Division Of Local Government Circular to Councils 08/64 - Internal Audit Guidelines For Councils And County Councils was circulated on 14 October 2008:
Quoting from that document:
"Internal audit is widely used in corporate Australia as a key mechanism to assist in managing risk and improving efficiency and effectiveness. At a federal and state government level, there are clear requirements for internal audit and risk management in most jurisdictions.
There is also growing acceptance of the importance of internal audit and risk management in local government. It is pleasing to see that a number of councils in New South Wales are showing leadership in fully embracing this concept. However, the Promoting Better Practice Programme has highlighted that while progress is being made, there is still opportunity for improvement. Effective internal audit and risk management processes should become part of the business as usual operations of councils.
The internal audit guidelines propose oversight of Council systems and processes through an audit committee. The combination of an effective audit committee and internal audit function provide a formal means by which councillors can obtain assurance that risk management and internal control are working effectively."
DLG Guidelines (2005) were designed to assist councils and county councils develop and implement internal audit and risk management frameworks that will in turn build community confidence in their managerial performance.
Revised guidelines were issued September 2010.
Brewarrina Shire Council is one of a number of councils that has completed Promoting Better Practice Reviews in recent years.
The Council engaged external auditors, Morse Group, to visit Brewarrina Shire Council during 2010. Primarily, the visit was undertaken as the first step to councils complying with the directive from the Division of Local Government in relation to establishing an internal audit program and setting up an internal audit committee.
The secondary reason for the visit was to require the auditors to undertake a review of Council's payroll function. This was duly completed and an operational report was received by the General Manager.
The Morse group provided council with formal documents required to be adopted by the Council to enable the internal audit program to commence.
The documents were: Internal Audit Charter; Audit Committee Charter; Risk Identification Matrix; Three Year Audit Plan and Internal Audit Program.
The Three-Year Internal Audit Plan and the Internal Audit Program serve to clarify the Division of Local Government's position in relation to internal audit.
Council is required to establish an internal audit committee as per the audit committee charter. The composition and tenure of the committee is shown at item 4.0 on the charter, as follows:
4.1 Members (voting)
Councillor
Independent external member with financial expertise (not a member of the Council whose role will include chairing the committee)
Independent external member (potentially from a neighbouring council).
4.2 Attendee (non-voting)
Mayor (optional)*
General Manager
Finance Manager
Internal Auditor
(Note* The DLG Guidelines recommends "...that the Mayor is not a member of the committee")
4.3 Invitees (non-voting) for specific agenda items
Representatives of the external auditor
Other officers or councillors may attend by invitation only as requested by the Committee
"The members of the Committee, taken collectively, will have a broad range of skills and experience relevant to the operations of Brewarrina Shire Council. At least one member of the Committee shall have accounting or related financial management experience, with understanding of accounting and auditing standards in a public sector environment."
Council at the 25 February 2011 Council meeting resolved:
1. Council adopts the following Brewarrina Shire Council documents:
a. Internal Audit Charter;
b. Audit Committee Charter;
c. Risk Identification Matrix;
d. Tree Year Audit Plan; and
e. Internal Audit Program.
2. Council appoints Councillor Reichler with the requisite experience to be a voting member of the Brewarrina Shire Council's Internal Audit Committee
