Compliance audits - what you need to know

Audit preparation

When the Local Government Investigations and Compliance Inspectorate schedules an audit, the council will be provided with a list of items the Inspectorate needs to review.

During the audit, the Inspectorate will work with key council staff members to source supporting evidence to confirm council processes are compliant with the regulatory requirements of the Local Government Act 1989.

What is the audit process?

Stage 1: Initial communication to council to negotiate audit dates

Stage 2: Audit preparation communication including material that should be prepared prior to the audit start date

Stage 3: Confirmation of attendance and logistical arrangements

Stage 4: Onsite audit process

  • initial meeting with council CEO and representatives to discuss audit process
  • audit conducted taking between two and five days
  • exit meeting to communicate preliminary findings.

Stage 5: Communication

  • draft audit report prepared and provided to council
  • council considers draft report findings and makes comment
  • Inspectorate considers comments and council action
  • final agreed audit report and action plan, if required, forwarded to council.

Stage 6: Action plan review, if required, after agreed timeframe

Stage 7: Outcome of review provided to council

What do the audit ratings mean?

When a scheduled compliance audit is conducted at council, the Inspectorate will review preselected 'testing items'.

Each testing item of the audit will be given one of the following three ratings depending on the level of compliance with the Act.

1. Compliant

The responses and supporting documentation supplied by council staff provide sufficient evidence that council has met the legislative requirements of the Act and there is no action required for this testing component.

2. Close to compliant

Responses and supporting documentation supplied by council staff demonstrate that council has attempted to meet the requirements of the Act, however, answers or supporting documentation may have fallen short of meeting the strict regulatory requirements of the Act and minor amendments to administrative procedures are required.

3. Not compliant

Responses and/or supporting documentation supplied by council staff do not provide sufficient evidence that council has met the requirements of the Act, or were not supplied.

The Inspectorate is committed to assisting councils to achieve clear, transparent governance and avoid possible breaches, and works with councils to ensure all areas of administration are compliant with the Act.

Local Government Victoria has published a number of guides for council governance to assist in continuous improvement and best practice processes.

What is the difference between scheduled and special purpose audits?

The Inspectorate may conduct scheduled audits or special purpose audits at any time to assess council compliance with the Act.

Scheduled audits form part of the scheduled rolling audit program that sees all 79 Victorian local councils audited to assess compliance with the Act.

Special purpose audits can take place at any time at the discretion of the Inspectorate without prior warning given to the council. A special purpose audit may be conducted on a specific issue or function and is driven by evidence or intelligence that supports the need for compliance audit action.

What trends has the Inspectorate seen in recent audits?

The Inspectorate has conducted audits of Victorian local councils to assess compliance with the Act since July 2010. The audit process has revealed some common trends across local councils, as well as opportunities for improvements.

Strengths

The Inspectorate has identified key areas where councils are demonstrating effective processes that ensure all obligations and requirements within the Act are being met.

Strong performing areas include:

  • Councillor code of conduct – Section 76C
  • Staff code of conduct – Section 95AA
  • Councillor and Mayoral allowances – Section 74
  • Insurance – Section 76A
  • Oath of office – Section 63 and 64
  • Election of Mayor – Section 71
  • Audit committee – Section 139.

Improvements

The Inspectorate has also identified opportunities for improvement that are common across councils. It is working with the sector to address these areas and achieve best practice processes.

Opportunities for improvement include:

  • Special committees - Sections 81, 86, 87 and 98
  • Senior officer contracts - Section 95A
  • Council budgets - Sections 127 and 130
  • Primary and ordinary returns – Section 81
  • Annual reports - Sections 131 and 134, and Regulation 17 of the Local Government (Finance and Reporting) Regulations 2004
  • Delegations - Section 98.

The Inspectorate has published several information bulletins to assist councils in developing best practice processes and to ensure compliance with the Act.

The Inspectorate can also assist by connecting councils to share ideas, promote collaboration and create strong networks within the local government sector.

Local Government Victoria has published a number of guides for council governance to assist in continuous improvement and best practice processes.

This content is subject to change if there are alterations made in the Local Government Investigations and Compliance Inspectorate audit process in 2017.