CONFIDENTIAL

Meeting: Council Title: External Audit Services Tender Responsible Manager: Chief Executive Officer, Kiki Magro Author: Acting Manager Finance, Vic Izzo Type of Report: Decision Required Pursuant to Section 83(5) of the Local Government Act 1999, the Chief Executive Officer indicates that the matter contained in this report may, if the Audit Committee so determines, be considered in confidence pursuant to Section 90(2) of the Local Government Act 1999 on the basis that the information contained in the attached report is information of the nature specified in subsections 90(3) (k) of the Act being:

The provision of services

Recommendation Pursuant to s.90 (3) (k) Pursuant to section 90(2) of the Local Government Act 1999 the Audit Committee orders that all members of the public with the exception of the Council’s Chief Executive Officer, Kiki Magro, General Manager, Heather Barclay, Acting Manager Finance, Vic Izzo & Protocol, Compliance & Governance Officer, Deb Bria, be excluded from attendance at the meeting for agenda Item16.1.1 External Audit Services Tender The Counc i l is satisfied that, pursuant to section 90(3)(k) of the Act, the information to be received, discussed or considered in relation to this Agenda Item are tenders for the provision of services that are for consideration of Audit Committee External Auditors. The Council is satisfied that the principle that the meeting be conducted in a place open to the public has been outweighed in the circumstances because the information to be disclosed and discussed has the potential to impact adversely on each of the tenderers as competitive commercial information will be disclosed.

Item No: 16.1.1 File No: 7.81.2.24 Date: 21 September 2015 Attachments: A,B,C & D

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Recommendation (Confidential) Recommendation That Council accepts the recommendation of the Audit Committee that the External Audit Services contract be awarded to Bentleys for a period of two (2) years commencing with the 2015/16 financial year, with a further option of an additional three (3) years through to 30 June 2020. Recommendation (Confidential) Pursuant to s.91(7) That having considered Agenda Item 6.1 External Audit Services in confidence under section 90(2) and (3)(k) of the Local Government Act 1999, the Council, pursuant to section 91(7) of that Act orders that the reports, attachments and/or minutes relevant to Agenda Item 1 6 . 1 . 1 be retained in confidence until the letter of engagement has been signed and that pursuant to Section 91(9)(c) of the Local Government Act 1999 the Audit Committee delegates to the Chief Executive Officer the power to review and revoke this Order. and That Council resolves to end its confidential deliberations pursuant to Section 90(2) of the Local Government Act 1999 and re-admit the public. Purpose of Report To provide Council with the recommendation from the Audit Committee following the interviews of the four (4) short listed tenderers in relation to the External Audit Tender. Relevance to Strategic Plan and / or Corporate Plans Local Government Act 1999 Background Section 128(1) of the Local Government Act 1999 states that a Council must have an auditor. Section 128(2) states that the auditor will be appointed by the Council on the recommendation of the Council’s Audit Committee. Section 128(4a) states that the term of an auditor of a Council must not exceed 5 years (and, subject to this section, a person may be reappointed at the expiration of a term of office). The current five year tender for External Audit Services expires at the conclusion of the 2014/15 annual financial statements. Council’s current auditor is Galpins Accountants, Auditors and Business Consultants. Council received seven responses to the open tender. These were:

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1. Galpins Accountants, Auditors and Business Consultants 2. Edwards Marshall 3. MGI Assurance 4. Dean Newbery & Partners 5. Creative Auditing 6. Hayes Knight SA 7. Bentleys

Following the analyses of the seven responses based on a weighting criteria Administration presented a confidential report (Attachment A) to the Audit Committee on 11 August 2015 with the recommendation that Creative Auditing be appointed as the External Auditor for the next five financial years commencing with the 2015/16 financial year. The Audit Committee after consideration of the report and recommendation resolved as follows:

AC16/15-16 “That Creative Auditing, Dean Newbery & Partners, Galpins and Bentleys be invited to present their tender application for External Audit Services to the Audit Committee members for the next five financial years”.

