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

 

Date:

Time:

Meeting Room:

Venue:

 

Tuesday, 27 August 2019

10.15am

Room 1, Level 26
135 Albert Street
Auckland

 

Komiti Tātari me te Mātai Raru Tūpono /

Audit and Risk Committee

 

OPEN AGENDA

 

 

 

 

MEMBERSHIP

 

Chairperson

Sue Sheldon, CNZM

 

Deputy Chairperson

Deputy Mayor Cr Bill Cashmore

 

Members

Cr Ross Clow

 

 

Paul Conder

 

 

Cr Richard Hills

 

 

Bruce Robertson

 

 

 

 

Ex-officio

Mayor Hon Phil Goff, CNZM, JP

 

 

IMSB Chair David Taipari

 

 

(Quorum 3 members)

 

Quorum must include two Governing Body members

 

Mike Giddey

Governance Advisor

 

21 August 2019

 

Contact Telephone: (09) 890 8143

Email: mike.giddey@aucklandcouncil.govt.nz

Website: www.aucklandcouncil.govt.nz

 

 



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.

 

 

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)

 

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.

 

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

 

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.

 

 

 


 

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

27 August 2019

 

ITEM   TABLE OF CONTENTS                                                                                         PAGE

1          Apologies                                                                                                                      11

2          Declaration of Interest                                                                                                 11

3          Confirmation of Minutes                                                                                             11

4          Petitions                                                                                                                        11  

5          Public Input                                                                                                                  11

6          Local Board Input                                                                                                        11

7          Extraordinary Business                                                                                              12

8          Audit and Risk Committee Work Programme                                                          13

9          Assurance Strategy 2019-2022, Assurance Plan 2019/2020 and Assurance Services Charter                                                                                                                          19

10        Monitoring of the Treaty of Waitangi audit recommendations                              39

11        Interim audit management report for the year ending 30 June 2019                    47

12        Final Audit Managment Report for the Long-term Plan Amendment                    77

13        Green Bond Annual Report                                                                                        89  

14        Consideration of Extraordinary Items 

PUBLIC EXCLUDED

15        Procedural Motion to Exclude the Public                                                               115

C1       Council-controlled Organisations Risk Update - August 2019                            115

C2       2019/20 Insurance Programme - Post Renewal Update                                        116

C3       Auckland Council Group New Zealand Stock Exchange announcement, media release and primary financial statements for the year ended 30 June 2019      116

C4       Update on the Audit of Building and Resource Consents                                    116

C5       Office of the Auditor-General and Audit New Zealand Briefing                           117

C6       Correspondence received                                                                                        117  

 


1          Apologies

 

An apology from Mayor P Goff has been received.

 

 

2          Declaration of Interest

 

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

 

 

3          Confirmation of Minutes

 

That the Audit and Risk Committee:

a)         confirm the ordinary minutes of its meeting, held on Wednesday, 5 June 2019, including the confidential section, as a true and correct record.

 

 

4          Petitions

 

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

 

 

 

5          Public Input

 

Standing Order 7.7 provides for Public Input.  Applications to speak must be made to the Governance 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.”


Audit and Risk Committee

27 August 2019

 

Audit and Risk Committee Work Programme

File No.: CP2019/15035

 

  

Te take mō te pūrongo

Purpose of the report

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

Whakarāpopototanga matua

Executive summary

2.       The committee approved its three-year forward work programme at its 29 May 2017 meeting.  It is good practice to review the forward work programme 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.

3.       There are no substantive changes recommended to the forward work programme (Attachment A) that arise from a change in the risk profile of council.

4.       There have been changes, as annotated on the attached work programme in the timing of certain specific items:

·    the quarterly risk update, council-controlled organisation risk and legal risk reports been rescheduled to the September 2019 meeting.

·    the Audit New Zealand interim audit management report (December 2018), and final 2019 Long-term Plan amendment management report, the building and resource consent update are recorded on today’s committee agenda.

·    An information report on the management of risks in parks and reserves will be reported in September 2019. 

·    The Audit New Zealand final audit management report 2019 will be brought to the December 2019 meeting.

 

Ngā tūtohunga

Recommendation/s

That the Audit and Risk Committee:

a)      adopt the revised forward work programme.

 

 

Ngā tāpirihanga

Attachments

No.

Title

Page

a

Audit and Risk Committee Workprogramme updated August 2019

15

      

Ngā kaihaina

Signatories

Author

Emma Mosely – Deputy Head of Assurance Services

Authoriser

Phil Wilson - Governance Director

 


Audit and Risk Committee

27 August 2019

 


Audit and Risk Committee

27 August 2019

 


Audit and Risk Committee

27 August 2019

 


Audit and Risk Committee

27 August 2019

 


Audit and Risk Committee

27 August 2019

 

Assurance Strategy 2019-2022, Assurance Plan 2019/2020 and Assurance Services Charter

File No.: CP2019/15049

 

  

Te take mō te pūrongo

Purpose of the report

1.    To brief the committee and seek feedback on:

·    progress on previous assurance objectives

·    a draft Assurance Strategy 2019-2022

·    a draft Assurance Plan 2019/2020.

2.    To aprove the Auckland Council Assurance Services Charter (previously referred to as the Internal Audit Charter).

Whakarāpopototanga matua

Executive summary

3.    Staff have drafted the attached Assurance Strategy to provide direction and clarify priorities for the Assurance Services department for the next three years.  The new draft strategy covers the internal audit, probity, elected member advisory and ethics and integrity functions (Attachment A).

4.    Alongside this draft three-year strategy, a draft Assurance Plan 2019/2020 has been provided for the committee’s review and feedback (Attachment B). The assurance plan contains a rolling schedule of audits and reviews to assess the effectiveness of key controls and processes that manage council’s top risks, core business processes and high priority issues.

5.    Members of the Executive Leadership Team of council are providing feedback alongside this committee and staff will finalise the strategy and audit plan before coming back to the Audit and Risk Committee (or equivalent) for endorsement following the 2019 local government elections.

6.    The Auckland Council Assurance Services Charter (Attachment C) establishes the mandate, scope of work, independence and accountabilities of the Assurance Services department.  It is a requirement of the Institute of Internal Audit (IIA) International Professional Practices Framework that the committee approve this charter annually.   There are no substantive changes to the charter which was last approved in June 2018, other than to reflect the department’s new name and unit structure.

