Agenda of Risk and Audit Subcommittee Meeting

HASTINGS DISTRICT COUNCIL

Risk and Audit Subcommittee MEETING

Monday, 6 May 2019

VENUE:

Landmarks Room

Ground Floor

Civic Administration Building

Lyndon Road East

Hastings

TIME:

10.00am

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 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 18 February 2019.

(Previously circulated)

4. Treasury Activity and Funding 5

5. Health and Safety Risk Management Update 15

6. Cape Kidnappers Interim Operations Manual 19

7. General Update Report and Status of Actions 23

8. MBIE Review of Tauranga City Council - Bella Vista Development 59

9. Internal Audit Report 61

10. Additional Business Items

11. Extraordinary Business Items

File Ref: 19/367

REPORT TO: Risk and Audit Subcommittee

MEETING DATE: Monday 6 May 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 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 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 The following table sets out Council’s overall compliance with Treasury Management Policy as at 30 April 2019:

Measure	Compliance	Actual	Min	Max
Liquidity (1)	ü	115%	110%	170%
Fixed Interest Debt	ü	68%	55%	95%
Funding Maturity profile: 0 – 3 years 3 – 5 years 5 years +	ü ü ü	27% 31% 42%	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	6% 93% 3% 5%	0% 0% 0% 0%	20% 150% 15% 20%

(1) Liquidity Ratio = (Cash Reserves + Lines of Credit + Drawn Debt) / Drawn Debt

Council is currently compliant with Treasury Management Policy.

3.3 The current total core net external debt is $104.2m as at 30 April 2019. This is supported by the Debt Status Report as at 30 April 2019 (Attachment 1). This report shows the debt at $104.2m.

3.4 On the 15^th March 2019 Council repaid, on maturity, $20m of Local Government Funding Agency (LGFA) debt. This was funded by two new LGFA loans taken out in August 2018, and the proceeds invested on term deposit until needed in March 2019. Over this period the term deposit earned Council $362,175, and cost Council $235,665 in loan holding costs, giving a net positive return to Council of $126,510.

3.5 Council has a further LGFA loan obligation of $2m due in June 2019, and a further $10m due in April 2020. Officers are currently investigating the merits of prefunding the second of these obligations in a similar manner, but this will be dependent on interest rates and how much debt Council wishes to hold at balance date. At the time of writing Council could borrow for a four year term at 2.06% pa fixed, and invest for nine months at 3.15% pa earning net interest income of $75,000 over this period of prefunding.

3.6 Note it is not normal practice for Council to borrow money simply to invest it in financial instruments, however where there is an known need for the funds at a future point in time, Council Officers will consider borrowing early (prefunding) if it is financially advantageous to do so.

3.7 Under Council’s treasury policy Council must maintain a liquidity ratio of greater than 110% (see 3.2 for an explanation of how this is calculated). This liquidity is essentially maintained through an undrawn $10m line of credit with Westpac Bank plus any surplus funds held in the Councils “Call Account”. As Council’s debt has now surpassed $100m, the $10m line of credit no longer, by itself, provided the 10% liquidity needed. As a result Officers have arranged a second $5m line of credit with Westpac Bank, giving Council a total of $15m of liquidity at any point in time. The cost of having this second line of credit available to the Council is 0.27% pa, or $13,500 pa. The cost using this line of credit is Westpac’s 90 day bank bill rate plus a margin of 1.35% pa.

3.8 Standard and Poors is currently consulting on proposed changes to its credit rating methodology. The main impact to Hastings District Council if adopted has to do with how they view liquidity. Essentially they would like to see that for the forthcoming 12 month period, our cash ending position is positive after taking into account the following formula:

Opening Bank Balance

Plus Forecast Cash Operating Surplus/(Deficit)

Minus Forecast Capital Requirements

Minus Loans due for repayment in the next 12 months

Plus Lines of Credit Available and/or Loan Prefunding Contractually Committed

3.9 We are currently seeking clarification on whether the Capital Requirements will be based on Councils full budgeted program, or whether they will give this number a 20% haircut. In the past they have treated Council Capital programs as aspirational rather than deliverable.

3.10 At present (even with our increased $15m line of credit), due to our loan maturities and large capital program, the combined expected cash outflows exceed our available funding. That is we expect to have to increase our external debt to fund this level of activity. To meet this new liquidity test Council will have to prefund its loan maturities and possibly a proportion of its expected capital program, or have even more lines of credit.

