Description: COAT-ARM Hastings District Council

 

Civic Administration Building

Lyndon Road East, Hastings

Phone:  (06) 871 5000

Fax:  (06) 871 5100

WWW.hastingsdc.govt.nz

 

 

 

 

Open

 

A G E N D A

 

 

Risk and Audit Subcommittee MEETING

 

 

 

Meeting Date:

Tuesday, 1 May 2018

Time:

9.00am

Venue:

Landmarks Room

Ground Floor

Civic Administration Building

Lyndon Road East

Hastings

 

Subcommittee Members

Chair: Mr J Nichols

Mayor Hazlehurst

Deputy Mayor Kerr

Councillors Nixon and Travers

(Quorum=3)

Officer Responsible

Chief Financial Officer, Bruce Allan

Committee Secretary

Carolyn Hunt (Ext 5634)

 


Risk and Audit Subcommittee – Terms of Reference

A subcommittee of the Finance and Monitoring Committee

 

Fields of Activity

The Risk and Audit Subcommittee is responsible for assisting Council in its general overview of financial management, risk management and internal control systems that provide:

·         Effective  management of potential risks, opportunities and adverse effects; and

·         Reasonable  assurance as to the integrity and reliability of the financial reporting of Council; and

·         Monitoring of the Council’s requirements under the Treasury Policy

 

Membership

Chairman appointed by the Council

The Mayor

Deputy Mayor

2 Councillors

An independent member appointed by the Council.

 

Quorum – 3 members

 

DELEGATED POWERS

 

Authority to consider and make recommendations on all matters detailed in the Fields of Activity and such other matters referred to it by the Council or the Finance and Monitoring Committee

The subcommittee reports to the Finance and Monitoring Committee.

 


 

HASTINGS DISTRICT COUNCIL

 

Risk and Audit Subcommittee MEETING

 

Tuesday, 1 May 2018

 

VENUE:

Landmarks Room

Ground Floor

Civic Administration Building

Lyndon Road East

Hastings

TIME:

9.00am

 

 

A G E N D A

 

 

 

1.         Apologies

At the close of the agenda no apologies had been received.

At the close of the agenda no requests for leave of absence had been received.

2.         Conflict of Interest

Members need to be vigilant to stand aside from decision-making when a conflict arises between their role as a Member of the Council and any private or other external interest they might have.  This note is provided as a reminder to Members to scan the agenda and assess their own private interests and identify where they may have a pecuniary or other conflict of interest, or where there may be perceptions of conflict of interest. 

If a Member feels they do have a conflict of interest, they should publicly declare that at the start of the relevant item of business and withdraw from participating in the meeting.  If a Member thinks they may have a conflict of interest, they can seek advice from the Chief Executive or Executive Advisor/Manager: Office of the Chief Executive (preferably before the meeting). 

It is noted that while Members can seek advice and discuss these matters, the final decision as to whether a conflict exists rests with the member.

3.         Confirmation of Minutes

Minutes of the Risk and Audit Subcommittee Meeting held Monday 12 February 2018.

(Previously circulated)

4.         Health and Safety Risk Management Update                                                      5

5.         Treasury Activity and Funding                                                                                9

6.         Enterprise Risk Management Update                                                                 20

7.         Asset Management Plans                                                                                       37

8.         General Update Report and Status of Actions                                               127

9.         Audit report for 2018-2028 Long Term Plan                                                    131

10.       Local Government Funding Agency Update                                                  147

11.       Water Services                                                                                                        151

12.       Additional Business Items

13.       Extraordinary Business Items 

14.       Recommendation to Exclude the Public from Item 15                                 155

15.       Enforcement and Inspection Internal Audit Report

 

     


File Ref: 18/202

 

 

REPORT TO:               Risk and Audit Subcommittee

MEETING DATE:        Tuesday 1 May 2018

FROM:                           Health and Safety Advisor

Jennie Kuzman

SUBJECT:                    Health and Safety Risk Management Update        

 

 

1.0       SUMMARY

1.1       The purpose of this report is to provide an update to the subcommittee in regards to the management of Health and Safety risks within Council.

1.2       This issue arises due to the Health and Safety at Work Act 2015 and the requirement of that legislation for Elected Members to exercise due diligence to ensure that Council complies with its Health and Safety duties and obligations.

1.3       This report also provides information in relation to a review of the effectiveness of the current Health and Safety reporting regime.

1.4       The report concludes by recommending that the Subcommittee receive the Report and that the Subcommittee recommend to Council that the proposed changes to Health and Safety reporting be approved.

2.0       BACKGROUND

2.1       At its June 2016 meeting, Council accepted the recommendations from the Audit and Risk Subcommittee in relation to Health and Safety reporting. The recommendations were:

·     Monthly reporting in the form of a ‘high level dashboard report’ to Council, and

·     Quarterly reporting at a more detailed level to Council, and

·     Quarterly reporting on Health and Safety risk management to the Audit and Risk Subcommittee.

2.2       This report serves as a quarterly report to the Risk and Audit Subcommittee on Health and Safety risk management.

3.0       CURRENT SITUATION

3.1       Overview of Health and Safety Risk Management

3.2       As previously reported to the Risk and Audit subcommittee during the November 2017 meeting, the 12 critical Health and Safety Risks are currently being analysed by officers using “Bow Tie” risk evaluation methodology.

3.3       The procurement process to acquire software for specific use in Bow Tie analysis has been completed and officers are now working through completing the 12 critical Health and Safety risks.

 

 

3.4       Legislation Changes

3.5       Officers are currently focusing on the following critical risks due to the requirements of  specific regulations which have been released by WorkSafe NZ:

·    Risk of serious health effects from exposure to asbestos.   

·    Risk of fatality from loss of containment and/or exposure to a hazardous substance.

3.6       The Health and Safety at Work (Asbestos) Regulations 2016 place a duty on businesses to have asbestos management plans in place for their buildings and workplaces where asbestos is likely to be found, by April 2018. Officers have completed a project to develop an overarching plan which is now being reviewed for approval by the Chief Executive.

3.7       The Health and Safety at Work (Hazardous Substances) Regulations 2017 were released in December, these supersede a large portion of the Hazardous Substances and New Organisms Act of 1996, setting out major changes to the way that Hazardous Substances are managed in New Zealand. Officers are currently working through a project implementation plan for the required changes across Council. Given the number of areas that Council works across, these Regulations present a considerable amount of work for staff.

3.8       Equal focus on ‘Health’ Risks

3.9       WorkSafe NZ have issued a strong mandate for organisations to focus equally on ‘Health’ risks not just ‘Safety’ risks.

3.10    Council already has a high level of focus in this health area and has identified an equal number of ‘Health’ and ‘Safety’ risks within its 12 critical Health and Safety Risks. As well as the Asbestos and Hazardous Substances risks mentioned above, the following are identified as critical health risks:

·    Risk of fatality or serious health effects from exposure to harmful levels of noise, vibration, dust, or biological hazards

·    Risk of serious health effects from exposure to factors causing stress

·    Risk of serious health and/or safety effects from fatigue and working while fatigued

·    Risk of adverse physical and mental health effects from exposure to aggression, physical violence and verbal abuse from members of the public and service users

3.11    Considerable progress that has been made in regards to implementing risk control measures in these areas.

3.12    Council has expanded its exposure monitoring programme utilising specialist Occupational Hygienists to carry out monitoring testing in relation to activities where workers are potentially exposed to harmful levels of noise, vibration, dust, or biological hazards.

