AUDIT AND RISK COMMITTEE - City of Perth · AUDIT\AR140527 - MINUTES.DOCX AUDIT AND RISK COMMITTEE...

$: AUDIT AND RISK COMMITTEE - City of Perth · AUDIT\AR140527 - MINUTES.DOCX AUDIT AND RISK COMMITTEE ... Corporate Business Plan 2013/14 to ... Audit timeline with completion of onsite$
I:\CPS\ADMIN SERVICES\COMMITTEES\7. AUDIT\AR140527 - MINUTES.DOCX

MINUTES

AUDIT AND RISK COMMITTEE

27 MAY 2014

A P P R O V E D F O R R E L E A S E

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

G A R Y S T E V E N S O N P S M C H I E F E X E C U T I V E O F F I C E R


FB CTE MINS 27 MAY 2014

MINUTES


27 MAY 2014

THESE MINUTES ARE HEREBY CERTIFIED AS CONFIRMED

PRESIDING MEMBER’S

SIGNATURE

-----------------------------------

DATE:----------------------------



INDEX

Item Description Page

AR18/14 DECLARATION OF OPENING 1

AR19/14 APOLOGIES AND MEMBERS ON LEAVE OF ABSENCE 1

AR20/14 QUESTION TIME FOR THE PUBLIC 1

AR21/14 CONFIRMATION OF MINUTES 2

AR22/14 CORRESPONDENCE 2

AR23/14 DISCLOSURE OF MEMBERS’ INTERESTS 2

AR24/14 MATTERS FOR WHICH THE MEETING MAY BE CLOSED 2

AR25/14 EXTERNAL AUDIT PLANNING MEMORANDUM – GRANT THORNTON 3

AR26/14 RISK MANAGEMENT – MAY 2014 UPDATE 5

AR27/14 EXTERNAL AUDIT CITY OF PERTH OCCUPATIONAL SAFETY AND HEALTH MANAGEMENT SYSTEMS 9

AR28/14 CONFIDENTIAL ITEM – APPOINTMENT OF EXTERNAL MEMBER – CITY OF PERTH AUDIT AND RISK COMMITTEE 13

AR29/14 CONFIDENTIAL ITEM – CORRUPTION AND CRIME COMMISSION REVIEW OF LOCAL GOVERNMENT PROCUREMENT PRACTICES 14

AR30/14 CONFIDENTIAL ITEM – CITY OF PERTH INTERNAL AUDIT PLAN 2013/14 – MAY 2014 PROGRESS REPORT 15

AR31/14 CONFIDENTIAL ITEM – INTERNAL AUDIT 2013/14 – REVIEW OF PAYROLL 15

AR32/14 MOTIONS OF WHICH PREVIOUS NOTICE HAS BEEN GIVEN 17

AR33/14 GENERAL BUSINESS 17

AR34/14 ITEMS FOR CONSIDERATION AT A FUTURE MEETING 17

AR35/14 CLOSE OF MEETING 17


- 1 - 27 MAY 2014


Minutes of the meeting of the City of Perth Audit and Risk Committee held in Committee Room 1, Ninth Floor, Council House, 27 St Georges Terrace, Perth on Tuesday, 27 May 2014.

MEMBERS IN ATTENDANCE

Cr Davidson - Presiding Member Cr Butler Cr Harley

OFFICERS

Mr Stevenson - Chief Executive Officer Mr Mianich - Director Corporate Services Mr Dunne - Director City Services Mr Gupta - Acting Director City Infrastructure and Enterprises Mr Ridgwell - Manager Governance Mr Berry - Manager Finance Ms Thrush - Risk Management Coordinator – Departed the

meeting at 5.08pm and did not return. Mr Cheldi - Internal Auditor Mr White - Chief Accountant Mr Mulcahy - Senior Management Accountant – Departed the

meeting at 4.53pm and did not return. Ms Honmon - Governance Officer

GUESTS

1 member of the press.

AR18/14 DECLARATION OF OPENING

The Presiding Member declared the meeting open at 4.45pm.

AR19/14 APOLOGIES AND MEMBERS ON LEAVE OF ABSENCE

Nil

AR20/14 QUESTION TIME FOR THE PUBLIC

Nil


- 2 - 27 MAY 2014


AR21/14 CONFIRMATION OF MINUTES

Moved by Cr Butler, seconded by Cr Harley That the minutes of the meeting of the Audit and Risk Committee held on 4 March 2014 be confirmed as a true and correct record. The motion was put and carried The votes were recorded as follows: For: Crs Davidson, Butler and Harley Against: Nil

AR22/14 CORRESPONDENCE

Nil

AR23/14 DISCLOSURE OF MEMBERS’ INTERESTS

Nil

AR24/14 MATTERS FOR WHICH THE MEETING MAY BE CLOSED

In accordance with Section 5.23(2) of the Local Government Act 1995, if an Elected Member wished to discuss the content of the confidential items and schedules listed below, it was recommended that the Committee resolve to close the meeting to the public prior to discussion of the following: Item No. Item Title Reason Confidential Item 3

