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.

Audit and Risk Committee

14 September 2017

Update on risk management and insurance activities

File No.: CP2017/17778

Purpose

1. To update the committee on risk management and insurance activities at Auckland Council.

Executive summary

2. Council's Top Risk Register, maintained by the Executive Leadership Team, has been updated to reflect changes in the last quarter. New risks regularly are evaluated for inclusion into the Top Risk and risk mitigations are regularly reviewed for their effectiveness.

3. A Risk Strategic Plan is being developed for 2018-2020 which aims to increase the risk management maturity within the council.

4. Project risk management is an area of continuing focus including raising risk management capability in Contract and project managers and the Risk team will continue to work with the business groups and include this within the strategic plan.

5. The council and council-controlled organisations have agreed an insurance policy, strategic objectives and work plan for 2018-2020.

6. The council and council-controlled organisations are developing a new approach to corporate policies based on common principles that are simple and easy to understand.

7. Claims data for the 2016/2017 financial year shows an increase in the number and value of claims made but the overall claims paid out is still in line with the sums paid out over the last two years.

Recommendation/s

That the Audit and Risk Committee:

a) receive the update on Enterprise Risk Management.

b) receive the update on Insurance activities.

Comments

Top risks

8. Scheduled quarterly discussions with the council’s with Executive Lead Team members in August 2017 have resulted in a few minor changes to the Top Risk Report since June 2017.

9. There has been a change to the risk rating to one of the Top Risks but otherwise the remaining risks largely remain unchanged. However a number of the risk descriptions have been updated together with a number of risk treatments.

10. The result is that of the 27 top risks, there are 11 high, 15 moderate risks and one low ranked risk. The next review is due in November 2017.

11. The ‘NewCore’ risk (risk 27) has moved from a ‘moderate to ‘low’ risk ranking due to the successful implementation of the NewCore project in June. Post implementation, the new processes will continue to be monitored with the establishment of a working group including investigating any post migration and data integrity issues, efficiency of new processes, and anticipated cost savings. A separate risk register will be maintained by the working group and the chief operating officer will continue to have oversight of any post implementation risks.

12. A copy of the updated snapshot and detailed Top Risk report (Auckland Council Risk Report September 2017) is attached as Attachment A and B respectively.

Risk strategy

13. The Risk team is currently developing a Risk Strategic Plan for 2018-2020.

14. This will be developed in conjunction with and in consultation with the other key stakeholder groups within the council with a risk and/or assurance function as well as with the council’s substantive council-controlled organisations.

15. The Risk Strategy will be presented to the Executive Leadership Team prior to bringing it to Audit and Risk Committee for endorsement.

Project risks

16. An area of focus for the council is the improvement of risk management practices in the project and contract management areas, particularly in the operations area. Work is underway with the risk team engaging with staff the Special Programmes and Project Management Office to gain greater visibility into capital projects and risk management practices undertaken at council.

17. In addition, as part of the wider project management risks review, the team is also working with the chief engineer and contract management team leader to improve the risk reporting for projects. In conjunction with the Internal Audit department, the team will be considering the outcomes from their review of the contract and project management which will feed into this stream of work as part of the Risk Strategic Plan.

18. An upskilling programme for project managers is planned for the next six months, with the risk team providing project management risk training to project managers across. This will also include recording of risks on the project risk system – Sentient.

19. This will ensure that more meaningful reporting can be produced thereby providing good visibility of key risks, enabling escalation of issues where required.

Update on 135 Albert Street

20. Following the July update by the project team to the Audit and Risk Committee, the project team advises that the recladding program is on track, with no financial or consenting issue to report presently. Similarly there have been no reported issues in relation to noise or disruption and the contractor is working with the project team to continuously maintain high standards of health and safety with the reporting now undertaken through the new Risk Manager tool.

Quarterly risk champions forum

21. As part of the Risk Champions Programme, in August 2017 the Risk team hosted the first quarterly risk champions forum which was attended by over 30 staff from across Auckland Council. These are staff members who are embedded within the business and have both been identified as a champion for their group and have received initial training from the Risk team.

