Agenda of Risk and Assurance Committee Meeting

Te Rārangi Take
Order of Business

1.0	Apologies – Ngā Whakapāhatanga 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.
2.0	Conflict of Interest – He Ngākau Kōnatunatu 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 Manager: Democracy and Governance (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.
3.0	Confirmation of Minutes – Te Whakamana i Ngā Miniti Minutes of the Risk and Assurance Committee Meeting held Monday 11 April 2022. (Previously circulated)
4.0	GM Corporate Update Report	7
5.0	Review of Emerging Risks on Council's Strategic Goals	11
6.0	Risk Assurance Update	19
7.0	GM Assets Update Report	39
8.0	Health and Safety Report: COVID-19 Response Update	41
9.0	Annual Report 2022 Update	43
10.0	Treasury Activity and Funding Update	47
11.0	Minor Items – Ngā Take Iti
12.0	Urgent Items – Ngā Take Whakahihiri
13.0	Recommendation to Exclude the Public from Items 14, 15 and 16	53
14.0	Contractor Health & Safety Performance Report
15.0	Flaxmere Waterworld Roof Fire Incident - Summary of Findings
16.0	Regional Aquatic Facility at the Mitre 10 Sports Park - Potential impacts on Hastings District Council Aquatics Facilities

Monday, 18 July 2022

Te Hui o Te Kaunihera ā-Rohe o Heretaunga

Hastings District Council: Risk and Assurance Committee Meeting

Te Rārangi Take
Report to Risk and Assurance Committee

Nā:

From:

Bruce Allan, Group Manager: Corporate

Te Take:

Subject:

GM Corporate Update Report

1.0 Purpose and summary - Te Kaupapa Me Te Whakarāpopototanga

1.1 Please note that COVID has had an impact on staff preparing this agenda and as such some of the reports are a little lighter on detail than expected. This detail will be covered through verbal updates by staff at the meeting.

Internal Audit Contract

1.2 The Internal Audit contract with Crowe is at the end of its contracted terms following three years with two one-year rights of renewals which have been utilised. Napier City Council have lead the procurement process on behalf of the five Hawke’s Bay councils. Officers may be able to provide the Committee with the outcome of that procurement process at the meeting should it be sufficiently completed.

Cyber Security

1.3 Council continues to implement both hard and soft controls to improve its security posture.

Recent Milestones

· Cybersecurity training completed by 81% of staff and 80% of Councillors. GMs and Mayor following up with anyone who has not completed it.

· New backup and recovery infrastructure implemented providing a plethora of recovery options.

· New next generation firewalls implemented replacing five-year-old firewalls.

· Cybersecurity Incident Management System implemented. This includes:

o A quick guide & full security incident management guide

o Cybersecurity incident management policy

o Standard operating procedures for nine different cybersecurity incident types / check lists

o Incident management plan

o Communication Strategy & Contacts list

· Project “Sandpit” scheduled for August 2022 to test Council’s incident management plan and restoration of enterprise system (Technology 1 Finance)

· Received ALGIM 2021 Cybersecurity award.

Centre of Internet Security (CIS) controls - Officers continue to work through the 281 CIS controls.

Insurance

1.4 AON have been engaged by the five Hawke’s Bay councils to assess the potential Material Damage (MD) loss due to the impact of seismic events on property assets owned by member councils of the Group. This work will provide a high-level assessment of potential MD losses to the HB Councils’ property assets due to earthquake damage. The Group’s property portfolio predominantly includes buildings (e.g., admin and civic buildings, community facilities etc.) and above-ground 3 Waters infrastructure assets (e.g., pumping stations, reservoirs etc.). The analysis will focus on worst-case scenarios that could cause wide-spread damage across the Hawke’s Bay region.

1.5 It is expected that this loss modelling will inform Council’s decision making in terms of setting loss limits rather than the current approach of having all assets insured.

1.6 Officers are also reviewing the current asset schedule, identifying assets that would not be replaced if they were to be damaged or destroyed. Assets in this category and identified to date include:

1.7 Public Liability (PL) & Professional Indemnity (PI) - London has applied a 23.8% increase due to a deterioration in claims for the sector (those with claims do have a higher increase), increasing the premiums to $143,883. PL & PI cover is provided through Marsh.

2.0 Recommendations - Ngā Tūtohunga

That the Risk and Assurance Committee receive the report titled GM Corporate Update Report dated 18 July 2022.

Attachments:

There are no attachments for this report.

