Local Government (Audit Panels) Order 2014

An audit panel is the body a council must establish under section 85(1) of the Local Government Act 1993. The Order defines it by reference to that Act. The panel’s composition is tightly controlled. It must have between three and five members. If the panel has three members, at least one must be an independent person , meaning a person who is not a councillor or employee of the relevant council. If it has four or five members, at least two must be independent. The chairperson must always be an independent person; if there is more than one independent member, the council must appoint one of them as chair. A Part 7 plan is defined in clause 4(1) as a strategic plan, an annual plan, a long‑term financial management plan, or a long‑term strategic asset management plan prepared under Division 2 of Part 7 of the Act. The panel must consider how these plans are integrated and the processes and assumptions used to create them. The term financial manager is defined for meeting attendance purposes only: it means the person determined by the general manager by notice to be responsible for preparing the council’s financial statements. The Order also introduces a charter concept: the council may give the panel a charter relating to how the panel performs its functions and its meeting procedure, but only on administrative matters. This is a deliberate limitation , a charter cannot restrict the panel’s substantive functions or its ability to review matters. The annual work plan is a mandatory document the panel must develop to assist it in performing its functions efficiently. It must include a schedule of meetings and the known objectives for each meeting. The concept of independence is central to the Order’s design. Independence is defined negatively (not a councillor or employee of that council), but the council must also ensure an independent person possesses “good business acumen and sound management and communication skills”. The council may also consider other relevant knowledge, such as audit practices, financial management, industry experience, and governance processes including risk management. However, a councillor or employee of one council cannot serve on another council’s panel (clause 5(2A), inserted in 2016). The Order thus creates a pool of independent persons drawn from outside council employment, potentially from private sector professions.

The Order directly binds every Tasmanian council that is required under the Local Government Act to establish an audit panel. That is all councils, because the Act does not exempt any class of council. The general manager of each council bears the duty to notify the Director (of Local Government) of appointments, terms, and the identity of the chairperson and independent members. The financial manager (a person determined by the general manager) is required to attend meetings unless the panel decides to meet in private. Individual councillors are affected in two ways: they may be appointed as members (except the mayor, who is barred), but they cannot serve on another council’s panel. Employees are broadly excluded from membership of their own council’s panel, but they may be invited to attend meetings. The independent members , the category of persons who are not councillors or employees , are the intended source of external oversight. They are likely to be retired accountants, auditors, governance specialists, or business people. They are entitled to remuneration and allowances determined by the council, which creates a direct financial relationship between the council and the independent members. The Director of Local Government receives notifications and may use the information for oversight or enforcement. Ratepayers are indirectly affected: the Order imposes a compliance cost on councils, which is ultimately borne by ratepayers through council budgets. The requirement that councils provide “all necessary funding” to the panel is open‑ended and could become a significant cost item, especially for smaller councils with limited revenue bases. The Order also affects private sector auditors, accounting firms, and governance consultants who may be recruited as independent members, creating a small market for panel services with councils as monopsony buyers. The Order does not exempt councils in financial hardship, nor does it differentiate between large and small councils, so the relative compliance burden is higher for small councils with limited administrative capacity.

Duties on the council: appoint panel members with the correct independence mix (clause 5(4)); ensure that the chairperson is an independent person (clause 6(2)); provide a charter, if any, only on administrative matters (clause 9(2)); provide secretariat support and all necessary funding required by the panel (clause 13). The council must also ensure that the general manager notifies the Director of appointments, terms, and independent members (clause 8). On a broader level, the council must not appoint the mayor, general manager, or any employee to the panel (clause 5(3)). Nor may it appoint a councillor or employee of another council to serve on its panel (clause 5(2A)).
Duties on the general manager: attend each meeting of the audit panel, or ensure a delegate attends, unless the panel decides to meet in private (clause 11(5)). The general manager is also the officer who must provide the notice to the Director under clause 8.
Duties on the financial manager: attend each meeting or ensure a delegate attends, subject to the same private meeting exception (clause 11(6)). This duty applies only to the person determined by the general manager to be responsible for financial statement preparation.
Duties on the audit panel: develop an annual work plan (clause 10); hold at least four meetings per financial year (clause 11(2)); ensure a quorum of a majority of appointed members with at least one independent present (clause 11(3)‑(4)); provide minutes to the council (clause 11(10)); and, after conducting a review under section 85A of the Act, provide the council with a written report of conclusions and recommendations (clause 12). The panel may regulate its own proceedings except as the Order or a charter provides (clause 11(9)).
Rights of independent members: independent persons are entitled to remuneration and allowances determined by the council (clause 7(2)). The council must determine the amount, but the Order gives no guidance on what is appropriate, leaving potential for underpayment or disputes. Independent members also have the right to be the chairperson, and the charter cannot restrict their substantive functions.
Rights of the panel: the panel may invite or allow any councillor or employee to attend meetings (clause 11(7)). The panel may decide to hold a meeting in private, which then excludes the general manager and financial manager (clause 11(8)). The panel may set its own procedures subject to the Order and any charter.

