) System.

This has resulted in an unnecessary w astage equivalent to one working day every month.

Recommendations

15. We recommend that executive implement the follow ing procedure:

• The Payroll Off icer provides list ings of (i) all staff who failed to submit t imesheets, (ii) all managers and team leaders w ho failed to approve t imesheets and (iii) all staff w ith inconsistencies between their t imesheets and the ESS to department managers every payroll run. The department managers are responsible for follow ing-up w ith the relevant staff . I t should no longer be the responsibility of the Payroll Off icer to follow -up w ith staff .

• All outstanding or incomplete t imesheets should be approved and submitted before the end of the week.

It is expected that transferring the responsibility for follow ing-up on outstanding or incomplete t imesheets to department managers should increase their diligence on communicating and enforcing the appropriate submission of t imesheets w ith their department’s staff .

Management Response

Duplicat ion of Recommendation 18. Business Service Review Finance Department Report II: Payroll. Response presented to Audit Committee 5 June 2013 and to Council 25 June 2013.


Target date Completed June 2013

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7. Reallocation of Duties Findings and impact

We reviewed the duties of staff of the Finance Department and we identif ied the follow ing opportunit ies to (i) transfer some duties to other departments, (ii) reallocate duties to other team members w ithin the department or (ii) propose recommendations to improve process eff iciencies w ithin the Finance Department. However, we would have expected that Finance management w ould have previously identif ied and resolved these issues as part of their day-to-day management.

• Grant acquit tals are performed by the Financial Accountant (17 grants were acquit ted in 2011-12) and signed-off by the relevant department but these departments do not manage this process.

• Some of the follow ing duties of the Financial Accountant are duties that are not compatible w ith a senior member of the team; these duties should be reallocated to other team members to free up t ime for the Financial Accountant to focus on more senior level responsibilit ies: (i) daily general journal inputs, (ii) daily clearing of suspense accounts, (iii) maintenance of the grants register, (iv) fees and charges schedule and (v) commercial and operating lease schedule. D uties for the Business Activity Statement (BAS) and Fringe Benefits Tax (FBT) may be transferred depending on the experience of the team member.

• The Systems Accountant performs the credit card reconciliat ions for approximately 14 corporate credit cards which consumes an average of four hours every month. Due to the seniority of the Systems Accountant, the responsibility for reconciliat ions should be reallocated to other team members so that the Systems Accountant is able to devote more t ime for senior level dut ies.

• There are opportunit ies to enhance the eff iciency of the accounting arrangements between the Finance Department and the Pepper Street Arts Centre (‘Pepper Street’ ). Art ists sell their artwork at the Pepper Street Art Centre. S ales are receipted by Pepper Street into MYOB. Pepper Street’s EFTPOS sales are ident if iable in the bank statements. Pepper Street performs the cheque banking every week. This information is sent to the Finance Off icer every week for cross-checking to the bank statement. Pepper Street e-mail all t ransactions to the Financial Accountant for confirmation of accurate treatment of GST. The Financial Accountant requests the Finance Off icer to check that the journal amount is consistent w ith banking records. When this is confirmed, the Financial Accountant posts the journal to cash-at-bank. Pepper Street provides the bank account details of the art ists to the Accounts Payable Off icer. The Accounts Payable Off icer pays all the art ists. A new supplier account is created for each new art ist. This is the exist ing arrangement between the Finance Department and Pepper Street. Previously, Pepper Street was responsible for its own accounting and record-keeping. We were advised that the Information Systems Off icer is presently invest igating options for enhancing the eff iciency of the accounting arrangements between the Finance Department and Pepper Street .

• The Finance Off icer processes the payroll journals w hich could be t ransferred to the Payroll Off icer.

• The Finance Off icer processes the petty cash for the Customer Services Team. There may be an opportunity to transfer this responsibility to the Customer Services Team for improved eff iciency.

• The Accounts Payable Off icer (0.4 FTE) was paid 415 addit ional hours (this was paid

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as normal hours and does not constitute overt ime) of work amounting to over $13,000 in 2011-12.

• We were advised by the Rates Co-Ordinator and the Rates Off icer that the Rates Off icer spends an excessive amount of t ime processing property rate searches. The average amount of searches is 140 every month at an est imated 5 minutes per search totalling 12 hours per month. Some searches are requested to be faxed. A ll searches have to be receipted by the Customer Services Team. Urgent searches require further liaison w ith the Customer Services Team. A potential solut ion may be the acquisit ion of eTrack, a software linked to the Property and Rat ing System that enables users to perform online searches, submit payment for the search fees, and direct ly receive the report detailing the search results. This addit ion may also enable online submission of development applicat ions, addit ional bin applicat ions and mini-skip permits as well as debtor payments.

• The Rates Team has absorbed some rates-related administrat ive duties transferred from the Customer Services Team. In return, the Customer Services Team is responsible for responding to general rate enquiries from the community. Despite providing all necessary information on rates to the Customer Services Team every quarter prior to issuance of not ices, providing general training on rates to the Customer Services Team and regularly updating rates information on the Council’s website, we were advised by the Rates Team that they continue to receive general enquiries that should have been absorbed by the Customer Services Team. We were advised by the Co-Ordinator - Customer Services & Events (Jasmin Munslow) that the recent extra workload on the Customer Services Team due to accepting duties transferred from another department and attending to enquiries on t he three bins system has prevented the team from addressing rates-related general enquiries.

• The staff level and employment hours of a team member is being reviewed by Executive.

Recommendations

16. We recommend that executive consider the follow ing options: • Transfer the responsibility for grants acquittal to the ow ner departments as this is

expected to strengthen the department’s understanding of the f inancial implicat ions of managing the grant program;

Management Response

Agreed & completed second half 2012/13. • Reallocate the follow ing responsibilit ies from the Financial Accountant to another team

member in the Finance Department (i) daily general journal inputs, (ii) daily clearing of suspense accounts, (iii) maintenance of the grants register, (iv) fees and charges schedule and (v) commercial and operat ing lease schedule;

Management Response

Agreed & completed June 2013 – see attached Finance Business Partner Posit ion Descript ion. • Reallocate the responsibility for credit card reconciliat ions from the Systems

Accountant to another team member in the Finance Department; Management Response

Agreed & completed June 2013 – see attached Finance Manager and Finance Off icer Posit ion Descript ions.

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• Follow -up on the options investigated by the Information Systems Off icer to enhance the eff iciency of the accounting arrangements between the Finance Department and Pepper Street;

Management Response

Agreed. To be completed by second half 2013/14.

Update 28/4/14: The follow ing improvements have been implemented which have made the accounting for Pepper Street more eff icient for all. • Previous GST problems have now been f ixed and the import of Pepper Street

transactions are again being imported into Finance 1 by Pepper Street staff , once the Finance Off icer has balanced bank statement of receipts journal is posted.

• A payment import f ile has now been created to replace the Accounts Payable Off icer manually entering all payments for art ists tw ice a w eek.

• Import f ile is now included w ith the 1st payment run of the month • Pepper Street have sent out letters to all current suppliers requesting EFT details and

new Statement of Supplier forms • Pepper Street are advising new art ists that EFT payments are the only option for

payments • New version MOYB has been ordered and w ill be tested in the forthcoming weeks

along w ith training of Pepper Street Staff

• Reallocate the responsibility for processing the payroll journals from the Finance Off icer to the Payroll Off icer;

Management Response Agreed & completed May 2013.

• Transfer the responsibility for petty cash from the Finance Off icer to the Customer Services Team for improved eff iciency.

Management Response Agreed. To be discussed w ith Customer Services in June 2013 and w ith agreement, implemented Q1 2013/14. Update 28/4/14: This is st ill w ith Finance pending the investigation of the Charles Sturt process. They st ill receipt to one GL Account number but w ith 2 dif ferent format options i.e. GST or non GST entries. At the end of the month they then produce a report which is used for a Journal to transfer payments to the allocated accounts.

• Consider review ing the FTE for the Accounts Payable Off icer from 0.4 to 0.6 to more accurately ref lect the actual cost of this resource.

Management Response The extra hours w orked by the Accounts Payable Off icer for the 2013/13 Financial Year up to week 25, totalled 523.5 hours w hich equates to 0.6 FTE. This included annual leave cover for the Finance Off icer in May 2013. Before the FTE is reviewed, any eff iciency improvements arising from the new Finance structure and the conclusion of a Business Systems review of the Procure to Pay process undertaken in June 2013 need to be evaluated. This is targeted for complet ion during the f irst half of 2013/14. Update 28/4/14: Progress on the development and implementation of an invoice query workf low process has been delayed by staff turnover and WorkCover injury. The Accounts Payable Off icer has had to continue working the addit ional hours. Update

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11/6/14: Administrat ion is trialling a part-t ime casual administrat ive resource via Barkuma to reduce the extra hours and cost w hilst w ork on process improvements w ill continue.

• Consider preparing a budget submission for eTrack as an enhancement to the property and rat ing system. Implementat ion costs excluding IT resourcing would be approximately $20,000 w ith an addit ional $2,000 p.a. for software maintenance;

Management Response Agreed. Finance w ill be joining Development Services w ith a b usiness case for the purchase of this software for 2013/2014. Update 28/4/14: A business case was prepared, submitted and accepted for inclusion in the draft 2014/14 Budget.

• The rates team provide introductory training to the recently appointed two new members of the Customer Services Team so that they are equipped to handle rates-related general enquiries. The rates team continue to provide refresher training to all members of the Customer Services Team at least every 12 months.

Management Response Agreed. Introductory Rates training has not been provided to the Customer Services Team for some t ime. This is to be discussed between the Finance and Customer Services teams at a meeting scheduled for the end of June 2013 and w ill be implemented by agreement. Update 28/4/14: Training for the CS staff was undertaken in August 2013. Refresher training has also been arranged for July 2014 before the new f/y rate notices are delivered. We are also providing ad hoc training whenever there is new CS staff .

• Adequate and suff icient just if icat ion such as level of responsibility, complexity of dut ies performed and comparison w ith other Councils should be obtained as support ing evidence to just ify revisions in staff levels.

Management Response Agreed. As part of the business service review of the Finance Department, a comparative study of several similar-sized Councils’ Finance Departments was compiled. This was provided to the CEO and General Manager Corporate Services but not included in any of the audit reports as the Finance Managers from these Councils requested confidentiality. This information w as used as reference for the proposed Finance restructure in July 2013.


Target date Work in progress, target complet ion December 2014

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Appendix 1: Classif icat ion of Audit Findings

Rating Definition Examples of Impact Action Required

High Issue represents a control w eakness, w hich could have or is having major adverse effect on the ability to achieve process object ives.

• Major impact on operat ions of funct ions.

• Major decline in the quality and value of service delivery.

• Probable decrease in the community’s conf idence in the Council.

• Breach of legislat ion or contractual non-compliance w ith probable lit igat ion, prosecut ion and / or penalty.

• Potent ial to cause life threatening or extensive injuries.

Reported to Chief Execut ive Off icer and General Managers for prompt management act ion (immediate – 1 month).

Moderate Issue represents a control w eakness, w hich could have or is having moderate adverse effect on the ability to achieve process object ives.

• Moderate impact on operat ions of funct ions.

• Moderate decline in the quality and value of service delivery.

• Possible decrease in the community’s conf idence in the Council.

• Breach of legislat ion or contractual non-compliance w ith threat of lit igat ion, prosecut ion and / or penalty.

