Risk and Assurance Committee – Terms of Reference

Fields of Activity

The Risk and Assurance Committee 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.

• Reasonable assurance as to the integrity and reliability of the reporting on financial performance of Council, including quality of audit services.

• Monitoring of Council’s requirements under the Treasury Policy.

• Monitoring of Council’s Strategic Risk Framework.

• Monitoring of Council’s legal compliance.

• Monitoring of Council’s health and safety compliance.

• Monitoring significant projects, programmes of work and procurement focussing on the appropriate management of risk.

• Oversight of preparation of the Long Term Plan, Annual Report, and other external financial reports required by statute.

In light of the impacts Cyclone Gabrielle has had on the communities in the district, the Committee will pay particular attention to activities affected within its Fields of Activity, including but not limited to and always in support of the work of Council and the Standing Committees:

• Oversight of cyclone-related insurance claims and issues.

• Monitor funding implications associated with recovery costs, including oversight of the process for recoveries from government.

• Monitor valuation process for cyclone-damaged assets, including impairments particularly relating to roading.

• Support post-cyclone expenditure planning by ensuring good process is applied.

Membership – 8 (including 5 Councillors)

· 5 Councillors - with one being the Chair of Performance and Monitoring, or its equivalent

· Independent Chair appointed by Council.

· Deputy Chair appointed by Council.

· 2 external independent members appointed by Council.

· 1 Heretaunga Takoto Noa Māori Standing Committee Member appointed by Council

Quorum – 4 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 Council.

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 12 February 2024. (Previously circulated)
4.0	Procurement Update	7
5.0	Treasury Activity and Funding Update	11
6.0	Annual Report - 2023 Wrap-up and 2024 Update	27
7.0	Long Term Plan Risk Based Indicators	31
8.0	Cyclone Gabrielle Recovery Risk Update Attachment 3 to this report is confidential in accordance with the Local Government Official Information and Meetings Act 1987 Section 7 (2) (j) - The withholding of the information is necessary to prevent the disclosure or use of official information for improper gain or improper advantage.	35
9.0	Strategic Risk Register & Horizon Scan	41
10.0	Executive Overview and Status of Actions	49
11.0	Health, Safety & Wellbeing Update Report	53
12.0	Minor Items – Ngā Take Iti
13.0	Urgent Items – Ngā Take Whakahihiri
14.0	Recommendation to Exclude the Public from Item 15	57
15.0	Health & Safety Contracts - Contractors' Health & Safety Performance Report

Monday, 20 May 2024

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:

Angela Hirst, Procurement and Corporate Services Manager

Te Take:

Subject:

Procurement Update

1.0 Purpose and summary - Te Kaupapa Me Te Whakarāpopototanga

1.1 The purpose of this report is to update the committee on progress being made with procurement at Council including the Smart Home of Procurement (SHOP) system implementation across the organisation.

1.2 Procurement Is identified as one of Council’s enterprise risks (and aggregates into the strategic risk, significant operational failure), therefore the council’s risk management principles are embedded into all aspects of the procurement lifecycle.

1.3 The report concludes by recommending that Council acknowledges receipt of this Procurement update.

2.0 Council’s procurement profile and strategic context

2.1 Council currently spends in excess of $200 million annually on a variety of goods, works and services to enable the delivery of infrastructure, facilities and services for our community.

2.2 In undertaking procurement, Council must operate within a policy framework which includes wider Council strategic objectives and outcomes, Government legislative and regulatory frameworks and for transport investment, the Waka Kotahi New Zealand Transport Agency (NZTA) procurement rules and guidance.

2.3 The procurement function within Council has three objectives;

· optimising public value,

· supporting the delivery of Councils objectives through efficient and effective procurement; and

· to build procurement capability and capacity.

3.0 Background

3.1 Prior to Cyclone Gabrielle, the procurement work programme was largely driven by the recommendations within the Crowe Horwath (Crowe) contract management review in October 2018 and follow up in June 2019.

3.2 Since this review a number of improvements have been made including new and updated templates, training modules, buyers guide, regular review and updating of procurement strategy and policy, the development of a progressive procurement tool kit and suppliers guide and the procurement of SHOP.

3.3 The SHOP implementation began at the start of 2023. Essentially SHOP is a procurement and approval workflow that delivers user’s the required templates and documentation relevant to the procurement activity they are carrying out. It has built in approval gate ways at key points along the procurement life cycle. SHOP knows when a user is undertaking procurement that sits outside our “normal” procurement guidelines and highlights to the user when an exemption is required to be approved by a GM e.g for direct engagements over $100k or for Invited tenders over $200k. Conflicts of interest are also managed in the system.

4.0 Update

4.1 So far, 133 staff have been trained using SHOP, of these 113 have a delegated financial authority. We also have staff without a DFA using SHOP e.g. administrators, engineering professional service panel members, project managers who will work in SHOP but will not be approving.

4.2 Currently we are working with new staff to the organisation and completing training with the 3 Waters team who were the last team to begin the transition to SHOP at the beginning of 2024.

4.3 In November 2023 we presented to Audit NZ on how we procure at Council, our controls in place and gave them a demonstration of SHOP. Martin Richardson, Director, Specialist Audit and Assurance Services of Audit NZ said:

“I wanted to write to say a huge thank you to you both for taking the time last week to speak to our team here at Audit New Zealand.

