ADELAIDE HILLS COUNCIL MEETING Tuesday 26 February 2013 ... · Family Business Forensic Services...

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ADELAIDE HILLS COUNCIL MEETING Tuesday 26 February 2013

CONFIDENTIAL AGENDA BUSINESS ITEM

Item: 15.1 Originating Officer: Tim Piper, Director Finance Subject: Appointment of External Auditor, Contract No. 15/13 SMP Goal: Goal 5: Open, Effective and Efficient Governance SMP Key Issue: 5.4 Financial Responsibility

1. External Audit Services, Contract No. 15/13 – Exclusion of the Public

Moved S/-

Pursuant to Section 90(2) and (3)(k) of the Local Government Act 1999, an order be made that the public, with the exception of appropriate Council staff – CEO Andrew Aitken, Director Engineering Tim Hancock, Director Finance Tim Piper, Acting Director Planning Deryn Atkinson and Minute Secretary Kylie Hopkins, be excluded from attendance at the meeting in order to receive, discuss or consider in confidence any information or matter relating to Section 90(3):

(k) tenders for the supply of goods, the provision of services or the

carrying out of works;

Adelaide Hills Council Meeting 26 February 2013 Appointment of External Auditor, Contract No 15/13 – CONFIDENTIAL

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2. External Audit Services, Contract No. 15/13 – Confidential Item 2.1 SUMMARY

Council advertised an open tender for the supply of external Audit Services following the conclusion of the incumbent auditor’s five year term. The tender closed on 6 February 2013 and the three submissions received were considered by the Audit Committee at its meeting on 11 February and subsequently. The Audit Committee discussed all three tenders and, having considered the tender evaluation scoresheet circulated by email, has endorsed the staff recommendation that BDO be awarded the External Audit Contract for the five years to 2017.

2.2 GOVERNANCE � Strategic Management Plan Not applicable � Legislation Local Government Act 1999 section 128. � Sustainability Economic Social

Environmental Governance

� Budget The budget for services under this contract is included in the 2012/2013 Operating Budget for $18,000. � Consultation Not applicable

2.3 BACKGROUND At the Audit Committee meeting on 12 November 2012 it was resolved: That staff compile a tender document to be used for the purpose of appointing an Auditor and refer back to the Audit Committee. The draft tender document was circulated to Committee members before Christmas and finalised over the holiday period. Tender 15/13 for Audit services was advertised on the Tenders SA website from 23 January to 6 February.


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2.4 DISCUSSION Council has received three submissions for consideration. They are from Deloitte, BDO and the incumbent Dean Newbery & Co. Because of time constraints (the tender closed the night before finalising the agenda for the 11 February Audit Committee meeting), no recommendation was made in the report to that meeting. At the meeting however, staff were able to provide a verbal assessment of the three tenders and the audit firms submitting them. In the tender document, Council undertook to determine which tenders represent value for money and to take into account, among other matters:

Weighting Criteria 20% Demonstrated understanding of and experience in Local

Government 20% Understanding of what services are being sought and

demonstrated ability to provide these 15% Expertise of key personnel 15% Resources available to carry out the contract 20% Fees proposed 10% Evidence of quality control and mechanisms

Tenders have been assessed against these criteria and scored as follows (out of a possible maximum score of 3.00):

Weighted Average Score

Criteria Weighting DNP BDO Deloitte

LG understanding/experience 10% 0.2 0.25 0.25

Understand svcs sought/ ability 10% 0.25 0.3 0.15

Expertise of Key Personnel 15% 0.3 0.45 0.375

Resources available 15% 0.225 0.375 0.375

Fees proposed 20% 0.6 0.4 0.2

Accessibility/responsiveness 10% 0.2 0.25 0.15

Quality control evidenced 20% 0.3 0.5 0.5

100% 2.08 2.53 2.00

Staff advise that the open tender process undertaken for this contract using the Tenders SA website both complies with and exceeds the requirements of Council’s Procurement and Purchasing Policy The formal tender evaluation scoresheet was completed and circulated to the Audit Committee by email to consider in conjunction with the tenders and the previous discussion. Following that process, the Audit Committee resolved unanimously by email to endorse the recommendation that the External Audit Contract be awarded to BDO for the five years ending 2017.

2.5 RECOMMENDATION That the Council award Contract No. 15/13 for the provision of External Audit services to BDO.


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2.6 APPENDICES (1) Tender No 15/13 – Submission from Dean Newbery & Co (2) Tender No 15/13 – Submission from BDO (3) Tender No 15/13 – Submission from Deloitte

Appendix 1 Tender No 15/13

Submission from Dean Newbery & Co


Submission from BDO

Private and confidential 1

ADELAIDE HILLS COUNCIL Audit services

6 February 2013

Private and confidential

TABLE OF CONTENTS

EXECUTIVE SUMMARY ................................................................................................. 1

ORGANISATIONAL PROFILE .......................................................................................... 2

REFEREES ............................................................................................................... 3

QUALITY ASSURANCE ................................................................................................. 4

KEY PERSONNEL, MANAGEMENT & TECHNICAL SKILLS .......................................................... 5

METHODOLOGY ........................................................................................................ 7

RELEVANT EXPERIENCE .............................................................................................. 9

EXTENT TO WHICH CRITICAL MATTERS WILL BE AUDITED .................................................... 11

PRICE INFORMATION ................................................................................................. 13

INSURANCE ............................................................................................................ 15

ATTACHMENT A: OUR PEOPLE ..................................................................................... 16

ATTACHMENT B: APPROACH TO SPECIFIC AUDIT AREAS ....................................................... 19

ATTACHMENT C: TENDER RESPONSE FORM ...................................................................... 21


EXECUTIVE SUMMARY

We understand that the Adelaide Hills Council will be seeking a partner that offers a team dedicated and

specialising in audit and assurance services and that can combine this with requisite industry knowledge.

Ian Painter, your engagement partner, has previous experience working with Adelaide Hills Council. From

this work, and the relationships we have developed with our other Local Government clients, we believe

that we have a good understanding of your needs and can fulfil a helpful, cooperative role, providing a

premium service at an economic price.

BDO will provide you with a quality audit, using a risk based approach that adds value to the Council.

Reasons to appoint BDO as your auditor include:

• We offer an audit fee which represents value for money. With extensive experience in local

government, we are conscious of the need to offer a sustainable audit fee for the Adelaide Hills

Council, whilst ensuring that we can provide you with the level of service you expect – not just in the

first year, but throughout the contract period. For this reason, we are proposing a fee that

represents a significant discount on our standard rates.

• Our audit team has demonstrated local government experience from our role as auditor of a number

of metropolitan councils; City of Charles Sturt, City of West Torrens, Adelaide City Council and City of

Holdfast Bay, as well as the District Council of Mount Barker

• Our recent experience with the latter two councils demonstrates our ability to effectively transition

from the departing auditors and bring a fresh approach to the audits, which the councils have

appreciated

• We have a strong, stable audit team. This consistency can contribute to efficiencies to benefit both

of our operations

• We have risk based audit approach, developed by BDO International, providing you with value over

and above a statutory report on your financial statements. This includes feedback on business and

other risks identified during our audit

• Ian Painter, your engagement partner, will ensure that the Adelaide Hills Council receives a

personalised approach to the audit and the attention to detail that you deserve

• We understand the legislative framework within which you operate. We are actively involved with

the Local Government Association and the SA Local Government Auditors Group (SALGAG). We have

worked with this group on a number of issues, including providing feedback in relation to the

development of the annual Model Financial Statements

• We keep up to date with changes as they occur – for instance, the Local Government (Accountability

Framework) Amendment Act 2010. We were actively involved in providing feedback to the LGA

through their consultative process in relation to this Bill, and are now working with SALGAG to

develop a framework for its implementation.

• We have a high level of technical expertise maintained through ongoing training programs and quality

control procedures.


ORGANISATIONAL PROFILE

About BDO

BDO is a worldwide network of accounting firms, with each independent Member Firm serving local and

international clients in its own country. Internationally, BDO consists of member firms in 138 countries;

with more than 54,000 people in over 1,204 offices.

In Australia, BDO offers the expertise of more than 160 partners, supported by over 1,300 staff, with

offices in Adelaide, Brisbane, Cairns, Darwin, Hobart, Melbourne, Sydney and Perth.

With the recent merger of BDO’s South Australian firm and PKF Business Advisors Pty Ltd, effective 1

January 2013, our combined firm has over 180 partners and staff, with significant skills, experience and

capabilities across a broad range of industry sectors. Although BDO was established in Australia in 1975,

the firm’s history in the South Australia can be traced back to 1933; celebrating 80 years in 2013. We are

now known as a leading firm in audit and financial advisory, with capabilities extending across the

following services:

BDO services

Advisory Audit Business Recovery & Insolvency Corporate Finance

Family Business Forensic Services Fraud Risk Assessment Growth Services

Organisation development Private Client Services Private Wealth Superannuation

Tax advice & consulting

Unlike other professional services firms, at BDO, we know that each of our clients is different, and we

treat them accordingly. We excel at creating strong relationships with clients who are seeking a

combination of technical excellence with a specialised range of services to support their goals. BDO

delivers pro-active, relevant and value-driven services. We place considerable emphasis on selecting a

service delivery team with the right mix of skills and experience to suit the needs of the client.