3.13    Council has employed an in-house Occupational Health Nurse to coordinate and improve its existing health monitoring programme.

3.14    Officers are currently working on developing specific Fatigue Management and Mental Wellbeing policies to replace the existing Stress & Fatigue Policy.

3.15    Officers have completed a draft Conflict and Violence Management Policy, which is expected to be released by the end of April 2018, this builds on the extensive planning work and training that has been provided to workers across the organisation.

3.16    Health and Safety Reporting Review

3.17    Regular monthly and quarterly reporting in relation to Health and safety leading and lagging indicators has been provided to Council for a period of 18 months. As was planned when reporting first commenced, the effectiveness of this reporting regime has been reviewed to assess whether it is meeting the needs of Council in relation to its governance Health and Safety duties and obligations.

3.18    Due to the relatively low movement in leading and lagging indicators in the monthly reports, trends are not easily identifiable or relevant. Therefore the quarterly reports have been regarded as more useful than the monthly reports for the purpose of governance review reporting.

3.19    Going forward, it is recommended that Monthly reports no longer be brought to Council meetings but rather they be uploaded onto the Hub for elected members to review. However, Quarterly reports should continue to be reported to Council meetings.

3.20    Should the change to the reporting regime be approved, it is also proposed that any urgent Health and Safety issues that arise outside of the Quarterly reporting regime be either notified by the Chief Executive/delegate to elected members by e-mail (as is already the case) and / or brought to Council as a ‘special report’.

4.0       SIGNIFICANCE AND ENGAGEMENT

4.1       This Report does not trigger Council’s Significance and Engagement Policy and no consultation is required

 

5.0       RECOMMENDATIONS AND REASONS

A)        That the report of the Health and Safety Advisor titled Health and Safety Risk Management Update dated 1/05/2018 be received.

B)        That it be recommended to Council that the proposed changes to Health and Safety Reporting timeframes be approved.

 

Attachments:

There are no attachments for this report.

 

 


File Ref: 18/278

 

1.   

REPORT TO:               Risk and Audit Subcommittee

MEETING DATE:        Tuesday 1 May 2018

FROM:                           Manager Strategic Finance

Brent  Chamberlain

SUBJECT:                    Treasury Activity and Funding        

 

 

1.0  SUMMARY

1.1       The purpose of this report is to update the Subcommittee on treasury activity and funding issues.

1.2       The Council is required to give effect to the purpose of local government as prescribed by Section 10 of the Local Government Act 2002. That purpose is to meet the current and future needs of communities for good quality local infrastructure, local public services, and performance of regulatory functions in a way that is most cost effective to households and businesses. Good quality infrastructure means infrastructure, services and performance that are efficient and effective and appropriate to present and anticipated future requirements.

1.3       This report concludes by recommending that the report on treasury activity and funding is received. 

2.0       BACKGROUND

2.1       The Hastings District Council has a Treasury Policy which forms part of the 2015-25 Long Term Plan and a Treasury Management Policy. Under these policy documents responsibility for monitoring treasury activity is delegated to the Risk and Audit Subcommittee.

2.2       Council is provided with independent treasury advice by Stuart Henderson of PricewaterhouseCoopers and receives weekly and monthly updates on market conditions.

2.3       Under the Treasury Policy, formal reporting to Council occurs quarterly and regular more in depth treasury reporting is provided for the Risk and Audit Subcommittee.

3.0       CURRENT SITUATION

3.1       Council’s debt portfolio is managed within the macro limits set out in the Treasury Policy. It is recognised that from time to time Council may fall out of policy due to timing issues as debt moves closer to maturity and shifts from one time band to another. The treasury policy allows for officers to take the necessary steps to move Council’s funding profile back within policy in the event that a timing issue causes a policy breach.

3.2       The following table sets out Council’s overall compliance with Treasury Management Policy as at 30 April 2018:

 

Measure

Compliance

Actual

Min

Max

Liquidity

ü

114%

110%

170%

Fixed debt

ü

80%

55%

95%

Funding profile:

0 – 3 years

3 – 5 years

5 years +

 

ü

ü

ü

 

37%

37%

26%

 

10%

20%

10%

 

50%

60%

60%

Net Debt as % Equity

Net Debt as % Income

Net Interest as % Income

Net Interest as % Rates

ü

ü

ü

ü

4%

59%

3%

5%

0%

0%

0%

0%

20%

150%

15%

20%

 

Council is currently compliant with Treasury Management Policy.

3.3       The current total core net external debt is $70.7m as at 30 April 2018. This is supported by the Debt Status Report as at 30 April 2018 (Attachment 1). Core external debt has increased $5m from the March 2018 report.

3.4       The additional $5m was required to fund the current capital spend program being undertaken. A total of $10m was borrowed from LGFA with a maturity of April 2024, and $5m of this was used to repay the earlier short term 110 day loan borrowed in December 2017.

3.5       An additional $19m in interest rate swaps was also taken out during the period.

Deal Date

Bank

Amount of Cover ($m)

Cover Start Date

Cover Maturity Date

Cover Interest Rate

Replaces existing Swap or New Swap

27/03/18

ANZ

4.0

20/09/19

20/09/25

3.17%

Replacing

18/04/18

WBC

5.0

18/06/19

17/04/25

3.13%

New

18/04/18

ANZ

5.0

17/01/20

17/04/26

3.29%

New

18/04/18

ANZ

5.0

18/06/20

18/04/28

3.47%

New

 

3.6       All the new swaps have forward start dates that lock in today’s low interest rates for future periods and are designed to match the expected growth of new debt over the first three years on the LTP. See the diagram under 4.2 for the impact of these new swaps.

3.7       Below is an update of how the Council is tracking with its capital spend program for the year:

3.8       While Council’s capital spend continues to accelerate with the Havelock North Water Main coming on stream and Whakatu Arterial running ahead of schedule, Council is beginning to fall behind the very aggressive budgeted plan and it is unlikely that Council will make up this deficit before year end. It is Officers best estimate that the capital program will finish with a total spend of $75m with an estimated $20m of loan funded capital expenditure to be carried forward to 2018/2019. Any carried forward capital expenditure will need to be added to the $85.1m already budgeted for 2018/19 (see chart below), giving a total of $105m which is 40% more than Council will achieve this year.

3.9       This forward view is important to help understand the likely debt requirements and the future treasury management actions that should be taken.

 

4.0       FORECAST SITUATION 

4.1       The chart below shows the key drivers of the expected movement in borrowings over the next quarter. This is based on projects that have started already, or are highly likely to commence before 30 June 2018 and indicates a forecast debt position of $83.3m. Budget managers are currently reviewing and updating their year-end predictions and it is expected that the current debt forecast could be reduced to between $75m and $80m.

4.2       The chart identifies the major projects underway, however the smaller renewal projects have been aggregated into the “Other” heading.

4.3       The chart below shows the forecast external debt levels signalled in the 2018-2028 LTP adjusted with a slightly lower predicted opening position.

4.4       The following graph shows Council’s fixed debt is within the policy minimum and policy maximum set out in Council’s Treasury Management Policy. This graph also incorporates Council’s forecast debt over the long term (discounted to 80% of projections). The projected external debt requirement for the next 12 months is forecast to increase which will provide Council with the opportunity to take advantage of funding longer term debt at historically low levels of interest.

