Agenda of Audit and Risk Committee

TERMS OF REFERENCE

Purpose

The purpose of the Audit and Risk Committee is to assist and advise the Governing Body in discharging its responsibility and ownership of governance, risk management, and internal control.

The committee will review the effectiveness of the following aspects of governance, risk management and internal control:

· enterprise risk management (ERM) across the Auckland Council group

· internal and external audit and assurance

· integrity and investigations

· monitoring of compliance with laws and regulations

· significant projects and programmes of work focussing on the appropriate management of risk

· oversight of preparation of the LTP, Annual Report, and other external financial reports required by statute.

The scope of the committee includes the oversight of risk management and assurance across council’s CCOs with respect to risk that is significant to the Auckland Council group.

To perform his or her role effectively, each committee member must develop and maintain his or her skills and knowledge, including an understanding of the committee’s responsibilities, and of the council’s business, operations and risks.

Decision-Making Powers

The committee has no decision making powers.

The committee may request expert advice through the chief executive where necessary.

The committee may make recommendations to the Governing Body and / or chief executive.

Tenure

External members will be appointed for an initial period not exceeding three years, after which they will be eligible for extension or re-appointment, after a formal review of their performance, and have not already served two terms on the committee. Councillors appointed to the committee will automatically cease to hold office at the time of the local authority triennial elections. They may be eligible for re-appointment post those elections if they are returned to office and have not already served two terms on the committee.

The chief executive, and the senior management team members will not be members of the committee.

The members, taken collectively, will have a broad range of skills and experience relevant to the operations of the council. At least one member of the committee should have accounting or related financial management experience, with an understanding of accounting and auditing standards in a public sector environment.

Committee’s responsibilities

The committee’s responsibilities are detailed below.

Forward Work Programme

The committee will agree and approve annually a forward work programme – which will consist of in depth briefings and reviews of specific significant risks and assurance strategies, as contained in the ERM “Top Risks” or Auckland Council’s work plan.

Risk management

· Review, approve and monitor the implementation of the ERM policy, framework and strategy (including risks pertaining to CCOs that are significant to the Auckland Council group).

· Review and approve the council’s “risk appetite” statement.

· Review the effectiveness of risk management and internal control systems including all material financial, operational, compliance and other material controls. This includes legislative compliance (including Health and Safety), significant projects and programmes of work, and significant procurement.

Review risk management reports identifying new and / or emerging risks, and any subsequent changes to the ERM “Top Risk” register.

Internal Audit

· Review annually the Internal Audit Charter – which confirms the authority, independence and scope of the function.

· Review and approve annually and monitor the implementation of the 3 year Internal Audit Strategy and 12 month detailed Internal Audit Plan.

· Review the co-ordination between the risk and internal audit functions – including the integration of the council’s ERM risk profile with the Internal Audit programme. This includes assurance over all material financial, operational, compliance and other material controls. This includes legislative compliance (including Health and Safety), significant projects and programmes of work, and significant procurement.

· Review the reports of the Internal Audit functions dealing with findings, conclusions and recommendations (including assurance over risks pertaining to CCOs that are significant to the Auckland Council group)

Review and monitor management’s responsiveness to the findings and recommendations – enquiring into the reasons that any recommendation is not acted upon.

Fraud and Integrity

· Review and approve annually, and monitor the implementation of, the Fraud and Integrity Strategy, including detailed work programme.

· Review annually the whistleblowing procedures and ensure that arrangements are in place by which staff, may, in confidence, raise concerns about possible improprieties in matters of financial reporting, financial control or any other matters, and that there is proportionate and independent investigation of such matters and appropriate follow-up action.

· Review the procedures in relation to the prevention, detection, reporting and investigation of bribery and fraud.

· Review and monitor policy and process to manage conflicts of interest amongst elected members, local board members, management, staff, consultants and contractors.

Review reports from the Risk, Internal Audit, Integrity and Investigations, external audit and management related to whistle blower, ethics, bribery and fraud related incidents.

Statutory Reporting

Review and monitor the integrity of the interim and annual report including statutory financial statements and any other formal announcements relating to the council’s financial performance, focussing particularly on:

· compliance with, and the appropriate application of, relevant accounting policies, practices and accounting standards

· compliance with applicable legal requirements relevant to statutory reporting

· the consistency of application of accounting policies, across reporting periods, and the Auckland Council group

· changes to accounting policies and practices that may affect the way that accounts are presented

· any decisions involving significant judgement, estimation or uncertainty

· the extent to which financial statements are affected by any unusual transactions and the manner in which they are disclosed

· the disclosure of contingent liabilities and contingent assets

· the clarity of disclosures generally

· the basis for the adoption of the going concern assumption

significant adjustments resulting from the audit.

External Audit

· Discuss with the external auditor before the audit commences:

· the nature and scope of the external audit

· areas of audit focus

· error and materiality levels.

· Review with the external auditors representations required by elected members and senior management, including representations as to the fraud and integrity control environment.

· Review the external auditors management letter and management responses, and inquire into reasons for any recommendations not acted upon.

Where required, the chair may ask a senior representative of the Office of the Auditor General to attend the committee meetings to discuss the office’s plans, findings and other matters of mutual interest.

Interaction with Council Controlled Organisations

Other committees dealing with CCO matters may refer matters to the Audit and Risk Committee for review and advice.

This committee will enquire to ensure adequate processes at a governance level exist to identify and manage risks within a CCO. Where an identified risk may impact on Auckland Council or the wider group, the committee will also ensure that all affected entities are aware of and appropriately managing the risk.

The Head of Risk and Head of Internal Audit are responsible for the provision of quality risk, assurance, insurance and ethics and integrity services for all CCOs except Auckland Transport and Watercare (with the exception of insurance services which are provided to Auckland Transport). Auckland Transport and Watercare have their own risk and assurance functions. The Head of Risk and Head of Internal Audit are responsible for monitoring CCO risk and internal audit strategies with respect to risks that are significant to the Auckland Council group.

Annual Report on the work of the committee

The chair of the committee will submit a written review of the performance of the committee to the chief executive on an annual basis. The review will summarise the activities of the committee and how it has contributed to the council’s governance and strategic objectives. The chief executive will place the report on the next available agenda of the governing body.

Exclusion of the public – who needs to leave the meeting

Members of the public

All members of the public must leave the meeting when the public are excluded unless a resolution is passed permitting a person to remain because their knowledge will assist the meeting.

Those who are not members of the public

General principles

· Access to confidential information is managed on a “need to know” basis where access to the information is required in order for a person to perform their role.

· Those who are not members of the meeting (see list below) must leave unless it is necessary for them to remain and hear the debate in order to perform their role.

· Those who need to be present for one confidential item can remain only for that item and must leave the room for any other confidential items.

· In any case of doubt, the ruling of the chairperson is final.

Members of the meeting

· The members of the meeting remain (all Governing Body members if the meeting is a Governing Body meeting; all members of the committee if the meeting is a committee meeting).

· However, standing orders require that a councillor who has a pecuniary conflict of interest leave the room.

· All councillors have the right to attend any meeting of a committee and councillors who are not members of a committee may remain, subject to any limitations in standing orders.

Independent Māori Statutory Board

· Members of the Independent Māori Statutory Board who are appointed members of the committee remain.

· Independent Māori Statutory Board members and staff remain if this is necessary in order for them to perform their role.

Staff

· All staff supporting the meeting (administrative, senior management) remain.

· Other staff who need to because of their role may remain.

Local Board members

· Local Board members who need to hear the matter being discussed in order to perform their role may remain. This will usually be if the matter affects, or is relevant to, a particular Local Board area.

Council Controlled Organisations

· Representatives of a Council Controlled Organisation can remain only if required to for discussion of a matter relevant to the Council Controlled Organisation.

