Agenda of Audit Committee

8 March 2022 Page 7

9. Matters Requiring a Determination of Committee

Item: 9.1

Compliance Audit Return 2021

Author/s	Sarah Walsh	Coordinator Governance & Corporate Support
Authorisor/s	Felicity Baxter	Director Corporate & Community Services

File Ref: D22/2947

Applicant

Corporate & Community Services

Location/Address

Shire of Esperance

Executive Summary

For the Audit Committee to recommend to Council, adoption of the 2021 Shire of Esperance Compliance Audit Return (CAR) as required pursuant to Section 7.13(1)(i) of the Local Government Act 1995, and Regulation 14 of the Local Government (Audit) Regulations 1996 as attached.

Recommendation in Brief

That the Audit Committee recommend that Council adopt the 2021 Shire of Esperance CAR pursuant to Regulation 14(3) of the Local Government (Audit) Regulations 1996.

Background

As in previous years, local governments are required to complete a CAR by the Department of Local Government and Communities for each calendar year.

The 2021 CAR contains 98 questions across 11 categories formulated around the Local Government Act 1995 and associated regulations. Categories and questions are completed by the relevant Shire Officers and presented to Council through the Audit Committee for adoption.

A copy of the 2021 Shire of Esperance CAR is attached for reference.

Officer’s Comment

The CAR has identified two areas of non-compliance within the Shire of Esperance for 2021 as follows;

Question

Non-compliance

Comment

Disclosure of Interest

Question 4

One primary return was not lodged by the relevant persons within three months of their start date. Officer commenced 12/08/2021, and primary return was lodged 15/12/2021.

Procedure has been updated to ensure Executive Assistant is aware of primary return required for officers with Delegated Authority.

Local Government Employees

Question 2

Director External Service’s position was advertised in the West Australian and the Shire website.

Advised Human Resources of the requirement to include information required under r.18A in advertising for Senior Employee positions, and Statewide Public Notice requirements.

Consultation

Asset Management

Corporate & Community Services

Executive Services

External Services

Financial Implications

Nil

Asset Management Implications

Nil

Statutory Implications

Local Government Act 1995 – Section 7.13(1)(i)

Local Government (Audit) Regulations 1996 – Regulation 14

Policy Implications

Nil

Strategic Implications

Strategic Community Plan 2017 - 2027

Leadership

Community confidence and trust in Council

Encourage community participation and insight into activities and decisions

Corporate Business Plan 2021/22 – 2024/25

Manage Corporate Reporting

Environmental Considerations

Nil

Attachments

a ⇩.

Compliance Audit Return 2021

Officer’s Recommendation

That the Audit Committee recommend that Council adopt the 2021 Shire of Esperance Compliance Audit Return pursuant to Regulation 14(3) of the Local Government (Audit) Regulations 1996.

Voting Requirement Simple Majority

Audit Committee: Agenda

8 March 2022 Page 21

Item: 9.2

2021/22 Budget Review

Author/s	Beth O'Callaghan	Manager Financial Services
Authorisor/s	Felicity Baxter	Director Corporate & Community Services

File Ref: D22/5526

Applicant

Corporate and Community Services

Location/Address

Internal

Executive Summary

For the Audit Committee to recommend Council adopt the 2021/22 Budget Review as per the legislative requirement.

Recommendation in Brief

That the Audit Committee recommends Council adopt the 2021/22 Budget Review.

Background

Council undertakes a Budget Review to assess the impact of actual events upon the adopted budget. The Budget Review document contains actual transactions up to the end of December 2021 and also a predicted figure for each account till the end of the financial year. The predicted figures attempt to quantify the likely difference that invariably occurs between the budget and the end of the financial year actual result.

A detailed dissection of the income and expenditure variations is supplied as an attachment. The report lists all accounts which have a variance (surplus or deficit) from which was estimated in the annual budget. All of the variances shown require Council approval by Absolute Majority to adjust the original budget. If Council resolves to adjust the budget as per the attachment, it will provide a predicted $6,584 deficit by 30 June 2022.