Interviews were held on 25 August 2015 and 1 September 2015 respectively. The Presiding Member of the Audit Committee requested a special meeting of the Audit Committee to be held on 1 September (immediately after the last interview), to enable the Audit Committee to formalise its recommendation to Council on the preferred tenderer at the ordinary meeting of Council on 21 September 2015. Issues for Consideration The basis on which the interviews were scored is shown on Attachment C. The assessment by the Audit Committee Members is contained in Attachment D. The table below provides a summary of the assessment scores.

Audit Firm Total Score Ranking Bentleys 22.50 1 Dean Newbery & Partners 21.50 2 Galpins 17.00 3 Creative Auditing 11.50 4

Based on the interviews Bentleys received the highest score of 22.50 and is the preferred tenderer by the Audit Committee. Options for Consideration Option 1 As part of the selection process Administration conducted reference checks using the referees listed in the formal tender response of the 4 short listed tenderers. Bentleys as the preferred tenderer is currently the external auditor for the City of Tea Tree Gully and has audited that Council since 2014. The reference check reveals that Tea Tree

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Gully Council is extremely happy with Bentley’s performance thus far and on a scale of 1 to 5 (where 5 is excellent and 1 is poor) the Chief Financial Officer rated Bentley as a 5. Bentleys has recently been appointed as the external auditor for the City of Charles Sturt and the 2014/15 financial statements will be their first audit for that Council. The Finance Manager has also rated them as a 5 based of their performance in the interim audit which is the lead up to the end of financial year audit. It is recommended that Council accepts the recommendation of the Audit Committee that the External Audit Services contract be awarded to Bentleys for a period of two (2) years commencing with the 2015/16 financial year, with a further option of an additional three (3) years through to 30 June 2020. Option 2 That Council resolves to appoint an alternative External Auditor. Financial The 2015/16 Budget has an allocation of $40,000 of which $20,000 is for auditing services of an External Auditor. Social: Nil Environmental: Nil Governance: Appointment of an External Auditor will ensure legislative compliance in accordance with Section 128 of the Local Government Act 1999. Preferred Option & Reasoning: Option 1 is the recommendation of the Audit Committee for the reasons stated above.

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Meeting: Council Title: External Audit Services Tender Responsible Manager: Chief Executive Officer, Kiki Magro Author: Acting Manager Finance, Vic Izzo Type of Report: Decision Required Recommendation Pursuant to Section 83(5) of the Local Government Act 1999, the Chief Executive Officer indicates that the matter contained in this report may, if the Council so determines, be considered in confidence pursuant to Section 90(2) of the Local Government Act 1999 on the basis that the information contained in the attached report is information of the nature specified in subsections 90(3) (k) of the Act being: (k) tenders for the supply of goods, the provision of services or the carrying out of works Recommendation (Public) Moved: Seconded: That pursuant to Section 90(2) of the Local Government Act 1999 Council order that the public be excluded, with the exception of the Chief Executive Officer, Kiki Magro General Manager, Heather Barclay, Acting Manager Finance and Protocol Compliance & Governance Officer, D Bria from being present at the meeting on the basis that the matter contained in this report is information of the nature specified in subsections 90(3) (k) of the Act being: (k) tenders for the supply of goods, the provision of services or the carrying out of works