• Potent ial to cause moderate injuries.

Reported to General Managers and line managers for management act ion w ithin 3 months.

Low Issue represents a minor control w eakness, w ith minimal but reportable impact on the ability to achieve process object ives.

• Minor impact on operat ions of funct ions.

• Minimal decline in the quality and value of service delivery.

• Should not decrease the community’s conf idence in the Council.

• Breach of legislat ion or contractual non-compliance w ith unlikely lit igat ion, prosecut ion and / or penalty.

• Unlikely to cause injuries.

Reported to line managers for management act ion w ithin 6 months (subject to competing priorit ies and cost / benef it analysis).

Appendix 2: Responsibility Statement

This report w as prepared in accordance w ith the terms and condit ions of the project brief signed by management and Australian audit ing standards subject to the follow ing limitat ions:

Our procedures w ere designed to provide reasonable / limited assurance as def ined by Australian audit ing standards, w hich recognises that absolute assurance is rarely attainable due to such factors as the use of judgement in gathering and evaluat ing evidence and forming conclusions, and the use of select ive test ing, and because much of the evidence available to the auditor is persuasive rather than conclusive in nature.

Because of the inherent limitat ions of any internal control structure, it is possible that errors or irregularit ies may occur and not be detected. Our procedures w ere not designed to detect all w eaknesses in control procedures as they w ere not performed cont inuously throughout the period and the tests performed are on a sample basis.

Any project ion of the evaluat ion of the control procedures to future periods is subject to the risk that the systems may become inadequate because of changes in condit ions, or that the degree of compliance w ith them may deteriorate.

The matters raised in this report are only those w hich came to our attent ion during the course of performing our procedures and are not necessarily a comprehensive statement of all the w eaknesses that exist or improvements that might be made. We cannot, in pract ice, examine every act ivity and procedure, nor can w e be a subst itute for management’s responsibility to maintain adequate controls over all levels of operat ions and their responsibility to prevent and detect irregularit ies, including fraud.

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Accordingly, management should not rely on our report to ident ify all w eaknesses that may exist in the systems and procedures under examinat ion, or potent ial instances of non-compliance that may exist .

Any reliance placed on internal audit reports and associated w orking papers, by a third party, excluding the City of Burnside and its off icers, including but not limited to the external auditor, is that party’s sole responsibility.

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Item No: 5.5 To: Audit Committee Date: 16 June 2014 Author: Martin Cooper – Chief Financial Officer General Manager and Division Contact:

Louise Miller Frost – General Manager, Corporate Services 8366 4202

Subject: EXTERNAL AUDITOR’S INTERIM REPORT 2013/14 (OPERATIONAL)

Attachments: A. City of Burnside Interim Report to the Audit and Risk Management Committee Year ended 30 June 2014

Prev. Resolution: N/A



2. That the External Auditor’s Interim Report remains a standing item on the Audit Committee Agenda to provide an update of progress until fully implemented.

Purpose

1. To provide the Audit Committee with a copy of the External Auditor’s Interim Report in accordance with Section 129 of the Local Government Act, 1999.

Strategic Plan





3.1 Interim Report supplied by Council’s External Auditor’s – HLB Mann Judd.

3.2 Internal Departments.

3.3 Discussions with representatives from HLB Mann Judd.

Statutory


4.1 Under Section 126 of the Local Government Act, 1999, the Council is required to appoint an Audit Committee. One of the prescribed functions of the Committee is to review the adequacy of the accounting, internal control, reporting and other financial management systems and practices of the Council on a regular basis.

4.2 Under Section 129 of the Local Government Act, 1999 – Conduct of audit, Council Auditors must now audit:

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4.2.1 the Council’s financial statements within a reasonable time after the statements are referred to the auditor for the audit (unless there is good reason for a longer period, this is within two months after the referral); and

4.2.2 the controls exercised by the Council for the receipt, expenditure and investment of money, the acquisition and disposal of property, and the incurring of liabilities.

4.3 The Auditor must provide to the Council an audit opinion on:

4.3.1 the financial statements; and

4.3.2 whether the Council’s controls are sufficient to provide reasonable assurance that Council’s financial transactions have been conducted properly and in accordance with the law.

Policy


Risk Assessment

6. Issues and risks raised in the External Auditor’s Interim Report must be addressed with priority to ensure that the City of Burnside remains a financially accountable and sustainable organisation.

Finance

7. The External Auditor’s Interim Report is provided to the Audit Committee on an annual basis and recommendations are closely monitored by the Audit Committee to ensure implementation.

Discussion

8. The External Auditor’s Interim Report states in Section 2 “Financial Accounting Issues” that two matters were discussed with management that could have an impact on the financial statements for 30 June 2014:

8.1. Capital Works in Progress; and

8.2. Implications of AASB 13 Fair Value Measurement

9. The External Auditor’s Interim Report Appendix 1 – Internal Control Findings lists a number of Issues and Recommendations as detailed in the following table with the Management Responses:

External Auditor’s Issue & Recommendations

Management Response

Rates

The rates reconciliation to the Valuer-General’s weekly report is not being independently reviewed.

Agreed. This process was implemented immediately after it was identified and is in place as a standing procedure.

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Recommendations:

From an efficiency point of view, we suggest that the monthly reconciliation be independently review and evidenced as such rather than the weekly report. Payroll

Detailed payroll master file report has no evidence of being reviewed. Recommendations:

It is recommended that the detailed payroll master file changes report is independently reviewed and evidenced.


Payroll

Employees being paid where there is no timesheet or the timesheet has not yet been authorised. Recommendations:

Payments are made only upon receipt of a valid timesheet that has been authorised in accordance with Council’s delegation of authority.

Agreed. Controls are now in place where timesheets that have not been supplied or authorised are escalated to General Manager level. Rectification by the employee (timesheet supply) or direct line manager (timesheet authorisation) and/or General Manager authorisation is required before payment is made.

Fixed Assets Fixed Asset Register(FAR) not reconciled Recommendations:

Reconcile the FAR to the general ledger regularly.

Agreed.

A major asset register project involving the revaluation of all (predominantly infrastructure) assets was undertaken. Some data entry upload issues were identified and are currently being rectified. Revaluations are currently being completed for Land and Buildings assets and these will need to be retrospectively applied from 1/7/13. A full reconciliation of all assets is being undertaken at present and will be completed as part of the EOY processes.

Financial Statements Financial statements on the Council’s web site.

Agreed. Will be remedied.

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Recommendations:

Implement quality control procedures to ensure that the final signed version obtained before making information available on the website.

10. The External Auditor’s Interim Report Appendix 2 – Positive Changes to Internal Controls lists a number of positive changes that have been implemented by Council to its internal control system:

10.1. Payments Requiring two signatories;

10.2. Review and sign-off off changes to master file; and

10.3. Review and approval systems.

11. A copy of the Interim Audit Report including the Management responses will be provided to Council at the next available meeting of Council as per Section 129 of the Local Government Act, 1999.

12. The recommendations that were raised within the External Auditor’s Interim Report will now become a standing item on the Audit Committee Agenda to provide an update of progress until fully implemented.

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City of Burnside Interim Report to the Audit and Risk Management Committee Year ending 30 June 2014

149

bortoluzzi

Attachment A

2

Contents 1. Audit Overview .......................................................................................................... 3

2. Financial Accounting Issues ...................................................................................... 3

3. Internal Controls ........................................................................................................ 5

Appendix 1 - Internal Control Findings ............................................................................. 6

Appendix 2 – Positive Changes to Internal Controls ........................................................ 8

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1. Audit Overview

1.1 Purpose

The purpose of this report is to communicate significant matters arising from our interim audit with the Audit and Risk Management Committee. This report was discussed with management on 19 May 2014 and provided as a draft for management’s comments on 22 May 2014.

1.2 Scope

We conducted our interim audit of the City of Burnside (“the Council”) for the year ending 30 June 2014 in accordance with Australian Auditing Standards to provide reasonable assurance as to whether the financial report is free of material misstatement and controls were operating effectively.

1.3 Access and co-operation

We can confirm that we were not restricted in any way from being able to perform our audit and were provided with access to all information when requested. In particular we would like to express our appreciation to Louise Miller-Frost, Martin Cooper and Gary Long for their co-operation and assistance.

1.4 Disclaimer

Other than our responsibility to the Audit Committee, Council and Management of City of Burnside (“the Council”), neither HLB Mann Judd nor any member or employee of HLB Mann Judd undertakes responsibility arising in any way from reliance placed by a third party, on this report. Any reliance placed is that party’s sole responsibility. Our report is for the sole use of the Council and is not to be used by any other person for any other purpose and may not be distributed, duplicated, quoted, referred to, in whole or in part, without our prior written consent.

2. Financial Accounting Issues We discussed some matters with management that were of a financial accounting nature and may have an impact on the financial statements for 30 June 2014. These items are detailed below:

2.1 Capital Works in Progress

The Capital Works in Progress accounts contained some items that appeared to be posted in error. For example, vehicles purchased in October 2013 which we assume are in use are subsequently not being depreciated. We recommend the accounts be reviewed regularly to ensure that capital items that are in use are appropriately classified and depreciated in accordance with Australian Accounting Standards.

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4

2.2 Implications of AASB 13 Fair Value Measurement

AASB 13 is effective for periods beginning on or after 1 January 2013. The standard now requires consideration of what is the highest and best use of an asset when determining fair value. This may not necessarily be in line with an asset’s current use. More often than not, this will be the case for Council’s land and buildings where the land value, if used for another purpose may vary significantly (e.g. development potential). Management are in the process of having land and buildings revalued and have highlighted some concerns with the valuations received. We have not seen the instructions given to the valuer, the valuation nor been able to assess the valuer’s assumptions but have been advised that the effect on building values and depreciation will be significant. The important factor when obtaining valuations of any kind, is the level of instruction provided to the valuer. We have discussed with management their concerns and will review the valuation report once it becomes available.

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3. Internal Controls The Audit Committee is well aware that the scope of the audit has changed significantly this year. For the first time, auditors of the local government sector are not only required to provide an opinion on the financial statements but also are required to provide an opinion on the controls.

More specifically, we are to provide the Council with an opinion as to whether the controls exercised by the Council during the financial year in relation to the receipt, expenditure and investment of money, the acquisition and disposal of property and the incurring of liabilities are sufficient to provide reasonable assurance that the financial transactions of the council have been conducted properly and in accordance with law.

In addressing this requirement, the Council has chosen to adopt the Better Practice Model – Financial Internal Control for South Australian Councils and undertaken an extensive process of assessing risk and implementing measures for mitigating those risks identified.

As can be appreciated, our consideration of the control structure and procedures would not necessarily disclose all material weaknesses, as our audit is based on selective tests of accounting records and supporting data. Other than the fixed assets, our primary focus for the interim visit was on the controls around the major income and expenditure cycles. Our year end visit will follow up on these cycle as well as the balance sheet reconciliations of which, we are aware, have not been performed monthly as anticipated due to staffing issues.

We have identified some matters that warrant the attention of management and the Audit Committee and these, along with management’s comments are included in Appendix 1.

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Appendix 1 - Internal Control Findings Issue Observation Implication Recommendation Management

Comment

The rates reconciliation to the Valuer-General’s weekly report is not being independently reviewed.

We were satisfied that the reconciliation was being performed by the Rates Officer as required, however there was no evidence of independent review. It should be noted that we did not find any errors in the sample selected.