3.11 Officers are keeping a watch on the outcome and implications of this consultation.

3.12 The graph below shows what has been happening in the wholesale interest rate market over the past 12 months. Councils floating rate loans are linked to the 90 day bill rate plus a bankers margin, so this is indicative of Council floating rate cost of funds. The 3,5, and 10 year swaps rates are indicative of what Council can buy interest rate swaps (a mechanism for buying fixed interest rate cover) at, plus a bankers margin

3.13 You will note that the longer term swap rates have been steadily declining over the past 12 months. This is a reflection that the financial markets believe that interest rates will stay lower for longer.

3.14 On 27 March 2019, the Reserve Bank of New Zealand released the following statement:

“The Official Cash Rate (OCR) remains at 1.75 percent. Given the weaker global economic outlook and reduced momentum in domestic spending, the more likely direction of our next OCR move is down.

The global economic outlook has continued to weaken, in particular amongst some of our key trading partners including Australia, Europe, and China. This weaker outlook has prompted central banks to ease their expected monetary policy stances, placing upward pressure on the New Zealand dollar.

Domestic growth slowed in 2018, with softness in the housing market and weak business investment contributing.”

3.15 This was a significant change in stance by the Reserve Bank, and caused a further fall in wholesale interest rates. In fact the fall has caused both the 3 year and 5 year swap rates to fall below the 90 day bank bill rate (essentially the floating rate). This inverting of the yield curve is very unusual and has some business commenters pointing out that this is typically a precursor to a recession, arguing that history says that recessions typically follow 12 to 18 months behind such a phenomenon occurring.

3.16 On 17 April 2019 the quarterly Consumer Price Index (CPI) figure was released for the latest quarter. CPI only rose by 0.1% for the quarter (below expectations), with the annual CPI easing to 1.5%. This is below the mid-point of the Reserve Bank’s annual inflation bank of 1-3%. This has financial commentators musing that with the publishing of such a low CPI number, the likelihood of a cut to the official Cash Rate in May 2019 has increased.

3.17 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 (based on the LTP adjusted to reflect the current level of activity). The projected external debt requirement for the next 12 months is forecast to increase, which coupled with the maturity of some existing LGFA debt, gives the Council the opportunity to take advantage of new longer term debt at historically low levels of interest.

3.18 Officers and PWC advisors are currently comfortable with the level of interest rate cover in place. We will continue to pick off dips in the wholesale interest rate markets, while benefiting from the low floating rates available at the moment.

3.19 The graph below shows the budgeted capital spend program for the 2018-19 year and what has been delivered to date:

3.20 The chart below shows the key drivers of the expected movement in borrowings over the next three months. This is based on projects that have started already, or are highly likely to commence before 30 June 2019 and indicates a forecast debt position of $112m (the 2018-2028 Long Term Plan forecast a debt position of $125m as at 30 June 2019).

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

3.22 The Council debt maturity has the following profile:

3.23 Any new debt will be considered along with Council’s working capital requirements and liquidity ratios.

4.0 FUNDING FACILITIES

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

4.2 Council’s liquidity ratio of 115% at 31 March 2019 is within policy (refer to 3.6 for further commentary).

5.0 Recommendations

That the report of the Manager Strategic Finance titled Treasury Activity and Funding dated 6/05/2019 be received.

Attachments:

1	Public Debt Status 31 March 2019	FIN-15-03-19-190
2	Debt Facilities as at 30 April 2019	FIN-15-03-19-189

File Ref: 19/373

REPORT TO: Risk and Audit Subcommittee

MEETING DATE: Monday 6 May 2019

FROM: Health and Safety Manager

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.

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.

2.2 This report serves as an update report to the Risk and Audit Subcommittee on health and safety risk management.

3.0 CURRENT SITUATION

3.1 Hazardous Substances

3.2 The regulation of hazardous substances that affect human health and safety in the workplace now sits under the Health and Safety at Work Act 2015 (previously regulated under the Hazardous Substances and New Organisms Act 1996).

3.3 Location compliance certificates and stationary tank certificates are required under the Health and Safety at Work (Hazardous Substances) Regulations 2017, when an organisation stores or uses explosive, flammable, oxidising, toxic or corrosive substances and the quantity exceeds the thresholds specified in the Regulations.

3.4 Location compliance and stationary tank certification are issued annually by a licenced compliance certifier on behalf of WorkSafe NZ.

3.5 Council currently has six locations and two stationary tanks requiring certification, of which all have current certification (see attachment one).

3.6 In addition to certification requirements, Council is required to ensure that all hazardous substances are appropriately stored, as well as maintaining up- to-date inventory registers of all hazardous substances and ensuring that staff have appropriate equipment and training to competently use/handle these substances safely.

