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TABLE OF CONTENTS
9. Stock .................................................................................................................................................... 19
9.1 Stock Policy ........................................................................................................................... 19
9.2 Physical Storage .................................................................................................................. 19
9.3 Issues and Returns ............................................................................................................... 19
9.4 Stock-Takes (Fuel and Oil) ................................................................................................. 19
9.5 Year End Considerations .................................................................................................... 19
10. General Ledger .................................................................................................................................... 19
10.1 Journals.................................................................................................................................. 19
10.2 General ................................................................................................................................. 20
10.3 Budgetary Control ............................................................................................................... 20
10.4 Annual Financial Statements ............................................................................................ 20
11. Other ...................................................................................................................................................... 20
11.1 Access Controls Property ................................................................................................ 20
11.2 Access Controls Computer ............................................................................................ 20
11.3 Internal ................................................................................................................................... 21
11.4 Prescribed Services ............................................................................................................. 21
11.5 Registers ................................................................................................................................ 21
11.6 Hiring of Properties .............................................................................................................. 21
11.7 Trust Funds ............................................................................................................................. 22
11.8 Subsidiaries of Council ........................................................................................................ 22
11.9 Computer Environment ...................................................................................................... 22
11.10 Records Retention and Destruction ................................................................................ 22
11.11 Records Security .................................................................................................................. 22
11.12 Insurable Risk ........................................................................................................................ 22
11.13 Machinery Costs and Indirect Expenditure Allocation ............................................. 22
11.14 Elected Members ................................................................................................................ 22
11.15 Activity Based Costing........................................................................................................ 23
11.16 Westpac Bank In-Store ....................................................................................................... 23
(1) Legislation
S125 of the Local Government Act 1999 requires Councils to have Internal Control
Policies. The Act does not prescribe the content of these policies, procedures and
practices.
S126 states that a Council may have an Audit Committee and states what the
functions of an audit committee may include.
S130 states that the Chief Executive Officer must provide assistance to the auditor
in the conduct of his/her duties.
Regulation 14.2 states that the auditor must give due consideration to Councils
policies, practices and procedures of internal control under S125 in forming an
opinion on the financial accounts per S129.
The Australian Auditing Standards require Councils to have systems of internal
controls sufficient for the auditor to be able to form an opinion on the financial
accounts.
Internal Control and Risk Management are key elements of this framework.
POLICY
Council shall develop and maintain such management structures, organisational behaviors,
policies, procedures, records and methods of reporting that are necessary to collectively
ensure that the financial and non-financial operations of Council is conducted in an orderly
and efficient manner to achieve Councils objectives by:
Assessing and containing the risks faced by Council to an acceptable level.
Detecting and correcting irregularities.
Safeguarding assets against loss or misuse.
Ensuring financial and other records are complete and accurately and reliably reflect
the conduct of Council.
Preventing the misuse or misappropriation of resources.
the Council's Strategic Plans and the objectives and goals contained therein are
achieved;
Resources are acquired economically and employed efficiently, quality business
processes and continuous improvement are emphasised;
The actions of all Council officers (including Council members, senior management
and staff) are in compliance with the Council's policies, standards, plans and
procedures, and all relevant laws and regulations
Internal Control is concerned with responding to the risk management of all of the
internal operations of Council including both the financial and other operations.
Internal Control is not concerned with risk management as it applies to matters
external to the operations of Council. Specifically, Internal Control is not concerned
with risks faced by the Council including potential disasters or political, economic and
environmental risks.
PRINCIPLES
Internal Control requires a full risk analysis of the internal operations of Council. This should be
addressed within the analysis of the Control Environment.
Internal control and risk management are key components of a sound governance
framework. Governance concerns leadership and incorporates long-term planning,
compliance, internal control, risk management, resource allocation, accountability and
transparency.
Internal Control is based on three elements:
Control environment
Information system
Control procedures
The control environment comprises organisational structures and culture and includes:
Management operating style
Levels of responsibilities and authorities
Audit practices
Use of information technology
Human resource management practices
The control environment requires Council to conduct an evaluation of the risks to which
council operations are exposed. This should include both financial and non-financial risks.
The information system comprises all of the records and reporting methods of Council used to
maintain accountability for assets, liabilities, income and expenses and for the achievement
of the objectives of council.
Control procedures comprise those policies and procedures established to ensure that the
objectives of council are achieved in an efficient and effective manner.
These include:
Document control
Reconciliations
Physical access controls
Protection of assets
Financial accounting procedures
Information technology controls
Budgeting and reporting
Management controls
Internal control is integral to risk management. In establishing and assessing internal control
practices, it is necessary to recognise that in practical terms a certain level of risk will always
exist within organisations. The purpose of internal control is to provide assurance that the
internal risks faced by Council are contained to acceptable levels. This must be defined in
respect to risk in respect to the financial, political, human resource, technical, information,
and technological operations of council.