1 Apologies

At the close of the agenda no apologies had 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

There are minutes for confirmation.

4 Petitions

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

5 Public Input

Standing Order 7.7 provides for Public Input. Applications to speak must be made to the Democracy Advisor, in writing, no later than one (1) clear working day 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 6.2 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 one (1) day’s 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 6.1 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

01 March 2017

Audit and Risk Committee Forward Work Programme

File No.: CP2017/00580

Purpose

1. To review and approve the Audit and Risk Committee’s three year forward work programme.

Executive summary

2. A draft forward work programme has been presented for the committee’s review and approval.

3. The forward work programme will be reviewed at each committee meeting, to ensure that it can be adapted quickly if council’s risk profile changes; and that it remains relevant to the needs of the Committee.

Recommendation/s

That the Audit and Risk Committee:

a) approve the three year forward work programme.

Comments

4. The proposed forward work programme is attached at Appendix A.

5. The forward work programme reflects:

· The incorporation of “deep dive” reviews with respect to significant “high” and “moderate” risks relevant to the committee’s Terms of Reference, as contained in council’s Enterprise Risk Management “Top Risk” register;

· The annual work programme with respect to

o the Risk and Insurance functions

o the Internal Audit and Integrity functions

o the audits of the annual report, Long-term Plan and Annual Plan

o the review of the six month interim financial statements

· Regular progress reporting at each committee meeting with respect to

o Internal Audit and Integrity

o Risk

o Legal Risk

o Health and safety

· Any other item of relevance to the committee’s Terms of Reference e.g. Auditor General reports.

6. It is recognised that for the committee to give due consideration to the specific focus areas identified for “deep dive” reviews, sufficient time needs to be devoted. We believe that the most effective means of considering specific topics in a “full and frank” manner is by way of workshops. These will take place immediately prior to each committee meeting.

7. The workshops do not replace the need for formal reporting to the committee.

8. The committee needs to be briefed on the following areas. It is proposed to do this briefing by way of workshop, which will be scheduled prior to the next meeting of this committee:

· Financial briefing (core risk #9 assessed as high risk - Delivery of Commitments - Funding)

· Legal Compliance (core risk #8 – assessed as high risk)

· Insurance Programme/Profiling

· NewCore

· CCO Risk Reporting

9. It is good practice that the committee, as a standing item at each meeting, review and confirm its forward work programme. This is to ensure that the work programme is flexible, can be adapted quickly if council’s risk profile changes and remains relevant to the needs of the committee.

10. For example, it would be appropriate for the committee to consider a change to the approved forward work programme in the event there has been a significant change in the risk profile of council as reflected in the “top risk” register. Similarly a significant event occurring either within council or in the wider operating environment could result in a change in the work programme of the committee.

Consideration

Local board views and implications

11. There are no specific impacts for local boards associated with this report.

Māori impact statement

12. There are no specific impacts for Māori associated with this report.

Implementation

13. There are no implementation issues associated with this report.

Attachments

No.	Title	Page
a ⇩	Draft Forward Work Programme	15

Signatories

Author	Mark Maloney - Head of Internal Audit
Authoriser	Phil Wilson - Governance Director

Audit and Risk Committee

01 March 2017

Approval of the Audit New Zealand audit fee proposal and audit arrangements letters

File No.: CP2016/25375

Purpose

1. The report provides the draft Audit New Zealand draft Audit Fee Proposal letter for the three years from 1 July 2016 to 30 June 2019 and the draft Audit Arrangements letter for the 30 June 2017 audit of the annual report for the Auckland Council Group for approval before the final letters are signed by the Mayor and Chief Executive.

Executive summary

2. Audit New Zealand has provided the draft Audit Fee Proposal letter for the three years from 1 July 2016 to 30 June 2019 and the Audit Arrangements letter for the 30 June 2017 audit of the annual report for the Auckland Council Group.

3. In addition to the draft letters above at the 13 December 2016 Finance and Performance Committee meeting the Audit New Zealand Audit Engagement letter for the three years from 1 July 2016 to 30 June 2019 and the Review Engagement letter for the six months ended 31 December 2016 were presented. The committee advised Audit New Zealand to issue the letters in final and recommended that the Mayor and Chief Executive sign them.

4. The draft Audit Fee Proposal letter and Audit Arrangement letter have been reviewed by Ms Sue Sheldon, Chair of the Audit and Risk Committee, Mr Paul Conder and Mr Bruce Robertson, independent members of the committee. The chair will provide a verbal update to the committee meeting on 1 March 2017.

5. These letters are provided in draft and are required to be approved by the Audit and Risk Committee before Audit New Zealand issues the final letters for signing by the Mayor and Chief Executive.

Recommendation/s

That the Audit and Risk Committee:

a) approve the draft Audit New Zealand Audit Fee Proposal letter for the three years from 1 July 2016 to 30 June 2019 and the draft Audit Arrangements letter for the 30 June 2017 audit of the annual report for the Auckland Council Group.

b) instruct Audit New Zealand to issue the final letters.

c) delegate the Mayor and Chief Executive to sign the finalised letters.

Comments

6. Jo Smaill, Audit New Zealand Audit Director, will be in attendance to answer any questions the committee may have.

7. Audit New Zealand has issued the following draft letters:

· Audit Engagement letter for the three years from 1 July 2016 to 30 June 2019 – presented and approved at the 13 December 2016 Financial and Performance Committee;

· Review Engagement letter for the six months ended 31 December 2016 - presented and approved at the 13 December 2016 Financial and Performance Committee;

· Audit Fee Proposal letter for the three years from 1 July 2016 to 30 June 2019 - presented as part of this paper to the Audit and Risk Committee (Attachment A);

· Audit Arrangements letter for the 30 June 2017 audit of the annual report - presented as part of this paper to the Audit and Risk Committee (Attachment B).

Audit Fee Proposal letter

8. The Audit Fee Proposal letter for the three years from 1 July 2016 to 30 June 2019 outlines the details of the proposed audit fees for the Auckland Council parent accounts along with the consolidation of the group accounts for the reporting periods ended 30 June 2017, 30 June 2018 and 30 June 2019.

9. The draft letter states the proposed number of hours (of 5,290 for each year – no change from that for the previous three years) and the total proposed audit fee excluding disbursements for the reporting period ended 30 June 2017 is $1,156,999, an increase on the year ended 30 June 2016 of $32,392 or 2.9 per cent, which is a direct reflection of the hours they are proposing and the change in staff mix they intend to use to complete the audits. The fee proposed for 2018 is $1,189,641 and for 2019 is $1,213,434 representing increases of 2.8 per cent and 2 per cent respectively.

10. We consider the proposed number of hours and fee to be reasonable given the size and complexity of the audit and experience from previous audits.

Audit Arrangements letter

11. The Audit Arrangements letter for the 30 June 2017 audit of the annual report articulates the key audit matters, significant business and reporting risks and Audit New Zealand’s audit response to these, together with logistical matters such as the audit term, audit timing and reporting deliverables.

12. In October 2015 the New Zealand Auditing and Assurance Standards Board finalised new auditing standards, which includes a requirement for auditors of listed issuers, and Financial Market Conduct reporting entities considered to have a higher level of public accountability (as referred to in the Financial Markets Conduct Act 2013), to communicate details of key audit matters in the auditor’s report.

13. Audit New Zealand will report on key audit matters as part of the audit report on the council’s financial statements for the year ending 30 June 2017.

14. Key audit matters are defined as those matters that, in the auditor’s professional judgement, are of the most significance in the audit of the financial statements of the current period. The focus will be on areas of significant auditor attention, including:

· areas identified as significant risk or involving significant auditor judgement;

· areas in which the auditor encountered significant difficulty during the audit, including with respect to obtaining sufficient appropriate audit evidence; and

· circumstances that required significant modification of the auditor’s planned approach to the audit, including as a result of the identification of a significant deficiency in internal control.

