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, 2 July 2019

Time:

1.00pm

Venue:

Council Chamber

Ground Floor

Civic Administration Building

Lyndon Road East

Hastings

 

Subcommittee Members

Chair: Mr J Nichols

Ex Officio: Mayor Hazlehurst

Deputy Mayor Kerr (Deputy Chair)

Councillors Nixon and Travers

(Quorum=3)

Officer Responsible

Chief Financial Officer, Bruce Allan

Committee Secretary

Christine Hilton (Ext 5633)

 


Risk and Audit Subcommittee – Terms of Reference

A subcommittee of the Finance and Risk 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 (4 Members)

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 Risk Committee

The subcommittee reports to the Finance and Risk Committee.

 


 

HASTINGS DISTRICT COUNCIL

 

Risk and Audit Subcommittee MEETING

 

Tuesday, 2 July 2019

 

VENUE:

Council Chamber

Ground Floor

Civic Administration Building

Lyndon Road East

Hastings

TIME:

1.00pm

 

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 General Counsel or the Democratic Support Manager (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 6 May 2019.

(Previously circulated)

4.         Chairman's Strategic Risk and Audit Overview                                                  5

5.         Risk Assurance Review                                                                                            7

6.         HDC Draft Risk Appetite Statement                                                                     19

7.         Updated Bow Tie Risk Analysis for Civil Defence Emergency Strategic Risk                                                                                                                                       25

8.         Treasury Activity and Funding                                                                             31

9.         2018/19 Annual Report Update                                                                             35

10.       Internal Audit                                                                                                              37

11.       General Update Report and Status of Actions                                                  53

12.       Additional Business Items

13.       Extraordinary Business Items 

14.       Recommendation to Exclude the Public from Items 15, 16 and 17             57

15.       Building Control Liability Risk Update

16.       Update on Delegated Financial Authorities review and implementation

17.       2019/20 Insurance Renewal Programme

 

     


File Ref: 19/611

 

 

REPORT TO:               Risk and Audit Subcommittee

MEETING DATE:        Tuesday 2 July 2019

FROM:                           Chief Financial Officer

Bruce Allan

SUBJECT:                    Chairman's Strategic Risk and Audit Overview        

 

 

1.0       SUMMARY

1.1      The purpose of this report is to provide the Chair of the Risk and Audit Subcommittee with the chance to discuss with Subcommittee members the strategic opportunities that may be present.

1.2      The Council is required to give effect to the purpose of local government as set out in section 10 of the Local Government Act 2002. That purpose is to enable democratic local decision-making and action by (and on behalf of) communities, and to promote the social, economic, environmental, and cultural well-being of communities in the present and for the future.

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

2.0       CURRENT SITUATION

2.1      The Terms of Reference for the Risk & Audit Subcommittee are as follows and are included on the inside front cover of each Subcommittee agenda:

            Risk and Audit Subcommittee – Terms of Reference

A subcommittee of the Finance and Risk 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 (4 Members)

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 Risk Committee.

The subcommittee reports to the Finance and Risk Committee.

2.2      Over the course of this triennium the scope of activities that the Subcommittee has provided oversight to has grown. The Chair would like to take this opportunity to cast an eye ahead to see what other activities could benefit from this oversight.

3.0       RECOMMENDATIONS AND REASONS

A)   That the report of the Chief Financial Officer titled Chairman's Strategic Risk and Audit Overview dated 2/07/2019 be received.

 

 

Attachments:

There are no attachments for this report.

 

 


File Ref: 19/412

 

 

REPORT TO:               Risk and Audit Subcommittee

MEETING DATE:        Tuesday 2 July 2019

FROM:                           Risk and Corporate Services Manager

Regan Smith

Risk Assurance Advisor

Dean Ferguson

SUBJECT:                    Risk Assurance Review        

 

 

1.0       SUMMARY

1.1       The purpose of this report is to inform the Sub-committee about the outcome of the first planned Risk Assurance Review undertaken on the Aquatics area.