Officer’s Comment

The Budget Review has been compiled in the statutory reporting program format similar to the monthly financial report. Four columns of information have been presented as follows:

1. The first column being the Council’s adopted budget

2. The second column contains the actual result recorded to 31 December 2021

3. The third column contains the actual result recorded to 28 February 2022

4. The fourth column being the predicted result to 20 June 2022.

Expenditure is presented without brackets and revenue is presented in brackets eg (100,000).

The Budget Review process is essentially designed to ensure that the adopted budget is being adhered to and there are no material variances that may cause a deficiency in “cash” to occur at financial year’s end.

A balance budget was adopted by Council for the 2021/22 Budget. Since adoption, budget amendments have been presented and adopted by Council however this has still resulted in a balanced position.

The main variations which have been identified since budget adoption are outlined below:

· The net movement for depreciation is $1.6 million increase. This is largely the increase in roads and street capitalisation from the previous year. The budgeted depreciation for this category was not increased at budget time as it was unknown what the increase would be at time of budget adoption. This is a non-cash item and is removed from the calculation of the budget surplus/deficit. Depreciation falls under the heading of Non-Cash Expense throughout the document. This heading will also include Loss on Sale if applicable for that area.

· Employment expenses has had an overall decrease of $93,000. Although a 2.5% increase across the board was provided to staff in December, there has been a number of savings due to vacant positions and difficulty in recruiting staff. Employment expenses includes other expenses besides wages, such as superannuation, uniforms, travel allowances, training, workers compensation insurance, recruitment costs, fringe benefits tax, salary sacrifice rent and leave accruals.

· Building maintenance program across all departments has had a slight increase of $72,000 resulting in increases and decreases across the schedules.

General Purpose Funding

· Financial Assistance Grant funding was $717,000 more than expected.

· Interest earnings has decreased by $66,000 resulting from very low interest rates.

· Mining tenements is higher than expected by $36,000, this is for 4 new tenements that have come onto the rating system.

Governance

· Employee costs for Corporate Support increased by $284,000 for performance based insurance. This is for claims outstanding and may not all be paid this financial year. This is partly offset by a reserve transfer in from Governance and Workers Compensation Reserve of $150,000.

· Employee costs for Corporate Performance decreased by $60,000 due to a vacancy in this area.

· Employee costs for Corporate Resources has increased by $43,000 for a Business Improvement Analyst assisting in a number of areas across the departments. This has been funded by a decrease in consultancy budgets for Corporate Resources, Executive Services, Information Management and Planning Services.

· Employee costs for External Services has decreased by $42,000 due to not replacing a vacancy in the area.

· Employee costs for Human Services has increased by $59,000. This is in response to high workload with a large number of vacancies and Employee Bargaining Agreement in process. Also included in this area is a salary sacrifice rent expense which is 100% offset with an increase in contribution income.

· In turn with high recruitment activity the recruitment expenses have also increased by $15,000.

· Employee costs for Information Technology has decreased by $42,000 due to a vacant position and an employee taking long service leave resulting in a lower leave accrual.

· Computer/IT costs has increased by $25,000 to cover operating costs for the new TEAMS setup. Offsetting this is a reduction in capital purchases for the same amount.

· Under Information Technology – Capital there is an increase in grants of $390,000 which is a Safer Communities Fund grant for CCTV. Infrastructure expenditure has increased by the same amount.

Law, Order & Public Safety

· As per budget amendment in January the Emergency Management grants has increased for Mitigation Activity Funding (MAF) by $34,500. This is offset by an increase in Fire Mitigation Works.

· During January Department of Fire and Emergency Services (DFES) provided a reimbursement of $31,452 for Wattle Camp Track firebreak. This increase in reimbursements is offset by an increase in Fire Mitigation Works.

· Rural house numbering project has an increase in funds to $30,000 to complete this project.

· Funding from DFES for fire prevention has increased by $93,000 to assist towards maintaining fire vehicles and brigades. This cost centre is self-funded.