 

Ngā tūtohunga

Recommendation/s

That the Audit and Risk Committee:

a)      note the draft Assurance Strategy 2019-2022 and provide feedback to staff

b)      note the draft Assurance Plan 2019/2020 and provide feedback to staff

c)      approve the Auckland Council Assurance Services Charter.

 

 

Horopaki

Context

7.    The committee approved the 2016-2018 Internal Audit Strategy in 2015. There has been regular reporting back to this committee on progress against that strategy.

8.    When approving the extension of the strategy in 2018, the committee directed that it be reviewed and refreshed in 2019.

9.    The Integrity and Fraud Assurance Strategy 2016-2018 summarised the strategic intent of the Integrity and Investigation unit. Progress against the strategy was reported in December 2018.

10.  In April 2019, a restructure of the department and the adoption of ‘Assurance Services’ as the name to reflect its functions was completed.  A combined three-year draft Assurance Strategy has been developed for feedback.

Tātaritanga me ngā tohutohu

Analysis and advice

Progress made under Internal Audit and Fraud Strategies 2016-2018

11.  The department has over the past few years focussed on progressively moving the mix of assurance work from low level compliance assurance work to ‘real-time’ advice including:

·    the provision of assurance on whether controls are ‘fit for purpose’ and operating effectively (getting the basics right)

·    continuing to align its programme with Councils risk framework and prioritisation.

·    continuing the focus on education, training and awareness raising - in particular in the fraud and integrity areas, and advice on governance and internal control matters

·    the provision of timely advice on probity (procurement and projects), management of conflicts, integrity and internal control.

12.  Our Charter, which was endorsed by the Governing Body in March 2018, establishes the expectations for conduct that apply to all staff – irrespective of role, seniority or location.

13.  As such, the focus areas for the department’s work programme in 2018/2019 were closely aligned to the key pillars of Our Charter, and the ‘Speak Up’ initiative which is core to the success of Our Charter. This focus was approved by this committee in August 2018.

14.  In 2019, the department has focussed on:

·    working with the People and Performance division to lead the development and implementation of the ‘Speak Up’ Framework so that Our Charter became embedded within council

·    continuing to provide training and raising awareness of the application of Our Charter – in particular the ‘We look after our Money and Assets’ pillar

·    continuing to focus on provision of integrity and fraud prevention training

·    providing governance support, training and advice to elected members – in particular around appropriate management of conflicts of interests. Our Charter has been integrated into the delivery of ongoing education, training and support to elected members

·    reviewing operational systems focussing on data quality e.g. regulatory operational reporting - with focus in 2019 on consenting

·    continuing to perform an ongoing monitoring role for Te Tiriti O Waitangi audit recommendations and reporting to the committee on a six-monthly basis

·    developing the ‘What does Good Governance look like’ guidance for small arms-length entities and ‘Business Improvement District organisations that council provides grant funding to.

15.  The 2019 plan also included the leading of the Project 17 Post Implementation review. At the request of the business this has been deferred until 2019/2020.

16.  Planned work around the Our Charter pillar ‘We look after our information’ did not proceed as planned. This work is a key area of emphasis in 2019 including:

·    information systems security and access controls (including cyber security)

·    controls with respect to changing software applications

·    application controls (e.g. SAP profiles)

·    review of operational systems focussing on data quality e.g. reviewing the completeness and accuracy of regulatory operational reporting.

17.  In the last 12 months, there has been strong focus on prevention strategies through a focus on education, training and awareness raising and there has been limited capacity to complete internal control audits and effectiveness testing.

18.  Recent examples of internal control failures across the corporate and public sectors highlight the risk to entities where core controls are either not well designed or haven’t been applied correctly. It is also important that controls are periodically assessed to see whether they are still adequate to mitigate identified risks and compliance breaches.

19.  The draft Assurance Strategy 2022 recognises that there needs a balance of capability and awareness building and other preventative activities and the ongoing routine audit assurance programme especially on the effective operation of internal controls for council’s core functions and top risks.

20.  This shift in focus is reflected in the updated Assurance Strategy, and the attached detailed assurance plan.

New draft Assurance Strategy 2019-2022

21.  The purpose of the new draft Strategy is to:

a)   ensure assurance activities fully address all key risk and strategic priority areas, those being:

·    corruption, fraud and integrity

·    probity in projects and procurements

·    elected member conduct and interests.

b)   provide assurance through independent audit and review (third line of defense)

c)   engage with stakeholders including people of Tāmaki Makaurau, elected members, council controlled organisations, senior leaders and staff

d)   focus and improve the Assurance Services department’s resourcing, capability and skills.

22.  The new draft Strategy includes the assurance vision, strategic objectives and prioritised initiatives phased over three years.

23.  It builds on the progress and momentum achieved through the Internal Audit Strategy 2016-2018 and Fraud and Integrity Strategy 2016-2018 and:

·        aligns and supports the delivery of council’s Our Strategy 2022 and ‘game changers’

·        addresses council’s current top risks

·        prioritises and focuses on initiatives that support Our Charter.

24.  The general direction and foundation set by the previous strategies is not proposed to alter radically.  However, the department will leverage the new Assurance Services structure to embed an integrated and agile approach that draws on all the assurance disciplines and targets the best resources and skills depending on the issue. 

25.  This will strengthen our independent support and advice and enable tailored and fit for purpose advice and guidance to departments and staff.  The department will enable continuous learning and improvements and help reduce the likelihood and impact of council’s top risks including fraud and unethical behavior, projects and procurements, and health and safety.

26.  The Strategy retains the following operating model adopted in the previous Integrity and Fraud Strategy which uses prevention, response and detection strategies to mitigate fraud risks.

 

27.  This model is to be expanded to all Assurance Services (probity, elected member and fraud and integrity).  The objective is to balance the work delivered across all the three parts of the model to maximise the proactive management risks such as conflict, probity, integrity and core system failure risks.

Priority areas for next three years

28.  In line with the council’s corporate Strategy 2022, staff are prioritising:

·     improving processes and our way of working (simplification and effectiveness)

·     empowering our people (‘Speak Up’ and Our Charter)

·     supporting our elected members (conflicts and conduct).

·     enabling council staff to do the right thing and Aucklanders to have trust and confidence in council by ensuring we have effective internal controls and processes.