22. The feedback from the session was extremely positive and the risk champions interaction and engagement was successful. The intention is to run the forums quarterly to create a community of risk practitioners providing an opportunity for the risk champions to be further upskilled and providing a network of support. As the risk champions complete their training they are invited to become part of the risk champions group.

23. The next risk champion forum is scheduled for 6 November 2017.

Legal compliance programme

24. The Risk and Legal Department is progressing the Legal Compliance Programme with phase one of the roll out having been completed. Phase one relates to the establishment of a Legal Compliance portal where staff can access relevant statutes and be provided with a summary of legal provisions as they apply to the particular business unit or function. Phase two planning is now underway expanding departmental compliance plans to priority areas, for example City Parks Services department and Treasury department. A foundation e-learning module is under development for all staff and will be implemented through the council online learning management system Tupu. A review of the programme to test for effectiveness and further opportunities for improvement is planned for the first quarter of 2018.

Corporate policy ‘Do the Right Thing’ policies project

25. The council through the Risk team and in conjunction with a cross council steering group is developing a new approach to our enterprise-wide corporate policies such as health and safety, gifts and hospitality, integrity, fraud and information security. At present there are 65 corporate policies in place, governing staff behavior, and with so many different policies in place to manage risk, they have become a barrier to getting things done. Our policies try to cover every possible scenario but in an organisation as complex as council, that has proven to be not effective or sustainable.

With the support of the Executive Leadership Team and the Mayor’s Office, and responding to feedback from employees, we are moving to a principle based approach to simplify our existing policies and empower our staff to exercise their good judgement to do the right thing.

26. The intention is to create a simplified set of policies that are clustered – such as safety and wellbeing, integrity, and responsible ownership (Information systems and information). For example, instead of having individual policies for fraud, integrity, conflict of interest, gifts, hospitality, expenses, koha, and sensitive expenditure, we’ll agree some common principles that cover all of those areas and create a single policy. Critical guidelines, standards and procedures will be separated from the core principles. The design of this is underway as we work with the business but the slides attached will provide an insight into what it could look like.

27. It is intended that the core policy principles will apply to the whole council family to achieve a clear and consistent approach right across council.

28. The planned roll out is intended for completion between December 2017 and February 2018.

29. An update on the ‘Do the Right Thing’ policies project is to be reported to the Finance and Performance Committee 19 September 2017 meeting together with reporting on the group Treasury, Procurement and Insurance policies.

30. A copy of the Corporate policy ‘Do the Right Thing’ policies project is attached in Attachment C.

Group Insurance Policy, strategic objectives and work plan

31. The council group insurance programme is evolving. Having recently moved to a single broker and the procurement of policies on a group basis, it is now appropriate to focus on a group policy and agree strategic objectives and a work plan for the next three years. The council and council-controlled organisations have agreed on the following group policy, objectives and work plan moving forward.

Group Insurance Policy

32. The policy ensures that the council group procures and manages insurance in the most effective manner with consistency of policies, coverage, claims management and insurers across the group. The four key principles from the policy are:

· effective management of risk

· value for money

· working together

· consistency in approach

33. A copy of the policy is attached as Attachment D.

Insurance strategy objectives and work plan 2018-2020

34. The objectives and work plan are to be read in conjunction with the policy. The group’s objective is to ensure that council group has the financial resources to recover from catastrophic and other events and to fund unforeseen losses to assets and service operations thereby providing continuity of services to the community whilst ensuring that any risk transfer is carried out in a cost effective and prudent manner.

35. The five key components of the work plan to deliver on the objectives are:

· planning a fit for purpose insurance programme responding to the group’s insurable risks

· develop clear financial risk tolerance and appetite guidelines to ensure retained risk is within the financial capability of the council group

· ensure council affiliated entities have appropriate insurance cover optimised through the council group programme

· ensuring claims and recoveries are well managed and cost efficient

· develop a governance group to report, monitor and review the strategy, work plan and account for its implementation.

36. A copy of the strategic objectives and work plan is attached as Attachment E.

Insurance claims review 2016-2017

37. Following the end of financial year 2016/2017, a review was carried out to compare the claims data for insurance purposes for the last financial year in comparison with the previous two financial years.