4.5       The peak of the existing swap cover (years 2-3) is $72.5m, which is not too far above today’s debt level of $70.7m meaning that for Council to be in a position of being over hedged at that peak, Council’s current debt position would have to remain relatively static. Given the projected capital programme, largely funded by debt, forecast debt levels are not expected to remain at today’s levels. The swap cover is at the policy mid-point of projected debt forecast using the conservative 80% debt forecast.

4.6       Officers are currently working with PWC on reviewing its interest rate strategy. PWC are currently recommending a target level of below 3.75% for retail swaps at the longer end of the yield curve (swaps of 5 to 10 years in length).

4.7       The graph below shows the Council’s position for funding risk with $70.7 million of financing facilities as at 30 June 2018, based on the assumption that there no new debt drawn between now and then.

4.8       The current liquidity ratio of 114% is within the policy band of 110% - 170%. Note that Council’s debt maturity profile will be out of policy in years 0-3 and 3-5. The graph above suggests some actions that will ensure Council remains in policy at June 2018.

·    that Council will renegotiate the line of credit with Westpac Bank ($10m) to have a new expiry date of June 2022 which will shift the yellow bar to the right by two years.

·    additionally it is expected that the Council will need to borrow at least a further $5m in June 2018, which will borrowed with a maturity date of 2025 (as indicated by the green box).

4.9       After these combined changes the debt maturity profile will be 47% years 0-3, 23% years 3-5, and 30% years 5 plus which is back in policy.

4.10    Looking beyond June 2018, the next three strategic matters on the horizon are Standard and Poor’s (S&P) annual review meeting (December 2018), the maturity of $20m of LGFA debt in March 2019, and decreasing liquidity ratio’s as our debt increases.

4.11    Interestingly all three matters are interrelated. S&P last year commented on the fact Council only has a $10m line of credit, but has a $20m debt repayment obligation due in March 2019. If the unthinkable happened and Council couldn’t raise a new loan with LGFA how would Council meet this obligation?

4.12    Council has two avenues to address this issue;

i)          One is to increase its line of credit with Westpac at the same time it renegotiates the maturity date. This would improve Council’s liquidity ratios as well which are near minimums currently, but comes with increased holding costs.

ii)         The second option is to borrow part of the replacement loan early, and put the funds on deposit till needed. The cost of doing this should be neutral for the Council (ie interest paid = interest received), and would remove the possibility of a default.

4.13    It is also likely that Council will need to borrow a further $15m in new debt between July and December 2018 to fund its capital program.

4.14    Assuming Council choses to borrow $15m of the replacement loan early (with a linked deposit), and does need a further $15m of new debt before 31 December 2018, and starts the year with $75.7m of existing debt, the new debt maturity might look something like this:

Such a strategy would be consistent with Council’s liquidity and debt profile KPI’s.

5.0       MARKET COMMENTARY

5.1       The Reserve Bank of New Zealand (RBNZ) last issued a Monetary Policy Statement on 22 March 2018 where the Official Cash Rate was held at 1.75%. The Reserve Bank Governor stated “The outlook for global growth continues to gradually improve. While global inflation remains subdued, there are some signs of emerging pressures. GDP was weaker than expected in the fourth quarter, mainly due to weather effects on agricultural production. Residential construction continues to be hindered by capacity constraints. CPI inflation is expected to weaken further in the near term due to softness in food and energy prices and adjustments to government charges. Monetary policy will remain accommodative for a considerable period. Numerous uncertainties remain and policy may need to adjust accordingly”.

5.2       On the 26 March 2018 Finance Minister Grant Robertson and incoming Reserve Bank Governor Adrian Orr signed a new Policy Targets Agreement (PTA) setting out specific targets for maintaining price stability and a requirement for employment outcomes to be considered in the conduct of monetary policy. The new PTA takes effect from 27 March 2018, when Adrian Orr starts his five-year term as Governor.

5.3       ASB’s take on the above announcements is that the RBNZ left its OCR rate unchanged at 1.75% as expected. Meanwhile the Federal Reserve (America’s equivalent to the RBNZ) hiked its Fed Funds rate to 1.75% also. This is up from a low of 0.25% during the Global Financial Crisis and they are expected to have 2 further 0.25% hikes this year, and 3 more the following year. While the RBNZ is expected to leave the OCR at its historic low of 1.75% until the second half of 2019. NZ core inflation pressures have yet to materially pick up.

5.4       The Fed Funds rate increasing will impact on the cost of borrowing fixed interest rate funds where the term is 5+ years, whereas the shorter end of fixed interest rate curve is more impacted by the NZ OCR rate.

           

6.1       The new RBNZ Policy Targets Agreement for monetary policy was released on Monday 26th of March, as well as the results of phase 1 of the review of the Reserve Bank Act. Importantly, the PTA retained the 1-3% CPI inflation target as the sole mandate, but added the requirement of the RBNZ to aim towards “supporting maximum sustainable employment within the economy”. A dual mandate looks to be coming, but this will require legislative changes to the Reserve Bank Act, which looks a number of months away.

6.2       The graph below shows how the NZ interest rate curve has moved over the past 18 months.

6.3       The PWC Treasury Advisory Team believe that both short-term (although not till after mid 2019 – linked to the OCR rate) and long-term interest rates could move higher due to the increased cost of borrowing offshore by New Zealand banks (see the Fed Reserve comments above).

           

7.0       FUNDING FACILITIES

7.1       Attachment 2 shows details of Council’s current debt facilities together with details of expiry dates and margins.

7.2       Council’s liquidity ratio of 115% at 31 March 2018 (based on net external debt of $65.7m and total debt facilities of $75.7m) is within policy (policy 110% - 170%). Officers are comfortable with this ratio because of continued uncertainty on debt forecasts and the ability to increase debt from the LGFA at relatively short notice.

 

8.0       Recommendations

That the report of the Manager Strategic Finance titled Treasury Activity and Funding dated 1/05/2018 be received.

 

 

Attachments:

 

1

Debt Maturity Status 31 March 2018

CG-14-25-00037

 

2

Public Debt Status 31 March 2018

CG-14-25-00036

 

 

 


Debt Maturity Status 31 March 2018

Attachment 1

 

PDF Creator


Public Debt Status 31 March 2018

Attachment 2

 

PDF Creator


REPORT TO:               Risk and Audit Subcommittee

MEETING DATE:        Tuesday 1 May 2018

FROM:                           Risk and Corporate Services Manager

Regan Smith

District Customer Services Manager

Greg Brittin

SUBJECT:                    Enterprise Risk Management Update        

 

 

1.0       SUMMARY

1.1       The purpose of this report is to update the Subcommittee on Enterprise Risk Management activities and to present Bow Tie analysis for the following strategic risks; Inadequate Available Funds, Economic Downturn, Biosecurity Failure, Corruption and Fraud Incidents and Business Interruption.

1.2       This issue arises from adoption of the Strategic Risk Register by Council.

The Council is required to give effect to the purpose of local government as prescribed by Section 10 of the Local Government Act 2002. That purpose is to meet the current and future needs of communities for good quality local infrastructure, local public services, and performance of regulatory functions in a way that is most cost–effective for households and businesses. Good quality means infrastructure, services and performance that are efficient and effective and appropriate to present and anticipated future circumstances.