29.  The following six strategic objectives have been developed for Assurance Services

1.    embed Our Charter and ‘Speak Up’

2.   strengthen culture and capability - balance reactive and proactive/preventative activities  

3.   make the most of expertise and resources - implement integrated ways of working to deliver probity, integrity, audit and elected member support – optimise use of external resources for additional investigation and specialist advisor work

4.   maintain and build visibility, trust and confidence in the team and council – communications, transparency and proactive reporting

5.   maximise efficiency in detection and response and enable continuous improvement across council through expanded use of data analytics

6.   build strong alignment, close collaboration and coordination with the Risk and Insurance, Health, Safety and Wellbeing, Financial Control, Te Waka Anga Mua, and Privacy/ Local Government Official Information and Meetings Act departments.

30.  These objectives, supported by priority initiatives over the next three years, will enable the department to prioritise and focus its work programme and enable trust and confidence in council.

Assurance Plan 2019/2020

31.  The Assurance Services department provides independent assurance that council’s system of internal controls is designed appropriately and are operating as intended. Previously, the department has maintained and delivered an annual internal audit programme containing topics that would be the subject of audits throughout the year.

32.  The attached draft assurance plan adopts a rolling approach to plan and deliver reviews through three phases: scoping/planning, fieldwork and reporting.

33.  This approach will enable the department to be more agile, deliver in a way that continually supports the business and focus reviews or audits as risks and priorities emerge.

34.  For each quarter in this financial year, the Assurance Services department will aim to deliver at least:

·    the scope and plan for two audits for future quarters 

·    complete one to two audits (fieldwork)

·    issue one to two audits (findings, learnings and recommendations).  

35.  The attached draft assurance plan includes reviews in progress, reviews due to be started and completed within the next six months, and potential future reviews subject to further planning. It is a living document to be updated on an ongoing basis in response to emerging risks and developing knowledge of business activities. (Attachment B)

36.  The current priority is on a combination of routine control audits, for example information technology security and general ledger reconciliations / suspense accounts as well as reviews focused on significant business processes, such as performance management of ‘full facilities maintenance’ contracts.

37.  In some cases, these are in response to specific changes in council processes or control environment, for example a review of sensitive expenditure following the introduction of Our Charter.

38.  Through these reviews, we will be able to provide assurance across a range of Our Charter principles. While much of our work relates to ‘We look after our money and assets’, we also cover other principles such as ‘We look after the people we serve’, e.g. through review of ‘full facilities maintenance contract’ performance, and ‘We look after our safety and wellbeing’, e.g. through our work on health and safety.

39.  Other ongoing work is also shown, including probity. Staff are currently developing a more risk-based and proactive approach to probity, to ensure that a sufficient level of assurance is provided over important strategic procurements and high-risk decision making.

Auckland Council Assurance Services Charter

40.  This committee reviews and approves the Assurance Services Charter annually. This charter establishes the department’s mandate, scope of work, independence and accountabilities.

41.  It is a requirement of the internal audit professional standards that the committee approve this charter.   There are no substantive changes to the charter which was last approved in June 2018, other than to reflect the department’s new name and unit structure. (Attachment C)

Ngā whakaaweawe me ngā tirohanga a te rōpū Kaunihera

Council group impacts and views

42.  The Assurance Strategy and plan is primarily for council.  However, the Our Charter and speak up advisory and support activities and any audits of council systems and services that are used or shared by council and council-controlled organisations will benefit the council group.

43.  Panuku Development Auckland Limited, Regional Facilities Auckland and Auckland Tourism, Events and Economic Development use the ‘0800 integrity’ line and the dedicated confidential integrity email address. The Assurance Services department are called on to respond to ‘Speak Ups’, undertake independent investigations and provide advice and assurance by these organisations.

44.  An audit of council’s information technology systems is included in the attached audit/review plan.  This independent audit is currently being scoped and planned in collaboration with Auckland Tourism, Events and Economic Development, and Panuku Development Auckland Limited. 

Ngā whakaaweawe ā-rohe me ngā tirohanga a te poari ā-rohe

Local impacts and local board views

45.  The views of local boards have not been sought in this report, or in the drafting of the draft strategy or assurance plan.

Tauākī whakaaweawe Māori

Māori impact statement

46.  The draft strategy and assurance plan cover matters associated with council’s obligations under the Treaty of Waitangi.

47.  A key ongoing responsibility for the Head of Assurance Services is as a member of the Waharoa Group which is responsible for monitoring and reporting progress of council’s activities and projects in the Treaty Audit response workstream.

48.  Council’s obligations to Māori and the Treaty o Waitangi are a core part of Our Charter.  Assurance Services may investigate and support staff who have spoken up about issues where decisions and behaviours do not align with the principles in Our Charter.

Ngā ritenga ā-pūtea

Financial implications

49.  There are no financial implications as a result of this report.  All activity associated with drafting the strategy and assurance plan have been met from within the Assurance Services department budget.

Ngā raru tūpono me ngā whakamaurutanga

Risks and mitigations

50.  The provision of the draft three-year strategy and assurance plan is important to ensure council has an appropriate and effective controls assurance function and effective probity, fraud and integrity prevention processes and systems.

51.  The draft strategy is aligned to the council’s corporate strategy and Our Charter and is informed by the top risk register to ensure it is focused on the priority areas.

52.  The proposed direction set for assurance and audit activity is subject to feedback from both the elected and independent members of this committee and from the Executive Leadership Team of council.

53.  The draft strategy and assurance plan will be reported to the council for consideration and endorsement after the election to manage the risk of misalignment or change in direction of the new council.

Ngā koringa ā-muri

Next steps

54.  Following feedback from this committee, staff will also seek feedback from key members of the Executive Leadership Team of council who have responsibilities towards assurance and audit activity. This feedback will be included, along with feedback from today’s meeting at the Audit and Risk committee meeting in December 2019.

 

Ngā tāpirihanga

Attachments

No.