38. The data collected by the Insurance and Claims team in the system known as Figtree is collated and used annually for risk profiling with prospective insurers. Whilst the data does not capture 100 per cent of all claims within the council and council-controlled organisations, it is a good indication of the types, volume and value of claims made against the council and council-controlled organisations.

39. The information includes payments made by insurers and by council or council-controlled organisations themselves (as the sums are below the deductible sum). Note the figures exclude Watercare Services Limited as prior to 30 June 2017, Watercare Services Limited had a separate insurance programme. The data excludes matters which are not included under the council’s existing insurance cover for example, claims for weather tightness as these are excluded from our insurance programme but includes combined weather tightness and non-weather tightness claims.

40. There were significantly more claims in number and value made against the council and council-controlled organisations in 2016-2017 from external parties (liability claims). The increase has been partly due to a receipt of a small number of (but reasonable size in value) claims for combined weather tightness. As these are related to weather tightness claims, cover for these have traditionally been excluded by the insurer. Council’s broker Aon is presently reviewing these with the previous insurer. Going forward, the council is confirming the insurer’s position in relation to cover for similar claims made under the council’s new policy for 2017-2018. In addition, a number of claims have been received from third parties against council’s contractors (for example damage caused by waste collection contractors). Almost all of these are recorded and referred to contractors to be managed by them, if necessary, with the involvement of their insurers. The increased claims also reflect more weather related events earlier in the year.

41. The council group is presently reviewing its current management of claims (both internal claims and external (third party)) with a view of looking at the most efficient way of managing claims having regard to value and existing resources allocated for the current function.

42. A copy of the Insurance information analysis 2016-2017 is attached as Attachment F.

Consideration

Local board views and implications

43. 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 for this report, risk management activity will have benefit for local board activities.

44. The Risk team has engaged with the risk and compliance champions from the Local Board Services department, which has resulted in the completion and maintenance of a comprehensive risk register.

Māori impact statement

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

46. 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.

47. Meeting outcomes for Māori has been identified as a strategic risk to council (refer Top Risk 15 for the risk treatment plan summary in place to address this risk). The treatment plan includes transformation shift initiatives being led by Te Waka Angamua, oversight by the council chief executive’s leadership group on Māori transformation shift initiatives, a monitoring and reporting framework and the Treaty of Waitangi internal audit work programme.

Implementation

48. None

Attachments

No.	Title	Page
a ⇩	Snapshot Top Risk Register - September 2017	25
b ⇩	Auckland Council Top Risk Report September 2017	27
c ⇩	Corporate Policy Do the Right Thing Policies project	47
d ⇩	Auckland Council Group Insurance Policy	51
e ⇩	Insurance Strategic Objectives and Work Plan 2018-2020	55
f ⇩	Insurance Information Analysis 2016-2017	61

Signatories

Authors

Selvan Naidoo - Senior Risk Advisor

Emma Mosely - Strategic Advisor Risk and Compliance

Authorisers

Cecilia Tse - Head of Risk

James Hassall - Director Legal and Risk (Acting)

Matthew Walker – Acting Group Chief Financial Officer

Phil Wilson - Governance Director

Audit and Risk Committee

14 September 2017

Monitoring of Treaty Audit Response Work Programme

File No.: CP2017/18462

Purpose

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

Executive summary

2. The Internal Audit 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 2015 Treaty of Waitangi Audit (Treaty Audit).

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

4. The department has also recently provided additional reporting to this committee on the approach to monitoring the implementation of treaty audit recommendations through 2017/2018 and the approach to monitoring the development and implementation of Māori Responsiveness Plans at council-controlled organisations.

5. At the time of writing this report, twelve of 24 action groups of the Treaty Audit had been assessed and categorised as ‘closed’. In July 2017 seven of 24 action groups were closed. Of the twelve action groups yet to be closed, three are substantially progressed and nine are partially progressed. The three action groups that are substantially closed should be completely closed in the first quarter of the 2017/2018 year.

