I hereby give notice that an ordinary meeting of the Audit and Risk Committee will be held on:

 

Date:                      

Time:

Meeting Room:

Venue:

 

Tuesday, 22 July 2014

1.30pm

Council Chambers
Auckland Town Hall
301-305 Queen Street
Auckland

 

Audit and Risk Committee

 

OPEN AGENDA

 

 

 

MEMBERSHIP

 

Chairperson

Cr Sir John Walker, KNZM, CBE

 

Deputy Chairperson

Cr Dr Cathy Casey

 

Members

Cr Cameron Brewer

 

 

Cr Bill Cashmore

 

 

Cr Sharon Stewart, QSM

 

 

Mr Roy Tiffin, FCA

 

 

Cr Penny Webster

 

 

 

 

Ex-officio

Mayor Len Brown, JP

 

 

Cr Penny Hulse

 

 

(Quorum 4 members)

 

 

 

Mike Giddey

Democracy Advisor

 

16 July 2014

 

Contact Telephone: (09) 307 7565

Email: mike.giddey@aucklandcouncil.govt.nz

Website: www.aucklandcouncil.govt.nz

 

 


 

TERMS OF REFERENCE

 

Responsibilities

 

The Audit and Risk Committee will be responsible for:

 

·         Providing objective advice and recommendations to the Governing Body regarding the sufficiency, quality and results of assurance on the adequacy and functioning of the council’s risk management, control and governance frameworks and processes.

·         Exercising active oversight of all areas of Auckland Council control and accountability (including Council Controlled Organisations), in an integrated and systematic way, such that the results of risk and assurance reviews and external audits may be incorporated in the priority-setting and strategic planning processes.

·         Liaison with Audit NZ and, where necessary, the audit committees of CCOs to ensure robust financial audits and reviews of the Auckland Council group

 

 


Audit and Risk Committee

22 July 2014

 

ITEM   TABLE OF CONTENTS                                                                                        PAGE

1          Apologies                                                                                                                        5

2          Declaration of Interest                                                                                                   5

3          Confirmation of Minutes                                                                                               5

4          Petitions                                                                                                                          5  

5          Public Input                                                                                                                    5

6          Local Board Input                                                                                                          5

7          Extraordinary Business                                                                                                5

8          Notices of Motion                                                                                                          6

9          Office of the Auditor-General                                                                                       7

10        Auditor-General's Report on Watercare Services Limited : Review of Service Performance                                                                                                                   9

11        2014 Annual accounts                                                                                                 85

12        Interim 2014 audit management letter                                                                     177

13        Outstanding audit report issues                                                                              189

14        Update on the introduction of International Public Sector Accounting Standards     193

15        Audit and Risk Committee Oversight of Council Controlled Organisation Risk 195

16        Update on Risk Management Activities                                                                  199

17        Review of business processes relating to elected members                               203  

18        Consideration of Extraordinary Items 

PUBLIC EXCLUDED

19        Procedural Motion to Exclude the Public                                                               207

C1       Update on Internal Audit Activities                                                                         207

C2       Update on Integrity and Investigation Activities                                                    207

C3       Selection of Second External Appointee                                                                207  

 


1          Apologies

 

Apologies from Cr MP Webster, Mayor LCM Brown and Cr PA Hulse have been received.

 

2          Declaration of Interest

 

Members are reminded of the need to be vigilant to stand aside from decision making when a conflict arises between their role as a member and any private or other external interest they might have.

 

3          Confirmation of Minutes

 

That the Audit and Risk Committee:

a)         confirm the ordinary minutes of its meeting, held on Tuesday, 15 April 2014, including the confidential section, as a true and correct record.

 

 

4          Petitions

 

At the close of the agenda no requests to present petitions had been received.

 

5          Public Input

 

Standing Order 3.21 provides for Public Input.  Applications to speak must be made to the Committee Secretary, in writing, no later than two (2) working days prior to the meeting and must include the subject matter.  The meeting Chairperson has the discretion to decline any application that does not meet the requirements of Standing Orders.  A maximum of thirty (30) minutes is allocated to the period for public input with five (5) minutes speaking time for each speaker.

 

At the close of the agenda no requests for public input had been received.

 

6          Local Board Input

 

Standing Order 3.22 provides for Local Board Input.  The Chairperson (or nominee of that Chairperson) is entitled to speak for up to five (5) minutes during this time.  The Chairperson of the Local Board (or nominee of that Chairperson) shall wherever practical, give two (2) days notice of their wish to speak.  The meeting Chairperson has the discretion to decline any application that does not meet the requirements of Standing Orders.

 

This right is in addition to the right under Standing Order 3.9.14 to speak to matters on the agenda.

 

At the close of the agenda no requests for local board input had been received.

 

7          Extraordinary Business

 

Section 46A(7) of the Local Government Official Information and Meetings Act 1987 (as amended) states:

 

“An item that is not on the agenda for a meeting may be dealt with at that meeting if-

 

(a)        The local  authority by resolution so decides; and

 

(b)        The presiding member explains at the meeting, at a time when it is open to the public,-

 

(i)         The reason why the item is not on the agenda; and

 

(ii)        The reason why the discussion of the item cannot be delayed until a subsequent meeting.”