15. As Auckland Council is an issuer, the Group Annual Report audit opinion (starting from the year ended 30 June 2017) will include the auditors’ comments of the key audit matters. The key audit matters currently identified are:

· Valuation of operational and infrastructure assets;

· Derivatives;

· Valuation of significant weathertightness provision; and

· Significant performance reporting issues – housing and transport.

16. The letter also outlines other areas of focus which include:

· City Rail Link (CRL), including overview of project management practices and transfer of project and costs;

· Newcore – including risk management, data migration, benefit and valuation of work in progress;

· Project management – including non-compliance with council policies, procedures and good practice;

· Procurement – including non-compliance with council policies, procedures and good practice and procurement decision making;

· Contract management – including contract monitoring arrangements, good practice processes and delivery by contractors;

· Infrastructure and financial strategies - including asset management, housing infrastructure fund, impairment and completed projects;

· Other provisions - including Eden Park guarantee and accuracy and completeness of provisions;

· Tamaki Redevelopment Company – including recording of the investment and managing risks associated with a large scale redevelopment;

· Rates setting – including legislative compliance and rate setting processes;

· World Masters Games (subsidiary of ATEED) - including recording of the investing, project management practices and reporting performance and outcomes;

· Unitary Plan, managing the implementation of the revised regulatory processes and resultant delivery of housing and infrastructure initiatives;

· Mayor’s office – transitional risks, system changes and internal controls and expense approval processes; and

· Statement of Service performance – systems and controls over performance information reporting processes.

17. The contents of the letters have been reviewed by Ms Sue Sheldon, Chair of the Audit and Risk Committee, Mr Paul Conder and Mr Bruce Robertson, independent members of the committee. The chair will provide a verbal update at the committee meeting on 1 March 2017.

Consideration

Local board views and implications

18. This report applies to the audit fee proposal and arrangements for the Auckland Council Group which do not include reporting at a local board level. Accordingly the views of local boards have not been sought.

Māori impact statement

19. The audit fee proposal and arrangements do not affect the achievement or reporting of council’s contribution towards Māori outcomes.

Implementation

20. Once the final version of these letters is issued by Audit New Zealand, the letters will be signed by the Mayor and Chief Executive.

Attachments

No.	Title	Page
a ⇩	Audit Fee Proposal letter for the three years from 1 July 2016 to 30 June 2019	31
b ⇩	Audit Arrangements letter for the 30 June 2017 audit of the annual report	39

Signatories

Author

Francis Caetano - Group Financial Controller

Authorisers

Kevin Ramsay - General Manager Corporate Finance and Property

Phil Wilson - Governance Director

Audit and Risk Committee

01 March 2017

Auckland Council and Group pro forma financial statements for the year ending 30 June 2017

File No.: CP2016/25373

Purpose

1. To present the Auckland Council and Group pro forma financial statements for the year ended 30 June 2017 for approval.

Executive summary

2. The Auckland Council Group financial statements are published as volume three of the Annual Report issued for the year ended 30 June 2017.

3. These pro forma financial statements are presented to the committee to provide the members with the opportunity to review and approve the reporting format before the commencement of the financial year end audit.

4. A major project was completed during the financial year ended 30 June 2016 in which the Auckland Council and Group Annual Report, including the financial statements and performance reporting, were streamlined. The objective of the project was improving the readability and flow of the financial statements and performance reporting, and to remove duplicate and immaterial information so readers can focus on the relevant and important information.

5. For the financial year ended 30 June 2017 staff do not recommend any major changes are made to the pro forma financial statements. There have been no material changes in the accounting standards and local government legislation affecting financial reporting and disclosures for this year.

6. This year minor improvements are being made to address feedback from Audit New Zealand to improve disclosures such as the weathertightness provision and the financial risk management note.

7. Ms Sue Sheldon, chair of the committee, Mr Paul Conder and Mr Bruce Robertson, independent members of the committee, will review and provide comments on the financial statements as part of the financial year audit process.

Recommendation/s

That the Audit and Risk Committee:

a) approve the 30 June 2017 pro forma financial statements for Auckland Council and Group, subject to the pro forma financial statements being updated for any changes identified during the 30 June 2017 audit process.

b) delegate to Ms Sue Sheldon, Mr Paul Conder and Mr Bruce Robertson authority to approve any amendments that occur during the 30 June 2017 audit process.

c) delegate authority to Ms Sue Sheldon, Mr Paul Conder and Mr Bruce Robertson to review and provide comments on the draft Auckland Council and Group 2016/2017 Annual Report and Summary Annual Report and verbally report to the September 2017 meeting of this Committee on the progress, findings and conclusions on the suitability of the reports for adoption.

Comments

8. The Auckland Council and Group 2016/2017 Annual Report and Summary Annual Report comprises the following:

· Volume One: Overview and Service Performance

· Volume Two: Local Boards

· Volume Three: Financial Statements

· Summary Annual Report

9. The 2016/2017 Annual Report compares and comments on the performance of Auckland Council and Group against the budget and performance targets set in the Annual Plan.

10. The Auckland Council and Group financial statements are published as volume three of the 2016/2017 Annual Report. The financial statements are completed in accordance with the New Zealand Generally Accepted Accounting Practice, the Local Government Act 2002, the Local Government (Auckland Council) Act 2009, the Local Government (Financial Reporting and Prudence) Regulations 2014, and comply with the Public Benefit Entity Accounting Standards.

11. The 2016/2017 Annual Report and Summary Annual Report are audited by the Auditor-General, who has appointed Jo Smaill of Audit New Zealand to undertake the audit on his behalf.

12. These pro forma financial statements are presented to the committee to provide the members with the opportunity to review and approve the reporting format before the commencement of the financial year end audit.

13. A major project was completed during the financial year ended 30 June 2016 in which the Auckland Council and Group Annual Report, including the financial statements and performance reporting, were streamlined. The objective of project was improving the readability and flow of the financial statements and performance reporting, and to remove duplicate and immaterial information so readers can focus on the relevant and important information.

14. There have been no material changes in the Public Benefit Entity accounting standards and local government legislation affecting financial reporting and disclosures for this year.

15. This financial year ending 30 June 2017 staff do not recommend any changes to the format of the pro forma financial statements, however staff’s focus during the financial year end audit will be on improving key note disclosures such as the weathertightness provision, and the financial risk management note to address feedback from Audit New Zealand. The purpose is to provide the reader with more insight into the assumptions and judgements made in calculating the financial impact to the Auckland Council and Group.

16. The pro forma financial statements will be reviewed by Audit New Zealand before the end of the 30 June 2017 financial year, with a final clearance provided by Audit New Zealand as part of the financial year end audit process.

Consideration

Local board views and implications

17. This report applies to the pro forma financial statements for the Auckland Council and Group which does not include reporting at a local board level. Accordingly the views of local boards have not been sought.

Māori impact statement

18. The pro forma financial statements do not affect the achievement or reporting on Auckland Council and Group’s contributions towards Māori outcomes.

Implementation

19. Ms Sue Sheldon, chair of the committee, Mr Paul Conder and Mr Bruce Robertson, independent members of the committee, will review and provide comments on the financial statements as part of the financial year audit process.

20. The Annual Report and Summary Annual Report will be presented to the 14 September 2017 Audit and Risk Committee meeting for approval.