Title

Page

a

Draft Assurance Strategy 2022

27

b

Draft Assurance Plan 2019/2020

31

c

Assurance Services Charter August 2019

35

     

Ngā kaihaina

Signatories

Authors

Emma Mosely – Deputy Head of Assurance Services

Nick Rennie – Manager Audit & Probity

Authoriser

Phil Wilson - Governance Director

 



Audit and Risk Committee

27 August 2019

 

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Audit and Risk Committee

27 August 2019

 

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Audit and Risk Committee

27 August 2019

 

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Audit and Risk Committee

27 August 2019

 

PDF Creator


Audit and Risk Committee

27 August 2019

 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


Audit and Risk Committee

27 August 2019

 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


Audit and Risk Committee

27 August 2019

 

Monitoring of the Treaty of Waitangi audit recommendations

File No.: CP2019/15059

 

  

Te take mō te pūrongo

Purpose of the report

1.       To update the committee on the monitoring work performed by the Assurance Services department on council’s treaty audit response work programme.

2.       The report includes:

·    a summary of work performed in monitoring the implementation of audit recommendations contained in Te Tiriti o Waitangi Audit Report 2018.

·    progress in finalising and implementing Māori Responsiveness Plans (MRPs) across the council group.

·    progress made in finalising the Māori Outcomes Performance Framework.

Whakarāpopototanga matua

Executive summary

3.       The Waharoa Group is comprised of representatives from the Assurance Services department, Te Waka Anga Mua and the Independent Māori Statutory Board Secretariat.

4.       Over the last 6 months, the group have implemented a strengthened process for monitoring and reporting on the delivery of the work programme in response to the findings of the Te Tiriti o Waitangi Audit Report 2018. The process for implementing and monitoring Te Tiriti o Waitangi Audit recommendations is shown in Attachment A.

5.       Thirty-four recommendations remain open in the treaty audit response work programme (including seven proposed for closure this month). There are four still open from 2012, 17 from 2015 and 13 from 2018. Many are being progressed as part of department work programmes.

6.       It is anticipated that project plans will be in place for all open audit recommendations by the end of October 2019, so that the Waharoa Group can focus on monitoring progress and risk management.

7.       The development of a performance management framework for Māori outcomes has been a recommendation of previous Treaty Audits. While Māori outcomes and priorities have been established and staff are finalising performance indicators for the four priority areas - Marae, Economic Development, Te Reo Māori, and Water (kaitiakitanga).

8.       The performance measures are to finalised and considered by the Maori Outcomes Steering Group.  The objective is to commence reporting of performance against the agreed measures in February 2020.

9.       Improvements are being made to the registering, tracking and monitoring of Māori Responsiveness Plans (MRPs) to enable accurate reporting. Work is progressing on refreshing and updating existing MRPs for the Finance Division, Assurance Services department and Panuku Development Auckland Limited.  In February 2019 staff advised 21 MRPs had been approved and were being implemented.  No further MRPs have been implemented in the last 6 months. 

10.     Māori Responsiveness Plans are in place for the five substantive council-controlled organisations.


 

 

Ngā tūtohunga

Recommendation/s

That the Audit and Risk Committee:

a)      receive the Monitoring of the Treaty of Waitangi Audit Recommendations report

b)      note the monitoring work that has been performed by the Assurance Services department

c)      note that the Assurance Services department will report on a six-monthly basis on progress against the Treaty Audit Response Programme to this committee in accordance with the approved Assurance Plan 2019/20.

 

 

Horopaki

Context

11.     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.

12.     The third Te Tiriti o Waitangi Audit was completed and received by the Finance and Performance Committee in July 2018, and by this committee in September 2018.

13.     All recommendations have been accepted and are being actioned as described in the council group’s Treaty Audit Response Programme. Outstanding recommendations from the 2012 and 2015 audits have been included in the Audit Response Programme.

14.     In total there are currently 34 recommendations being addressed and responded to by council.

15.     Te Tiriti o Waitangi Audit Report 2018 noted that council had made a considerable effort over the previous 12 months to address the outstanding recommendations from the previous two audits. It also recognised that progress has been made in the development of Māori Responsiveness Plans.

16.     Te Tiriti o Waitangi Audit Report 2018 report recommends that the Assurance Services (formerly Internal Audit) department continue monitoring and reporting to the Audit and Risk Committee and that the council’s ‘follow-up’ framework is used by the Waharoa Group.

17.     The treaty audit response programme is the basis for the department’s monitoring and reporting to this committee.

18.     This committee resolved at its September 2018 meeting that the department specifically report on progress against finalising the performance framework as required by action 24 of the Te Tiriti o Waitangi Audit Report 2015 (Resolution AUD/2018/59).

Tātaritanga me ngā tohutohu

Analysis and advice

The Waharoa Group

19.     The Waharoa Group is comprised of representatives from the Assurance department, Te Waka Anga Mua and the Independent Māori Statutory Board Secretariat.

20.     Its role is to provide oversight of Te Tiriti o Waitangi (Treaty Audit) Response Programme, including monitoring, guidance and support to Action Executives and Owners, and closure of recommendations.

21.     Assurance Services provides independent oversight and reporting of progress. 

Te Tiriti Audit Response Work Programme

22.     The Waharoa Group have implemented a strengthened process for monitoring and reporting on the delivery of the work programme. It is anticipated that project plans will be in place for all open audit recommendations by the end of October 2019, so that the Waharoa Group can focus on monitoring progress and risk management.

23.     One Tiriti audit recommendation (to establish capacity contracts processes) was closed in the six months to 30 June 2019. At its meeting on 19 August 2019, the Waharoa Group will consider four further recommendations for closure.

24.     Currently there are 34 open recommendations (including the seven proposed for closure in August 2019). There are four still open from 2012, 17 from 2015 and 13 from 2018. Many are being progressed as part of department work programmes; 15 do not yet have project plans that have been agreed with the Waharoa Group.

25.     The Waharoa Group will consider several Te Tiriti o Waitangi/Treaty of Waitangi recommendations at its meeting on 19th August. A verbal update will be provided for today’s Audit and Risk Committee meeting.

Māori Outcomes Performance Management Framework

26.     The development of the Māori Outcomes Performance Management Framework (PMF) is in response to a recommendation from the 2012 Treaty of Waitangi audit.

27.     The purpose of the performance framework is to monitor and report how the council group is delivering on Māori outcomes in a comprehensive and more specific way.  It forms a key component of the council group’s collaborative approach to delivering Māori outcomes.

28.     The work is being overseen by a council group steering group called the Māori Outcomes Steering Group (members include council and CCOs representatives).