3.7 Council is also required to regularly undertake workplace exposure testing and to monitor the health of workers who regularly use/handle hazardous substances to ensure that health exposure risks are appropriately managed.

3.8 Regular internal and external inspections and audits are undertaken to ensure compliance with the Regulations.

3.9 Council is also responsible for the regulation of non-work related hazardous substances that can affect human health and safety under the Hazardous Substances and New Organisms Act 1996 (HSNO). This regulatory work is currently undertaken by Planning & Regulatory staff, guided by advice from Health & Safety staff.

3.10 Organisation Security Project

3.11 Under the Health and Safety at Work Act 2015, Council is responsible for providing safe secure facilities and environments for all staff to work in, and the public to frequent (such as its libraries, pools, sports centres, and community centres).

3.12 In 2018, Council engaged WSP Opus to undertake a review of security measures across all 23 Council facilities. The scope of this review included the review of all Council facilities electronic security services and staff requirements for: Specification of systems, age of systems, quantity / alternatives, cost and efficiencies, staff processes and procedures, perceptions and behaviour, site design / CPTED (Crime Prevention Through Environmental Design), lighting (Security), upgrade recommendations for both physical and electronic systems

3.13 The review was completed in late 2018, providing Council with a report addressing each facility and outlining recommendations in order to manage the security requirements for each facility.

3.14 There are many recommendations through this report, some are simple and require minimal effort, and others require significant planning and expertise. Therefore an experienced Project Manager has been engaged for 12 months in order to implement the recommendations across the organisation.

3.15 Regular progress updates on this project shall be provided to the Risk and Audit subcommittee over the next 12 months.

3.16 Implementation of ISO/NZS 45001:2018 Health and Safety Standard

3.17 As previously advised to the Risk and Audit Subcommittee, Council’s external audit certification (ACC Workplace Safety Management Practices (WSMP) accreditation) lapsed in February 2019. This ACC scheme is now defunct, and therefore Council should undertake an alternative external audit verification of its health and safety system.

3.18 To achieve this external verification, in December 2018 the then Acting Chief Executive authorised implementation of the international health and safety standard ISO/NZS 45001:2018 which has been adopted by New Zealand (replacing all previous NZ standards).

3.19 Officers are currently working through a direct engagement process with Telarc to undertake a gap analysis of what is required to meet the standard and an initial audit assessment. It is anticipated that the gap analysis will be completed within the next 3-6 months. The delay in undertaking the gap analysis is due to a large number of other organisations undertaking similar gap analyses and a skills shortage and availability of experienced accredited auditors.

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 Manager titled “Health and Safety Risk Management Update” dated 6/05/2019 be received.

Attachments:

Hazard Identification Assessment & Management - Hazardous Substances Management - HDC Location Compliance Certificates and Stationary Container Certificates April 2019 (For May 2019 Risk & Audit Report)

HR-03-6-6-19-37

File Ref: 19/378

REPORT TO: Risk and Audit Subcommittee

MEETING DATE: Monday 6 May 2019

FROM: Group Manager: Asset Management

Craig Thew

Group Manager: Human Resources

Bronwyn Bayliss

SUBJECT: Cape Kidnappers Interim Operations Manual

1.0 SUMMARY

1.1 The purpose of this report is to inform and enable endorsement and further input from the Subcommittee on the interim operations measures to manage the unquantified risks along the beach from Clifton to Cape Kidnappers.

1.2 This request arises from Council’s decision on 5 March to remove the road closure of the beach from Clifton to Cape Kidnappers subject to the implementation of reasonable control measures.

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 Committee endorses the interim operations manual.

2.0 BACKGROUND

2.1 On the 23 January 2019 a significant landslide occurred on the beach between Clifton and Cape Kidnappers. Immediately following this event the Department of Conservation (DOC) closed their section of the walk to the gannet colony and Hastings DC temporarily closed the beach.

2.2 Following investigations a paper was taken to Council on the 5 March where Council adopted to re-open the beach and commence the Quantitative Risk Analysis (QRA), working with support from DOC on the QRA.

2.3 The recommendations adopted also required officers to consider and implement reasonable control measures prior to opening, along with a requirement to continue to investigate known risks and minimise, where practical, and regularly report back.

2.4 On the 28 March officers provided a summary to the full council meeting of the interim control measures proposed and council adopted the recommendations, with the 29 April date set for the implementation of the measures and removal of the temporary road closure.

3.0 CURRENT SITUATION

3.1 The interim operations manual (attached) has been produced and will be in operation when this committee meets.

3.2 The manual has been produced with input from Matt Shore of Stantec and council officers. Officers have also meet with Worksafe to talk through the management approach.