We spend a lot of time reviewing the procurement practices of government organisations and supporting them through our probity assurance. Given that we have seen a lot of differing approaches to procurement across the sector I was mightily impressed with the work you are doing both on making broader outcomes a reality and making good procurement process easy to comply with. I thought your procurement system was excellent and a great way to avoid many of the issues that seem repeatedly to crop up in other organisations.

I hope you didn’t find some my colleagues’ questions too challenging. I think you got them excited and being auditors, they quickly fell into questioning mode. I’m happy to chat further if you want to about anything that was discussed.

So once again, thanks for your time, and well done on such excellent procurement initiatives. Inspirational stuff”.

5.0 Current Risks and Management

5.1 The current risks to meeting our objectives are:

· limited procurement capability and capacity across the organisation

o The procurement team has limited resources consisting of the procurement and corporate services manager, a senior procurement advisor a procurement advisor and an administrator to assist and oversee procurement activities at Council.

o The procurement function at Council is decentralised and a number of officers across the organisation with varying levels of experience are carrying out procurement and contract management as part of their roles.

o Increasing number of consultants outside the engineering professional services panel carrying out procurement functions with limited understanding of Local government procurement and procurement at HDC.

o While the procurement module in SHOP is being well used, we are seeing varying levels of skill and knowledge with regards to procurement fundamentals.

o The Contract module in SHOP isn’t being used to its full potential. Once a procurement has been awarded, and a contract formed, this is where the data flow ends for many procurement activities which means the ability to report on meaningful contract management functions is limited e.g., variations to time, price conditions or quality, notices to contractors, delivery of KPIs or management of milestones.

· sustainable outcomes (achieving public value) not identified early:

o whilst sustainable outcomes should generally be identified at the project stage, we do have the progressive procurement tool kit for staff to utilise the procurement stage of projects and SHOP includes a dedicated section for consideration of sustainable outcomes early in the procurement process which flow through to the contract as KPI’s to be monitored and delivered.

6.0 What next

6.1 Continue the implementation of SHOP across the organisation with ongoing support for users.

6.2 Working with the finance team to create better knowledge for DFA holders and understanding their responsibilities and limitations relevant to their DFA level.

6.3 A progressive procurement road show across the organisation demonstrating how to use and apply the tool kit.

6.4 SHOP has reporting functionality which enables us to build reports in the system. As more data goes into SHOP the quality of the reporting will improve.

7.0 Recommendations - Ngā Tūtohunga

That the Risk and Assurance Committee receive the report titled Procurement Update dated 20 May 2024.

Attachments:

There are no attachments for this report.

Monday, 20 May 2024

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

Ross Franklin, Chief Financial Officer

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 12^th February 2024, Council has not borrowed any further new debt, however Council has had forward start contracts become “live” in replacing maturing debt of $29m in April.

1.3 Council’s total external debt updated as at 31^st April 2024 is $353m, with debt forecasted to rise to $396m by the end of the year. Looking forward officers will be borrowing $40m in June 2024 to meet forecasted cashflow requirements and will be rolling over maturing debt of $20m in July 2024.

1.4 Council’s draft 2024-34 LTP is now out for consultation and this forecasts peak debt of $701m by June 2030. This higher debt forecast will require additional hedging for Council to remain in policy after the LTP is adopted in June.

1.5 On the advice of Council’s treasury advisors, and in line with the interest rate strategy, officers have placed instructions with banks to monitor interest rate swaps between 2024 and 2030 and contact council officers if the interest rates swaps get close to the target rate. Firm pricing will be obtained so that further cover (additional interest rate swaps) can be locked in.

1.6 Our advisers consider that an interest rate swap at or under 4% will represent good long-term value for Council.

1.7 The initial target is to take out a further $45m of cover however, over time total additional cover of $135m will be required to match Council’s new draft debt profile.

1.8 Council is currently compliant with its existing Treasury Management Policy for the 2023-24 debt profile.

1.9 The Reserve Bank of New Zealand’s (RBNZ) Official Cash Rate (OCR) is at 5.5% at its last review on 10^th April 2024. Its next review is 22^nd May 2024.

2.0 Recommendations - Ngā Tūtohunga

That the Risk and Assurance Committee receive the report titled Treasury Activity and Funding Update dated 20 May 2024.

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 As part of the 2024 – 2034 Long Term Plan process the Treasury Policy has been updated and the new policy will be adopted when the 2024-34 LTP is adopted in June.

3.3 Council is provided with independent treasury advice by Bancorp Treasury Services and receives daily and monthly updates on market conditions.

3.4 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. The Treasury Policy has been updated to reflect the current financial situation and in support of the 2024-34 Long Term Plan and is attached (Attachment 1).

4.0 Discussion – Te Matapakitanga

4.1 Current Situation:

4.2 Council’s current total external debt is $353.7m at 30^th April 2024 ($353.7m as at 12^th February 2024). Supporting this in terms of liquidity are $7m of bank deposits along with a $45m bank facility.

4.3 Officers will be borrowing $40m in June 2024 to meet forecasted cashflow requirements and will be rolling over maturing debt of $20m in July 2024.

4.4 Forward start contracts for $29m become “live” in April 2024 and are replacing maturing debt. $20m is fixed and $9m is floating.

4.5 These contracts are at the following rates and maturities:

Draw Date	Fixed /Floating	Amount	Margin	Effective Interest Rate	Maturity Date
15/10/2024	Floating	$9m	0.48%	6.11%	15/04/2026
15/10/2024	Fixed	$20m		5.43%	15/04/2029

4.6 The 2023/24 Annual Plan forecast the debt as at June 2024 to be $322m. As at 30^th April the Council debt is $353m and the closing debt is forecast to be approximately $396m.