29.     Outcomes and priorities were established for the 2018-2028 Long Term Plan, and work has progressed in developing performance measures for the top four priority outcomes, those being:

·    Marae development

·    Economic Development

·    Te Reo Māori

·    Water (kaitiakitanga).

30.     Measures must capture performance information that the council has a direct influence in achieving. The indicators are also intended to guide council on whether investment decisions or inputs are delivering on the desired outcomes. 

31.     The PMF is focused on measuring performance at the council-activity level, as opposed to the Auckland Plan 2050 outcome level. As such, the focus has been on the development of intermediate outcomes measures linked to output measures at the activity/project level.  Intermediate outcomes measures attempt to capture the likely short to medium term impacts of a project or intervention rather than project outputs.  Ideally, measures should also capture impact on Māori communities.  However, this may involve the development of surveys and additional data sources.

32.     The development of a draft set of indicators involved an initial stocktake of existing measures and data sources.  Workshops with subject matter experts and programme leaders were held between June and July 2019.  Criteria have been developed to enable selection of appropriate measures.

33.     The selection and development of specific indicators have been guided by the following criteria:

·      adopting a strengths-based approach

·      culturally significant, meaningful and relevant to Māori

·      grounded in research (i.e. evidence that the intervention addresses key factors that are likely to impact the outcome)

·      ‘SMART’ (i.e. specific, measurable, achievable, realistic and time bound)

·      supported by robust data (i.e. sample size, able to be collated regularly and consistently in future so that the progress can be tracked over time)

·      scale – contributing projects should have sufficient reach as to make an impact.

·      readiness – projects are underway and carrying out activities that will result in outputs that contribute to intermediate outcomes.

34.     The proposed performance measures for the four priority areas - Marae, Economic Development, Te Reo Māori, and Water (kaitiakitanga) are to be considered by the Māori Outcomes Steering Group on 28 August 2019. 

35.     An example of the proposed measures is the number of marae supported to deliver initiatives that enable them to be sustainable, cultural hubs for Māori and the wider community (existing long-term plan measure).

36.     The objective is to complete the measures in the next three months and for reporting of performance to commence in February 2020.

Māori Responsiveness Plans

37.     Improvements are being made to the registering, tracking and monitoring of Māori Responsiveness Plans (MRPs) to enable accurate reporting. Work is progressing to refreshing and updating existing MRPs for the Finance Division, Assurance Services department and Panuku Development Auckland Limited.  In February 2019 staff advised 21 MRPs had been approved and were being implemented.  No new MRPs have been implemented in the last 6 months. 

38.     The Customer and Community Services and Democracy Services MRPs are in the final stages of review, prior to approval and implementation. The Customer and Community Services MRP will refresh and replace three existing MRPs (Arts, Culture and Events, Libraries and Information, and Parks, Sport and Recreation).

39.     The Democracy Services Department has also completed an MRP subject only to final review. Within the Governance Division, Assurance Services and Local Board Services have already completed MRPs and an umbrella MRP at division level is underway which will see full coverage by the end of this calendar year.

40.     There are Māori Responsiveness Plans for all CCO’s.

Ngā whakaaweawe me ngā tirohanga a te rōpū Kaunihera

Council group impacts and views

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

Ngā whakaaweawe ā-rohe me ngā tirohanga a te poari ā-rohe

Local impacts and local board views

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

Tauākī whakaaweawe Māori

Māori impact statement

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

Ngā ritenga ā-pūtea

Financial implications

44.     The committee is not being asked to make a decision with financial implications.

Ngā raru tūpono me ngā whakamaurutanga

Risks and mitigations

45.     The meeting of council’s obligations to Māori and honouring of its treaty obligations is a priority objective of council. 

46.     Key risks to achieving this objective are insufficient planning, resources and monitoring of the Audit work programme. The independent oversight and monitoring by Assurance Services, membership of the Waharoa Group and six-monthly reporting to the Audit and Risk Committee are key mitigations of these risks.

Ngā koringa ā-muri

Next steps

47.     The Assurance Services department will continue to attend the Waharoa Group and monitor the Treaty Audit response programme and report to the committee in accordance with the Assurance plan, and the committee’s forward work programme.

 

Ngā tāpirihanga

Attachments

No.

Title

Page

a

Process for Implementing and Monitoring Te Tiriti o Waitangi Audit Recommendations

45

     

Ngā kaihaina

Signatories

Author

Emma Mosely – Deputy Head of Assurance Services

Authoriser

Phil Wilson - Governance Director

 



Audit and Risk Committee

27 August 2019

 



Audit and Risk Committee

27 August 2019

 

Interim audit management report for the year ending 30 June 2019

File No.: CP2019/15006

 

  

Te take mō te pūrongo

Purpose of the report

1.       To summarise the issues identified by the Office of the Auditor-General during the recent interim audit for the year ended 30 June 2019 and outline how Auckland Council is addressing the issues raised.

Whakarāpopototanga matua

Executive summary

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

3.       Following the completion of the interim audit, a report has been issued which outlines issues identified and makes recommendations for significant items that need to be addressed in the preparation of the Annual Report. The report is attached (Attachment A).

4.       The service performance of consenting activities was highlighted as a continuing area for improvement, specifically to processes, systems and controls to accurately record consent processing times.

5.       The new recommendations made include:

·    review of the delegated financial authority (DFA) registers and SAP delegations

·    review of the elected members’ expense policy which requires one up approval of expenditure incurred by the mayor, councillors and chief executive

·    monitoring of user access rights to ensure access remains necessary

·    review of users able to access vendor masterfile

·    review of Auckland Council’s ‘spending money’ guide

·    clearer documentation of the business purpose for purchasing card and travel expenditure.

6.       The report also includes an update on prior year recommendations which are either in progress or have been resolved. Issues in progress are:

·    embedding “Our Charter”

·    cash handling compliance

·    automated DFA approval in Ariba

·    holiday pay compliance

·    monitoring payroll controls.

7.       Several matters raised in previous reports have been resolved.

8.       Auckland Council accepts the recommendations made and has provided a response outlining actions being taken to address each issue raised.

 

Ngā tūtohunga

Recommendation/s

That the Audit and Risk Committee:

a)      note the issues identified by the Office of the Auditor-General and Auckland Council’s responses to the matters raised as a result of the interim audit for the year ended 30 June 2019.