The Order itself contains no penalty provisions. It does not prescribe fines, offences, or civil penalties for non‑compliance. Enforcement must come from the parent Act or other sources. The Local Government Act 1993 likely provides the Director of Local Government with powers to issue directions, conduct investigations, or take remedial action if a council fails to establish an audit panel in accordance with the Act and this Order. The Director could potentially seek an order from the Magistrates Court or the Supreme Court. Councillor misconduct provisions under the Act might be triggered if a councillor obstructs the panel or ignores its recommendations. The requirement that the panel must provide minutes and reports to the council creates a record that the Director can inspect. Failure to notify the Director of appointments under clause 8 could amount to a breach of a statutory duty, but the Order does not specify a consequence. Because the Order is subordinate legislation, any breach of its provisions would likely be a breach of the Act as well, because the Act requires compliance with the Order. However, the absence of explicit penalties in the Order itself creates legal uncertainty. A council might argue that a particular requirement (such as “all necessary funding”) is ambiguous and thus not enforceable until clarified. The panel’s own compliance with meeting frequency and quorum rules could be challenged by councillors or the Director. In practice, enforcement depends on the Director’s resources and willingness to act. The Order also does not create a private right of action for ratepayers or residents to enforce compliance. Judicial review might be available for a council’s failure to follow the Order, but that is costly and discretionary. The lack of a clear enforcement mechanism weakens the Order’s practical effect and places reliance on self‑policing and the Director’s oversight.

The Order is made under the Local Government Act 1993 and must be read in that context. The Act requires the establishment of audit panels under section 85(1) and defines the review function under section 85A. The Order specifies matters for that review and adds detail. The Order also references Part 7 Division 2 of the Act, which deals with strategic and financial planning. The interaction ensures that the panel’s review of Part 7 plans is linked to the council’s broader planning obligations under the Act. The Acts Interpretation Act 1931 applies to the interpretation of the Order as if it were by‑laws (clause 3(2)), meaning that standard rules of statutory interpretation apply, including the purposive approach and the use of extrinsic materials. The Order does not appear to interact directly with other local government legislation such as the Local Government (General) Regulations, but those regulations may govern related matters such as council meetings, financial reporting, or procurement. The Order may also interact with state anti‑corruption and audit legislation. For example, the Integrity Commission or the Auditor‑General may have overlapping jurisdiction with the audit panel. The panel’s anti‑fraud and anti‑corruption review function under clause 4(2)(c) could duplicate or complement the work of those bodies. However, the Order does not address how conflicts or overlaps should be resolved. The Order is silent on whether its requirements override inconsistent council by‑laws or policies. Because the Order is a statutory rule, it prevails over any inconsistent council‑level instruments. The Order also does not create any interaction with Commonwealth laws such as the Corporations Act, unless a council operates a business entity that falls under Commonwealth regulation. Independent members who are also company directors may have separate duties under the Corporations Act, but the Order does not address this. The interaction with the local government audit framework is critical: the Order imposes obligations on councils that are separate from the external audit conducted by the Auditor‑General. The panel’s review is an internal oversight mechanism, not a substitute for an external audit.

The Order was notified in the Gazette on 19 February 2014 and took effect on that day (clause 2). The only amendment shown in the source text is by S.R. 2015, No. 79, applied from 1 January 2016. That amendment affected clause 5 (Membership of audit panel). Specifically, subclauses (2)(b) and (2)(c) were amended: the source text shows (b) as deleted (replaced by “. . . . . . . . .”) and (c) remains as “a member of an audit panel of another council, if he or she is an independent person in respect of the other council”. Additionally, a new subclause (2A) was inserted: “A councillor, or employee, of a council is not eligible to be a member of an audit panel of another council.” The effect of the 2015 amendment was to tighten the independence rules. Previously, a councillor or employee of one council could serve on another council’s audit panel as an independent person (since they were not a councillor or employee of that other council). The amendment closed that loophole: now a councillor or employee of any council is ineligible to serve on any other council’s audit panel. This change likely responded to concerns about conflicts of interest or the perception that local government insiders could not provide genuine independent oversight. The amendment also deleted what was probably a provision allowing a member of another council’s audit panel to serve (if the person was independent in respect of that other council). That category is now subsumed under (c) as amended, but with the additional bar in (2A). No other amendments are recorded in the source. The Order has remained otherwise unchanged since 2014. The amendment history is minimal, suggesting that the framework has been stable. However, the absence of further amendments does not mean the Order is well‑adapted to changing circumstances; it may simply mean that the government has not revisited it.