4.7 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.

4.8 In April 2024 the Reserve bank kept the official cash Rate (OCR) at 5.5%, with the next meeting being in May 2024.

Debt Cover – Existing Policy (prior draft 2024-34 LTP)

4.9 As previously noted in the last report, as a starting point for the draft 2024-34 LTP, officers have forecasted a closing debt position of around $396m at the end of the 23/24 year.

4.10 Council’s treasury advisors Bancorp have reviewed with officers the level of debt cover that will be required, should debt reach the expected year end level of $396m and whether Council currently are within policy. As advised in the previous meeting on some additional cover has been taken out to maintain cover within policy limits.

4.11 As noted in paragraph 4.3, $20m of the $29m debt rolling over is at a fixed rate of 5.43% with the remaining $9m floating.

4.12 As the current cover is at the lower end of the policy range, and future debt is forecast to increase further, the strategy agreed with Council treasury advisors is to actively take out additional forward cover and execute when market opportunities present themselves so that the rates at which cover is taken is still financially efficient.

4.13 Officers have issued instructions with banks to monitor and alert when swap rates fall into this range to enable this to happen.

Looking forward – impact of draft 2024-34 LTP debt forecasts

4.14 In the draft 2024-34 LTP Council is proposing new policy limits. These are being reflected in an updated Treasury policy.

· The key measure is the Debt to revenue limit of 250%

This represents the debt to revenue ratio on continuing operations. This means one-off revenues such as capital and operational subsidies for new capital projects and cyclone recovery works are excluded.

4.15 Total council debt is forecast to reach $701m by June 2030 before dropping to $605m in June 2034

4.16 This higher forward debt profile will require changes to the level of forward cover Council has to ensure we stay within policy, once the LTP is adopted. Our advisers have modelled the revised, higher debt profile in the draft LTP and have identified additional cover that will be needed. This is set out in the following table. The table shows:

o The swap value by term

o The notional amount

o The forward start date

o The end date

o The target interest rate for officers to execute a swap in an economically efficient manner

o The current swap rate (as at 10 May 2024)

4.17 The following shows the existing and forecast position, after the additional hedging proposed in the table above, against the LTP debt profile.

Debt to Revenue Ratio Headroom:

4.18 As highlighted above this is the key measure for Councils debt profile as it is the measure used by Council’s major funders.

4.19 The closer Council gets to its limits the more likely it is that:

- The cost of funds will increase (lower credit rating and higher borrowing margins, and

- Council will experience problems raising new debt.

4.20 The Local Government Funding Authority (LGFA) have set the maximum allowable limit at 280% for a Council to be able to continue to borrow funds from LGFA.

4.21 The draft 2024-34 LTP and amended treasury policy proposes a debt to revenue ratio of 250% based on revenues from continuing operations.

4.22 While an increase in the policy limit was be needed Council must maintain sufficient headroom. This is why a policy limit of 250% using the modified revenue calculation was adopted. While the “official” measures will be much lower the adoption of the modified measure ensure Council does not unknowingly consume any head room prior to the loss of the one off revenues.

4.23 Within the LTP debt projections under-deliverability assumptions have been loaded. Between the current (2023-24) and LTP year one (2024-25) a total reduction of $35m has been assumed in modelling assumptions.

Attachments:

1 ⇩

HDC 2024-34 Draft Treasury Policy

CG-17-6-00109

Monday, 20 May 2024

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 - 2023 Wrap-up and 2024 Update

Purpose and summary - Te Kaupapa Me Te Whakarāpopototanga

1.1 The purpose of this report is to present the Report on Control Findings for the year ended 30 June 2023 from Council’s auditors Ernst & Young (EY), as well as provide an update on the 2024 Annual Report.

1.2 Attached as Attachment 1 is the Report on Control Findings to Council for the year ended 30 June 2023 from Council’s auditors EY.

1.3 Attached as Attachment 2 is the 2024 Audit Plan from Council’s auditors EY.

2.0 Recommendations - Ngā Tūtohunga

That the Risk and Assurance Committee receive the report titled Annual Report - 2023 Wrap-up and 2024 Update dated 20 May 2024.

3.0 Discussion

Finalisation of the 2023 Annual Report

3.1 The 2022/23 Annual Report and Summary Annual Report were finalised and adopted through Council on the 26^th October 2023.

3.2 The audit and adoption of the Annual Report were completed within the statutory deadline reporting date and Council received an unmodified audit opinion over the financial statements within the Annual Report.

3.3 However, the non-financial performance information again received a qualified opinion for the same matters that were first reported in 2020 and 2021.

Report on Control Findings for the year ended 30 June 2023

3.4 Officers have received and made comments on the observations raised by EY for the 2023 audit. There were no high risk improvements identified this year (compared to one identified in 2022). Moderate and low risk improvements are detailed below.

3.5 There were four moderate risk improvements identified. The audit report identifies moderate risk items as areas that need substantial improvement. The four areas identified for improvement are:

· Performance Information in relation to Customer Complaints

Council have been qualified on this matter since 2020. Officers have worked to significantly improve the reporting of customer calls received through Council’s internal Customer Call Centre and EY concluded this year that Council is collecting and recording customer calls correctly. There are still issues with the way the after-hours provider reports their data through to Council. Palmerston North City Council (PNCC) who provide the after-hour services, are moving to a new phone system which may provide different reporting options. Officers hope that this will resolve the issue going forward, however the change will not be in time for the full 2023/24 financial period.