All audit services are provided by dedicated and specialised external audit, internal audit and risk

management practitioners. Each member undergoes thorough training including specialised Audit

Certification for senior staff.

In addition, our people have access to BDO’s advanced suite of tools and technology developed globally

and used extensively on all audit engagements.

We are confident we can provide the resources you need to meet your specific needs and reporting

deadlines.

Communication and accessibility

We understand the importance of using your time and resources effectively. We will assist you by raising

matters of interest that deserve your attention, both internal and external, via management reports and

verbal discussion.

We also understand the need to keep you informed about audit matters and to be responsive to any urgent

requests and requirements. If, at any time, you have a need to talk to us urgently, our client service

approach is structured so that even in the absence of your engagement partner, the quality review partner

will be adequately familiar with your business affairs to ensure quality advice is provided by the

appropriate person.


REFEREES

You are welcome to contact the referees below to confirm our depth of knowledge and our working

relationships:

Referees

Annette Pianezzola

Team Leader Financial Operations

Adelaide City Council

Telephone: 8203 7230

Email: [email protected]

Norm Biggs

Manager Financial Services

City of West Torrens



Annette Martin

Manager Finance

City of Charles Sturt




QUALITY ASSURANCE

Declaration

We have addressed any potential or existing conflict of interest, whether actual or perceived, that would

impact our appointment as your auditor.

Our confidentiality provisions are annually discussed, reviewed and monitored with all staff.

Independence

We follow a rigorous process to ensure we are able to provide an audit opinion without compromising

actual or perceived independence, using an electronic Conflict & Independence Check system. All staff

are required to take personal responsibility for ensuring that they comply with independence policies.

Mandatory training is undertaken.

Our audit technology prevents the commencement of audit planning until all identified members of the

audit team have confirmed and signed off on their independence. Similarly the audit cannot be finished

until all members have reconfirmed their independence.

We have conducted all necessary conflict checks on a national basis. BDO and its staff are independent

of any of the Adelaide Hills Council organisational affairs.

We will not compromise our audit independence in any way including providing management advice or

participating in executive decisions. However, we seek to maximise the benefits of the audit. We resolve

this apparent conflict by raising questions, alerting directors and staff to alternatives and the advantages

to those alternatives and providing extra services where these are restricted to compilation.

Confidentiality

The conduct of our audit in accordance with Australian Auditing Standards means that information

acquired by us in the course of our audit is subject to strict confidentiality requirements. Information will

not be disclosed by us to other parties except as required or allowed for by law or professional standards

or with your express consent.

Quality Assurance

Adelaide Hills Council is seeking a quality audit firm to ensure that it meets its own corporate governance

responsibilities. BDO is a global network, working to the highest professional and ethical standards, and

has a rigorous internal quality assurance process in compliance with Professional Standard APES 320

“Quality Control for Firms” issued by the Accounting Professional & Ethical Standards Board Limited.

The Institute of Chartered Accountants in Australia exercises a quality control program in respect of its

members. In the absence of specific direction from you to the contrary, our audit files including the files

relating to your audit may be selected at random for external review either by one of our associate firms

practising under the name of BDO or by a nominee of the Institute of Chartered Accountants. The same

strict confidentiality requirements apply to these external reviews as apply to us as your auditor.


KEY PERSONNEL, MANAGEMENT & TECHNICAL SKILLS

Audit service team

You will benefit from the involvement of our most experienced people and the attention they provide you

while delivering the assurance services required.

Team member Role

Ian Painter Engagement Partner

Geoff Edwards Review Partner

Sam Hilbink Audit Manager

James Leach Audit Senior

Resumes detailing relevant experience and qualifications are included at Attachment A.

Ian Painter - Engagement Partner

Registered Company Auditor No 5471

Ian Painter, your engagement partner, is very much a hands-on auditor, who likes to ensure that the audit

focuses on the risks facing the client, as ultimately these risks have some form of financial or long-term

consequences for the business.

Ian has extensive council audit experience. He has completed five year term as the client service partner

for Adelaide City Council and the City of Charles Sturt. He is currently the audit partner for City of

Holdfast Bay and City of West Torrens, and has also provided consulting services to a number of other

South Australian Local Councils, including Adelaide Hills Council. Prior to joining BDO, Ian was an audit

partner with Ernst and Young for 16 years.

Geoff Edwards - Review Partner

Registered Company Auditor No 322799

Geoff Edwards, your review partner, will assist Ian in ensuring that you receive a quality audit and your

expectations are met. Geoff will provide a second point of contact for you if Ian is not available for any

reason, and would deal with Complaints Handling should that be required.

Geoff has over 20 years experience in auditing a wide range of South Australian entities including listed

public companies, local subsidiaries of large multi-national corporations, large incorporated associations

and a range of other South Australian entities.

Geoff is the audit partner for the City of Charles Sturt, Adelaide City Council and District Council of Mount

Barker, and is actively involved with the Local Government Association of South Australia through his

participation in their Auditors Forum.

Sam Hilbink - Audit Manager

Sam has several years audit experience both in Australia and the UK, where he qualified. Since returning

to Australia and joining BDO in early 2009 Sam has successfully taken on responsibility for a diverse group

of audit clients. He is highly regarded for his capacity to work collaboratively with client staff, to

efficiently execute audit procedures and to identify matters that provide value-adding feedback.

Sam has extensive local government experience obtained working as Audit Manager on the audit of City of

Charles Sturt and City of West Torrens.


James Leach - Audit Senior

James will be assisting Sam on the day to day conduct of the audit and has council audit experience from

his involvement in the audit of the District Council of Mount Barker and the City of West Torrens.

Other team members

The engagement audit team outlined above is ably supported by other appropriately qualified members of

the BDO Audit division. Should members of your audit team not be available to discuss technical financial,

accounting and audit issues with you, you will find one of our other senior team members will be able to

respond to your queries.

Staff continuity

We have a commitment to maintain ongoing continuity of staff on all audit engagements. This is not only

important from your point of view but also provides efficiencies from our point of view. As our knowledge

of your operations is increased from year to year it also enables us to add more value in terms of pro-

active advice and reduces inefficiencies caused by the need for new staff to become familiar with your

operations.

Audit transition

Changing auditor can be a difficult and time consuming task for any organisation. One of the most

positive benefits, and often also one of the most compelling reasons for a change, is to gain fresh insight

and invite new perspectives.

BDO facilitates this transition by bringing expertise relating to operational practices, accounting systems

and business generally. In addition, our sector knowledge and experience means we understand the

principal issues of your organisation.

In preparing this proposal we have spent time learning about your operations. Given our experience with

similar organisations, we believe our team will quickly be able to maximise the efficiency of your audit.


METHODOLOGY

BDO audit approach and methodology

The BDO approach to assurance work is a risk-based methodology. While the primary role of external audit

is to provide an independent assurance opinion to Council, we also have the following objectives in

undertaking the audit:

•••• Helping our client build and maintain value by providing constructive and valuable business advice

•••• Compliance with relevant legislation and standards - all assurance and advisory work will comply

with the Local Government Act, 1999 and Regulations, Auditing Standards and ethical guidance issued

by the professional bodies.

Our approach to the audit is necessarily collaborative. We undertake we will communicate and consult

with Council, the Audit Committee and key management as required throughout the audit process.

The diagram below is a representation of our audit plan.

Perform the work

Design of assurance programs

(Responses to risk = detailed audit plan)

Reports

C L I E N T P O I N T S

A U D I T I S S U E S

Engagement procedures

Team

Discussion

Evaluation of

controls

Knowledge

Client

Discussion

RISK

ASSESSMENT


Risk assessment procedures

Before considering assurance procedures we carry out an overall risk assessment. This involves:

• Gaining an understanding of the Council and the environment in which it operates from a variety of

sources including applying knowledge gained from our other local council clients

• Considering the results of preliminary analytical review

• Holding a team discussion on identified risks and our approach to dealing with these in our audit.

Our consideration of risk, at this stage, does not take the financial statements as its starting point. The

financial statements are produced at the end of a financial reporting process that has operated

throughout the period and the risks of misstatement inevitably arise as a consequence of other risks

affecting the business. If we simply focus on the financial statements we are unlikely to identify the real

sources of risk and the full implications thereof and will be unable to devise the most effective and

appropriate response.

Our starting point is therefore a consideration of all aspects of risk that may be of significance to the

Adelaide Hills Council. We take into account risks arising from:

• The nature of the Council’s operations

• The regulatory environment

• The commercial environment in which the Council operates

• External or internal pressures on council , management or employees

• The way in which the Council is governed, managed and controlled

• The culture and ethos of Council, management and staff

• The Council’s accounting policies and practices

• The Council’s financial situation.