 

Section 46A(7A) of the Local Government Official Information and Meetings Act 1987 (as amended) states:

 

“Where an item is not on the agenda for a meeting,-

 

(a)        That item may be discussed at that meeting if-

 

(i)         That item is a minor matter relating to the general business of the local authority; and

 

(ii)        the presiding member explains at the beginning of the meeting, at a time when it is open to the public, that the item will be discussed at the meeting; but

 

(b)        no resolution, decision or recommendation may be made in respect of that item except to refer that item to a subsequent meeting of the local authority for further discussion.”

 

8          Notices of Motion

 

At the close of the agenda no requests for notices of motion had been received.

 


Audit and Risk Committee

22 July 2014

 

Office of the Auditor-General

 

File No.: CP2014/15350

 

  

 

 

Purpose

1.       To provide an opportunity for the Auditor-General to attend the meeting and address the committee.

Executive summary

2.       The Auditor-General wishes to speak to the “Office of the Auditor-General’s report on Watercare Services Limited: Review of Service Performance” issued in May 2014. This report is attached to a separate staff report in the agenda.

 

Recommendation/s

That the Audit and Risk Committee:

a)      receive the information provided by the Auditor-General.

 

 

Attachments

There are no attachments for this report.     

Signatories

Author

Mike Giddey - Democracy Advisor

Authoriser

Grant Taylor - Governance Director

 


Audit and Risk Committee

22 July 2014

 

Auditor-General's Report on Watercare Services Limited : Review of Service Performance

 

File No.: CP2014/15111

 

  

 

 

Purpose

1.       To inform the committee of the results of the Auditor-General’s review of service performance of Watercare Services Limited.

Executive summary

2.       The Local Government (Auckland Council) Act 2009 requires the Auditor-General to periodically review the service performance of Auckland Council and CCOs. The first review was completed in May 2014, covering Watercare Services Limited.

 

Recommendation/s

That the Audit and Risk Committee:

a)      receive the update on the Auditor-General’s report on Watercare Services Limited : Review of Service Performance.

 

Comments

 

3.       The Auditor-General’s report on Watercare Services Limited : Review of Service Performance is included as an appendix.

Consideration

Local board views and implications

4.       Consideration of local board views was not required for this report.

Maori impact statement

5.       The report does not have any particular benefits or adverse effects for Māori.

Implementation

6.       No issues.

Attachments

No.

Title

Page

aView

The Office of the Auditor-General's report on Watercare Services Limited : Review of Service Performance

11

   

Signatories

Author

Nick Rennie - Internal Audit Manager

Authoriser

Grant Taylor - Governance Director

 


Audit and Risk Committee

22 July 2014

 











































































Audit and Risk Committee

22 July 2014

 

2014 Annual accounts

 

File No.: CP2014/12137

 

  

 

 

Purpose

1.       To present the pro forma 2014 annual accounts for approval.

Executive summary

2.       The format of the financial statement section of the annual report has been reviewed and improved.  The section has been divided into three parts; the financial statements, Local Government act disclosures and Other disclosures.  The materiality concept has been applied more cohesively in preparing the accounts.  Finally, new disclosure requirements are outlined.  The pro forma 2014 annual accounts incorporating these changes are presented for approval.

 

Recommendation/s

That the Audit and Risk Committee:

a)      approve the pro forma 2014 annual accounts.

 

Comments

 

3.       Local Government financial reporting disclosures have to meet the requirements of the International Financial Reporting Standards (IFRS), the Local Government act and regulations and for Auckland Council the NZX listing rules.  Previous annual accounts have combined all disclosures together resulting in a voluminous set of notes.  The 2014 financial section has been restructured into three sections:- financial accounts and notes complying with IFRS, Local Government act and regulation disclosures, and Other disclosures.  This improves readability and navigation of the section.

4.       The data in financial accounts is increasing as the reporting standards specify more and more disclosures.  Notwithstanding a requirement to disclose specified data, IFRS has an overriding concept: disclosure is not required if the data is not material.  Information is considered material if omission would influence a user’s decision or assessment of the entity.  Materiality is a matter of professional judgement and involves both the size of the item and its sensitivity.  This year we have been more rigorous in applying materiality to reduce clutter in the accounts from too many unimportant items.  As a result of applying materiality guidelines more cohesively across the whole document, the current year’s disclosures are more succinct and readable, an improvement from the prior year.  We have removed certain tables (for example, movements for doubtful debt provision) which while required by IFRS, are not material and will not, in our opinion, influence the decisions or assessment of users of the financial statements.  While we have exercised our professional judgement the auditors may well have a different conclusion and challenge our decisions.  Where this occurs we will review our decision taking into account the auditors views.

5.       A number of new disclosures are required this year, among them certain prescribed benchmarks required by the Local Government (Financial Reporting and Prudence) Regulations 2014 to enable the public to assess the group’s governance and financial prudence.  In addition, the Financial Markets Authority (FMA) have recommended a new disclosure format for audit fees, providing more detail to the different types of services provided by an entity’s auditors.