Item No: 6.1 File No: 7.81.2.24 Date: 11 August 2015 Attachment: A

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Recommendation (Confidential) That the External Audit Services contract be awarded to Creative Auditing for a period of 5 years commencing with the 2015/16 financial year. Recommendation (Confidential) Moved: Seconded: That the Council, having considered the said information or matter in confidence under Part 3 of Chapter 6 of the Local Government Act 1999, orders, pursuant to Section 91(7) of the Local Government Act 1999, that the report titled External Audit Services Tender, dated 11 August 2015 and any other documentation relative to the report to be retained in confidence excluding minutes) in relation to this Agenda Item No 6.1 and minutes relating to this Agenda Item No 6.1 be kept confidential until the contract has been signed by the relevant parties excepting that the Council authorises the release of the minutes to those parties identified in the substantive resolution relating to Agenda Item No 6.1. Recommendation (Confidential) That the Audit Committee recommends to the Council that Creative Auditing be appointed as the External Auditor for the next five financial years commencing with the 2015/16 financial year. Moved: Seconded: That Council resolves to end its confidential deliberations pursuant to Section 90(2) of the Local Government Act 1999 Council and re-admit the public. Purpose of Report To provide members of the Audit Committee with a recommendation arising from the External Audit Services Tender. Relevance to Strategic Plan and / or Corporate Plans Living in the Town of Walkerville A Lively Local Culture Objective 1 Encourage active community involvement in events, activities and places. Objective 2 Promote and support diverse cultural values, heritage and identity. An Economically Successful Community Objective 1 Create and active, well-connected Town Centre. Objective 2 Identify and develop mixed-use opportunities along Main North Road and North East Road. Objective 3 Provide information and resource material that actively promotes home based business

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activity. Sensitive Environments & Development Objective 1 Create a safe, well-planned and biodiverse Linear Park that allows for recreation along the river. Objective 2 Promote development in balance with the natural environment. Objective 3 Create accessible, useable and connected open spaces and streets. Background At the Audit Committee meeting dated Tuesday 14 July 2015 it was resolved (AC4/15-16) as follows: The report entitled ‘External Audit Services Tender’ be received and the Audit Committee meeting scheduled for Tuesday 4 August 2015 be rescheduled to Tuesday 11 August 2015 to review of the Tender Assessment. The current audit services contract with Galpins Accountants, Auditors and Business Consultants expires at the conclusion of the audit of the 2014/15 annual financial statements. The initial Request for Tender for the provision of external audit services was, as previously advised, recommenced and based on the following timetable: Request for Tenders 16 July 2015 Closing Date 31 July 2015 Tender Evaluation & Signoff 3 – 7 August 2015

(indicative) Notification to successful Tenderers 19 August 2015

(indicative) Auditor appointed 28 August 2015 Issues for Consideration Following the closing date of the tender on Friday 31 July 2015 Council received responses from seven tenderers. These are as follows: 1. Galpins Accountants, Auditors and Business Consultants 2. Edwards Marshall 3. MGI Assurance (SA) Pty Ltd 4. Dean Newbery & Partners 5. Creative Auditing 6. Hayes Knight SA 7. Bentleys All tenderers were required (under Section F) of the tender document to respond to the following schedules: • Schedule 1 – Tender Form – Formal Offer • Schedule 2 – Tenderer’s Details • Schedule 3 – Financial Capacity • Schedule 4 – Licences, Permits and Accreditation • Schedule 5 – Insurance • Schedule 6 – Work Health & Safety & Risk Management

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• Schedule 7 – Environmental Management System (Not required for this tender) • Schedule 8 – Industrial Relations Record • Schedule 9 – Conflict of Interest • Schedule 10 – Referees • Schedule 11 – Statement of Conformity • Schedule 12 – Capacity • Schedule 13 – Capability • Schedule 14 - Pricing The evaluation of the tenders was conducted by the Acting Manager Finance in consultation with the General Manager. The basis of the evaluation was from the tenderers responses contained in the tender document. A summary of the information of the tender responses and evaluation are contained in Attachment A. Following this process a weighting was allocated to what was considered the most important elements of the tender. The weighting and justification are as follows: No. Description Weighting Justification 1 Capability 30% This takes into consideration such things

as how many years the tenderer has been engaged in the type of work required by the contract, previous external auditing experience with other councils etc. This is a measure of the tenderer’s experience and familiarity with the work, particularly in the local government environment. This aspect is considered to be highly desirable and regarded.

2 Financial Capacity 5% This provides an indication as the the capacity of the tenderer to be able to undertake the work included in the contract in a timely basis.