The risk assessment procedures include gaining an in depth understanding of the Council’s operations and

assessing the risks of material misstatement in the financial statements. This will incorporate having

discussions with your personnel to ascertain critical business issues and risks confronting the Council

including holding a team discussion on the susceptibility of the financial statements to material

misstatement whether due to fraud or error. In addition to identifying the risks, we will also be

considering the related controls in place to mitigate the risks and therefore we will be evaluating those

controls as part of the risk assessment procedures.

Following the risk assessment we design work programs for specific assurance areas. We will consider:

• Materiality

• Risk - any points relating to the assurance area identified in our risk assessment

• Other matters affecting our assessment of the risk that material misstatements might exist

• Controls - any assurance that we can gain from an evaluation of controls which may mitigate a risk of

misstatement

• Assurance that we have gained from work on other areas (overlaps)

• Assurance that we can gain from the work of others (after suitable evaluation)

• The results of analytical procedures (which may provide us with further assurance or may highlight

areas where there is a risk of misstatement).


RELEVANT EXPERIENCE

Local government audit experience and understanding of relevant legislation

One of the real benefits of appointing BDO is our wealth of background experience, particularly with Local

Councils.

We are currently the auditors of the City of Charles Sturt, Adelaide City Council, City of West Torrens,

City of Holdfast Bay, and District Council of Mount Barker, and therefore have considerable experience in

the audits of large metropolitan councils and the unique issues that such organisations face.

Senior members of the audit team have experience in providing audit and related services to many other

local government entities, including Centennial Park Cemetery Authority, The City of Burnside, City of

Salisbury, The Elizabeth City Council and your own Council.

Your engagement partner, Ian Painter, has previously worked with Adelaide Hills Council. He was asked to

review the 2010/2011 budget and long term financial plans, included benchmarking the council’s

performance and KPI’s against a number of other councils of similar size and demographics.

Our Management Consulting team has worked extensively with Local Government to meet stakeholder

expectations and improve business performance.

Consulting work has included:

•••• Providing business process and control improvement advice

•••• Performing strategic performance assessment

•••• Undertaking financial assessments

•••• Preparing business cases

•••• Facilitating service improvement workshops

•••• Considering local council amalgamations

•••• Providing risk management advice.

We have also undertaken numerous internal audit / assurance assignments for local councils. Councils we

have worked with include:

•••• Adelaide City Council

•••• City of Marion

•••• City of Onkaparinga

•••• City of Burnside

•••• City of Playford

•••• District Council of Mount Barker

•••• City of Salisbury

•••• Kangaroo Island

•••• City of Whyalla.

Through this work, we have built up a comprehensive understanding of relevant local government

legislation and, in particular, how it relates to the external audit function.


We are actively involved with the Local Government Association. Geoff Edwards is a founding member of

the recently formed SA Local Government Auditors Group (SALGAG), set up with the assistance of the LGA.

We provided feedback to the LGA on the Local Government (Accountability Framework) Amendment Act

2009 and continue to work within SALGAG to develop the implementation framework for the audit

requirement under this new Act.

Members of our audit group have considerable experience auditing within the requirements of the Public

Finance and Audit Act. It is this Act, and its requirement for auditors to report on controls exercised in

relation to the receipt, expenditure and investment of money, the acquisition and disposal of property

and the incurring of liabilities, that has provided the framework now adopted in the Local Government

(Accountability Framework) Amendment Act 2009. This experience will be valuable in developing audit

procedures at the Adelaide Hills Council, to meet these new requirements.


EXTENT TO WHICH CRITICAL MATTERS WILL BE AUDITED

Details of our approach to specific audit areas

For your general information, we have included a brief synopsis of some of the likely work which would be

conducted in the key audit areas, at Attachment B.

Audit Delivery

We have an established track record with our Local Council clients of delivering the required audit

outcomes within the councils’ required timetables.

We will continue to do so.

At the start of each year’s audit, we will provide you with a detailed Job Arrangement letter, setting out a

proposed timetable for all stages of our work. The letter will also provide an extensive and detailed

analysis of all the records and documentation we need Council to make available to us for audit purposes,

and the agreed timing of this availability.

In the first year of our audit cycle, we like to make contact as soon as we are appointed. This helps to

develop an effective ongoing working relationship, conduct our risk assessment and establish the audit

timetable and finalise the job arrangements letter for presentation to the audit committee as soon as

possible. Finalisation of our planning and interim testing then normally occurs in the April to June period

at a time convenient to you, taking into account your internal workload and budgeting and planning

processes. We often meet with the audit committee in late June or early July to make sure that any

emerging issues have been dealt with early in the audit process and to report on any interim findings.

Final audit work is usually done in August / September to enable audit clearance in time with your

internal reporting guidelines and approval processes.

It is part of BDO‘s philosophy that clients should be treated with the respect they deserve and that this is

translated into measurable performance indicators such as the following:

•••• Response to telephone calls within 24 hours

•••• Access to other BDO personnel when on leave to ensure service provision is maintained

•••• Completion of management letters within 14 days of completion of fieldwork

•••• Commitment to achieving client deadlines

•••• Provision of relevant information for audit committees 5 working days prior to the meeting

•••• Provision of six monthly accounting standards updates and various BDO publications affecting the

industry.

We commit to ensuring that these performance standards are met in relation to all our dealings with the

Adelaide Hills Council.


Reporting

We will always be available to meet with the Chief Executive and / or relevant General Managers as

required, and to attend Council and / or Committee meetings on matters relating to the audit. At various

stages through the audit process we produce and issue formal reports as required, including:

•••• Prior to year end we will provide a general outline of our proposed audit methodology, and consider

any feedback you have in relation to this

•••• On conclusion of our year-end audit procedures we will provide an audit completion report

summarising the more important matters arising from our work

•••• On finalisation of the audit, issue an audit opinion as specified under section 129(3) of the Local

Government Act 1999, giving due consideration to the adequacy of Council’s policies, practices and

procedures of internal control under section 125

•••• Providing to Council a client report (‘management letter’) incorporating points arising from our risk

assessment and detailed audit procedures, on particular matters arising from the audit in relation to

any irregularities or opportunities for improvement in the efficiency or effectiveness of the Council’s

accounting practices or the management of Council’s financial affairs.

Computer audit

The recent addition of Mat Hannan and Luc Thompson from KPMG has enabled BDO to expand its computer

audit capabilities. This team is experienced in the many components of IT audit and consulting, including

system selection, IT health checks, IT risk management, security reviews, penetration testing and

infrastructure planning and assessment.


PRICE INFORMATION

Audit of the financial statements

The following table sets out our estimate of the hours to be spent on the audit of the annual financial

statements for the year ending 30 June 2013, according to the category of staff involved:

Staff Role

Expected full

hourly rate for

2013 year audit

(exc. GST)

Adelaide Hills Council

discounted hourly

rate

(exc. GST)

Hours

Ian Painter Engagement Partner 385 270 23

Geoff Edwards Review Partner 385 270 4

Sam Hilbink Audit Manager 235 170 34

James Leach Audit Senior 175 125 56

As required Audit Graduates 125 90 56

In arriving at this estimate, we have made allowance for four ‘small audits’, being Superannuation

contributions, Workers Compensation contributions, Construction Industry Training Board Levy collections,

and Home and Community Care expenditure. Other grant acquittal audits can be provided if and when

required, at a fee based on the discounted rates set out above.

For the year ending 30 June 2013, we propose a fee of $19,500 (GST exclusive) ($21,450 GST inclusive) for

the audit of the annual financial statements and the four associated ‘small audits’ listed above.

This fee is exclusive of disbursements. We will charge a standard administration fee of 2.5% (plus GST) of

each fee rendered in relation to this engagement for the recovery of a range of costs that are incurred on

your behalf, including but not limited to; all photocopying and printing costs, telephone expenses, fax

expenses, courier and postage expenses, all storage costs of documents either on our premises or in

secure, offsite storage as well as transport to and from such premises and or our electronic filing of

appropriate documents and bank merchant fees, all expenses of private destruction, shredding of

documents and waste management. Any other disbursements such as travel expenses will be charged in

addition to the standard administration fee, at cost plus GST.


Future year’s fees

Proposed fees for the years ending 30 June 2014 to 30 June 2017 are as follows:

Year Tendered Price

(exc. GST) $

Tendered Price

(inc. GST) $

30 June 2014 $20,300 $22,330

30 June 2015 $21,100 $23,210

30 June 2016 $29,200 $32,120

30 June 2017 $30,400 $33,440

Proposed fees for subsequent years are estimated on the assumption that there is no material change in

the scope of audit requirements as a result of further legislative changes, or material changes to the

Council’s circumstances.

The proposed fees for the year ended 30 June 2016 onwards include an allowance for our estimated costs

in providing an independent audit opinion as to whether the internal controls exercised by the Council

during the relevant financial year are sufficient to provide reasonable assurance that the financial

transactions have been properly conducted. Our estimate of costs is based on draft Regulations with the

detailed requirements for this opinion that have only recently been published, and our current

understanding of what additional work will be required.