Attachments

No.	Title	Page
a	30 June 2017 pro forma financial statements for Auckand Council and Group (Under Separate Cover)

Signatories

Author

Francis Caetano - Group Financial Controller

Authorisers

Kevin Ramsay - General Manager Corporate Finance and Property

Phil Wilson - Governance Director

Audit and Risk Committee

01 March 2017

Progress on items raised by Audit New Zealand

File No.: CP2017/00184

Purpose

1. Updating the Committee on progress Auckland Council has made to clear recommendations made by Audit New Zealand.

Executive summary

2. Audit New Zealand is the council’s external auditor appointed by the Auditor-General to conduct the audit on his behalf. Audit New Zealand works with council throughout the year reviewing our internal controls, reviewing our half year report and disclosures to both the New Zealand and overseas stock exchanges and auditing our Annual Report. Audit New Zealand issues reports to council throughout the year with recommendations on how the council can enhance and improve our processes and procedures and disclosures.

3. The Audit New Zealand reports addressed to the council are tabled at the Audit and Risk Committee. Issues of a less significant nature are outlined in a separate report to the Chief Executive.

4. At the conclusion of the 2015/2016 financial year there were 16 matters identified to the council which needed to be addressed. The recommendations made by Audit New Zealand are classified as either urgent, necessary or beneficial. There are no outstanding urgent issues. Audit New Zealand considers necessary and beneficial matters should be resolved within six to 12 months, however more complex issues take longer. The council is making progress on all 16 matters identified.

Recommendation

That the Audit and Risk Committee:

a) note the progress made to resolve the 16 issues raised by Audit New Zealand.

Comments

5. At the completion of each audit, our external auditors, Audit New Zealand make recommendations to enhance council’s internal controls, processes and financial statement preparation. Council responds to the items raised and indicates the actions we will undertake to resolve each issue. Progress is monitored throughout the year and when council considers that the recommendation has been addressed we supply information to Audit New Zealand for them to review and conclude whether the item can be cleared.

6. Audit New Zealand’s recommendations are cleared when council can demonstrate that the issue has been addressed and Audit New Zealand is satisfied with our response. While some of the recommendations can be resolved relatively quickly, other items take longer to resolve due to their complexity. As other recommendations relate to issues which are performed only in the financial statement preparation, clearance by Audit New Zealand may not occur until the next external financial statement preparation in June and December.

7. The final management report for the 2015/2016 financial year which contained the council’s responses was tabled at the December Finance and Performance Committee. There are 16 outstanding issues which council is working on. The key recommendations are in the areas of procurement and contract management and project management practices. The council is actively addressing the issues raised. Below is a brief summary.

Project management

8. Audit New Zealand has reviewed the council’s project management practices to assess how these align with accepted good project management. They found that individual project managers had a good grasp of sound project management processes and what was required for each project. The project manager was either project management qualified or otherwise had extensive experience in the management of projects.

9. In total there are six recommendations regarding project management, four relating to enhancing project management practices and two recommendations specifically regarding the AMETI project, managed by Auckland Transport. The recommendations cover areas such as defining and monitoring expectations, implementing a system of quality assurance and completing benefits realisation processes during project closure. The Strategic Portfolio and Programme office has noted the recommendations made and is working across the council to implement a range of improvements including the development of an investment delivery framework, a quality management system.

Procurement and contract management

10. Audit New Zealand reviewed procurement and contract management policies and procedures in 2015 and made recommendations for improvement. In 2016 they followed up the council’s progress implementing their recommendations. They noted council was progressing these and has developed policies and procedures to assist with procurement and contract management. They reviewed the recently developed procurement tools and found that the tools and templates were comprehensive and well rationalised. However, they found there was inconsistent practice in the areas of:

· conflicts of interests

· risk management

· negotiation planning

· contract management planning

11. A contract management framework has been developed and it will be launched in the early part of 2017. The framework includes work streams on contract documentation, data management and competence and training.

Non financial performance reporting

12. There are four recommendations regarding service performance reporting, one recommending the council continues to improve the effectiveness of internal controls over service performance information. The remaining three relate to two specific stormwater and one food grading measure which had errors in the recording of the results. The council has in place the recommended improvements.

Annual Report preparation

13. Two items have been raised concerning disclosures in the Annual Report due to their high dollar value and significance, relating to assessing assets for fair value at each reporting period and suggesting additional weathertightness provision disclosures. The council will address the matters as part of finalising the Annual Report.

Strengthening internal controls

14. The remaining three issues are recommendations to enhance the controls around user access to Information systems and payroll monitoring. We have in place improvements to address the issues identified.

Consideration

Local board views and implications

15. There are no outstanding issues with Audit New Zealand relating to reporting at a local board level. Accordingly the views of local boards have not been sought.

Māori impact statement

16. The report does not affect the achievement or reporting on Auckland Council and Group’s contributions towards Māori outcomes.

Implementation

17. There are no implementation issues.

Attachments

There are no attachments for this report.

Signatories

Author

Francis Caetano - Group Financial Controller

Authorisers

Kevin Ramsay - General Manager Corporate Finance and Property

Phil Wilson - Governance Director

Audit and Risk Committee

01 March 2017

Update on Enterprise Risk Management and Insurance Activities

File No.: CP2017/00174

Purpose

1. This report:

a) Updates the Audit and Risk Committee on Enterprise Risk Management (ERM) and Insurance Activities; and

b) Updates the committee on Auckland Council's Risk Appetite Statement August 2016, which forms part of council's refreshed Risk Management Policy.

Executive summary

2. Key aspects of how council manages risk were reviewed and refreshed late last year. This report updates the new committee on the updated ERM Framework and Risk Management Policy. Of note:

a) ERM Framework: The Framework was revised in December 2016 to include a new risk assessment matrix. This added a new "extreme" rating and aligns with the Health and Safety risk matrix.

b) Risk Management Policy: The Policy was also reviewed in December 2016. The refreshed Policy improves usability, is principle based, and enables staff understanding. Under the Policy, everyone has a role to play in risk management. The Risk Appetite Statements previously endorsed by the Executive Lead Team (ELT) and the Audit and Risk Committee are included in the Policy.

c) Council's Top Risks have been updated in accordance with the annual process and in light of the refreshed Policy and Framework. The Top Risk Report is before the Committee for discussion.

3. The council is part way through the procurement of insurance brokerage and advisory services that will commence on 1 April 2017. The service will be for all Auckland Council group insurance including Watercare, which traditionally have received services from a separate broker to the rest of council and the other CCOs.

Recommendation/s

That the Audit and Risk Committee:

a) receive the update on Enterprise Risk Management;

b) note the Risk Appetite Statement, previously endorsed by the Committee in 2016, which forms part of the council’s refreshed Risk Management Policy;

c) receive the update on Insurance activities.

Comments

Enterprise Risk Management Framework

4. The council’s Enterprise Risk Management Framework was prepared and originally endorsed by the Audit and Risk Committee in 2014.

5. The ERM Framework contains the processes and management tools that council uses to manage risk in accordance with the policy. Included in the Framework are council’s approach to risk management and risk categories, risk matrix, the risk register, and risk appetite statements.

6. In November 2016, the Framework was reviewed and refreshed to align with the council’s organisation strategy and to keep abreast of external changes to ensure it remains fit for purpose. The review took place in conjunction with some of council’s CCOs risk teams to ensure a consistent approach applied.

7. The Enterprise Risk Management Framework was updated to include the following:

· Updated risk categories – aligning these with council’s strategies and objectives;

· Updated roles and responsibilities;

· Updated risk management process – making it simpler and easier to follow and use.

· Updated risk matrix which introduces an “extreme risk” definition, providing a better distribution of risk rankings. This enabled a degree of consistency to be achieved between the Health and Safety and Project management risk matrix and the Enterprise Risk matrix.

Risk Management Policy

8. The Risk Management Policy (the Policy) was reviewed in 2016 in accordance with council’s Corporate Policy Framework and a new Policy was approved by ELT in December 2016.

9. With changes occurring impacting on the council business, it was necessary to update the Risk Policy so that it better supports the ongoing practice of risk management at council. In line with the Corporate Policy Framework, it has now been through a process of review. The new policy, as reviewed and updated, also includes the Risk Appetite Statement as adopted by the Audit and Risk Committee in August 2016.