3 Audit Methodolgy 25% This provides council confirmation on the tenerer’s understanding of the local government environment and how the tenderer proposes (methodology) to undertake the work.

4 Pricing 35% This measure provides whether council is obtaining “value for money”

5 Statement of Conformity 5% This provides a checklist that tenderers have complied or substantially complied with the requirement of information requested in the tender documents. The weighting is low because it is considered that all or most tenderers would comply.

100%

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The table below summarises the tender evaluations contained in Attachment A. No. Tenderer Weighting Score Ranking 1 Galpins 3.65 3 2 Edwards Marshall 3.35 5 3 MGI Assurance 3.10 6 4 Dean Newbery & Partners 4.00 2 5 Creative Auditing 4.85 1 6 Hayes Knight SA 2.95 7 7 Bentleys 3.45 4 Based on the evaluation and weighting scores Creative Auditing is the preferred tenderer. The Local Government Act 1999 stipulates the following in relation to audits and auditor. Section 128 (reproduced in part) states that: (1) A council must have an auditor. (2) The auditor will be appointed by the council on the recommendation of the council's audit committee. (2a) The audit committee must, in making a recommendation under subsection (2), take into account any factor prescribed by the regulations. (3) The auditor must be— (a) a registered company auditor; or (b) a firm comprising at least one registered company auditor. (4) A person is not eligible to be the auditor if— (a) the person is a member of the council; or (b) the person is a nominated candidate for election as a member of the council. (4a) The term of appointment of an auditor of a council must not exceed 5 years (and, subject to this section, a person may be reappointed at the expiration of a term of office). Options for Consideration Option 1 That the Audit Committee recommends to the Council that Creative Auditing be appointed as the External Auditor for the next five financial years commencing with the 2015/16 financial year. Option 2 That the Audit Committee provides an alternative recommendation to the Council. Analysis of Options Option 1 The Administration has undertaken a vigorous evaluation of the tenders received and based on the evaluation methodology, Creative Auditing is the standout tenderer. Option 2 Should the Audit Committee provide an alternative recommendation to the Council, this would delay the process of an appointment, leaving Council with an expired audit contract

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and technically without an auditor which effectively means that Council is breaching Section 128 of the Local Government. Financial and / or Risk Implications Financial The appointment of Creative Auditing for a five year period commits Council to an annual expenditure of $15,000 pa or $75,000 over the five year period. Social Nil Environmental Nil Governance 1. It is a requirement under Section 128(1) of the Local Government Act 1999 that a Council must have an auditor. 2. The Administration has followed the Council’s Contracts and Tender Policy. 3. The Administration has undertaken a detailed evaluation process in selecting the winning tenderer. Preferred Option & Reasoning As indicated above. Option 1 As indicated in the analysis.

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Meeting: Audit Committee Title: External Audit Services Tender Responsible Manager: Chief Executive Officer, Kiki Magro Author: Protocol, Compliance & Governance Officer, Deb Bria Type of Report: Decision Required Pursuant to Section 83(5) of the Local Government Act 1999, the Chief Executive Officer indicates that the matter contained in this report may, if the Audit Committee so determines, be considered in confidence pursuant to Section 90(2) of the Local Government Act 1999 on the basis that the information contained in the attached report is information of the nature specified in subsections 90(3) (k) of the Act being:

The provision of services

Recommendation Pursuant to s.90 (3) (k) Pursuant to section 90(2) of the Local Government Act 1999 the Audit Committee orders that all members of the public with the exception of the Council’s Chief Executive Officer, Kiki Magro, General Manager, Heather Barclay, Acting Manager Finance, Vic Izzo & Protocol, Compliance & Governance Officer, Deb Bria, be excluded from attendance at the meeting for agenda Item 6.1 External Audit Service Tender The Audit Committee is satisfied that, pursuant to section 90(3)(k) of the Act, the information to be received, discussed or considered in relation to this Agenda Item are tenders for the provision of services that are for consideration of Audit Committee External Auditors. The Audit Committee is satisfied that the principle that the meeting be conducted in a place open to the public has been outweighed in the circumstances because the information to be disclosed and discussed has the potential to impact adversely on each of the tenderers as competitive commercial information will be disclosed.