The proposed fees also include meetings with the Chief Executive and / or relevant General Managers as

required, and attendance at Council and / or Audit Committee meetings on matters relating to the audit.

Incidental advice given during the course of the audit, such as updates on Australian Accounting

Standards, and taxation matters will not to be charged separately but will be included in the cost of the

audit. Our National Technical Group regularly issue periodic written updates to clients, which we will

make available to you. As the statutory auditor of the Council, we would be precluded by the

independence provisions of the Local Government Act from providing accounting and other services.

We are well aware fees are an important criterion in your decision process. We would therefore

appreciate the opportunity to discuss our fees further if they alone become an issue for you in acceptance

of this proposal.

We are committed to providing a cost effective, high quality service that represents value for money.


INSURANCE

Confirmation of our Insurance Cover

We confirm that we have and will maintain during the duration of the audit term, professional indemnity

insurance covering the legal liability arising out of any neglect, default, error, or omission of at least $5m

in aggregate or $2m on an “each and every claim” basis with a two year run-off, plus public liability

insurance to a minimum of $10m.


ATTACHMENT A: OUR PEOPLE

[email protected] Direct: 08 7324 6048

BDO (SA) Pty Ltd Level 7 BDO Centre 420 King William Street Adelaide SA 5000

www.bdo.com.au

IAN PAINTER

Partner, Audit

Ian has over 35 years audit and accounting experience. He is a Bachelor of

Economics and an associate of the Institute of Chartered Accountants and a

member of the Institute of Internal Auditors. He is a Registered Company

Auditor.

Ian specialises in audit and assurance services. Ian is a former Chairman and

current member of the SA branch of the Institute of Internal Auditors.

Ian’s current audit portfolio includes a mix of public and private companies and

not-for profit organisations and many superannuation funds. His expertise

extends to business risk solutions, specialising in internal audit, treasury reviews,

probity audits, fraud investigations and business risk management.

Ian is knowledgeable of the government and public sector industry and has been

project manager for a number of high profile assignments within the public sector

including the introduction of accrual accounting, GST implementation, accounting

education and training and budget / cost management initiatives.

Ian is has considerable expertise in litigation support services that assist lawyers

in quantifying economic losses incurred as part of the litigation process. In this

role Ian has advised on matters of professional negligence and fraud, and has

conducted investigative and expert reports.

Expertise summary

• External audit • Internal audit • Business risk solutions • Due diligence • Probity audits • Litigation support services • Fraud investigations • Corporate advisory • Superannuation fund audits

Industry expertise

• Health and aged care • Manufacturers • Mining and resources • Not for profit • Government education and utilities • Hospitality and tourism • Banking and finance • Telecommunications

Sporting associations

Qualifications and memberships

• Chartered Accountant • Member of the Institute of Internal Auditors • Member of the Institute of Company Directors • Registered Company Auditor




www.bdo.com.au

GEOFF EDWARDS

Partner, Audit

Geoff has over 20 years experience in England and Australia. He has a Diploma

in Accounting Studies and is a member of the Institutes of Chartered

Accountants in England and Wales, and in Australia.

Geoff specialises in audit and corporate services and is an assurance and

advisory business services partner in the Adelaide office.

Geoff spent many years as a director with Deloitte in Adelaide, in their

Assurance and Advisory group. Specialising in audit services he has worked

with a wide range of South Australian clients. These have included listed

companies, large internationally owned companies, privately owned

businesses, local councils, co-operative bodies, incorporated associations,

trust accounts, government businesses and agencies.

He also has extensive experience in providing other services including detailed

technical accounting advice, financial modelling, probity audit, fraud

investigations and due diligence.

Geoff has worked with a number of clients in the aged and health care

industry, including retirement villages, community and public sector

hospitals, and other public sector health care entities.

Geoff is the audit partner for the City of Charles Sturt and Adelaide City

Council, and is actively involved with the Local Government Association of

South Australia through his participation in their Auditors Forum. He has a

good understanding of the legislative and regulatory framework applying for

local government, having managed the audits of several councils and regional

authorities, as well as other Local Government related entities such as Local

Super.

Expertise summary • External audit • Internal audit • Financial accounting/reporting • Due diligence assignments • Probity audits • Fraud investigations.

Industry Expertise • Energy and infrastructure • Credit unions • Wine industry • Manufacturers • Service industries • Incorporated associations • Government and semi-government bodies

Other Experience

• Assisting with the accounting for the merger of two mutual organisations • Financial modelling in relation to significant and complex financing proposals


• Providing technical financial reporting advice to clients • Fraud investigating and reporting

Qualifications& memberships

• Diploma in Accounting Studies

• Chartered Accountant (Australia, England & Wales)

• Registered Company Auditor



www.bdo.com.au

SAM HILBINK

Assistant Manager, Audit

Sam is an Audit Manager in the BDO Adelaide office. He has previous audit

experience supervising and undertaking audits of a variety of public and private

sector clients, including listed companies, associations and trusts. He has also

provided accounting, tax and statutory compliance help when required and

reporting to funding bodies.

Sam has seven years audit experience, including four years working in audit in the

UK, and is a member of the Institute of Chartered Accountants of England and

Wales. He has particular experience with audits of ‘not-for profits’ and

incorporated associations, private companies and consolidated company audits.

Clients worked on at BDO include Police Health, City of Charles Sturt Council,

Uniting Church, Animal Welfare League of South Australia, ACH Group Inc. and

Drake Supermarket group.



www.bdo.com.au

JAMES LEACH

Audit Senior, Audit

James is an audit senior in the BDO Adelaide office. his work experience includes

undertaking audits of a variety of private corporate and non-corporate clients

such as companies, associations and colleges, together with accounting, tax and

statutory compliance work as required and reporting to funding bodies.

James has several years experience across a broad section of audits of varying

nature and complexity in Australia. He has gained a depth of experience in

working with both senior managers and partners.

James has worked on a wide range of Government clients including

Department of Treasury & Finance, Land Management Corporation, Department of

Primary Industries and Resources South Australia, Department of Correctional Services,

University of South Australia, South Australian Financing Authority, Shared Services SA

,SACE Board and the former Department of Administrative and Information Services.


ATTACHMENTB: APPROACH TO SPECIFIC AUDIT AREAS

Revenue

•••• Analytical review and testing of total rates revenue compared to budget and declared rates

•••• Analytical review of revenue from other sources

•••• Review of internal control systems in relation to revenue and cash collections

•••• Sample testing of income from rates and user charges

•••• Verification of major grant, subsidy and contribution income to external documentation.

Expenditure

•••• Reconciliation of wages and salary on-costs paid to wages and salaries expense

•••• Sample testing of wages to employee records

•••• Bona fide testing for existence of employees

•••• Sample testing of wage calculations

•••• Review of insurance cover and approach to renewals of policies

•••• Sample testing of payments for authorisation and account allocation

•••• Review of a sample of contracts to ensure that expenditure is properly authorised, projects properly

controlled and accounting treatment is correct

•••• Testing of share of expenditure under joint venture arrangements.

Current assets

•••• Independent verification of cash and investment balances

•••• Review of bank reconciliations and checking of significant and / or long outstanding items

•••• Testing of recoverability of rates and other receivable balances.

Non current assets

•••• Review of the asset register for reasonableness of depreciation calculations and useful lives of fixed

assets

•••• Review of the accounting policies and practices in relation to the accounting for major infrastructure

assets

•••• Review of the capital replacement and maintenance plans both for infrastructure and information

technology assets

•••• Review of policies for the verification of the existence and valuation of existing infrastructure and

fixed assets

•••• Testing of capital works in progress, and WIP additions.

Liabilities

•••• Analytical review of creditors and accruals for reasonableness

•••• Review of subsequent payments to identify any significant creditors omitted at balance date

•••• Review and verification of a sample of employee benefit entitlements as at balance date

•••• Independent confirmation of LGFA loans and other significant external liabilities.


Equity

•••• Verification of roll forward of equity balances and any adjustments such as revaluations

•••• Review of income statement to ensure that capital and operating results are properly segregated.

Other

•••• Review of minutes, budgets and long-term financial plans to identify any emerging issues or matters

of financial significance.

•••• Review of disclosures regarding capital and operating commitments, and financial risk management

disclosure and policies

•••• Review and discussion with various personnel to identify the existence and disclosure of relevant

contingent liabilities and capital commitments.

•••• Independent review of disclosure in line with recent Local Government financial reporting guidelines

and our own disclosure checklists

•••• Independent verification of the council’s cash flow statement.