1.2       This issue arises from the planned Risk Assurance Review programme to support the HDC Enterprise Risk Management framework.

1.3       The Council is required to give effect to the purpose of local government as set out in section 10 of the Local Government Act 2002. That purpose is to enable democratic local decision-making and action by (and on behalf of) communities, and to promote the social, economic, environmental, and cultural well-being of communities in the present and for the future.

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

2.0       BACKGROUND

2.1       Risk Assurance Reviews are part of Hastings District Council’s Enterprise Risk Management programme.

2.2       The purpose of Risk Assurance Reviews is to assess the integrity of critical controls identified for Council’s strategic risks in order to provide confidence in the level of risk mitigation achieved.

2.3       Risk Assurance Reviews also provide the opportunity to strengthen existing controls and identify additional risk controls for consideration.

2.4       Through the review programme Council seeks to ensure mandatory obligations are met, provide assurance regarding management of significant risk and the efficiency and effectiveness of core processes.

3.0       CURRENT SITUATION

­Review Programme

3.1       The current review is the first in the series planned for 2019. The intended programme of Risk Reviews is attached (Attachment 1).

The schedule for the Risk Review programme was adjusted due to the risk assurance role being diverted to other Council matters which took precedence. As a result, the review cycle has been moved back by 3 months. Risk Assurance had scheduled in Transportation for the next review but due to operational and end of financial year obligations, the review will not commence until August 2019. In the interim, a review of a number of critical controls has been added to the review plan and will be carried out to provide assurance to Council. The purpose of the critical control review will be to assess the effectiveness of the controls across Council, not just focussing on one particular business unit. The results 

Aquatics Review

3.2       The review of the Flaxmere Aquatic Centre formed part of the Council Risk Assurance three year review plan and is supported by the Risk Assurance Charter (PMD-9-1-18-12).

3.3       The objective of the Aquatics Review was to assess the adequacy of the policies, procedures and controls supporting the management and performance of the Swim Heretaunga Pool – Flaxmere Aquatic Centre, which is owned and operated by Council. In order to do that, a number of Strategic Council Risks and critical controls were identified and tested against the operation.

3.4       During the course of the review, the scope was broadened to factor in the other facilities that came under the control of the business unit including Frimley Pool, Clive War Memorial Pool and Village Pool – Havelock North. The key areas of focus during the review were:

·    Corruption and Fraud: financial policies, procedures and controls around general cash handling practices, banking reconciliation, financial operating systems, cash in transit and organisational culture.

·    Procurement and contract management: adequacy of documented contract management policies and procedures, contract register, governance oversight and competency.

·    Health & Safety: incident and hazard reporting, compliance monitoring and education and training of staff.

·    Facility Failure: resilience and planning including business continuity management, Asset Management Plans and incident reporting.

·    Loss of Key Staff: adequacy of key roles and responsibilities, manageable workloads and management of avoiding single points of knowledge.

·    Business Interruption: Business Continuity Planning.

3.5       The review resulted in 29 findings against 6 Strategic Risks. The findings have been weighted using a severity scale of very high, high, medium or low, to indicate the priority with which we consider these findings should be treated.

3.6       As a result of the review, a number of recommendations have started to be implemented including:

·    Cash Handling Framework (SR13: Corruption & Fraud): The review identified that improvement was required around Council’s Policies and Procedures when it came to handling cash. There were varying standards being applied across the sites, some of which were not as effective as they could be. As a result of the review, a programme of works has been initiated to carry out a gap analysis across all sites that handle cash or have a financial transaction function. A team has been established to review the results and put in place a set of standards for all sites to follow. The standards will be underpinned by a Council wide policy and framework and will be in place by the opening of the pools for the summer season. The framework will factor in the findings from the review including the development of a Policy, Training (both process and system),

