New Amendments to Local NSW Government Regulations: A Comprehensive Guide for Councils

The landscape of local government operations in New South Wales is poised for significant change with the recent amendments to the Local Government (General) Regulation 2021. These changes, set to take effect on 1 July 2024, mandate all councils and joint organizations to establish a risk management framework, an internal audit function, and adhere to prescribed membership requirements for audit risk and improvement committees. This article outlines the key components of these regulatory changes and provides guidance on implementation.

Risk Management Framework

Starting 1 July 2024, every council must adopt and implement a robust framework for identifying and managing risk, as stipulated in section 216S of the Regulation. The framework should be comprehensive, addressing various risk factors and incorporating strategies for mitigation. Moreover, the council’s audit, risk, and improvement committee (ARIC) is tasked with overseeing the implementation of this framework, ensuring its effectiveness and providing ongoing advice to the council.

Why is Risk Management Critical?

Risk management serves as an essential decision-making tool, enabling councils to proactively identify and assess potential risks. This process is crucial for mitigating issues before they escalate, thereby safeguarding the council’s operations and reputation.

Guiding Principles for Effective Risk Management

1. Responsibility and Accountability: Each council must own its risk management responsibilities, ensuring clear accountability at all levels.
2. Alignment with Standards: The risk management framework should be consistent with the accepted Australian risk management standards.
3. Integration into Operations: Risk management should be embedded in all council activities, from management to operational functions, with clearly defined responsibilities.
4. Positive Risk Culture: Councils should cultivate a culture that supports proactive risk management practices.
5. Regular Review and Adaptation: Continuous review and adaptation of the risk management framework are necessary to address evolving risks and operational changes.
6. Community Accountability: Councils must transparently communicate their risk management practices and compliance to the community.

Annual Attestation

Commencing with the 2024-2025 annual report, the general manager of each council will be required to attest to the council’s compliance with the prescribed risk management requirements. This attestation must be included in the council’s annual report, providing an accountability mechanism, and ensuring adherence to the Regulation.

Internal Audit Function

Each council and joint organization is now required to establish an independent internal audit function. This function must report to the audit, risk, and improvement committee and comply with current international standards for internal audit. The independence and objectivity of the internal audit function are crucial for providing unbiased assessments of the council’s operations and risk management practices.

Components of a Successful Internal Audit Program

1. Independence: The internal audit function must operate independently from the council’s management to ensure unbiased evaluations.
2. Objectivity: Auditors must maintain an impartial stance, free from conflicts of interest.
3. Comprehensive Scope: The audit program should cover all relevant aspects of the council’s operations, ensuring thorough oversight.
4. Proficiency and Due Professional Care: Auditors must possess the necessary skills and adhere to professional standards to conduct effective audits.

Audit, Risk, and Improvement Committee (ARIC)

By 1 July 2024, each council and joint organization must have a fully operational and independent ARIC. This committee is responsible for reviewing the matters outlined in section 428A of the Local Government Act, ensuring comprehensive oversight of the council’s risk management and internal audit functions.

Conclusion

The amendments to the Local Government (General) Regulation 2021 represent a significant step towards enhancing governance and accountability within local councils in NSW.

By implementing a rigorous risk management framework, establishing an independent internal audit function, and ensuring effective operation of the ARIC, councils can better manage risks and improve their operational integrity. As these changes take effect, councils must proactively adapt to meet the new requirements, fostering a culture of accountability and continuous improvement.

Watch our webinar with Pulse software

Vincents and Pulse Software have partnered to bring a three part webinar series that addresses the key requirements of the framework to ensure you are prepared for the changes. You can watch our first webinar in the series, ‘Implementing the New Risk Management Framework for Local Government’ below:

If you would like to access our slides on Implementing the New Risk Management Framework for Local Government, you can download them here.

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