Consideration

Local board views and implications

6.       No impact.

Maori impact statement

7.       No impact.

Implementation

8.       None.

 

Attachments

No.

Title

Page

aView

2014 Pro forma Financial Statements

87

     

Signatories

Author

Robert Nelson - Financial Controller

Authorisers

Kevin Ramsay - Manager Finance

Grant Taylor - Governance Director

 


Audit and Risk Committee

22 July 2014

 



























































































Audit and Risk Committee

22 July 2014

 

Interim 2014 audit management letter

 

File No.: CP2014/12139

 

  

 

 

Purpose

1.       This report summarises the issues identified by Audit New Zealand during their planning and first interim audit visits.

Executive summary

2.       Audit New Zealand has issued a letter detailing the findings arising from their planning and first interim audit visits.  Overall, Audit New Zealand has assessed that Auckland Council has an effective management control environment.  This assessment of the management control environment is used by Audit New Zealand to plan the most effective and efficient audit approach and is part of the assessment used to determine the audit fees are charged to Auckland Council.

 

Recommendation/s

That the Audit and Risk Committee:

a)      receive the report.

b)      note the responses to the issues identified by Audit New Zealand.

 

 

Comments

 

3.       Audit New Zealand uses the planning and first interim visits to assess the Auckland Council’s control environment and follow up on issues raised in prior year’s management reports.

Audit New Zealand has identified a couple of areas where they believe the control environment can be improved; these areas are in the internal audit function, the implementation of a risk management policy and framework and controls and processes in the Information Systems area.

None of the areas commented on by Audit New Zealand are major requiring urgent or immediate attention with many of the enhancements already in progress by Auckland Council.  The areas commented on do not require any additional items to be added to the Management Report register.

During the interim audit, Audit New Zealand also reviewed the progress made on items raised in prior year’s management reports.  Audit New Zealand has commended Auckland Council for putting in place a formal process to ensure that reported items are being followed up and resolved.  A separate agenda item summarising the progress of these items has been prepared.

Consideration

Local board views and implications

4.       Local boards have not been consulted because the report deals primarily with internal management issues.

Maori impact statement

5.       The report does not have any particular benefit or adverse effects on Maori.

Implementation

6.       No issues.

 

Attachments

No.

Title

Page

aView

Auckland Council Interim Management Letter

179

     

Signatories

Author

Robert Nelson - Financial Controller

Authorisers

Kevin Ramsay - Manager Finance

Grant Taylor - Governance Director

 


Audit and Risk Committee

22 July 2014

 










Audit and Risk Committee

22 July 2014

 

Outstanding audit report issues

 

File No.: CP2014/12140

 

  

 

Purpose

1.       This report summarises the progress made to resolve the items raised by Audit New Zealand.

Executive summary

2.       A report to the Audit and Risk Committee meeting in April outlined the process put in place to work with Audit New Zealand to address and resolve recommendations made to the council.  This report provides an update on this process.

 

Recommendation/s

That the Audit and Risk Committee:

a)      receive the report.

 

Comments

 

3.       Audit New Zealand, as part of their audit work, report to council issues they have identified.  The issues range from items which recommend improvements; to the quality of policy or processes which need to be implemented or amended; to recommendations detailing future work required to address new or upcoming changes.

4.       The processes we have put in place include identification of the issues; assigning responsibility for resolution of issues; planning how the issues will be addressed; following up on progress and regularly updating Audit New Zealand.

5.       A separate agenda item has been prepared on the Audit New Zealand interim 2014 audit report.  In that report Audit New Zealand provided the following table with the status of the 51 items:

14

Matters that have been resolved

5

Progress is being made, but not yet fully resolved

7

Auckland Council advised resolved, Audit New Zealand to follow up

25

Outstanding matters for Auckland Council to follow up

 

6.       Since the report was prepared, Audit New Zealand has confirmed that they are satisfied that an additional four items have been resolved.  Audit New Zealand has commenced their final audit work, and there are many other items they will review during that process.

7.       With 18 resolved items and 33 items remaining on the Audit New Zealand register, Auckland Council has made significant progress.  In our assessment we believe that following Audit New Zealand’s assessment during the final audit;

·    12 additional matters will be assessed as resolved

·    on 7 items we have made significant progress but the item may not be assessed by Audit New Zealand as fully resolved

·    we have made some progress on the remaining 14 items.

8.       Examples of items in that are in progress but unlikely to be resolved at the final audit include

Recommendation

Current situation

Auckland Council’s ability to analyse procurements in detail for strategic purposes is limited. Work should be undertaken to explore alternative ways of accumulating procurement data to enable better analysis of procurement activities e.g. replacing the current spreadsheet with a database.

Information Services have indicated that this should be built on Microsoft Sharepoint.  In this format, there might be further opportunities to rationalise contracts and obtain efficiencies in subsequent procurements. Work has been delayed on building the database as work has been prioritised in other areas such as for the NewCore Project, the current spreadsheet will continue to be used.  Procurement is also engaging with IS to determine if this work could be given a higher priority.

