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

· health, safety and wellbeing

· business continuity and resilience

· integrity and investigations

· monitoring of compliance with laws and regulations

· significant projects, programmes of work and procurement 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 the council’s CCOs and the council 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 other than those in these terms of reference.

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.

Assurance

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

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

· Review the co-ordination between the risk and assurance 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 assurance 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 Assurance Strategy, including the fraud and integrity aspects, including a detailed work programme.

· Review annually the ‘Speak Up’ and 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, Assurance, 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 Long-term Plan, 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 way 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:

o the nature, scope and fees of the external audit

o areas of audit focus

o 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 Assurance and the Chief Risk Officer are responsible for monitoring CCO risk and internal audit strategies with respect to risks and CCO 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

09 December 2019

Audit and Risk Committee Forward Work Programme 2020-2022

File No.: CP2019/19964

Te take mō te pūrongo

Purpose of the report

1. To brief the Audit and Risk Committee on its Terms of Reference which were adopted by Governing Body on 26 November 2019.

2. To consider and approve a draft three-year forward work programme 2020-2022.

Whakarāpopototanga matua

Executive summary

3. Terms of Reference were adopted by the Governing Body on 26 November 2019. Resolution number GB/2019/110. An excerpt of the Terms of reference relating to the Audit and Risk Committee is provided as Attachment A.

4. The Terms of Reference delegate the appropriate responsibilities and powers to, and setting quorums for, the committees established by the mayor. They also include certain matters to be included in the work programme.

5. The Terms of Reference remain largely unchanged from the previous term of council with four refinements. The most substantive change is that the Audit and Risk Committee reports directly to the Government Body.

6. A draft work programme for 2020 – 2022 is attached for consideration and approval. (Attachment B)

7. The programme generally reflects the content from the current work programme that was adopted on 12 September 2019 with some proposed changes.

8. A new layout has been developed that is organised by the key areas of work of the Audit and Risk Committee.

9. The following improvements are proposed:

(a) the Risk department and Assurance Services department general activity updates be scheduled for every second meeting (6 months) with reports on specific or urgent matters to be brought separately and if required.

(b) the council-controlled organisations (CCOs) scheduled attendances be maintained but that the September meeting be reserved for Annual Plan risk discussions by CCOs to avoid unnecessary duplication.

(c) an area of work concerning Auckland Council partner/shareholder risk management be added with scheduled reporting scheduled for the 36^th America’s Cup and City Rail Link.

10. To increase transparency and planning, it is proposed that a schedule of workshop topics be included in the work programme. The final scheduling will be determined by the Audit and Risk Committee every six months.

Ngā tūtohunga

Recommendation/s

That the Audit and Risk Committee:

a) note its Terms of Reference in Attachment A to the report

b) adopt the Audit and Risk Committee 2020-2022 Forward Work programme.

Horopaki

Context

11. On 26 November the Governing Body adopted the Terms of Reference. The mayor has the power to establish committees and to appoint their chairpersons. By adopting the Terms of Reference, the Governing Body has delegated the appropriate responsibilities and powers to, and set quorums for, the committees established by the mayor.

12. The Terms of Reference have been developed in consultation with councillors and staff from across the organisation, to ensure that reporting responsibilities align clearly with the purpose of each of the committees.

13. This being the first meeting of the Audit and Risk Committee following the Governing Body decisions, the new Terms of Reference have been provided for the committee’s information and a new work programme developed that accords with the Terms of Reference.

Tātaritanga me ngā tohutohu

Analysis and advice

Terms of Reference

14. The Audit and Risk Committee Terms of Reference (extract from the Governing Body Terms of Reference 26 November 2019) are provided in Attachment A.

15. The terms of reference remain largely the same as for the previous 2017-2019 term. However, the following changes have been made:

(a) the Committee reports directly to Governing Body (previously it was a subcommittee of the Finance and Performance Committee)

(b) health, safety and wellbeing and business continuity and resilience have been specified in the list of aspects of governance, risk management and internal control over which the committee will review the effectiveness

(c) the oversight of Ports of Auckland Limited and Auckland International Airport Limited has been removed. These entities report to other committees

(d) the responsibilities of the Chief Risk Officer and Head of Assurance Services over the council-controlled organisations (CCOs) have been clarified. CCOs have their own risk and assurance functions, and accordingly, the officer’s responsibilities are to monitor CCO risk and internal audit strategies with respect to risks and CCOs risks that are significant to the Auckland Council Group.

Proposed work programme 2020-2022

16. The Audit and Risk Committee adopted its last work programme on 1 May 2017 and most recently reviewed and updated it on 12 September 2019.

17. In accordance with good practice, the committee reviews and updates the programme at each meeting. This is to ensure it can be adapted quickly if council’s risk profile changes and that it remains relevant to the needs of the committee. For example, it would be appropriate for the committee to consider a change to the approved forward work programme in the event there has been a significant change in the risk profile of council as reflected in the top risk register. Similarly, a significant event occurring either within council or in the wider operating environment could result in a change in the work programme of the committee.

18. A draft work programme for 2020 – 2022 is attached for consideration and approval as Attachment B.

Content of draft work programme

19. The programme generally reflects the content from the current work programme that was most recently adopted on 12 September 2019 with some proposed changes.

20. A new layout has been developed that is organised by the key areas of work of the Committee, those being:

(a) Assurance

(b) Te Tiriti o Waitangi - Independent Maori Statutory Board audit – oversight of council’s response

(d) CCO risk management

(e) Auckland council partner/shareholder risk management

(f) Health safety and wellbeing

(g) Legal risk

(h) Insurance

(i) Interim financial Statements

(j) Annual Report/Long-term plan

(k) External audit

21. The forward work programme includes:

· the incorporation of ‘deep dive’ reviews on significant ‘high’ and ‘moderate’ risks, as contained in council’s Enterprise Risk Management Top Risk register

· the annual work programme, covering:

o the risk and insurance functions

o the assurance (internal audit, integrity, and probity functions)

o the audits of the annual report, long-term plan and annual plan

o the review of the six-month interim financial statements.

· Regular progress reporting concerning:

o assurance services

o risk

o legal risk

o health, safety and wellbeing

o business continuity

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

Reporting by council-controlled organisations

22. All substantive CCOs are required to provide quarterly, written risk updates to the Audit and Risk Committee of Auckland Council. In addition, within a 12-month period and on a rolling basis, representatives of the CCOs are required to present their risk update in person to this committee. (AUD/2017/027).