APPOINTMENT OF EXTERNAL MEMBER – CITY OF PERTH AUDIT AND RISK COMMITTEE

s. 5.23(2)(e)(iii)

Confidential Item 4 and Schedules 3 and 4

CORRUPTION AND CRIME COMMISSION REVIEW OF LOCAL GOVERNMENT PROCUREMENT PRACTICES

s. 5.23(2)(f)(i)

Confidential Item 5 and Schedule 5

CITY OF PERTH INTERNAL AUDIT PLAN 2013/14 – PROGRESS REPORT

s. 5.23(2)(f)(i)

Confidential Item 6 and Schedule 6

INTERNAL AUDIT 2013/14 – REVIEW OF PAYROLL

s. 5.23(2)(f)(i)


- 3 - 27 MAY 2014


Confidential reports and schedules are distributed to Elected Members under separate cover. Moved by Cr Harley, seconded by Cr Butler That the Audit and Risk Committee resolves that the order of business detailed in the agenda be amended to enable items, which are open to the public, to be considered as the first items of business at this meeting, specifically: 1. Agenda Item 1 – External Audit Planning Memorandum – Grant

Thornton; 2. Agenda Item 2 – Risk Management – May 2014 Update; and 3. Late Item 7 – External Audit City of Perth Occupational Safety and

Health Management Systems. The motion was put and carried The votes were recorded as follows: For: Crs Davidson, Butler and Harley Against: Nil

AR25/14 EXTERNAL AUDIT PLANNING MEMORANDUM – GRANT THORNTON

BACKGROUND:

FILE REFERENCE: P1000838-5 REPORTING OFFICER: Ian Berry, Manager Financial Services RESPONSIBLE DIRECTOR: Robert Mianich, Director Corporate Services DATE: 15 May 2014 MAP / SCHEDULE: Schedule 1 – Audit Planning Memorandum – Grant

Thornton In accordance with Regulation 7 of the Local Government (Audit) Regulations 1996, the City’s Auditors, Grant Thornton, have provided the City with an Audit Planning


- 4 - 27 MAY 2014


Memorandum that details the objectives, scope, plan, remuneration for the auditor and methodology of its annual external financial audit.

LEGISLATION / STRATEGIC PLAN / POLICY:

Legislation Local Government Act 1995 Local Government Audit Regulations 1996

Integrated Planning and Reporting Framework Implications

Corporate Business Plan 2013/14 to 2017/18 Council Four Year Priorities: Capable and Responsive Organisation A capable, flexible and sustainable organisation with a strong and effective governance system to provide leadership as a capital city and deliver efficient and effective community centred services.

DETAILS:

The Memorandum, attached as Schedule 1, set outs out the following in relation to the City’s annual external financial audit: 1. Audit responsibilities and reporting requirements 2. The processes employed in conducting the audit. 3. Service term. 4. Audit methodology and approach. 5. Planning risk assessment. 6. Audit timeline with completion of onsite audit work on 22 September and sign

off of the accounts on 28 September. 7. Statements regarding audit independence. 8. Audit fees of $24,000 which are as per the tender.

FINANCIAL IMPLICATIONS:

Audit fees are included in the budget for 2014/15.

COMMENTS:

It is noted that the audit timeline is tighter than normal and the City appreciates the discipline of completing the annual accounts earlier than in prior years.


- 5 - 27 MAY 2014


Moved by Cr Harley, seconded by Cr Butler That the Audit and Risk Committee receives the external Audit Planning Memorandum prepared by the City’s auditors, Grant Thornton, attached as Schedule 1. The motion was put and carried The votes were recorded as follows: For: Crs Davidson, Butler and Harley Against: Nil

AR26/14 RISK MANAGEMENT – MAY 2014 UPDATE

BACKGROUND:

FILE REFERENCE: P1013822 – 3 (124478/14) REPORTING OFFICER: Kirsten Thrush, Risk Management Coordinator RESPONSIBLE DIRECTOR: Robert Mianich, Director Corporate Services DATE: 23 April 2014 MAP / SCHEDULE: Schedule 2 – Strategic Risks


Legislation Local Government Act 1995 Regulation 17 of the Local Government (Audit) Regulations 1996


Corporate Business Plan 2013/14 to 2017/18 Council Four Year Priorities: Capable and Responsive Organisation S18 Strengthen the capacity of the organisation IP31 Implement Organisational Development Plan

Organisational Development Plan: G4 Risk Management Policy Policy No and Name: 19.1 – Enterprise Risk Management


- 6 - 27 MAY 2014


DETAILS:

Policy and Framework The Enterprise Risk Management Policy and Framework were adopted by Council in June 2013. The Policy states that the purpose of risk management is to: “To protect the community, the City of Perth and its workers against foreseeable risks through developing a whole of enterprise culture of risk awareness, plans that reduce our risk exposure and systems that provide information to assist in informed decision making, maximising asset potential and enhancing community wellbeing.” Under the framework the Audit and Risk Committee has the responsibility for the City’s systems and processes for risk management in line with the Local Government (Audit) Regulations 1996. The framework states that strategic and high level operational risks will be reported to the Audit and Risk Committee and Council on a six monthly basis. This report fulfils the reporting requirements of the framework. Implementation process The diagram below shows graphically the path that is being followed to embed risk management within all functions of the organisation.