· Tracking the Cost to repair Infrastructure

With the impact of Cyclone Gabrielle on the roading network, there were significantly complex accounting difficulties that were encountered at year end in 2023. Specifically in assessing the level of impairment required, and then subsequently whether costs to restore the network were restoration/response works (i.e. operational in nature) or actual replacement and therefore added to the value of the asset (i.e. capitalised). Officers have been working closely with Council asset managers to ensure works are being appropriately coded based on the nature of those works, which in turn drives the recognition of those costs as either operational or capital in nature. As we move through the recovery process, we expect to see much more in restoration and recovery works with much of the immediate response works now complete.

· The Cost of Infrastructure Repairs Compared to Impairments Incurred

EY have raised several accounting complexities that Council will face as result of making such significant impairments (mainly to the roading network) at the end of the 2023 financial period. These complexities mainly exist in the detailed asset register and maintenance of this system. Officers will work closely with BECA, who are currently contracted to maintain the asset data, to reduce these risks.

· The Valuation of Three Waters assets

As recommended by EY, Officers are in the progress of contracting an external valuer to complete the three waters valuation for the 2024 year end valuation.

3.6 There were four low risk items identified (areas that need some improvement). Officers continue to work with EY to manage these and resolve these issues.

2024 Annual Report

3.7 Staff are beginning the process for the annual year end timetable. Due to the timing of Risk and Assurance meetings this year, the update on the Annual Report is a little earlier than usual and therefore progress to report is not as far along.

3.8 To meet statutory deadlines this year the date set for Council approval is 24^th October, with Risk and Assurance Committee meeting earlier on 14^th October. At this point the Committee can receive and endorse the Annual Report for adoption. Other key dates for the audit process are:

· Draft financial statements available for EY 6th September

· Full Annual Report available for EY 6th September

· Summary Annual Report available for EY 13^th September

· Final Audit begins – EY on-site 9^th September

3.9 There are no significant changes to accounting standards this year that impact on Councils financial reporting.

Asset Valuations

Infrastructure assets are the most significant balance on Council’s balance sheet. Every year there are revaluations of various classes of assets that are performed on a rotating basis on a set schedule. This year, the scheduled valuations for major assets include land and building assets and 3 waters.

As recommended by EY, Council will be using external valuers for the first time this year to value the 3 waters asset class. There is the possibility for a regional approach to this valuation process, and Officers are contemplating the impact of this on year-end processes and what options are available to best obtain a valuation report for 3 waters.

Officers have determined that due to the significant uncertainty and level of damage still existing on the roading network, that roading assets will again undergo a full asset revaluation in 2024.

The above asset valuations are being completed and are as at 30^th June 2024.

Cyclone Gabrielle impact

Cyclone Gabrielle continues to have an impact in all areas of Council and the Annual Report is no exception. Officers expect to see further impairments to the roading infrastructure assets as deterioration occurs for roads not yet repaired fully but still in use. Depending on future Council decisions on roads there may also be write offs to consider if a road is no longer going to be in use.

With the purchasing of Category 3 properties this year, Officers also expect there to be significant write-offs of the assets still owned by Council at year end, given the difference between the settlement purchase price and the enduring land value of the acquired properties now that they are categorised as Category 3.

In last year’s Annual Report, Cyclone Gabrielle costs and income streams were separately identified and reported on. We expect to complete similar reporting this year to ensure transparency for the users of the financial statements.

2024 Audit Plan

3.10 In May, EY provided their finalised Audit Plan for the year. The Audit Plan outlines audit logistics, specific areas of focus for EY and areas of potential risk for Council. The areas that EY have identified in their Audit Plan as being areas of focus are (high/medium/low):

· Emergency works and Funding;

· Infrastructure Assets;

· Integrity of Rates Strike, Rates invoicing and collection;

· Grants and Subsidies;

· Non-financial performance information reporting (specifically how Council will be reporting on performance in relation the impact of Cyclone Gabrielle);

· Core controls over expenditure, procurement and tendering; and

· Debt

Interim Audit

3.11 EY were onsite during March and have completed their interim audit. No issues were raised with Officers during this visit.

Attachments:

1 ⇨	Financial Management - Audits - External audit - 2023 EY Report to Management Hastings DC - signed	FIN-07-01-24-488	Under Separate Cover
2 ⇨	Financial Management - Audits - External audit - 2024 HDC EY Audit plan	FIN-07-01-24-489	Under Separate Cover

Monday, 20 May 2024

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, Chief Risk Officer

Steffi Reeves-Bird, Risk Manager

Te Take:

Subject:

Long Term Plan Risk Based Indicators

1.0 Purpose and summary - Te Kaupapa Me Te Whakarāpopototanga

1.1 The purpose of this report is to present an approach for defining risk-based indicators to monitor delivery of the 2024-2034 Long Term Plan.

1.2 This issue arises from the resolution at the 12 February 2024 Committee meeting that the Committee request quarterly updates on risk-based indicators including growth.

2.0 Background

2.1 Councillors, as the elected representatives for their communities, are responsible for determining objectives and agreeing the financial plan to achieve those objectives. Planning activities are achieved through the Long Term Planning (LTP) process and actual outcomes are monitored by the Performance and Monitoring Committee.