ATTACHMENT C: TENDER RESPONSE FORM

SECTION B1: Declaration by Tenderer

I/We: BDO (SA)

(name of Person, Firm or Company Tendering) (USE BLOCK LETTERS)

Of: LEVEL 7, BDO CENTRE, 420 KING WILLIAM STREET, ADELAIDE, SA, 5000

(Address)

hereby tender to perform the following works: (Description of Works)

CONTRACT NO. 15113 PROVISIONS OF AUDIT SERVICES

In accordance with the tender document as supplied:

• Conditions of Tender

• General Conditions of Contract

• Specification

• Tender Form

1. For a lump sum

Of: NINTEEN THOUSAND FIVE HUNDRED DOLLARS ($19,500) GST EXCLUSIVE

(State amount is words and figures)

If the tenderer is a Firm, the full names of the individual members of the Firm must be stated here:

Signature of Tenderer:

Date: 06/02/2013 Telephone No:7324 6061

Builders or other Licence No: N/A Expiry Date: N/A

Name of Holder of Licence: N/A


SECTION B2: EVIDENCE OF REGISTRATION AND LICENSING

Refer “key personnel, management & technical skills” section of proposal for registered company auditor

details.


SECTION B3: EVIDENCE OF WORKCOVER REGISTRATION



SECTION B5: EVIDENCE OF TECHNICAL, PHYSICAL, MANAGERIAL AND FINANCIAL RESOURCES

Refer to attached proposal documents.


Submission from Deloitte


Proposal for Audit Services

Contents

1 Tender requirements checklist 2

2 Objectives, term and scope 3

3 Our experience 5

4 Methodology and approach 7

5 Timelines and tasks 10

6 Areas of audit focus 11

7 Independence and quality 13

8 Value for money 15

9 Our team 18

10 Part A – Tender Response Schedules 21

Liability limited by a scheme approved under Professional Standards Legislation.

Deloitte Touche Tohmatsu

ABN 74 490 121 060

11 Waymouth Street

Adelaide SA 5000

GPO Box 1969

Adelaide SA 5001 Australia

DX: 664

Tel: +61 (0) 8 8407 7000

Fax: +61 (0) 8 8407 7001

www.deloitte.com.au

Member of Deloitte Touche Tohmatsu

Mr Tim Piper


Director of Finance 28 Onkaparinga Valley Road

WOODSIDE SA 5244

6 February 2013

Dear Tim

Re: Proposal for Statutory Audit Services 2012/13 – 2016/17 – Adelaide Hills Council [Tender No 15/13]

Thank you for the opportunity to submit our brief proposal to provide statutory audit services to the Adelaide Hills

Council.

Why choose Deloitte?

We will be able to leverage our national and global networks to ensure that we are providing insights and

meaningful recommendations throughout the audit process.

Through the extensive roll we played in assisting the Local Government Association develop the Better

Practices Manual for internal controls we will be well placed to guide you through regulatory change facing

Councils Internal Control Self Assessments.

Our service capability. With over 340 staff and two offices based in Adelaide, we have the capacity to

provide services in a responsive and timely manner. Deloitte was awarded the title of Best Accountancy

Firm at the recent BRW Client Choice Awards 2011.

Our collaborative approach. We believe there should always be a productive working relationship which

aims to foster an efficient and effective audit service together with the management team.

Our experience. Our external and internal audit appointments with other city and district councils, and

through the development of our Control Self Assessment (CSA) tool for local government entities, has

provided us with the required experience to appropriately understand the governance, compliance and reporting requirements of local government as well as keeping pace with future change.

Value for money. In addition to our services we will be providing the Council with the analysis of risk

areas, recommendations for improvements, and other information on current development trends in the Local

Government space. Audit Committee Chair will be invited to our Audit Committee Effectiveness luncheon

sessions and key finance personnel will be invited to our six monthly financial reporting updates.

We look forward to discussing our proposal with you. Please do not hesitate to contact me if you require any

additional information.

Yours sincerely

Philip Teale

Partner

Registered company auditor number: 410687

Tender requirements checklist

2

1 Tender requirements

checklist

Tender Specification Section of Proposal

3 Scope of Services

3.1 Carry out work to form an opinion as to whether:

(i) the accounts are properly kept; and

(ii) the annual financial statements; and (iii) the internal controls are sufficient and have

been complied with (from 2015/2016)

3.2 Include in the audit report any matters identified

3.3 Undertake statutory audit of Council’s

Controlling Authorities, Community Centres, Community Grants, Superannuation Contributions, Workers’ Compensation

Contributions, Construction Industry Training Levy and other similar minor accounts

Section 2 Section 2

Section 2 Section 4

Section 2

4 Audit Methodology and Audit Approach

(i) Methodology (ii) Plan for the audit

Section 4 Section 5

5 Critical Matters to be Audited

Section 6

6 Hours, Fees and Expenditure

(i) Estimate of hours spent on the audit; (ii) Fees for completing the audit

(iii) The nominated auditor and registered company audit number;

(iv) The experience of the nominated auditor in completing Local Government Audits.

Section 8

Section 8 Section 9

Section 9

7 Auditor Independence Section 7

Part A – Forms Section 10

Objectives, term and scope

3

2 Objectives, term and

scope

Audit objective The objective of the audits will primarily be to provide reasonable assurance, through the provision of an independent audit opinion, that the Council’s annual financial report is free from material misstatement, as well as to whether the controls exercised by the Council during the relevant financial year are sufficient to provide reasonable assurance that the financial transactions have been properly conducted (from 2015/16 financial year). In addition to the above, there is a requirement to conduct “small audits”. As outlined in the Tender Specification, the “small audits” for 2012/13 comprise:

The audit of the Council’s Controlling Authorities;

The audit of Community Centres

The audit of Superannuation contributions;

The audit of the Worker’s Compensation contributions;

The audit of the Construction Industry Training Board Levy; and

Relevant grant acquittals.

Term of appointment We understand that the Council is seeking to make such an appointment for a period of 5 years commencing 1 July 2012 through to 30 June 2017.

Scope of audit procedures Audit of Financial Report The scope of the statutory audit regarding the financial report will involve such procedures as required in accordance with the Australian Auditing Standards to enable an opinion to be formed as to whether the financial report of the Council has been prepared in accordance with the Local Government Act 1999 including:

a) giving a true and fair view of the Council’s financial position as at year end and of its performance for the relevant financial year; and

b) whether the report complies with Australian Accounting Standards, the Local Government Act 1999 and the Local Government (Financial Management) Regulations 1999.

We will also report to senior management and the Audit Committee on matters relating to any unadjusted audit differences and matters associated with the control environment as they relate to your business objectives and risk framework that require future focus by management.

Objectives, term and scope

4

Internal Control Audit

Section 129 of the Local Government Act 1999 requires that from 2015/16 the auditor to

undertake an audit of the controls exercised by the council during the relevant financial year in relation to:

The receipt, expenditure and investment of money;

The acquisition and disposal of property; and

The incurring of liabilities.

It is envisaged that our audit will be based on the following approach:

Understanding of the key controls in place;

The Councils assessment of these controls;

Re-performance, on a sample test basis, of the control self assessment undertaken by the Council;

Confirmation of the ratings attributed to the control environment by the Council; and

Assessment of remediation plans and where appropriate the subsequent reassessment

of controls where they were initially determined to be ineffective and are now considered effective.

Our objective will be to provide an opinion as to whether the controls exercised by the Council during the relevant financial year are sufficient to provide reasonable assurance that the financial transactions have been properly conducted.

Our experience

5

3 Our experience

Local Government experience

Deloitte has extensive experience in the local government sector through the provision of

statutory audit services, information technology audits, internal audit engagements, process

improvement audits, Local Government Act compliance audits, accounting advice, corporate

governance reviews and reviews of presentation in accordance with Australian equivalents of International Financial Reporting Standards (“A-IFRS”).

We have provided audit and assurance services to the following council areas within Adelaide within the last 5 years:

City of Port Adelaide Enfield

City of Marion

City of Salisbury

Corporation of the City of Adelaide

City of Charles Sturt

City of Burnside Council

Kangaroo Island Council


City of Playford

City of Unley

City of West Torrens

Darwin City Council

External audit services



Internal audit services


Risk management services




Internal audit and risk management services



We have also provided the above services to other entities within the local government sector:

Local Government Superannuation Board

Local Government Association

Local Government Finance Managers Group

Better Practices Manual

We have worked closely with the Local Government Association (‘LGA’) in developing the

Better Practice Manual for the Internal Controls Assessment. This Manual has recently been

integrated into the legislation as best practive for the internal controls self assessment.

Should we be awared the external audit contract we will integrate the team who assisted with

the development of this Manual into the audit to ensure you have access to the thought leaders in this area.

Our experience

6

Our Control Self Assessment (CSA) Capability

Our integrated services approach ensures we combine the skills and experience of our team

with the commitment and knowledge of our clients to provide solutions which achieve

objectives and maximise our clients’ benefits. An example of this is our CSA tool which the LGA has approved and a number of other Councils are utilising.

Listed below are a number of Councils we are working with regarding the control environment of Council and the Control Self Assessment tool.