6. The nine action groups that are partially progressed will be subject to close monitoring over the next year.

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 the Internal Audit department.

c) note that the Internal Audit department will report on a six-monthly basis to this committee in accordance with the approved Internal Audit work plan.

Comments

7. The Independent Māori Statutory Board’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.

8. Te Tiriti o Waitangi Audit Report 2015 includes a “Summary of Recommended Actions”, in which 24 action groups are contained. These are linked to the 67 specific recommendations of the audit report.

9. Recommendation 66 advised 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”.

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

11. In addition the committee requested the following additional reporting from the department to the committee

· a report to the July 2017 meeting on its approach to the measurement of the Treaty Audit Response Work Programme, and the steps in place in setting up a final year programme (Resolution number AUD/2017/7).

· a report to the August 2017 meeting on its approach to the monitoring and reporting of the development and implementation of CCO Māori Responsiveness Plans through 2017/2018 (Resolution number AUD/2017/28) .

12. 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 agrees to close the action (and the linked Treaty Audit recommendation). When all actions within a group are complete, the action group can be closed.

13. At the July meeting we reported seven of 24 action groups of the Treaty Audit had been assessed and categorised as ‘closed’. Of the 17 action groups that were yet to be closed, eight were substantially progressed and nine were partially progressed. We reported that the eight action groups that were substantially closed should be completely closed in the first quarter of the 2017/2018 year.

14. In August five of those eight action groups were closed by the Waharoa Group. They were:

· Action Group 5 (Te Reo Framework)

· Action Group 11 (Quality Maori Responsiveness Advice Programme)

· Action Group 12 and 15 ( Relationship Agreements)

· Action Group 18 (Regional Mana Whenua Kaitiaki Forum).

15. The following action groups remain on track to be closed by the end of the first quarter of 2017/2018

· Action Group 6 (Taonga Management Policy)

· Action Group 13 (Maori Capability and Employment)

· Action Group 24 (Performance Framework).

16. The Waharoa Group is meeting in September to develop a monitoring programme for the remaining nine action groups that are partially progressed.

17. Attached at Attachment A is a summary of the status of Treaty Audit action groups.

18. In August 2017 we reported to the committee on the approach to monitoring the progress of Māori Responsiveness Plans for council-controlled organisations - in particular Watercare Services Limited and Regional Facilities Auckland. Te Waka Angamua are liaising with the respective council-controlled organisations to support them in the development of their plans.

Consideration

Local board views and implications

19. The views of local boards have not been sought in relation to this report.

Māori impact statement

20. The Treaty of Waitangi Audit Response Work Programme enables the council group to strengthen responsiveness to Māori through targeted actions and improvements.

Implementation

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

Attachments

No.	Title	Page
a ⇩	Status of Treaty audit recommendations	67

Signatories

Author

Mark Maloney - Head of Internal Audit

Authorisers

Matthew Walker – Acting Group Chief Financial Officer

Phil Wilson - Governance Director

Audit and Risk Committee

14 September 2017

Assurance approach for Long-term Plan 2018-2028

File No.: CP2017/17675

Purpose

1. To outline the Long-term Plan 2018-2028 (LTP) assurance process and the role of the Audit and Risk Committee in this process.

Executive summary

2. According to the Local Government Act 2002, the council must have an LTP adopted before the beginning of the first year to which it relates, and utilise a special consultative procedure to consult with its community.

3. To deliver an LTP that achieves an unqualified audit opinion, it is critical for the council group to ensure that:

· LTP processes are robust

· information contained in the LTP is materially complete and reliable

· any risks associated with the LTP process are minimised and

· the LTP meets the requirements of the Local Government Act 2002, and the Local Government (Auckland Council) Act 2009.

4. Separate work-streams have been setup to deliver the programme, overseen by an LTP overview group.

5. Phase one of the LTP project focuses on developing the consultation document and supporting draft LTP information, to be adopted by the Governing Body by February 2018. This will be made available throughout the region for public consultation in late February 2018.

6. Phase two of LTP focuses on developing the final LTP to enable the implementation of its strategic plans and identifying what people can expect over the next 10 years. The final LTP document needs to be adopted by 30 June 2018.