Item No: 6.1 File No: 7.81.2.24 Date: 1 September 2015 Attachments: A

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Recommendation (Confidential) Recommendation That the Audit Committee recommends to Council that the External Audit Services contract be awarded to ……………….for a period of two (2) years commencing with the 2015/16 financial year, with further options of an additional three (3).years through to 30 June 2020. Recommendation (Confidential) Pursuant to s.91(7)

That having considered Agenda Item 6.1 External Audit Services in confidence under section 90(2) and (3)(k) of the Local Government Act 1999, the Committee, pursuant to section 91(7) of that Act orders that the reports, attachments and/or minutes relevant to Agenda Item 6 . 1 be retained in confidence until the letter of engagement has been signed and that pursuant to Section 91(9)(c) of the Local Government Act 1999 the Audit Committee delegates to the Chief Executive Officer the power to review and revoke this Order. and That Audit Committee resolves to end its confidential deliberations pursuant to Section 90(2) of the Local Government Act 1999 and re-admit the public. Purpose of Report To provide the Audit Committee a basis for recommendation to Council following on from the interviews of the 4 short listed tenderers in relation to the External Audit Tender. Relevance to Strategic Plan and / or Corporate Plans Local Government Act 1999 Background At the Audit Committee meeting held on 11 August 2015 the Committee considered a report and recommendation on the External Audit Service Tender (Attachment A) At this meeting the Audit Committee resolved the following.

AC16/15-16 “That Creative Auditing, Dean Newbery & Partners, Galpins and Bentleys be invited to present their tender application for External Audit Services to the Audit Committee members for the next five financial years”.

Following on from this, interviews were held with the respective tenderers on 25 August 2015 and 1 September 2015. The Presiding Member requested a Special meeting of the Audit Committee be scheduled on 1 September (immediately after the last interview), to enable the Audit Committee to formalise its recommendation to Council on the preferred tenderer at the Ordinary meeting of Council on 21 September 2015.

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Issues for Consideration As per Attachment A. Options for Consideration As per Attachment A. Financial and/or Risk Implications Financial The 2015/16 budget has an allocation of $20,000 for the services of an External Auditor. Social: Nil Environmental: Nil Governance: Appointment of an External Auditor will ensure legislative compliance. Preferred Option & Reasoning: N/A

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Attachment C

External Audit Tender Interviews - Assessment

Firm Presenter Date Interviewed

Score (refer below)

Bentleys David Papa 25/8/2015 Dean Newbery & Partners John Jovicevic 25/8/2015 Galpins Simon Smith 1/9/2015 Creative Auditing Ian McDonald 1/9/2015

General

Please note that your score should be based on the overall presentation of the interview taking into account such things as:

the staffing allocated to the audit firm’s (and staff) experience in local government how well the questions from the Audit Committee Members were answered approach and methodology value add the firm would bring to Council whether the audit partner be “hands on” or remote from their office what would be the first things they do (eg meet with CEO) did you feel comfortable with the presenter and feel that Council would get good value for

money.

Scoring

5 = Excellent

4 = Very Good

3 = Satisfactory

2 = Fair

1 = Poor

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Audit Firm Webster Fricker Garrett Connor Scinto TotalBentleys 5 5 4 4 4.5 22.50Dean Newbery & Partners 4 4 5 4.5 4 21.50Galpins 4 3.5 3 3.5 3 17.00Creative Auditing 3 2 2 2 2.5 11.50

Members of Audit Committee1. Cr Graham Webster2. Cr Elizabeth Fricker3. Independent Member Corinne Garrett4. Independent Member Greg Connor5. Presiding Independent Member Lisa Scinto

Audit Committee Special Meeting 1 September 2015Attachment D

Assessment Sheet from Interviews

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