City of Norwood Payneham & St Peters

City of Salisbury

City of Marion

Campbelltown City Council

City of Prospect

Light Regional Council

Wakefield Regional Council

City of Holdfast Bay

Alexandrina Council

City of Mitcham

Port Augusta City Council

Methodology and approach

7

4 Methodology and

approach

Our audit methodology

Our audit procedures are designed to provide reasonable assurance that Council’s financial report is free of material misstatement. Our methodology is designed to align our audit to the Council’s business objectives and associated risks. Accordingly, we use a risk and controls-based methodology. We engage closely with management to assist in focusing on areas of most significance. This includes any industry, regulatory and accounting issues, as well as your strategies, related business risks and internal controls visually depicted below.

Our approach

allows input by management to be incorporated as part of the audit program;

is risk driven and Partner led, which means the audit resources are used more effectively

and focused on the significant risks;

focuses on the identification of key controls that mitigate identified risks. We will test the

design and implementation of the control processes and systems to gauge the

effectiveness of the overall control environment as applicable to our audit;

involves the use of specialist IT staff to perform the audit work, where required; and

is efficient and effective through the use of our audit software, AuditSystem/2 (AS/2).


8

We can confirm that our audit methodology and documentation is compliant with the

requirements of the Australian Auditing Standards and the Australian Accounting Standards

as well as complying with legislative requirements and in particular the requirements of the

Local Government Act 1999 and the Local Government (Financial Management) Regulations

1999.

Audit technology (AS/2)

We use the proprietary audit software AuditSystem/2 (AS/2) in our audits. AS/2 supports us

in conducting an audit efficiently and effectively and to respond to identified risks in a focused and proactive manner.

Conducting the Audit

A critical component to the conduct of the audit is the planning that is undertaken prior to the

commencement of the main audit process. Our approach is to plan collaboratively with management in the months preceding the year end. These sessions essentially allow:

the anticipation of audit issues;

that the critical matters to be audited noted in the specification for external audit services are all addressed throughout the audit engagement;

early assessment of any unusual or specific transactions; and

the running of the forthcoming audit so that all parties are on the same page.

A number of items are derived from these sessions including a comprehensive requirements

listing, schedules to be prepared by management for the purposes of assisting the audit

process and the timing of the key milestones during the audit. This ensures that all parties

involved in the audit process have clarity around the process, deliverables and responsibilities.

Computer Assisted Audit Techniques (CAATs)

In an environment where the use and management of data is becoming increasingly

important to the operations of an organisation, we recognise that leveraging the data as an

asset of Council’s operations can be useful for the audit approach. We intend to adopt

computer assisted audit techniques in the sampling and analysis of data populations for the purpose of audit testing.

Control and co-ordination of audit work

Philip and Marina will have the primary responsibility for the control and co-ordination of the

audit work. They will be the key points of contact and they will liaise with all relevant

resources to ensure that the audit work is conducted in line with the agreed timeline and in an efficient manner.


9

Timeline and task plan

The key audit tasks and proposed timetable for the Council for the initial year of appointment 2012/13 is outlined at Section 5.

Communication & Reporting

At Deloitte we recognise the importance of effective communication as an essential element

in providing audit services. Accordingly the reporting of major matters will take place as they

arise, or as soon as practical. Throughout the audit process, issues and risks identified will be promptly communicated to senior management and the Audit Committee as appropriate.

We commit to the following:

Discussions with management a number of months prior to year end covering results for the period and to plan the approach to the audit.

Meeting with management on a regular basis throughout the duration of the audit to

assess the status of the audit progress at each stage.

Conducting exit meetings with management at the conclusion of audit procedures.

Attendance at Audit Committee meeting for the purpose of presenting the Annual Audit Plan prior to each audit.

Attendance at Audit Committee meeting for the purpose of presenting findings arising

from the audit and for endorsement of the accounts.

Attendance at Council meeting for adoption of the accounts and issuing an audit report

as required by Section 129 of the Local Government Act 1999.

Management Letter

We will also provide a management letter to senior management which will report on observations relating to the control environment.

A formal letter to the Mayor will be issued to confirm the completion of our procedures, our conclusions, the nature of any significant matters, if any and the relevant Independence Declaration.

Communicating to those charged with governance

A verbal report will be provided to the Audit Committee as to the nature of matters arising within the detailed management letter issued to management. The reporting of major matters for the attention of the Audit Committee, however, will take place as they arise or as soon as practical. In the case of any serious irregularity, a written report to the Minister for Local Government will be prepared.

Timelines and tasks

10

5 Timelines and tasks

A key part of the overall audit service plan is to continue to maintain and develop reporting

lines and ongoing communication with management. The key audit tasks and proposed

timetable for the Adelaide Hills Council for the initial year of appointment to 30 June 2013 is proposed as follows:

Audit Tasks March 2013 April 2013 May 2013 July 2013 September

2013

October

2013

Formal Appointment

Review of previous auditor

workpapers

Discuss Audit Plan and

scope with management

Communicate specific list of

audit requirements

Interim audit visit

(3- 4 days)

Final audit visit

(2 weeks)

”Small” audits (as required)

Partner review, Quality

Assurance Review

Delivery of signed audit

opinion, attendance at

Council meeting

Delivery of detailed

management letter and

letter to the Mayor

Client service feedback and

attendance at council

meeting (as required)

Audit Committee Meetings

(estimated dates)

The timetable above is indicative. We would meet with management and the audit committee to finalise this based on any specific needs the Council may have and ensure we make our staff available to service you to ensure your reporting timetables are met.

Areas of audit focus

11

6 Areas of audit focus


In forming our audit opinion, critical matters will be given attention as follows:

Audit focus area Description Income

Rates and statutory charges As a material transaction cycle, revenues recognised from rates and statutory charges will be assessed for validity and completeness. Controls will be tested combined with substantive testing. Grant revenues We shall consider the extent to which grant revenues have appropriately been deferred to the balance sheet as a result of unfulfilled obligations at period end and substantively test in detail.

Expenditure

Given the volume, magnitude and public accountability of Council expenditures the preventative and detective controls over expenditures, including the budgetary cycle, will be given consideration. Substantive detailed testing will be adopted. Depreciation expenditure will be analysed for each asset category for compliance with Council approved policy with an assessment of useful lives and residual values.

Current Assets

Combined tests of control and substantive testing to confirm existence and valuation to ensure correct valuation and allocation per the financial statements. Liquid balances will be tested through controlled confirmation processes.

Non Current Assets

Major project expenditures will be assessed to determine whether expenditure has been appropriately capitalised. Progress against budget will also be reviewed. In particular, review of capital expenditure approvals at inception of the project as well as verification of expenditure against Delegated Authorities throughout the project life. The methodology and basis for the determination of fair value of assets as well as the level of appropriate disclosures will be assessed. Combination of test of control and substantive testing will be adopted to confirm existence and valuation of non-current assets.


12

Audit focus area Description Liabilities

Compliance with any relevant financial covenants for any given year and classification of borrowings will be verified. Combination of test of control and subsequent payment testing will be adopted to confirm completeness and valuation.

Key Financial Indicators

Disclosures of key financial indictors within the financial report will be recalculated and analysed to confirm accuracy.

Other statements

The full set of financial statements will be reviewed by Deloitte to ensure consistency of information throughout the report given knowledge gained from the audit. Other statements for relevant “small audits” will be conducted as required and as outlined above.

Council’s compliance

Review of council’s financial statements with reference to the Local Government Act requirements.

Internal controls

Review and testing of internal controls maintained by the Council in accordance with Local Government Act requirements. Refer to section 3 for a deeper explanation of the approach to the internal control audit required under the legislation.

Independence and quality

13

7 Independence and

quality

Independence and Conflicts of Interest

Independence

Our commitment to independence and objectivity is the foundation of Deloitte’s reputation for

integrity and quality. Our commitment to independence starts with the tone at the top and is

followed by careful and consistent implementation and monitoring of comprehensive independence quality controls, policies and procedures. Of particular note:

- On appointment, all partners and staff assigned to the audit engagement are

required to confirm to the audit partner they are independent of all entities subject to audit, prior to commencing any work on the audit engagement.

- Auditor independence is declared on an annual basis as part of signing the statutory audit opinion.

Conflict of interest

Deloitte is presently unaware of any conflicts of interest, potential or otherwise, that would in

any way adversely affect our ability to perform services in accordance with the requirements of this proposal.

Quality

Our quality control procedures

Deloitte has always maintained a firm-wide emphasis on professional service quality and

quality control. For us, the components of quality are not static; we continually revisit, review and improve them.

Prior to signing an audit opinion, the following procedures are undertaken to ensure we

provide assurance on the accuracy of the financial report and maintain the highest standards in the conduct of our audit:

Independence and quality

14

1) Quality Control Review

Deloitte policy is to assign an Independent Review Partner or Director to all audits as

Engagement Quality Control Reviewer (EQCR). The EQCR provides an additional level

of objectivity and competency in relation to matters such as resolution of significant

issues, compliance with relevant accounting standards and other mandatory professional reporting requirements.

2) Professional Standards Review

In addition to the Engagement Quality Control Review, we also have the Professional

Standards Review (PSR). PSR is aimed specifically at the quality of our deliverables and

involves independent and experienced professionals reviewing reports and financial statements bearing our opinion.

