Local council governance and audit committees - the missing link?

Local council governance and audit committees - the missing link?

Purpose: This paper examines the level of compliance of NSW Local Government councils with the Internal Audit Guidelines developed and published by the NSW State Government to address the identified weaknesses in the governance structures of the councils. The specific focus is on a key component of good governance, in this instance whether an audit committee was established accordance with the guidelines.

Design/methodology: Archival data was used to research the 2009/2010 Annual Reports and websites of NSW Local Government councils to collect data on the existence and structure of their audit committees. The data is presented and analysed using basic quantitative analysis from which inferences are drawn.

Findings: There is only minimal compliance by NSW Local Councils to the Internal Audit Guidelines in relation to the establishment of an audit committee. The audit committees, which have been established, were reviewed and the structure and membership of a number of these committees were found to not meet the level of independence required as outlined in the guidelines.

Practical implications: This paper highlights the potential risk exposure in Local Government councils. The findings indicate that the current approach of merely recommending the establishment of an audit committee, is not as robust as legislation.

Originality/value: While there is a relatively large amount of literature on Local Government practices there is little on the level of compliance of Local Government councils with specific governance requirements such as the establishment of an audit committee.

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