The City is approaching the end of stage one above and entering stage two. Since adoption of the policy and framework there has been a number of actions occurring within the City’s operations: Presentations have been given at unit meetings and staff inductions to raise

awareness of risk management.

Stage 1 Implement

•Policy and Framework adopted

•Risk registers developed for all units

•Information download, large number of risks

•Utilise excel spreadsheets

Stage 2 Rationalise

•Rationalise and refine unit risk registers

•Develop project risk registers

•Implement risk management system

•Develop reporting/actions

Stage 3 Embed

•Embed into the business cycle

•Concentrate on key risks

•Evolve reporting/actions

Stage 4 Independence

•Staff independent/self reliant

•Risk built into everyone's business

•Risk based planning and decision making


- 7 - 27 MAY 2014


Workshops have been held with each unit to develop unit risk registers. These are held in excel spread sheets.

A software system (RMSS – Risk Management Software System) has been implemented to record and manage health and safety risks. Note that in the future RMSS will hold other risks as well as those related to health and safety.

Strategic risks have been reviewed and updated. Strategic Risks Profile The following table demonstrates the risk profile for strategic risks within the organisation. The Enterprise Risk Management Framework states that all extreme and high risks are to be treated where possible, medium risks are to be treated if possible and cost effective to do so and low level risks are to be monitored. There have been 23 strategic risks identified within the organisation, none of which are rated extreme and one of which is high. A full list of the risks, the controls, risk ratings and any further action required is provided in Schedule 2. Consequence

Likelihood 1 Insignificant

2 Minor

3 Moderate

4 Major

5 Catastrophic

A Almost certain

B Likely

C Moderate

7 1

D Unlikely

1 1 2

E Rare

5 5 1

TOTAL Low - 6 Medium - 16 High - 1 Extreme - 0

Operational risks Profile The following table demonstrates the risk profile for operational risks within the organisation. The number in each box corresponds to the number of risks with that rating. This includes risks from all unit risk registers as well as those from project risk registers.


- 8 - 27 MAY 2014


There are 602 risks identified within risk registers, 11 of which are rated extreme and 82 high. The extreme operational risks fit into broad themes of project management risks, transport/traffic management risks, breach of copyright and risks of suicides from buildings and car parks. The level of risk is being reviewed as part of the 2014 risk register update that is currently happening as it is believed some of the risks may be over rated. Treatment plans are in place to address all high and extreme risks. A full list of the extreme and high risks, the controls, risk ratings and any further action required is provided for in the individual risk registers held within the organisation. Consequence

Likelihood 1

Insignificant 2

Minor 3

Moderate 4

Major 5

CatastrophicA

Almost certain

10 18 18 3 0

B Likely

11 33 23 6 0

C Moderate

11 45 56 12 2

D Unlikely

9 44 79 21 11

E Rare

16 37 62 34 41

TOTAL Low - 179 Medium - 330 High - 82 Extreme - 11

Future direction The organisation is now entering stage two of the implementation process. The actions that are proposed for the coming twelve months include: Review unit risk registers. Configuration of the RMSS system for risk and upload of the risks to the

database. This is likely to result in a revision to the risk register template, handbook and possibly the framework.

Using the RMSS system for future reporting to management and Committee. Developing a process for managing risk within projects. Developing organisation wide business continuity plans for key services. Under Regulation 17(3) of the Local Government (Audit) Regulations 1996, the Chief Executive Officer is required to review and report on risk management, internal control and legislative compliance biennially. The Regulations state the Audit and Risk Committee is to consider this report and then report the results to Council. The report required under the Regulations is a more detailed version of this report and will be presented at the October Audit and Risk Committee meeting.


- 9 - 27 MAY 2014



There are no financial implications related to this report. Each risk identified may have its own financial implications which will be the subject of normal budget consideration.

COMMENT:

Nil. Moved by Cr Harley, seconded by Cr Butler That the Audit and Risk Committee receives the report titled “Risk Management – May 2014 Update”. The motion was put and carried The votes were recorded as follows: For: Crs Davidson, Butler and Harley Against: Nil

AR27/14 EXTERNAL AUDIT CITY OF PERTH OCCUPATIONAL SAFETY AND HEALTH MANAGEMENT SYSTEMS

BACKGROUND:

FILE REFERENCE: P1000205-10 REPORTING OFFICER: Julie McMahon, Occupational Safety and Health Advisor RESPONSIBLE DIRECTOR: Robert Mianich, Director Corporate Services DATE: 22 May 2014 MAP / SCHEDULE: Schedule 7 – LGIS AS/NZS 4801:2001 Occupational

Health and Safety Management System Audit Report Extract

This report was distributed as a late item by the Acting Chief Executive Officer on Friday, 23 May 2014. The purpose of this report is to provide the Audit and Risk Committee with a summary of the City of Perth’s Occupational Safety and Health Management System (OSHMS) Audit Extract (detailed in Schedule 7). The Audit scope covered all elements of AS/NZS 4801:2001 Occupational Health and Safety Management System for conformance.