Monday, 18 July 2022

Te Hui o Te Kaunihera ā-Rohe o Heretaunga

Hastings District Council: Risk and Assurance Committee Meeting

Te Rārangi Take
Report to Risk and Assurance Committee

Nā:

From:

Regan Smith, Risk and Corporate Services Manager

Steffi Bird, Risk Assurance Advisor

Te Take:

Subject:

Review of Emerging Risks on Council's Strategic Goals

1.0 Purpose and summary - Te Kaupapa Me Te Whakarāpopototanga

1.1 The purpose of this report is to provide further context to the emerging risks reported at the Risk and Assurance Committee meeting on 14 February 2022. This information is provided to enable the Committee to fulfil its role of supporting Council to effectively manage risk.

1.2 Based on this information the Committee may wish to advise Council on additional steps that can be taken to navigate the volatility in the current operating environment in order to successfully deliver strategic outcomes.

2.0 Emerging Risk Profile

2.1 The following four emerging risks were previously identified as relevant to Council’s strategic objectives:

· Inflation.

· Supply chain disruption.

· Talent attraction and retention.

· Energy costs.

2.2 To assess the effect that these emerging risks may have on Council’s Long Term Plan goals, interviews were held with the relevant project owners. These discussions were focused on two time horizons: A short term view covering current management actions to respond to the emerging issues; and a medium term view that provides a context for future strategic decision making.

2.3 By assessing the effect of these emerging risks on Council’s strategy, it may be possible to assess if the variation would be within Council’s risk appetite, and whether Council should consider changes to the current projects to achieve strategic goals.

2.4 The attached table (Attachment 1) lists a summary of the possible short and medium term effects of the emerging risks on the current Long Term Plan focus areas. The key points from this summary are:

Short term issues:

· Increased management monitoring of key performance indicators to enable plans to be adjusted as needed.

· Investment in training & development of staff and provision of flexible working arrangements to support talent retention and attraction.

· Early contractor engagement, programme sequencing and product substitution to address construction project impacts.

Medium term issues:

· Undertaking analysis to determine the sensitivity of existing policies to unexpected future conditions (i.e. much lower than expected growth).

· Considering there is a general trend toward higher cost for delivery of projects, it will be important to critically review and prioritise projects to ensure key outcomes are delivered while maintaining a sustainable project and financial workload. This may also include reviewing service levels, including deciding on the relative balance between core maintenance vs general amenity.

· Due to the demand in the construction sector and constraints in supply chains, consideration should be given to adapting procurement practices to enable more innovation in the approach to contracting. In addition, reviewing delegations to ensure the organisation has sufficient agility to adjust work programmes to respond to immediate market conditions would be desirable.

· Developing a strategy that leverages the capability of Foodeast to address potentially significant changes in land and water use, as well as the need to up-skill the workforce to match the greater level of automation in food production that is likely in the next few years.

3.0 Climate Adaptation Risk

3.1 The following update is provided on the basis that Failure of Climate Adaptation is currently the top risk on Council’s strategic risk register.

3.2 The Government has recently released two key policy documents that set the direction for the response to climate change. Those documents are the National Adaptation Plan and the Emissions Reduction Plan.

3.3 National Adaptation Plan

3.4 The Government’s first National Adaptation Plan (NAP) acknowledges that there are locked in impacts of climate, regardless of any mitigating actions, and proposes actions to help New Zealand adapt to these irreversible impacts. The NAP prioritises actions for the next six years with the following vision, purpose and goals:

3.5 Vision: Our people, places and systems are resilient and able to adapt to the effects of unavoidable climate change in a fair, low-cost and ordered manner.

3.6 Purpose: To enable New Zealanders to prepare for and adapt to the impacts of climate change.

3.7 Goals:

3.7.1 Reduce vulnerability to the impacts of climate change.

3.7.2 Enhance adaptive capacity and consider climate change in decisions at all levels.

3.7.3 Strengthen resilience to climate change.

3.8 HDC staff consider the following risks to be a priority in regards to the draft NAP: water quantity and quality (Strategic Risk #3), natural disaster resilience (particularly land use planning) (Strategic Risk #1), ability to fund/financial sustainability (Strategic Risk #9), drought, erosion and sea level rise (HDC has significant assets in low-lying areas), extreme rainfall events, fuel prices and other externalities, and the resources (human and financial) required to adapt to Government policies.

3.9 The deadline for submissions on the NAP closed on 3^rd June. After reviewing the situation Hastings District Council did not make an independent submission, but was supportive of the Hawke’s Bay Regional Council views.