·    Contract Management (SR12 Procurement Failure): The review concentrated on 3 critical controls under the Procurement Failure Strategic Risk. It was identified during the review that there was limited contract management and oversight when it came to the actual managing of contracts. There was no central role providing oversight and support ensuring contracts were managed effectively. The Council Contracts Register was also reviewed and it was established that it was not as effective as it could be. There were contracts under the facilities that had either expired, had no contract manager or had critical information missing. As a result of the review, a working group has been established to address some of the critical gaps in contract management and ensure that it is part of the overarching Procurement and Contract Management Framework. Contract Management training is also being sourced and developed and will be delivered to Council staff (who hold contracts) by the end of 2019.

·    Loss of Key Staff (SR15 Loss of Key Staff): The review focussed on the support for key staff and avoiding single points of knowledge, manageable workloads, defining roles and responsibilities and separation of duties. The focus of the review was to consider not just the facility but also the managerial support and structure. It was observed that the Aquatics Centre had a good level of experience and knowledge across a number of key staff but the other pools did not have the same level of knowledge at the site. Recommendations were made to consider a competency programme that allows skilled staff move to a different pool as and when required to ensure there was an adequate level of knowledge and skills to keep the facility operating.

3.7       With the draft report only being signed, Officers are still working through the recommendations and how they can be implemented. It is expected that an updated report on the review along with an update on the action plan be prepared and provided to the Risk & Audit Subcommittee in December 2019. 

 

4.0       RECOMMENDATIONS AND REASONS

A)        That the report of the Risk and Corporate Services Manager titled Risk Assurance Review dated 2/07/2019 be received.

 

Attachments:

 

1

Risk Review Plan

PMD-9-1-19-16

 

 

 

 


Risk Review Plan

Attachment 1

 

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File Ref: 19/614

 

 

REPORT TO:               Risk and Audit Subcommittee

MEETING DATE:        Tuesday 2 July 2019

FROM:                           Risk and Corporate Services Manager

Regan Smith

SUBJECT:                    HDC Draft Risk Appetite Statement        

 

 

1.0       SUMMARY

1.1       The purpose of this report is to seek guidance from the Subcommittee on the draft risk appetite statement proposed for Council to adopt.

1.2       This proposal arises from development of the Council’s Enterprise Risk Management programme.

1.3       The Council is required to give effect to the purpose of local government as set out in section 10 of the Local Government Act 2002. That purpose is to enable democratic local decision-making and action by (and on behalf of) communities, and to promote the social, economic, environmental, and cultural well-being of communities in the present and for the future.

1.4       This report concludes by recommending the report be received.

2.0       BACKGROUND

2.1       It is considered best practice to include a statement of risk appetite as part of a risk management framework. The ISO31000 risk management standard includes defining risk criteria, the equivalent of a risk appetite, before undertaking risk identification and analysis.

2.2       Risk appetite is referred to as the amount and type of risk that an organisation is willing to seek or accept in pursuit of objectives. This can be considered the value the organisation is willing to put at risk in order to deliver strategic goals.

2.3       A good risk appetite statement should also include the acceptable tolerances for variation in delivery of the organisation’s objectives. These tolerances should be measurable so that they can be effectively monitored.

2.4       Once defined the organisation’s risk appetite and the associated tolerances provide a driver for strategic decision making and act as a regulator or constraint on operational activities (e.g. a Delegated Financial Authority).

2.5       Because the organisation’s risk appetite is a tool to moderate the organisation’s total risk exposure, it is vital that the statement is defined by the organisation’s governing body. Consequently Council has embarked on a journey to understand the current risk appetite of the Elected Members and Executive Management.

2.6       In order to define a risk appetite for Council, surveys have been undertaken to establish the governance and management views of stakeholder expectations and their relative priorities. The results of these surveys are now available for review.

3.0       CURRENT SITUATION

3.1       A draft Risk Appetite Statement for Hastings District Council based on the survey responses is attached for consideration.