- 10 - 27 MAY 2014



Legislation Occupational Safety and Health Act 1984 Occupational Safety and Health Regulations 1996 AS/NZS 4801:2001 Occupational Health and Safety Management System


Corporate Business Plan 2013/14 to 2017/18 Council Four Year Priorities: Capable and Responsive Organisation A capable, flexible and sustainable organisation with a strong and effective governance system to provide leadership as a capital city and deliver efficient and effective community centred services.

Policy Policy No and Name: 19.1 – Enterprise Risk Management

DETAILS:

The Local Government Insurance Service (LGIS) in unification with key parties at the City of Perth (City) conducted a thorough OSHMS Audit. The Audit comprised of interviews, discussions and documented evidence to elucidate exact issues as well as to ascertain an insight of the City’s conformance against AS 4801:2001 Occupational Health and Safety Management System specifications. The Audit outcomes noted that the City’s OSHMS continues to perform well despite the constant changes to the working environment that could have an influence on the continual improvement of the safe systems of work. Comparison between the previous OSHMS audits conducted in 2010 and 2013 are summarised in the table below.

2010 2013 Category 90% 92% OHS Policy 75% 82% Planning 77% 83% Implementation 75% 76% Training 76% 75% Consultation, Communication and Reporting 75% 78% Documentation 75% 75% Hazard Identification, Risk Assessment and Control of Risks76% 84% Emergency Preparedness and Response 75% 75% Measurement and Evaluation 75% 76% Management Systems 76% 78% Total

The audit findings of the City’s OSHMS resulted in an overall outcome of 78%, highlighting that the City of Perth met the 75% in all ten categories, a minimum


- 11 - 27 MAY 2014


criteria required to obtain the ‘Gold Diligence in Safety Award’, as documented in the table below.

Rating Score Diamond ≥95%

Gold 75 – 94% Silver 60 – 74%

It should be noted that to receive the LGIS Gold Diligence in Safety Award, the City of Perth would be required to achieve 15% reduction or 10% reduction for Silver over a three year period in either the incidence rate or frequency rate of lost time injury and disease. Unfortunately, this criterion was not met in either category. The audit took into consideration the challenges the City has faced over the past two years and commended the City for continuing to strive for continuous improvement by assessing, monitoring and evaluating effective safety control measures. It was noted that the City has a robust OSHMS and findings suggest that the City has made a substantial commitment to maintain the OSHMS.


There are no financial implications related to this report.

COMMENTS:

To ensure continuous improvement, an industry specialist, engaged by the City of Perth, has completed a gap analysis between the City’s current OSHMS and the National Work Health and Safety Act 2011. Findings of the analysis have been presented to the City’s Executive Leadership Group and are scheduled for presentation at the next Organisation Leadership Group meeting. Copies of the Gap Analysis Action Plan are available if required by Elected Members. Moved by Cr Butler, seconded by Cr Harley The Audit and Risk Committee receives the report titled “External Audit City of Perth Occupational Safety and Health Management Systems” undertaken by Local Government Insurance Services. The motion was put and carried


- 12 - 27 MAY 2014


The votes were recorded as follows: For: Crs Davidson, Butler and Harley Against: Nil Moved by Cr Harley, seconded by Cr Butler That the Audit and Risk Committee resolves to close the meeting to the public to consider Confidential Items AR28/14, AR29/14, AR30/14 and AR31/14 in accordance with Sections 5.23(2)(e)(ii) and 5.23(2)(e)(iii) of the Local Government Act 1995. The motion to close the meeting was put and carried The votes were recorded as follows: For: Crs Davidson, Butler and Harley Against: Nil The meeting was closed to the public at 4.51pm with 1 member of the press departing the meeting. In accordance with the Committee’s Resolution (item AR24/14), the order of business has been changed enabling the items to be considered in the following order: Agenda Item 3 at AR28/14; Agenda Item 4 at AR29/14; Agenda Item 5 at AR30/14; and Agenda Item 6 at AR31/14.