3.10 Emissions Reduction Plan

3.11 In addition to the NAP, the Government released New Zealand’s first National Emissions Reduction Plan (ERP) during May, which sets out how New Zealand will meet the Government’s first emissions budget.

3.12 Key actions from the Emissions Reduction Plan which have an impact on Local Government include:

· Transparency and management of climate risks.

· Low-emissions and resilient housing, and urban development.

· Financing for infrastructure to support low-emission urban environments.

· Development of a circular economy and bio-economy strategy.

· Improvements and initiatives to increase the use of cycling (including e-bikes), walking, electric vehicles and zero- or no-emission freight options.

· Improvements in the Building and Construction sector to accelerate low-emissions buildings.

· Improvements to both household and commercial waste management.

3.13 The actions within the ERP will require Council to effect change in three distinct arenas:

3.13.1 Operating Model: The way Council undertakes its activities will need to transition to a low‑emissions profile (e.g. building energy efficiency and low/zero emission transport). A carbon assessment of Council activities is underway to develop a transition plan.

3.13.2 Core Services Delivery: Many of the initiatives in the ERP will involve Council giving effect to Government policy through statutory processes to drive a change in community behaviour (e.g. land use planning and transportation system changes). To be successful, Council will need to make the goals of the NAP and actions from the ERP key deliverables of core Council services such as; Environmental Planning, Resource Consenting, Building Consenting, Waste Management, Transportation.

3.13.3 Community Leadership: In order to achieve an orderly and equitable transition Council will need to play a proactive leadership role to adapt to the changes affecting our district and region. In this capacity, partnership with Maori/Iwi, local and central Government agencies and community groups will be important, as will be general community education.

3.14 To ensure HDC can respond effectively to the actions within the ERP, an internal working group is being established. The intention is to form a group of key representatives from the teams that are impacted by the actions within the Plan.

4.0 Recommendations - Ngā Tūtohunga

That the Risk and Assurance Committee receive the report titled Review of Emerging Risks on Council's Strategic Goals dated 18 July 2022.

Attachments:

1 ⇩

Impact of Emerging Risks on Council Objectives June 2022

PMD-9-3-22-50

Monday, 18 July 2022

Te Hui o Te Kaunihera ā-Rohe o Heretaunga

Hastings District Council: Risk and Assurance Committee Meeting

Te Rārangi Take
Report to Risk and Assurance Committee

Nā:

From:

Steffi Bird, Risk Assurance Advisor

Elmien Steyn, Emergency Readiness & Business Continuity Advisor

Te Take:

Subject:

Risk Assurance Update

1.0 Executive Summary – Te Kaupapa Me Te Whakarāpopototanga

1.1 This report provides the Committee with an update on key risk assurance updates since the last meeting, including:

· Approved changes to the Tier 2 Enterprise risks

· Approved Assurance Review Plan for 2022-2025

· Final audit reports for Records Management and Community Grants Management from Hastings District Council’s independent auditor, Crowe

· A summary of actions from recent event and exercise debriefs

1.2 Tier 2 Enterprise Risk Register Changes

· Through a planned review, there has been a change to one of the risks managed by the HDC Management Team.

· Previously called ‘Facility Failure’, risk #19 has been reshaped to ‘Community Service Failure’ through a series of work between the Risk Assurance Team and the Risk Owner, Group Manager: Community Wellbeing and Services.

· The risk profile now reflects the risk event (or tipping point) being a failure to deliver services to the community, and failure of the facility is one of the threats that could lead to this event.

· The changes have been approved by the Lead Team and the new risk summary is provided to the Committee for awareness (Attachment 1).

· This risk is one of the enterprise risks which aggregates into the Tier 1 Strategic Risk, ‘Significant Operational Service Failure’ owned by Council.

1.3 Assurance Review Plan 2022-25

· The Assurance Review Plan 2022-2025 (Attachment 2) has been developed by the Risk Assurance Advisor and approved by the Lead Team.

· Based on prior discussion, the review plan is focused on providing assurance over the Tier 2 Enterprise risks.

· The below reviews have been prioritised for completion. These will be undertaken by the Risk Assurance function and an executive report provided back to the Committee at completion:

o Environmental, Social & Governance Review

o Fraud & Corruption Incidents

o Man-made/natural disaster

1.4 Records Management & Community Grants Management Audit Report (undertaken by Crowe)

· Crowe, HDC’s externally appointed, internal auditor, have undertaken Records Management and Community Grants Management audits for HDC.