23. Further discussion about the CCO reporting and schedule of attendances is included in the Quarterly Risk Update report to the Audit and Risk Committee on 9 December 2019.

Proposed changes to work programme from 2017-2019 term

24. The following new matters and adjustments are proposed address the role and responsibilities of the committee and to maximise the effective use of the meeting time available:

(d) the Risk and Assurance Services departments general activity updates be scheduled every second meeting (6 months) as opposed to every meeting on the basis that reporting will be brought on specific or urgent matters to be brought separately and as required

(e) the CCO scheduled attendances are maintained but that the September meeting be reserved for annual plan risk discussions by CCOs to avoid unnecessary duplication.

(f) an area of work concerning Auckland Council partner/shareholder risk management be added with reporting scheduled for 36^th America’s Cup and City Rail Link.

25. In the previous term, the committee has held workshops on matters where a general background briefing or more informal discussion was required. No decisions are made, and the workshops do not replace the need for formal reporting to the committee.

26. To improve transparency and planning, it is proposed that a schedule of workshop topics be included in the work programme to confirm the priority matters requiring workshop. The final scheduling will be determined by the Audit and Risk Committee every six months.

27. Staff recommend that the committee hold a workshop in February 2020 covering:

· the completed top risk deep dive for service delivery risk

· the post event review on the sky convention centre fire (including business continuity and emergency response).

Tauākī whakaaweawe āhuarangi

Climate impact statement

28. Climate change risk is currently identified as a top risk on council’s top risk register. A risk deep dive (phase 2) is scheduled for completion and reporting to the Audit and Risk Committee in May 2020.

Ngā whakaaweawe me ngā tirohanga a te rōpū Kaunihera

Council group impacts and views

29. The reporting of CCOs is included in the work programme and discussed in this report.

30. Under its Terms of Reference, the scope of the Audit and Risk Committee includes oversight of risk management and assurance across council’s CCOs and the council with respect to risk that is significant to the Auckland Council Group.

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

Local impacts and local board views

31. There are no specific local impacts arising from this report.

Tauākī whakaaweawe Māori

Māori impact statement

32. Staff recommend that the committee maintain its six-monthly review of the council’s progress to address the recommendations of the Independent Maori Statutory Board’s Te Tiriti o Waitangi audit (Treaty Audit). The next update will be provided in February 2020.

Ngā ritenga ā-pūtea

Financial implications

33. The Audit and Risk Committee Terms of Reference and work programme includes the review and monitoring of the Long-term plan, interim and annual report including statutory financial statements and any formal announcements relating to the council’s financial performance.

Ngā raru tūpono me ngā whakamaurutanga

Risks and mitigations

34. There are no risks arising from this report.

Ngā koringa ā-muri

Next steps

35. The work programme will be reported to the next meeting for review and approval.

Ngā tāpirihanga

Attachments

No.	Title	Page
a ⇩	Excerpts from Governing Body Terms of Reference 26 November 2019 - Audit and Risk Comittee	17
b ⇩	Draft Audit and Risk Committee work programme 2020-2022	25

Ngā kaihaina

Signatories

Author

Emma Mosely - Head of Assurance Services (Acting)

Authorisers

Emma Mosely - Head of Assurance Services (Acting)

Phil Wilson - Governance Director

Audit and Risk Committee

09 December 2019

Assurance Services Strategy and Activities Update

File No.: CP2019/20234

Te take mō te pūrongo

Purpose of the report

1. To seek endorsement of the Assurance Strategy 2022 – 3 year roadmap.

2. To update the Audit and Risk Committee on the activities undertaken by the Assurance Services department to progress the Assurance Strategy 2019-2022 and the Assurance Audit and Review plan 2019/2020 in the period August 2019 - November 2019.

Whakarāpopototanga matua

Executive summary

3. The finalised Assurance Strategy 2022 and 3 year roadmap is recommended for the endorsement of the Audit and Risk Committee (Attachment A).

4. Minor editorial refinements to the draft received by the Committee on 27 August 2019 have been made reflecting feedback from the executive leadership team and key stakeholder departments.

5. Good progress has been made on the 2019/2020 priority areas across all six strategic objectives.

6. The Assurance Services department’ rolling audit plan 2019/2020 has been reviewed and updated. (Attachment B). Four audits have been completed and reports issued in the four months ending November 2019.

7. In all areas reviewed, there have been some control weaknesses identified and process enhancements recommended. Action plans or appropriate responses have been agreed with the control owners and progress will be monitored.

8. The key reviews to be completed in the next six months relate to ICT security, Aotea Centre Refurbishment project, sensitive expenditure (p-card expenditure and staff reimbursements) and waste key performance indicator processes.

9. A building and resource consents performance measure assurance plan is being implemented to manage the risk of inaccurate data and ensure effective oversight and clear process (Attachment C). A verbal update on the plan will be provided at the meeting.

Ngā tūtohunga

Recommendation/s

That the Audit and Risk Committee:

a) receive and note the update on activities performed by the Assurance Services department

b) endorse the Assurance Strategy 2019-2022 – 3 year roadmap.

Horopaki

Context

10. This report provides an update on Assurance Services activities for Auckland Council to enable the Committee to have oversight and review the effectiveness of governance, risk management and internal control.

Tātaritanga me ngā tohutohu

Analysis and advice

11. This update provides advice and assurance on the following matters:

· the Assurance Services Strategy – 3 year roadmap

· audits and reviews

· probity support for procurements and projects

· integrity and investigations – Speak Up

· elected member advice

· Holidays Act 2003 project

· resource and building consents performance measures

· City Rail Link sponsor agreement made under delegation.

Assurance Services Strategy – 3 year roadmap

12. A draft Assurance Strategy – 3 year roadmap was reported to the Audit and Risk Committee on 27 August 2019 for discussion and feedback.

13. Further feedback has been received from key departments and executive and senior leaders and minor editorial refinements have been made. The finalised strategy is attached for the committee’s consideration and endorsement (Attachment A).

14. The three-year strategy covers internal audit, probity, elected member advisory services and integrity functions. It includes the assurance vision, strategic objectives and prioritised initiatives phased over the next three years.