Effective programmes of internal Information Services audit work should be developed to assess Auckland Council’s IT general controls and identify any areas for improvement

Some internal audit work was carried out this year which utilised CAATS data analysis technology. Internal capability to perform programme audits is currently under development and aligned with the Internal Audit work programme

Information Services and Accounting Services work with the CCO’s to review and set appropriate delegated financial authorities so that the limits in SAP for the CCO’s can align to their respective delegation policies

The delegated financial authorities in SAP for each CCO have been input. However, several of the policies have different limits for operational and capital expenditure. The current configuration in SAP only allows one delegated financial authority for each role and, the highest limit was input into SAP. There is a risk that expenditure outside the policy could be approved.

 

9.       Auckland Council will continue with our programme to implement the recommendations made and work closely with Audit New Zealand to resolve the items.

Consideration

Local board views and implications

10.     Local boards have not been consulted because the report deals primarily with internal management issues.

Maori impact statement

11.     The report does not have any particular benefit or adverse effects on Maori.

Implementation

12.     No issues.

 

Attachments

There are no attachments for this report.    

Signatories

Author

Robert Nelson - Financial Controller

Authorisers

Kevin Ramsay - Manager Finance

Grant Taylor - Governance Director

 


Audit and Risk Committee

22 July 2014

 

Update on the introduction of International Public Sector Accounting Standards

 

File No.: CP2014/12141

 

  

 

 

Purpose

1.       To advise the Committee of the impact of the introduction of International Public Sector Accounting Standards on the financial statements of Auckland Council, and the group.

Executive summary

2.       The International Public Sector Accounting Standards (IPSAS) are a suite of accounting standards which apply specifically to public benefit entities, from the period beginning 1 July 2014.  The December 2014 and June 2015 financial statements will need to comply with IPSAS.  Comparative prior period balances in both sets of financial statements may need to be restated in order to comply with IPSAS.  The main changes compared to NZ IFRS will be presentational; there may also be some changes in the timing of revenue recognition for the December accounts.

 

Recommendation/s

That the Audit and Risk Committee:

a)      receive the report

b)      note the work undertaken to introduce the public sector reporting standards and the impact on Council’s reported financial performance.

 

Comments

 

3.       New Zealand has adopted IPSAS for all public sector reporting for years commencing 1 July 2014.  These new standards are based on the international standards amended where appropriate for New Zealand specific issues.  The main differences compared to NZ IFRS, the current reporting standards applied by Auckland Council are around the classification of revenue between ‘exchange’ and ‘non-exchange’.  The classification of exchange or non-exchange can result in a different timing for the recognition of revenue.

4.       Exchange transactions are akin to commercial transactions when the exchange between the parties is of approximately equal value.  Parking fees is an example for Council.

5.       Non-exchange transactions occur where there is not equal exchange, or where there is compulsion on one of the parties.  General rates is a good example for Auckland Council.  While the council provides a variety of public services and infrastructure to ratepayers, it does not do so in consideration for the payment of general rates.  Further, property owners cannot avoid the rate charge.

6.       Under IPSAS exchange revenue is recognised on an accrual basis as the services are provided.  This is how we currently recognise income including rates.  Non exchange revenue will in future be recognised when invoiced.  This means almost all rates will be recognised as income when the rates demands are prepared in July.  The result of this is the published accounts for the six months ended December each year will record as income almost all rate income for the year, and a large surplus will be reported in the statement of financial performance.  Previously approximately 50% of income was reported for the first six months.  There is no change to the income reported for the full year.

7.       There are a number of transactions whose classification is more subjective, such as targeted rates, development and financial contributions, consents, licensing and compliance fees.  We have used our application framework to classify these types of transactions.

8.       We are in the process of finalising this framework, together with our classification of significant revenue types.  This will be provided to Audit New Zealand to support how we will be preparing the financial statements for the Council group in the future.

Consideration

Local board views and implications

9.       No impact.

Maori impact statement

10.     No impact.

Implementation

11.     An update on progress and impacts will be provided at the next Audit and Risk Committee meeting.

 

Attachments

There are no attachments for this report.    

Signatories

Author

Robert Nelson - Financial Controller

Authorisers

Kevin Ramsay - Manager Finance

Grant Taylor - Governance Director

 


Audit and Risk Committee

22 July 2014

 

Audit and Risk Committee Oversight of Council Controlled Organisation Risk

 

File No.: CP2014/14930

 

  

 

 Purpose

1.       To consider the Audit and Risk committee’s requirement to have oversight of Council Controlled Organisation (CCO) risk, and to recommend an interim process that ensures that the committee has adequate oversight of CCO risk before making recommendations in relation to the 2013/2014 Auckland Council Annual Report.

Executive summary

2.       Auckland Council’s Audit and Risk Committee under the terms of reference is required to have oversight of CCO risk. The committee has expressed concern that it currently does not have adequate oversight of CCO risk and assurance. This report recommends an interim approach that will enable the committee to have a degree of oversight of CCO risk prior to making its recommendation to the Finance and Performance Committee in September 2014. Following the September Audit and Risk Committee meeting, staff will review this process with a view to establishing a permanent process.