· The Community Grants Management audit was based upon good practice guidance from the Office of the Auditor General which resulted in three findings (one rated low, and two rated moderate) and three subsequent recommendations.

Recommendation	Rating
As per the OAG’s guide, the Council should ensure clear policies and procedures are in place for identifying the purpose and criteria of the grants that the Council will fund and the procedures that will be followed in ensuring the council’s policy aims are effectively met. Additionally, there should be clear policies and procedures in place to ensure that public information on the availability of funds and processes for applying are appropriately made available.	Moderate
As per the OAG’s guideline the council should perform regular reporting, monitoring and other checks to ensure compliance with the conditions of the grant and assess whether future grant is to be released. There should also be procedures in place enforcing penalties where conditions are not met. Additionally, any monitoring done for the purposes of publishing outcome information on the website should also be tracked in Smarty Grants forming part of the acquittal information.	Low
For transparency purposes, when grant funding is awarded, including the Community Events Grants, it should be ensured that the decision-making processes are documented and retained. Where required, it should also be ensured that decisions are made publicly available. The documentation should include (but not be limited to): • the full list of applicants • details of the grants awarded (including justification and amounts, if required) • the individuals making the decisions • any conflicts of interest identified and the steps taken to manage those conflicts.	Moderate

· The Records Management Standard issued by Archives New Zealand was used as the basis for the audit on HDC’s Records Management policies and procedures. The audit resulted in eight findings against the Standard’s 20 requirements (one process improvement, two rated low, and five rated medium), with seven recommendations.

Recommendation	Rating
It is recommended that the Council reviews the Records Management Policy and related strategies and plans to ensure it remains up to date. It should be ensured that review dates for policies are adhered to or that reviews are undertaken whenever significant system changes or upgrades are implemented to ensure the policies remain valid.	Low
Consideration could be given as to whether the Project HPRM Requirements document used by 3 Waters could be implemented wider across the major contracting departments to ensure all documents required in HPRM are captured.	Process Improvement
The steps already identified to be completed as part of the Draft Digital Preservation Strategy. Completion of these steps will allow for the requirements for documents of high risk, high value or both to be met.	Moderate
Departmental level operating procedures should be documented to ensure all staff are aware of the information management requirements and their responsibilities for information management. It should be ensured that these procedures provide sufficient detail to ensure all staff are aware of the type of information that should be retained, for how long and how it should be disposed. These details should include department specific requirements as well as council-wide requirements (for example emails giving advice or making decisions should be retained as opposed to general emails which may not need to be kept). The Executive Sponsor should ensure that appropriate procedures have been documented across all departments that manage records in systems other than HPRM.	Moderate
The Council should implement a process to regularly assess or audit its information and records management practices to demonstrate that its business rules, procedures and systems are operating routinely. This could be performed in a form of a self-assessment, described in 1.8. Each department should be accountable to ensure relevant policies and procedures are in place capturing the relevant records management requirement. The Executive Sponsor should be responsible for overseeing these assurance activities and ensuring they take place.	Moderate
We note that the Draft Digital Preservation Strategy includes the following goals: · Infrastructure, tools, standard policies and procedures for managing HDC's digital information will be in place. HDC will promote the use of open format files where practicable. · Action plans for managing and preserving digital information will be in place to assist HDC in complying with the Archives New Zealand Information and Records Management Standard 2016 and the Public Records Act 2005. · Systems, environments, tools and resources will be in place to ensure that digital information as an asset is created, captured, accessible, has integrity and is authentic throughout its lifecycle. It should be ensured that the strategy includes consideration of the data held on network drives and Microsoft Teams files.	Moderate

· Final reports have been discussed with the respective management of each area audited and management actions agreed. Completion of actions is underway and will be monitored to completion.

· An executive summary of each of the final audit reports has been provided for the Committee (Attachments 3 & 4).

1.5 Summary of Event & Exercise Debrief Actions

· An overview is provided to the Committee on the learnings identified from real time responses, as well as from the business continuity exercises held between August 2021 and March 2022, including:

o The COVID-19 Delta variant outbreak lock down of 17 August to 7 September 2021;

o The 22 to 24 March 2022 rain event;

o Ex-Tropical Cyclone Fili of 11 to 13 April 2022;

o COVID-19 Delta outbreak with the LT: Operation Falcon, 4 August 2021 (exercise);

o Active shooter incident at Toitoi: Operation Cedric, 18 November 2021 (exercise);

o Tsunami response for campgrounds (Evers-Swindell Reserve, Haumoana Domain & Clifton Road Reserve): Operation Lilo, 4 March 2022 (exercise);

o Tsunami response for the Clive Wastewater Treatment Plant: Operation Outfall, 10 March 2022 (exercise); and

o Tsunami response at the Clive War Memorial Pool: Operation Freestyle, 11 March 2022 (exercise).