15. Its purpose is to:

(a) ensure effective independent assurance activities addressing key risk areas:

· corruption, fraud and integrity

· probity in projects and procurements

· elected member conduct and conflict of interests

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

16. Good progress has been made on the 2019/2020 priority areas across all six strategic objectives. Our priority in the last six months has been to maintain and build visibility, trust and confidence, maximise efficiency and close collaboration and coordination with key assurance departments across council.

17. We are increasing our use of data analytics through all aspects of the Assurance Services departments’ work as well as offering expert advice and support to divisions to undertake and utilize data analytics in auditing and monitoring processes.

18. Highlights include:

· external publication on council’s website of a summary of gifts accepted and declared by staff to increase openness, transparency, trust and confidence

· elected member conflicts of interest support and induction

· planning and engagement with the Risk and Insurance, Investment Management Office and Procurement departments on forward work programmes

· monthly speak up meetings and reporting to the executive leadership team via a dashboard report has been established

· communications and events run for fraud week have raised visibility and awareness

· Assurance Services Kotahi intranet pages and information available to all staff have been refreshed

· conflicts of interest anniversary disclosure process established for all staff.

Audits and Reviews

19. The Assurance Audit Plan 2019/2020 has been reviewed and updated (Attachment B).

20. Except for the review of the Memorial Gardens (completed), no new audits or reviews have been added to the plan reported on 27 August 2019. However, refinements and clarification to scope and planned scheduling have been made.

21. In the first quarter of 2019/2020, we have completed and issued five audits concerning:

· Treasury

· Project Management and the Investment Delivery Framework

· Avondale Business Association payment processes and controls

· Manukau Memorial Gardens

22. To maintain the integrity and effectiveness of the confidential assurance review and audit processes, key findings and outcomes are reported to the Audit and Risk Committee in a separate confidential report.

23. In all areas audited, there have been some control weaknesses identified and process enhancements or further work recommended as part of continuous improvement. Actions plans or appropriate further work have been developed and agreed with control owners and progress will be monitored.

24. The key reviews to be completed in the next six months relate to ICT security, Aotea Centre Refurbishment project, sensitive expenditure (p-card expenditure and staff reimbursements) and waste key performance indicator processes.

Probity support for procurements and projects

25. Our strategic objective for the probity function is to proactively plan and prioritise support based on risk and strategic priorities of the council.

26. We continue to provide independent probity assurance over large and high-risk procurements and probity oversight and advice to council departments and council controlled organisations. Advice covers conflicts of interest and fairness and equity of processes and decision making.

27. In the three months since September 2019, staff have been supporting the following procurements:

· Integrated waste collection services (“three bins”)

· Stormwater southern and regional maintenance

· Westhaven pile berth redevelopment (Panuku)

· Aotea Central development

28. In all cases staff were comfortable that the procurements were run in a fair and effective manner.

29. The Finance Division has recently completed a change process that has included the establishment of a new department responsible for projects and programmes called the Investment Management Office. Discussions have commenced about implementing a programme of work to support the probity of significant projects and programmes including opportunity for independent, real time probity advice and targeted audits and quality checks.

Integrity and Investigations – Speak Up

30. Integrity matters and fraud prevention, detection and response remain a priority focus for the council, the Assurance Services department and the Integrity team.

31. Our priority in the next quarter is to increase and expand our communications to raise general awareness and support higher risk areas to increase numbers of staff completing the e-learning and other training.

Speak Up status update

32. Auckland Council encourages staff and provides multiple channels through which people can speak up about behaviors that are not in line with “Our Charter”. This includes empowering staff to look for and speak up about fraud and corruption.

33. The Assurance Services department provides an independent channel for staff to confidentially and safely speak up on questions, issues or concerns from minor through to serious issues. Options to contact Assurance Services include:

· direct contact to Assurance staff, dedicated email addresses and phone numbers

· the integrity hotline - phone 0800 AC INTEGRITY (0800 224 683)

· anonymous online email capability

· external opportunities are also listed via Auckland Council’s web page

34. The Speak Up channels are operating adequately and the numbers of speak ups received are remaining steady. While there has been a general decline in total numbers using the formal channels there has been an increase in complexity and time taken to resolve.

35. Work to align and coordinate channels is continuing. Ongoing internal communications linking to Our Charter are reinforcing the Speak Up messages and maintaining awareness. Six monthly reporting to the executive leadership team on Speak Up processes, trends and issues has been established.

Training and capability building

36. The Assurance Services department delivers an ongoing training and capability building programme that includes e-learning, integrity training and tailored sessions for departments and leadership teams. Over the 12 months ending December 2019 the programme has included:

Type of Training	Sessions / Attendances
Ethics and Integrity workshop (General Integrity Training)	10 sessions, 148 staff attended
Staff Induction Days	21 sessions, 934 staff attended
Building Consent & Regulatory Induction Workshops	9 sessions, approx. 180 staff
Integrity eLearning module	391 staff completed (three months since roll out commenced)
Other tailored sessions	17 sessions, including Local Board workshops, the lead teams of Panuku Development Auckland Limited and Auckland Council, the Youth Advisory Panel, Finance division (Continuing Professional Development)

37. The roll out of the integrity e-learning online training module for staff started in August 2019. Completing the module is mandatory as part of the ‘on boarding’ of new staff.

38. Our next priority is to increase the awareness of the e-learning module and numbers of existing staff completing through targeted communications and linking it to ongoing engagements with departments and teams.

Summary of gift register published on Council website

39. A summary from our staff gift register (including travel, entertainment and gifts) was published on council’s website in the first week of October 2019. This publication covers the period 1 July to 30 September 2019. The gift register will be published quarterly to align with financial reporting.

40. Our policies or procedures on giving and receiving gifts have not changed, only the proactive publishing of details from our gift register. In line with current practices, staff below tier 4 will only be referred to by position title and not named.

41. While information about the gifts we receive has previously been available to the public via Local Government Official Information and Meetings Act requests (LGOIMA), as part of the council's strategic direction to increase public trust and confidence, this information will be proactively released. As a result, we are also anticipating a reduction in the number of LGOIMA requests for this information.

42. This approach is in line with other public sector entities including the New Zealand Police and New Zealand Treasury.