2.2 To support the Councillors in fulfilling their role, the Risk and Assurance Committee is responsible for assisting Council in its general overview of financial management, risk management and internal control systems. Specific responsibilities assigned to the Committee in the Terms of Reference (ToR) include:

· Provide effective management of potential risks, opportunities and adverse events.

· Monitoring significant projects/programmes focusing on appropriate management of risk.

· Oversight of LTP and Annual Report preparation

2.3 With the key benefit of the Risk and Assurance Committee being provision of Independent technical expertise to support Elected Members achieve prudent outcomes.

3.0 Monitoring Approach

3.1 To assist the Risk and Assurance Committee fulfil the ToR responsibilities without duplicating the financial oversight undertaken by the Performance & Monitoring Committee it is proposed that the Risk and Assurance Committee focus on the following:

· Verify that the material risks to delivering the Long Term Plan Financial Strategy have been identified and addressed.

· Monitor the underlying risks that could affect delivery of the Financial Strategy over the life of the LTP.

LTP Material Risks.

3.2 The material risks to delivering LTP financial strategy are covered in the Draft 2024-2034 LTP finance section significant forecasting assumptions (Attachment 1). These factors include:

· Population growth and aging.

· Assumed new household numbers expected.

· Assumptions on where growth will occur.

· Growth in the rating base.

· Rate of inflation and assumed interest rates.

· Revenue streams, such as NZTA subsidies, Crown contribution to infrastructure acceleration and Cyclone Gabrielle recovery, and community facilities.

· Levels of service not changed, including requirements of Resource Consents held by Council.

· No abnormal events occur during the term of the plan.

· Effects of climate change.

· Deliverability of the capital works programme.

3.3 The Council’s risk mitigation for each of these factors is included in the Finance extract from the Draft 2024-2034 LTP.

Financial Strategy Underlying Risks

3.4 To identify the underlying financial strategy risks that should be monitored, the significant forecasting assumption from LTP listed above have been used to develop the bowtie risk assessment shown below.

3.5 Based on this representation it can be seen that many of the issues identified will affect the revenue vs expenditure balance achieved by the proposed financial strategy. The green boxes in this bowtie diagram represent the underlying causes of failure to adhere to the financial strategy. Therefore, these are the factors that could be monitored by the Committee to provide a forward looking and a different perspective to the metrics tracked by the Performance & Monitoring Committee.

Sensitivity Analysis

3.6 While any of the factors shown in the Bowtie might impact the financial performance achieved, the reporting should focus on those things that can cause a material deviation in the intended financial outcome (e.g. balanced budget and debt level).

3.7 To understand what can drive a material change in achieved performance a quantitative analysis will be undertaken to understand the degree of variation needed for any one assumption to cause an undesirable outcome. This information will then be used to establish thresholds to understand when a measure might be tracking toward a concerning level.

Reporting Cycle

3.8 It should be noted that many of the statistics used in the financial strategy are annualised or are only released periodically. As a result, the risk-based indicator report for the Committee will need to be aligned with this reporting frequency. However, it might be possible to provide interim reports of a few key metrics on a more frequent basis where that information is more readily available.

What should Risk and Assurance focus on?

3.9 The key issue for the committee is determining what Risk and Assurance should focus on separate from the monitoring role of the Performance & Monitoring committee. Through the standard quarterly financial reporting cycle the Performance and monitoring committee will monitor progress against the delivery of Council’s operational and capital programmes.

3.10 The factors that link to the monitoring of the current and future profile for the key treasury ratios should be of particular interest to the committee. This is likely to include:

· Forward debt profile

o Impacts of changes to budgets, capital program.

§ Incl. Deliverability assumptions

o Potential impacts from changes in key assumptions (inflation, interest rates).

· Risk around growth (timing of expenditure vs revenues) – impacts on debt and risks to ratepayers.

3.11 As noted in the treasury report there is an under-delivery assumption built into the debt projections in the draft LTP. Risk and assurance could play a role in testing the assumptions and advising on risk and opportunities that will influence the Councils forward debt profile.

3.12 Most of these risks will require some ad hoc reporting and focus rather than standard quarterly reporting. Discussion and the future reporting could focus on ensuring Council is fully informed and is made aware of risks to its financial position, particularly the debt profile, from changes made either during the year or as part of an annual plan cycle. As an example, the forward view will need to be updated when Council prepares its 2025-26 Annual Plan.

4.0 Recommendations - Ngā Tūtohunga

A) That the Risk and Assurance Committee receive the report titled Long Term Plan Risk Based Indicators dated 20 May 2024.

B) That the Risk and Assurance Committee agrees that the significant forecasting assumptions and risk mitigations to achieving the Draft Financial Strategy have been included in the Draft 2024-2034 Long Term Plan.

C) That the Risk and Assurance Committee request a risk-based indicator report based on the significant forecasting assumptions and risk mitigations stated in the Draft 2024-2034 Financial Strategy.

Attachments:

1 ⇨

Draft 2024-2034 Long Term Plan Financial Strategy

PMD-9-3-24-85

Under Separate Cover

Monday, 20 May 2024

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, Chief Risk Officer

Te Take:

Subject:

Cyclone Gabrielle Recovery Risk Update

1.0 Purpose and summary - Te Kaupapa Me Te Whakarāpopototanga

1.1 The purpose of this report is to provide the Committee with an update on the Cyclone Gabrielle Recovery risk profile.