· Below is an account of the key recommendations that were identified and a summary of the actions still open:

EVENTS
TOTAL	CLOSED	OPEN
35	22	13
EXERCISES
TOTAL	CLOSED	OPEN
30	9	21

2.0 Recommendations - Ngā Tūtohunga

That the Risk and Assurance Committee receive the report titled Risk Assurance Update dated 18 July 2022.

Attachments:

1 ⇩	Strategic Risk Summary - Community Service Failure	PMD-9-3-22-53
2 ⇩	HDC Assurance Review Plan 2022-2025	PMD-9-3-22-55
3 ⇩	Audit Report for HDC Community Grants Management (Crowe)	PMD-9-3-22-56
4 ⇩	Audit Report for HDC Records Management (Crowe)	PMD-9-3-22-57

Monday, 18 July 2022

Te Hui o Te Kaunihera ā-Rohe o Heretaunga

Hastings District Council: Risk and Assurance Committee Meeting

Te Rārangi Take
Report to Risk and Assurance Committee

Nā:

From:

Jennie Kuzman, Health and Safety Manager

Bronwyn Bayliss, Group Manager: People and Capability

Te Take:

Subject:

Health and Safety Report: COVID-19 Response Update

1.0 Executive Summary – Te Kaupapa Me Te Whakarāpopototanga

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

1.2 This report provides an update on Council’s COVID-19 Response.

2.0 Recommendations - Ngā Tūtohunga

That the Risk and Assurance Committee receive the report titled Health and Safety Report: COVID-19 Response Update dated 18 July 2022.

3.0 Background – Te Horopaki

3.1 The purpose of this report is to provide information to the Committee in regards to the management of Health and Safety risks within Council.

3.2 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.

4.0 Discussion – Te Matapakitanga

4.1 COVID-19 response update

4.2 As previously reported to the Committee at the February and April 2022 meetings, the established COVID-19 Response team has been supporting the organisation through its business continuity response and planning for any COVID-19. This approach continues to work well and is providing a joined up organisation-wide approach to managing the constantly changing environment.

4.3 Given the fast moving and constantly changing environment that we are operating in a verbal update will be provided to the Committee at the meeting, based on the most up-to-date information at that time.

Attachments:

There are no attachments for this report.

Monday, 18 July 2022

Te Hui o Te Kaunihera ā-Rohe o Heretaunga

Hastings District Council: Risk and Assurance Committee Meeting

Te Rārangi Take
Report to Risk and Assurance Committee

Nā:

From:

Jess Noiseux, Financial Improvement Analyst

Aaron Wilson, Financial Controller

Te Take:

Subject:

Annual Report 2022 Update

1.0 Purpose and summary - Te Kaupapa Me Te Whakarāpopototanga

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

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

2022 Annual Report

1.3 Staff have completed the annual year end timetable for the 2022 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. Normally the Local Government Act stipulates that the Annual Report must be adopted by Council by 31^st October each year. However the impact of Covid-19 resulted in the Annual Reporting and Audit Time Frames Extensions Legislation Act 2021 which pushes the adoption date out to 31 December 2022.

1.4 To meet publishing deadlines in time for the Christmas shut down period, this year the date set for Council approval is 8^th December. Other key dates for the audit process are:

· Draft financial statements available for Audit 23^rd September

· Full Annual report available for Audit 23^rd September

· Summary Annual Report available for Audit 23^rd September

· Final Audit begins – audit on-site 31^st October

1.5 As was advised in the GM Corporate’s update in April, Audit NZ have communicated that they will not be able to complete the HDC 2022 Annual Report in time for the outgoing Council to adopt the audited accounts before the election. The key dates outlined above are reflective of Officers commitment to provide the completed unaudited Annual Report for outgoing Councillors to endorse prior to the election. The incoming Council will then be required to formally adopt the audited 2022 Annual Report once they have been officially sworn in.