- 13 - 27 MAY 2014


AR28/14 CONFIDENTIAL ITEM – APPOINTMENT OF EXTERNAL MEMBER – CITY OF PERTH AUDIT AND RISK COMMITTEE

BACKGROUND:

FILE REFERENCE: P1028787-2 REPORTING OFFICER: Mario Cheldi, Internal Auditor RESPONSIBLE DIRECTOR: Robert Mianich, Director Corporate Services DATE: 14 May 2014 MAP / SCHEDULE: N/A In accordance with Section 5.23(e)(iii) of the Local Government Act 1995, this item is confidential and has been distributed to the Elected Members under separate cover. Confidential Item AR28/14 is bound in Confidential Committee Minute Book Volume 1 2014. Moved by Cr Davidson, seconded by Cr Harley The Council: 1. approves the appointment of Mr Stephen Linden as an external

member of the City of Perth Audit and Risk Committee for a term of two years, commencing in October 2014;

2. notes that, dependent on the local government reform process, the

term of appointment of Mr Stephen Linden may be varied as required.

The motion was put and carried The votes were recorded as follows: For: Crs Davidson, Butler and Harley Against: Nil


- 14 - 27 MAY 2014


AR29/14 CONFIDENTIAL ITEM – CORRUPTION AND CRIME COMMISSION REVIEW OF LOCAL GOVERNMENT PROCUREMENT PRACTICES

BACKGROUND:

FILE REFERENCE: P1029779 REPORTING OFFICER: Mario Cheldi, Internal Auditor RESPONSIBLE DIRECTOR: Robert Mianich, Director Corporate Services DATE: 2 May 2014 MAP / SCHEDULE: Confidential Schedule 3 – Draft report on the Corruption

and Crime Commission Review of Local Government Procurement Practices dated 11 March 2014 and accompanying letter dated 11 April 2014 Confidential Schedule 4 – City of Perth response to the draft report dated 2 May 2014

In accordance with Section 5.23(f)(i) of the Local Government Act 1995, this item is confidential and has been distributed to the Elected Members under separate cover. Confidential Item AR29/14 is bound in Confidential Committee Minute Book Volume 1 2014. Moved by Cr Harley, seconded by Cr Butler That Council: 1. receives the draft report on the Corruption and Crime Commission

Review of Local Government Procurement Practices dated 11 March 2014 and the accompanying letter dated 11 April 2014, attached as Confidential Schedule 3;

2. notes that the City has provided a response to the draft Corruption

and Crime Commission Review report dated 2 May 2014, attached as Confidential Schedule 4.

The motion was put and carried The votes were recorded as follows: For: Crs Davidson, Butler and Harley Against: Nil


- 15 - 27 MAY 2014


AR30/14 CONFIDENTIAL ITEM – CITY OF PERTH INTERNAL AUDIT PLAN 2013/14 – MAY 2014 PROGRESS REPORT

BACKGROUND:

FILE REFERENCE: P102969-8 REPORTING OFFICER: Mario Cheldi, Internal Auditor RESPONSIBLE DIRECTOR: Robert Mianich, Director Corporate Services DATE: 6 May 2014 MAP / SCHEDULE: Confidential Schedule 5 – City of Perth Internal Audit

Plan 2013/14 In accordance with Section 5.23(2)(f)(i) of the Local Government Act 1995, this item is confidential and has been distributed to the Elected Members under separate cover. Confidential Item AR30/14 is bound in Confidential Committee Minute Book Volume 1 2014. Moved by Cr Butler, seconded by Cr Harley That the Audit and Risk Committee receives the report titled the “City of Perth Internal Audit Plan 2013/14 – May 2014 Progress Report”. The motion was put and carried The votes were recorded as follows: For: Crs Davidson, Butler and Harley Against: Nil

AR31/14 CONFIDENTIAL ITEM – INTERNAL AUDIT 2013/14 – REVIEW OF PAYROLL

BACKGROUND:

FILE REFERENCE: P1013788-5 REPORTING OFFICER: Mario Cheldi, Internal Auditor RESPONSIBLE DIRECTOR: Robert Mianich, Director Corporate Services DATE: 19 May 2014 MAP / SCHEDULE: Confidential Schedule 6 – City of Perth Payroll Review

March 2014


- 16 - 27 MAY 2014


In accordance with Section 5.23(2)(f)(i) of the Local Government Act 1995, this item is confidential and has been distributed to the Elected Members under separate cover. Confidential Item AR31/14 is bound in Confidential Committee Minute Book Volume 1 2014. Moved by Cr Harley, seconded by Cr Butler That the Audit and Risk Committee receives the review of the City’s Payroll records and transactions as part of the Internal Audit 2013/14 as detailed in Confidential Schedule 6. The motion was put and carried The votes were recorded as follows: For: Crs Davidson, Butler and Harley Against: Nil Motion to re-open the meeting to the public Moved by Cr Harley, seconded by Cr Butler That the Audit and Risk Committee re-opens the meeting to the public. The motion to re-open the meeting was put and carried The votes were recorded as follows: For: Crs Davidson, Butler and Harley Against: Nil The meeting was re-opened to the public at 5.07pm and no members of the public returned to the meeting. Ms Thrush, Risk Management Coordinator, departed the meeting at 5.08pm and did not return.