 

 

Horopaki

Context

9.       This report summarises the issues identified by the Office of the Auditor-General during their interim audit and outlines how Auckland Council is addressing the matters raised.

Tātaritanga me ngā tohutohu

Analysis and advice

10.     An interim audit is completed for the purpose of reviewing Auckland Council’s control environment. An assessment is made by the auditors of Auckland Council’s control environment and financial and non-financial systems to determine their audit approach, so that they can issue an audit opinion on Auckland Council’s annual report, including the financial statements and service performance information.

11.     The service performance information regarding consenting activities, remains a significant matter. The committee has received separate reports outlining the work and reviews being undertaken to address the issues with the reporting of the processing time for building and non-notified resource consents.

12.     The new recommendations made are:

·    Review of the DFA policy and SAP delegations

Some inconsistencies between the DFA assigned in SAP and Auckland Council’s DFA policy were found. It was established that this had arisen in spite of the fact that the responsibilities of the individual employee remained the same, due to the reshaping of the organisation, their department changing reporting lines and the delegation becoming misaligned to their tier in the organisation.  A review will be undertaken to ensure appropriate delegations are in place for both financial and non-financial transactions.

·    Review of the elected members’ expense policy which requires one up approval of expenditure incurred by the mayor, councillors and chief executive

Although the elected members’ expense policy requires one up approval of expenditure incurred by the mayor, councillors and chief executive, in practice this has been delegated to the group chief financial officer. Auckland Council intends to address this inconsistency when the new council is sworn in.

·    Monitoring SAP user access to process invoices and authorise payment runs

SAP access to process invoices and authorise payment runs, is restricted to a limited number of staff. However, the auditors noted several people who had this access had not used this functionality in the last 12 months and recommended that a regular review is performed to remove access which is not required. The council has now removed the access from the staff involved and will periodically review usage by staff.

 

 

·    Procurement team access to the vendor masterfile

One member of the procurement team had been granted access to the vendor masterfile to enter the unique contract identifier in SAP to match with Ariba. While changes to the vendor masterfile are reviewed by a separate team, the recommendation has been made to limit the procurement employee’s access to only the fields which require editing. Auckland Council is working through options to restrict access or to create an automated link between SAP and Ariba.  

·    Review of Auckland Council’s spending money guide

The requirement for adequate supporting documentation and to submit this promptly are not explicitly stated in Auckland Council’s spending money guide. Although these requirements form part of Auckland Council’s processes, it is recommended that they are detailed in the guide to ensure the guide is in line with OAG good practice guidelines.

·    Purchase cards and travel

The business purpose and supporting documentation is required for purchasing card expenditure. However, the level of detail supplied sometimes does not provide enough information to assess the appropriateness without seeking additional information. We will remind staff that more detailed explanations are required.

13.     Updates were also provided on previously raised recommendations:

·    Implementation and embedding of the charter

A programme of work is underway to embed “Our Charter”. Specific work in progress includes working with the council-controlled organisations to adopt the foundation principles, and regular reporting to the executive leadership team of performance measures.

·    Cash handling

Cash handling guidance on expected good practice has been distributed and cash handling audits continue to be performed by internal audit.

·    Procurement DFA

Auckland Council is currently exploring changes to automate delegated financial authority within SAP Ariba to ensure consistency.

·    Holiday Pay Compliance

The Holidays Act project is progressing. The required systems changes have been tested and changes to the live environment are scheduled for the coming weeks. At the time of finalising this report, remediation payments to current employees whose leave entitlement was incorrectly calculated are scheduled to occur in October with payments to former employees paid in November 2019.

·    Monitoring payroll systems and controls

Employees are now able to amend their own bank account details directly, which reduces the risk of fraudulent changes. However, although a report is available which details changes made it is not generated and checked on a regular basis. The Payroll team have reviewed their process and have agreed to a range of changes to address the deficiencies. These changes include:

all bank account changes made by the Payroll and Data Management team will be monitored

monitor all changes made in SAP, noting payroll staff employees’ ID against the changes

ensure the correct process is followed when producing a bank account report.  The payroll administrator will check and sign this off for compliance

amending new employee training to ensure new team members are aware of the required compliance controls, and reasons behind the controls.

14.     There are several matters which were raised in previous reports which have been resolved:

·    The accounting treatment for ACIL, Ports of Auckland and the interests in Auckland International Airports Ltd

·    The timing of the payments to MBIE for building fees levied on their behalf

·    The accounting treatment for the early adoption of PBE IFRS 9 Financial Instruments

·    Termination processes and payments.

Ngā whakaaweawe me ngā tirohanga a te rōpū Kaunihera

Council group impacts and views

15.     There are no items covered by this agenda item that impact the Auckland Council Group, so the views of group entities have not been sought.

Ngā whakaaweawe ā-rohe me ngā tirohanga a te poari ā-rohe

Local impacts and local board views

16.     There are no local impacts from the audit report or issues relating to reporting at a local board level. Accordingly, the views of local boards have not been sought.

Tauākī whakaaweawe Māori

Māori impact statement

17.     The report does not affect the achievement or reporting on Auckland Council’s or the Auckland Council Group’s contributions towards Māori outcomes. Auckland Council’s contributions to Māori outcomes are reported in the annual report.

Ngā ritenga ā-pūtea

Financial implications

18.     There are no financial implications directly arising from the information contained in this report.

Ngā raru tūpono me ngā whakamaurutanga

Risks and mitigations

19.     Auckland Council is actively addressing the issues raised, and we have assessed the matters will not impact on the audit opinion of the Auckland Council Group’s annual report.

Ngā koringa ā-muri

Next steps

20.     A further report will be received from the auditors following the completion of the 2018/2019 year-end audit, which will include an update on the progress of previously raised items.

 


 

 

Ngā tāpirihanga

Attachments

No.

Title

Page

a

Interim management report for the year ended 30 June 2019

53

 

Ngā kaihaina

Signatories

Author

Morna Macfarlane - Financial Compliance Manager

Authorisers

Francis Caetano - Group Financial Controller

Kevin Ramsay - General Manager Corporate Finance and Property

Matthew Walker - Group Chief Financial Officer

Phil Wilson - Governance Director

 


Audit and Risk Committee

27 August 2019

 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


Audit and Risk Committee

27 August 2019

 

Final Audit Managment Report for the Long-term Plan Amendment

File No.: CP2019/15415

 

  

Te take mō te pūrongo

Purpose of the report

1.       To summarise the matters identified by the Office of the Auditor-General during the recent audit of the Long-term Plan Amendment and outline how Auckland Council is addressing the matters raised.