The Elected Member Body is responsible for the internal control policy of Council.
The Chief Executive Officer is accountable to the Elected Member body for developing and
implementing such internal controls as are necessary to ensure that the objectives of Council
are achieved in an orderly and efficient manner.
The management of Council is responsible for the development of adequate internal controls
and for their implementation, evaluation and revision on an ongoing basis in respect to all of
the functions of Council under their control.
The Council employees are responsible for conducting their duties in accordance with
internal control policies, procedures and practices of Council. They are also responsible for
reporting to management instances where they consider that internal control procedures are
inadequate or are not being complied with.
BACKGROUND
The previous Local Government Act placed responsibility for internal control with the Chief
Executive Officer. Councils have therefore always been required to maintain adequate
systems of control.
With the new Act placing responsibility for internal control with Council, it is necessary to
clearly document and explain internal control practices in such a way that will provide
sufficient confidence to Council that the organisation is being properly managed within
acceptable limits of risk.
Definition: Internal Control comprises those management policies, procedures and practices
which collectively ensure that the level of internal risk of an organisation is contained so that
its objectives are achieved in an orderly and efficient manner.
Control is any action taken by management to enhance the likelihood that established
objectives and goals will be achieved. Controls may be preventive (to deter undesirable
events from occurring), detective (to detect and correct undesirable events that have
occurred), or directive (to cause or encourage a desirable event to occur).
PROCEDURES
Based on the above prepare such policies and document and evaluate such procedures as
necessary to maintain sound internal control.
Conduct such internal audit procedures as necessary to ensure that over time the system of
internal control of Council is adequate and is operating in a sound manner. In response to
any matters identified, take timely remedial action.
Provide from time to time such reports to management and Council to evidence the
adequacy of the internal control system in operation.
The effectiveness of this Policy shall be reviewed at least once every four years, being the
term of the Council. The Chief Executive Officer of the Council will report to Council on the
outcome of the evaluation and make recommendations for amendment, alternation or a
substitution of a new policy.
This Policy will be available for inspection at the Councils principal office during ordinary
business hours. Copies will also be provided to interested members of the community upon
request, and upon such payment of such fee (if any) as the Council may, in its discretion, fix.
RECORD OF AMENDMENTS
1. Definition
Internal control comprises the plan of the organisation and all of the coordinated methods
and measures adopted by the Council and contained within the Local Government
Accounting manual, to safeguard its assets, check the accuracy and reliability of its
accounting data, promote operational efficiency and encourage adherence to
prescribed managerial policies. This definition possibly is broader than the meaning
sometimes attributed to the term. It recognises that a system of internal control extends
beyond those matters which relate directly to the functions of the accounting and
financial departments and such a system includes budgetary control, periodic operating
reports, statistical analysis and the dissemination thereof, a training programme designed
to aid personnel in meeting their responsibilities and internal audit staff as needed to
provide additional assurance to management as to the adequacy of its outline
procedures and the extent to which they are being effectively carried out.
Council shall maintain accounting records and procedures of the following kind:-
1. Purchases and Payments System;
2. Payroll System;
3. General Receipts and Debtor System;
4. Rates;
5. Fixed Assets;
6. Stock;
7. General Ledger; and
8. Other
4.1 Creditors
The following functions should be, where possible, independent of each other:-
receiving goods;
ordering goods;
invoice authorisation;
invoice processing; and
cheque signatories
The Council may provide a responsible officer with cash advances for the
purpose of defraying the cost of travel and accommodation, while on Council
business, of members, officers or employees. The amount to be advanced is to be
approved by either the Chief Executive or Manager Corporate & Community
Services or the Fi8nance Manager. However wherever possible Credit Cards are
to be used.
Under no circumstances are IOUs to be issued and taken from Petty Cash or
Customer Service Officer - Cashiers Floats.
(1) The Mayor of Council plus the Chief Executive Officer, Manager Technical
Services, Manager Corporate & Community Services, Manager Development
and Inspectorial Services and Library Manager are authorised to use Credit Cards
to be charged to Tatiara District Council for the procurement of goods and
services on behalf of Council.
(3) Transaction Methods - The following are the approved methods of processing
transactions:
Across the counter (the card holder signs a purchase slip at the time of
purchase);
By telephone (the transaction is completed by quoting corporate card
details to the supplier). In these circumstances the card holder should
maintain a record of transactions;
By mail, quoting card number on orders to suppliers, e.g. library subscription
renewals, book supplier accounts etc. Similarly, records need to be
maintained of transactions; and
By Internet (the transaction is completed by quoting corporate card details
to the supplier). In these circumstances the cardholder should maintain a
record of transactions.
(4) Credit Limit - The credit limit applied to each card is authorised by the Chief
Executive Officer and is to be used in accordance with Councils Delegated
Authority Document.