10. In drafting the policy, the Risk team worked with some of the CCO Risk teams to ensure as much as possible, consistency in approach and the adoption of best practice.

11. Extensive user testing was conducted with various stakeholders within council to ensure its user friendly and easy to read.

12. The primary reasons for the Policy review was to:

· Remove the ‘jargon’ to make the documents easier to read;

· Alignment to the new Policy Framework and adoption of the associated template;

· Improvement of the flow in the ERM Risk Framework document and the topic groupings;

· Include key principles;

· Inclusion of the Risk Appetite Statements.

13. The Policy is scheduled to be launched to council staff in the next quarter as part of a Communications and Engagement plan for Risk and Compliance. This engagement is being developed in partnership with a wider Legal Compliance (Do it Right) Communications strategy being prepared with the Legal, Integrity, Internal Audit, Privacy, and Corporate Policies. A copy of the Risk Management Policy is attached as Attachment A.

Risk Appetite Statement

14. The Risk Appetite Statement forms part of the Risk Policy and ERM Framework, and stipulates the level of risk council is prepared to tolerate or accept in the pursuit of its strategic objectives. Under the Risk Framework, staff must consider the statement to determine acceptable levels of risk.

15. The Risk Appetite statement addresses the following areas: strategic, financial, reputational and operations/service delivery, people, governance and regulatory/compliance. It sets a separate “appetite” threshold between no-low-moderate-high appetites for each area.

16. This Appetite Statement was endorsed by the previous Audit and Risk Committee in August 2016 and attached for this committee’s endorsement. The Risk Appetite Statement is in the Policy attached as Attachment A.

Top Risks

17. The Risk team completed an annual review of council’s Top Risks with the ELT in November-December 2016. The review was also timely to align with the council’s new organisation strategy.

18. The review included individual discussions with ELT members and their lead teams, and a group discussion to agree the top risks.

19. The results of the review of the top risks include the following:

· New risks identified or reframing of existing risks descriptions,

· Updated risk ratings,

· Identifying and agreeing risk owners, and

· Risk treatment plans identified and agreed

20. Of the top 29 top risks, there are 13 high, 14 moderate and two low risks. The top risks are reviewed quarterly. The next review is due in May 2017. A copy of the updated Top Risk report (Auckland Council Risk Report March 2017) is attached as Attachment B.

Risk Programme of work – implementation of Risk Strategic plan

21. The existing Risk Strategy is due to be reviewed in 2017. The Risk team will commence drafting the Risk Strategy for 2018-2020 for presentation to the Audit and Risk Committee for approval by the end of 2017.

22. The council is undergoing a journey of risk maturity. In August 2016 the committee confirmed that the council would aim to achieving an “integrated” level of risk maturity at the conclusion of 2017. A number of additional work streams have been initiated to achieve this.

23. Over the next four months, these include:

· Systems and processes – continuous learning and improvement

Risk and Compliance Champions and Risk Register – this programme is being refreshed with the induction of new (and existing) champions throughout the business units and the use of Risk Registers as a tool to support the departments with issues, mitigations and as appropriate, escalations.

· Training, Knowledge and Confidence – increasing competence and maturity

A number of other learning and development tools are being developed, including developing a Risk e-learning module in connection with the Legal Compliance learning and development strategy to be available via the new centralised Learning management System (Tupu);

Tailored Workshops and training for the Senior Leaders Team and Risk and Compliance champions.

· Communications and Engagement plan for Risk and Compliance.

This is being developed in partnership with a wider Legal Compliance (Do it Right) Communications strategy being prepared with the Legal, Integrity, Internal Audit, Privacy, and Corporate Policies.

· Monitoring and reporting - implementing an effective reporting tool

Presently reporting on Risks is carried out by recording information on spreadsheets. The Team is presently investing in a centralised online system for reporting and monitoring of risks enabling real time reporting and monitoring. The same system is proposed to be used by Risk, Health and Safety, Legal Compliance and Privacy to capture, report on, and respond to events, issues, breaches and risks in one consistent and integrated interface for staff.

Insurance Brokerage appointment 1 April 2017

24. With the exception of Watercare, JLT is the incumbent broker for council group insurance services. The existing contract is due to expire on 31 March 2017.

25. The council group (including Watercare) is undergoing a procurement process and has called for Expression of Interest followed by a Request For Proposal for the provisioning of brokerage and advisory services for the group.

26. Council is presently negotiating with the preferred supplier and aims to be in a position to make a recommendation to the Director of Legal and Risk and the Chief Group Finance Officer for approval by the Chief Executive under delegation by end of February 2017. This will enable any transition to take place as soon as possible.

27. By taking a group approach, the Council group is confident of the savings in both premiums and the brokerage fee for insurance whilst increasing coverage (as appropriate) and creating increased efficiencies with the management of insurance claims within the group.

Insurance Renewal / Group Insurance Programme 2017-18

28. The existing council group insurance renewals are due on 1 July each year. Due to the timing of the procurement process, the renewal preparation will commence as soon as possible following the appointment of the broker process to enable appropriate risk profiling and reviews to be undertaken in good time.

29. Due to the timing of the next Audit and Risk Committee meeting taking place in July 2017, it is anticipated that the Finance and Performance Committee will approve the procurement of the group insurance programme prior to 30 June 2017. An update on the renewal programme will be provided at the July meeting of the committee.

Local Government New Zealand Insurance Market Review – update on progress with 60/40 review and Local Government Risk Agency proposals

30. In April 2016 the Audit and Risk Committee was advised in the context of the council’s insurance strategy that there had been:

“signalled changes to central government Civil Defence and Emergency Management (60:40) cover for three waters and flood protection assets. Council will be working with central Government and Local Government NZ on the proposed changes”

31. Since 2013, insurance services and the funding and systemic risk management of underground infrastructure damage caused by natural disaster has been the subject of review and discussions by Local Government New Zealand (LGNZ), Treasury, Department of Internal Affairs and Ministry of Civil Defence and Emergency Management. LGNZ commissioned a review of the issues and in April 2015, the government agreed to review the 60/40 percent co-funding arrangement.

32. It had been anticipated that a decision would be made and consultation document released in April 2016 but this has not occurred.

33. Key proposals that have been explored by officials include the establishment of a Local Government Risk Agency and a change to the financial approach from the 60/40 split to have council take the primary risk based on a modelled Probable Maximum Loss calculation.

34. At this time, no decisions have been made or announced by Government. It is our understanding that the options and proposals (including the business case for the Local Government Risk Agency) are awaiting ministerial consideration and decision before any progress will be made.

Consideration

Local board views and implications

35. Local boards are affected by many of the top risks as they represent risks to the entire council organisation. While no specific consultation has been done concerning the content in this report, risk management activity will have benefit for local board activities.

36. The Risk team has engaged with the Risk Champions from Local Board Services which resulted in the completion of a comprehensive risk register.

Māori impact statement

37. This information report does not have any particular benefit or adverse effects on Māori.

38. Māori outcomes and, in particular, council obligations to meet established legal and other responsibilities to Māori and satisfy all reasonable expectations of responsiveness is included and managed through the Enterprise Risk Framework - Top Risks register.

39. Meeting outcomes for Māori has been identified as a strategic risk to council (refer Top Risk No 28 for the risk treatment plan summary in place to address this risk). The treatment plan includes an Internal Audit Treaty of Waitangi Audit work programme and Māori transformation shift initiatives being led by Te Waka Angamua).