2.0 Recovery Programme Risk Profile

2.1 The Cyclone Gabrielle Recovery Programme risk register and associated summary risk profile have been updated based on feedback from regular meetings with risk owners. The updated Cyclone Gabrielle Recovery Risk Profile (Attachment 1) again shows that there are several significant risks that push the boundaries of Council's risk appetite. The primary areas of concern continue to be the pressure on Council's finances and potential for litigation. Despite these ongoing high risks, there has been an overall reduction in the level of risk which can be seen in the Time Horizon Map (Attachment 2) as more risks are now assessed as Medium risk (shown as orange) than those assessed as High risk (shown as red).

2.2 Financial risk relating to the Voluntary Buy-Out programme is reducing now the programme is reaching the halfway mark and the nature of valuations and offers is becoming clearer. There remains some financial risk in this programme due to the uncertainty regarding the cost for demolition of residential property and potential re-sale value of purchased Category 3 properties. These factors are keeping the overall financial risk of Voluntary Buy Out progamme at a high level.

2.3 The main driver of the financial pressure is now the Transport rebuild programme. The key financial risks associated with the Transport programme are:

· Short term delays in receiving the committed Government contribution to projects,

· Lack of certainty over the transport subsidy rate in the medium to long term. At present the Draft 2024-2034 Long Term Plan (LTP) assumes a subsidy of 73%, but this is yet to be confirmed by NZ Transport Agency Waka Kotahi so represents a contingent liability for the Council which could be in the order of tens of millions of dollars, and

· Accuracy of forecasting assumptions used to determine future construction costs. Council uses BERL factors to calculate the future cost of construction projects. These factors have traditionally underestimated the increase in cost of construction over time.

2.4 Officers are working with the relevant Crown agencies to resolve the delays in payment of transportation claims and to confirm the ongoing subsidy for cyclone recovery work.

2.5 A further financial consideration is the reduced capacity for any future shocks. The finance strategy in the LTP proposes a debt to revenue limit that retains some capacity for further borrowing before reaching the maximum acceptable limit. However, this retained capacity is relatively small in the face of the potential cost of a further significant adverse event.

2.6 Outside of the financial pressures, the top Recovery Programme risks now include underlying compliance challenges for to managing future use of Category 3 land, and ensuring the organisation has sufficient capacity to meet recovery programme workload. The full Recovery Risk Register is included for reference (Attachment 3).

3.0 Voluntary Buy-Out Office Risk Appetite

3.1 An updated risk appetite report for the Voluntary Buy Out Office summarising the achieved performance against tolerance measures is included (Attachment 4). From this report the following can be observed.

· The number of Letters of Offer presented to property owners is tracking at the upper limited of the risk tolerance band but at a similar rate to the target. An initially faster start than expected appears to be the main driver of the higher achieved performance. Overall the stable rate of progress that is broadly inline with the target appears to reflect the measured approach to the programme considered acceptable.

· Claims for the Crown contribution to the property buy-out costs shows that the actual expenditure tracking below claims. The lower achieved performance is driven mainly by the time taken for owners to consider an offer before accepting. This factor is beyond the Council’s control and difficult to anticipate. This is indicative of a more conservative approach with regard to Crown claims.

· Outcomes for the key risk areas of Health & Safety, Compliance and Reputation were good with no significant events of concern occurring in this period.

3.2 This confirms that the Voluntary Buy Out programe is being operated in line with a Measured approach to managing risk, which means risks are accepted if limited and heavily out-weighed by the benefits.

4.0 Recommendations - Ngā Tūtohunga

That the Risk and Assurance Committee receive the report titled Cyclone Gabrielle Recovery Risk Update dated 20 May 2024.

Attachments:

1 ⇩	Cyclone Gabrielle Recovery Risk Profile May 2024	IRB-3-15-24-104
2 ⇩	Cyclone Gabrielle Recovery Time Horizon Risk Map	IRB-3-15-24-107
3	Cyclone Gabrielle Recovery Programme Risk Register May 2024 Confidential in accordance with Section 7 (2) (j) of the Local Government Official Information and Meetings Act 1987	IRB-3-15-24-105	Under Separate Cover
4 ⇩	Voluntary Buy Out Office Risk Appetite Statement May 2024	IRB-3-15-24-106

Monday, 20 May 2024

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 Reeves-Bird, Risk Manager

Regan Smith, Chief Risk Officer

Te Take:

Subject:

Strategic Risk Register & Horizon Scan

1.0 Executive Summary – Te Kaupapa Me Te Whakarāpopototanga

1.1 The purpose of this report is to provide the Committee with a copy of the current strategic risk register and a Risk Horizon Scan, to support the Committee in undertaking a review of the Council’s current risk register.

1.2 Council’s strategic risk register currently lists twelve (12) risks which could create uncertainty for the achievement of Council’s goals, as set out in the 2021-2031 Long Term Plan.

1.3 Risks relating to the achievement of business-as-usual activities as an organisation, are held in a separate enterprise risk register which is owned by the Lead Team.

2.0 Recommendations - Ngā Tūtohunga

A) That the Risk and Assurance Committee receive the report titled Strategic Risk Register & Horizon Scan dated 20 May 2024.

B) That the Committee endorse the proposed changes to the strategic risk register, including:

i. ‘Environmental, Social, Governance and Cultural (ESG&C) Expectations’ changes from a threat risk to an opportunity risk.

ii. ‘Natural/Man-made Disaster Exposure’ is elevated from an enterprise risk to a strategic risk.

C) That the Committee consider any other changes or additions to the current strategic risk register that may be appropriate

3.0 Background – Te Horopaki

3.1 The Risk & Assurance Committee undertook a formal review of the strategic risk register in April 2023, with changes made to the register and adopted by Council in August 2023.