(5) Chief Executive Officer - shall ensure that appropriate approvals and reporting to
meet audit requirements are adhered to.
Authorisation for payment of the invoice and account allocations must be made
by the relative Manager or authorised officer.
Where invoice relates to a service supply or contract, invoice details and amount
are to be cross checked against contract sum or master service register i.e. Power
or Water accounts, Waste Management accounts etc.
On processing of invoices the person posting invoice is to stamp it ENTERED (this
denotes the cancelling of the invoice). A list of the Batch numbers is to be stored
with the invoices paid in that run.
Account allocations and amount of payment are made by the Creditors Officer
and checked by an authorised officer, budget limits should be checked prior to
authorisation.
Where invoices are posted in batches, batch totals are calculated prior to
posting and agreed to the totals posted and the Creditors to be Paid counter
signed by an authorised officer with financial delegations.
4.7 Payments
All cheques are printed/written and issued in sequential order.
All cheques are to be crossed not negotiable Account Payee Only.
Documentation, i.e. invoice, orders, goods received advice, are to be
accompanied with the cheques as evidence for review by cheque signatories
prior to signing.
Cheques are to be signed by two authorised Council signatories as set out in the
Policy Manual of which one should preferably be either the Chief Executive, the
Manager of Corporate & Community Services or the Finance Manager.
Remittance advices are to be supplied to all creditors with the exception of
electronic payment.
All cheques which have been cancelled are to be recorded in a register, as well
as the details of their cancellation.
4.8 Reconciliations
Supplier statements to be reconciled monthly to Creditors Ledger and creditor
invoices and payments made.
Creditors control account is to be reconciled to the creditor ledger and
discrepancies/reconciling items are promptly followed up.
Creditors ledger balances are regularly reviewed and unusual items such as debit
balances are investigated.
New creditor accounts are not to be opened without authorisation from a
responsible officer preferably a departmental Manager (this is particularly
important with GST obligations).
A revision of existing creditors lists is to be undertaken yearly in conjunction with
purchasing staff to reduce multiple suppliers, review trading terms, reduce costs
and ensure full exploitation of contracts and discounts available from the Local
Government Purchasing and MAPS Purchasing group.
Electronic Fund Transfers. All electronic payment amounts recorded against our
bank account are to be verified by the Creditors Officer to ensure the amount
invoiced and received equals the amount paid.
Staff are to be aware of all current Council bank signatories at all times.
Creditors master-file amendments are to be undertaken only under the direction
of the Finance Manager.
A monthly reconciliation (creditors audit trail) of changes to bank details is to be
printed and signed off by the Finance Manager.
4.9 Other
The following functions where practical are to be independent of each other:
- ordering goods;
- receiving goods;
- invoice authorisation;
- invoice processing;
- cheque signatories.
5. Payroll Systems
Completed Leave Application Forms are filed in the employees personnel file.
Annual leave and long service leave is not to be paid without receipt of the
appropriate authorised form.
Leave entitlements are to be immediately updated to reflect annual, sick and
long service leave taken.
Annual leave, sick leave and long service leave entitlements are to be reviewed
half yearly and arrangements made with employees with excessive entitlements
to reduce these.
All applications for payment of Long Service Leave in lieu of leave is to be
authorised by the Chief Executive Officer in consultation with the relevant
Manager.
5.4 Payment
Pay slips will be distributed to employees on pay day where possible.
Pays are only to be paid by bank transfer unless written authorisation advising
otherwise has been received and approved by departmental Manager.
If pays are via direct bank deposit, listings should be reconciled to:-
- net pay total;
- total number of employees paid; and
- listings received from relevant bank/institution
The payment of electronic pays is strictly controlled by selected personnel)
through Westpac E-Bank facilities. This involves logging into Westpac and
inputting two authorised passwords and pin numbers following which active
card passwords are generated to allow full access into the direct pay/account
system.
All payroll control accounts are to be balanced and cleared at least on a
monthly basis.
5.5 Records
Records shall be maintained in a secure area in respect of each officer and
employee showing:-
- hours worked and rate of pay;
- gross salary or wages;
- tax and details of all other payments and deductions such as annual and
long service leave available and taken; and
- all pay records shall be retained for periods stated in legislation/regulations.
6.2 Banking
All money received by an officer or employee of the Council must be receipted
as soon as practicable.
Council must keep detailed records of its banking.
Banking shall be reconciled with receipts and discrepancies reported to the
Finance Manager.
Banking is to occur at least daily.
During times when rates are due and daily cash takings build up, an interim
banking is to be undertaken
Excessive cash is to be removed from the front counter area where practicable to
a secure area.
6.4 Investments
All investments are to be in the name of Tatiara District Council.
Investments are only to be made in authorised investments allowed by the Act.