1.6 There are minor amendments to the Public Benefit Entity (PBE) reporting standard PBE IPSAS 2 Cash Flow Statement that Officers have assessed will result in added disclosures required in the 2021/22 Annual Report. PBE IPSAS 40 PBE Combinations also comes into effect, however Officers have assessed that this standard has no impact on the presentation of Council’s financial statements.

1.7 Officers have chosen to early adopt PBE IPSAS 41 Financial Instruments in line with our accounting policy statement in the Long Term Plan 2021-31. The early adoption of this accounting standard impacts on classification of financial assets and how impairment on these financial assets is calculated. Council do not have complex financial assets and the impact of this standard does not materially affect the 2021/22 Annual Report.

1.8 Last year Council received a qualified audit opinion over the activity groups’ statement due to issues in two separate performance measures:

· Incomplete information about the number of complaints Council received related to 3 waters complaints. This was an issue across a number of councils in both the 2021 and 2020 financial years, partly due to the ambiguity in some of the guidance from the Department of Internal Affairs (DIA) and how this was interpreted. In August 2020, Council implemented a number of changes to resolve the issues identified by Audit. However, Council is also reliant on Palmerston North City Council’s system and processes for recording complaints received after hours and limitations in this process resulted in another qualification in the 2021 Annual Report.

· Insufficient data to reliably measure real water loss from the Council’s networked water reticulation system. Council do not have sufficient water meters installed on residential connection to report a statistically reliable water loss percentage. Officers have been exploring using a different measurement methodology (minimum nightly flow) that is allowable under the DIA framework. If this method proves reliable and accurate, Council should be able to report a reliable water loss percentage in the 2022 Annual Report.

1.9 Every year there are revaluation of various classes of assets that are performed on a rotational basis on a set schedule. This year it is the three water assets (water supply, sewerage and wastewater) that will be revalued. These valuations are being completed and are as at 30^th June 2022.

2022 Audit Plan

1.10 In May Audit NZ provided their finalised Audit Plan for the year. The Audit Plan outlines audit logistics, specific areas of focus for Audit NZ and areas of potential risk for the Council. A copy of the finalised plan is attached as Attachment 1. The areas that Audit have identified in their Audit Plan as being areas of focus are:

· Reporting on mandatory performance measures;

· Revaluation of three waters;

· Fair value assessment of other asset classes (land and buildings, roading, and parks);

· Capital do-ability and carry forward of projects;

· Accounting for central government funding;

· Impact of three waters reform;

· Configuration and customisation costs for Software-as-a-service (SaaS);

· Covid-19 impact; and

· Adoption of PBE FRS 48 Service performance reporting.

Interim audit

1.11 Audit NZ were onsite during May and June and have completed their interim audit. Due to the timing of this, Officers have yet to receive an interim Management Report in time for inclusion in this report. Audit have yet to provide a memo for this meeting advising of key findings from their interim audit. A copy of this memo will be circulated once it is received. Any recommendations or updates will be included and reported on by Audit NZ during the final year-end audit process.

Covid-19 implications

1.12 We do not expect that year-end reporting will need to articulate the impact of Covid-19 in a significant way this year. Officers will work with Audit NZ to ensure disclosure (if any) is sufficient for reporting purposes.

2.0 Recommendations - Ngā Tūtohunga

That the Risk and Assurance Committee receive the report titled Annual Report 2022 Update dated 18 July 2022.

Attachments:

1 ⇨

Financial Management - Audit Plan for 2022 from Audit NZ

FIN-07-01-22-469

Under Separate Cover

Monday, 18 July 2022

Te Hui o Te Kaunihera ā-Rohe o Heretaunga

Hastings District Council: Risk and Assurance Committee Meeting

Te Rārangi Take
Report to Risk and Assurance Committee

Nā:

From:

Aaron Wilson, Financial Controller

Te Take:

Subject:

Treasury Activity and Funding Update

1.0 Executive Summary – Te Kaupapa Me Te Whakarāpopototanga

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

1.2 Since the last update in on the 11^th April, Council has had one forward start contract become “live” in replacing maturing debt of $23m. In addition Council has in June 2022 borrowed $32m additional funds to prefund 2022/23 capital expenditure and in July 2022 has entered into another forward start contract for $21m for debt maturing in April 2023.

1.3 The Council’s current total external debt is $237m as at 30th June 2022. Offsetting this is $32m of bank deposits, giving a net external debt position of $205m.

1.4 Council is currently compliant with its Treasury Management Policy.

The Reserve Bank of New Zealand (RBNZ) raised its Official Cash Rate (OCR) to 2.0% at its last review in May 2022.