Conflict of interest disclosure anniversary reminder process

43. On 25 September 2019, a new process commenced of emailing interest disclosure reminders to all staff and contractors when they start work and on their annual anniversary date. This is to ensure staff are regularly reminded to disclose and manage interests. The reminders provide links to the required forms and the online ‘Awhina’ system to make disclosure as easy as possible.

44. As anticipated, the process has generated an increase in staff making declarations of possible conflicts of interests and in staff seeking advice about their interests from the Assurance Services department. In the three months to 20 November 2019, 1118 staff have responded.

International Fraud Awareness Week 17 – 23 November 2019

45. During this focus week, the Assurance Services department arranged an event at which the General Manager of the Serious Fraud Office presented to staff from council and council controlled organisations on fraud and corruption in the public sector. There were also enterprise wide and people leader communications and stories published promoting the Our Charter principles, Speak Up channels and guidance available.

Elected members advice

46. There has been a consistent number of requests for personalised interest management advice from newly elected local board members. This advice has included advice regarding managing the perception of predetermination, as well as financial conflict of interest management.

47. The Assurance Services department are working alongside council’s legal team and the Auditor-General Office to ensure that all elected members are compliant with the Local Government Members Interest Act 1968 disqualification rule.

48. A series of workshops introducing local board members to Assurance Services as well as a discussion on gifts and interest management has been offered to each of the local boards. The first of these sessions took place on the 28th November 2019 with all 21 local boards to be visited over the next 12 months.

49. The Assurance Services department are working with the Auditor General’s Office to co-present at two conflict of interest sessions as part of the Kura Kāwana elected member development programme entitled “Should I? Could I? Will I?” The sessions focus on scenario-based learning and are scheduled to take place February and March 2020.

Holidays Act 2003 Project

50. The council is nearing completion of its programme to rectify leave calculation issues and ensure all staff receive their correct entitlements according to the Holidays Act 2003.

51. Systems changes and upgrades have been completed and implemented with the reconfigured payroll systems (including SAP, Verint and Time Target) operating in a manner compliant with the Act.

52. Final remediation payments and annual leave balance corrections were made to existing staff on 21 November 2019. Remediation of sick leave balances is currently under way with the project team aiming to complete this before the end of the year.

53. An online portal has been developed and hosted by Ernst Young for former employees to register and confirm whether they are owed a Holidays Act’ payments. The portal was open as of 25 November 2019. Once identity is confirmed for those owed payment, our internal payroll team will process payments.

54. This portal will be available for about a year of the seven-year window agreed with the Ministry of Business, Innovation and Employment (MBIE) for former employees to make a remediation claim. It is anticipated that the need for the portal will tail off after this time and staff are currently considering what alternatives can be made for the following years.

55. The Labour Inspector had extended the enforceable undertaking until 20 December 2019. Now that the payments have been made to existing employees, a process is in place to manage claims by former employees, and our payroll system has been configured correctly, we will work with the Labour Inspector to extinguish the enforceable undertaking. To date, he has expressed his satisfaction with the efforts we have made to remediate and reconfigure, and our progress generally.

Resource and building consents

56. The Audit and Risk Committee has been receiving regular reporting to provide oversight of the ongoing issue on the reliability of the systems data for building consent and resource consent performance measures relating to the timeliness of processing.

57. While the quality and accuracy of consenting data is generally improving over time and plans are in place to improve performance, the process remains complex and reliant on manual processes. The council has recognised a need to add additional manual control processes to strengthen the control environment for this financial year.

58. Since the last update provided to the Audit and Risk Committee on 27 August 2019, the Regulatory Services division have been working to ensure that processes are in place for accurate and validated data to be used for the performance measures for the 2019/20 financial year.

59. A building and resource consents performance measure assurance plan is being implemented (Attachment C).

60. The assurance plan contains the key activities and controls to manage and mitigate the risk that the data produced for council’s resource consents and building consents performance is accurate and can be reported in the annual report.

61. This assurance plan has been developed to apply the three lines of defense risk model with mitigations and monitoring implemented in the consent departments, secondary quality checking and an independent audit.

62. The assurance plan includes key decision points when reporting will occur to the Audit and Risk Committee and implements the following controls:

· Additional quality checking/ audit process for 100 per cent of all building and resource consents.

· Assurance services oversight of the Regulatory Services’ training programme and system improvement programme.

· A steering group established for oversight and escalations and decisions on process, approach and controls. Senior representatives from Regulatory Services, Assurance Services, Finance, and Audit New Zealand.

· Assurance Services department to complete sample quality assurance to establish additional controls working, methodology for this checking will be developed and agreed with Audit New Zealand

· Assurance Services department to maintain ongoing monitoring of process and monthly quality checking and reporting to steering group.

63. A steering group meeting will be held in late December 2019 to review the Assurance Services department quality assurance results and a decision will be taken on whether a similar recalculation approach to last year is required.

City Rail Link – record of sponsor’s decision

64. The Governing Body has delegated responsibility to the Audit and Risk Committee to:

“receive regular reports on the City Rail Link project status, including a record of all Sponsors decisions made under delegated authority and information on the management of key risks (budget, schedule, specification, safety and probity)” [Resolution number GB/2017/72 J].

65. The council is joint sponsor with the Crown for the project and has delegated to the mayor, deputy mayor and chief executive the authority to enter into the Project Delivery Agreement.

66. The Audit and Risk Committee received a report in September 2019 regarding City Rail Link and will receive further status and risk management reports as part of the committee’s work programme in May and September 2020.

67. Any Sponsor’s decisions made under delegated authority made outside the scheduled six-monthly reporting, will be reported to the Audit and Risk Committee as part of the Assurance Services department update report.

68. The Project Delivery Agreement between Council, Crown and City Rail Link Limited (CRLL) sets out the terms upon which CRLL will manage the delivery of the City Rail Link project.

69. The Sponsors signed the Deed of Amendment and Restatement in relation to the Project Delivery Agreement (PDA) on 22 October 2019.

70. The Deed of Amendment updates the Project Delivery Agreement to reflect the key decisions made by the Shareholders on scope (agreed enhancement of the capacity of the railway from six to nine car trains) , the procurement strategy (from a design and construct model to an alliance model) and increased funding to reflect change in market conditions and the enhanced capacity of the railway (GB/2019/33).