7. The Audit and Risk Committee will have an oversight role throughout the LTP process as prescribed in its Terms of REference. In phase two, the committees role will also be to attest that the final prepared document is a true and accurate reflection of the decisions made by the Governing Body and that it complies with all accounting standards and legislative requirements. The committee will then recommend the document to the Governing Body for adoption.

8. Summary of controls and sign-offs for key areas of the LTP:

Area	Key controls and sign-offs
Programme management and governance	· An LTP Overview group monitors LTP alignment with council priorities, and ensures that significant risks are being actively managed. · Councillors are engaged throughout the LTP process so late surprises or risks to adoption are minimised.
Asset management planning	· Internal Audit department review to assess whether asset management plan processes are sufficiently robust and the information is materially complete and reliable. · Review and department manager sign off that the planned services and AMPs are consistent with available funding and strategies.
Infrastructure investment	· Mitigate risks of uncoordinated planning by areas working together in one workstream on an integrated programme of infrastructure provision. · Engagement with community and stakeholders on scenario trade-offs and decisions.
Levels of service and performance measures/ performance targets	· Validate existing measure set for relevancy, meaningful targets and robust reporting methodology. · Following approval of budgets, performance targets will be realigned and signed-off by activity managers to ensure that the planned services are consistent with available funding.
Key alignment and linkages	· Key steps will be taken to ensure that financial and non-financial information included in the LTP is consistent with council’s strategies, policies and assumptions. · Appropriate managers from council parent and council-controlled organisations will review and sign-off whether information included for each group of activities has been incorporated into the underlying information.
Assumptions	· Ensure assumptions are complete, reasonable and supportable. · Sign-off of budget submissions by business financial managers to confirm consistent application of assumptions.
Accounting standards	· Document review against accounting standard FRS-42 Prospective financial statements as well as New Zealand Society of Local Government Managers guidance. · Peer review of financials by Financial Control team.
Financial model and data	· Monitor built-in checks in model of treasury ratios, prudential benchmarks and the balanced budget assumption. · Review the financial model against significant commitments, policies and strategies e.g. City Rail Link commitments, Financial Strategy, Infrastructure Strategy.
Document preparation	· Council has an experienced legal team who will conduct a review of the Consultation Document, supporting information, and the final LTP, and provide legal support and guidance during the process.
Prudent financial management	· Financial scenarios presented to elected members will illustrate the impact of different scenarios on rates and debt levels in the short and long term. · Final published documents will include assessment of council’s borrowing against its prescribed limits and of its operating budget through a prescribed Balanced Budget Benchmark.
Right debate with the community	· One of the key issues in the consultation document will be balancing affordability of rates and other charges against the need for additional infrastructure investment. · Communication and Engagement team will review and signoff that the consultation document and process adopted are fit for purpose.
Budget refresh for Final LTP	· Budget refresh process will incorporate alignment of budgets with AMP and performance targets and any new investment or changes in budget request will require a full justification. · Prior to submission of all budgets, there will be a review and signoff by boards of council-controlled organisations and council council’s Executive Leadership Team.

Recommendation/s

That the Audit and Risk Committee:

a) endorse the Assurance approach for Long-term Plan 2018-2028.

Comments

Background

9. The Auckland Council LTP is a key statutory document for Auckland Council, to enable the implementation of its strategic plans and identifying what people can expect over the next 10 years.

10. The Auckland Council will be providing an opportunity for all stakeholders including tangata whenua and the community at large to submit on the LTP consultation document.

11. The development of the LTP is a collaborative effort with key accountabilities for delivery lying with the Financial Strategy and Planning team. However, by its very nature and content, requires collective engagement from the entire organisation, including local boards and council-controlled organisations.

12. Phase one of LTP focuses on developing the LTP consultation document and supporting draft LTP information, to be adopted by the Governing Body by February 2018. This will be made available throughout the region for public consultation in late February 2018.

13. Phase two of LTP focuses on developing the final LTP to enable the implementation of its strategic plans and identifying what people can expect over the next 10 years. The final LTP document is adopted by 30 June 2018.