3.2       Overall the survey responses show a consistent pattern between Elected Members and the Executive Management. This alignment is positive as it indicates a similar view on issues between groups, which would be expected due to the nature of the working relationship. This also indicates that the survey results provided a valid profile that can be used to infer decision making preference.

3.3       Interpretation of Survey Results

3.4       Based on the spread of views evident in the survey responses, and the fact that the majority opinion was marginally, but not strongly, on the conservative side of neutral, a cautious risk appetite has been assumed. This implies that Council’s preference is for delivering the expected outcome, and the tolerance for accepting options that put objectives at risk is limited to situations where the risks are and heavily out-weighted by the benefits.

3.5       The exceptions to this are outcomes that affect safety or accuracy and reliability of core services, where the tolerance for variation is low. Conversely results indicate that there may be a more flexible approach to reputation risk depending on the circumstances.

3.6       A further observation associated with the majority view being close to neutral is that there could be some flexibility to accepting more risk depending on the circumstances or objective. However, it is not clear from the results the circumstances in which that might occur. Therefore, it is proposed that Council explicitly set a risk appetite for key strategic goals or projects to provide specific guidance on the delivery approach to be taken.

3.7       Areas for Discussion

3.8       The survey results also identified four key areas of difference between Elected Members, Executive Management and Officers that warrant further discussion. Those areas are:

·        How much focus should be put on protecting the community when seeking to achieve progress.

·        How much focus to apply to compliance when trying to deliver responsive service.

·        How much effort to put in to partnership and communication/consultation when that might affect the speed of service or perceived bureaucracy.

·        Should speed of service or cost effectiveness be the key service driver.

4.0       OUTCOME

4.1       The attached Draft HDC Risk Appetite Statement is considered to be reflective of the surveys undertaken to understand governance risk attitude.

4.2       Discussion and refinement of this draft is recommended in order to reach a final version that the Council is prepared to adopt as a guiding document for strategic planning and operational activity.

4.3       In this respect feedback and endorsement from the Risk and Audit Subcommittee is sought on the draft statement.

5.0       RECOMMENDATIONS AND REASONS

A)        That the report of the Risk and Corporate Services Manager titled HDC Draft Risk Appetite Statement dated 2/07/2019 be received.

B)        That the draft Risk Appetite Statement be discussed at a Council Workshop before adoption by Council.

 

Attachments:

 

1

DRAFT Risk Appetite Statement V2

PMD-03-81-19-189

 

 

 

 


DRAFT Risk Appetite Statement V2

Attachment 1

 

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File Ref: 19/534

 

 

REPORT TO:               Risk and Audit Subcommittee

MEETING DATE:        Tuesday 2 July 2019

FROM:                           Risk and Corporate Services Manager

Regan Smith

SUBJECT:                    Updated Bow Tie Risk Analysis for Civil Defence Emergency Strategic Risk        

 

 

1.0       SUMMARY

1.1       The purpose of this report is to update the Subcommittee on a revised Bow Tie risk analysis undertaken on Strategic Risk Number 2, Civil Defence Emergency.

1.2       This issue arises from ongoing review of the Council’s strategic risk profile.

1.3       The Council is required to give effect to the purpose of local government as set out in section 10 of the Local Government Act 2002. That purpose is to enable democratic local decision-making and action by (and on behalf of) communities, and to promote the social, economic, environmental, and cultural well-being of communities in the present and for the future.

1.4       This report concludes by recommending that the revised risk analysis is adopted and reported to Council.

2.0       BACKGROUND

2.1       In late 2017 a series of Bow Tie risk analysis were undertaken on all of the strategic risks identified for Council. This included an assessment of the Civil Defence Emergency risk.

2.2       This initial assessment focused on the response activities for which the Council is responsible during a Civil Defence event. Therefore, the assessment focused those things Council can control to avoid losing control of an emergency response (Attachment 1).