1.3       This report concludes by recommending that the report be received and that Biosecurity risk be moved to a threat to Economic Downturn risk.

2.0       BACKGROUND

2.1       Council has adopted the Bow Tie risk assessment method to analyse the strategic risks adopted by Council on 31 July 2017.

2.2       The Bow Tie risk assessment method was selected by Council as it is an effective tool to demonstrate causal relationships in complex systems. A Bowtie diagram does two things. First of all, it gives a visual summary of all plausible accident scenarios that could exist around a certain Hazard. Secondly, by identifying control measures the Bow Tie displays what the organisation does to control those scenarios.

2.3       Bow Tie analysis of strategic risks and associated threats, consequences and control barriers, have been completed and reported to the Subcommittee for the following risks:

·      Civil Defence Emergency (Risk #2).

·      Health & Safety Incident (Risk #3).

·      Infrastructure Service Failure (Risk #4)

·      Ineffective Regulatory Oversight (Risk #5)

·      Adverse Environmental Change (Risk #6)

·      Demographic Change (Risk #7)

·      Information Security Failure (Risk #8)

·      Procurement Failure (Risk #12)

3.0       CURRENT RISK ANALYSIS

3.1       Water supply contamination (Risk #1): A workshop was held on 9 April 2018 with members of the water services team, the Group Manager: Asset Management and external consultant Dr Dan Deer, to review the draft water contamination Bow Tie diagram. This workshop validated the information presented in the Bow Tie and identified changes needed to ensure the diagram provided a comprehensive view of the systems in place to manage water contamination risk. The updated Bow Tie will be available for review at the next Subcommittee meeting in June.

3.2       Initial Bow Tie risk analysis have been completed for the following strategic risks:

3.2.1   Inadequate Available Funds (Risk #9): Loss of access to sufficient funds to meet Council’s current financial commitments. Inadequate funds risk covers failure of loan facilities, or unforeseen global financial market failure, or level of debt reaching our loan cap, resulting in Council not having enough cash on hand to pay immediate financial commitments, including payroll.

3.2.2   Risk assessment: Strong treasury controls and oversight supported by robust budgeting and forecasting, including obtaining expert advice when necessary, significantly reduces the chance that Council will commit to financial obligations that exceed the funds to which Council has access.

3.2.3   Economic Downturn (Risk #10): Changes in global economic conditions or political stability that adversely affect the local community, resulting in reduced demand and ability to pay for services.

3.2.4   Risk assessment: Through a combination of well-informed land use and infrastructure planning, and an economic development initiative designed to promote economic diversity in the district, Council aims to minimise the impact of an economic downturn should it occur.

3.2.5   Corruption and Fraud Incidents (Risk #13): Deliberate misuse of position or authority that results in loss of funds, loss of assets or reputation damage. Corruption and Fraud risk covers all aspects relating to avoiding corrupt activity within Council and includes deliberate acts of theft, undeclared conflicts of interest, gifting and coercion that results in financial loss or reputation damage for Council.

3.2.6   Risk assessment: The chance and magnitude of potential fraud is mitigated through clear separation of duties and monitoring of spending activities, while corruption is minimised through robust organisation culture and declaration of gifts and conflicts of interest.

3.2.7   Business Interruption (Risk #14): Business interruption caused by some unexpected event impacting service delivery. This risk covers unexpected events that disrupt delivery of Council services 24 hours a day 7 days a week. The disruption could be to any of the resources needed to deliver core services including; buildings, technology (e.g. websites, payment gateways, application services, telephony and email), people, utilities etc.

3.2.8   Risk assessment: Council has a Business Continuity Framework that sets out the crisis management and business continuity planning principles to achieve efficient containment and recovery from disruptions. Supporting plans have been established for services that are highly sensitivity to disruption; such as water supply and customer services. Further development of these plans to improve operational application is underway.

3.3       Biosecurity Failure (Risk #11): The initial analysis of Biosecurity risk has identified that Council has very little influence over the factors that give rise to, or ability to mitigate the consequence of, a biosecurity failure. However, it is acknowledged that the consequences of a biosecurity failure do have implications for the economic prosperity of the region.

3.4       Therefore, it is recommend that Biosecurity Risk number 11 be removed from the Strategic Risk Register and the relevant issues be incorporated in to strategic risk number 10: Economic Downturn.

4.0       SIGNIFICANCE AND ENGAGEMENT

4.1       While consideration of risk is significant to effective operation of Council, changes to the risk register are not significant in terms of Council’s Significance and Engagement Policy and no consultation is required.

5.0       RISK ASSURANCE ADVISOR APPOINTMENT

5.1       Council has established a new Risk Assurance Advisor position to support the strategic risk analysis work, and to undertake internal audits to provide assurance that risk controls are working as intended.

5.2       Dean Ferguson has been appointed to this role and started work with Council on 23rd of April. Mr Ferguson has a good background in risk management and internal audit in the UK insurance industry.

6.0       NEXT STEPS

6.1       Complete initial analysis of all strategic risks by the end of June 2018. Remaining risks include:

6.1.1   Loss of key staff (Risk #15).

6.1.2   Officer negligence (Risk #16).

6.1.3   Failure to meet regulatory requirements (Risk #17).

6.1.4   Legislative change (Risk #18).

6.1.5   Facility failure (Risk #19).

6.1.6   Failure to achieve business as usual performance (Risk #20).

6.2       The current Risk Management Policy and Framework was adopted on 13 July 2017 and is due for annual review. A review and associated draft will be provided to the Subcommittee at the next meeting in June.

 

 

7.0       RECOMMENDATIONS AND REASONS

A)        That the report of the Risk and Corporate Services Manager titled Enterprise Risk Management Update dated 1/05/2018 be received.

B)        Risk and Audit Subcommittee recommend to Council that Biosecurity Risk number 11 be removed from the Strategic Risk Register and the relevant issues be incorporated in to strategic risk number 10: Economic Downturn.

With the reasons for this decision being that the objective of the decision will contribute to meeting the current and future needs of communities for good quality local infrastructure, local public services and performance of regulatory functions in a way that is most cost-effective for households and business by:

i)          Validating that risks in core business processes are effectively managed.

 

 

Attachments:

 

1

Policies, Procedures, Delgtns, Warrants & Manuals - Manuals - Risk Management - Governance Strategic Risk Register for Risk and Audit Subcommittee 1 May 2018

 

PMD-03-81-18-136

2

Policies, Procedures, Delgtns, Warrants & Manuals - Manuals - Risk Management - Governance Strategic Risk Summary Inadequate Available Funds for Risk and Audit Subcommittee 1 May 2018

 

PMD-03-81-18-127

3

Policies, Procedures, Delgtns, Warrants & Manuals - Manuals - Risk Management - Governance Strategic Risk Bow Tie Inadequate Available Funds for Risk and Audit Subcommittee 1 May 2018

 

PMD-03-81-18-128

4

Policies, Procedures, Delgtns, Warrants & Manuals - Manuals - Risk Management - Governance Strategic Risk Summary Economic Downturn for Risk and Audit Subcommittee 1 May 2018

 

PMD-03-81-18-129

5

Policies, Procedures, Delgtns, Warrants & Manuals - Manuals - Risk Management - Governance Strategic Risk Bow Tie Economic Downturn for Risk and Audit Subcommittee 1 May 2018

 