Phase one: consultation document

Programme management and governance

14. A detailed roadmap has been put into place that establishes the path of the entire LTP. (See Attachment A, LTP 2018-2028 Key Milestones)

15. Audit and Risk Committee will have an oversight on key aspects of LTP governance, assurance, risk management and internal control.

16. Clear roles and responsibilities have been allocated to various work-streams who report to the LTP Overview group consisting of the group chief financial officer, director finance and policy from Mayoral Office and general manager, financial strategy and planning. (See Attachment B, LTP 2018-2028 Governance Structure).

17. Overview group has delegated authority to make key decisions that will impact the process and accountability of:

· monitoring the strategic direction of the project and ensure ongoing alignment with council priorities

· understanding and supporting the project objectives, process and deliverables

· checking that all significant project risks have been identified and are being actively managed.

18. Councillors are part of the process at the outset, in the form of committee meetings and workshops with the Finance and Performance Committee, Governing body and local boards. The Mayor has provided his Mayoral Intent document that guides the focus of the LTP.

19. The work-stream leaders and project oversight group meet regularly to track progress and respond to issues.

20. Key stakeholders such as Te Waka Angamua and Independent Māori Statutory Board representatives attend the regular workstream leaders meetings.

21. Risks and issues will be recorded in the internal LTP risk and issues register and mitigating actions will be coordinated through LTP governance and programme management. Highly significant risks will also be recorded and followed up via the Enterprise Top Risk Register and risk mitigation process.

22. Any substantial risks or issues will be escalated to the Executive Leadership Team by the Oversight group.

23. We are working closely with Audit New Zealand to ensure that the scope of assurance reflects the work that they will be performing when they audit the LTP. By doing this work in advance of the external audit, we will be in a position to identify any issues early and address them prior to the external audit visits during the LTP preparation.

Asset management planning

24. An internal audit is underway to review, assess and report on whether:

· council’s asset management planning framework and processes are sufficiently robust

· the information contained in council’s asset management plans is materially complete and reliable.

25. The review will assess whether the plans will provide a reasonable basis for the Infrastructure Strategy, Financial Strategy, financial forecasts and service performance framework that will be contained in the LTP.

26. The audit focuses on the Auckland Council group’s AMP processes across the significant Infrastructural Asset Management Plans such as Roading, Public Transport, Water, Wastewater, Stormwater, Parks, Property and Community Facilities.

27. External peer review is being carried out across AMP’s with the significant spends – Water (Watercare Services Limited), Transport (Auckland Transport) and Stormwater.

28. Review and testing of individual asset management plans focuses on:

· analytical review to understand and verify the reasonableness of renewal and capex expenditure

· identification, assessment and disclosure of risk

· assumptions for completeness, reasonableness, and consistency of application;

· integration of service levels

· integration of demand and asset lifecycle management

· updating of Asset Management Plans to reflect renewal and capital expenditure incurred

· the outcomes of quality assurance performed over Asset Management Plans, including the actions taken to respond to Quality Assurance findings.

29. A provisional AMP review report is due to be released by mid-September, to be finalized on the delivery of AMPs that are still under development, or undergoing peer review.

Infrastructure Investment

30. The Infrastructure Investment workstream focuses on council’s capital build over the next three, 10 and 30 years. Infrastructure providers across the council family are working together to provide an integrated programme view of infrastructure for the next 30 years. It is proposed to provide various scenarios, consistent with the priorities identified in the Mayor’s Intent, to assist the committee’s decision-making.

31. Staff are mitigating risks of uncoordinated planning by working together on an integrated programme of infrastructure provision. In addition, the work programme gives effect to the adopted Future Urban Land Supply Strategy and the draft Auckland Plan Development Strategy.

32. There will be engagement with community and stakeholders on scenario trade-offs and decisions.

33. Any funding risks are being managed through connection with the Infrastructure Funding workstream and any advice or outputs will be aligned with any funding, audit and legal requirements.