2.3       It should be noted that this risk relates to the impact on Council objectives as a result of a Civil Defence event, and does not include those areas for which the Group Civil Defence Emergency Management team are responsible.

3.0       CURRENT SITUATION

3.1       As a result of comparing the Council risk register with other similar agencies it was identified that a wider view of the Civil Defence Emergency risk could be beneficial.

3.2       Therefore, another Bow Tie risk assessment of the Civil Defence Emergency risk has been completed using the Hawkes Bay Emergency Management Group’s list of top 10 regional hazards as the key threats.

3.3       The one-page summary (Attachment 2) and full Bow Tie (Attachment3) are included for reference. The main outcomes of the revised risk analysis are:

3.3.1   The central event of concern is described as “People or Property at risk”, which broadens the focus to include impact on the objective of community safety rather than just Council operations.

3.3.2   The Bow Tie illustrates how the regular consenting and asset planning activities work to minimise the threat to the community.

3.3.3   The relevance of Civil Defence preparedness and Council business continuity planning is clear.

3.3.4   The previous central event relating to “Loss of control of a Civil Defence response” can be seen as a key control to mitigate the possible injury or loss of life when the need arises to respond to a Civil Defence event.

4.0       SIGNIFICANCE AND ENGAGEMENT

4.1       The risk assessment presented represents activities already undertaken by Council therefore the matter is not significant in terms of Council’s Significance and Engagement Policy and consultation is not required.

5.0       ASSESSMENT OF OPTIONS (INCLUDING FINANCIAL IMPLICATIONS)

5.1       The revised Civil Defence Emergency risk analysis provides a more comprehensive view of all the activities Council undertakes to reduce the impact on the community caused by known hazards.

5.2       As a result, the revised analysis is considered more useful to understand the critical controls that should be reviewed for effectiveness, and therefore, will be used in place of the original analysis (note; the original loss of control of response risk analysis will be retained as an operational risk to inform Emergency Management planning).

5.3       There are no cost implications of the current risk analysis.

6.0       RECOMMENDATIONS AND REASONS

A)        That the report of the Risk and Corporate Services Manager titled Updated Bow Tie Risk Analysis for Civil Defence Emergency Strategic Risk dated 2/07/2019 be received.

B)        That the revised risk analysis for Civil Defence Emergency is reported to Council.

With the reasons for this decision being that the objective of the decision will contribute to enabling democratic local decision-making and action by (and on behalf of) communities, and to promote the social, economic, environmental, and cultural well-being of communities in the present and for the future by:

i)          Providing comprehensive understanding of strategic risk.

 

Attachments:

 

1

Civicl Defence Emergency Response 1 Page Summary

PMD-03-81-19-184

2

Revised Strategic Risk 1 Page Summary

PMD-03-81-19-185

3

Revised Strategic Risk Bow Tie

PMD-03-81-19-186


Civicl Defence Emergency Response 1 Page Summary

Attachment 1

 

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File Ref: 19/568

 

1.   

REPORT TO:               Risk and Audit Subcommittee

MEETING DATE:        Tuesday 2 July 2019

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 set out in section 10 of the Local Government Act 2002. That purpose is to enable democratic local decision-making and action by (and on behalf of) communities, and to promote the social, economic, environmental, and cultural well-being of communities in the present and for the future.

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 2018-28 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       Attachment 1 sets out Council’s overall compliance with Treasury Management Policy as at 30 June 2019.

3.3       The current total core net external debt is $106.2m as at 30 June 2019. This is supported by the Treasury Position 30 June 2019 Report in Attachment 1.

3.4       On 17 June 2019 Council repaid, on maturity, $2m of Local Government Funding Agency (LGFA) debt. This and Council’s ongoing funding needs was financed through a new loan with LGFA for $4m. This was borrowed fixed at 1.88% with a maturity date of 15 April 2023

3.5       Interest rates have fallen further in New Zealand following the Reserve Bank’s lowering of the Official Cash Rate on the 8th May 2019. Below is their official statement:

“The Official Cash Rate (OCR) has been reduced to 1.5 percent.