2.0 Recommendations - Ngā Tūtohunga

A) That the Risk and Assurance Committee receive the report titled Treasury Activity and Funding Update dated 18 July 2022.

B) That the Committee endorse the recommended changes to the Treasury Policy as reviewed by council officers and outlined in the report in A) above.

3.0 Background – Te Horopaki

3.1 The Hastings District Council has a Treasury Policy which is a summarised version of the Treasury Management Policy and forms part of the 2021-2031 Long Term Plan. Under these policy documents, responsibility for monitoring treasury activity is delegated to the Risk and Assurance Committee.

3.2 Council is provided with independent treasury advice by Miles O’Connor of Bancorp Treasury Services and receives daily and monthly updates on market conditions.

3.3 Under the Treasury Policy, formal reporting to Council occurs quarterly and regular more in-depth treasury reporting is provided for the Risk and Assurance Committee.

4.0 Discussion – Te Matapakitanga

4.1 Council’s debt portfolio is managed within 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. 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.

4.2 Council’s current total external debt is $237.7m as at 30th June 2022 ($205.7m as at 31^st March 2022). Offsetting this are $32m of bank deposits ($16.6m as at 31st March 2022), giving a net external debt position of $205m. This is supported by the Treasury Position 30^th June 2022 Report (Attachment 1).

4.3 Council has bank deposits totalling $32m which is to fund a significant capital spend budget.

4.4 Standard and Poors Global (S&P) Update – S&P conduct an annual ratings review on Council’s Outlook based on a set of five metrics. These metrics are, Economy, Financial Management, and Budgetary performance, Liquidity, and Debt burden.

4.5 An in-depth financial analysis of S&P’s metrics has been completed by officers in order to better understand what was required in order to maintain Council’s rating from the prior year of AA stable. As a consequence liquidity was identified as an area that officers could affect by ensuring a higher level of prefunding both for capital spend and repayment of maturing debt.

4.6 In tandem with this analysis, officers forecasted cash flows needed in light of the large capital spend underway in Council. In consultation with Bancorp treasury advisors, Council borrowed $32m, with a mix of fixed and floating and over different maturities. This is itemised in the table below:

4.7 In light of Council’s current cash flows being able to meet its funding requirements, it is not expected that Council will engage in any further borrowing apart from just before year end ensuring Council maintains an ability to fund budgeted capital spend in the new financial year and meet Standard and Poors liquidity requirements.

4.8 The mix of floating and fixed debt borrowed was in order to achieve two outcomes, firstly in terms of the fixed debt, to ensure that Council remained compliant with Treasury Policy parameters in terms of cover, secondly, the floating portion was to enable Council to continue to suppress and lower the cost of funds wherever possible in light of policy and market considerations.

4.9 In addition to this, officers engaged in a forward start contract for $21m that will become “live” the day before the maturing debt for the same amount comes due in April 2023. Of this $21m, $10m was a fixed interest rate bond, when it comes into effect in April 2023 it will increase the percentage of fixed interest rate cover that Council has, pushing Council towards the mid-point range of policy.

4.10 It should also be noted on the Treasury position dashboard, Council’s cost of funds is now at 3.04%, which is a slight rise from the low of 2.76%.

4.11 As was requested at the previous Risk and Audit Committee meeting, officers have created a graph that forecasts the future level of debt cover that would be in place if the water reform was to take place and 50% of Council debt due to water was to be taken over by the new water entity.

Graph: Forecast

4.12 The light blue block shows the forecasted cover based on what will be happening over the next 5 -15 months. The purple line shows the amount of cover that would be still in place should Council’s debt and some of the hedging cover be transferred to the new water entity. The two black lines are the maximum and minimum debt cover parameters as required by the treasury policy. These can be seen to be shifting down dramatically as the debt falls.

4.13 Officers are comfortable with the level of cover currently in place in relation to the level of debt held. There are a number of reasons for being cautious around committing Council to additional swap cover at this time. However, having said this in order to maintain compliance with the treasury policy officers have continued to fix debt prudently.

4.14 In May 2022 the Reserve bank has again raised the official cash Rate (OCR) to 2%.

5.0 Next steps – Te Anga Whakamua

5.1 Council officers will continue to work with Bancorp Treasury Services to keep Council’s financing costs to a minimum, maintaining adequate liquidity, while maintaining compliance with Council’s Treasury Policy.