PMD-03-81-18-130

6

Policies, Procedures, Delgtns, Warrants & Manuals - Manuals - Risk Management - Governance Strategic Risk Summary Corruption and Fraud for Risk and Audit Subcommittee 1 May 2018

 

PMD-03-81-18-132

7

Policies, Procedures, Delgtns, Warrants & Manuals - Manuals - Risk Management - Governance Strategic Risk Bow Tie Corruption and Fraud for Risk and Audit Subcommittee 1 May 2018

 

PMD-03-81-18-133

8

Policies, Procedures, Delgtns, Warrants & Manuals - Manuals - Risk Management - Governance Strategic Risk Summary Business Interruption for Risk and Audit Subcommittee 1 May 2018

 

PMD-03-81-18-134

9

Policies, Procedures, Delgtns, Warrants & Manuals - Manuals - Risk Management - Governance Strategic Risk Bow Tie Business Interruption for Risk and Audit Subcommittee 1 May 2018

 

PMD-03-81-18-135

10

Policies, Procedures, Delgtns, Warrants & Manuals - Manuals - Risk Management - Governance Strategic Risk Bow Tie Biosecurity Failure for Risk and Audit Subcommittee 1 May 2018

PMD-03-81-18-131

 

 

 


Policies, Procedures, Delgtns, Warrants & Manuals - Manuals - Risk Management - Governance Strategic Risk Register for Risk and Audit Subcommittee 1 May 2018

Attachment 1

 

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Policies, Procedures, Delgtns, Warrants & Manuals - Manuals - Risk Management - Governance Strategic Risk Bow Tie Biosecurity Failure for Risk and Audit Subcommittee 1 May 2018

Attachment 10

 

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File Ref: 18/313

 

 

REPORT TO:               Risk and Audit Subcommittee

MEETING DATE:        Tuesday 1 May 2018

FROM:                           Chief Financial Officer

Bruce Allan

Group Manager: Asset Management

Craig Thew

SUBJECT:                    Asset Management Plans        

 

 

1.0       SUMMARY

1.1       The purpose of this report is to provide information to the Risk and Audit Subcommittee in regards to the steps taken to provide assurance that the Asset Management planning at Council is well managed and that Councils assets are being appropriately maintained.

1.2       The Council is required to give effect to the purpose of local government as prescribed by Section 10 of the Local Government Act 2002. That purpose is to meet the current and future needs of communities for good quality local infrastructure, local public services, and performance of regulatory functions in a way that is most cost–effective for households and businesses. Good quality means infrastructure, services and performance that are efficient and effective and appropriate to present and anticipated future circumstances.

1.3       This report concludes by recommending the report is received.

2.0       BACKGROUND

2.1       Strategic Risk Register identifies the following risk which is related to good asset management planning.

 

Infrastructure Service Failure: Infrastructure service failure resulting in loss, or compromised operation, of essential services causing harm to the community.

2.2       The mitigations identified in the strategic risk register include:

“The probability of a significant event is reduced through application of high service levels to all infrastructure services. These service levels are achieved through robust asset management planning based on international standards, which are monitored by external audits and 3 yearly external peer reviews.”

2.3       Council are required to have comprehensive asset management plans for the core infrastructure of Roads and the Three Waters. It is these asset management plans that are the focus of this report.

2.4       Asset Management Plans are living documents, continually being updated and reviewed based on changing and improving information. It is therefore the summaries of these plans that the Council will be asked to adopt, representing the knowledge and understanding of these important assets as at a point in time.

2.5       The asset management plans also include improvement plans, these improvement plans highlight initiatives that have been identified in the asset planning process to further develop the understanding and management of the future service needs of our community.

3.0       CURRENT SITUATION

3.1       During the 2018-28 Long Term Plan audit, Audit NZ take a close interest in the Asset- Management Plans and specialist auditors are allocated the task of reviewing these documents and the associated processes. In the Audit NZ report to Council on the Long Term Plan Consultation Document the following is noted in terms of the Water and Roading plans:

 

Quality of asset-related forecasting information

The Water and Roading Asset Management Plans (AMP) were reviewed by our sector specialists. Through discussion with infrastructure staff, a high level assessment of the District Council’s planning systems, review of the infrastructure strategy, and a review of the asset management plans the overall quality and material completeness of the Roading and Water Asset Management Plans was assessed as good. These are a sound basis on which to base the asset related forecasts and no significant improvements were noted.

We have specifically reviewed the projects in terms of the work that is required to the water infrastructure as a result of the Havelock North water contamination event and the required replacements of rural bridges. We have also gained an understanding of asset renewal expenditure. The renewal spend matches the requirements as modelled through the AMPs and there were no issues noted as a result of our review.”

3.2       Review process – Waugh Consulting

3.2.1   Council has an adopted an Asset Management Policy, as part of this Policy an assessment of the ‘appropriate level of asset management’ is defined for each of the asset areas. This approach is now more commonly referred to as asset management maturity (as noted in the new Treasury Investor Confidence Rating (ICR) system and in the updated Infrastructure Investment and Maintenance Manual (IIMM)).

3.2.2   This approach considers the relative risks of service delivery, across the different aspects of asset planning, with consideration of the Hastings context and the particular risks requiring management. The purpose is to ensure that the level of effort and complexity is balanced and focused on the need.

3.2.3   In 2014 the appropriate practice target level was reassessed externally by Ross Waugh (Waugh Consulting) and updated (attachment 1), taking into account context changes and improvements to the assessment approach. Following this re-assessment a compliance review of the previous Asset Management documentation was undertaken (by Ross Waugh) to identify gaps between the desired level and the information provided from the AMP documents.

3.2.4   This review highlighted a number of documentation opportunities where the Asset planning practice was not acknowledged in the documents. The review also noted areas of recommended focus. These become Asset planning improvement opportunities that are programmed and prioritised.

3.3       Over the last 3 year period significant changes to the operating context in drinking water have occurred. This has required a wide review of previous practice, planning assumptions, resourcing requirements, and approach. This process has taken considerable resources and re-prioritisation of tasks. The drinking water AMP therefore required a greater level of input and review to collate up to the latest information. It is expected that this area will continue to develop as the knowledge continues to develop and the legislative context changes.

3.4       To meet this increased need a greater level of oversight and assistance has been provided by Waugh Consulting. The external input is being used to provide additional tensioning and industry best practice in the updating process. The asset managers retain the responsibility for the updating and ownership of the AMPs.

3.5       Given the increased level of involvement by Waugh Consultancy, in particular Ross Waugh, officers are considering an alternative third party review. This would occur once the remaining documentation updates are completed.

3.6       Due to the workloads required for the water change process the GM of Asset Management engaged Neil Cook (Rationale) to provide an oversight and guidance role for the Transportation AMP update process.

3.7       NZTA review process for Transport

3.7.1   As a major co-investor the New Zealand Transport Agency completes a number of audits across the transport asset planning and delivery activities. These range from technical through to procedural audits. These audits include reviews of the asset management business case (told by the Transport AMP) that are required to support the funding request for co-investment.

3.7.2   For the 2018/21 Land Transport Programme applications Councils have been required to adjust their approach to respond to the new NZTA business case and One Network Road Classification (ONRC) system. The Road Efficiency Group (REG) and NZTA provided facilitated regional workshops (multiple per region) across NZ to provide increased practice development, sharing, and feedback. The Hastings DC staff played an active role in this workshop process and staff are also involved in the REG committees charged with developing practice and understanding across all road controlling authorities.