Client service assessment

We will continuously seek input from you to ensure we fully understand and exceed your

expectations. At the conclusion of the audit engagement, an independent partner of the firm will conduct a client service assessment to seek your feedback.

Value for money

15

8 Value for money

Fees for the June 2013 audit

Financial Statement Audit

Partner and EQCR 15 350 5,250

Manager 35 150 5,250

Experienced Analyst 230 70 16,100

IT Partner 3 350 1,050

Sub-total (financial statement audit) 283 27,650

Discount (investment in transition) (5,650)

Proposed Audit Fee 30 June 2013 (Excl GST) 22,000

Hours Rate Fee ($)

“Small audit” fees

Detailed below is a summary of the fee proposal for the “small audits” as described in the tender specification.

Small audits

Workers compensation declaration audit 1,200

Superannuation contribution audit 1,200

Construction Industry Training Board audit 1,200


Fee ($)

Fees for the other small audits such as Council’s Controlling Authorities (if any), Community Centres and other grant acquittals are expected to be incremental and will be separately agreed as required once the full scope is known.

Fees for the Internal Control Audit

Section 129 of the Local Government Act 1999 requires the auditor to undertake an audit of the controls exercised by the council during the relevant financial year in relation to:

The receipt, expenditure and investment of money;

The acquisition and disposal of property; and

The incurring of liabilities

The fee proposed below is based on the above and the expectation that there is no deviation between the Council’s initial rating and the rating we apply based on the work undertaken.

Value for money

16

Internal Control Opinion

Partner and EQCR 10 350 3,500

Manager 25 150 3,750

Experienced Analyst 55 70 3,850

Sub-total (internal controls opinion) 90 11,100

Discount (investment in transition) (1,100)


Hours Rate Fee ($)

Assumptions for the determination of the audit fee for June 2013

Our proposed audit fees have been calculated on the basis that:

standard year-end general ledger reconciliations and accounting records will be available at the commencement of our final audit visit;

the existing accounting systems and internal controls are adequate and have been

operating effectively throughout the year. In particular, there are no major breakdowns in the systems or internal controls which will require an extension of our audit testing;

the year-end timetable will be met within reason and as agreed prior with management;

the scope of work will not change significantly, for example, through organisational

restructuring, or major regulatory changes;

for purposes of the separate opinion required with regard to the control environment

beyond 2013 assumptions have been made with regards to the scope. If the scope changes as it is refined by the LGA the amount quoted will need to be revisited; and

fees are exclusive of overheads and indirect costs.

Price Schedule

Based on the summary of information above, the combined fee amount for the 30 June 2013 financial year is $25,600 (excluding GST). Note that from 30 June 2016 the controls opinion has is included in the fee in addition to the small audits and external audit fee (which are included from the outset).

Reporting

period

Tender Specification

Scope of Service

Objectives of Audit Items

Price Tendered

per Unit (ex

GST)***

GST

Component

Price

Tendered per

unit (inc GST)

30 June 2013 Financial Statement audit +

small audits** 25,600 2,560 28,160

30 June 2014* As above 26,370 2,637 29,007

30 June 2015* As above 27,160 2,716 29,876

30 June 2016* As above (including new

specif ic audit of internal

controls) 37,970 3,797 41,767

30 June 2017* As above (including new

specif ic audit of internal

controls) 39,110 3,911 43,021 * Fee increases on an annual basis by 3% as an average of the Adelaide Consumer Price Index.

** Small audits only include the workers compensation declaration audit, superannuation contribution audit and

construction industry training board audit.

*** Fees are exclusive of out of pocket expenses and disbursements.

Value for money

17

Invoicing schedule

Audit stage Month Proportion

Interim visit 1 April 40%

Planning & preparations for final visit 1 August 30%

Completion of final field visit 1 October 30%

Total fee 100%

All future audits will be invoiced during the same stages and at the same proportions of the total fee.

Fees for other services

Without limiting our audit independence, should you decide to engage Deloitte to perform

other services, we will work with you to mutually agree an appropriate fee. Prior to engaging

any such services, an estimated fee will be calculated and provided to you to ensure fees will be in line with your cost expectations.

Value adding benefits

As outlined previously we shall offer technical support with key finance staff invited to attend

our financial reporting update sessions for the latest technical accounting standard changes.

We will also extend an invitation to the Audit Committee Chair to attend our Audit Committee

Effectiveness lunch forum in the interest of providing an environment where Audit Committee members may leverage one another’s experience, share insights and knowledge.

Terms and conditions

We can confirm that as auditor we shall not sub-contract to a third party without Council approval, nor assign contracts to third parties. We can confirm that the Australian firm has professional indemnity insurance with a captive insurer company that provides professional indemnity insurance to all Deloitte Touche Tohmatsu member firms worldwide. Upon engagement your standard terms and conditions will be referred to as part of our letter of engagement. Should we be appointed, we shall discuss further with you any clauses that require clarification.

Our team

18

9 Our team

The Deloitte name offers integrity, excellent systems, quality assurance, global backing and great resources. Nevertheless, it is the Deloitte people who create the service experience.

We have a strong, dedicated team based in Adelaide that will be able to support you.

Our team will be structured as follows:

Offshore resourcing

Where relevant we also have the option of accessing and leveraging our offshore resources

based in India. We can access these experienced Deloitte trained resources as an extension of the local audit team particularly with assisting data analysis and sampling.

The benefit of leveraging resources from our office in India being:

Time. The time differential between India and Australia will enable offshore /

onshore team members to provide more timely delivery by effectively extending the

work day

Lower cost structure. With scale, our team members in India have a lower cost

structure, and leveraging this model allows us to truly commit to your fees being

maintained at a manageable and value for money level even as your business expands.

Note that we this will be an option for you and is not currently included in the proposed fees.

We will have further discussions with the you to determine whether this will be appropriate

for you.

Philip Teale Audit Partner

Marina Gvozdeva

Client Manager

Experienced Audit Analysts

David Hobbis

IT Audit Partner

Stephen Harvey Quality Assurance

Partner

Our team

19

Philip Teale – Audit Partner

Philip will be responsible for the overall delivery of

audit services to the Council and be the primary contact with senior management and the Council.

As audit partner, Philip will direct the audit, so that

timelines are met, audit issues are resolved and value

adding communications are delivered. Philip’s

strength is his ability to lead and manage complex

engagements, establish strong relationships with his

clients and his involvement in all facets of the delivery

of professional services on a year round basis. Philip

has vast experience within the Local Government

sector as audit partner for a number of councils

including Kangaroo Island Council, as well as being

Quality Assurance partner for the audits of the City of

Marion, City of Salisbury and City of Port Adelaide Enfield.

In addition, Philip is leading the Financial Reporting

Advisory Group as well as being the Advisory partner for existing Local Government audit engagements.

David Hobbis – IT Audit Partner

David Hobbis has 17 years’ experience in providing IT

audit and assurance services as well as IT risk

management, security management and application integrity including to local councils.

David and his team will assess the computer control

environment and assist with the computer assisted audit techniques for the Council.

Stephen Harvey - Quality Assurance Partner

The quality assurance partner is independent of the

audit and is an objective reviewer responsible for

ensuring the audit, accounting and financial reporting

matters for the Council have received adequate attention.

Marina Gvozdeva – Audit Manager

Marina has 15 years of experience in the provision of audit services including external audit for the City of Port Adelaide Enfield, City of Marion and City of Salisbury. Marina will be the primary contact for the finance team throughout the fieldwork, will ensure timelines are met and audit issues are resolved.

Our team

20

Craig Johnson – Partner, Risk Services

Craig has 18 years' experience in the provision of internal and external audit services to Local Government entities and Government departments. He is a leading partner in the provision of the Internal Controls Self-Assessment Tool to Local Governments.

Pascal Marrot-Castellat – Manager, Risk Services

For the past 6 years Pascal has been involved with numerous internal audits for clients mainly in the public sector. Pascal played a critical role in the development of the Control-track software that is used by many South Australian Councils as part of the Internal Controls Self-Assessment Tool.

Continuity

We have a vested interest in sustaining efficiencies and therefore the continuity of staff on our audit engagements and will commit such continuity to you wherever possible.

Part A – Tender Response Schedules

21

10 Part A – Tender

Response Schedules

PART A – TENDER RESPONSE SCHEDULES

Tender Number: 15/13

Tender Description: Provision of Audit Services to Adelaide Hills

Council


22

SECTION B1: DECLARATION BY TENDERER

I, PHILIP TEALE, PARTNER, DELOITTE TOUCHE TOHMATSU LEVEL 17, 11 WAYMOUTH STREET, ADELAIDE, SA, 5000 Hereby tender to perform the following works: In accordance with the tender documents as supplied:

Conditions of Tender General Conditions of Contract Specification Tender Form

For a lump sum of: One hundred and fifty six thousand, two hundred and 10 dollars ($156,210), including annual workers compensation audit, superannuation contribution audit and construction industry training board audit, excluding GST, out of pocket expenses as well as other “small audits” that will be agreed separately as they arise.

