Meeting 1 September 2020 requirements - Draft Audit and Risk Advisory Committee Charter

In order to provide support to councils to achieve the requirements due for implementation by 1 September 2020, Local Government Victoria has provided a draft Audit and Risk Advisory Committee (ARC) Charter for councils to use. We have received considerable feedback on this document and have therefore updated the document to incorporate these changes. Secondly, a Self Assessment survey tool is provided and thirdly an ARC Annual Work Plan, with a second page example of what a rolling four year plan for review of the Internal Control Environment (ICE) might look like (note that there are two worksheets here)

Audit & Risk Advisory Committee Charter guidance

Key changes incorporated into the Audit and Risk Advisory Committee Charter model include:

  • Text to take account of the expanded role of the Committee pursuant to Sections 53 and 54 of the Act;
  • Guiding commentary to provide users with guidance in tailoring the Charter to suit the circumstances of their Council;
  • An Appendix that provides guidance to Committee members on their regulatory responsibilities with regard to confidentiality, use of information and managing and reporting conflicts of interest;
  • A stronger emphasis on the key role that the internal control environment plays and how Committees can monitor this area of Council’s performance more effectively. This change includes references to the impact of the new Governing Principles on Councils’ policies and procedures

The model does not take account of the maturity level of Audit & Risk Committees in the sector, but it is likely that some Councils will be more advanced in dealing with the challenges of the new model Charter. In this context it is understood that some Councils may need time to transition to the more extensive requirements for Audit & Risk Committees under the new Act.

Draft Audit and Risk Advisory Committee Charter
MS Word (51.80 KB)

Audit & Risk Advisory Committee Self Assessment guidance

  • Any assessment of the Committee’s performance should not be an assessment about the performance of individual members. That is a separate exercise that the ARC Chair/CEO may conduct. Committee and individual performance assessments should not be combined as they do not work and create problems when there are comments about an individual;
  • The real value in these surveys is in the comments that respondents provide at the end of each section;
  • There needs to be a minimum of 10 responses to provide reliable results with meaningful comments;
  • The process that is followed once the surveys have been completed is a key part of the self assessment process – ARC Chairs have a key role to play here.
  • There can be a difficulty in interpreting the results, as the answers are averaged out from across Councillor members, Independent members and senior officers who have different levels and occurrences of involvement. The Chair will therefore need to manage the responses carefully.
  • This is a Word document, but this template can be developed from an Excel document also and the value there is in summarising and interpreting results, for example, on a question by question basis, or on a subject matter basis, etc.
Audit and Risk Committee Self Assessment Survey Template
MS Word (31.77 KB)

Audit & Risk Advisory Committee Workplan

Draft Audit and Risk Advisory Committee Annual Workplan (Sample)
MS Excel (28.52 KB)

What I need to do to be compliant by 1 September 2020

1. To be compliant with the new Act 2020 your council must:

  • prepare and approve a committee charter and make appointments to the committee (establish the committee) on or before 1 September 2020 (s 54(7)).

2. The committee charter must specify the functions and responsibilities of the committee, and must include the following functions (s 54):

  • monitor the compliance of council policies and procedures with the overarching governance principles and the Act and any regulations and Ministerial directions
  • monitor council financial and performance reporting
  • monitor and provide advice on risk management and fraud prevention systems and controls
  • oversee internal and external audit functions.

Section 54 of the Act also describes the work an Audit and Risk committee must undertake and administrative instructions.

Note: While section 139 of the previous Act (1989) has already been repealed, the new Act (2020) specifically allows for the continued operation of an audit committee established under that section (prior to the repeal) may continue to operate until the new committee is established
The Local Government Act 2020 has five new requirements that Audit and Risk Committees must meet. We will be working with the sector on the additional three requirements in due course.

The council must prepare and approve a committee charter and establish the committee (appoint members) by 1 September 2020.

The committee must report to council twice yearly, the report must include the committee’s findings and recommendations.

A majority of committee member must be independent of council; the chair must not be a councillor and members of council staff must not be committee members. Collectively, the committee must have expertise in financial and risk management and experience in public sector management.

The committee must undertake an annual assessment of its own performance against the charter and report on this to council.

The committee must adopt an annual workplan.

Your Feedback

We asked you to review Local Government Victoria’s Audit Committees: A guide to good practice for local government (2011) and tell us how we can improve it to meet the needs of your council under the requirements of the new Act. You reported that, to a reasonable extent, the guide would meet your council’s needs. You did note that there were some omissions, your comments:
Feedback from Audit and Risk Committee consultation
MS Word (1.46 MB)

Policy Examples

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Resource library

Click on the resources below to find advice on Audit and Risk functions. This has been sourced from material and advice from professional bodies, the International Internal Auditors (IIA) and other states of Australia.

Risk Management - the International Organisation for Standardisation’s risk management standard AS ISO 31000:2018 Risk Management – Guidelines has been accepted as the Australian risk management standard and widely adopted in the private and public sectors. Many councils have membership to access these standards.

Victoria Auditor General's Report - August 2016. This is aimed at Victorian public sector agencies where audit committees play a role in decision making as opposed to local government audit committees that play an advisory role.