Assumptions

34. Controls and sign-off on completeness and appropriateness of assumptions will consist of the following:

· ensure assumptions are complete, reasonable and supportable

· review assumptions against Local Government Act 2002 and New Zealand Society of Local Government Managers guidance to identify mandatory and recommended assumptions

· identify council specific assumptions based on a documented risk assessment, e.g. central government funding for transport

· support assumptions by way of reference to external supporting documentation where practical

· sign-off of assumptions, including assessment of risk and potential impacts, by the LTP financial workstream.

35. To ensure consistent application of assumptions, the following controls and sign-offs are intended:

· send clear written communication/ guidance to all business areas

· design and pre-populate templates with assumptions where practical, e.g. budget submission templates

· sign-off of budget submissions by business financial managers to confirm consistent application of assumptions

· perform and document an analytical review of budget submissions and supporting information to confirm consistency with assumptions.

Financial model and data

36. Data integrity review will consist of the following:

· confirm access controls exist to prevent unauthorised changes to data and models

· reconcile base data for modelling to existing 2017/2018 budgets

· reconcile the financial model results to budget submissions/ templates

· clearly identify the impact of consultation options and reconcile back to base data

· monitor built-in data checks in the financial model.

37. To ensure consistency with other strategies and policies, the following reviews will be carried out:

· monitor built-in checks in model of treasury ratios, prudential benchmarks and the balanced budget assumption

· review the financial model against significant commitments, policies and strategies such as City Rail Link commitments, Financial Strategy, and Infrastructure Strategy.

38. The financial model will also go through an overall review, reconciliation and sign-off process:

· document analytical review of year-on-year movements by activity

· reconcile the result of different financial statements in the model, e.g. funding impact statement, statement of comprehensive income, statement of cash flows and movements in balance sheet

· acceptance of budgets by operational and senior management by way of sign-off.

Consultation document preparation

39. We will work with various stakeholders to produce a user friendly LTP consultation document that informs and engages the public about the LTP and the Auckland Plan refresh.

40. Council has an experienced legal team who will conduct a legal review of the consultation document, supporting information, and the final LTP, and provide legal support and guidance during the process.

Prudent financial management

41. Auckland Council’s approach to prudence is laid out in the Financial Strategy and supported by the Treasury Management Policy, and the Revenue and Financing Policy. In phase two, The Final LTP will include an updated Financial Strategy and Revenue and Financing Policy. The plan development process may also include an update to our Treasury Management Policy.

42. The key factors in the council’s approach are prudent borrowing and funding of depreciation. All financial scenarios presented to elected members will clearly illustrate the impact of the scenario on these factors.

43. Final published documents will include, in accordance with regulations, assessment of council’s borrowing against its prescribed limits and of its operating budget through a prescribed Balanced Budget Benchmark.

Right debate with the community

44. We plan to drive an elevated conversation with Aucklanders, based on the big issues to help them engage in, understand and shape the LTP/ Auckland Plan refresh. We will ensure the LTP consultation document, supporting material and final document is publically available easily.

45. One of the key issues in the consultation document will be balancing affordability of rates and other charges against the need for additional infrastructure investment. This will focus on the effects of our Financial Strategy on debt, rates and services delivered.

46. Communication and Engagement team are involved in ensuring that the consultation document and process adopted are effective in meeting their intended purpose.

Phase two: final Long-term Plan 2018-2028

Levels of service and performance measures/performance targets

47. In order to ensure a set of relevant, meaningful measures and targets, along with a robust underpinning methodology, a review will be conducted between representatives from the appropriate departments to validate the information.

48. A performance framework and guidance material has been developed that articulates the linkages between community outcomes, LTP measures and asset management plan performance information.

49. LTP targets will be updated and signed-off to reflect any changes to levels of service due to proposed funding envelopes. Following the budget committee approval of the final envelopes, the targets will be realigned to ensure that the planned services are consistent with available funding.

Key alignment and linkages

50. Key steps will be taken to ensure that information included in the LTP is consistent, such as:

· review and sign-off by activity managers that key plans and policies are adequately applied

· review of consistency of assumptions with key plans and policies in the development of the underlying information

· review and sign-off whether information on capital expenditure included in the funding impact statements is consistent with underlying asset information

· review to ensure linkages between community outcomes, LTP measures and asset management plan performance information.