Council officers shall where possible obtain competitive interest rates to maximise
investment yield. The Local Government Finance Authority is to be given an
opportunity to quote for investments.
Investment certificates shall be placed in investment files under the control of the
Records Officer.
All investments must be reviewed at least on an annual basis.
6.5 Invoicing
The charging of invoices shall be in accordance with established policies and
fees and charges Council may have in place i.e. block clearing, licences, rentals,
water fees etc.
7. Rates
Parameters entered (i.e. rates in $, minimum rate, rebates, concession etc) are to
be authorised by a responsible official. Only authorised persons make any
changes to these parameters.
Prescribed Percentage per month = cash advance debenture rate for financial
year + 3% /12
Monthly reconciliation of rates subsidiary to General Ledger.
8. Fixed Assets
On disposal:-
- asset depreciated to date of disposal;
- accumulated depreciation and cost of the asset to be written back in the
general ledger and removed from the fixed asset register, at the end of that
particular financial year; and
- profit/loss on disposal is calculated. This calculation should be prepared or
authorised by the Finance Manager.
8.3 Recording/Registers
Fixed Assets Registers shall be maintained for all assets controlled by Council.
Wherever possible assets will be recorded as separate items in the registers.
Fixed Asset Registers should be reconciled periodically to balances per the
General Ledger. This reconciliation is evidenced as reviewed by a responsible
official. All discrepancies are to be promptly investigated and the fixed asset
register or general ledger appropriately updated.
A physical count of all fixed assets per the fixed assets register is to be undertaken
periodically. All discrepancies are to be investigated and the condition of the
assets noted.
Registers are regularly to be reviewed, noting unusual items or items included in
fixed assets, which have been sold or scrapped.
Authorisation is to be obtained before any items are deleted from the registers
(due to sale or scrapping).
The Finance Manager is to be advised of all acquisitions, disposals, trade-ins and
scrapping.
8.5 Other
Adequate security arrangements should exist over all premises and storage areas.
These arrangements are to be regularly reviewed and improved where they have
become inadequate. Arrangements restricting access to authorised personnel
and protection from accidental destruction, deterioration, theft or fraudulent or
illegal use.
Adequate security exists to prevent unauthorised access to Councils computer
servers and other sensitive IT equipment.
Insurance coverage is regularly reviewed to ensure that it is adequate in
conjunction with Councils Insurance Brokers.
Maintenance plans implemented and reviewed to ensure that the asset is:-
- used to maximum capacity;
- being operated correctly;
- not deteriorating excessively; and
- maintained to an acceptable standard.
9. Stock
10.1 Journals
All journals are to be authorised and reviewed by the Finance Manager or
Manager Corporate & Community Services and initialled accordingly.
A sequentially numbered journal book is to be used.
All journals are to be adequately explained or supported by full explanatory
vouchers.
Once posted, journals are marked (initialled) to ensure no journals are overlooked
or posted twice and journal number entered.
10.2 General
Control of clearing accounts is reconciled monthly and clearing and suspense
accounts are regularly cleared. These reconciliations are to be evidenced by the
Finance Manager.
A Chart of Accounts is to be regularly updated (at least annually) to ensure
correct allocations are made.
Appropriate/relevant registers are maintained.
Full disclosure is made to Council through the Administration and Finance
Committee and Councils Audit Committee.
11. Other
11.3 Internal
individuals access as set out in Council computer usage policy is restricted to
functions considered relevant to their respective needs;
controls over the availability and knowledge/passwords;
general users passwords are changed when necessary; and for officers where
system maintenance is accessible, shall be reviewed annually or when security
has been breached.
attempted breaching of access reported by the system are promptly
investigated and appropriate action taken;
on and off site back up data, programs and documentation;
adequate protection from accidental destruction, deterioration, misplacement
and pilferage;
all updates and changes to programs are authorised, tested and documented;
formal disaster recovery plan is established for this area which shall list total
configuration of equipment held including software to enable immediate
replacement in case of a disaster;
the control of IT equipment issued for out of hours use; and
all documentation of the policy and procedures relate to the above controls are
contained within Councils IT strategy.
11.5 Registers
Registers shall be maintained (containing the information set out in the attached
listings) as follows:-
o land and buildings and leases;
o Receipt Books
o plant and machinery;
o office furniture and equipment;
o licences and leases issued;
o leased road reserves;
o insurances;
o accountable documents (including order books, cheques.);
o personnel; Member allowances and benefits.
o contracts;
o debentures issued;
o streets and roads;
o Loan guarantees;
o salaries; and
o register of interests Councillors, Chief Executive, General Managers.
A register need only be maintained where there are appropriate items to include in
the register.
Elected members and senior staff must lodge a primary or ordinary register of
interest yearly in accordance with the regulations. Such a return shall be
lodged with the Chief Executive.