· New dog pound expenditure has increased by $102,000 due to contract variations. Building maintenance reserve transfer into municipal has been increased to equal the expenditure.

Health

· Environmental Health grants has increased by $100,000 for WA Primary Health Alliance grant for suicide prevention. This has increased a special project expenditure by the same name.

· Employee costs for Environmental Health has been reduced by $60,000 due to vacant positions in this area.

Education and Welfare

· As required, the accounting treatment for recognition of funds received in prior years has been processed. This brings what has been recorded as a contract liability for prior years into the Homecare Program on the income statement. This accounting process brings in the existing liability as increased Homecare Program Income, with an equivalent increase to the administration expenses by $368,000.

· A further reallocation of Homecare Employee to administration expenses by $321,000 is included in this review, resulting in a total increase to administration expenses of approx. $689,000. At the end of the financial year, a full review of unspent Homecare Program funding will be done, recording any unspent balance as a contract liability. Homecare is a self-funded cost centre and has no impact on the municipal budget bottom line.

· Volunteer Resource Centre has successfully received a further $84,000 from Volunteering WA that was unexpected. Therefore grant income has increased with offsetting increases in employee costs and administration expenses. Volunteer Resource Centre was a self-funded cost centre however funding in recent years has been unpredictable. Council adopted budget in August with the knowledge that it will be assisting towards funding the Volunteer Resource Centre. With the unexpected additional funding since budget adoption the revised budget sees a smaller cost to Council.

Community Amenities

· Cemetery fees and charges has had an increase of $40,000 based on year to date actuals.

· Burial ground expenses have increased in line with income by $26,000.

· Grants, subsidies and contributions for Environmental Services has increased by $66,000. $50,000 is to fund the GVROC Climate Change Coordinator. $16,000 is for salary sacrifice rent contribution from one of the environmental officers.

· Special projects for Environmental Services has increased by $50,000 for the GVROC Climate Change Coordinator expenses.

· Planning Services employee costs have reduced by $51,000 due to vacant positions in the area.

· Planning Services allocation for the development of online application submission $30,000 has been reallocated to assist funding for the Business Improvement Officer resource, whilst this project is reviewed with Civica.

· Strategic Planning and Land Projects grants has decreased by $33,000 for the Dual Naming Project as the application for Lotterywest funding was unsuccessful. Subsequently the project will not be going ahead and the expenditure has been reduced.

· Land Project Survey costs $20,000, under special projects for Strategic Planning and Land Projects has also been removed as this will not go ahead this financial year.

· Waste Management fees and charges have increased by $390,000. This is based on year to date actuals for rubbish removal, tip entry charges and sale of recyclable products.

· Employee costs for Waste Management has increased by $76,000 as it appears it was inaccurately budgeted initially based on year to date and compared to previous years.

· Special projects for waste have overall increased by $44,000. Waste Oil relocation came in cheaper than expected and was reduced by $15,000 and the Strategic Waste Initiatives has increased by $60,000. This budget allocation is for operational review and capital needs assessment for the Myrup Liquid Waste and Truckwash in addition to Myrup Transfer Station assessment.

· Waste Management recycling expenditure has increased by $49,000 due to a large amount of green waste processing that has occurred.

· Waste Management maintenance has been decreased by $112,000 which is mainly for the capping that won’t be taking place this financial year.

· A reduction in capital expenditure for Waste Management by $60,000 due to the Truckwash pump shed and equipment not happening this financial year.

· Waste Management is a self-funded cost centre and has no impact on the municipal budget bottom line.

Recreation and Culture

· Employee costs for Bay of Isles Leisure Centre (BOILC) Administration has gone up by $34,000. It appears it was inaccurately budgeted initially based on year to date and compared to previous years prior to COVID-19. The impact of COVID-19 has made it difficult to estimate the wages for the centre with reduced opening times and number of patrons.

· Fees and charges for Swim School has increased by $20,000 based on year to date actuals. Expenses have subsequently increased by $18,000 for the pool operations.