3.3 Importantly the interim operations manual includes a number of both proactive and reactive trigger conditions that instigate further action, including temporary road closures.

3.4 The attached manual also describes the steps being taken on an ongoing operational basis, such as signage and ongoing inspections, and the approach to verification.

3.5 The interim measures were activated on and before the 29 April, and the interims operations manual will be in effect at the time of the meeting.

3.6 The interim operations manual triggers were invoked by a further large landslide over the Easter holiday period. Whilst detailed survey information is not yet available to accurately state the size the photos provided clearly show a landslide well over the lower 100 cubic metres of material. At the time of writing this report this trigger event means that the beach access remains closed until the assessment of the new landslide, and an updated risk assessment has been completed.

3.7 DOC’s position is unchanged with their section of the walk remaining closed until the QRA is completed and assessed. Officers are following up with DOC to confirm when their new signage will be erected.

4.0 SIGNIFICANCE AND ENGAGEMENT

4.1 This item does not trigger significance or further engagement requirements. The manual is an operational item that officers are providing to the risk and audit committee for endorsement and further input if required.

5.0 RECOMMENDATIONS AND REASONS

A) That the report of the Group Manager: Asset Management titled “Cape Kidnappers Interim Operations Manual” dated 6/05/2019 be received.

B) That the Risk and Audit subcommittee endorse the interim operations manual for the management of the beach road from Clifton to Cape Kidnappers.

Attachments:

Clifton Beach Operations Manual REV D HDC Version FINAL

PRJ19-002-0205

Under Separate Cover

File Ref: 19/409

REPORT TO: Risk and Audit Subcommittee

MEETING DATE: Monday 6 May 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 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 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 30 April 2019.

3.0 CURRENT SITUATION

3.1 Tech one Upgrade:

There are three main tranches of work underway in this area. The first is the upgrading of the Finance module, in order to allow for the implementation of the Procure to Pay (P2P) module. As the finance module was being upgraded it was decided to bring forward the property and rating module upgrade in order to maintain compatibility across the Council’s ERP system.

Both these upgrades are well underway with a complete testing programme being undertaken across all areas of Council to ensure there are no adverse effects from the upgrades once they go “live”.

3.2 Electronic Purchase Order Project (Procure to Pay (P2P))

The third tranche of this work is the P2P implementation. Configuration for this has now started in “test” with workstreams for this project underway. It is expected that a pilot programme in “live” will be underway in October, with a full rollout from November this year.

3.3 Delegated Financial Authority (DFA):

A DFA policy has been written and presented to LMT for feedback, review and signoff. The current model and levels of authorisation have been adjusted in order to better reflect the way Council does business along with enabling a model of authorisation that can allow the new P2P system to control the levels of spend. Attached as Attachments 2 and 3 is the DFA policy and the supporting schedule of delegations.

The changes to the DFA’s reflect a role based delegation approach with increased financial delegations to allow staff to efficiently and effectively do their jobs.

The Policy has been drafted with input from a number of areas of Council and has taken good practice from other organisations in its development. It is important to acknowledge that the need to update delegations was to ensure Council had delegations that could be supported by the financial systems that provide the necessary approval controls.

3.4 Audit New Zealand 2019 Audit Plan

Attached as Attachment 4 is the Audit New Zealand 2019 Audit Plan. The Plan highlights the audit risks and issues and has five key focus areas identified. A standard item on all Audit Plans is fraud risk and this is covered in some detail.

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 6/05/2019 be received.

B) That the Subcommittee note that the Delegated Financial Policy and the associated Delegated Financial Authorities have been updated and adopted by the Chief Executive and the Lead Team.

Attachments:

1	Risk and Audit Status of Actions 30 April 2019	FIN-09-01-19-170
2	Delegated Financial Authority Policy	FIN-09-4-19-178
3	DFA Schedule 2019	CG-14-25-00081
4	Audit NZ 2019 Audit Plan	FIN-07-01-19-426

File Ref: 19/438

REPORT TO: Risk and Audit Subcommittee

MEETING DATE: Monday 6 May 2019

FROM: Financial Controller

Aaron Wilson

Chief Financial Officer

Bruce Allan

SUBJECT: Internal Audit Report

1.0 SUMMARY

1.1 The purpose of this report is to update the Subcommittee about progress being made with the Internal Audit plan.

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 Internal Audit update be received.