Attachments

No.	Title	Page
a ⇩	Risk Management Policy	83
b ⇩	Auckland Council Risk Report March 2017	93

Signatories

Authors

Selvan Naidoo - Senior Risk Advisor

Emma Mosely - Senior Solicitor

Authorisers

Cecilia Tse - Head of Risk

Katherine Anderson - Director Legal and Risk

Phil Wilson - Governance Director

Audit and Risk Committee

01 March 2017

Monitoring of Treaty Audit Response Work Programme

File No.: CP2017/00582

Purpose

1. This report updates the committee on the monitoring work performed by the Internal Audit department of council on council’s Treaty Audit Response Work Programme.

Executive summary

2. The Internal Audit department (the department), as part of its routine work programme, monitors the council group’s implementation of the Treaty Audit response work programme. Inclusion of this activity in the department’s work programme is in response to recommendations arising from the Independent Māori Statutory Board’s (IMSB) 2015 Treaty of Waitangi audit.

3. In accordance with this committee’s forward work plan, the department reports on a six-monthly basis to this committee.

4. This is the second monitoring report. The department previously reported to the March 2016 meeting of this committee. Planned reporting to the September Audit and Risk Committee meeting did not occur due to the completion of an independent health check on the Monitoring and Compliance Framework by PwC. The Committee has not met since then.

5. The primary focus of the department’s work to date has been the provision of “real time” feedback on Māori Responsiveness Plans. The department also participates in the Waharoa Group, which monitors progress against Treaty Audit recommendations.

6. As at the date of this report, five of 25 action groups have been assessed by the Waharoa Group as closed. In March 2016 one action group was closed. A further three action groups are in substance closed, only subject to the final formal closure of these action groups by the Waharoa Group on 2 March.

7. Nine departmental Māori Responsiveness Plans have been approved and are being implemented. A further three plans are in the final stages of development. Two plans remain on track to be completed before the end of this calendar year. The department has reviewed and provided feedback on 13 of these Māori Responsiveness Plans.

8. Te Waka Angamua was subject to a restructuring in mid-2016. This impact has temporarily limited progress on the implementation of Treaty Audit recommendations in the latter part of 2016. However the restructuring is now complete and early indications are that this momentum is now being regained.

9. We anticipate that the Treaty Audit Response Programme will benefit from the Te Waka Angamua restructure, because there are now dedicated Māori Responsiveness roles embedded in the organisation.

10. A health check on the Treaty Audit Monitoring and Compliance Framework by PwC confirmed that the framework is properly designed and working effectively. Areas were identified where it can be further enhanced. These areas are being addressed.

Recommendation/s

That the Audit and Risk Committee:

a) receive the Monitoring of Treaty Audit Response Work Programme report

b) note the monitoring work that has been performed to date by Internal Audit

c) note the health check confirmed that the Treaty Audit Response framework is working effectively, and identified some minor improvements which are being implemented

d) note that Internal Audit will report on a six monthly basis to this committee.

Comments

11. The IMSB’s Treaty of Waitangi Audit process sets out a framework for assessing council’s performance against statutory responsibilities and requirements relating to Te Tiriti o Waitangi and to Māori.

12. The results of the second Treaty of Waitangi Audit were reported to the Finance and Performance Committee on 21 May 2015 (Te Tiriti o Waitangi Audit Report 2015). The summary audit report is attached to this report at Appendix A.

13. In response, the Finance and Performance Committee adopted a council Treaty Audit response work programme on 20 August 2015. The committee noted that quarterly reports on work programme progress would be provided to:

· council’s Chief Executive and the executive leadership group of Te Toa Takitini;

· the Finance and Performance Committee; and

· joint Governing Body and IMSB meetings

Bi-annual reports by the department on progress of the Treaty Audit response work programme and its operations would be provided to the Audit and Risk Committee during 2015-2018.

14. Te Tiriti o Waitangi Audit Report 2015 includes a “Summary of Recommended Actions”, in which 25 action groups are contained. These are linked to the 67 specific recommendations of the audit report.

15. Recommendation 66 recommends that “the responsibility for monitoring the work programme completion should move from Te Waka Angamua to Internal Audit, an independent function comprising risk and controls experts, well versed in how to undertake substantive follow up activity and with a direct reporting line to the Audit and Risk Committee, a body charged with oversight of risk, control and compliance matters”.

16. The forward work programme of this committee (approved in December 2015) requires the department to report to this committee on a six-monthly basis, on its monitoring work on council’s response to the recommendations contained in the Te Tiriti o Waitangi Audit Report 2015.

17. The primary focus of the department’s work has been the provision of “real time” feedback on Māori Responsiveness Plans. The department also participates in the Waharoa Group, which monitors progress against Treaty Audit recommendations.

18. The broad approach to the work performed by the department is:

· review of Māori Responsiveness Plans and action owner’s individual project plans – assessing whether they are “fit for purpose” to achieve Treaty Audit recommendation objectives.

· obtaining of regular updates from audit action owners about their progress in executing individual project plans.

· periodic testing (via enquiry, observation, review and testing of underlying controls, processes and documentation) to assess whether individual project plans, internal controls and underlying processes are being implemented as intended.

· review of the Treaty Audit response work programme component of the quarterly report to the Finance and Performance Committee of the Te Toa Takitini Māori Responsiveness Portfolio.

· reporting to the Audit and Risk Committee.

Māori Responsiveness Plans

19. In assessing whether each Māori Responsiveness Plan is “fit for purpose” the focus of the review work has been whether:

· initiatives as contained in the plans will achieve the objectives of Treaty Audit recommendations.

· appropriate accountabilities have been put in place for delivery of the plans.

· proposed performance frameworks within the plans are appropriate to assess whether outcomes will be achieved.

· adequate budget and resource has been set aside to deliver on the plans.

· the proposed delivery timeframes of specific initiatives are realistic and “doable” given departmental priorities.

Contribution to the Waharoa Group

20. The department also discharges its monitoring responsibilities through its contribution to the work of the Waharoa Group. The Waharoa Group is comprised of representatives from the department, Te Waka Angamua and the IMSB Secretariat. Its role is to monitor progress and apply criteria for closure of actions and each related Treaty Audit recommendation.

Monitoring of Progress

21. Each of the actions recommended in Te Tiriti o Waitangi Audit Report 2015 has a set of agreed closure criteria. When these are met the Waharoa Group jointly agree to close the action (and the linked Treaty Audit recommendation). When all actions within a group are complete, the action group can be closed.

22. As at the date of this report five of 25 action groups have been assessed by the Waharoa Group as closed. In March 2016 one action group was closed. These action groups are with respect to Departmental / CCO Māori Responsiveness Plans; Treaty of Waitangi Settlements Implementation; Hearings Policy; Good Practice Benchmarking; and Effectiveness and Compliance Framework.

23. A further three action groups are closed in substance. Evidence has been presented to the Waharoa Group to confirm closure of the three action groups. They will be formally closed at the next meeting of the Waharoa Group on 2 March 2017. These action groups are with respect to the Significance and Engagement Policy; Mana Whenua Kaitiaki Forum and Te Reo Māori Framework

24. Te Waka Angamua was subject to a restructuring in mid 2016. The impact of this restructuring was to temporarily stall progress with respect to progressing the Treaty Audit response programme through the latter part of 2016.

25. However the restructuring is now complete. The Treaty Audit response programme should benefit from the restructure, by virtue of the fact that Māori responsiveness roles are embedded in the organisation. This is through the establishment of virtual hubs in Operations and the Planning Office. There are now dedicated full time staff embedded in the office of the Chief Operating Officer, Development Project Office, Community Facilities, Plans and Places and the Southern Initiative.

26. Now that the restructure is complete we now see evidence of the Treaty Audit response programme starting to regain momentum.

27. Māori Responsiveness Planning is progressing steadily. Nine departmental Māori Responsiveness Plans have been approved and are being implemented. Three are in the final stages of development (Chief Financial Office; Transport & Infrastructure; and Civil Defence & Emergency Management). A further two remain on track to be completed in the next six months.

