Councils across NSW will need to have an Audit, Risk and Improvement Committee by early 2021. We’re here to help Members get up to speed.
As part of a new risk management and internal audit framework for NSW Local Government, all councils are required to have an Audit, Risk and Improvement Committee (ARIC) by March 2021.
The NSW Government has made this requirement compulsory under section 428 of the Local Government Act 1993 (the Act). The Act also presents guiding principles to assist councils proactively manage risk.
The framework aims to improve financial management and combat fraud and corruption. By 2026, it is intended that the NSW Local Government sector will boast Australia’s strongest risk management and internal audit framework.
An operational and effective ARIC supports proper governance for all councils regardless of their size or region. The benefits for Members of having such a committee include:
- Bolstering policies and practices for procurement, contract management, risk management and legislative compliance.
- Helping to build community confidence.
- Meeting probity, accountability and transparency standards.
- Help create a culture of continuous improvement, accountability and transparency.
At present, the vast majority of NSW councils already have an ARIC in place. Those yet to get on board are mainly rural, county councils and joint organisations.
When proclaimed, section 428B of the Act will allow a council to establish a joint ARIC with other councils including through joint or regional council organisations.
Due to the risk-based nature of the legislated requirement, we implore Members to have Risk Managers or Risk Coordinators play an active role on their committees. They are in an ideal position to provide their ARIC with useful information including claims and incident data as well as objective assessments of risk compliance and implementation against system requirements.
We also highly recommend Members without an ARIC adopt an Enterprise Risk Management (ERM) framework or review their existing ERM as a starting point.
What is an Enterprise Risk Management Framework?
Simplistically defined, an ERM framework is one that provides for a comprehensive approach to identifying, assessing and treating risk based on Council’s risk appetite within the context of their risk environment.
An ERM framework:
- provides a consistent approach to managing risks;
- allows for a systematic risk management approach that guides decision making and resource allocation;
- assigns responsibility and accountability for managing risk; and
- helps develop key performance indicators to measure implementation.
In the context of the ARIC requirement, an ERM framework will complement and align with Council’s ARIC. Having a healthy and functional ERM framework in place will inform an ARIC and greatly assist in meeting Council’s obligations.
Board Funded Initiatives
Statewide Mutual’s Board funds ERM-related initiatives for Members, such as:
- ERM Foundation Programme
Two onsite workshops providing a comprehensive overview of all the key elements required in building a robust and mature risk management capability within your Council. - Risk Appetite Development
Identification and development of Risk Appetite and Risk Appetite Statements and operational implementation planning sessions. - ERM Maturity Review
Service examining Council’s existing ERM Framework with a particular focus on strategy and governance, process, systems and intelligence, monitoring and review and culture.The review is benchmarked against the ISO 31000:2018 Risk Management – Guidelines and is aligned with the assessment tool of the Audit Office of New South Wales.
The Board also offers free initiatives to Members regarding governance training, officer due diligence and Emergency Planning Committee training.
You’ll find all documentation relating to these initiatives in the online Member Centre portal. Please speak with your Regional Risk Manager if you have any further questions.
How Else Is Statewide Mutual Supporting Members?
Towards meeting the ARIC framework requirements, Members can also access the Continuous Improvement Pathway (CIP) program. The program offers a framework that councils can use to assess progress in developing effective risk management systems. Self-assessment benchmarking workbooks provide a gap analysis against best practice for risk management. The results of the analysis can be reported to ARIC.
Your Mutual also provides access to Regional Risk Managers who can offer advice in complying with the ARIC requirements. This support may include assistance drafting ERMs, help developing risk registers and conducting risk-related training sessions.
Additionally, the Member Centre has a wealth of support resources including:
- fact sheets;
- Best Practice Manuals;
- Guidance Notes, and
- Training Modules.
Speak with your Account Manager if you don’t already have access to the Member Centre
Have Some Feedback?
The NSW Government is welcoming your thoughts on the ARIC framework. They have made available a discussion paper that details the new requirements.
Members are invited to provide comments, ideas and feedback by 31 December 2019. You can send your written submissions to:
- Post: Locked Bag 3015, NOWRA NSW 2541
- Email: olg@olg.nsw.gov.au
Like to Know More?
Please contact your Regional Risk Manager if you require further information on the new ARIC requirements or would like advice on any risk related matter – including Council’s ERM framework.