Tauākī whakaaweawe āhuarangi

Climate impact statement

71. There are no climate impacts arising from this report.

Ngā whakaaweawe me ngā tirohanga a te rōpū Kaunihera

Council group impacts and views

72. There are no council group impact arising from this report. The 0800-integrity line and integrity channels are available and used by Panuku Development Auckland Limited, Auckland Tourism, Events and Economic Development and Regional Facilities Auckland staff.

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

Local impacts and local board views

73. The Assurance Services department has been supporting local boards with advice and training on conflicts of interest and conduct matters. Feedback from local board members is that they appreciate the independent real time advice available from the team.

Tauākī whakaaweawe Māori

Māori impact statement

74. The Assurance Services Strategy and Assurance Plan includes maintaining independent oversight and monitoring of the council’s progress to address the recommendations of the Independent Maori Statutory Board audit of the Te Tiriti o Waitangi (Treaty Audit) and report six monthly to the Audit and Risk Committee.

75. The Waharoa Group continues to meet monthly to provide oversight of the Te Tiriti o Waitangi (Treaty Audit) response programme.

Ngā ritenga ā-pūtea

Financial implications

76. This report does not require the committee to make decisions with financial implications.

Ngā raru tūpono me ngā whakamaurutanga

Risks and mitigations

77. There are no specific risks arising from this report.

78. All risks and issues identified through the Assurance Services activities have been raised with the appropriate risk owner and shared with the Risk and Insurance department.

Ngā koringa ā-muri

Next steps

79. The department will complete reviews and audits relating to ICT security, the Aotea Centre Refurbishment project, sensitive expenditure (p-card expenditure and staff reimbursements) and waste key performance indicator processes.

80. Increase and expand our communications to raise general awareness and support higher risk areas to increase numbers of staff completing the e-learning and other training.

81. In accordance with the Audit and Risk Committee’s work programme, Assurance Services will provide updates on strategy and activities every second meeting (6 monthly).

82. Any significant or serious issues or matters for the oversight or attention of the Audit and Risk Committee will be reported separately as required.

Ngā tāpirihanga

Attachments

No.	Title	Page
a ⇩	Assurance Strategy 2022 - 3 Year Roadmap	41
b ⇩	Assurance Audit and Review Plan November 2019	45
c ⇩	Building and Resource Consents Performance Measure Assurance Plan Oct 2019	49

Ngā kaihaina

Signatories

Authors

Nick Rennie - Manager Audit and Probity

Gary Hale - Integrity and Investigations Manager

Maureen Glassey - Principal Advisor Governance Elected Members

Authorisers

Emma Mosely - Head of Assurance Services (Acting)

Phil Wilson - Governance Director

Audit and Risk Committee

09 December 2019

Health Safety and Wellbeing update - November 2019

File No.: CP2019/19817

Te take mō te pūrongo

Purpose of the report

1. To update the committee on Auckland Council’s health safety and wellbeing (HSW) performance between September and November 2019.

Whakarāpopototanga matua

Executive summary

2. Auckland Council’s strategic HSW vision is ‘to become a leading organisation for HSW by 2020’. Good progress is being made against the strategy.

3. With the elections complete our health safety and wellbeing policy statement becomes due for signing by the mayor and the chief executive, re-establishing a person conducting a business or undertaking (PCBUs) commitment and support to the health and safety for our people, volunteers and visitors.

4. Auckland Council uses an overall performance measure for our HSW performance measure called ‘Safe365’. Auckland Council’s aggregated Safe365 HSW capability score is at 61 per cent for the period. Our strategy is focussed on achieving 75 per cent by end of June 2020.

5. There are departments who are below the 60 per cent target.

6. Council passed the ACC Accredited Employer Programme Audit at Primary level and will enter the self-insurance accredited employer programme on 16 December 2019.

Ngā tūtohunga

Recommendation/s

That the Audit and Risk Committee:

a) review and endorse this report for referral to the Governing Body and draw the attention of elected members to their duties under the Health and Safety at Work Act 2015

b) note that this report will be provided to all local boards for their information.

Horopaki

Context

7. Under the Health and Safety at Work Act 2015 all elected members are deemed officers and must exercise a duty of due diligence in relation to health and safety. These quarterly reports provide information to assist elected members to carry out that role.

8. Our health and safety framework provides a robust mechanism for ensuring that council can comply with its legal requirements. To ensure this, a commitment is required from council leaders to ensure our framework is supported and effectively managed. Our people also need to know the roles and responsibilities they all play and what is expected from all of us. The health and safety policy statement achieves this.

9. With the election now complete, staff are inviting Mayor Goff and Auckland Council’s Chief Executive Stephen Town to sign this document and reconfirm to our people that HSW is central to ensuring our people are kept healthy and safe in the delivery of their work and that our council operations, as far as is reasonably practicable, do not cause harm.

Tātaritanga me ngā tohutohu

Analysis and advice

10. The key metrics considered from a health and safety perspective are:

· Safe365 health and safety capability indicator (lead indicator)

· people leaders trained in their health, safety and wellbeing responsibilities (lead indicator)

· new starters - health, safety and wellbeing inductions

· critical risk reporting and assurance audits

· reporting index.

11. Our health and safety dashboard comprised of the various metrics can be seen in Attachment A.

Safe365

12. The Safe365 indicator provides a holistic view of performance across the council by measuring health and safety capability across the highest risk areas and then aggregating it. The council’s score in November 2019 has not moved since the last report and remains at sixty one per cent. Sixty per cent is an indicator of being in overall compliance.

13. As represented in the starburst graphic below in amber, module 2, forty per cent of our people leaders have attended Managing Safely training, our mandatory HSW Induction.

14. As represented in the starburst graphic below in amber, module 5, our line three assurance program is still in its infancy. Critical risk audits carried out to date have shown very little active monitoring of controls i.e. front-line monitoring, is taking place. This is consistent with organisations developing their safety maturity.

15. As represented in the starburst graphic below in amber, module 6, we must focus on improving our testing or drills on emergencies. The common drill practiced is fire. Our Corporate Security team and HSW team have recently developed training regarding other emergencies such as ‘active shooter’ and response to major injury.

Chart 1 – Safe365 Starburst – Auckland Council Aggregate

Safe 365 Key: 1. Director knowledge, 2. Management knowledge, 3. Worker / Contractor knowledge, 4. Health and safety management system, 5. Verification and audit activities, 6. Emergency preparedness, 7. Health and safety data collection, 8. Management reporting, 9. Worker/Contractor engagement, 10. Culture and behaviours.