3.2 These changes included:

· Addition of two new risks to the register; Liability for legal challenge (threat risk), and Successful strategic partnerships (opportunity risk)

· Increases to the following risks’ current risk level, largely influenced by the post-cyclone environment, Significant operational service failure, Financial sustainability and Truth decay.

4.0 Discussion – Te Matapakitanga

4.1 The attached Risk Horizon Scan is intended to highlight key signals in the current environment which could have an impact on Council’s identified risks, both adversely and potentially positively.

4.2 Signals have been identified as either strong or weak, and whether the source is internal or external to Council.

4.3 It can be observed in the horizon scan diagram that the strong signals, primarily originating externally to Council, are indicating an impact on Council’s financial sustainability and operational service delivery.

4.4 The Committee is encouraged to consider whether any of these signals, or related uncertainties, may warrant further investigation and a position on Council’s strategic risk register.

4.5 Regarding the existing strategic risk register, the following changes are recommended:

· Environmental, Social, Governance and Cultural (ESG&C) Expectations moves from a threat risk to an opportunity risk, to highlight the prospect of enhancing ESG&C outcomes for the community. This would result in the risk description changing to:

Successfully and proactively addressing Environmental, Social, Governance (ESG) and Cultural expectations during decision making processes would contribute to improving equity of resources, enhanced community wellbeing, enrichment of the natural environment, increased trust of and a positive reputation for Council, attraction as an employer and to gain a head start on complying with potential future legislation.

· Elevating the risk, Natural/Man-made Disaster Exposure, from an enterprise risk to a strategic risk. Currently, this risk is managed within the enterprise risk register by the Lead Team and it is recommended that it is moved to a strategic risk for Councillors given its significance to the community and constraints on the organisation’s financial capacity to manage a future event. Note:

- This risk relates to exposure to natural or man-made events, impacting people and property. The nature of these events means Council is unable to reduce the likelihood of the event occurring, but can through various controls, reduce the impact that an event may have on the community – for example, land-use planning, earthquake prone building regulations.

- There is a separate identified risk, managed by the Lead Team, in relation to Council’s ability to respond effectively to an event when it occurs. This is where controls such as staff training, exercises, contingency funds, alternative resources (power, worksites) and response plans are mitigation tools. This risk should remain with the Lead Team given the operational nature.

4.6 This paper seeks the Committee’s endorsement of the changes within 4.5.

4.7 With consideration of the Horizon Scan and members’ own insights, any additional changes or additions to the strategic risk register from the Committee are welcome.

4.8 Proposed changes and additions will be collated by officers, further developed into structured risk descriptions (including risk scores) and brought back to the next Committee meeting for endorsement. A final strategic risk register will then be presented to Council for approval.

4.9 Council’s Risk Appetite Statements will be updated in conjunction with the presentation of the Risk Policy update.

5.0 Next steps – Te Anga Whakamua

5.1 Committee to review the horizon scan and strategic risk register and consider any necessary changes to the register.

5.2 Committee to endorse the recommended changes within 4.4.

5.3 Officers will collate any further changes to the strategic risk register and provide an updated register at the next Committee meeting for endorsement.

5.4 Endorsed strategic risk register to be presented to Council for approval.

Attachments:

1 ⇩	Strategic Risk Register - May 2024	IRB-3-15-24-108
2 ⇩	HDC Strategic Tier 1 Risk Horizon Scan Diagram - May 2024	IRB-3-15-24-109

Monday, 20 May 2024

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, Safety and Wellbeing Manager

Te Take:

Subject:

Health, Safety & Wellbeing Update Report

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 Subcommittee in regard to the management of Health, Safety & Wellbeing risks within Council.

1.2 This report provides information on:

· Psychosocial (Wellbeing) Risk Management

· Progress on Health, Safety & Wellbeing Priority Work Plan

2.0 Recommendations - Ngā Tūtohunga

That the Risk and Assurance Committee receive the report titled Health, Safety & Wellbeing Update Report dated 20 May 2024.

3.0 Background – Te Horopaki

3.1 The purpose of this report is to provide information to the Committee in regard to the management of Health, Safety and Wellbeing 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

Psychosocial Risk Management

4.1 Psychosocial risk factors refer to environmental, relational, and operational hazards that are present at work that may affect people’s psychological and physical health. Examples of these factors are high workloads, tight deadlines, lack of control of the work or working methods (lack of autonomy), lack of role clarity, harassment, and workplace conflicts. These are often colloquially referred to as ‘wellbeing’ risks.

4.2 Council has a legal obligation under the Health and Safety at Work Act to identify and address psychosocial risks within the workplace and put in place measures to eliminate these risks where possible, and where they cannot be eliminated to put in place measures to minimise the risk as far as practicable.

4.3 Council has identified twelve critical Health, Safety & Wellbeing risks, of which three are classified as psychosocial risks: Work-related Stress, Fatigue and Conflict & Violence.

4.4 ‘Work-related stress’ is a collective term used by Council to manage a group of psychosocial risk factors. Whilst robust processes are in place to support staff who may be feeling the effects of these risk factors, further work is required to gain a deeper understanding of the specific psychosocial risk factors affecting staff and put in place further targeted measures to prevent and reduce harm.

4.5 Fatigue is a psychosocial risk that will also require further analysis to gain a greater understanding of the contributing risk factors and put in place further targeted measures to prevent and reduce harm.