Whakarāpopototanga matua

Executive summary

2.       On 20 June 2019 the Governing Body of Auckland Council adopted an amendment to the 10-year Budget 2018-2028 (or long-term plan). On the same day the Office of the Auditor-General issued an unmodified audit opinion on this amendment. This report confirms that the conclusions reflected in their report on the original 10-year Budget 2018-2028 remain valid.

3.       The Office of the Auditor-General also issues reports to the council with recommendations on how the council can enhance and improve our processes for current and future planning. A management report on the audit of the Long-term Plan Amendment has been issued and is provided as Attachment A.

4.       The only recommendation made in the report concerned project management and the quality control of different iterations of financial information provided for audit. Council staff accept the recommendation and have provided a response outlining the action being taken to address this.

 

Ngā tūtohunga

Recommendation/s

That the Audit and Risk Committee:

a)      note the matter identified by the Office of the Auditor-General in the audit of the Long-term Plan Amendment and the council’s response.

 

Horopaki

Context

5.       On 20 June 2019 the Governing Body of Auckland Council adopted an amendment to the 10-year Budget 2018-2028 (or long-term plan). On the same day the Office of the Auditor-General issued an unmodified audit opinion on this amendment. This report confirms that the conclusions reflected in their report on the original 10-year Budget 2018-2028 remain valid.

6.       The report on the original 10-year Budget 2018-2028, issued on 28 June 2018, was a standard audit report that meant that the Office of the Auditor-General was satisfied that the plan met the statutory purpose and that they did not need to draw the readers’ attention to anything in particular.  Additionally, they found the underlying information and assumptions used to prepare the long-term plan provided a reasonable and supportable basis for preparation.

7.       The Office of the Auditor-General also issues reports to the council with recommendations on how the council can enhance and improve our processes for current and future planning.

Tātaritanga me ngā tohutohu

Analysis and advice

8.       A management report on the audit of the Long-term Plan Amendment has been issued and is provided in Attachment A. The matters discussed in the report, beyond the core audit findings, are summarised below.

Legal advice

9.       The auditors noted the value of the input of our internal legal team, and the use of external legal advice where necessary, throughout the project. They highlighted the importance of this process in ensuring the council is complying with all legislative requirements.

Project management

10.     The auditors noted that during the development of the Consultation Document and the Amended 10-year budget the council put in place a centralised approach to project management and that this approach worked reasonably well. This approach brought together staff from a number of different disciplines, and from across the council family to deliver a successful project. The central team held responsibility for the delivery of information from across the project by agreed deadlines.

11.     The auditors also noted, however, that they were required to review multiple versions of the financial model during both stages as adjustments to assumptions and corrections were incorporated. They recommended that the council needs to more clearly identify the changes that will arise from a proposal and what supporting information would be needed to audit that information. They also recommended that this information is then collated, and quality checked before being presented for audit.

12.     Council staff acknowledge the challenge of multiple versions of financial information. It was also acknowledged that the parts requiring amending were identified early and that a number of complexities emerged during the process. As part of the project review process staff have identified a need for additional quality controls prior to information being provided to audit and these will be implemented in future projects of this nature.

Ngā whakaaweawe me ngā tirohanga a te rōpū Kaunihera

Council group impacts and views

13.     There are no issues raised in the management letter relating to council-controlled organisations. Accordingly, their views have not been sought.

Ngā whakaaweawe ā-rohe me ngā tirohanga a te poari ā-rohe

Local impacts and local board views

14.     There are no issues raised in the management letter relating to planning at a local board level. Accordingly, the views of local boards have not been sought.

Tauākī whakaaweawe Māori

Māori impact statement

15.     The report does not affect the achievement or reporting on the council or the council group’s contributions towards Māori outcomes

Ngā ritenga ā-pūtea

Financial implications

16.     There are no financial implications directly arising from the information contained in this report.

Ngā raru tūpono me ngā whakamaurutanga

Risks and mitigations

17.     Risks and issues raised are detailed in the body of this report and its attachment.

Ngā koringa ā-muri

Next steps

18.     The council staff are actively addressing the issues raised by Office of the Auditor-General to ensure that they are resolved.

 

Ngā tāpirihanga

Attachments

No.

Title

Page

a

Final management report on the Long-term Plan Amendment

81

     

Ngā kaihaina

Signatories

Authors

Michael Burns - Manager Financial Strategy

Ross Tucker - General Manager, Financial Strategy and Planning

Authorisers

Matthew Walker - Group Chief Financial Officer

Phil Wilson - Governance Director

 


Audit and Risk Committee

27 August 2019

 


 


 


 


 


 


 


Audit and Risk Committee

27 August 2019

 

Green Bond Annual Report

File No.: CP2019/13612

 

  

Te take mō te pūrongo

Purpose of the report

1.       To receive the Green Bond Annual Report for June 2019 and note the process to be followed for future assurance engagements for reporting to the Audit and Risk Committee.

Whakarāpopototanga matua

Executive summary

2.       Auckland Council established a Green Bond Framework in early 2018 and issued its first Green Bond in June 2018.

3.       Under the Green Bond Framework, Auckland Council is required to report annually on the use of proceeds from green bond issuance and a summary of the environmental outcomes delivered by the assets/project and seek assurance from an independent assurer.

4.       Auckland Council published its first Green Bond Annual Report in June 2019. This included a post issuance assurance report by Ernst and Young (EY). 

5.       The EY assurance report is confirmation that Auckland Council is complying with its obligation under the Green Bond Framework.

6.       The chair of the Audit and Risk Committee reviewed the Green Bond Annual Report prior to publication. Future annual reports will be presented to the Audit and Risk Committee for approval prior to publication.

 

Ngā tūtohunga

Recommendation/s

That the Audit and Risk Committee:

a)      receive the first Green Bond Annual Report for information

b)      note that future Green Bond Annual Reports will be presented to the committee for approval prior to publication.

 

Horopaki

Context

7.       A Green Bond is defined as a bond issued to finance or refinance projects or assets that deliver positive environmental outcomes.