The source text of the Order does not refer to any litigation. There is no mention of court cases, tribunal decisions, or judicial interpretations in the instrument itself. This is unsurprising for a subordinate legislative instrument that has only been amended once. However, the absence of litigation does not mean the Order has never been contested. It is possible that challenges have been brought under the Local Government Act 1993 that tangentially involve audit panel provisions. For example, a council might have sought judicial review of a director’s direction regarding panel appointments, or a ratepayer might have challenged the validity of a panel’s composition. But such cases are not recorded in the Order. The quorum requirement in clause 11(4) , that at least one independent person must be present , could be a source of dispute if a meeting proceeds without an independent member and the council attempts to rely on its report. A court would likely hold such a report invalid. The definition of “independent person” could also be litigated if a council appoints someone who, though not a councillor or employee, has a close relationship with a councillor or employee that compromises independence. The Order does not define “independent” beyond the negative definition, leaving room for argument about de facto dependence. The restriction in clause 5(2A) , that a councillor or employee of one council cannot serve on another council’s panel , is clear but could be challenged as ultra vires the Act if the Act does not authorise such a restriction. No such challenge appears in the source. The Order’s silence on penalties might also be tested if a council fails to comply and the Director seeks to enforce compliance through the Act. In summary, there is no recorded litigation history in the Order itself. Practitioners should be aware that the ambiguity in the term “all necessary funding” in clause 13 could be a fertile ground for disputes between the panel and the council.

Several provisions in the Order contain traps for the unwary. First, the quorum rule in clause 11(4) is stringent: if at least one independent person is not present, there is no quorum even if a majority of all members is present. A panel with only one independent member is effectively unable to meet if that member is absent. Councils should therefore consider appointing two or more independent members to avoid paralysis. Second, the restriction in clause 5(2A) , councillors or employees of one council cannot serve on another council’s panel , is easy to overlook when cross‑council appointments might seem efficient. A person who is a councillor of Council A cannot sit on Council B’s audit panel, even if they are independent in relation to Council B. This reduces the available pool of independent persons, particularly in regional areas where suitable candidates are scarce. Third, the charter under clause 9 may only relate to administrative matters. A council cannot use a charter to limit the panel’s substantive review functions, exclude certain matters from review, or prescribe what conclusions the panel must reach. Any attempt to do so would be ultra vires. Fourth, the requirement that the general manager and financial manager must attend meetings (clause 11(5)‑(6)) is subject to the panel’s power to declare a meeting private (clause 11(8)). If the panel decides to hold a meeting in private, the general manager and financial manager must be excluded. This creates a tension: the council’s senior officers may be cut off from discussions, potentially undermining the panel’s access to information. The panel must balance confidentiality with the need for accurate input. Fifth, the panel’s recommendation under clause 12 is only a report; the council is not obliged to adopt the recommendations. The Order does not require the council to respond to the report or explain why it rejected a recommendation. This could render the review process a paper exercise if the council routinely ignores findings. Sixth, “all necessary funding” in clause 13 is an open‑ended obligation. A council facing budget constraints could be forced to allocate funds it cannot afford. There is no criterion for “necessary”, leaving room for disagreement. Seventh, the annual work plan (clause 10) must include “known objectives” for each scheduled meeting. This imposes a planning burden on the panel and could lead to rigidity if unforeseen issues arise. Finally, the panel may regulate its own proceedings (clause 11(9)), but this discretion is subject to the Order and any charter. If no charter is provided, the panel has wide procedural freedom, including the power to exclude any person from meetings. Councillors and employees have no right to attend unless invited.

Compliance with the Order requires careful attention to both the letter and the operational implications. The first step is to establish the audit panel with the correct number of members: between three and five. The council must identify independent persons (not councillors or employees) and ensure that the minimum count is met: at least one if the panel has three members, at least two if it has four or five. The council must formally appoint the members in accordance with its usual appointment processes. The instrument of appointment should specify a term of between one and four years (clause 7(1)). The council must ensure that the mayor, the general manager, and any employee are not appointed to the panel of their own council, and that no councillor or employee of any council is appointed to another council’s panel. Next, the council must appoint one of the independent persons as chairperson (clause 6(2)). The chairperson cannot be a councillor or employee. The council must then cause the general manager to notify the Director of all appointments, the terms, and the identity of the chairperson and independent members “as soon as practicable” after establishing the panel and after any new appointment (clause 8). The council may choose to provide the panel with a charter, but that charter must be confined to administrative matters such as meeting procedures, minute‑keeping, and document handling. The charter cannot restrict the panel’s substantive review functions. The council must then provide secretariat support and “all necessary funding” (clause 13). This should be budgeted for in the council’s annual plan. The funding must be sufficient for the panel to perform its functions, including hiring external advisers if needed. The panel itself must develop an annual work plan (clause 10) that includes a schedule of at least four meetings per financial year and the known objectives for each meeting. The plan should be finalised before the start of the financial year and reviewed periodically. The panel must hold at least four meetings per year. At each meeting, the chair must ensure that a quorum exists: a majority of all appointed members, with at least one independent person present. If the independent member(s) are absent, the meeting should be adjourned. The general manager and financial manager (or their delegates) must attend unless the panel has decided to hold the meeting in private that is noted in the minutes. The panel may invite councillors or employees to attend. The panel must keep minutes of each meeting and provide a copy to the council as soon as reasonably practicable (clause 11(10)). After each review conducted under section 85A of the Act, the panel must prepare a written report of its conclusions and recommendations and provide it to the council (clause 12). The council should receive the report formally and may record its response, though that is not required by the Order. For reappointments, the council must ensure eligibility remains. Independent members may be reappointed for up to four years per term. The council should keep a register of appointments and terms to ensure continuity. Regular communication between the panel and the council is essential to avoid procedural disputes.