· Fees and charges for the Dry area of BOILC have increased by $15,000 based on year to date actuals. Dry Operations expenses has increased by $10,000.

· Local Roads and Community Infrastructure (LRCI) funds of $550,000 has been reallocated to the BOILC for the plant room and heating upgrade as per budget amendment presented to Council in January.

· Due to the uncertainty of COVID-19 and its current and future impact on the Civic Centre, officers have done a review of show/functions budget line items. This has resulted in a reduction in income of $59,000 and a slight decrease in show expenditure by $5,000. Some shows have cancelled and the shows that do go ahead will have limits on audience based on the latest public health restrictions. The expenditure looks high relative to the income. This is related to deposits for shows delayed to future years. Some performances originally scheduled to the current year have been delayed to future year but have been funded in the current budget. Employee costs have increased by $43,000. The reasons for this include increases in levels for the Coordinator, and qualifying trainee, and 50% of an officer’s wage that was previously budgeted to Community Development, is now costed to the Civic Centre as their tasks are Civic Centre related. There is also the organisation wide 2.5% increase impact.

· Building maintenance for the Civic Centre has increased by $154,000 mainly for lighting upgrades and asbestos removal works when installing the exterior lighting.

· Coastal infrastructure Grants has increased by $300,000 for the funds received from Department of Transport for the Backpass Trial. Although received in the prior year it is not recognised as income until the current year. The offsetting expenditure has been increased by $300,000 accordingly to match up with the income. The Backpass trial has increased by $40,000 for additional works.

· Coastal Infrastructure grants also increased by $10,000 for the Dept of Communities funding towards the Beach Accessibility Project which was a budget amendment approved by Council in January. Special projects for the James Street Beach Inclusive Access has been increased by $32,000. As per the budget amendment the James Street Beach Cleaning work order has been decreased by $22,000.

· The reimbursements, employee costs and administration expenses for Coastal Infrastructure have been reduced by $30,000 as the Max Employment Work for the Dole Program will not be taking place this financial year.

· The capital spending in Coastal Infrastructure projects has increased - $110,000 for the finishing touches on the new jetty and $55,000 to complete the Lap Pontoon.

· Community Grant payments to community events has been reduced by $10,000 for the Escare Kids Fun Day that has been cancelled.

· Administration expenses for Parks has been increase by $19,000 for Covid-19 personal protective equipment (PPE) $9,000 and $10,000 for Land Tax on Adventureland Park.

· Park maintenance costs have increased by $37,000 for the completion of the pods at the jetty.

· The building maintenance on the Condingup Hall has increased by $43,000 for Horizon Power’s fee to carry out a power upgrade and replace the power pillar which had rusted.

· The new Self Supporting loan to the Esperance Bay Yacht Club for $750,000 is now reflected in the budget along with the payment to the Club.

· Employee costs for Sporting Complexes has increased by $19,000 which is mainly an increase in superannuation to cover the Graham Mackenzie Stadium cleaners that was not budgeted.

· Building operations for Sporting Complexes has increased by $63,000 of which $50,000 is the cleaning budget for Graham Mackenzie Stadium that was not budgeted for.

· Fees and charges for Sporting Grounds has increased by $65,000 which is for GSG Overflow Camping fees being higher than expected.

· Ports’ Lighting Project $25,000 has been included as per Council resolution in August with an offsetting Priority Projects reserve transfer into Muni for the same amount.

· The Eastern Suburbs Water Supply (ESWS) pump station/irrigation upgrade has gone over budget by $31,000 because of additional bore works that had to be completed.

Transport

· Licensing commission under fees and charges has increased by $40,000. This was in response to a review of the commission paid on transactions by the Department of Transport (DOT) after request from the Shire. DOT in an effort to increase the commission has adjusted their calculations. DOT will no longer cap the commission received when a certain volume of transactions is reached but will now pay the full commission on all transactions.