 

Recommendations

That the Audit and Risk Committee:

a)      receive this report.

b)      request each Council Controlled Organisation (CCO) to provide a copy of its annual audit management letter to this committee at its September meeting.

c)      request the attendance of CCO chief finance officers to this committee at its September meeting as determined by the committee chairperson, external member Roy Tiffin and the Governance Director after reviewing the audit management letters.

d)      request staff report back on progress on a permanent solution for the Audit and Risk Committee to have greater oversight of CCO risks to its December meeting.

 

 

Comments

Introduction

3.       The terms of reference for the Auckland Council’s Audit and Risk committee includes

“Exercising active oversight of all areas of Auckland Council control and accountability (including Council Controlled Organisations), in an integrated and systematic way, such that the results of risk and assurance reviews and external audits may be incorporated in the priority-setting and strategic planning processes.”

And

“Liaison with Audit New Zealand and, where necessary, the audit committees of CCOs to ensure robust financial audits and reviews of the Auckland Council group.”

4.       The committee has expressed concern that it does not currently have adequate oversight of CCO risk and assurance, particularly financial risk.  Following the 15 April 2014 committee meeting the chair of the Audit and Risk Committee, Cr Sir John Walker, wrote to the Auckland Council Chief Executive requesting a report to the July 2014 meeting of the Audit and Risk committee about how the committee could achieve greater oversight of CCO risk.

Council need for oversight of CCO risk

5.       Nearly one quarter of Auckland Council annual rates revenue funds CCO operational expenses. CCOs are responsible for delivering nearly half of the council’s capital expenditure programme, and 70% of the council’s total assets are owned by CCOs. Auckland is unique amongst New Zealand local authorities with respect to the value of business being delivered through arm’s length entities. The council is accountable to the public for public funding provided to CCOs and for public assets owned by CCOs and requires assurance that risks are being adequately managed by CCOs.

6.       The need for the council to have greater oversight of group financial risk and assurance is strengthened by the council taking a group approach to its financial reporting.   In September each year, the Audit and Risk Committee is required to consider whether there are any outstanding audit or risk matters that would provide a reason not to approve the council’s Annual Report. The committee makes a recommendation to the Council’s Finance and Performance committee based on its assessment. Currently the committee must rely on advice from the Auditor General as to whether there are any such matters arising from CCO risk. The committee’s view it that it needs to be able to make this assessment itself.

7.       Under the Local Government Auckland Council Act 2009, the Auckland Council can introduce planning and reporting requirements for CCOs beyond the normal Local Government Act 2002 provisions. This legal power recognises that Auckland Council delivers much of its core business through CCOs.

8.       Staff have consulted with CCOs in the preparation of this report. There is a high level of support for enhanced oversight of CCO risk by the council, provided that it does not increase the burden of reporting unnecessarily.

CCO boards and risk management

9.       Risk management is a key responsibility of a board of directors. In putting in place mechanisms to increase its oversight of risk and assurance, the council must ensure that it does not undermine the role of the boards nor diminish the boards’ responsibility. Provided that the committee maintains a role of oversight of risk rather than management of CCO risk, this situation should not arise.

CCO approaches to risk management, internal audit and external audit

10.     CCO’s approach to risk management, internal and external audit is summarised in the table below

CCO

Risk Management

Internal Audit

External Audit

Auckland Council Investments Limited

A risk register that is maintained and reviewed by management with Audit and Risk Committee (ARC) oversight annually.

No internal audit function or dedicated resource. Dependent on Auckland Council representation and obligations under the Master Service Agreement (MSA).

Deloitte on behalf of the Auditor General. The ARC also has Deloitte present at its meeting to discuss any matters of concern with them without management in attendance.

Auckland Council Property Limited

Risk registered reviewed and updated on a monthly basis at management level. Full risk report prepared on a quarterly basis and discuss at a management, ARC and full board level. Further health and safety risk reporting is provided to the board on a monthly basis.

No internal audit function or dedicated resource. Dependent on Auckland Council representation and obligations under the MSA. Internal processes developed around health and safely and conflict of interest for staff and directors.

Undertaken by Audit New Zealand. Audit engagement/arrangement discussed by the audit and risk committee.

 

Auckland Tourism Events and Economic Development

Internally managed, Risk Manager reports to CFO.  Detailed quarterly risk reporting to Board.  Regular monthly reporting of all portfolio risk to leadership team and update of any changes to risk via CE report to board each month.  Financial risk monitored by ARC quarterly; updated forecasts to board quarterly.  Quarterly reporting of any high or critical risk to the CCO governance and monitoring committee (this covers all risk and is not limited to financial risk).

No internal audit function or dedicated resource. Dependent on Auckland Council representation and obligations under the MSA. Considering proposal to outsource this function in 2014/15.

Undertaken by Audit New Zealand.