16. Departmental Safe365 scores can now be seen in Attachment B.

ACC Accredited Employer Programme Audit

17. Council was audited by ACC between the 9 and 11 October 2019. Council passed the audit at Primary Level and as such were granted access to the accredited employer program. This audit is significant as it is the first audit under our new framework. It verifies and supports that the council health and safety framework is effective.

18. The audit did identify some areas of weakness in the application of the HSW framework in the two departments audited, (the waste transfer station and libraries). These areas are being addressed.

19. The ACC accredited employer program allows large employers to take on the responsibility of managing their own workplace health and safety, including claims management and rehabilitation of their own employees following a work injury. Council has partnered with WellNZ to deliver this.

20. This is another positive step in council’s health and safety maturity level. It is expected that this will deliver council savings but also foster the culture of prevention and equally, positive and swift response in the event of an incident as council’s performance in this area is now financially linked and provides a further business incentive.

Due diligence duties

21. As ‘officers’ (under the Act) elected members have the duties set out in the table below. This also shows measures underway to support those duties.

Duty	Support provided
Duty 1 - Acquire and keep up to date with health and safety knowledge and matters	Health and safety training for designated ‘officers’ Health and safety training has been ongoing to ensure elected members and senior management are well informed and up to date on health and safety matters. Following the recent elections, the health and safety induction will be delivered under the Kura Kāwana (elected member development). Due Diligence Refreshers and proposed coaching for ELT On 25 November ELT undertook a due diligence refresher. In line with our health safety and wellbeing strategy under the pillar of ‘safety leadership’ and with the view of reaching our vision on becoming a leading organisation for health and safety, we are considering trialling a safety leadership coaching programme for the ELT members who have critical risks under their area of management. If supported by ELT these will roll out from the third quarter. The Health Safety and Wellbeing team are working with the Legal Service department to arrange a mock trial to deliver to our senior leadership team, ELT and general managers to further focus their responsibilities and provide insight as to how they are meeting these. Third Party Administrator – Accredited Employer Programme ACC audited council HSW systems and processes between 9 and 11 October 2019. Council passed the audit and will enter the accredited employer programme on the 16 December 2019. The Central Library and the Waitakere Refuse Centre were chosen as audit locations.
Duty 2 - Understand council’s operations and associated hazards/risks	Site visits A health and safety site visit plan for the chief executive, ELT members and elected members is in place. In October ELT visited our West Wave leisure centre and the Waitakere Refuse Centre. Health Safety and Wellbeing committee The ELT operates as the Health Safety and Wellbeing Committee which creates better visibility and understanding of council operations and the health and safety risks in their parts of the organisation. These have been taking place quarterly.
Duty 3 - Ensure the council has appropriate resourcing and processes to eliminate/minimise risks	Corporate training programme A key focus of the current strategy is to build capability within the organisation and to prioritise high risk business areas. A corporate training programme has now been agreed mandating all people leaders to complete a one day ‘Managing Safely’ course. Our indicator in this area has increased to forty percent. The target is 75 per cent by the fourth quarter.
Duty 4 - Ensure the council has appropriate processes for receiving and considering information regarding incidents, hazards and risks and for responding in a timely way to that information	Management framework and reporting A management framework is now in place. It is designed to ensure robust safety governance, processes, guidance and positive behaviours around health and safety. Risk Manager is also working effectively as our reporting tool for unsafe conditions, incidents and near misses. Triage The Corporate team continues to triage incidents. This assures the quality of the data and furthermore tasks ‘reasonably expected’ actions to people leaders in the business as incidents arise in Risk Manager. This helps safeguard the organisation further to ensure incidents are not closed without knowledgeable oversight and that any serious incidents involving critical risk are appropriately investigated either by people leaders, local health and safety specialist or the Corporate team.
Duty 5 - Ensure the council has, and implements, processes for complying with any duty or obligation	Policy statement The chief executive and mayor are set to sign the Health and Safety Policy Statement following the elections. This has been implemented alongside the new Health and Safety Framework. Our Charter The health and safety section in Our Charter (we look after our safety and wellbeing) is being prepared for application to all council-controlled organisations. We are ready to roll out this value to all CCOs.
Duty 6 -Take reasonable steps to verify the provision and use of resources and processes through reviews and audits	Safe365audits No external verification audits were done this quarter Assurance framework Assurance audits are now taking place. The dashboard in Attachment A shows the audits that have taken place in the last quarter. Our AIM Airport Contract was audited this quarter as were the northern regional parks operation.

Tauākī whakaaweawe āhuarangi

Climate impact statement

22. The decisions contained in this report do not have an impact on climate change.

Ngā whakaaweawe me ngā tirohanga a te rōpū Kaunihera

Council group impacts and views

23. This update includes information about council activities only. It does not provide a group-wide view.

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

Local impacts and local board views

24. Briefings for elected members, including local boards, will now be rolled out in line with the Kura Kāwana programme inducting all new elected members. The elected members site visit program will be offered at this session.

25. This report will be provided to all local boards together with a briefing from staff.

Tauākī whakaaweawe Māori

Māori impact statement

26. Auckland Council staff work with the Independent Māori Statutory Board and the council’s co-governance entities, such as the Tūpuna Maunga Authority, Te Poari o Kaipātiki ki Kaipara, the Ngāti Whātua Ōrākei Reserves Board and Te Motu a Hiaroa (Puketutu Island) Trust to ensure they have information and support to comply with their duties under the legislation.

27. The People and Performance department have integrated Health Safety Wellbeing plans into council’s Māori employment strategy (known as the Mahi Strategy).

Ngā ritenga ā-pūtea

Financial implications

28. There are no financial implications in this report.

29. As reflected in the Corporate Risk Register, non-compliance with Health and Safety Legislation and poor performance in this area can carry substantial fines and impacts to operational costs through incidents and or poor productivity.

Ngā raru tūpono me ngā whakamaurutanga

Risks and mitigations

30. The risk of non-compliance with health and safety is recorded in the council’s top risk register. As set out above, controls are in place to monitor and respond to critical risks through the Risk Manager System.