2.0 CURRENT SITUATION

Data Analytics

2.1 This is the second year that we have had Crowe Horwath undertake the data analytic assessment across the Accounts Payable and Payroll masterfiles and the year’s transactional data, this time from 1 July 2017 to 30 June 2018. The objective of the data analytics was to perform a data analysis review that involved an analysis of master file data and transaction data for payroll and vendor (accounts payable) payments.

2.2 The analysis provided 45 recommendations or comments on the outcomes of the analysis on the tests for the payroll and vendor masterfile and transactional data. Officers have reviewed the recommendations and have not found any suspicious transactions. Officers will also review the outcomes of the results from the tests undertaken and consider if there are opportunities for making improvements to current practices.

Contract Management Review

2.3 The Crowe Horwath Contract Management Review undertaken in September/October 2018 separated their findings into four sections:

· Policies and Procedures;

· Roles and Responsibilities;

· Contract Risk Management; and

· Contract Management Performance

2.4 A key part of their recommendations they have identified that there is a lack of council wide contract management policies, procedures, templates and manuals. While these exist in places, they have been developed for particular areas of Council or by specific staff to meet their own needs.

2.5 This review has highlighted for Council that while work has been done to improve the robustness of council’s contract management, it has often been done at a group or team level and not with the wider organisations needs in consideration. There is significant opportunity to improve these practices.

2.6 There are 14 recommendations made with the majority of those recommendations assessed as having moderate risk to the organisation.

The two findings rated “High” were the following:

1) Contracts not assessed for risk – while there are some risk assessment practices, these are not consistently applied.

2) Lack of reporting requirements – this is particularly relevant for reporting at a governance level and review of governance reporting is being considered.

2.7 The work being undertaken through the development Procurement and Contract Management Framework is continuing to address the findings of this review.

Procurement and Contract Management

2.8 In February the Subcommittee was given an update on a review of the procurement activities across Council. That review had highlighted opportunities to make improvements to current documentation procedures and systems to meet current best practice. The review also highlighted that there were pockets of procurement improvement projects underway that would benefit from some centralised oversight to ensure that the various initiatives remain aligned. To address both issues, a programme of work was established to create a Council Procurement and Contract Management Framework. The initial work streams for this programme of work include:

· Procurement policy, strategy(s) & plans

· Templates Procedures & Guides

· Training - Procurement & Contract Management

· Communications (Staff & Supplier)

2.9 Despite the departure of Council’s Procurement Manager in March, progress has been made on a number of activities including:

· An introductory procurement and contract management training exercise for staff has been developed – at the time of writing approximately 40 staff had been identified to undertake this in-house training during May.

· The Ministry of Business, Innovation and Employment (MBIE) are rolling out contract management training this year with the first session held in Napier in February. Further sessions will be available in the coming months to the 5 Hawkes Bay Councils along with online resources.

· Significant progress has been made in developing tools and templates that are required to support the business. Typically the approach being taken is to modify the MBIE tools and templates where applicable as these are recognised as being best practice in New Zealand. These tools and templates will be much more accessible to staff.

· Work continues across the organisation to bring the contracts register up to date.

· Work has progressed updating the Council website to aid in communicating more effectively with suppliers, giving them more access to information on how to do business with Council.

· The next significant phase of work will be a refresh of the Procurement Policy and Manual, expected to be commenced by June.

· A wider programme of work is currently being scoped by the HB LASS Programme Manager looking at the creation of a Hawkes Bay Council Centre of Excellence for Procurement. While this will take some coordinated effort to create, there is a strong willingness across the 5 Councils to progress this and it is expected that such an approach will go along way to addressing the shortcomings that were identified in the Crowe Horwath Contract Management review and the shortcomings identified in our own Procurement review.

Future Audits

2.10 Crowe Horwath will be on-site in early May to do their annual follow-up audit to assess actions taken to address findings from previous audits. They will also be undertaking some training with finance staff to enable internal staff to be more proactive in providing internal audit support, particularly in relation to reviewing practices at our remote sites of activities.

2.11 Officers will bring back to the Subcommittee in June the proposed audit plan for 2019/20.

Audit Action Sheet

2.11.1 Attached as Attachment 1 is an updated Audit Action sheet providing the Subcommittee with a view of the status of recommendations made from previous internal and external audits. Good progress has been made on addressing recommendations. Note that at this stage the most recent contract management audit has yet to be added to this schedule as there is some work required to understand how those recommendations can be delivered, the resources required and the time needed to do so.

3.0 RECOMMENDATIONS AND REASONS

A) That the report of the Financial Controller titled “Internal Audit Report” dated 6/05/2019 be received.

Attachments:

There are no attachments for this report.

Hastings District Council

Lyndon Road East, Hastings