4.6 Council has undertaken to contract a specialist external provider to complete an independent assessment of psychosocial risks to Council staff. This process will involve collecting both quantitative and qualitative data through staff surveys and focus group interviews. A comprehensive analysis of this data will be undertaken by the provider which will then be provided in a summary report with recommendations. The report will serve as a benchmark for Council and will inform the development of Council’s Mauri Tū Mauri Ora (Wellbeing) framework strategy for 2025-2028. It is intended that the assessment will be repeated at regular intervals for comparison against the benchmark.

4.7 Council has a comprehensive Conflict and Violence Policy which was reviewed in 2023 with input from Council staff. Since that time, there has been a notable increase in conflict situations particularly with regards to protests from members of the public. Work is currently underway to review existing controls for the management of these risks. This includes the review of processes for managing public events and public protests and planning for the procurement of modern electronic monitoring equipment for those staff undertaking at risk tasks alone and/or in remote locations. Note: across the 12 critical HDC Health, Safety & Wellbeing risks, working alone is identified as an escalation factor.

4.8 Recently the Lead Team has again discussed a a psychosocial hazard which has the potential to cause serious psychological harm to both Council staff and Elected Members, and that mitigations to date may not be sufficiently effective. This hazard relates to repetitive harassment-type interactions from members of the public, which often occur by way of voracious, repetitive, and individual-targeted commentary and requests for information. Council has just engaged an independent provider to review this hazard and provide recommendations for managing the risk.

Progress on Health, Safety& Wellbeing Priority Work Plan

4.9 The following table highlights the priority work for the HDC Health, Safety & Wellbeing team for the remainder of the 2023/2024 financial year and its status.

Table 1: Health, Safety& Wellbeing Priority Work Plan 2023/24

Work To be completed		Status
Policies/Frameworks to be reviewed	· Overarching Asbestos Management Plan. · Rehabilitation & Fit-For-Work Policy. · Mauri Tū Mauri Ora (Wellbeing) Framework.	Underway Underway Deferred to 2024/25
Health, Safety and Wellbeing Critical Risk summary profiles to be developed (from full bowtie analysis)	· Mental Wellbeing / Stress. · Asbestos. · Hazardous Substances.	Underway Underway Underway
Exposure Monitoring & Health Risk Assessments to be completed	· Ōmarunui Landfill: Vibration and Hazardous Substances. · Aquatics/Splash Planet: Noise, and Hazardous Substances. · Tomoana Showgrounds: Noise, Vibration, and Hazardous Substances. · Water Operations: Hazardous Substances · Cemetery Operations: Hazardous Substances	All completed.
Internal Audits to be completed	· Annual Facility Inspections. · Audits of Contracts that undertake High-Risk activities (from a health & safety perspective). · Internal Safe Plus Assessment.	Underway Underway Planned for June 2024
External Audits / Assessments	· Psychosocial (wellbeing) assessment	Planned for June 2024

4.10 The Health, Safety & Wellbeing team has been operating at reduced capacity over the last 6 months, due to four staff finishing over during December/January. Whilst two vacancies were filled in January/February the other two were not. (To date there are two vacancies: one senior position and one technician. New staff have been appointed and will commence in mid-June).

Attachments:

There are no attachments for this report.

HASTINGS DISTRICT COUNCIL

Risk and Assurance Committee MEETING

Monday, 20 May 2024

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 Health & Safety Contracts - Contractors' Health & Safety Performance Report

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

GENERAL SUBJECT OF EACH MATTER TO BE CONSIDERED

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

PARTICULAR INTERESTS PROTECTED

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

15 Health & Safety Contracts - Contractors' 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 Health & Safety information relating to third party 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, 20 May 2024
Te Wā: Time:	10.00am
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:	Deputy Chief Executive - Bruce Allan

Mematanga: Membership:	Koromatua Chair: Jon Nichols – External Independent Appointee Nga Kai Kaunihera Councillors: Simon Nixon (Deputy Chair), Alwyn Corban, Tania Kerr, Michael Fowler (Chair of Performance & Monitoring Committee) and a vacancy Mayor Sandra Hazlehurst External Independent Appointee: Graeme McGlinn Heretaunga Takoto Noa Māori Standing Committee appointee: Tom Keefe
Tokamatua: Quorum:	4 members
Kaihokoe mo te Apiha Officer Responsible:	Deputy Chief Executive – Bruce Allan
Te Rōpū Manapori me te Kāwanatanga Democracy & Governance Services:	Christine Hilton (Extn 5633)

Item 5 Treasury Activity and Funding Update
HDC 2024-34 Draft Treasury Policy	Attachment 1

Item 8 Cyclone Gabrielle Recovery Risk Update
Cyclone Gabrielle Recovery Risk Profile May 2024	Attachment 1

Item 8 Cyclone Gabrielle Recovery Risk Update
Cyclone Gabrielle Recovery Time Horizon Risk Map	Attachment 2

Item 8 Cyclone Gabrielle Recovery Risk Update
Voluntary Buy Out Office Risk Appetite Statement May 2024	Attachment 4

Item 9 Strategic Risk Register & Horizon Scan
Strategic Risk Register - May 2024	Attachment 1

Item 9 Strategic Risk Register & Horizon Scan
HDC Strategic Tier 1 Risk Horizon Scan Diagram - May 2024	Attachment 2

Item 10 Executive Overview and Status of Actions
Status of Actions - May 2024	Attachment 1