 

Auckland Transport

All risks are managed via a risk register. At the board level, the ARC which is a committee of the whole deal with all risk management and monitoring. Risk registers are maintained at multiple levels across the organisation under an Enterprise Risk Framework Policy approved by the Board

Maintain an internal risk and audit function that undertakes an annual programme based on risk assessments.

Undertaken by Audit New Zealand.

The OAG also undertakes periodic special topic audits. For example they are about to undertake one on the AMETI project

Regional Facilities Auckland

Internally managed under the Enterprise Risk Framework Policy developed and approved by the board. Reported to the Audit and Risk committee on a quarterly basis. Relevant Risks are reported to the whole board via the CE’s report on a monthly basis.

Internally managed with PWC assistance and Auckland Council internal audit oversight under the MSA.

Undertaken by Audit New Zealand.

 

Watercare Services Limited

Enterprise, operational and health and safety risk is managed by the Board at each meeting. Financial risks are managed via the ARC which meets 4-5 times per year. Risk registers are maintained at multiple levels across the organisation under an Enterprise Risk Framework Policy approved by the Board.

Maintain an internal risk and audit function that undertakes an annual programme based on risk assessments and reports into the ARC.

Deloitte on behalf of the Auditor General. They attend all ARC meetings and meets alone with the Committee at the end of each meeting.

Waterfront Auckland

Internally managed with PWC support at board level workshops. Reported at least quarterly to the board.

KPMG currently.

Undertaken by Audit New Zealand.

 

 

Proposed approach

11.     This report recommends an interim approach that will enable the committee to have a degree of oversight of CCO risk prior to making its recommendation to the Finance and Performance Committee in September 2014.

12.     The recommendation is for each CCO to provide a copy of its annual audit management letter to this committee at its September meeting. These reports focus on the most significant areas of financial risk and control, and include management response to address any specific changes that might be required to manage risk.

13.     This interim solution has some drawbacks including:

·    The focus of the auditor’s report is on financial risk rather than providing a comprehensive overview of risk.

·    It bypasses the CCO Governance and Monitoring Committee which is the committee responsible for monitoring CCO performance. Ideally the CCO Governance and Monitoring Committee would be the conduit for CCO reporting to the Council’s Audit and Risk Committee.

14.     Notwithstanding these points, the interim solution is an improvement upon the current situation.

15.     The report also recommends that the committee requests the attendance of CCO chief finance officers (CFO) at its September meeting as appropriate.

Next Steps

16.     Following the September Audit and Risk Committee meeting, staff will review this process with a view to establishing a permanent process. The view of staff is that the long-term solution is for reporting to occur through the CCO Governance and Monitoring Committee who would then refer the reports to the Audit and Risk Committee. The review will also consider the most appropriate timing and scope of future reporting.  Ideally the process should enable the committee to have oversight of current issues rather than purely retrospective reporting.

Consideration

Local board views and implications

17.     The matters raised in this report relate to CCO accountability and governance which is a Governing Body function.

Maori impact statement

18.     Oversight of CCO risk by the council’s Audit and Risk Committee has no specific implications for Maori wellbeing and does not raise any matters requiring iwi consultation.

Implementation

19.     The report identifies that further work is required to develop a long-term solution to the issues raised by the committee. This further work will cover the nature, scope and timing of risk reporting by CCOs.

 

Attachments

There are no attachments for this report.    

Signatories

Authors

Catherine Syme - Principal Advisor, CCO Governance and External Partnerships

Andrew John - Funding Manager

Authorisers

Mark Butcher - Treasurer

Andrew McKenzie - Chief Finance Officer

Grant Taylor - Governance Director

 


Audit and Risk Committee

22 July 2014

 

Update on Risk Management Activities

 

File No.: CP2014/14980

 

  

 

 

Purpose

1.       This report summarises the activities undertaken by the Risk Management department since the last report to the Audit and Risk Committee in April 2014.

Executive summary

2.       The Risk Management department continued to implement Enterprise Risk Management (ERM) as per the Strategic Plan 2012-17.

 

Recommendation/s

That the Audit and Risk Committee:

a)      receive the Update on Risk Management Activities report.

 

 

Comments

 

3.       Organisation-wide Risk Registers

Risk Management is currently in the investigation phase of getting an appropriate risk management system to provide the required single-point visibility of risks across council.  Risk data is currently being gathered from across all business areas and reviewed to ensure high quality and accuracy risk information. A risk workshop with the ELT is planned for 22 August where top risks will be finalised and follow up planning agreed.

4.       Targeted Risk Review

Information Services (IS) risk review is currently in progress and scheduled to be completed in the first quarter of the new financial year (2014/15). 

The scope of the review is to identify and prioritise the high level risks that exist within the IS function, together with proposed remediation in the following areas:

a)   Information Technology direction and oversight

b)   IT management

c)   Business system development

d)   IT infrastructure operations

5.       Enterprise Risk Management Framework

The ERM Framework identifies risk categories with relevant risk tolerance limits.  To ensure adequate mitigation is in place, specific risk frameworks are being continually developed in high risk/strategic areas to get greater coverage from a risk management perspective.  The key focus areas in the last quarter were:

·     Programme and Project Risk Framework – NewCore programme risks has been a key focus area and a monthly review of risks for the programme continues with high level risks escalated, as appropriate to the required stakeholders.

