Councils' ARICs(audit, risk and improvement committees)

Guidelines for Risk Management and Internal Audit for Local Government in NSW

Audit, risk and improvement committee

The Local Government Act (section 428A) requires each council to establish an audit, risk and improvement committee to continuously review and provide independent advice to the general manager and the governing body of the council on:

1. → whether the council is complying with all necessary legislation, regulations and other legal requirements
2. → the adequacy and effectiveness of the council’s risk management framework,fraud and corruption prevention activities, financial management processes, and the council’s financial position and performance
3. → the council’s governance arrangements
4. → the achievement by the council of the goals set out in the council’s community strategic plan, delivery program, operational plan and other strategies
5. → how the council delivers local services andhow it could improve the performance of its functions more generally
6. → the collection of performance measurement data by the council, and
7. → any other matters prescribed by the Local Government Regulation (including internal audit).

The Local Government Act (section 428B) allows councils to establish a joint audit, risk and improvement committee with other councils including through joint or regional organisations of councils to function as a shared committee.

The requirements for shared committees in these Guidelines are detailed in core requirement 1.

The Local Government Regulation prescribes the following requirements in relation to the membership and operations of councils’ audit, risk and improvement committees:

• → Councils must by resolution appoint an audit, risk and improvement committee comprising of a chairperson and at least two or more other persons as voting members of the committee (section 216C).
• → Commencing 1 July 2024, the chairperson and other voting members of a council’saudit, risk and improvement committee must satisfy the independence and eligibility criteria prescribed by the Regulation (sections 216D, 216E and 216F).

The criteria are also set out in these Guidelines. Councils must not appoint a
person to be the chairperson or a voting member of the council’s audit, risk and
improvement committee unless they satisfy the independence and eligibility
criteria prescribed by the Regulation and specified in these Guidelines.

• → Councils may appoint one councillor as a non-voting member of its audit risk and improvement committee (section 216C).Councillors appointed as a non-voting member of an audit, risk and improvement committee should satisfy the eligibility criteria for councillor members of committees specified in these Guidelines.
• → For the purposes of section 428A(2)(i) of the Local Government Act, councils’ audit,risk and improvement committees are to keep under review internal audit activities (section 216M).
• → The Departmental Chief Executive may approve model terms of reference for councils’ audit, risk and improvement committees (section 216K). The model terms of reference approved by the Departmental Chief Executive are provided in Appendix 3 of these Guidelin
• → Councils must adopt by resolution, terms of reference for their audit, risk and improvement committees and must consider the model terms of reference for committees approved by the Departmental Chief Executive contained in these Guidelines when doing so (section 216K).
• → A council’s audit, risk and improvement committee must exercise its functions in accordance with the terms of reference adopted by the council (section 216K).
• → Councils must provide their audit, risk and improvement committee with such access to the general manager and other senior management staff of the council, and any information and resources of the council as may be necessary for the committee to exercise its functions (section 216L).

..Councillor members

Councillor members of audit, risk and improvement committees are non-voting
members of committees. This is to ensure that decision making by the committee is
independent of the council.
Councillor members of committees act as an important link between the governing body and the committee.
Their role is to:

• → relay to the committee any concerns the governing body may have regarding the council and issues being considered by the committee
• → provide insights into local issues and the strategic priorities of the council that would add value to the committee’s consideration of agenda items
• → advise the governing body (as necessary) of the work of the committee and any issues arising from it, and
• → assist the governing body to review the performance of the committee each council term.

Issues or information councillor members raise with or provide the audit, risk and
improvement committee must relate to the matters listed in section 428A of the Local Government Act, the committee’s terms of reference and issues being considered by the committee.

Councillor members of audit, risk and improvement committees are not entitled to receive information about audit, risk and improvement committee activities outside of established reporting requirements. 

Councillor members of audit, risk and improvement committees must conduct themselves in a non-partisan and professional manner.

Councillor members of committees must not engage in any conduct that seeks to politicise the activities of the committee or the internal audit function or that could be seen to do so.

Where a councillor member of an audit, risk and improvement committees engages in such  or in any other conduct that may bring the committee and its work into disrepute, the chairperson may recommend to the council, that the councillor member be removed from membership of the committee.

Where the council does not agree to the chairperson’s recommendation, it must give reasons for its decision in writing to the chairperson.

The requirements for audit, risk and improvement committees in these Guidelines
are detailed in core requirement 1.

Guidelines at https://www.olg.nsw.gov.au/wp-content/uploads/2023/12/Guidelines-for-Risk-Management-and-Internal-Audit-updated-November-2023.pdf23-15 Regulation amendments prescribing requirements for audit risk and improvement committees, internal audit and risk management

Circular Details

23-15 / 4 December 2023 / A860774

What’s new or changing As foreshadowed in circular 22-41, the Local Government (General)Regulation 2022 (the Regulation) has been amended to give statutory force to key elements of the Office of Local Government’s (OLG) Guidelines for Risk Management and Internal Audit for Local Government in NSW (the Guidelines). The Amendment Regulation, which is attached to this circular, commences on 1 July 2024 to give councils and joint organisations time to implement the new requirements. The Guidelines have been updated to reflect the Regulation amendments as drafted. What this will mean for your council The requirements prescribed under the Regulation are largely the same as those set out in the draft Guidelines issued in December last year. Some minor modifications have been made for legal reasons, but these largely give effect to the same outcomes set out in the draft Guidelines issued in December last year. An overview of the amendments and any modifications are set out in the attachment to this circular. Key points The amendments do not take effect until 1 July 2024 to allow councils and joint organisations time to implement them. Councils and joint organisations will be required to report on their compliance with the Regulation in their annual reports from 2024/25. Councils and joint organisations are exempt from compliance with the Regulation in certain circumstances subject to their reporting their non-compliance, the reasons for their non-compliance and the alternative steps taken to achieve the same outcomes prescribed by the Regulation to OLG and in their annual reports.

https://www.olg.nsw.gov.au/council-circulars/23-15-regulation-amendments-prescribing-requirements-for-audit-risk-and-improvement-committees-internal-audit-and-risk-management/