51. Appropriate managers from parent council and council-controlled organisations will review and sign-off whether information for each group of activity has been incorporated into the underlying information.

Accounting Standards

52. The following key steps will be taken to ensure prospective financial information complies with General Accounting Accepted Practices:

· document review against accounting standard FRS-42 Prospective financial statements as well as New Zealand Society of Local Government Managers guidance

· confirm with Financial Control department that the accounting policies are consistent with those in the last audited annual report and those expected to be used for subsequent reporting

· Peer review of financials by Financial Control department.

Final budget decision-making

53. Following consultation and engagement, a series of Finance and Performance Committee workshops will be held through May 2018 to discuss budget issues, implications and trade-offs.

54. The mayor, in his role leading the planning process, will present a proposal to the Finance and Performance Committee in late May.

55. The Finance and Performance Committee will debate the proposal and make decisions for the LTP. These decisions will then be confirmed by the Governing Body (both meetings are currently scheduled for 31 May 2018).

Document preparation

56. Council staff will incorporate the decisions made by the Governing Body into the LTP document in line with the appropriate legislation. This document will include an updated Financial Strategy, Infrastructure Strategy, Revenue and Financing Policy, and Funding Impact Statement.

Audit and Risk Committee review

57. The LTP will be presented to the Audit and Risk Committee in June 2018.

58. The committee will review the document to ensure that:

· it is a true and accurate reflection of the decisions made by the Governing Body

· the prospective financial statements, and level of service statements accurately reflect the impacts of the decisions

· the prospective financial statements are compliant with the relevance accounting standards

· the document fulfils all legislative requirements.

59. The committee will recommend the document to the Governing Body for adoption.

Long-term Plan 2018-28 Adoption

60. The Governing Body must adopt the final LTP and strike rates for the 2018/2019 financial year by 30 June 2018 (this is currently scheduled for 27 June 2018).

Consideration

Local board views and implications

61. Local Board Plans are a key input to the LTP and are well progressed. The role of local boards in the public consultation process is an integral part of our approach. Locally held ‘Have Your Say’ events will be deployed across the region to collect feedback on regional and local issues to inform the LTP and Auckland Plan.

62. Local boards have the discretion within the consultation period to hold various ‘Have Your Say’ events that may or may not include a traditional style event. A delegation from the Finance and Performance Committee would be required for local board members and/ or staff to hear from people giving feedback on the LTP if any Finance and Performance members were not at the event.

Māori impact statement

63. Engagement will take place with mana whenua and mataawaka during the consultation phase.

64. A feedback event will be held focusing on Tūpuna Maunga Authority draft operational plan attended by Tūpuna Maunga Authority members, including councillors on the Tūpuna Maunga Authority board.

Implementation

65. The LTP quality assurance workstream coordinates and reviews risks with Audit New Zealand, Legal, the various work-stream leaders and the organisation wide risk management team as appropriate.

66. The overarching objective of the audit and quality assurance workstream is to support the delivery of the LTP by reviewing and assessing that:

· LTP processes are sufficiently robust

· the information contained in LTP is materially complete and reliable

· any risks associated with the LTP process are minimised and

· it meets requirements of the LGA, and the Local Government (Auckland Council) Act 2009.

67. The quality assurance workstream is currently conducting an internal pre-assessment to identify any issues early and address them prior to Audit New Zealand’s formal assessment. Key information on controls, sign-offs, workshop material and supporting content will be provided to Audit New Zealand at the time of various workshops or meetings, to ensure that there are no surprises or late issues. (See Attachment C: List of controls and sign-offs structured by Audit New Zealand modules).

Attachments

No.	Title	Page
a ⇩	LTP 2018-28 Key Milestones	87
b ⇩	LTP 2018-28 Governance Structure	91
c ⇩	List of controls	93

Signatories

Authors

Tushar Shreyakar – Principal Advisor

Ross Tucker – Manager Financial Strategy

Authorisers

Matthew Walker – Acting Group Chief Financial Officer

Phil Wilson - Governance Director

Audit and Risk Committee

14 September 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 Updates on the managment of risks within council-controlled organisations.

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