· As mentioned above a budget amendment approved the transfer of LRCI funds to the BOILC plant room and heating upgrade, therefore the GPS CORS Network project and grant income, $250,000 under Road Making Plant has been removed.

· Road and Street fees have increased by $64,000 for the Wind Turbine remedial road works reimbursement charge.

· Road and Street operating grants and contributions has increased by $340,000 and this is for rectification works paid by Boral Asphalt.

· Rural road maintenance has had an increase in budget funds of $500,000 funded by a reduction in rural road municipal capital expenditure. This is due to extraordinary harvest impact on rural roads recently. To fund this a number of capital resheet jobs have been reduced.

· Further to rural capital expenditure changes as above, there are reallocation of funds to allow for the purchase of bitumen equipment such as an emulsion road tanker and an emulsion tank at the depot for $245,000. The recently awarded bitumen contract to Bitutek included the purchase of this equipment from them.

· Road and street capital grants have reduced by $217,000 net. This included the removal of $300,000 of LRCI funds for the Town Entry Statements as per budget amendment to increase the budget for BOILC plant room and heating upgrade. It also includes the increase of $83,000 for LRCI funding for River Road upgrade.

· The town road municipal capital expenditure has consequently reduced for the $300,000 Town Entry Statements that is not happening this financial year as per the budget amendment mentioned above.

Economic Services

· Due to vacancies in Building Services the employee costs have been reduced by $14,000 however consultants has increased by $8,000 to assist with the workload.

· As per the budget amendment adopted by Council in November the Worker Accommodation Study is included in the budget under Community and Economic Development. Therefore grants has increased for the $20,000 Goldfields Esperance Development Commission (GEDC) contribution, special projects has increased by $40,000 and Priority Project reserve transfer into municipal for $20,000 is also included.

· Visitor Centre fee income has decreased by $33,000. This constitutes a net of decrease in commissions, DPAW passes and an increase in souvenir sales based on current year to date actuals and estimated impact of COVID-19 on tourism. With the expected decrease in DPAW passes sales the Resale expenditure has also been reduced by $21,000 to reflect this.

· Rural Services income has been reduced by $100,000 for the Esperance Biosecurity Association, offsetting this is a reduction in Wild Dog Control by the same amount.

· Shire Building management reimbursements has been included, $46,000 for workers compensation claim to LGIS for an employee. Partly offsetting this is an increase in employee costs.

· Tourism and Area Promotion fees has increased by $35,000 for Blue Waters Lodge rent as the rental of this building has exceeded initial expectations with the current housing shortage in Esperance. Likewise the expenditure on the building has increased as well by $38,000 to cover operating costs such as electricity, water, insurance and cleaning.

Other Property & Services

· Employee costs for the Depot has increased by $37,000. This is due to supervisor rate increases and the 2.5% increase across the board applied in December and a crossover period where an employee was covering off another who was on extended leave.

· Proceeds on sale of assets for Other Property & Services has increased by $205,000 due to the unexpected sale of 3 Mills Place. Any funds received in this account, generally for land sales other than Flinders Estate and Shark Lake Industrial Park is transferred at the end of the financial year to the Land Purchase and Development Reserve.

· Outside Works administration expenses has increased by $48,800. $9,000 is an increase in PPE for COVID-19 purposes. The remainder is for an increase in vehicle expenses based on year to date actuals.

· Plant and Vehicles employee costs has increased by $63,000. This appears to be a budgeting error for this area. The employee costs that go to this area is the three workshop employees who do maintenance on all of the Shire heavy and light fleet as well as the start-up maintenance each outside works employees do on their plant items each morning.

· Vehicle costs under Plant and Vehicles has been increased by $95,000 and is mainly an increase in fuel costs based on year to date actuals.

In conclusion the original budget commenced as a balance budget (nil surplus/deficit) with subsequent budget amendments resulting in still a balanced budget. After the Budget Review as at 31 December 2021 the expected budget position is now a small deficit of $6,584. This is a good result considering challenges with multiple projects and the continued uncertainty of the impact of COVID-19.