Risk that an error may not be identified/corrected as the preparer and review is the same. Errors in this reconciliation could result in incorrect rates being changed on rateable properties.

From an efficiency point of view, we suggest that the monthly reconciliation be independently review and evidenced as such rather than the weekly report.


Detailed payroll master file report has no evidence of being reviewed.

We noted that the summary payroll master file report is being reviewed and signed off by the CFO for changes to employees. However this report does not contain the more pertinent information such as bank account number and account name changes.

Fraud may go undetected.

It is recommended that the detailed payroll master file changes report is independently reviewed and evidenced.


Employees being paid where there is no timesheet or the timesheet has not yet been authorised.

There was evidence of employees being paid where the timesheets were not completed or not approved by a supervisor. Supervisors were being informed of the deficiency via an exception report and the payment was being processed. We have since been advised that mitigating controls have been implemented.

Employees may be paid salary when they are not entitled, Payments may be made to bogus employees or employees that have been terminated.

Payments are made only upon receipt of a valid timesheet that has been authorised in accordance with Council’s delegation of authority.

Agreed. Controls are now in place where timesheets that have not been supplied or authorised are escalated to GM level. Rectification by the employee (timesheet supply) or direct line manager (timesheet authorisation) and/or GM authorisation is required before payment is made.

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7

Issue Observation Implication Recommendation Management Comment

Fixed Asset Register(FAR) not reconciled

The fixed asset register did not reconcile with the fixed asset figures noted in the general ledger and was not reconciled during the year.

Fixed assets may be misstated.

Reconcile the FAR to the general ledger regularly.

Agreed. A major asset register project involving the revaluation of all (predominantly infrastructure) assets was undertaken. Some data entry upload issues were identified and are currently being rectified. Revaluations are currently being completed for Land and Buildings assets and these will need to be retrospectively applied from 1/7/13. A full reconciliation of all assets is being undertaken at present and will be completed as part of the EOY processes.

Financial statements on the Council’s web site.

The financial statements on the Council’s website do not contain the signed auditor’s report but rather a letter to management providing clearance.

Inaccurate/ misleading information may be communicated on the council’s web site with regard to financial statements.

Implement quality control procedures to ensure that the final signed version obtained before making information available on the website.

Agreed. Will be remedied.

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Appendix 2 – Positive Changes to Internal Controls During the course of our interim audit we have noted the following positive changes that were implemented by the Council to its internal control system: Payment Requiring two signatories. Since our last audit, risks associated with payments made via EFT have been mitigated with the requirement for two authorisations. Review and sign off of changes to master file. We observed evidence of independent review and sign off on master file changes in the following areas;

Property and Rating; Creditors Records, including changes to the creditor bank account details. Payroll Employee files, including changes to the employee bank account details.

Review and approval systems We noted that a number of measures have been introduced to improve the level of segregation of duties. This was primarily noted in the procurement area where weaknesses were previously identified. The following key controls were observed;

Procurement department is now required to authorise all creditors included on the payment system.

Payment batch creator not being an authoriser of the bank payment. Two authorised required to approve the EFT payment and cheque payment. Filing of supporting documents electronically and better utilisation of the council’s software. Improved role definition for staff during the implementation process of segregation duties.

It was noted that where segregation of duties was not practicable, improved supervision was observed with regular reporting and sign offs being carried out.

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Audit Committee Agenda Item 5.6 16 June 2014 Item No: 5.6 To: Audit Committee Date: 16 June 2014 Author: Adriana Christopoulos – Governance Coordinator General Manager and Division


Contact: 8366 4155 Subject: GOOD GOVERNANCE ASSESSMENT PROGRAM – PROGRESS

REPORT (OPERATIONAL) Attachments: A. Good Governance Action Plan – Completed tasks

B. Good Governance Action Plan – Ongoing tasks Prev. Resolution: A0183, 5/10/10

A0200, 5/7/11 A0224, 7/2/12 A0254, 5/6/12 A0283, 5/12/12 A0303, 5/6/13 A0335 4/12/13

Officer’s Recommendation 1. That the Report be received.

2. The Audit Committee advises Council that the recommendations from the Good Governance Assessment Program Independent Validation Report 2010 have now been implemented.

Purpose

1. To update the Audit Committee on the Good Governance Assessment Program Progress Report.

Strategic Plan





3.1. Discussions with the General Manager, Corporate Services.

Statutory



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Audit Committee Agenda Item 5.6 16 June 2014 Policy


Code of Conduct for Council Members

Code of Conduct for Employees, Staff and Associates

Public Consultation Policy

Procurement Policy

Risk Assessment


6.1. Council codes, policies and practices need to be compliant with the Local Government Act, 1999.

6.2. The Good Governance Assessment Program Independent Validation Report in 2010 provided a suite of recommendations to improve governance practices and address areas of risk.

6.3. Regular review of Council’s policies is an important method of ensuring that the Administration is appropriately charged and empowered to do the business of Council in the manner that the Elected Body determines.

Finance

7. There are no financial implications for the City of Burnside in respect of the recommendation.

Discussion

Background

8. The Local Government Association of SA (LGA) obtained funding from the Local Government Research and Development Scheme to develop a set of consistent evaluation criteria to assist Councils to review and improve their mandatory governance policies and related practices.

9. The project was designated as the Good Governance Assessment Program (GGAP). It comprised a two part assessment process, with one process being undertaken by an independent assessor appointed by the LGA, and the other by Council staff.

10. The City of Burnside evaluation process was undertaken by John Comrie who provided his Independent Validation Report (IVR) including an Action Plan in August 2010. The report was presented to Council on 21 September 2010. Council referred the IVR to the Audit Committee for monitoring.

11. Mr Comrie’s recommendations were combined with those identified by Council staff into the Good Governance Action Plan combined table (refer Attachment B).

12. The Good Governance Assessment Program (GGAP) Independent Validation report and Action Plan were presented to the Audit Committee in December 2013.

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Audit Committee Agenda Item 5.6 16 June 2014 Analysis

13. Attachment A shows the completed items and Attachment B shows the progress to date for the 2 tasks from the Good Governance Assessment.

Completed 18

Part completed 2

14. Topic 1.1 Register of Interests (refer Attachment B)

Section 111 (b) of the Local Government Act, 1999 relating to the Register of Interests, refers to “any other officer, or any officer of a class declared by a council to be subject to the operation of this Division”.

The application of the Register of Interests has been extended to include Team Leaders and other staff who are deemed to hold responsibility in respect to their decision making within their roles.

15. Topic 1.5 Council Meetings (refer Attachment B)

The IVR recommends that whenever a matter considered in confidence is resolved, the Council is automatically and immediately out of confidential session. Doors should therefore always be opened before debating the next agenda item; this includes whether to go into confidential session for the next item.

The Ombudsman recommends otherwise, that the fact that doors are reopened following a confidential item should be separately minuted. Research across other Local Councils in South Australia has found this practice to be inconsistent. The Administration recommends no further action be given to this task and is now following the Ombudsman’s recommendations.

16. Items that have been completed since the last report to Audit committee are shown on Attachment A.

Conclusion

17. The remaining Good Governance Assessment Program Independent Validation Report recommendations relates to Item 1.1 Register of Interests. This report will be presented to Council in July 2014. The Administration recommends that no further action be taken regarding Item 1.5 Council Meetings as it is not a legislative requirement.

18. This report concludes the outcomes of the Good Governance Assessment Program Independent Validation Report from 2010 with no further reports to be presented to the Audit Committee.

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City of Burnside GOOD GOVERNANCE ACTION PLAN COMPLETED ACTIONS AS June 2014 Key:

• Mandatory actions shown with topic heading in bold • Actions shown in italics were identified by Governance Co-ordinator as part of self-assessment

Topic Issue(s) Identified Action Recommended Valid at or

Report Reference

Responsibility assigned to

Action Status

Theme 1; Ethics, values & Council Members 1.1 Code of Conduct – Council Members

Item 8: Council does not currently have a policy regarding the receiving of gifts and benefits Item 14: Code does not include or refer to a conflict resolution process Item 8, 10 and 11:

Consider developing gifts and benefits policy Develop, specify and emphasise conflict resolution process in next update to Code Include “adherence to all council policies” and wording re breach of Code. Cross reference with other policies. Include reference to good practice elements at 1.1.8.

Manager ODG / Governance Officer Manager ODG / Governance Officer

Action 1 Completed Mandatory review completed 25 October 2011. Resolution C8465. Receipt of Gifts included in Code. Gifts Register set up. Complaint handling procedure included as Appendix. Cross references included.

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Topic Issue(s) Identified Action Recommended Valid at or Report Reference


Action Status

Action 2 Item 17

Put copy of Code in Council Chamber

Action 2 Completed

1.2 Code of Conduct - Council Staff

Item 8: Code does not make reference to issues associated with internet use.

Consider inclusion of (or reference to) protocols regarding internet use in Code. Note: There is an “Internet acceptable use” Management Policy.

Manager ODG / Governance Officer

Action 3 Completed Mandatory review completed November 2011.

1.2 LGA Mandatory Draft Code of Conduct for Elected Members.

Mandatory LGA Model Code of Conduct for Elected Members

The City of Burnside has considered and endorsed the Draft LGA Code of Conduct for Elected Members in April 2013 and will be adopting the mandatory LGA Model Code of Conduct for Elected Members later this year.

CEO, Manager OD & Governance, Governance Coordinator.

Action 3 Completed Legislated Code of Conduct for Council Members from 1/9/13.

1.3 Council Member Training and Development

Item 7: Burnside has developed a sound forward program of training and information sessions in conjunction with other Eastern Region Alliance councils but does not have training and development plan that is tailored to the specific needs and preferences of each member of Council.

Consider development of annual training plan that is based on the identified specific needs and preferences of each member of Council. (EMs have been given passwords for LGA self-assessment training modules)

CEO / Governance Officer

Action 4 Completed. Workshop with EMs held 9/6/2011. Mandatory annual review of policy and plan by Council; 26 June 2012, Resolution C8766.

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Action Status

1.3 The Independent Commissioner against Corruption Act 2012

Formal ICAC information sessions for City of Burnside staff.

City of Burnside is a member of the ERA group (Eastern Region Alliance); ERA has approached two local law firms who are offering ICAC information sessions to Local Government staff as a general overview session and then individual sessions for specialist areas.

CEO, Manager OD & Governance, Governance Coordinator

Completed ICAC Sessions conducted for all staff July-August 2013. ICAC information incorporated in Governance Induction for new employees.

1.3 Complaints Mechanism

Item 7; Council has not met with the Ombudsman to discuss nature and patterns of complaints to that Office. Item 6; Complaints management

Request meeting with / presentation by Ombudsman (possibly as joint session with other ERA councils).

Note: Meeting with Ombudsman held 16/2/2012 to discuss findings of Ombudsman’s Audit of Confidential item management.

Staff training re Internal Review Procedure and complaints other than under S. 270.

New Complaint Handling and Request for Service policies adopted by Council 22/5/2012.

CEO / Governance

Officer

CEO, Manager OD & Governance, Governance

Officer

Action 17 Completed. ERA session held on 26/10/2011. Completed; Burnside Meeting held 16/2/2012 Action 18 Completed Training commenced in February 2013. Council staff who have been identified as requiring further assistance will be retrained.

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Action Status

1.4 LGA Mandatory Draft Code of Conduct for Elected Members - Gifts and Benefits Complaint Handling Procedure for Council Members.