Ngā koringa ā-muri

Next steps

31. Staff will continue with the implementation of the HSW strategy, embedding the Health and Safety Framework.

Ngā tāpirihanga

Attachments

No.	Title	Page
a ⇩	Health Safety and Wellbeing dashboard	57
b ⇩	Safe365 Departmental scores	61

Ngā kaihaina

Signatories

Authors

Oliver Sanandres - Head of Health, Safety and Wellbeing

Andre Lubbe – Head of Health, Safety and Wellbeing (Acting)

Authorisers

Patricia Reade - Director People and Performance

Phil Wilson - Governance Director

Audit and Risk Committee

09 December 2019

Final audit management report for the year ended 30 June 2019

File No.: CP2019/19666

Te take mō te pūrongo

Purpose of the report

1. To summarise the issues identified by the Office of the Auditor-General during the final 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 Auditor-General to conduct the audit on their behalf. Audit New Zealand works with the 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 the council throughout the year with recommendations on how the council can enhance and improve our processes, procedures and disclosures.

3. Following the completion of the final audit, a report has been issued which outlines issues identified and makes recommendations for significant items that need to be addressed. The report is provided as 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:

· valuation of the weathertightness provision

· development of a formal review programme to ensure consistent procurement practice is being followed

· implementation of the recommendations arising from the Treasury and Funding management review

· inclusion in the 2019/2020 annual report of reporting against Auckland Plan outcomes

· additional guidance on the principles and process for termination payments.

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

· project management:

o project closure and benefits measurement

o gateway reviews

o risk assessment process

o risk tolerance and escalation process

· consenting and service reporting

· quality of information for audit

· sensitive expenditure.

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

8. The 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 at the year-end 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 the final audit for the year ended 30 June 2019 and outlines how Auckland Council is addressing the matters raised.

10. The Office of the Auditor-General issued their audit report on 26 September 2019 on the Auckland Council Group Annual Report 2018/2019. As part of the audit process the auditors undertake reviews to evaluate the council’s systems, controls and processes including financial statement preparation. Matters identified during the audit are reported to the council. The council responds to the items raised in the report and indicates the actions we will undertake to resolve each recommendation.

Tātaritanga me ngā tohutohu

Analysis and advice

Audit reporting and audit opinion

11. At the June 2019 and August 2019 meetings of the Audit and Risk Committee, the Review Engagement Management Report for the six months ended 31 December 2018 and Interim Audit Management Report for the year ended 30 June 2019 respectively were provided to the committee arising from the work performed by the auditors in the 2018/2019 financial year. These reports contained recommendations made and the council’s actions to address issues.

12. The most significant item raised during the year related to be the accuracy of reporting of statutory timelines for building and non-notified resource consents. The audit opinion on the financial statements was unmodified. While the auditors were able to determine that the 2018/19 reporting of service performance was materially correct, a modified opinion on the statement of service performance was issued as the 2017/2018 comparative results.

Key audit matters

13. As the council is an issuer of bonds, the annual report audit opinion is required to include the auditor’s comments of the key audit matters. The five key audit matters identified were:

· valuation of derivatives

· reporting performance on transport, housing and three waters

· valuation of the weathertightness provision

· City Rail Link

· valuation of operational and infrastructure assets.

14. It was determined that the key audit matters were appropriately addressed by the council.

Audit Recommendations

15. The council’s responses to the recommendations arising from the final audit are set out below:

· Valuation of the weathertightness provision

The council is required to have a provision on the balance sheet for any obligations which may arise from weathertightness. One portion of the provision relates to unreported claims. It is recommended that this be reviewed as there has been a significant drop in the number of actual claims being received. The council is working with our actuaries to review the underlying assumptions of this provision.

· Development of a formal review programme to ensure consistent procurement practice is being followed

The council has established a team within procurement to undertake formal reviews to ensure procurement practices and processes are followed consistently.

· Implementation of the recommendations arising from the Treasury and Funding management review

An internal review of the council’s treasury and funding management functions was performed and has been approved by the Treasury Management Steering Group. This matter is included as part of the Assurance Services Strategy and Activities item in this meeting.

· Inclusion in the 2019/2020 annual report of reporting against Auckland Plan outcomes

In the 2019/2020 annual report, the council will include a summary of results reported within the Auckland Plan progress report.

· Principles and process for termination payments

The council has a policy and process regarding severance payments. The support and advice of the council’s Employment Relations team is always sought. The decision to make a payment is made based on the circumstance of the situation and is based on the best interests of the organisation and ratepayers. There is a downward trend in the number and quantum of severance payments made.

16. Updates were also provided on previously raised recommendations:

· Project management – project closure and benefits measurement

As part of the Investment Delivery Framework (IDF), the council has developed a project health check as a form of independent quality assurance. During the year improvements have been made which include the identification of benefit owners. As part of our continuous improvement programme a review is planned of the project health check.

· Project management – gateway reviews

Electronic gateways reviews for projects over $1 million are working well and providing the information required. In the coming year the criteria for electronic gating will be reviewed to capture high risk, low value projects.

· Consenting and service reporting

A business optimisation programme to address the issues impacting consenting and service reporting is underway.

· Quality of information for audit

A quality control process is in place to review all the volumes of the annual report prior to submitting the information to the auditors. Although there was an improvement in the process in comparison to the prior year further improvements can be made.

· Project management – risk assessment process

Risk processes and controls have been developed and are being reviewed to ensure that appropriate controls are embedded in the Investment Development Framework.

· Project management – risk tolerance and escalation process

The council has established a programme and project risk and tolerance steering group and a project risk framework is being developed to address risk tolerance and escalation.

· Sensitive expenditure

To ensure staff are documenting the rationale for decisions made regarding sensitive expenditure, the council has developed a mandatory e-learning module covering this area and also regularly reminds approving managers of their obligations.

Audit matters addressed during the year

17. In the Interim Audit Management Report tabled in August 2019, several matters were identified as being addressed and therefore finalised in the year. The following matters have now also been resolved following the final audit:

· implementation of the Investment Delivery Framework

· project management change programme

· development of a consistent compliance approach to procurement practices

· documented conflict of interest management plan for procurements

· embedding consistent contract management practices

· development of enhanced reporting and refresher training for procurement staff

· improvements to the reporting for City Rail Link sponsors.