3.7.3   NZTA has yet to provide a formal review of the latest AMP document. Officers have received the initial feedback on the strategic business case and rated its confidence rating for the different areas of the plan.

3.7.4   The change in Government and the subsequent change in Transport policy direction (Government Policy Statement (GPS)) and funding priorities will need to be considered by Council to ensure new opportunities and risks are actively managed.

3.7.5   These sorts of changes are acknowledged in the Asset Planning process, and reflects the need to keep the full AMP’s as working documents, continuously adapting and responding to new information. The executive summaries are the intended to be the public facing document that summarises the direction, key items, and the planned response.

3.7.6   The intent is for Council to adopt the AMP summaries as part of the LTP adoption and to publish these on the Council website with the other LTP documentation.

3.7.7   The asset planning improvements will also be programmed and progress on this programme will be managed alongside the management capital delivery programme.

3.7.8   The current versions of the amp overviews and executive summaries for the 3 waters and transport activities are attached for information.

 

4.0       RECOMMENDATIONS AND REASONS

A)        That the report of the Chief Financial Officer and Group Manager: Asset Management titled Asset Management Plans dated 1/05/2018 be received.

B)        That the Subcommittee 2018-28 Asset Management Plan summaries for Roading, Water Supply, Waste Water and Stormwater be received.

With the reasons for this decision being that the objective of the decision will contribute to meeting the current and future needs of communities for good quality local infrastructure in a way that is most cost-effective for households and business by:

i)          Acknowledging that the planning and understanding of Councils important infrastructure assets are good.

 

 

Attachments:

 

1

Selecting appropriate AM level 2014 review

AST-1-1-18-4

2

Asset Management - Asset Management Plans - Water - Water AMP Summary 2018

AST-1-1-18-5

3

Asset Management - Asset Management Plans - Wastewater - Wastewater AMP Summary 2018

AST-1-2-18-4

4

Asset Management - Asset Management Plans - Stormwater - Stormwater AMP Summary 2018

AST-1-3-18-3

5

Asset Management - Asset Management Plans - Transportation - Transportation at a glance

AST-1-4-18-2

6

Asset Management - Asset Management Plans - Transportation - Executive Summary - extract from TAMP

AST-1-4-18-3

 

 

 


Selecting appropriate AM level 2014 review

Attachment 1

 

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Asset Management - Asset Management Plans - Water - Water AMP Summary 2018

Attachment 2

 

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Asset Management - Asset Management Plans - Wastewater - Wastewater AMP Summary 2018

Attachment 3

 

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Asset Management - Asset Management Plans - Stormwater - Stormwater AMP Summary 2018

Attachment 4

 

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Asset Management - Asset Management Plans - Transportation - Transportation at a glance

Attachment 5

 

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Asset Management - Asset Management Plans - Transportation - Executive Summary - extract from TAMP

Attachment 6

 

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File Ref: 18/318

 

 

REPORT TO:               Risk and Audit Subcommittee

MEETING DATE:        Tuesday 1 May 2018

FROM:                           Manager Strategic Finance

Brent  Chamberlain

Chief Financial Officer

Bruce Allan

SUBJECT:                    General Update Report and Status of Actions        

 

 

1.0       SUMMARY

1.1       The purpose of this report is to update the Subcommittee on various matters including actions raised at previous meetings.

1.2       The Council is required to give effect to the purpose of local government as prescribed by Section 10 of the Local Government Act 2002. That purpose is to meet the current and future needs of communities for good quality local infrastructure, local public services, and performance of regulatory functions in a way that is most cost–effective for households and businesses. Good quality means infrastructure, services and performance that are efficient and effective and appropriate to present and anticipated future circumstances.

1.3       This report concludes by recommending that the report titled “General Update Report and Status of Actions” from the Manager Strategic Finance be received.

2.0       BACKGROUND

2.1       The Audit & Risk Subcommittee members requested that officer’s report back at each meeting with progress that has been made on actions that have arisen from the Audit & Risk Subcommittee meetings. Attached as Attachment 1 is the Audit & Risk Subcommittee Action Schedule as at 1 May 2018.

3.0       CURRENT SITUATION

3.1       Tech One Upgrade

3.1.1   Work undertaken by staff to review the scope and nature of the upgrade to the Technology One Finance Module has taken place and has resulted in a plan with Stage 1 significantly “down-sized” which has minimised risk and cost while still achieving much of what was considered necessary when the project was first initiated. 

3.1.2   A consultant from TechOne spent three days onsite in April, and peer reviewed what Officers are proposing to undertake as part of Stage 1 and has suggested several refinements. An initial scoping meeting as also held to discuss the future implementation of Procure to Pay (Stage 2).

3.1.3   Risks are being managed well with this upgrade being the first significant improvement project for quite some time. It is important that we build capability to manage this change before we then take the next steps on an improvement plan that will be more significant and complex. Our aim is to build trust in the organisation that between Technology One and HDC that we can implement these improvements and manage risk appropriately.

3.2       Insurance

3.2.1   The annual insurance renewal process has begun with the five Hawkes bay Council’s meeting with JLT in March. The outcome from the renewal programme will be reported to the Subcommittee in June, however general feedback on the insurance market is that we should expect increases in premiums for 2018/19.

·    Material Damage – market suggesting 10-15% increase on last year, JLT hoping to get 10% due to our group power.

·    Motor vehicles – market around 15% increase, aiming to reduce increase to around 5% due to group power and low claims for last 12 months.

·    Public liability, market around 5% up, hoping to keep this flat.

3.2.2   Following the fraud incident at the Sports Centre an exclusion was placed on this policy in relation to financial segregation of duties. We will be writing to our insurers this year to request that this exclusion is removed as we don’t believe that fraud perpetrated at the Sports Centre was because of a failure of segregation of duties to the point that no one individual can control the financial transactions from commencement to completion.

3.2.3   An exclusion was also applied to the Statutory Liability policy for Resource Management Act prosecutions following the Hawkes Bay Regional Council attempted prosecution following the Havelock North water contamination event. At this stage it is note expected that this exclusion will be removed and more time and evidence will be required to demonstrate a change in enforcement practice at HBRC.

3.3       Delivery Risks

3.3.1   The 2018-28 LTP has a significant capital programme and there are risks associated with the delivery of such a large programme. Measures are being put in place to ensure the organisation is better resourced to manage this programme of work with the recent appointment of Mr Graeme Hansen to the new senior role of Director: Major Capital Projects Delivery. Mr Hansen will lead a small team focused on major capital projects, where he will principally lead implementation of Council’s major capital investments in water.

3.3.2   The delivery risk for the organisation is also broader than just the delivery of the capital programme. There is an ever increasing expectation on the organisation from the community to deliver more and this is placing increased pressure on staff across the organisation.

4.0       SIGNIFICANCE AND ENGAGEMENT   

4.1       This report does not trigger Council’s Significance and Engagement Policy and no consultation is required.

 

5.0       RECOMMENDATIONS AND REASONS

That the report of the Manager Strategic Finance titled General Update Report and Status of Actions dated 1/05/2018 be received.