Mandatory LGA Model Code of Conduct for Elected Members- Gifts and Benefits

Council members must not:

1. Seek gifts or benefits of any kind. 2. Accept any gift or benefit that

may create a sense of obligation. 3. Accept any gift or benefit from

any person who is in, or who seeks to be in, any contractual relationship with the council.

4. Council Members may accept hospitality provided in the context of performing their duties.

5. Where Council Members receive a gift of more than the value gazetted by the Minister details of the gift must be recorded within a gifts and benefits register maintained by the Council’s Chief Executive Officer.

6. This register must be made available for inspection at the principal office of the council and on the council website.


Mandatory Code of Conduct for Council Members. This includes the Gifts and Benefits Register and the Complaint Handling Procedures for Council Members. Completed

1.4 Council Committees

Item 14: LGAMLS not advised of names of committee members who are not Council members.

Advise LGAMLS of details of any independent persons who are members of Council’s LG Act S.41 committees (eg currently Audit Committee).


Action 5 Completed. LGMLS notified of 2 new Audit independents

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Action Status

July 2011 (Agars & Scinto). LGMLS notified of replacement independent member (Blaskett); 25 November 2011

1.5

Item 1.5.4; Code of Practice for access to meetings and documents

Amend Code to include legislative requirement to be reviewed within 12 months of election. Practice has been undertaken but not stated in Code.

Governance Officer

Action 7 Completed. EMs Workshop held 9 June 2011. Mandatory review completed; 9 August 2011. Resolution C8374.

1.5 Draft Code of Conduct for Employees, Staff and Associates- Gifts and Benefits

Employees, Staff and Associates must not :

1. Seek gifts or benefits of any kind. 2. Accept any gift or benefit that

may create a sense of obligation. 3. Accept any gift or benefit from

any person who is in, or who seeks to be in, any contractual relationship with the council.

4. Where Council Employees, Staff and Associates receive any gift it must be recorded within a gifts and benefits register maintained


Completed Employees, Staff and Associates – Gifts and Benefits Policy adopted by Council 24/9/13. Code of Conduct for Employees, Staff and Associates amended to reflect changes to Gifts

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Action Status

by the Council’s Chief Executive Officer.

5. This register must be made available for inspection at the principal office of the council and on the council website.

6. Any Gifts received on behalf of the organisation will be donated to charity.

and Benefits. The Council adopted a zero tolerance gifts and benefits policy in September 2013. Further updates to this policy were made and adopted by Council on 27th May 2014

1.6 Council Members access to Information

Items 6 – 10; Council does not have policy and documented procedure for CEO (or other delegated officer) to follow when responding to requests for access to information from Council Members.

Consider developing a policy for the Chief Executive Officer (or other delegated officer) to follow when responding to requests for access to information from Council Members. (Note: there are some paragraphs in the “Elected Members” Policy which briefly mention requests for information. This policy should be reviewed as part of the current review process.)


Action 8 Completed. Included with Code of Conduct for Council Members and the draft Code of Practice Meetings Procedures.

Theme 2; Risk management & internal controls 2.2 Internal Control

Existing internal control procedures need to be better documented and in some cases enhanced and/or new procedures developed and implemented.

Continue to upgrade Council’s documented suite of internal control policies and procedures.

Manager Finance

Action 9 Completed 3 policies adopted April 2011: Cash management,

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Action Status

Funding, Treasury management 6/9/2011 5 Management policies adopted: - Assets. - Borrowing. - Budget management; carry forwards. - Financial management; open space. - Liability.

2.3 Fraud & Corruption

Item 14: fraud and corruption training not explicitly part of the induction training program

Consider including reference to fraud and corruption as part of induction training program.

Note: Staff training on Procurement Policy and practices undertaken in October/November 2012.

p.38

CEO, Manager ODG,

OD Officer, Governance

Officer

Action 10 Completed Governance induction introduced for new employees. ICAC training conducted for existing staff

2.5 Purchasing

Policies generally sound but would benefit from an update

Council policy and management policy should both be reviewed to improve

Manager Procurement &

Action 11 Completed

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Action Status

and re-drafting to simplify useability. Item 11: no explicit provision to ensure potential suppliers are aware of risks of fraudulent activity. Item 13; no provision in purchasing policy for use of probity auditor where warranted. Item 17; no articulated system to independently investigate complaints and other allegations. Management policy & procedure needs urgent re-drafting. Council Procurement policy needs to be re-drafted. completed 24/4/12 C8683

readability and effectiveness. This review should include consideration of issues identified in items 11, 13 and 17. Note: Since the GGAP was done, there have been changes to the Local Government Act. Section 48 now requires Council to have a prudential management policy. Note: For item 17, either S.270 Internal review or Complaints Handling policy would be used.

Contracts

New Procurement policy adopted by Council 24/4/2012. Completed Authority and Procedures for the Procurement of Goods and Services has been incorporated into other policies and protocols.

2.6 Audit Committee

Item 3; Terms of reference should refer to all LG Act specified functions. Currently S.126(4)(ab) (proposing, and providing information relevant

Review Audit Committee’s terms of reference having regard to LG Act S.126(4)(ab).


Action 12 Completed 14/12/2010

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Action Status

to, a review of the council’s strategic management plans or annual business plan) not included Item 8(d); Audit Committee work program does not include review of Council’s strategic management plans and annual business plan

Ensure Audit Committee reviews future updates of Council’s strategic management plans and annual business plans (ABP). See also; Topic 3.5, Action 16 below

CEO / Manager Finance / Manager OD & Governance

Action 13 Completed for 2012-13 ABP. Audit Committee 3/4/2012. Council 24/4/2012

2.7 Sale and Disposal of Assets

Item 4; policy does not specifically deal with ‘trade-ins’.

Item 6a; policy does not refer to possibility of a lease. Item 10; no specific provision for use of probity auditor where warranted in policy. Item 11; Sale and disposal contracts are not suitably risk assessed. Amend Procurement (Contracts & tenders) Policy

Note: Item 4; trade-ins included in new policy. Note: Item 10; Prudential Management policy to be drafted. Note: Item 11; Risk assessment is included in the suite of contract management documents.

Manager Procurement & Contracts

Action 14 Completed New Procurement policy adopted by Council 24/4/2012. Completed Authority and Procedures for the Procurement of Goods and Services has been incorporated into other policies and protocols.

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Action Status

Theme 3; Decision-making 3.4 Community Engagement

Item 5; sub-item r): no reference re arrangements for removal of abandoned vehicles in Public Consultation Policy

Update public consultation policy to include reference to LG Act requirement to place public notice when owner of an abandoned vehicle is unknown. [Sections 237(3) and 237(4) notice in newspaper] Note: This section of the LG Act has been amended and commenced from 15/11/2010. November 2012; Policy under review. Public Consultation Policy reviewed and adopted by Council on 29 January 2013 C9006.

Manager Community Engagement

Action 15 Completed There is no requirement in the Act or Regs for this to be included in Community Consultation Policy. The public notification process is defined in S.237.

3.5 Strategic Management Planning

Item 2; Council hasn’t specifically declared which plans will constitute its strategic management plans as per LG Act S.122(8).

Specify by resolution which plans constitute Council’s strategic management plans and highlight this (eg in overarching strategic management planning document and on website). S.122(4); Strategic management plans must be reviewed within 2 years of each general election of Council. (ie. November 2012)

CEO / Manager OD & Governance / Strategic & Corporate Planner

Action 16 Completed Review completed. New Strategic Plan adopted by Council 27 November 2012

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Action Status

See also; Topic 2.6, action 13 above.

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City of Burnside

GOOD GOVERNANCE ACTION PLAN

Ongoing Actions Progress as at June 2014

Key:

• Mandatory actions shown with topic heading in bold • Actions shown in italics were identified by Governance Officer as part of self-assessment

Topic Issue(s) Identified Action Recommended Responsibility assigned to

Action Status

1.5 Council Meetings

Whenever a matter considered in confidence is resolved the Council is ‘automatically’ and immediately out of confidential session. Doors should therefore always be opened before debating next agenda item – including whether to go into confidential session for the next item.

Ensure that meetings are always open to the public whenever a proposal to go into confidential session is being debated.

Note: Council has been included in the state wide audit being conducted by the Ombudsman on the use of confidentiality provisions. Closing date for return of the survey was 30 November 2011.

p.26 CEO Action 6 Ongoing This is not a recommendation from the Ombudsman and research across other Local Councils in South Australia has found this not to be consistent practice. The administration recommends no further action be given to this task.

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Topic Issue(s) Identified Action Recommended Responsibility

assigned to Action Status

1.1 Register of Interests.

Section 111 (b) of the Local Government Act 1999 (b) any other officer, or any other officer of a class, declared by a council to be subject to the operation of this Division. The application of Register of Interest has been extended to include Team Leaders and other staff who are deemed to hold delegation in respect to decision making within their departments.

Team Leaders and other staff who are deemed to hold delegation in respect to decision making within their departments are now required to lodge a primary return and subsequently ordinary returns.

CEO, Manager OD & Governance, Governance Coordinator.

Policy is currently being developed to reflect changes in will be presented to Council in July 2014.

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Item No: 5.7 To: Audit Committee Date: 16 June 2014 Author: Samantha Atkins – Manager, Procurement and Contracts General Manager and Division

Louise Miller-Frost – General Manager, Corporate Services

Contact: 8366 4196 Subject: POLICY REVIEW – PROCUREMENT (STRATEGIC) Attachments: A. Procurement Policy (ver. April 2012)

B. Procurement Policy (track changes new version) C. Procurement Policy (new version)

Prev. Resolution: F1725, 31/8/09 A0249, 3/4/12 C8683, 24/4/12



2. That the draft Procurement Policy with amendments be endorsed.

3. That the draft Procurement Policy be presented to Council for consideration and adoption.

Purpose

1. To provide the Audit Committee with recommended changes to the Procurement Policy which have arisen as part of the annual review process.

Strategic Plan






3.1. Procurement and Contracts staff.

3.2. Department Managers.

3.3. Executive Team.

Statutory



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Competition and Consumer Act, 2010

National Competition Policy

Competition Policy Reform (South Australia) Act, 1996

Local Government Elections Act, 1999 – Caretaker Provisions

Freedom of Information Act, 1991

Independent Commissioner Against Corruption Act, 2012

Ombudsman Act, 1972

Policy


Proceeds from Economic Development Activity

Caretaker Policy

Code of Conduct for Council Employees February 2014

Employees, Staff and Associates Gifts & Benefits

Fraud and Corruption Prevention Policy

Risk Management Policy

Delegations Register

Customer Service Policy

Management Protocol – Liability Policy – Credit Card Procedures

Internal Financial Controls Policy

Prudential Project Management


Complaint Handling Policy

Management Procedure - Complaints and Compliments

Risk Assessment

6. The regular review of Council policies is an important method of ensuring that the Administration is appropriately charged and empowered to conduct the business of Council in the manner that the Elected Body determines. The risk of not doing so is that the Administration might be acting on outdated orders.

7. If Council policies are not reviewed and updated on a regular basis, they may fail to reflect other Council policy and legislative changes.

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Finance

8. There are no financial implications for the City of Burnside in respect of the recommendation.

Discussion

9. The City of Burnside has a number of Council Policies which inform and guide the way the Administration conducts the business of Council.

10. These policies are reviewed and presented to Council for adoption to ensure that they reflect the current legislative, financial and political environment.