8.       Auckland Council established a Green Bond Framework (Framework) in early 2018 which was subsequently updated in April 2019 (Attachment A). The Framework sets out how the council proposes to issue and manage its Green Bond programme.

9.       The Framework addresses how the proceeds from each bond issue will be used, the process of evaluation and selection of projects and assets (eligible assets), management of the proceeds and reporting.

10.     Examples of project and assets that can be funded via Green Bond are low carbon transport assets (i.e. electric trains, public walking and cycling infrastructure), sustainable water and wastewater management, waste management, low carbon and efficient building.

 

11.     To ensure robust assessment of the Framework and the underlying Eligible Assets in any Green Bond issuance, Auckland Council may seek to employ one or more external review options. These include the option to seek assurance from an independent Assurer and/or certification from the Climate Bonds Initiative or Climate Bond Standards.

12.     Under the Framework, Auckland Council is required to report annually on the use of proceeds and provide a summary of the environmental outcomes that have been delivered by the assets/projects.

Tātaritanga me ngā tohutohu

Analysis and advice

13.     In June 2018 Auckland Council issued its first green bond (also the first green bond issued by a New Zealand entity). This bond raised $200 million, for a 5-year bond with an interest coupon of 3.17 percent.

14.     The proceeds from this first bond issue was used to refinance borrowings deemed to be attributed to Electric Multiple Units (i.e. electric trains).

15.     To meet reporting obligations under the Framework, Auckland Council published the first Green Bond Annual Report in June 2019 (Attachment B).

16.     EY was engaged to undertake a post issuance audit and provide an assurance report for the annual report. Their assurance statement can be found as Appendix 1 to the Green Bond Annual Report.

17.     The Annual Report was published in June 2019 to support Auckland Council’s second Green Bond issue in July 2019. Staff recognised late that the Audit and Risk Committee should be involved in the process relative to the EY assurance report, therefore the report was provided to the Chair of the Audit and Risk Committee for review prior to publication.

18.     It is proposed that next year’s Green Bond Annual Report (including the assurance report) will be presented to the Audit and Risk Committee for approval prior to the report being published.

Ngā whakaaweawe me ngā tirohanga a te rōpū Kaunihera

Council group impacts and views

19.     There are no additional impacts relating to reporting at a group level.

Ngā whakaaweawe ā-rohe me ngā tirohanga a te poari ā-rohe

Local impacts and local board views

20.     There are no additional impacts relating to reporting at a local board level.

Tauākī whakaaweawe Māori

Māori impact statement

21.     There are no additional impacts relating to Māori.

Ngā ritenga ā-pūtea

Financial implications

22.     The financial impact is the same as any other domestic retail bond issue. The only additional cost is the engagement EY to conduct post issuance assurance and seeking Climate Bonds Initiative certification. These costs are approximately $15,000 depending on the size of the issuance and the type of asset/project being funded. These costs are met within existing interest cost budgets.

Ngā raru tūpono me ngā whakamaurutanga

Risks and mitigations

23.     The EY assurance report is confirmation that Auckland Council is complying with its obligation under the Green Bond Framework.

Ngā koringa ā-muri

Next steps

24.     None.

 

Ngā tāpirihanga

Attachments

No.

Title

Page

a

Green Bond Framework - April 2019

93

b

Annual Green Bond Report - June 2019

99

     

Ngā kaihaina

Signatories

Authors

Alec Tang - Principal Specialist Corporate Sustainability

Andrew John - Treasury Funding Manager

Authorisers

Jacques Victor – General Manager Auckland Plan Strategy and Research

John Bishop - Treasurer and General Manager Financial Transactions

Phil Wilson - Governance Director

 


Audit and Risk Committee

27 August 2019

 


 


 


 


 


 


Audit and Risk Committee

27 August 2019

 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 

     

 


Audit and Risk Committee

27 August 2019

 

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       Council-controlled Organisations Risk Update - August 2019

Reason for passing this resolution in relation to each matter

Particular interest(s) protected (where applicable)

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

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

s7(2)(c)(i) - The withholding of the information is necessary to protect information which is subject to an obligation of confidence or which any person has been or could be compelled to provide under the authority of any enactment, where the making available of the information would be likely to prejudice the supply of similar information or information from the same source and it is in the public interest that such information should continue to be supplied.

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

In particular, the report contains risk reporting and detailed top risks confidentially to the council-controlled organisations Board or Audit and Risk Committees.  The council-controlled organisations have provided their risk report for council's Audit and Risk Committee subject to confidentiality.

s48(1)(a)

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

 


 

C2       2019/20 Insurance Programme - Post Renewal Update

Reason for passing this resolution in relation to each matter

Particular interest(s) protected (where applicable)

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

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

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

In particular, the report contains particular details of Council Group's professional indemnity policy.

s48(1)(a)

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

 

C3       Auckland Council Group New Zealand Stock Exchange announcement, media release and primary financial statements for the year ended 30 June 2019

Reason for passing this resolution in relation to each matter

Particular interest(s) protected (where applicable)

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

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

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

In particular, the report contains financial adjustments, assumptions and judgements that have impact on the financial results of the Auckland Council Group as at 30 June 2019.

s48(1)(a)

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

 

C4       Update on the Audit of Building and Resource Consents

Reason for passing this resolution in relation to each matter

Particular interest(s) protected (where applicable)

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

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

s7(2)(c)(ii) - The withholding of the information is necessary to protect information which is subject to an obligation of confidence or which any person has been or could be compelled to provide under the authority of any enactment, where the making available of the information would be likely to damage the public interest.

In particular, the report contains infomation prepared for Audit New Zealand and in draft for the Annual Report that is subject to confidentiality.

s48(1)(a)

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

 


 

C5       Office of the Auditor-General and Audit New Zealand Briefing

Reason for passing this resolution in relation to each matter

Particular interest(s) protected (where applicable)

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

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

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

In particular, the report from Audit New Zealand contains information regarding the annual report and financial results of the Auckland Council Group and Auckland Council as at 30 June 2019.

s48(1)(a)

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

 

C6       Correspondence received

Reason for passing this resolution in relation to each matter

Particular interest(s) protected (where applicable)

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

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

s7(2)(g) - The withholding of the information is necessary to maintain legal professional privilege.

In particular, the report contains information which is the subject of legal negotiations.

s48(1)(a)

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