 

Attachments:

 

1

Action Sheet 1 May 2018

CG-14-25-00035

 

 

 

 


Action Sheet 1 May 2018

Attachment 1

 

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File Ref: 18/319

 

 

REPORT TO:               Risk and Audit Subcommittee

MEETING DATE:        Tuesday 1 May 2018

FROM:                           Chief Financial Officer

Bruce Allan

SUBJECT:                    Audit report for 2018-2028 Long Term Plan        

 

 

1.0       SUMMARY

1.1       The purpose of this report is to inform the Subcommittee about the Audit Management Letter received for the 2018-28 Long Term Plan Consultation Document.

1.2       The Council is required to give effect to the purpose of local government as prescribed by Section 10 of the Local Government Act 2002. That purpose is to meet the current and future needs of communities for good quality local infrastructure, local public services, and performance of regulatory functions in a way that is most cost–effective for households and businesses. Good quality means infrastructure, services and performance that are efficient and effective and appropriate to present and anticipated future circumstances.

1.3       This report concludes by recommending that the Audit Management Letter from Audit New Zealand for the 2018-28 Long Term Plan Consultation Document be received.

2.0       BACKGROUND

2.1       The audit of the 2018-28 Long Term Plan is completed by Audit New Zealand and is undertaken in two parts, with the first part being an audit of the Consultation Document.

2.1.1   The Local Government Act requires the Consultation Document to contain a report from the Auditor-General on whether the consultation document gives effect to the purpose of the consultation document as set out in the Act and on the quality of the information and assumptions underlying the information provided in the consultation.

2.1.2   The second part of the Long Term Plan Audit process is to provide an Audit opinion on the overall Long Term Plan. Most of this work is undertaken at the time of assessing the quality of the information and assumptions used for informing the Consultation Document.  As such the final audit process for the LTP is more about understanding the changes that have been made through the consultative process and any additional reporting requirements not included in the information provided at the time of consultation. This is scheduled for the beginning of June.

2.2       On completion of each stage of the audit, an Audit management letter is produced to highlight any issues identified during the audit and suggested improvements.  Attached as Attachment 1 is the Report to Council from Audit New Zealand for Council’s Long Term Plan Consultation Document 2018-2028.

 

3.0       CURRENT SITUATION

3.1       The Audit Management letter confirms that an unmodified opinion was issued on 22 March 2018 and provides the following positive comment:

“Overall we found that the District Council had prepared well for the LTP CD and that the project plan was largely followed. The District Council staff were responsive to our queries and corrected items in both the LTP CD and the underlying information to ensure that this was as complete and accurate as possible for adoption by Council.”

 

3.2       The areas of audit emphasis and noted in the report of Audit New Zealand were:

3.2.1        Water Systems – Audit considered that following the Havelock North water contamination incident the response to the water strategy was comprehensive and that the timeframes for projects included in the LTP are achievable and costed appropriately and they were satisfied with the costings and timing of water projects that give rise to the large increases in the water supply targeted rate.

3.2.2        Bridges – Audit noted that they were satisfied that the programme of bridge strengthening and replacements has been included in the underlying financials appropriately and that they are based on appropriate costings and the timing matches that planned by the District Council.

3.2.3        Municipal Building – While the exact scope of this redevelopment has yet to be confirmed, audit noted that they were satisfied that the funding required had been appropriately included.

3.2.4        Renewals, affordability and levels of service – Audit notes that there is no significant backlog of renewals which means that the headroom in its debt profile is more than adequate to cover unexpected failures.

3.2.5        Quality of asset-related forecasting information – Audit noted that the overall quality and material completeness of the Roading and Water Asset Management Plans was assessed as good. These are a sound basis on which to base the asset related forecasts and no significant improvements were noted

3.3       Audit did note some areas of improvement in relation to quality assurance processes over documents submitted for audit to ensure that there is consistency between them and that when changes are made that they flow through all of the documents that make up the LTP CD and underlying information. Management accept that improvements could be made to this part of the LTP process and will be undertaking a full debrief to identify further improvement opportunities.

3.4       Officers have also identified a number of improvements that can be made to the financial model used to collate the LTP budget data, including how that data flows through to the Statement of Financial position. These improvements will address the issues identified by Audit through the audit process.

 

4.0       RECOMMENDATIONS AND REASONS

            That the report of the Chief Financial Officer titled Audit report for 2018-2028 Long Term Plan dated 1/05/2018 be received.

 

 

Attachments:

 

1

Management Letter to Council for the final LTP

FIN-07-01-18-400

 

 

 

 


Management Letter to Council for the final LTP

Attachment 1

 

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File Ref: 18/344

 

 

REPORT TO:               Risk and Audit Subcommittee

MEETING DATE:        Tuesday 1 May 2018

FROM:                           Manager Strategic Finance

Brent  Chamberlain

SUBJECT:                    Local Government Funding Agency Update        

 

 

1.0       SUMMARY

1.1       The purpose of this report is to update the Committee on the performance of the Local Government Funding Agency (LGFA) to date.

1.2       This issue arises from the annual visit to Hastings District Council by senior executives from LGFA. Officers have taken the opportunity to align this visit with the Risk and Audit Subcommittee meeting and LGFA executives will make a brief presentation to the Subcommittee.

1.3       The Council is required to give effect to the purpose of local government as prescribed by Section 10 of the Local Government Act 2002. That purpose is to meet the current and future needs of communities for good quality local infrastructure, local public services, and performance of regulatory functions in a way that is most cost–effective for households and businesses. Good quality means infrastructure, services and performance that are efficient and effective and appropriate to present and anticipated future circumstances.

1.4       This report concludes by recommending that the report be received.

2.0       BACKGROUND

2.1       The LGFA was established on 1 December 2011 with 18 Local Government shareholders and the Crown. Hastings District Council became a shareholder with a shareholding investment of $400,000 (1.8%). The LGFA is a Council Controlled Organisation.

2.2       During 2012 12 new shareholders joined the LGFA as part of the second opening with Council selling down some shares to the 12 new shareholders. This reduced HDC’s shareholding to $373,196 (1.77%).

2.3       As of 6th April 2018 there are 53 Council who have borrowed a total of $7.6 billion through the LGFA.

2.4       Other than the New Zealand Government each shareholder in LGFA must be a Guarantor. The guarantee is in favour of the Security Trustee in relation to the obligations of the LGFA. Any call under the guarantee will be allocated across all guarantors on a pro rata basis in relation to their rates revenue. As of 6th April 2018 there are 45 Councils acting as guarantor (30 shareholding, and 15 non shareholding Councils).

2.5       LGFA has a prudent approach to risk management. All Councils that borrow from LGFA are obliged to:

·     Provide security in relation to their borrowing from LGFA and related obligations.

·     Issue securities to LGFA (every $100 of borrowing is matched by a $1.60 investment in LGFA borrower notes).

·     Comply with their own internal borrowing policies

·     Comply with the following LGFA financial covenants:

 

Financial covenant

Lending policy covenants

Foundation policy covenants

Net debt/Total revenue

<175%

<250%

Net interest/Total revenue

<20%

<20%

Net interest/Annual rates income

<25%

<30%

Liquidity

>110%

>110%

 

2.6       Auckland Council is limited to a maximum of 40% of LGFA’s total Local Authority assets. As of 6th April 2018 Auckland accounted for 27.4% of LGFA’s total lending ($2.08 billion), and Christchurch accounted for a further 21.1% ($1.56 billion).

2.7       LGFA covers 85% of the New Zealand council sector debt (Auckland, Christchurch, and Dunedin do some borrowing in their own right outside of LGFA).