- 17 - 27 MAY 2014


LATE AGENDA ITEM 7 EXTERNAL AUDIT OF CITY OF PERTH OCCUPATIONAL SAFETY AND HEALTH MANAGEMENT SYSTEMS

In accordance with the Audit and Risk Committee’s previous resolution (refer item AR24/14) to change the order of business, the above noted late agenda item 7 was dealt with at AR27/14.

AR32/14 MOTIONS OF WHICH PREVIOUS NOTICE HAS BEEN GIVEN

Nil

AR33/14 GENERAL BUSINESS

Responses to General Business from a Previous Meeting Nil New General Business Nil

AR34/14 ITEMS FOR CONSIDERATION AT A FUTURE MEETING

Outstanding Items: Nil

AR35/14 CLOSE OF MEETING

There being no further business the Presiding Member declared the meeting closed at 5.10pm.

Audit Planning Memorandum

City of Perth

10 April 2014

I:\CPS\Admin Services\Committees\7. Audit\AS140521\1 sched - CoP-Grant Thornton - Audit Planning Memorandum

SC

HE

DU

LE 1

http://www.google.com.au/url?sa=i&rct=j&q=&esrc=s&frm=1&source=images&cd=&cad=rja&uact=8&docid=HcVuBypCTacVJM&tbnid=3gjS9meESJMi6M:&ved=0CAUQjRw&url=http%3A%2F%2Fcityofperthband.org%2F&ei=SudEU7e4O8XjkgXCvoCoDQ&bvm=bv.64507335,d.dGI&psig=AFQjCNHDlbu1RIaqAlf1UJmRYK--yN7Y2w&ust=1397110967387608

City of Perth – Audit Planning Memorandum – 10 April 2014

© 2010 Grant Thornton Audit Pty Ltd. All rights reserved.

Contents

Page

1. Audit responsibility/Reporting requirements 1

2. Audit process chart 2

3. Service team 3

4. Audit methodology and approach 4

5. Preliminary risk assessment conclusion 5

6. Audit timeline 6

7. Audit independence 7

8. Audit services and estimated fees for 2014 8




Responsibility

We conduct an independent audit in order to express an opinion. Our audit is conducted in accordance with Australian Auditing Standards in

order to provide reasonable assurance as to whether the financial reports are free of material misstatement. The nature of an audit is

influenced by factors such as the use of professional judgment, selective testing, the inherent limitations of internal controls, and the

availability of persuasive rather than conclusive evidence. Therefore, because of the inherent limitations in any audit, our audit can only

provide a reasonable, not absolute, assurance that the financial report is free from material misstatement.

We perform procedures and prepare and sign an audit opinion as to whether:

a The financial report gives a fair view of the council’s financial position as at 30 June 2014 and of its performance for the financial year

ended 30 June 2014; and

b The financial statements comply with Australian Accounting Standards.

We form our audit opinion on the basis of these procedures, which include:

Examining, on a test basis, information to provide evidence supporting the amounts and disclosures in the financial report; and

Assessing the appropriateness of the accounting policies and disclosures used and the reasonableness of significant accounting estimates

made.

We will inform the entity of any material errors, instances of fraud or illegal acts and material weaknesses relating to internal control and

accounting procedures we identify.

Reporting Requirements

1 Grant Thornton will provide an audit opinion on the 30 June 2014 statutory accounts of the City of Perth for the purpose of fulfilling the

council’s requirements under the Local Government Act 1995 Part 6 (as amended) and Regulations under that Act

2 We have included a proposed audit timeline that we have agreed with management within section 6.

3 Grant Thornton will also ensure that all specific reporting requirements in relation to the audit of the City of Perth are met within the

prescribed timeframes.

1. Audit responsibility/Reporting requirements




2. Audit process chart

Step 1

Perform risk assessment procedures and identify risks.

Determine audit strategy and identify critical accounting matters.

Determine planned audit approach.

Prepare all pre audit planning

materials

Step 2 Understand accounting and

reporting activities.

Evaluate design & implementation of selected controls.

Test operating effectiveness of selected controls.

Assess control risk & Risk of Significant Misstatement.

Step 3 Plan substantive procedures.

Perform substantive procedures.

Consider if audit evidence is sufficient and appropriate.

Conclude on critical accounting

matters.

Step 4 Perform completion procedures.

Perform overall evaluation of financial statements and disclosures.

Review format of financial statements

Verify balances for disclosure

Consider if audit evidence is sufficient and appropriate.

Conclude on critical accounting matters.

Specific Procedures (testing to be for the 11 month period to May 2014):

• Completion of all administrative requirements including sending of all

confirmations and signing of audit engagement letter. • Documentation of risk areas detailed within section three including a review of

significant processes and controls and who conducts each control identified. • Revenue testings on a statistical sample basis

• Employee entitlement testing of annual and long service leave

• Fixed asset testing of material additions and disposals

• Control testing of purchases

• Document internal control findings and results to the board.