11. Section 49 of the Local Government Act, 1999 sets out a requirement for the establishment of a Policy to address Contracting and Tendering activities and Disposal of Land and Assets under Council ownership.

12. In March 2012, the Procurement and Contracts Department was established and the Procurement (Contracts, Tenders and OHSW) Policy was reviewed and restructured to provide the framework and underpin the operations of this new department. At the time of its adoption, the Procurement Policy was due for review in April 2015.

13. Historically, policies of Council have been reviewed on a five year cycle. They are now being reviewed and update on an annual basis, thereby ensuring that policies remain current, reflect legislative changes, and continue to reflect the directions of the elected body.

14. In February 2014, the Manager, Contracts and Procurement commenced a review of the Procurement Policy. During this review, it was determined that a number of amendments were required. Some changes were made to reflect additional legislation which had been enacted and policies which had been adopted by Council since the adoption of the Procurement Policy in April 2012. Additional wording changes and clarification are also recommended which provide clarity in terms of process and how Procurement procedures are incorporated into Council business. These changes reflect best of practice processes and requirements.

15. In its most recent iteration, the Procurement Policy contained provision for “Procurement Policy Exemptions” During the consultation process for the review, it was determined that this provision did not actually relate to an exemption from the policy, but merely allowed for dispensations or amended processes from selected requirements of the Policy. An analysis of these dispensations was conducted, and changes incorporated into the draft Policy now allow for specific Single Source dispensations, and for other dispensations from specific clauses. The Administration believes that these changes reflect more accurately the intent of these provisions, and set out clear guidelines for when they might be used.

16. The threshold for granting dispensations from the Procurement Policy has been reviewed following feedback from Managers, General Managers and Contracts and Procurement staff. This threshold has been increased from $25,000 to $50,000 to ensure that the Chief Executive Officer remains focused on strategic matters and not be drawn into matters which can be dealt with appropriately at a different level within the organisation.

17. The thresholds for proceeding to select and open tender procurement processes have also been reviewed following feedback from industry, staff and managers. The proposed thresholds provide additional flexibility to proceed to select or open tender for projects valued at less than a nominated value, but also allow for a more appropriate approach to the market. Tendering for projects is a costly and resource intensive

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activity for Suppliers, and they must see a return on investment in order to make the investment to submit a tender. Council has been working with industry to position itself well within the market to receive value for money submissions, and setting appropriate thresholds for tender are an important tool in this positioning exercise.

18. Appendix 2 has been removed from the Policy as the Administration has reviewed its accounting requirements and Purchase Orders are required for all purchases within Council, with the exception of purchases made by credit card, which are subject to a separate reconciliation process. As a result, this appendix is no longer relevant.

19. The draft Procurement Policy was sent to Elected Members in an Information Document on 22 May 2014 and comments were due by 5 June 2014. No comments were received.

20. The draft Procurement Policy is presented to the Audit Committee for endorsement. After including any required Audit Committee enhancements or modifications, the draft Procurement Policy will then be presented to Council for consideration and adoption.

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City of Burnside Policy Manual Page 1

Procurement Policy

Classification: Council Policy

Policy Name: Procurement Policy

First Issued / Approved: 24 April 2012, C8683

Last Reviewed: 31 August 2009, F1725 - see note below

Next Review: 2016


Responsible Officer: Manager Procurement and Contracts

Relevant Legislation:

Local Government Act 1999

Competition and Consumer Act 2010 (Commonwealth)

National Competition Policy (Commonwealth)

Competition Policy Reform (South Australia) Act 1996

Local Government (Elections) Act 1999 – Caretaker provision

Freedom of Information Act 1991

Related Policies:

Caretaker Policy

Code of Conduct for Employees, Staff & Associates




Competition and Competitive Neutrality Policy


Management Policy – Liability Policy – Credit Card Procedures


Note

Policy previously called: • Contracts & Tenders Policy (May 2003) • Procurement (Contracts, Tenders and OHSW) Policy (F1725, 31 August 2009)

1. Introduction

This Policy provides a framework for how procurement activities will be undertaken at the City of Burnside and applies to all employees of Council procuring any Goods, Works and Services during the course of performing their duties.


2.1 A financially accountable and sustainable organisation. 2.2 Leading best practice and compliance in Council business.

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bortoluzzi

Attachment A


2.3 Representation that instills confidence and reflects the best interests and values of the community.

3. Our Approach

3.1 Ensure the long term financial sustainability of Council operations. 3.2 Remain compliant with all relevant legislation, standards and codes through

effective risk management.

3.3 Ensure provision of Council services meets community needs.

3.4 Continue to seek and implement innovative initiatives to enhance Council practices.

3.5 Enable effective and efficient Council business.

4. Legislative Requirements and Corporate Policy Context

4.1 This Policy has been developed and adopted in accordance with Section 49 of the Local Government Act 1999.

4.2 Section 49(a1) of the Local Government Act 1999 requires Council to develop and

maintain a procurement Policy on contracts and tenders, including policies, practices, and procedures on:

4.2.1 Obtaining value in the expenditure of public money; and

4.2.2 Providing for ethical and fair treatment of participants; and

4.2.3 Ensuring probity, accountability and transparency in procurement

operations.

4.3 Policies developed must include:

4.3.1 The contracting out of services; and 4.3.2 Competitive tendering and the use of other measures to ensure that

services are delivered cost-effectively; and 4.3.3 The use of local goods and services; and 4.3.4 The sale or disposal of land or other assets.

5. Interpretation

5.1 For the purpose of this Policy: 5.1.1 “Direct Sourcing” means the sourcing of a product or service through a

single supplier, either as it is covered in this Policy, or because there is only one Supplier for this.

5.1.2 “Employee” means a person employed by the City of Burnside.

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5.1.3 “Head Agreement” means a contractual arrangement used where the Supplier has agreed to a contract price or process, but Council purchases that/those item(s) through a local Supplier.

5.1.4 “Open Tender” means a tender is advertised to the entire market via an

open invitation process e.g. SA Tenders website accompanied by an advertisement.

5.1.5 “Panel Contract” means a contract for Goods, Works or Services where

there is more than one Contractor or Supplier engaged for that Goods, Works or Service.

5.1.6 “Preferred Supplier” means a Supplier that is preferred by the Council to

supply certain Works, Goods or Services, following a competitive process.

5.1.7 “Purchase Order” means a document sent to a Contractor/Supplier authorising purchase or Goods, Works or Services at a specified price and subject to specified terms. A Purchase Order creates a legally binding contract which cannot be changed without the consent of both parties.

5.1.8 “Quotation” means seeking a price and scope of Goods, Works or

Services to enable comparison.

5.1.9 “Select Tender” means seeking tenders from a limited number of Suppliers/Contractors on the basis of the value of the contract, location, previous performance, or as the result of an Expression of Interest process.

5.1.10 “Strategic Alliance” is seeking tenders and establishing contracts as part

of a purchasing group, aggregating spend to make an offering more commercially viable or accessing contracts already established by other spheres of government.

5.1.11 “Value for Money” means the best outcome achievable when all costs and

benefits, both qualitative and quantitative, over the procurement lifecycle (acquisition, use, maintenance and disposal) are considered.

6. Policy

6.1 Procurement Principles

The following key principles underpin all procurement activities at the City of Burnside: 6.1.1 Value for Money achieves the best outcome for the most appropriate

price. This includes taking into account fitness for purpose, whole of life cost, timeliness, flexibility to adapt to the needs of the project/supply, quality of product, sustainability, intangible costs/benefits, service, support and warranty.

6.1.2 Open and Fair Competition is ensured by providing equitable and

appropriate access to Council’s procurement activities. Council recognises the commercial and economic benefits of open and effective competition. Council will encourage healthy competition in the markets from which it purchases.

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6.1.3 Ethical Behaviour and Fair Treatment is necessary to ensure an

appropriate purchase using public money. Council employees have a responsibility to act honestly and impartially and behave with fairness, independence, openness, integrity and professionalism to ensure probity in a procurement process. Council employees will observe Council’s Code of Conduct for Employees, Staff and Associates at all times during the conduct of procurement processes.

6.1.4 Risk Management ensures that appropriate risk management practices

are in place for procurement activities including risk identification, assessment, and implementation of controls.

6.1.5 Professional Integrity and Probity ensure that the highest ethical and

professional standards are observed in Council’s business dealings. Council aims to achieve integrity in its procurement activities through accountable and transparent processes. Council respects the rights of contractors and suppliers, including the right to confidentiality and the expectation to be treated fairly and without bias at all stages of the procurement process.

6.1.6 Compliance with Statutory Obligations refers to the obligation to

comply with all legal and common law obligations. 6.1.7 Social, Economic and Environmental Sustainability – Council is

committed to maximising the positive impact of its activities to benefit the local community, its economy, and the environment. Where all other considerations are equal, Council may give preference to a local supplier to ensure local employment opportunities, and economic stability and/or growth. In addition, in order to minimise Council’s impact on its environment, Council will where all other factors are equal, purchase to achieve the following:

6.1.7.1 conservation of natural resources; 6.1.7.2 purchase environmentally friendly or recycled products; 6.1.7.3 integrate principles of waste minimisation and energy

reduction; and 6.1.7.4 provide leadership to local business and the community in

promoting the use of environmentally sensitive Goods and Services.

6.1.8 Financial Responsibility ensures that Council employees procure

Goods, Works or Services where there is an approved and allocated budget for that purchase, and where a Council employee with the appropriately delegated financial authority approves the purchase.

6.2 Methods of Procurement

Council will generally purchase Goods, Works or Services in accordance with the table in Appendix 1. The determination of the method of Procurement will be documented and will show why it is determined the method used is the most appropriate for that purchase. Amounts quoted are annualised amounts for a particular Supply of Goods/Works Service. Expenditure should not be split to bring it under a particular threshold. For the purpose of this Policy, the

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6.2.1 Single one-off purchases shall be the total or estimated amount of the

purchase (excluding GST); 6.2.2 Multiple purchases shall be the gross annual or estimated gross annual

value of all items to be purchased (excluding GST); or

6.2.3 Ongoing purchases over a period of time shall be the annual gross value or estimated gross annual value (excluding GST).

6.2.4 Splitting of amounts to bring expenditure within lower limits is not

permitted under this Policy. 6.2.5 Council purchases can be made using the following procurement

methods:

6.2.5.1 Direct sourcing – to be facilitated either by petty cash, invoice or by credit or purchase card;

6.2.5.2 Quotations – should be sought for one-off purchases only and

are usually for purchases of low value, complexity and risk. Quotations should be received in writing, and recorded in Council’s record management system. Where at least three (3) quotes are required or there are higher risk factors inherent within a purchase, Council employees will need to consider the use of a formal contract and formal evaluation criteria.

6.2.5.3 Tender – where a tender process is used in the procurement of

Goods, Works, or Services, the tenders shall be conducted in accordance with the prescribed Conditions of Tender, all Tenderers will be advised of the results including the identity of the successful Tenderer, and all unsuccessful Tenderers will be offered a tender debrief.

6.2.5.4 Expression of Interest – this method is generally used to gauge

market interest and capability or interest in supplying, and is followed by a select tender process.

6.2.5.5 Registration of Interest – this method is used to generate a

Preferred Supplier list for a particular Goods, Works or Service and consists of open advertisement of opportunities for a set period defined by the Conditions of Registration and ensures that Preferred Suppliers meet predefined criteria and prudential standards to be Contractors for Council. It is of particular importance that local business be given an opportunity to participate in this process.