The Monetary Policy Committee decided a lower OCR is necessary to support the outlook for employment and inflation consistent with its policy remit.

Global economic growth has slowed since mid-2018, easing demand for New Zealand’s goods and services. This lower global growth has prompted foreign central banks to ease their monetary policy stances, supporting growth prospects.

Domestic growth slowed from the second half of 2018. Reduced population growth through lower net immigration, and continuing house price softness in some areas, has tempered the growth in household spending. Ongoing low business sentiment, tighter profit margins, and competition for resources has restrained investment.

Employment is near its maximum sustainable level. However, the outlook for employment growth is more subdued and capacity pressure is expected to ease slightly in 2019. Consequently, inflationary pressure is projected to rise only slowly.

Given this employment and inflation outlook, a lower OCR now is most consistent with achieving our objectives and provides a more balanced outlook for interest rates.”

3.6       This was the first OCR rate change since November 2016. Financial markets are now mixed on whether the Reserve Bank will deliver future interest rate cuts. ANZ is currently forecasting 2 further cuts of 25 basis points before June 2020, while Westpac is forecasting none. Westpac argues that the lack of a capital gains tax, and cheaper mortgages will reactivate the housing market. The cheaper mortgages will also support consumer spending, which along with the Wellbeing Budget putting more money into the pockets of those in need and this will provide enough stimulation to the economy so that further OCR rate cuts will not be required.

 

4.0       Recommendations

That the report of the Manager Strategic Finance titled Treasury Activity and Funding dated 2/07/2019 be received.

 

 

Attachments:

 

1

Treasury Position 30 June 2109

FIN-15-03-19-192

 

 

 


Treasury Position 30 June 2109

Attachment 1

 

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File Ref: 19/593

 

 

REPORT TO:               Risk and Audit Subcommittee

MEETING DATE:        Tuesday 2 July 2019

FROM:                           Chief Financial Officer

Bruce Allan

Financial Controller

Aaron Wilson

SUBJECT:                    2018/19 Annual Report Update        

 

 

1.0       SUMMARY

1.1       The purpose of this report is to update the Subcommittee about progress being made on year-end issues.

1.2       The Council is required to give effect to the purpose of local government as set out in section 10 of the Local Government Act 2002. That purpose is to enable democratic local decision-making and action by (and on behalf of) communities, and to promote the social, economic, environmental, and cultural well-being of communities in the present and for the future.

1.3       This report concludes by recommending that the report be received

2.0       CURRENT SITUATION

2019 Annual Report

2.1       Staff have completed the annual year end timetable for the 2019 year end. The timetable is inclusive of all the processes and requirements of the production of the Annual Report and requires a high degree of coordination across Council.  The Local Government Act stipulates that the Annual Report must be adopted by Council by 31st October each year, this year the date set down for Council approval is 10th October. Other key dates for the audit process are:

·    Draft financial statements available for audit                 21 August

·    Full Annual report available for Audit                              21 August

·    Summary Annual Report available for Audit                  21 August

·    Final Audit begins – audit on-site                                     26 August

·    Draft final financial statements available                        2 September

2.2       Improvements have been made to reporting processes and systems over the past few years and Officers are confident of providing Audit with completed draft financial statements for audit on August 21st prior to them arriving on-site. The Finance team has its full complement of accounting resources this year which should make the year end process more manageable than last year.

2.3       Every year there are revaluations of various classes of assets that are performed on a rotating basis on a set schedule.  This year it is the Roading and Parks assets that will be revalued. Both these valuations have been completed in June and are as at 31st May. This is to allow for the tighter Annual Report scheduling due to the Council elections taking place in October of this year.