Specific Procedures:

• Roll forward interim testing to final month of the year. • Substantive procedures of material balance sheet items and analytical review of

non-significant profit and loss accounts. • Agreed all external confirmations to necessary accounts and disclosure. • Obtain all disclosure items for the financial statements.

• Review financial statements for all entities.

Interim testing: June 2014 Final testing: August 2014




The service teams provided to the City of Perth include:

Client satisfaction

At Grant Thornton we strive for a high level of client satisfaction. Our business is built around the relationships we maintain with our clients.

We want to hear feedback from our clients to ensure the services we provide exceed your expectations.

At the end of our audit we ask the key stakeholders involved with the audit process to complete a Client Satisfaction Survey via email. The

feedback given is important to us, as we constantly strive to improve our service.

.

3. Service team

AUDIT AND

ASSURANCE SERVICE

TEAM

Partner Name

Michael Hillgrove

Manager Name

Lorenzo Stella

KEY CONTACT DETAILS

Michael Hillgrove [email protected] (08) 9480 2150

Lorenzo Stella [email protected] (08) 9480 2186

All service team members can be

contacted by phone on 9480 2000.

In-charge Name

TBA

Auditor

TBA

Auditor

TBA




Our audit approach is highly automated, using leading-edge technology, in order to reduce impact on the organisation’s operation and maximise

efficiency. This approach places emphasis on understanding your business and supports our staff through all stages of the audit process. This

technology enables the audit team to generate audit programmes that are specifically tailored to the organisation’s situation.

We will perform the audit using an electronic audit file and the majority of our work will be performed and stored electronically.

We do not regard the audit as a one off exercise rather we consider it to be a cycle of events which culminates in us issuing our opinion on the

financial statements. Our proposed audit approach has been based on the current group structure and trading conditions. The methodology to

be used is as follows:

4. Audit methodology and approach

Step 3

Substantive Testing

Plan substantive procedures. Perform substantive procedures. Consider if audit evidence is sufficient and appropriate. Conclude on critical accounting matters.

Step 4

Completion

Perform completion procedures. Perform overall evaluation of financial statements and disclosures. Form an audit opinion. Consider if audit evidence is sufficient and appropriate. Conclude on critical accounting matters.

Step 1

Planning

Perform risk assessment procedures and identify risks. Determine audit strategy and identify critical accounting matters. Determine planned audit approach.

Step 2

Control Evaluation

Understand accounting and reporting activities. Evaluate design & implementation of selected controls. Test operating effectiveness of selected controls. Assess control risk & Risk of Significant Misstatement.




5. Preliminary risk assessment conclusion

Financial Statement Level Risks

Focus Area Planned Audit Approach

Revenue and debtors • Detailed revenue testing based on a monetary sample basis. • Control testing of rates and fines processing systems • Review significantly aged receivable balances and subsequent receipt of debtor

balances. • Analytical review of revenue trends. • Review revenue either side of balance date to ensure proper cut off.

Operating costs and trade payables

• Review controls around purchasing. • Control testing of purchases made relative to contracts. • Analytical review of contract costs relative to revenue. • Unrecorded liabilities testing of payments recorded subsequent to balance date. • Review accruals against invoices recorded. • Review of internal auditors work completed

Employee costs and entitlements

• Detailed testing of employee payroll on a statistical sample. • Detailed annual and long service leave testing. • Masterfile and tax file number testing. • Analytical review of payroll and employee entitlements including a review of contractor

costs. • Review of internal auditors work completed

Capital and infrastructure assets • Review and assess adequacy of the controls over the asset management and maintenance processes.

• Verify reconciliation between the asset register and the general ledger. • Sample testing of fixed asset acquisitions and disposals. • Review useful lives of fixed assets for reasonableness. • Review of capital expenditure approval processes. • Review carrying amounts of PPE, including assessing if assets have been impaired. • Review fair value approach taken to infrastructure assets.




The following table includes the major milestone dates from our audit timeline in respect to the City of Perth Engagement.

Week commencing Milestone Duration Number of staff

9 June 2014 Interim audit procedures 1 Week 3

23 June 2014 Interim audit findings N/A N/A

8 September 2014 Final audit procedures (including Lord Mayor Distress Fund) 2 Weeks 3

28 September 2014 Final documents to management for review N/A N/A

28 September 2014 Signing and issue of audit opinions N/A N/A

6. Audit timeline




As the members of the Finance Committee would be aware, our audit services are subject to Grant Thornton’s and the accounting profession’s

strict rules and policies regarding auditor independence, as well as certain statutory requirements. We enforce these rules and policies in order to

maintain objectivity and to be free of conflicts of interest when discharging our professional responsibilities.

Grant Thornton understands the importance of our role as auditors in the external reporting framework and we work hard to maintain an

extensive system of quality controls over our audit practices.

For the benefit of the Finance Committee we confirm that no non-audit services have been performed during the year from 1 July 2013 to date.