6.3 Purchase Orders

Purchase Orders must be raised for the purchase or Goods, Works or Services prior to the purchase being made, except for the purchases nominated in Appendix 2 of this Policy.

6.4 Prequalification of Suppliers

Where possible, Council will establish contracts by conducting a prequalification process for Contractors. Each of these prequalification processes will be

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conducted in accordance with the appropriate Registration of Interest process. Participation in this process will allow Contractors to become a Preferred Supplier for particular types of Goods, Works and Services. Contracts established under this method will require quotations to be sought from Contractors for each individual project.

6.5 Panel Contracts

Where appropriate, panel contracts may be established for particular types of Goods, Works or Services and these constitute a standing offer. Panel Contracts may be appropriate where: 6.5.1 There are a number of Suppliers who can provide the Goods, Works or

Service; 6.5.2 There is an ongoing demand for the Goods, Works or Service;

6.5.3 The peak requirement for the Goods, Works or Service cannot be

adequately predicted;

6.5.4 The volume or type of work may be too difficult for one Supplier to undertake at any point in time; and/or

6.5.5 There is a commercial advantage to Council in having a choice of

Suppliers. 6.6 Strategic Alliances

Purchases can be made through strategic alliances with the aim of:

6.6.1 Reducing direct and indirect purchasing costs; and/or

6.6.2 Providing tangible benefits through joint purchasing; and/or

6.6.3 Improving delivery and/or quality of Services to residents; and/or

6.6.4 Attract more competition or a more suitable field of providers to respond to

the tender call.

6.6.5 Strategic alliances include but are not limited to:

6.6.5.1 Local Government Corporate Services (LGCS) 6.6.5.2 Procurement Australia (PA) 6.6.5.3 Australian State or Federal Contracts 6.6.5.4 G6 Procurement Group 6.6.5.5 Ad-hoc alliances created with other Local Government entities

6.7 Exemptions from the Policy

6.7.1 Exemptions from the processes and requirements outlined in this Policy

may be approved as follows:

6.7.1.1 Up to the value of $25,000, General Managers may approve; and

6.7.1.2 Above the value of $25,000, the Chief Executive Officer may

approve.

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6.7.2 All exemption requests must be made in writing and must outline the

reasons for the request and any risks which may be involved in the approach.

6.7.3 Approved exemption requests must be recorded in Council’s record

management system. 6.7.4 Where a Funding Agreement specifies that Council must follow a

prescribed tendering or selection process which differs from that outlined in this Policy, the project funded under that Agreement is exempted from the requirements of this Policy.

6.8 Emergency Procurement

6.8.1 The provisions of this Policy can be suspended in emergency situations to

ensure that purchases can be made in the most timely manner to alleviate the situations. The provisions of this section must not be used as an excuse for not complying with the Policy requirements. For the purpose of this section, Emergency situations are restricted to:

6.8.1.1 Community

(i) Genuine concerns for public health and safety; (ii) Avoiding major expenses;

(iii) Activation of the Emergency Response Plan;

6.8.1.2 Council Assets

(i) Ensuring that residents, occupants, or customers of Council-owned buildings and facilities are not subject to undue discomfort or hardship due to breakdown of building facilities or equipment;

(ii) Security of Council’s assets;

(iii) Activation of the Business Continuity or Crisis

Management Plan.

6.8.2 Determination of whether these situations apply will be at the discretion of the relevant Manager on a case by case basis.

6.8.3 Where a purchase is made under this section, the following will apply:

6.8.3.1 Expenditure must be within the employee’s delegated financial authority;

6.8.3.2 Expenditure must be limited to that required to alleviate the

emergency situation only; and 6.8.3.3 The employee must ensure that appropriate methods of

purchase are resumed as soon as practicable.

183


6.9 Outsourcing

Any proposal to purchase by outsourcing of any service or function currently performed predominantly ‘in house’ by Council staff, must be approved by the Chief Executive Officer.

6.10 Public Consultation

Where a purchase requires public consultation, then such consultation must be conducted in accordance with Council’s Community Engagement Policy.

6.11 Administration of the Policy

Operating Procedures and guidelines will be implemented to support this Policy. Complaints about any Procurement process shall be subject to Council’s Customer Service Policy, complaints handling procedures.

6.12 Health, Safety and Welfare

The City of Burnside will only engage Contractors and Suppliers who are able to maintain an appropriate level of Health, Safety and Welfare acceptable to Council for the contract they are engaged to. As a minimum, this will be compliance to all applicable legislation, regulations, project requirements, standards, and Council policies, and as specified in terms and conditions of contractual arrangements.

6.13 Disposal of Land and other Assets

6.13.1 Prior to commencing any process to dispose of land assets, Council will ensure that, where necessary, the process for revocation of the classification as community land in accordance with Section 201 of the Local Government Act 1999 has been concluded.

6.13.2 For the sale and disposal of land and other assets, the following key

principles apply:

6.13.2.1 consistency with and relevance to Council’s corporate and strategic plans;

6.13.2.2 transparency and accountability in sale and disposal

procedures and practices, ensuring that Council obtains the best possible price in the circumstances surrounding the sale, and that all potential purchasers are given equal opportunity to purchase the land or assets;

6.13.2.3 opportunities to enhance local economic development and

growth; 6.13.2.4 compliance with statutory and other obligations; 6.13.2.5 commercial confidentiality within legislative constraints; and 6.13.2.6 other relevant factors deemed appropriate by Council.

184


6.13.3 Council may utilise one or more of the following methods to sell or dispose of land and other assets:

6.13.3.1 trade-in;

6.13.3.2 public auction;

6.13.3.3 select tender;

6.13.3.4 open tender; or

6.13.3.5 direct approach to potential purchasers.

6.13.4 Council will normally call for tenders for the sale or disposal of land or

other assets as follows:

6.13.4.1 Council will approach the market using a formal tender process for the sale of land where the value of the land exceeds $150,000; and

6.13.4.2 Council will approach the market using a formal tender

process for the sale of other assets where the value of the asset exceeds $150,000.

6.13.5 Council may, at its discretion, determine not to call for tenders in respect

of a particular sale or disposal where it is deemed it is in the best commercial interests of the Council and its ratepayers.

6.13.6 Council will record the reasons for utilising an alternative disposal

method.

6.14 Availability

6.14.1 The Policy is available to be downloaded, free of charge, from Council’s internet site www.burnside.sa.gov.au

6.14.2 The Policy will be available for inspection without charge at the Civic

Centre during ordinary business hours and a copy may be purchased at a fee as set annually by Council.

City of Burnside Civic Centre 401 Greenhill Road, Tusmore SA 5065 Telephone; 8366 4200 Fax; 8366 4299 email: [email protected] Office hours: Monday to Friday, 8.30am to 5.00pm (except public holidays)

185


mailto:[email protected]


Appendix 1

Purchasing Thresholds Table

Value of Purchase Method of Purchase Agreement Type

Up to $2,000 Direct Sourcing Commercial terms/Credit Card (refer Management Policy)

$2,001 - $5,000 At least 1 Written Quote Purchase Order

$5,001 - $15,000 At least 2 Written Quotes Purchase Order

$15,001 - $50,000 At least 3 Written Quotes Purchase Order/Contract/Other written Agreement

$50,001 - $150,000 Minimum of Select Tender Contract

$150,001 + Minimum of Open Tender Contract

186


Appendix 2 Nominated Goods, Works or Services which are exempt from using a Purchase Order for payment Please note that the items on this schedule may change from time to time based on Council’s operational requirements. Category 1 Contract arrangements which include:

• Contracts which have been entered into following a competitive process • Strategic Alliance contract acceded to through the G6 Procurement Group or State

Government

Category 2 Purchases for the following Goods, Services, Fees and Charges

• Payment of Grants from Council to community groups • Vehicle registrations • Refunds or reimbursements of expenses • Banking services • Statutory Government charges • Courier services • Insurance payments • Lease & rental payments • Media monitoring • Publishing charges • Postal services • Subscriptions • IT licence charges for existing software • Taxi fares • Travel and accommodation • Utilities (eg SA Water, Telstra, AGL) • Food and beverages • Licence and membership fees • Temporary labour hire and traineeship charges • Employee Assistance Program costs

187

Procurement Policy



First Issued / Approved: 24 April 2012, C8683May 2003 – see note below

Last Reviewed: 31 August 2009, F1725 - see note below24 April 2012

Next Review: 20165


Responsible Officer: Manager Procurement & Contracts








Independent Commissioner Against Corruption Act 2012

Ombudsman Act 1972

Related Policies:

Caretaker Policy

Code of Conduct for Council Employees February 2014, Staff & Associates

Employees, Staff & Associates Gifts & Benefits




Competition and Competitive Neutrality Policy


Management Policy Protocol – Liability Policy – Credit Card Procedures






Note Policy previously called: • Contracts & Tenders Policy (May 2003) • Procurement (Contracts, Tenders and OHSW) Policy

188

bortoluzzi

Attachment B


(F1725, 31 August 2009)

1. Introduction

1.1 This Policy provides a framework for how procurement activities will be undertaken at the City of Burnside and applies to all employees of Council procuring any Goods, Works and Services during the course of performing their duties


2.1 A financially accountable and sustainable organisationDelivery of good governance in Council business.

2.2 Leading best practice and compliance in Council businessA financially sound Council that is accountable, responsible and sustainable.

2.3 Representation that instills confidence and reflects the best interests and values of the community.

3. Our Approach

3.1 Ensure the long term financial sustainability of Council operationsRegularly review, update and adopt leading governance, risk management and administrative processes.

3.2 Remain compliant with all relevant legislation, standards and codes through

effective risk managementEnsure the long term sustainability of Council operations by monitoring and comparing to peak body indicators.

3.3 Ensure provision of Council services meets community needsProvide sufficient

resources to meet current and future needs of the community.

3.4 Continue to seek and implement innovative initiatives to enhance Council practices.

3.5 Enable effective and efficient Council business.








operations.


Formatted: Indent: Left: 0.95 cm,Hanging: 1.05 cm, Tab stops: 2 cm,List tab + Not at 0.63 cm + 0.95 cm

Formatted: Indent: Left: 1 cm,Hanging: 1 cm, Tab stops: Not at 0.63cm

189




5. Interpretation

5.1 For the purpose of this policy: 5.1.1 “Acquisition Plan” A document that outlines the procurement methodology

and strategy to be undertaken in procuring the required works, goods or services. This plan is approved by the appropriate approving body/person before the procurement strategy is commenced.

5.1.2 “Common Use Arrangements” Across and inter government contracts for the procurement of particular works, goods and services that streamline the purchasing process and eliminate the need for public authorities to undergo a full procurement process by allowing public authorities to undertake secondary procurements directly from approved suppliers.

5.1.15.1.3 “Direct Sourcing” is a procurement process undertaken by directly approaching and negotiating with one or more suppliers without testing the market means the sourcing of a product or service through a single supplier, either as it is covered in this Policy, or because there is only one Supplier for this.


5.1.5 “Evaluation Plan” means a plan of the processes that will be followed in

evaluating the quotes, tenders, proposals, etc, received. It includes timing, membership and weightings.

5.1.25.1.6 “Expression of Interest” An EOI (also referred to as a Registration of Interest - ROI) is a formal market approach and the first step in a multi stage procurement process in a documented acquisition plan. Suppliers are invited to express/register their interest in providing particular goods or services and the responses evaluated to develop a shortlist for future market approaches or negotiations, using a more detailed specification.