Attachments:

1 ⇩

Financial Management - Treasury - Investment reporting - Funding and Interest Rate Risk 30th June 2022

FIN-15-01-22-27

Summary of Considerations - He Whakarāpopoto Whakaarohanga

Fit with purpose of Local Government - E noho hāngai pū ai ki te Rangatōpū-ā-Rohe

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 wellbeing of communities in the present and for the future.

Link to the Council’s Community Outcomes – Ngā Hononga ki Ngā Putanga ā-Hapori

This proposal promotes the economic wellbeing of communities in the present and for the future.

Māori Impact Statement - Te Tauākī Kaupapa Māori

There are no known impacts for Tangata Whenua.:

Sustainability - Te Toitūtanga

This report promotes sustainable financing costs ensuring the economic wellbeing of communities in the present and for the future.

Financial considerations - Ngā Whakaarohanga Ahumoni

This report will ensure that financing costs are kept within Council’s existing budgets.

Significance and Engagement - Te Hiranga me te Tūhonotanga

This decision/report has been assessed under the Council's Significance and Engagement Policy as being of minor significance.

Consultation – internal and/or external - Whakawhiti Whakaaro-ā-roto / ā-waho

There has been no external engagement:

Risks

The purpose of this report and the Treasury Policies it refers to, assist officers to manage Council’s treasury risk.

REWARD – Te Utu

RISK – Te Tūraru

To assist officers to manage Council’s Treasury risk; Finances, Reputation.

Cashflows and finance costs; Finances, Service Delivery, Reputation.

Rural Community Board – Te Poari Tuawhenua-ā-Hapori

There are no implications for the Rural Community Board:

HASTINGS DISTRICT COUNCIL

Risk and Assurance Committee MEETING

Monday, 18 July 2022

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:

14 Contractor Health & Safety Performance Report

15 Flaxmere Waterworld Roof Fire Incident - Summary of Findings

16 Regional Aquatic Facility at the Mitre 10 Sports Park - Potential impacts on Hastings District Council Aquatics Facilities

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

14 Contractor Health & Safety Performance Report

Section 7 (2) (b) (ii)

The withholding of the information is necessary to protect information where the making available of the information would be likely to unreasonably prejudice the commercial position of the person who supplied or who is the subject of the information.

The report contains sensitive information relating to third parties.

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.

15 Flaxmere Waterworld Roof Fire Incident - Summary of Findings

Section 7 (2) (b) (ii)

This report contains sensistive Information relating to third parties.

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 Regional Aquatic Facility at the Mitre 10 Sports Park - Potential impacts on Hastings District Council Aquatics Facilities

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.

Protect Commercial activities.

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.

Te Rā Hui: Meeting date:	Monday, 18 July 2022
Te Wā: Time:	1.00pm
Te Wāhi: Venue:	Council Chamber Ground Floor Civic Administration Building Lyndon Road East Hastings
Te Hoapā: Contact:	Democracy and Governance Services P: 06 871 5000 \| E: democracy@hdc.govt.nz
Te Āpiha Matua: Responsible Officer:	Group Manager: Corporate - Bruce Allan

Mematanga: Membership:	Koromatua Chair: Jon Nichols – External Independent Appointee Nga Kai Kaunihera Councillors: Simon Nixon (Deputy Chair), Alwyn Corban, Tania Kerr, and Geraldine Travers Heretaunga Takoto Noa Māori Standing Committee appointee : Robin Hape External Independent Appointee: Jaun Park Mayor Sandra Hazlehurst
Tokamatua: Quorum:	4 members
Kaihokoe mo te Apiha Officer Responsible:	Group Manager: Corporate – Bruce Allan
Te Rōpū Manapori me te Kāwanatanga Democracy & Governance Services:	Christine Hilton (Extn 5633)

Item 5 Review of Emerging Risks on Council's Strategic Goals
Impact of Emerging Risks on Council Objectives June 2022	Attachment 1

Item 6 Risk Assurance Update
Strategic Risk Summary - Community Service Failure	Attachment 1

Item 6 Risk Assurance Update
HDC Assurance Review Plan 2022-2025	Attachment 2

Item 6 Risk Assurance Update
Audit Report for HDC Community Grants Management (Crowe)	Attachment 3

Item 6 Risk Assurance Update
Audit Report for HDC Records Management (Crowe)	Attachment 4

Item 10 Treasury Activity and Funding Update
Financial Management - Treasury - Investment reporting - Funding and Interest Rate Risk 30th June 2022	Attachment 1

Risk and Assurance Subcommittee – Terms of Reference