2.4       There are no significant changes to Public Benefit Entity (PBE) reporting standards that are likely to materially affect the 2018/19 Annual Report.

2.5       Hastings District Council entered into the Omarunui Landfill Gas Generation partnership with Pioneer Energy in the 2014/2015 financial year. Its purpose was to generate electricity from gas produced by the Omarunui landfill site.

2.6       Council has 40% of the equity in the Limited Partnership with Pioneer having the remaining 60%.  Due to ongoing operational issues, generation has been well below expected budgeted levels with the limited partnership sustaining losses over recent years.

2.7       In consultation with Pioneer Energy management and their auditors it has been agreed that Council’s investment of $744k should be impaired to more accurately reflect the value of that investment in the partnership.  Discussions are still being had on the quantum of that impairment.

2.8       Should the future performance of the underlying asset improve, the increased value of the asset will be recognised accordingly.

2.9       At this stage of the Annual Report process, Officers are not aware of any additional issues that may give rise to technical discussions with Audit and judgements that will be required by Officers.

2.10    With the next Risk and Audit Subcommittee meeting scheduled for September 2nd, Officers will have the preliminary draft financial statements available for the subcommittee to review. Obviously at this time anything presented will be unaudited and subject to change.

3.0       SIGNIFICANCE AND ENGAGEMENT

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

 

4.0       RECOMMENDATIONS AND REASONS

A)        That the report of the Chief Financial Officer titled 2018/19 Annual Report Update dated 2/07/2019 be received.

 

Attachments:

There are no attachments for this report.

 

 


File Ref: 19/610

 

 

REPORT TO:               Risk and Audit Subcommittee

MEETING DATE:        Tuesday 2 July 2019

FROM:                           Chief Financial Officer

Bruce Allan

Financial Controller

Aaron Wilson

SUBJECT:                    Internal Audit        

 

 

1.0       SUMMARY

1.1       The purpose of this report is to update the Subcommittee about Internal Audit activity during 2018/19 and provide the draft 2019/20 Internal Audit Plan.

1.2       The Council is required to give effect to the purpose of local government as set out in section 10 of the Local Government Act 2002. That purpose is to enable democratic local decision-making and action by (and on behalf of) communities, and to promote the social, economic, environmental, and cultural well-being of communities in the present and for the future.

1.3       This report concludes by recommending that the Internal Audit reports be received.

2.0       BACKGROUND

2.1       Since July 2017 the Risk and Audit Subcommittee has received internal audit reports on the following:

2017/18

Fraud risk gap analysis

Accounts Payable and Payroll data analytics

Enforcement and Inspection Activities

Review of previous reviews and recommendations

2018/19

Accounts Payable and Payroll data analytics

Contract Management

Staff training and upskilling

Review of previous reviews and recommendations

2.2       The last phase of the 2018/19 Internal Audit programme was for Crowe Horwath to do a follow up to previous reports to check progress on recommendations made. The previous reports will include recommendations made by PwC prior to Crowe Horwath being appointed. The draft review report has been received but management have not yet had the opportunity to respond, but have included an extract from the executive summary in paragraph 3.2.

 

 

3.0       CURRENT SITUATION

3.1       Internal Audits

3.2    Internal Audit work undertaken recently has been to review whether management actions relating to previous audit recommendations have been effectively implemented in line with agreed implementation dates or that senior management has accepted the risk of not taking action. The draft audit report details the recommendations made and the actions that have been taken to remedy those recommendations. The report states:

 

“A significant amount of work is currently underway with regard to contract management and wider procurement planning. We note that with changes in procurement management staff in recent months, a number of activities relating to procurement and contract management have been delayed and alternative strategies considered. We note that, based on the current plans and strategies for contract management, the full implementation of the plans that are currently in progress would meet the requirements of our recommendations.

Based on the level of implementation, we have reassessed the risk of the outstanding recommendations to provide a current risk level. In some cases, full implementation is required to reduce the level of risk below medium.