5.1.7 “Head Agreement” means a contractual arrangement used where the

Supplier has agreed to a contract price or process, but Council purchases that/those item(s) through a local Supplier.

5.1.35.1.8 “Multi-stage tender process” A combination of market approaches to

cull a large number of respondents and help identify the best service providers in a particular market. The first stage will often limit the number of tenderers to those that can demonstrate the requisite capability.

5.1.45.1.9 “Open Tender” means a tender is advertised to the entire market via

an open invitation process e.g. SA Tenders website accompanied by an advertisement.

Formatted: Indent: Left: 3.27 cm, No bullets or numbering


Formatted: List Paragraph, No bulletsor numbering



190


5.1.55.1.10 “Panel Contract” means a contractual arrangement established with at least two suppliers for the anticipated provision of Goods, Works or Services, as and when required over a specified period of time for Goods, Works or Services where there is more than one Contractor or Supplier engaged for that Goods, Works or Service.

5.1.65.1.11 “Preferred Supplier” means a Supplier that is preferred by the Council

to supply certain Works, Goods or Services, following a competitive tender process.

5.1.75.1.12 “Purchase Order” means a is an official document used to authorise

and record the purchase of Goods, Works or Services. It is a document that is sent to a Contractor/Supplier authorising purchase or Goods, Works or Services at a specified price and subject to specified terms. A Purchase Order creates a legally binding contract which that cannot be changed without the consent of both parties.

5.1.13 “Quotation” means a formal request to obtain offers from one or more

suppliers. This is generally used for low value purchases and therefore is not advertised publicly seeking a price and scope of Goods, Works or Services to enable comparison.

5.1.14 “Request for Information (RFI)” An RFI is an informal means of

researching the particular good or service and the possible solutions or approaches available in the market. As such, informal market research and the gathering of intelligence through an RFI do not require any formal procurement approvals to be sought.

5.1.15 “Request for Proposal (RFP)” A formal request where potential suppliers

are invited to suggest ways and means of meeting an identified need, allowing scope for variety and innovation.

5.1.85.1.16 “Request for Tender (RFT)” A publicly advertised invitation to offer

based around a clearly defined and specific statement of requirements.

5.1.95.1.17 “Select Tender” involves the selection of suppliers that will be invited to tender. Selection may be from a multi-use list, a list of potential suppliers that have previously responded to an expression of interest or a list of potential suppliers that have been granted a specific licence or comply with a legal requirement. Sometimes referred to as limited tenderingmeans seeking tenders from a limited number of Suppliers/Contractors on the basis of the value of the contract, location, previous performance, or as the result of an Expression of Interest process.

5.1.105.1.18 “Strategic Alliance” is seeking tenders and establishing

contracts as part of a purchasing group, aggregating spend to make an offering more commercially viable or accessing contracts already established by other spheres of government.

5.1.115.1.19 “Value for Money” means the best outcome achievable when all

costs and benefits, both qualitative and quantitative, over the procurement lifecycle (acquisition, use, maintenance and disposal) are considered

6. Policy





191



price. This includes taking into account fitness for purpose, whole of life cost, timeliness, flexibility to adapt to the needs of the project/supply requirement, quality of product, sustainability, intangible costs/benefits, service, support and warranty.











committed to maximising the positive impact of its activities to benefit the local community, its economy, and the environment. Where all other considerations are equal, Council may give preference to a local contractor/supplier to ensure local employment opportunities, and economic stability and/or growth. In addition, in order to minimise Council’s impact on its environment, Council will where all other factors are equal, seek to purchase to achieve the following:

6.1.7.1 environmentally friendly or recycled productsconservation of

natural resources; 6.1.7.2 conservation of natural resourcespurchase environmentally

friendly or recycled products; 6.1.7.3 integrate principles of waste minimisation and energy

reduction; and

192


6.1.7.4 provide leadership to local business and the community in





Council will generally purchase Goods, Works or Services in accordance with the table in Appendix 1. The determination of the method of Procurement will be typically be documented through the production of an Acquisition Plan, detailing and will show why it is determined the method used is the most appropriate for that purchase and approved by the delegate prior to proceeding. The evaluation of the responses from suppliers and contractors will be documented, typically in an Evaluation Plan for delegate approval. Amounts quoted are annualised amounts for a particular Supply of Goods/Works Service. Expenditure should not be split to bring it under a particular threshold. For the purpose of this Policy, the: 6.2.1 Single one-off purchases shall be the total or estimated amount of the






methods:





Goods, Works, or Services, the tenders shall be conducted in accordance with the approved method of procurement and the prescribed Conditions of Tender, e.g. Multi-stage tender, EOI, ROI, RFP, select tender etc all Tenderers will be advised of the results including the identity of the successful Tenderer, and all unsuccessful Tenderers will be offered a tender debrief.

193


6.2.5.4 Expression of Interest – this method is generally used to gauge market interest and capability or interest in supplying, and is followed by a select tender process.

6.2.5.5 Registration of Interest – this method is used to generate a

Preferred Supplier list for a particular Goods, Works or Service and consists of open advertisement of opportunities for a set period defined by the Conditions of Registration and ensures that Preferred Suppliers meet predefined criteria and prudential standards to be Contractors for Council. It is of particular importance that local business be given an opportunity to participate in this process.

6.3 Purchase Orders

Purchase Orders must be raised for the purchase or Goods, Works or Services prior to the purchase being made, except for the purchases nominated in Appendix 2 of this Policy.

6.4 Prequalification of Suppliers (Panel Contracts)

Where possible, Council will establish contracts by conducting a prequalification process for Contractors. Each of these prequalification processes will be conducted in accordance with the appropriate Registration of Interest process. Participation in this process will allow Contractors to become a Preferred Supplier for particular types of Goods, Works and Services. Contracts established under this method will require quotations or tenders as appropriate to be sought from Contractors for each individual project. 6.5 Panel Contracts Where appropriate, panel contracts may be established for particular types of Goods, Works or Services and these constitute a standing offer. Panel Contracts may be appropriate where: 6.5.1 There are a number of Suppliers who can provide the Goods, Works or






Suppliers. 6.66.5 Strategic Alliances and Common Use Arrangements

Purchases can be made through strategic alliances or common use arrangements with the aim of:


Formatted: Indent: Left: 2 cm


Formatted: Indent: Left: 2 cm, Nobullets or numbering


194



6.6.3 Improving delivery and/or quality of Services outcomes to residents; and/or


the tender call.


6.6.5.1 LGA Procurementocal Government Corporate Services (LGAPCS)

6.6.5.2 Procurement Australia (PA) 6.6.5.3 Australian State or Federal Contractsprocurement

arrangements 6.6.5.4 G6 Procurement GroupCouncil Solutions 6.6.5.5 6.6.5.5 Ad-hoc alliances created with other Local Government

entities 6.7 6.7 Exemptions Dispensations from the Policy

6.7.1 Exemptions Dispensations from the processes and requirements outlined

in this Policy may be approved as follows:



approve.

6.7.1.2 6.7.2 Dispensations from the Policy may be either general dispensations from

specific provisions of the Procurement Policy, or a Single Source Supply dispensation. Single Source Supply dispensations will apply where at least one of the following reasons applies:

6.7.2.1 There are only a limited number of Suppliers with the capability,

experience, and suitability to meet needs and no alternative exists;

6.7.2.2 No submissions are received in a procurement process or the

submissions received did not meet the requirements; 6.7.2.3 The need for compatibility with existing systems or Services; 6.7.2.4 Obligations under warranty or other contractual arrangements

requiring the supply of Goods or Services from a particular Supplier;

6.7.2.5 An absence of competition due to technical reasons, including

but not limited to exclusive licence, proprietary information, or protection of Intellectual Property;

6.7.2.6 Value in the procurement process will not be achieved by the

prescribed market approach, and there is demonstrated advantage in amending the approach; and

Formatted: Indent: Left: 3.25 cm,Hanging: 1.75 cm


Formatted: List Paragraph, Outlinenumbered + Level: 4 + NumberingStyle: 1, 2, 3, … + Start at: 5 +Alignment: Left + Aligned at: 3.17 cm+ Indent at: 4.44 cm



195


6.7.2.7 A response to a Council resolution with limited timeframes.

6.7.3 All exemption dispensation requests must be made in writing and must outline the reasons for the request and any risks which may be involved in the approach.

6.7.3 Approved exemption dispensation requests must be recorded in Council’s

record management system. 6.7.4 Where a Funding Agreement specifies that Council must follow a

prescribed tendering or selection process which differs from that outlined in this Policy, the project funded under that Agreement is exempted from the requirements of this Policymust follow the tendering or selection process outlined in the Funding Agreement and records of this must be recorded in Council’s records management system according to the provisions for Procurement Policy Dispensations.

6.86.7 Emergency Procurement



6.8.1.1 Community


(iii) Activation of the Emergency ResponseCouncil’s Business

Continuity Plan;





Management Plan.

6.8.2 Determination of whether these situations apply will be at the discretion of the relevant Manager on a case by case basis and records of this must be recorded in Council’s records management system according to the provisions for Procurement Policy Dispensations.




Formatted: Outline numbered +Level: 2 + Numbering Style: 1, 2, 3, …+ Start at: 6 + Alignment: Left +Aligned at: 1.06 cm + Indent at: 2.22cm


196


6.8.3.2 Expenditure must be limited to that required to alleviate the emergency situation only; and

6.8.3.3 The employee must ensure that appropriate methods of

purchase are resumed as soon as practicable.

197


6.96.8 Outsourcing Any proposal to purchase by outsourcing of any service or function currently performed predominantly ‘in house’ by Council staff, must be approved by the Chief Executive Officer and/or under resolution by Council.