28. The department has reviewed and provided feedback on 13 Māori Responsiveness Plans.

Monitoring work – next six months

29. To provide assurance to the committee that the Treaty Audit response work programme remains on track the following monitoring and reporting work will occur over the next six months:

· Real time feedback on Māori Responsiveness Plans will continue as the plans are developed. Further the department will focus over the next six months on recommendations due to be implemented in quarter three to four of 2016/2017.

· The Waharoa Group will shortly work through the Action Group Register (with respect to actions due to be delivered in the 2017 year) and work with action owners to revalidate closure criteria, actions and outcomes. The Action Group Register is subject to monthly review and update.

· To strengthen accountability for delivery of the Treaty Audit response work programme, the department will report the results of its work to the Te Toa Takitini Executive Leadership Group.

· To reinforce the implementation of treaty audit recommendations, the PwC Health Check recommendations will be implemented.

Te Tiriti o Waitangi Audit – Audit Action Follow-Up Health Check

30. In mid-2016 the IMSB commissioned PwC to carry out an “Audit Action Follow Up Health Check” to assess and comment on the Monitoring and Compliance Framework. The objective of this assessment was to:

· Assess the design and operating effectiveness of the Monitoring and Compliance Framework (including assignment of responsibilities, delivery and reporting) that council and the IMSB rely on to drive the progress of Te Tiriti o Waitangi Audit recommended actions;

· assess the follow-up framework against good practice;

· identify recommendations to improve the follow-up framework.

31. The audit report is attached at Appendix B

32. While the current framework is working well, the review team in conjunction with the Waharoa Group have identified areas where the framework can be enhanced (e.g. developing a charter for the Waharoa Group, enhancements to the annual planning and closure criteria processes; enhancing the visibility of the work of the Waharoa Group with the executive leadership group).

33. The Waharoa Group is implementing the recommendations of the health check.

Consideration

Local board views and implications

34. Nil applicable.

Māori impact statement

35. The Treaty of Waitangi Audit response work programme enables the council group to strengthen responsiveness to Māori through targeted actions and improvements

Implementation

36. The department will continue to monitor the Treaty Audit response programme through 2017 and 2018.

Attachments

No.	Title	Page
a ⇩	Te Tiriti o Waitangi Audit on Auckland Council 2015 Summary Report	115
b ⇩	Te Tiriti o Waitangi Audit Action Follow Up Health Check	147

Signatories

Author	Mark Maloney - Head of Internal Audit
Authoriser	Phil Wilson - Governance Director

Audit and Risk Committee

01 March 2017

Health, Safety and Wellbeing Report

File No.: CP2017/01991

Purpose

1. To provide a summary of health, safety and wellbeing performance information for the 2016 calendar year, to support the committee’s due diligence responsibilities and to provide an update on priority actions since the last Audit and Risk Committee meeting.

Executive summary

2. Auckland Council is committed to being a high performance council, where our elected members, employees, contractors, volunteers and the people who use our council facilities and services are safe and all major risks are reduced and managed effectively.

3. This report provides a summary of council’s health and safety performance for the year 2016, and an update on the key milestones and deliverables for implementing a strong health, safety and wellbeing culture to ensure council effectively meets its responsibilities as a PCBU (person or organisation conducting a business or undertaking). A key performance issue highlighted in this report is a decrease to the 12 month rolling Lost Time Injury Frequency Rate (LTIFR) between August and December 2016.

4. Following a successful bid to Auckland Council’s Investment Group in October 2016 Risk Manager has been procured and is currently being configured for implementation within council. The corporate Health, Safety and Wellbeing (HSW) team is working with all council business units, Auckland Tourism, Events and Economic Development (ATEED) and Panuku to implement Risk Manager, which will replace Vault as the single system to capture all safety information. Regional Facilities Auckland (RFA) has been successfully using Risk Manager for some time. Risk Manager will be a key part of our service delivery and will help people leaders meet both the enterprise expectations and the legal requirements under the Health and Safety at Work Act 2015. The Go Live date for Risk Manager is end of April 2017.

5. The system will allow for improved reporting, a key priority for council. The system will improve council’s response to, and reporting of, incidents and notifiable events and build consistent practice across all business units. Increased near-miss reporting is also a key focus to reduce the likelihood of incidents and injuries occurring.

6. The indicative LTIFR rate for December 2016 was 5.04 versus the organisational target of <2.25. LTIFR measures injuries which have resulted in a person needing time away from work. The decrease in December was most likely to be due to the Christmas shutdown where a large percentage of staff were on leave.

7. The report would like to bring the steady decline in ‘near miss’ reporting to the attention of the committee. The declining number could indicate a potential waning in engagement. In safety practice this is a key cultural indicator and a high number of near miss notifications are desirable. The Corporate HSW team are currently looking to improve this through a renewed campaign. It is intended also that council’s Risk Manager software will deliver an increase due to simpler access and ease of reporting.

8. The ACC Workplace Safety Management Practices (WSMP) audit was completed in October this year. Council maintained its level of Secondary status. City Parks Services, however, received Tertiary level status as part of an additional voluntary audit. Tertiary is the highest level of attainment. Please note that the WSMP audit process has been withdrawn by ACC and we understand that there are no plans to replace it in the near future.

Recommendation/s

That the Audit and Risk Committee:

a) receive the update report on Health, Safety and Wellbeing.

b) refer this report to the Finance and Performance Committee for its consideration.

c) note that this report will also be provided to all Local Boards for their information.

Comments

9. The overall objectives for 2016 were to:

· have the basics right across the organisation (with business-focused solutions) in line with legislative and audit requirements

· share good practice and lessons learned

· maintain WSMP Secondary status

· effectively educate, upskill and engage our staff and elected members to build a positive and proactive health, safety and wellbeing culture.

· Since the May 2016 update council welcomed a new Head of Health Safety, Oli Sanandres who commenced in the role on 1 November 2016. The Corporate HSW team are currently working to revise the strategic goals and key deliverables for health, safety and wellbeing.

10. Since the May update council welcomed the new Head of Health Safety and Wellbeing. The Corporate HSW team are currently working to revise the strategic goals and key deliverables for health, safety and wellbeing.

Performance report

11. Key performance metrics reflecting the 2016 year are based on 30 November for the purposes of this report. In summary:

a) As at 30 Nov 2016 the LTIFR was 5.10 (indicative) against a target of <2.25. There were five injuries leading to lost time.

b) There were four notifiable events reported in November.

Oct Indicative LTIFR	5.13	Oct Actual LTIFR	5.15
LTIFR Target	<2.25	Nov Indicative LTIFR	5.10
Nov Notifiable Events	4

c) A total of three health and safety inspections were reported into Vault. A total of 186 corrective actions were issued in Vault, 168 of which have since been completed.

d) 65 near misses were reported at 28 November in comparison to 89 reported in October and the high of 121 in July. This trend back down from the spike in July is something to take action on, as demonstrated by a focused campaign by City Parks Services and Infrastructure and Environmental Services (I&ES) which made a positive difference in July. City Parks Services (CPS) continues to be the highest reporter within the Operations Division.

e) Eleven staff injuries were reported in Vault before an ACC notification was received. A total of 19 incidents were not reported before an ACC claim was received, 10 for Council and nine for CCOs. This indicates that our managers are not fully engaging with the accident reporting system.

Lost Time Injury Frequency Rate

12. The monthly Lost Time Injury Frequency Rate (LTIFR) increased while the rolling LTIFR decreased in November.

13. To achieve the >2.25 target for FY17, the Council needs to substantially reduce the total number of lost time injuries to a maximum of two per month. To enable this, near miss reporting and immediate action to eliminate or fix near miss hazards and risks is crucial.