A summary of the risk ratings we have applied to our recommendations is detailed below:”

 

Indicator

Risk rating

Original risk ratings

Current risk ratings

 

High

2

0

 

Medium

14

8

 

Low

0

0

 

3.3       Officers are pleased with the progress that has been made in addressing the recommendations made through the respective audits over the past 24 months.

3.4       2019/20 Internal Audit Plan

3.5       Since reactivating the Internal Audit function Council has now completed three years of the internal audits planned through the engagement of PwC and more recently Crowe Horwath.

3.6       The priority areas identified for 2019/20 include:

·    Payroll compliance

·    Revenue processes at remote locations

·    Building and Resource consent income processes

4.0       SIGNIFICANCE AND ENGAGEMENT

4.1       The matter raised in this report are not considered significant in line with Councils Significance and Engagement Policy.

 

5.0       RECOMMENDATIONS AND REASONS

A)        That the report of the Chief Financial Officer titled Internal Audit dated 2/07/2019 be received.

B)        That the 2019/20 Draft Internal Audit Plan from Crowe Horwath be received.

 

Attachments:

 

1

Financial Management - Audits - Internal audit - HDC Proposed Internal Audit Plan 2019-20

CG-14-25-00096

 

 

 

 


Financial Management - Audits - Internal audit - HDC Proposed Internal Audit Plan 2019-20

Attachment 1

 

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Financial Management - Audits - Internal audit - HDC Proposed Internal Audit Plan 2019-20

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File Ref: 19/567

 

 

REPORT TO:               Risk and Audit Subcommittee

MEETING DATE:        Tuesday 2 July 2019

FROM:                           Manager Strategic Finance

Brent  Chamberlain

SUBJECT:                    General Update Report and Status of Actions        

 

 

1.0       CURRENT SITUATION SUMMARY

1.1       The purpose of this report is to update the Risk & Audit 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 set out in section 10 of the Local Government Act 2002. That purpose is to enable democratic local decision-making and action by (and on behalf of) communities, and to promote the social, economic, environmental, and cultural well-being of communities in the present and for the future.

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 Risk & Audit Subcommittee members requested that officer’s report back at each meeting with progress that has been made on actions that have arisen from the Risk & Audit Subcommittee meetings. Attached as Attachment 1 is the Risk & Audit Subcommittee Action Schedule as at 31 May 2019.

3.0       CURRENT SITUATION

3.1       Treasury Advisory Services

Officers have conducted an invited RFP for its Treasury Advisory Services in May/June 2019. Both our incumbent provider, PricewaterhouseCoopers, and Bancorp Treasury were invited to tender. These firms were chosen as they are the two main participants in the New Zealand market.

3.2       Bancorp were evaluated as the preferred supplier of Treasury Advisory Services and have been advised accordingly.

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 Manager Strategic Finance titled General Update Report and Status of Actions dated 2/07/2019 be received.

Attachments:

1

Status of Actions 31 May 2019

FIN-09-01-19-171

 


Status of Actions 31 May 2019

Attachment 1

 

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TRIM File No. CG-14-25-00093

 

 

 

HASTINGS DISTRICT COUNCIL

 

Risk and Audit Subcommittee MEETING

 

Tuesday, 2 July 2019

 

 

 

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.       Building Control Liability Risk Update

16.       Update on Delegated Financial Authorities review and implementation

17.       2019/20 Insurance Renewal Programme

 

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.       Building Control Liability Risk Update

Section 7 (2) (g)

The withholding of the information is necessary to maintain legal professional privilege.

Legal advice received is legally privileged.

 

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.

16.       Update on Delegated Financial Authorities review and implementation

Section 7 (2) (a)

The withholding of the information is necessary to protect the privacy of natural persons, including that of a deceased person.

To protect named persons.

 

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.

17.       2019/20 Insurance Renewal Programme

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.

Commercial Sensitivity.

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.