6.106.9 Public Consultation


6.116.10 Administration of the Policy


6.126.11 Health, Safety and Welfare


6.136.12 Disposal of Land and other Assets



principles apply:











198


6.13.3 Council may utilise one or more of the following methods to sell or dispose of land and other assets:

6.13.3.1 trade-in;





6.13.4 Council will normally call for tenders evaluate the most appropriate

procurement model for the sale or disposal of land or other assets as followsin accordance with the requirements of this Policy that includes:

6.13.4.1 approaching the market for the sale of any parcel of land

unless there is a Council resolution to the contrary (i.e. land encroachment);

6.13.4.2 Council will approaching the market using a formal tender

process for the sale of land where the value of the land exceeds $150,000; and

6.13.4.23 Council will approaching the market using a formal tender





method. 7. Availability

7.1 The Policy is available to be downloaded, free of charge, from Council’s website www.burnside.sa.gov.au

7.2 The Policy will be available for inspection without charge at the Civic Centre

during ordinary business hours and a copy may be purchased at a fee as set annually by Council. City of Burnside Civic Centre 401 Greenhill Road, Tusmore SA 5065 Telephone; 8366 4200 Fax; 8366 4299 Email; [email protected] Office hours: Monday to Friday, 8.30am to 5.00pm (except public holidays)

199




Appendix 1









Formatted: Space Before: 0 pt, After: 0 pt





200


Appendix 2 Nominated Goods, Works or Services which are exempt from using a Purchase Order for payment Please note that the items on this schedule may change from time to time based on Council’s operational requirements. Category 1 Contract arrangements which include:

• Contracts which have been entered into following a competitive process • Strategic Alliance contract acceded to through the G6 Procurement Group or State

Government

Category 2 Purchases for the following Goods, Services, Fees and Charges

• Payment of Grants from Council to community groups • Vehicle registrations • Refunds or reimbursements of expenses • Banking services • Statutory Government charges • Courier services • Insurance payments • Lease & rental payments • Media monitoring • Publishing charges • Postal services • Subscriptions • IT licence charges for existing software • Taxi fares • Travel and accommodation • Utilities (eg SA Water, Telstra, AGL) • Food and beverages • Licence and membership fees • Temporary labour hire and traineeship charges • Employee Assistance Program costs

201

Procurement Policy



First Issued / Approved: May 2003 – see note below

Last Reviewed: 24 April 2012

Next Review: 2016


Responsible Officer: Manager Procurement & Contracts








Independent Commissioner Against Corruption Act 2012

Ombudsman Act 1972

Related Policies:

Caretaker Policy

Code of Conduct for Council Employees February 2014

Employees, Staff & Associates Gifts & Benefits





Management Protocol – Liability Policy – Credit Card Procedures






Note

Policy previously called: • Contracts & Tenders Policy (May 2003) • Procurement (Contracts, Tenders and OHSW) Policy (F1725, 31 August 2009)

202

bortoluzzi

Attachment C


1. Introduction

1.1 This Policy provides a framework for how procurement activities will be undertaken at the City of Burnside and applies to all employees of Council procuring any Goods, Works and Services during the course of performing their duties




3. Our Approach

3.1 Regularly review, update and adopt leading governance, risk management and administrative processes.

3.2 Ensure the long term sustainability of Council operations by monitoring and

comparing to peak body indicators.









operations.




5. Interpretation

5.1 For the purpose of this policy: 5.1.1 “Acquisition Plan” A document that outlines the procurement methodology

and strategy to be undertaken in procuring the required works, goods or

203


services. This plan is approved by the appropriate approving body/person before the procurement strategy is commenced.

5.1.2 “Common Use Arrangements” Across and inter government contracts for the procurement of particular works, goods and services that streamline the purchasing process and eliminate the need for public authorities to undergo a full procurement process by allowing public authorities to undertake secondary procurements directly from approved suppliers.

5.1.3 “Direct Sourcing” is a procurement process undertaken by directly approaching and negotiating with one or more suppliers without testing the market


5.1.5 “Evaluation Plan” means a plan of the processes that will be followed in

evaluating the quotes, tenders, proposals, etc, received. It includes timing, membership and weightings.

5.1.6 “Expression of Interest” An EOI (also referred to as a Registration of Interest - ROI) is a formal market approach and the first step in a multi stage procurement process in a documented acquisition plan. Suppliers are invited to express/register their interest in providing particular goods or services and the responses evaluated to develop a shortlist for future market approaches or negotiations, using a more detailed specification.

5.1.7 “Head Agreement” means a contractual arrangement used where the

Supplier has agreed to a contract price or process, but Council purchases that/those item(s) through a local Supplier.

5.1.8 “Multi-stage tender process” A combination of market approaches to cull a

large number of respondents and help identify the best service providers in a particular market. The first stage will often limit the number of tenderers to those that can demonstrate the requisite capability.

5.1.9 “Open Tender” means a tender is advertised to the entire market via an

open invitation process e.g. SA Tenders website accompanied by an advertisement.

5.1.10 “Panel Contract” means a contractual arrangement established with at

least two suppliers for the anticipated provision of Goods, Works or Services, as and when required over a specified period of time.

5.1.11 “Preferred Supplier” means a Supplier that is preferred by the Council to

supply certain Works, Goods or Services, following a competitive tender process.

5.1.12 “Purchase Order” is an official document used to authorise and record the

purchase of Goods, Works or Services. It is a document that is sent to a Contractor/Supplier authorising purchase or Goods, Works or Services at a specified price and subject to specified terms. A Purchase Order creates a legally binding contract that cannot be changed without the consent of both parties.

5.1.13 “Quotation” means a formal request to obtain offers from one or more

suppliers. This is generally used for low value purchases and therefore is not advertised publicly.

204


5.1.14 “Request for Information (RFI)” An RFI is an informal means of

researching the particular good or service and the possible solutions or approaches available in the market. As such, informal market research and the gathering of intelligence through an RFI do not require any formal procurement approvals to be sought.

5.1.15 “Request for Proposal (RFP)” A formal request where potential suppliers

are invited to suggest ways and means of meeting an identified need, allowing scope for variety and innovation.

5.1.16 “Request for Tender (RFT)” A publicly advertised invitation to offer based

around a clearly defined and specific statement of requirements.

5.1.17 “Select Tender” involves the selection of suppliers that will be invited to tender. Selection may be from a multi-use list, a list of potential suppliers that have previously responded to an expression of interest or a list of potential suppliers that have been granted a specific licence or comply with a legal requirement. Sometimes referred to as limited tendering .

5.1.18 “Strategic Alliance” is seeking tenders and establishing contracts as part

of a purchasing group, aggregating spend to make an offering more commercially viable or accessing contracts already established by other spheres of government.

5.1.19 “Value for Money” means the best outcome achievable when all costs and

benefits, both qualitative and quantitative, over the procurement lifecycle (acquisition, use, maintenance and disposal) are considered

6. Policy



price. This includes taking into account fitness for purpose, whole of life cost, timeliness, flexibility to adapt to the needs of the requirement, quality, sustainability, intangible costs/benefits, service, support and warranty.







205






committed to maximising the positive impact of its activities to benefit the local community, its economy, and the environment. Where all other considerations are equal, Council may give preference to a local contractor/supplier to ensure local employment opportunities, and economic stability and/or growth. In addition, in order to minimise Council’s impact on its environment, Council will where all other factors are equal, seek to purchase to achieve the following:

6.1.7.1 environmentally friendly or recycled products; 6.1.7.2 conservation of natural resources; 6.1.7.3 integrate principles of waste minimisation and energy

reduction; and 6.1.7.4 provide leadership to local business and the community in





Council will generally purchase Goods, Works or Services in accordance with the table in Appendix 1. The determination of the method of Procurement will be typically be documented through the production of an Acquisition Plan, detailing why it is determined the method used is the most appropriate for that purchase and approved by the delegate prior to proceeding. The evaluation of the responses from suppliers and contractors will be documented, typically in an Evaluation Plan for delegate approval. Amounts quoted are annualised amounts for a particular Supply of Goods/Works Service. . For the purpose of this Policy, the: 6.2.1 Single one-off purchases shall be the total or estimated amount of the




206




methods:





Goods, Works, or Services, the tenders shall be conducted in accordance with the approved method of procurement and the prescribed Conditions of Tender, e.g. Multi-stage tender, EOI, ROI, RFP, select tender etc.

6.3 Purchase Orders

Purchase Orders must be raised for the purchase or Goods, Works or Services prior to the purchase being made.

6.4 Prequalification of Suppliers (Panel Contracts)

Where possible, Council will establish contracts by conducting a prequalification process for Contractors. Each of these prequalification processes will be conducted in accordance with the appropriate Registration of Interest process. Participation in this process will allow Contractors to become a Preferred Supplier for particular types of Goods, Works and Services. Contracts established under this method will require quotations or tenders as appropriate to be sought from Contractors for each individual project and constitute a standing offer. Panel Contracts may be appropriate where: 6.5.1 There are a number of Suppliers who can provide the Goods, Works or






Suppliers. 6.5 Strategic Alliances and Common Use Arrangements

207


Purchases can be made through strategic alliances or common use arrangements with the aim of:



6.6.3 Improving delivery and/or quality of outcomes to residents; and/or


the tender call.


6.6.5.1 LGA Procurement (LGAP) 6.6.5.2 Procurement Australia (PA) 6.6.5.3 Australian State or Federal procurement arrangements 6.6.5.4 Council Solutions 6.6.5.5 Ad-hoc alliances created with other Local Government entities

6.7 Dispensations from the Policy

6.7.1 Dispensations from the processes and requirements outlined in this Policy

may be approved as follows:



approve.

6.7.2 Dispensations from the Policy may be either general dispensations from specific provisions of the Procurement Policy, or a Single Source Supply dispensation. Single Source Supply dispensations will apply where at least one of the following reasons applies:

6.7.2.1 There are only a limited number of Suppliers with the capability,

experience, and suitability to meet needs and no alternative exists;

6.7.2.2 No submissions are received in a procurement process or the

submissions received did not meet the requirements; 6.7.2.3 The need for compatibility with existing systems or Services; 6.7.2.4 Obligations under warranty or other contractual arrangements

requiring the supply of Goods or Services from a particular Supplier;

6.7.2.5 An absence of competition due to technical reasons, including

but not limited to exclusive licence, proprietary information, or protection of Intellectual Property;

6.7.2.6 Value in the procurement process will not be achieved by the

prescribed market approach, and there is demonstrated advantage in amending the approach; and

208


6.7.2.7 A response to a Council resolution with limited timeframes.

6.7.3 All dispensation requests must be made in writing and must outline the reasons for the request and any risks which may be involved in the approach.

6.7.3 Approved dispensation requests must be recorded in Council’s record

management system. 6.7.4 Where a Funding Agreement specifies that Council must follow a

prescribed tendering or selection process which differs from that outlined in this Policy, the project funded under that Agreement must follow the tendering or selection process outlined in the Funding Agreement and records of this must be recorded in Council’s records management system according to the provisions for Procurement Policy Dispensations.

6.7 Emergency Procurement



6.8.1.1 Community


(iii) Activation of the Council’s Business Continuity Plan;





Management Plan.

6.8.2 Determination of whether these situations apply will be at the discretion of the relevant Manager on a case by case basis and records of this must be recorded in Council’s records management system according to the provisions for Procurement Policy Dispensations.



6.8.3.2 Expenditure must be limited to that required to alleviate the

emergency situation only; and

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6.8.3.3 The employee must ensure that appropriate methods of purchase are resumed as soon as practicable.

6.8 Outsourcing

Any proposal to purchase by outsourcing of any service or function currently performed predominantly ‘in house’ by Council staff, must be approved by the Chief Executive Officer and/or under resolution by Council.

6.9 Public Consultation


6.10 Administration of the Policy


6.11 Health, Safety and Welfare


6.12 Disposal of Land and other Assets



principles apply:






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6.13.3 Council may utilise one or more of the following methods to sell or

dispose of land and other assets:

6.13.3.1 trade-in;





6.13.4 Council will evaluate the most appropriate procurement model for the sale or disposal of land or other assets in accordance with the requirements of this Policy that includes:

6.13.4.1 approaching the market for the sale of any parcel of land

unless there is a Council resolution to the contrary (i.e. land encroachment);

6.13.4.2 Council approaching the market using a formal tender

process for the sale of land where the value of the land exceeds $150,000; and

6.13.4.3 Council approaching the market using a formal tender





method. 7. Availability

7.1 The Policy is available to be downloaded, free of charge, from Council’s website www.burnside.sa.gov.au

7.2 The Policy will be available for inspection without charge at the Civic Centre

during ordinary business hours and a copy may be purchased at a fee as set annually by Council. City of Burnside Civic Centre 401 Greenhill Road, Tusmore SA 5065 Telephone; 8366 4200 Fax; 8366 4299 Email; [email protected] Office hours: Monday to Friday, 8.30am to 5.00pm (except public holidays)

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Appendix 1









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