We confirm that, to the best of our knowledge and belief, we are independent having regard to Grant Thornton's policies, professional rules and relevant statutory requirements regarding auditor independence.

7. Audit independence




Service Timing Fee estimate ($) – exclusive of GST

Statutory audit of the June 2014 financial statements

Month Year

24,000

8. Audit services and estimated fees for 2014


I:\CPS\ADMIN SERVICES\COMMITTEES\7. AUDIT\AS140521\2 SCHED - REPORT TO AUDIT COMMITTEE MAY 2014 RISK REGISTER.DOCX

STRATEGIC RISKS *Refer to Strategic Community Plan

Risk description Strategy *

Controls Consequence Likelihood Risk Further actions

1 The City of Perth not performing its duties effectively resulting in a negative impact to the CBD economy.

S6, S13 Policy and procedures

Major Rare Medium Monitor

2 City of Perth planning not addressing environmental sustainability and the resultant issues this may cause when dealing with issues such as climate change, energy security and water security.

S12, S16, S18

Planning documents regularly reviewed to take account of changing information. Asset Management


3 Lack of integration with Government agencies planning resulting in undesired outcomes, and legal redress.

S1, S3, S4, S5, S7, S9, S10, S11, S13, S14, S16

Regular review of planning framework


4 Lack of financial sustainability resulting in inability to deliver services and damage to reputation.

S2, S12, S7, S14, S18

Policy and procedures


5 The City not delivering projects and services that are environmentally sustainable resulting in damage to reputation and the environment.

S11, S12, S18

Policy and procedures


SC

HE

DU

LE 2





6 Transport networks running above capacity resulting in delays to motorists, financial impact on businesses and damage to reputation.

S3, S4 Liaison with other transport partners

Moderate Moderate Medium Monitor

7 Major global economic downturn leading to loss in revenue.

S1, S5, S6, S7, S10, S12, S13, S14

Major Unlikely Medium Monitor

8 Council strategic direction being in conflict with that wanted by the community resulting in damage to reputation.

S17, S19, S20

Community consultation

Moderate Rare Low Monitor

9 Development not in accordance with the City’s Urban Design Framework resulting in undesirable urban form.

S1, S7, S9, S10, S12


10 Strategic policies not being implemented by City of Perth resulting in damage to reputation.

S18 Policy and procedures, organisational development plan


11 Government policy interference resulting in undesired outcomes for the city.

Monitoring of government policy direction


12 Shifting of costs from other sectors onto the City resulting in financial impacts or affecting service delivery.

S12, S18 Moderate Moderate Medium Monitor

13 Partners in projects not being able to S7, S12 Moderate Moderate Medium Monitor





afford their project share resulting in delays to projects or financial implications for the city.

14 Poor relationship with state government and other external agencies resulting in difficulty in achieving desired outcomes.

S3 Build relationships Legislative controls

Moderate Rare Low Advocate for further legislative controls

15 Lack of ‘control’ of social media resulting in inadequate information.

S20 Policy and procedures

Moderate Moderate Medium Review social media policy

16 Fraud and corruption within the organisation resulting in damage to reputation, legal issues, financial issues.

S18 Policy and procedure, audit

Minor Unlikely Low Monitor

17 Contributed assets from Metropolitan Redevelopment Authority (MRA) projects have financial and operational impacts for the City.

S1 Liaison project managers and engineers

Major Moderate High Monitor

18 Poor decisions from the Local Government structural reform that weakens or distracts from the role of City of Perth as a Capital city.

S18 Processes being put in place

Major Unlikely Medium Advocate for an appropriate reform decision

19 City of Perth allowing situations to develop that result in long term safety and security implications for

S14, S18 Policies and procedures






employees. 20 Natural or imposed disasters occurring

that disrupt the City operations and/or cause harm to life and property.

S14, S18 Emergency management procedures

Catastrophic Rare Medium Monitor

21 Lack of available, skilled staff resulting in services not being delivered.

S18 Workforce plan Moderate Unlikely Medium Monitor

22 Changes to the City and growth creating situations that may reduce the safety and security of the general population.

S14, S18 Implementation of appropriate strategies in coordination with outside agencies


Audit and Risk Committee Confidential Schedules 3 and 4

(Minute AR29/14 refers)

Distributed to Elected Members under separate cover

Bound in Consolidated Committee

Confidential Minute Book

Volume 1 2014

Audit and Risk Committee Confidential Schedule 5 (Minute AR30/14 refers)




Volume 1 2014

Audit and Risk Committee Confidential Schedule 6 (Minute AR31/14 refers)




Volume 1 2014

AUDIT AND RISK COMMITTEE - City of Perth · AUDIT\AR140527 - MINUTES.DOCX AUDIT AND RISK COMMITTEE...

Documents

Transcript of AUDIT AND RISK COMMITTEE - City of Perth · AUDIT\AR140527 - MINUTES.DOCX AUDIT AND RISK COMMITTEE...