Audit Committee

As part of the Council’s duty to fulfil its governance obligations to the community, Council established an Audit Committee to Council in 1996 in accordance with Section 139 of the Local Government Act 1989 and operates in accordance with the best practice guidelines for Audit Committees.  The Audit Committee reports to Council as an Advisory Committee of Council.

Role

The primary role for the Audit Committee is to provide an independent review of Council’s financial and management systems and reporting responsibilities, and to ensure compliance with statutory rules and regulations and oversee an effective and efficient audit system both internally and externally.  The Audit Committee also provides an effective means of communication between the external auditor, internal audit process, management and the Council.

Membership

The Audit Committee consists of five members, three independent members and two Councillors.   The Councillors are appointed for a two year period with one Councillor retiring annually.  Independent members are appointed for a three year term and are eligible to be reappointed after the expiry of their term.  The Chairperson of the Committee is appointed on an annual basis from the independent membership of the Committee by all members of the Audit Committee.

The Audit Committee meets 5 times per annum.

The current membership of the Audit committee is:

Independent Members

 Mr John Thomson B.Com., ACA, Grad Dip IT, MAICD
 Current Chairman of the Audit Committee

 Mr Michael Said CPA, RCA

 Mr A.J. (John Purcell) FCPA,

Councillor Members

 Cr Clifford Hayes

 Cr Alex del Porto (Mayor)

The Chief Executive Officer, Director Corporate Services, Manager Finance, Manager Governance and Internal Auditors attend all meetings by invitation, to assist the Committee, and do not have voting rights. The External Auditor attends a Committee meeting to present to the external audit plan and the presentation of the audited Financial, Standard and Performance Statements. The opportunity is provided for the Audit Committee to meet with the auditors without management at each meeting.

Matters commonly discussed at the Audit Committee meetings include:

• Internal audit reviews
• External audit reports
• Implementation status of audit recommendations
• Financial Statements
• Reports relating to governance, legislative compliance and information technology
• Risk management issues
• Insurance matters
• Procurement matters

Internal Audit

The Internal Audit function is provided by Deloitte Growth Solutions Pty Ltd who provides independent assurance regarding the effectiveness and efficiency of governance, risk management and internal control processes across the organisation.

The appointment of the Internal Auditor was undertaken as a result of a public competitive tendering process in April 2011.  The Internal Auditor was appointed in June 2011 for a term of three years with an option for Council to extend for one year.

Charter

The Audit Committee operates within a Charter which is reviewed annually.  The most recent review of the Charter was undertaken in May 2011.  A copy of the Charter is attached.

Duties and Responsibilities of the Audit Committee

The Audit Committee discharges its responsibilities undertaking the following activities:

External Audit

• Review the external auditor’s proposed audit scope and approach, understand the materiality yardstick to be applied each year in light of Council’s present circumstances and changes in regulatory and other requirements.
• Discuss with the external auditor the appropriateness of accounting policies applied in Councils financial statements.
• Discuss with the external auditor any audit problems encountered in the normal course of audit work, including any restrictions on audit scope or access to information.
• Ensure that significant findings and recommendations made by the external auditor and management’s proposed responses are received, discussed and appropriately actioned. 
•  Ensure that significant adjustments, unadjusted differences, disagreements with management and critical accounting policies and judgements are discussed with the external auditor.
• Meet separately with the external auditor to discuss any matters that the Committee or auditor believe should be discussed privately.  Ensure that the auditor has access to the Committee Chairperson when required.
• To consider the independence of the external auditor in the context of any other services provided to Council. It is proposed that the external auditors would not provide services other than external audit functions.
• Review on an annual basis the performance of the external auditor.

Financial Reporting

• Review the annual financial statements prior to their approval by Council and determine whether they are complete and consistent with the information known to Committee Members, assess whether the financial statements reflect appropriate accounting policies and comply with all relevant standards and regulatory requirements.
• Review and recommend adoption of the annual financial and performance reports to the Council. Review any significant changes and the reasons for the changes that may arise subsequent to any such recommendation but before the financial and performance reports are signed.
• To review Council’s financial position, via the receipt of Council’s Quarterly Finance Management reports and where remedial action is required, to recommend this to Council.
• Review significant accounting and reporting issues, including recent professional and regulatory pronouncements, and understand their impact on financial reports.
• Highlight and inform significant changes in Councils accounting principles, policies and practices to Council for approval.
• Advise management in regard to its responsibilities to ensure that Council receives reliable, timely, understandable and meaningful financial information.
• Monitor compliance with statutory requirements for financial reporting.
• Review any litigation, claim or contingency which could have a material affect on Council’s financial position or operating result.

Ethical and Statutory Compliance

• To monitor statutory compliance, ethical standards and related party transactions, and determine whether the systems of control are adequate.
• Review the process for communicating the Councillor and Staff Code of Conduct for the City of Bayside and for monitoring compliance with these codes.
• Obtain regular updates from management about compliance and non compliance matters of material significance pertaining to ethical, statutory and legal issues.

Internal Controls

• Review the effectiveness of the internal Control environment established by management.
• Review internal controls over significant areas of risk, including non-financial management control systems.
• To review internal controls over revenue, expenditure, assets and liability processes.
• Review Council’s Compliance with regulations, policies, best practice guidelines, and contractual arrangements.
• Assess whether management has appropriate controls in place for unusual types of transactions and/or any particular transactions that may carry more than an acceptable degree of risk.

Internal Audit

• Review the level of resources allocated to internal audit and the scope of its authority including the Internal Audit Charter.
• Review the strategic three year and annual plan of the Internal Auditor to ensure that it takes into consideration the risk profile of Council.
• Review the scope of the internal audit plan and the effectiveness of the function, evaluating whether the plan addresses the following issues:
1. Effectiveness of internal controls over significant areas of risk, including non-financial management control systems,
2. Effectiveness of internal controls over key processes relating to revenue, expenditure, assets and liabilities,
3. Efficiency and effectiveness of significant Council programmes, and
4. Compliance with legislation, policies, best practice guidelines and contractual arrangements.
• Receive, review and approve the scope of work for each proposed audit prior to the audit being undertaken.
• Ensure that significant findings and recommendations made by the Internal Auditor, and management’s proposed responses are received, discussed and appropriately acted upon.
• Review the appropriateness of special internal assignments undertaken at the request of Council or the Chief Executive Officer and whether the outcomes of such assignments have been implemented.
• Receive reports from the Internal Auditor on completion of items in the Annual Internal Audit Plan and the implementation by management of recommendations adopted by the Committee.
• Monitor the implementation by management of the Internal Auditor’s recommendations.
• Review on an annual basis the performance of the internal auditor. Where performance is not considered satisfactory, discuss with Council and management the proposal to undertake a tender process for the appointment of a new internal auditor.
• Be party to the process of the appointment of the internal auditors to ensure the proposed appointee has the necessary skills and experience to undertake the internal audit function to the satisfaction of the Committee.
• Where the internal audit has been outsourced to an external provider consider the independence of the internal auditor in the context of any other services provided to Council.
• Ensure there are no unjustified restrictions or limitations placed on the Internal Auditor.
• Meet with the Internal Auditor annually or as required to consider any matters that the Audit Committee or internal auditor should discuss privately.

Page last updated: 15 Jun 2011