Risk Management in Local Government

Economic news

Why local governments in WA must act to mitigate risk and implement effective risk management

Following the appointment of the Auditor General as their official auditor several years ago, local governments in Western Australia have faced greater scrutiny surrounding financial management.

Risk Management

Several local governments have been publicly named for failing to meet Local Government Act requirements.

The onus remains on local government officials to take every measure to ensure their operations are compliant – particularly in regards to financial statements and purchasing and procurement practices.

Recently, a number of local governments were called out for falling short of requirements in how service procurement is documented and justified. While this may be due to a lack of suppliers in some regions, documentation ultimately provides assurance that procurement was conducted fairly and provided value for money.

The widespread impacts of non-compliance

When a local government is found to be in breach of legislative requirements, it can have widespread implications for leadership and staff. 

For example, serious misconduct or non-compliance may lead to an investigation by the Corruption and Crime Commission (CCC) – and individuals who are found to have acted carelessly or negligently can face criminal charges.Risk Management

The investigation itself can also cost the local government significantly in terms of time and resources in assisting throughout the process. In addition, local governments that are publicly named for non-compliance may suffer reputational (and therefore financial) damage.

Unfortunately, many cases of non-compliance are simply due to a lack of oversight or proper procedures. All of the negative impacts associated with poor audit findings or CCC investigations could be eliminated with a few modest changes that mitigate fraud and demonstrate compliance.

A simple way to mitigate the risk of non-compliance

One recommendation we would make to local governments is to review reports released by the Auditor General, Department of Local Government, Sport and Cultural Industries, and other agencies on local government audits and financial management practices. This will allow you to benchmark your own internal performance against those findings, and identify any gaps to see if improvements can be made.

We would also recommend engaging a skilled third party to conduct a review or internal audit. This is a simple and cost-effective way to manage risk and gain assurance of compliance and is particularly important for small local governments which do not have qualified chartered accountants within their teams.

RSM’s accounting teams provide WA local governments with:

  • Outsourced financial statements and budgets
  • A full review of internal policies and practices
  • Control testing

A thorough review allows us to benchmark your entire financial management system against legislative requirements, and call out any gaps and areas for improvement.

Partnering with a skilled finance team prior to an external audit makes the process much simpler. Most importantly, it gives you to the tools to demonstrate and have confidence that your local government is compliant.

How can RSM help you to identify risks and implement effective risk management?

To find out how we can assist your local government to mitigate the potential risk of non-compliance, contact the outsourced financial services team at your local RSM office