Signature of Tenderer:

DELOITTE TOUCHE TOHMATSU

Date: 6 FEBRUARY 2013 Telephone No: (08) 8407 7673

Builders or other Licence No: 410687 Expiry Date: Not applicable

Name of Holder of Licence: Philip Walter Teale


23

SECTION B2: EVIDENCE OF REGISTRATION AND LICENCING


24

SECTION B3: EVIDENCE OF WORKCOVER REGISTRATION


25

SECTION B4: EVIDENCE OF OHS&W MANAGEMENT SYSTEMS

OHS Policy and Management

Deloitte does have an OH&S management system comprised of policies and procedures detailing how Deloitte has established and maintains a safe and healthy working environment for all our people. These policies and procedures are internal and confidential to Deloitte. Deloitte is happy to discuss further if required.


26

SECTION B5: EVIDENCE OF TECHNICAL, PHYSICAL, MANAGERIAL AND FINANCIAL RESOURCES

5.1 Organisation Structure

National structure

Deloitte was established and has been trading since 1891 in Australia.

Deloitte is a Big 4 firm with 12 offices and over 5,400 people in Australia providing external

audit, internal audit and risk management, tax, consulting, and financial advisory services to

public and private clients across the country. Deloitte's professionals are dedicated to

strengthening corporate responsibility, building public trust, and making a positive impact in their communities.

In 2011, we were awarded Best Accountancy Firm by BRW Client Choice Awards.

Shareholding:

Publicly / Privately Held

Deloitte Touche Tohmatsu is a Swiss Verein (association) and, as such,

neither Deloitte Touche Tohmatsu nor any of its member firms has any

liability for each other’s acts or omissions. Each of the member firms is a

separate and independent legal entity operating under the names

“Deloitte Touche Tohmatsu”, “Deloitte”, “Deloitte & Touche” or other

related names. The services described herein are provided by the

member firms and not by the Deloitte Touche Tohmatsu Verein.

Local structure

We have two offices based in Adelaide comprised of 27 partners and over 340 staff. Our

Assurance & Advisory group comprises 4 audit partners and 50 professional staff. External

audit services to the Adelaide Hills Council are proposed to be provided out of our Waymouth street office.

5.2 Key Personnel

Details of the personnel proposed for providing the Services

Refer Section 9

Contingency arrangements

We are committed to providing full access of our team to all key management personnel and the Audit Committee as required.

Our Quality Assurance Partner may be used as an alternative point of contact to the audit

partner for the Audit Committee and key management to freely access and who will be sufficiently familiar with the audit assignment.

With regard to audit analyst personnel, we are the largest accounting firm in Adelaide and

sizeable enough to be able to bring a quality audit of a Big 4 firm to Adelaide Hills Council.

We have a number of audit personnel with local government experience in our office, and

have additional audit trained resources based at our Unley premises also. We will therefore be able to commit to your service needs in a timely manner.


27

5.3 FINANCIAL RESOURCES

1. Banker's Name: National Australia Bank

Address: NAB House George Street, Sydney

2. Annual Turnover for: 2009/10: $ 820 million

2010/11: $ 935 million 2011/12: $ 1 billion

3. What percentage of the Tenderer’s South Australian business does this tender

represent in terms of turnover?

Deloitte Touche Tohmatsu operates as a national partnership and is not able to provide financial information specific to South Australia. For competitive reasons, we do not disclose financial information outside of the firm, we are however able to provide you with the Australian firm’s net revenue figures above.

4 How many employees (Full Time Equivalent) does your organisation employ? Nationally: 5,400 Locally: 340

Our Signals Continuously grow and improve – we have an environment that respects the individual, rewards achievements, welcomes change and encourages a lifetime of learning – with ourselves and our clients.

Have fun and celebrate – there is never a wrong time to celebrate and have fun – recognising, appreciating, acknowledging and learning from the experiences and success shared between our client and Deloitte teams.

Aim to be famous – we aim to reach for the stars – and beyond. To be thought leaders, showcasing our clients and our team’s talent and expertise.

Play to win-think globally – winning is our stated objective. It is also our state of mind.

Talk straight – when we talk, it’s open, regular, honest, constructive two-way communication between our people and our clients.

Empower and trust – we encourage a sense of ownership and pride by giving responsibility and delegating authority.

Recruit and retain the best – our people are talented, enthusiastic, self-starters, team players who are bursting with potential. They are people with whom we have a lifetime association.

Our culture – our essence Culture at Deloitte does not just happen – we work at it.

It’s the sum total of the actions of our people, it’s the way we treat others – it’s the way we behave. Our seven Signals embody these values. Our passion for teamwork and exceptional client service is our point of difference.

At Deloitte, we live and breathe our culture.

Our internationally experienced professionals strive to deliver seamless, consistent services wherever our clients operate. Our mission is to help our clients and our people excel.

Recent awards and achievements

Deloitte Australia has once again been recognised as an Employer of Choice for Women for the 11th successive year by the Federal

Government's Equal Opportunity for Women in the Workplace Agency (EOWA)

Analyst firm Gartner, has recognised the Deloitte member firms (Deloitte) as a global leader in finance transformation consulting

services in its latest Magic Quadrant for Financial Management Consulting Services

Deloitte has been recognised by analyst firm Kennedy for its broad and deep capabilities across HR segments, as well as in important

adjacent areas of HR-related IT consulting

Australian partners Jonathan Bernsen, Fiona Craig, Paul Riley and Jacques Van Rhyn have been recognised as leading Transfer

Pricing experts in Euromoney’s 2011 Guide to the World’s Leading Transfer Pricing Advisers.

Deloitte was voted one of Australia's top places to work by BRW Best Places to Work 2011. Deloitte was rated as the most credible

company to work for in Australia after being ranked as one of Australia’s 50 best places to work for the third year in a row by the Great

Place to Work Institute Australia

Deloitte has won the prestigious 2011 Australian Business Award for Marketing Excellence. The Award recognises organisations that

have achieved outstanding results through innovative marketing strategies and execution

Deloitte has won the prestigious 2011 Australian Business Award for Product Innovation for its unique Smartphone platform, Bamboo®

Deloitte Australia was awarded the prestigious BRW Client Choice Awards 2011 for Best Accountancy Firm (revenue over $500m)

The tax practice of Deloitte Australia was awarded the Australian Tax Disputes Firm of the Year for 2011 at the International Tax

Review, Asia Tax Awards

Proposal only

This proposal is not intended to be a binding offer or to give rise to a

binding contract with us. If you want to accept our proposal please let us

know and we will provide you with an engagement letter which will be

the basis of the contract between us for the proposed services.

This document and the information contained in it is confidential and

should not be used or disclosed in any way without our prior consent.

Where we advertise or represent that tax agent services will be provided

by us, such services will be provided by a Deloitte registered tax agent.

About Deloitte

Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a

UK private company limited by guarantee, and its network of member

firms, each of which is a legally separate and independent entity. Please

see www.deloitte.com/au/about for a detailed description of the legal

structure of Deloitte Touche Tohmatsu Limited and its member firms.

Deloitte provides audit, tax, consulting, and financial advisory services to

public and private clients spanning multiple industries. With a globally

connected network of member firms in more than 150 countries, Deloitte

brings world-class capabilities and high-quality service to clients,

delivering the insights they need to address their most complex business

challenges. Deloitte's approximately 195,000 professionals are committed

to becoming the standard of excellence.

About Deloitte Australia

In Australia, the member firm is the Australian partnership of Deloitte

Touche Tohmatsu. As one of Australia’s leading professional services

firms, Deloitte Touche Tohmatsu and its affiliates provide audit, tax,

consulting, and financial advisory services through approximately 6,000

people across the country. Focused on the creation of value and growth,

and known as an employer of choice for innovative human resources

programs, we are dedicated to helping our clients and our people excel.

For more information, please visit Deloitte’s web site at

www.deloitte.com.au.

Liability limited by a scheme approved under Professional Standards

Legislation.

Member of Deloitte Touche Tohmatsu Limited

© 2013 Deloitte Touche Tohmatsu

Contact us

Deloitte 11 Waymouth Street Adelaide SA 5000 GPO Box 1969 Adelaide SA 5001 Australia Tel: +61 8 8407 7000 Fax: +61 8407 7001 www.deloitte.com.au

http://www.deloitte.com.au/

Adelaide Hills Council Meeting 26 February 2013 External Audit Services, Contract No 15/13 – CONFIDENTIAL

3. External Audit Services, Contract No. 15/13 – Period of Confidentiality

Moved S/-

That having considered this matter in confidence under section 90(2) and 90 (3)(k) of the Local Government Act 1999, the Council, pursuant to section 91(7) of the Local Government Act 1999, orders that the documents, reports and minutes pertaining to this matter, including discussions and considerations, be retained in confidence until the tender is finalised, but not longer than 12 months, pursuant to section 91(9). That, pursuant to section 91(9)(c) of the Local Government Act 1999, the Chief Executive Officer be authorised to release documents at the conclusion of the period of confidentiality.

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