·     Liability Risk Framework - to ensure that council minimizes potential risk exposures around financial liability, through contractual arrangements, health and safety and other regulatory or compliance requirements, the team continues to work with the relevant areas, as and when required.  Risk Management is currently working with Procurement, Legal and Insurance in an effort to bring consistency in managing Professional Indemnity and Public Liability insurance requirements across council.  Council is also currently undergoing a Health & Safety transformation programme which will further enhance this framework.

·     Treasury Risk Framework - quarterly and ad hoc meetings, as appropriate, are held with the Treasurer to review treasury risks, potential non-compliance to policy and emerging risks in the debt markets.  With the Treasurer and the Chief Financial Officer’s resignation, key person risk is being managed by People and Capability (formerly Human Resources) division, together with the current incumbents. 

·     Asset Management Planning Framework - Council is exposed to considerable risks due to the scale of the assets it owns and manages. Risk Management is working closely with the Asset Management Planning team to further embed risk management requirements.  A steering committee was established recently and Risk Management will continue to provide risk oversight.

·     Fraud Risk Framework – we continue to work closely with the Ethics and Integrity Officer to minimize fraud risks and assist as and when required.

6.       Risk Management Workshop

No workshops were conducted due to the Risk Management team’s active involvement in the business planning process across council for the 2014/15 financial year.

 

7.       Project Risk Management

Risk Management provides risk oversight to the various project teams by ensuring risks are identified, documented and monitored as part of the Programme and Project Risk Framework.

          The projects that Risk Management is involved in are:

1.   NewCore

2.   Workplace Strategy

3.   The Southern Initiative

4.   Asset Management Planning

5.   Waiheke Library

6.   Lopdell House and Gallery Refurbishment

7.   NorSGa

8.   Quay Street Seawall

9.   Auckland Harbour Bridge SkyPath

10. World Masters Games (2017) – not initiated yet.

11. Revaluation and Rates

8.       A new senior role of Head of Risk has been established. The Position Description has had input from Roy Tiffin and has been agreed by the ELT and discussed with the existing risk team. The recruitment process has now started and once the incumbent is appointed, will report to the General Counsel.

Consideration

Local board views and implications

9.       Local boards have not been consulted because the report primarily deals with internal management issues.

Maori impact statement

10.     This report does not have any particular benefit or adverse effects on Maori.

Implementation

11.     None

 

 

Attachments

There are no attachments for this report.    

Signatories

Author

Aashmita Naikar - Risk Manager

Authorisers

Alan Brookbanks – People & Capability Director

Grant Taylor - Governance Director

 


Audit and Risk Committee

22 July 2014

 

Review of business processes relating to elected members

 

File No.: CP2014/15900

 

  

 

 

Purpose

1.       To advise the Committee on the findings of a review conducted with the help of PricewaterhouseCoopers (PWC) on processes related to elected members.

Executive summary

2.       Auckland Council, through its Democracy Services and Local Board Services Departments, is responsible for administering a number of sensitive business processes relating to elected members.   There can be public criticism if it is perceived that these processes are not robust or transparent enough. 

3.       PWC were engaged to help review the two Departments’ processes and make recommendations for improvements.

4.       The review established that processes were essentially sound but that there were opportunities for improvements. These opportunities are detailed in the body of the report.

 

Recommendation/s

That the Audit and Risk Committee:

a)      note the findings of the review of business processes relating to elected members undertaken  by Democracy Services and Local Board Services.

 

 

Comments

 

Background

 

5.       There is public sensitivity around processes relating to elected members’ support and decision-making. It is important for Council to ensure that its processes are robust, transparent and legally-compliant. Non-compliance can lead to considerable public criticism. 

6.       At the beginning of 2014 the Democracy Services and Local Boards Services Departments decided to undertake a review of the business processes underpinning their administrative support and legislative compliance functions, and obtain advice on how to improve these processes. They also wanted to ensure that they worked effectively with other relevant parts of Council to provide that support, including the Mayor’s office.

7.       The two departments undertook a closed tender process to select a reputable external service provider that could help conduct this process review.  Proposals were received from three providers, with PWC being engaged.

Processes reviewed

 

8.       PWC helped review the following processes:

·     payroll processes – incorporating expense and mileage claims

·     travel

·     conferences/personal development/membership costs

·     other expenses (e.g. parking)

·     other sensitive expenditure

·     declaration of interests (annual declarations and conflicts of Interests declared at meetings)

·     gift register

·     statutory declarations (made at the swearing-in ceremonies)

·     record of elected members’ meeting attendance

·     election expenses.

 

9.       The approach adopted included:

 

(i)       undertaking a current state assessment of the processes being followed by Democracy Services, Local Board Services and the Mayor’s Office

(ii)      identifying opportunities for improvement

(iii)     compiling a comprehensive record of all processes, incorporating PWC’s recommendations for good practice.