LTI

Medical

First Aid

Near Miss

14. Injury pyramids showing 12-month average (left) vs. Nov 2016 (right). The latest trends demonstrate the beginning of the overall change we are aiming for – less injuries, more near misses. Momentum needs to be maintained and the Corporate HSW team will run a campaign however a more meaningful culture change shift is required. The new Risk Manager system is part of this improvement but an educational and capability improvement programme is also required.

Wellbeing Initiatives

A number of wellbeing initiatives were rolled out across the region in 2016, focusing on mental and physical wellbeing. Sessions with the Mental Health Foundation were well received; further sessions are to be rolled out in 2017. Council has also recently gone live on a new Wellbeing Portal under the RE-New Hub Campaign.

Information on the six aspects of the due diligence duty

15. Officers of council (i.e. those in a governance role including elected members, the Chief Executive and potentially other members of the executive leadership team) must exercise a duty of due diligence. There are six aspects to that duty, listed and discussed below. All officers have equal and personal responsibility.

16. To assist elected members in their role as officers the Head of Health, Safety and Wellbeing, the Director of Legal and Risk and the governance division lead team are working together to establish systems that will enable councilors and local board members to have access to relevant information to fulfill their due diligence responsibilities. This includes developing new quality advice guidance to assist staff preparing advice on projects where a health and safety assessment is necessary for decision-making, quarterly performance reporting to the Audit and Risk Committee, Finance and Performance Committee and local boards and information to be included in the elected member induction programme after the 2016 local government election.

17. Staff are also working with the Independent Māori Statutory Board and council’s co-governance entities such as the Maunga Authority, the Parakai Recreation Reserve Board and the Ngāti Whātua Ōrākei Reserves Board to ensure they have information and support to assist them with complying with their PCBU duties (as a Board) and their officer duties (as individual members).

‘Up to date’ (1): Acquire and keep up to date with Health and Safety knowledge and Health and Safety matters

18. To comply with the officer’s due diligence duty, it is critical that council’s elected members, Chief Executive and executive leadership team understand the key elements of the new legislation and regulations.

19. Prior to the Health and Safety at Work Act 2015 coming into force on 4 April 2016 three briefings were provided for elected members to outline the key elements of the legislation, particularly the role of ‘officers’. Health and Safety briefings have also been a core part of new elected member induction.

20. To ensure elected members and senior management are well informed and up to date on health and safety matters further workshops are being planned throughout 2017. Governing Body and local board workshops will build on the information sessions to date and focus on putting the legislation into practice, including meeting personal obligations as an officer, what is required for day to day decision making and implications for community groups and volunteers.

21. Future reporting to elected members and senior management will include information to help officers keep up to date with their health and safety knowledge. Officers may also undertake their own personal actions to keep their health and safety knowledge up to date.

‘Understand’ (2): Understand Council’s operations and the associated hazards and risks

22. Council officers will already have a working visibility of council business. To ensure that officers have a sufficient visibility of the breadth and variety of council operations to comply with their due diligence duties, highlighting key activity on council’s operations related to health and safety will be part of regular reporting.

23. It will take time for council to transition from the previous hazard assessment approach to the more proactive risk-based approach provided for in the new Act. Work is underway across the organisation on reviewing hazard registers, developing business unit/activity risk assessments and then delivering safety risk control plans. Risk Manager will improve visibility for all leaders in this area.

24. A health and safety site visit plan for both the Chief Executive (and ELT members) and elected members will be developed for 2017 as ongoing opportunities for council’s officers to experience and better understand council operations and the health and safety risks in the various parts of the business.

‘Resources and processes’ (3): Ensure Council has appropriate resourcing and processes to eliminate or minimise risks to health and safety

25. As part of the organisational strategy a business case for health and safety was developed. It highlighted the need for council to transition from the previous hazard assessment approach to the more proactive risk-based approach. The business case also considered the level of resourcing for health and safety within the organisation. Ongoing resourcing levels will be considered during 2017 as the orginsation looks to maintain its risk awareness training and the shift towards proactive safety as required by the new legislation.

26. A key focus is to build capability within the organisation and prioritise those business areas that need particular training and support, however a Corporate Training programme will be developed in order to increase awareness, capabiliity and ownership of safety risk at the operational level.

‘Reporting and investigation’ (4): Ensure Council has appropriate processes for receiving and considering information regarding incidents, hazards and risks and for responding in a timely way to that information

27. Health, safety and wellbeing performance reporting has been improved to assist officers and senior management receive and consider information on incidents, hazards and risks. The current approach has been developed with and approved by the executive leadership team. This includes the structure of the report, and the content including lead and lag indicators.

28. The Health, Safety and Wellbeing and Legal Services teams continue to work in partnership to revise the incident management and notifiable event management plans to ensure council has processes in place to respond to incidents, hazards and risks. The plans provide clear, step by step guidance on what staff need to do in various situations, including an emergency situation. The plans also specifically include guidance on advising elected members of incidents in their ward/local board area.

29. A fit for purpose safety management system and timely reporting will also be crucial to enable council to receive and consider information on incidents, hazards and risks. This new Safety Management system is currently being developed by the Corporate HSW team.

‘Monitor’ (5): Ensure Council has, and implements, processes for complying with any duty or obligation

30. A crucial aspect of ensuring that council has systems in place for complying with its obligations is the setting of high level policy and strategic direction. The Chief Executive and executive leadership team attended a strategic planning day at the end of March. A further session will be planned for 2017.

31. Council’s health and safety policy statement, manual and all documents and procedures connected to these are currently under review against the new legislation and regulations and following feedback from the 2016 WSMP audit.

32. Staff awareness of health and safety obligations will contribute to compliance. Further to awareness communications in 2016 more Health and Safety at Work Act overview seminars are being planned for all staff.

33. Council’s Do it Right legislative compliance programme is currently working with some pilot business units to develop legislative compliance business unit plans. Health and Safety has been integrated into this critical programme.

34. Having effective and supported health and safety representatives also contribute to council complying with its health and safety obligations. A health and safety representative training plan has been developed, which included roadshows and a representative handbook in 2016.

‘Verify’ (6): Take reasonable steps to verify the provision and use of resources and processes through reviews and audits

35. At regular intervals the Audit and Risk Committee will consider council’s compliance with its PCBU obligations and council officers’ compliance with their due diligence duty. That feedback is made by way of recommendation to the Finance and Performance Committee. All officers of council need to continue to ensure that they keep thorough records of their compliance with their individual due diligence duty. Risk Manager will be a key enabler.

36. Council was audited via an ACC Workplace Safety Management Practices (WSMP) audit in October 2016. This audit assessed council as secondary and as such maintained its rating. Tertiary is the highest level of accreditation.

Consideration

Local board views and implications

37. Briefings for elected members, including local boards were provided in November for the new elected members. Further workshops are planned for 2017 as part of the elected member Learning and Development programme.

38. This report will be provided to all local boards and a face to face briefing to local board chairs will be scheduled.

Māori impact statement

39. The health, safety and wellbeing of Māori staff, elected members, volunteers and members of the public is a priority as are the Māori wellbeing priorities identified in council’s Māori responsiveness framework, Te Toa Takitini work programmes, and other relevant documents.

40. The HSW team are working with the Independent Māori Statutory Board and council’s co-governance entities, such as the Tūpuna Maunga Authority, Parakai Recreation Reserve Board and the Ngāti Whātua Ōrākei Reserves Board and Puketutu Island to ensure they have information and support to comply with their PCBU duties (as a Board) and their officer duties (as individual members).

Implementation

Attachments

There are no attachments for this report.

Signatories

Author

Oliver Sanandres, Head of Health, Safety and Wellbeing

Authorisers

Christine Etherington - People & Capability Director

Phil Wilson - Governance Director

Audit and Risk Committee

01 March 2017

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 Integrity and Investigations - Integrity and Fraud Assurance Strategy Progress Report

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