2.8       The primary objective of the LGFA is to optimise the debt funding terms and conditions for participating local authorities through:

·    Savings in interest costs

·    Availability of longer term borrowings

·    Enhance certainty of access to debt markets

3.0       CURRENT SITUATION

3.1       Andrew Michl, Manager, Credit and Client Relations, LGFA, will be attending the meeting and will update the Subcommittee on the LGFA and trends in the NZ debt market.

3.2       As at 9th April 2018, Hastings District Council has 9 active loans with the LGFA totalling $70m, offset by $1.12m investments in LGFA borrower notes. This loans have maturities that range from 15th March 2019 to 15th April 2027.

3.3       By having an “AA” credit rating, Hastings District Council can borrow at a 0.2% discount to a non-rated Council with a guarantee (0.3% to a non-guarantor). In practical terms, the cost of new loans as at 18th April 2018 was:

3.4       LGFA have reported their provisional unaudited financial results for the half year to 31 December 2017. These show the LGFA had a net profit of $6m, and equity of $58.5m. This is on the back of interest revenues of $178m for the half.

3.5       LGFA have reported that they were compliant with their internal treasury policy throughout the December quarter.

3.6       LGFA was issued with an “AA+” credit rating by S&P on the 25th September 2017, and “AA+” by Fitch on the 10th November 2017.

4.0       SIGNIFICANCE AND ENGAGEMENT

4.1       The matters within this report do not trigger the thresholds within Council’s significance policy.

5.0       RECOMMENDATIONS AND REASONS

A)        That the report of the Manager Strategic Finance titled Local Government Funding Agency Update dated 1/05/2018 be received.

 

Attachments:

There are no attachments for this report.

 

 


File Ref: 18/360

 

 

REPORT TO:               Risk and Audit Subcommittee

MEETING DATE:        Tuesday 1 May 2018

FROM:                           Chief Executive

Ross McLeod

SUBJECT:                    Water Services        

 

 

1.0       SUMMARY

1.1       The purpose of this report is enable staff to update the Subcommittee on progress with the Water Services Change Programme.

1.2       The Water Services Change Programme was commissioned by the Chief Executive in June 2017, following receipt of the capability and capacity review into the water services area that recommended that change work be undertaken.  This followed on from the Havelock North water contamination event, and issues identified in some of Council’s water supply arrangements.

1.3       In terms of governance oversight of the programme, Council asked that the Chief Executive report progress on the change programme to the Risk and Audit Subcommittee on a regular basis.  Council is also receiving updates.

1.4       The Council is required to give effect to the purpose of local government as prescribed by Section 10 of the Local Government Act 2002. That purpose is to meet the current and future needs of communities for good quality local infrastructure, local public services, and performance of regulatory functions in a way that is most cost–effective for households and businesses. Good quality means infrastructure, services and performance that are efficient and effective and appropriate to present and anticipated future circumstances.

1.5       The objective of this decision relevant to the purpose of local government is to provide governance oversight to the water services change programme in order to help Council ensure safe drinking water and fit for purpose, effective and efficient water services across the three waters.

1.6       This report concludes by recommending that the information be received

2.0       BACKGROUND

2.1       The Havelock North water contamination event led to the identification of some areas of Council’s organisational arrangements and performance that were not at the required standard. While the Inquiry found that Council did not cause the contamination event and outbreak (surface water from a pond in the Mangateretere Stream contaminated the aquifer and was drawn into the water supply), the Chief Executive moved to address the issues identified and undertake a significant review and improvement programme across the three waters activities.

2.2       The Chief Executive commissioned a capability and capacity review of the water services area. This was part of wider array of initiatives to ensure water safety and improve systems and performance that included additional resourcing and support, modified processes and the use of new systems. The review was carried out by a review team comprising Bruce Robertson, Ross Waugh and Neil Taylor. A copy of the review report was circulated to members separately at the time of the first report to the Subcommittee.

2.3       The review identified a number of findings and implications of those findings. It made a number of recommendations which the Chief Executive adopted without modification.

2.4       In order to deliver on the review recommendations and enable improvement more broadly, a change management programme was initiated. This is led by a Change Management Team (CMT) that makes recommendations to the Chief Executive. The CMT is led by an independent Chairman, Mr Garth Cowie, and comprises a number of senior staff and an independent technical advisor, Mr Jim Graham, a water industry expert now with Water New Zealand.

2.5       The CMT is supported by a programme/change manager, and work is carried out through a series of workstreams that involve a combination of internal staff and external expertise.

2.6       The aim of the work being undertaken is to deliver a water supply that is among the safest in the country and, more broadly, the most cost-effective three waters arrangements. “Operationalised” risk management is one of the key areas of focus for the CMT to ensure that risks are actively being managed at an operational level.

3.0       CURRENT SITUATION

3.1       Work on the change programme is well underway.  Good progress has been being made in addressing the recommendations of the review team across the scope of the activities in the change programme.

3.2       In terms of specific progress, significant engineering and scientific resource has been added to the Three Waters team in order to meet the requirements of the emerging operating environment and the standard of care recommended through the Inquiry. 

3.3       The first stage of the team engagement and culture development work stream has been completed, with a second stage to be undertaken now that a number of new staff have come on board.

3.4       Significant work has also been undertaken on process and documentation development, system development and risk management work.

3.5       The Chief Executive and members of the CMT will brief the Risk and Audit Subcommittee on aspects of the work programme and be available to answer questions. 

4.0       RECOMMENDATIONS AND REASONS

A)        That the report of the Chief Executive titled Water Services dated 1/05/2018 be received.

With the reasons for this decision being that the objective of the decision will contribute to meeting the current and future needs of communities for good quality local infrastructure in a way that is most cost-effective for households and business by:

i)          Providing for effective Governance oversight of the water services change programme.

 

 

Attachments:

There are no attachments for this report.

 

           


TRIM File No. CG-14-25-00038

 

 

 

HASTINGS DISTRICT COUNCIL

 

Risk and Audit Subcommittee MEETING

 

Tuesday, 1 May 2018

 

 

 

RECOMMENDATION TO EXCLUDE THE PUBLIC

 

SECTION 48, LOCAL GOVERNMENT OFFICIAL INFORMATION AND MEETINGS ACT 1987

 

THAT the public now be excluded from the following part of the meeting, namely:

 

15.       Enforcement and Inspection Internal Audit Report

 

The general subject of the matter to be considered while the public is excluded, the reason for passing this Resolution in relation to the matter and the specific grounds under Section 48 (1) of the Local Government Official Information and Meetings Act 1987 for the passing of this Resolution is as follows:

 

 

GENERAL SUBJECT OF EACH MATTER TO BE CONSIDERED

 

 

REASON FOR PASSING THIS RESOLUTION IN RELATION TO EACH MATTER, AND

PARTICULAR INTERESTS PROTECTED

 

 

GROUND(S) UNDER SECTION 48(1) FOR THE PASSING OF EACH RESOLUTION

 

 

 

 

15.       Enforcement and Inspection Internal Audit Report

Section 7 (2) (h)

The withholding of the information is necessary to enable the local authority to carry out, without prejudice or disadvantage, commercial activities.

The internal audit includes the review of commercial arrangements as part of the audit process.

Section 48(1)(a)(i)

Where the Local Authority is named or specified in the First Schedule to this Act under Section 6 or 7 (except Section 7(2)(f)(i)) of this Act.