 

Overall findings

 

10.     The project is about to be completed, with some final tasked to be finished. Overall the project has provided assurance that current processes are essentially sound, but also identified some opportunities for improvement which are now being implemented.

 

Opportunities for improvement

 

Technology provided to members

11.     Members should not make personal use of equipment provided to them, however occasional personal use of technology such as mobile phones cannot reasonably be avoided.  In such instances members should reimburse the Council for their personal use.  The process for providing members with information on which to base such reimbursement was complicated to understand.  Improvements have been made to create a cleaner report and establish a simpler process for making reimbursement.  This is still not ideal and Democracy Services will continue to work on improving the reports provided to members.

12.     Further improvements could be made by using other call and data plans for elected members. However Council is currently reviewing its telecommunications contract, and until negotiations are finalised with a telco provider changes cannot be made to the current plans. 

Record of meeting attendance

13.     The minutes of meetings record meeting attendance for each meeting, however the process for keeping a cumulative record of attendances by all members for all meetings requires improvement.  Current processes are manual and time-consuming and Democracy Services and Local Board Services are implementing more efficient methods for doing this, within current IT systems limitations.

Declarations of interest and gift register

14.     Compliance with the requirement of the Code of Conduct for an annual declaration of interest and gifts over $300 is monitored by Audit NZ.  There are barriers to compliance if the processes for making such declarations are burdensome on elected members.  Democracy Services has simplified its processes to make them easier for members. For declarations of interest, Members now only need to enter information which has changed since their previous declaration. A section has been added to the members’ expense claim forms to enable declaration of gifts on a monthly basis. Democracy Services is progressing a move to more automated electronic processes for gathering and keeping these declarations.

Consideration

Local board views and implications

15.     The process review was a joint project between Democracy Services and Local Board Services as all processes affect both Governing Body and Local Board members. 

Maori impact statement

16.     The processes which were reviewed relate to internal procedures for elected members and do not have an impact on the Māori community.

Implementation

17.     Declarations of interest are required to be made in the month of July, following the financial year end.  Indications to date are that the response rate by elected members has improved using the new process.

18.     Members can now declare gifts over $300 at the time of offer using their monthly claim forms. This information is captured monthly in the gift register managed by Democracy Services.

 

 

Attachments

There are no attachments for this report.    

Signatories

Author

Warwick McNaughton - Principal Advisor - Democracy Services

Authorisers

Marguerite Delbet - Manager Democracy Services

Grant Taylor - Governance Director

      

 


Audit and Risk Committee

22 July 2014

 

Exclusion of the Public: Local Government Official Information and Meetings Act 1987

 

That the Audit and Risk Committee:

a)      exclude the public from the following part(s) of the proceedings of this meeting.

The general subject of each matter to be considered while the public is excluded, the reason for passing this resolution in relation to each 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 follows.

This resolution is made in reliance on section 48(1)(a) of the Local Government Official Information and Meetings Act 1987 and the particular interest or interests protected by section 6 or section 7 of that Act which would be prejudiced by the holding of the whole or relevant part of the proceedings of the meeting in public, as follows:

 

C1       Update on Internal Audit Activities

Reason for passing this resolution in relation to each matter

Particular interest(s) protected (where applicable)

Ground(s) under section 48(1) for the passing of this resolution

The public conduct of the part of the meeting would be likely to result in the disclosure of information for which good reason for withholding exists under section 7.

s7(2)(h) - The withholding of the information is necessary to enable the local authority to carry out, without prejudice or disadvantage, commercial activities.

In particular, the report contains financial and operational information and details of Internal Audit activity which if released may jeopardise the effective delivery of Internal Audit services..

s48(1)(a)

The public conduct of the part of the meeting would be likely to result in the disclosure of information for which good reason for withholding exists under section 7.

 

C2       Update on Integrity and Investigation Activities

Reason for passing this resolution in relation to each matter

Particular interest(s) protected (where applicable)

Ground(s) under section 48(1) for the passing of this resolution

The public conduct of the part of the meeting would be likely to result in the disclosure of information for which good reason for withholding exists under section 6.

s6(a) - The making available of the information would be likely to prejudice the maintenance of the law, including the prevention, investigation, and detection of offences and the right to a fair trial.

In particular, the report contains financial and operational information regarding investigations which if released may jeopardise the effective delivery of Integrity services..

s48(1)(a)

The public conduct of the part of the meeting would be likely to result in the disclosure of information for which good reason for withholding exists under section 6.

 

C3       Selection of Second External Appointee

Reason for passing this resolution in relation to each matter

Particular interest(s) protected (where applicable)

Ground(s) under section 48(1) for the passing of this resolution

The public conduct of the part of the meeting would be likely to result in the disclosure of information for which good reason for withholding exists under section 7.

s7(2)(a) - The withholding of the information is necessary to protect the privacy of natural persons, including that of a deceased person.

In particular, the report contains personal information relating to the appointment of a committee member.

s48(1)(a)

The public conduct of the part of the meeting would be likely to result in the disclosure of information for which good reason for withholding exists under section 7.