Tauākī whakaaweawe āhuarangi

Climate impact statement

18. This is an information report, and the issues covered do not have any climate-related impacts and implications.

Ngā whakaaweawe me ngā tirohanga a te rōpū Kaunihera

Council group impacts and views

19. 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

20. 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

21. 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

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

Ngā raru tūpono me ngā whakamaurutanga

Risks and mitigations

23. Auckland Council is actively addressing the issues raised.

Ngā koringa ā-muri

Next steps

24. Auckland Council will continue to work on resolving and clearing the outstanding issues.

Ngā tāpirihanga

Attachments

No.	Title	Page
a ⇩	Audit report to the Council for the year ended 30 June 2019	69

Ngā kaihaina

Signatories

Author

Morna Macfarlane - Financial Compliance Manager

Authorisers

John Bishop - Group Treasurer

Matthew Walker - Group Chief Financial Officer

Phil Wilson - Governance Director

Audit and Risk Committee

09 December 2019

Approval of the draft Audit New Zealand Interim Engagement Letter for the 6 months ended 31 December 2019, and draft Audit New Zealand Audit Engagement and Audit Proposal letters for 2020, 2021 and 2022

File No.: CP2019/19440

Te take mō te pūrongo

Purpose of the report

1. To review and endorse the following documents:

· draft Audit New Zealand Review Engagement Letter (review engagement letter) for the six months ending 31 December 2019 (Attachment A)

· draft Audit New Zealand Audit Engagement Letter (audit engagement letter) for the audit of the Auckland Council Group and Auckland Council for the financial years ending 30 June 2020, 2021 and 2022 (Attachment B)

· draft Audit New Zealand Audit Proposal Letter (audit proposal letter) for the audit of the Auckland Council Group and Auckland Council for the financial years ending 30 June 2020, 2021 and 2022 (Attachment C).

Whakarāpopototanga matua

Executive summary

2. In the last few weeks Audit New Zealand has provided drafts of the letters listed above to the council’s group financial controller and group treasurer. They have reviewed the draft letters, provided feedback and Audit New Zealand has made all requested amendments.

3. These documents are required to be approved by the Audit and Risk Committee before Audit New Zealand issues the final letters for approval by the mayor and chief executive.

4. The Audit New Zealand Audit Director Athol Graham will be in attendance to answer any questions the committee may have in relation to these letters.

Review Engagement Letter

5. The review engagement letter outlines the scope of responsibilities, group entities subject to review, areas of review focus and administration matters such as logistics and timetables.

6. The letter is substantially the same as in prior years with the exception that Panuku Development Auckland Limited and Auckland Tourism, Events and Economic Development Limited are no longer considered to be significant and therefore are excluded from the list of group entities subject to review.

Audit Engagement Letter

7. The audit engagement letter outlines the scope of the respective responsibilities of the Governing Body and the Deputy Auditor-General, significant components (i.e. entities), independence matters and reporting contents, covering the next three financial years to 30 June 2022.

The Audit Proposal Letter

8. The audit proposal letter contains the statutory basis for the audit and how audit fees are set, the entities covered by this proposal, team members and hours planned to be spent and proposed fees for the next three financial years.

Ngā tūtohunga

Recommendation/s

That the Audit and Risk Committee:

a) review and endorse Audit New Zealand’s draft review engagement letter, draft audit engagement letter and draft audit proposal letter

b) request Audit New Zealand issue the final letters

c) recommend the mayor and chief executive sign the finalised letters.

Horopaki

Context

Review engagement

9. A review engagement provides readers with a moderate level of assurance that nothing has come to the auditor’s attention that causes him to believe that the interim financial statements do not fairly reflect the Auckland Council Group’s financial position, performance and cash flows for the period. This moderate level of assurance (known as negative assurance) is a lower level of assurance than that of an audit.

10. The review is performed in accordance with the review standards issued by the External Reporting Board. It primarily involves enquiry, analytical procedures, the obtaining of representations and reconciliation of the financial statements to underlying accounting records.

Audit engagement and audit proposal letters

11. An audit engagement provides readers with a high level of assurance that the financial statements fairly reflect the group’s financial position, performance and cash flows for the period.

12. The audit engagement letter sets out the terms of the audit engagement and outlines the objectives of an annual audit.

13. The audit proposal letter provides details on the audit fee budget for the financial years ending 30 June 2020, 2021 and 2022 and outlines areas that may result in an increase in fees over and above budgeted fees.

Tātaritanga me ngā tohutohu

Analysis and advice

Review engagement letter

14. The draft review engagement letter outlines the:

· scope of the Audit New Zealand and the Auditor-General’s responsibilities

· scope of the governing body and management’s responsibilities

· areas of the review focus

· engagement logistics and timelines.

15. This draft review engagement letter includes the following areas of focus (which are the same as in the prior year; except for the addition of City Rail Link Limited):

· Fair value assessment of fixed assets and investment property – consideration of significant changes in fair value which might require an independent valuation to be carried out.

· Accounting for capitalisation and impairment of work in progress – work in progress (WIP) on projects that span an extended period should be assessed for impairment.

· Valuation of derivatives – derivatives should be appropriately valued, and fair value movements should be clearly explained in the financial statements.

· Provisions – the weathertightness provision should be re-assessed and the Eden Park Loan should be appropriately measured and disclosed.

· Crown funding initiatives – the Housing Infrastructure Fund, Crown Infrastructure Partners (Wainui) and Regional Fuel Tax scheme should be appropriately accounted for and disclosed.

· City Rail Link Limited – the council’s investment in City Rail Link Limited should be appropriately accounted for and disclosed.

· Early adoption of accounting standards – outstanding analysis should be completed, and the new standards should be applied in the interim financial statements.

· Treasury and funding management – the accounting treatment and disclosure of financial liabilities should meet accounting standard requirements.

· Management override of controls – Audit New Zealand will maintain an awareness of the risk of management override of controls as they perform their review procedures.

· Rates revenue recognition – annual rates revenue should be recognised in full, from the beginning of the financial year, and appropriately discounted for rates yet to be received in accordance with PBE IPSAS 23.

· Legislative compliance – all reporting should continue to undergo a thorough legal review to ensure compliance with legislation and NZX listing rules.

16. All accounting matters will be subject to formal accounting analysis by the Financial Control team.

17. The proposed fee for the review engagement is $121,816 plus disbursements. This is approximately 10 per cent of the 30 June 2020 annual audit fee and represents an increase of two per cent on the fee charged for the same engagement last year. We consider the areas of review focus and the proposed fee are appropriate, given the size and complexity of the review engagement.

Audit engagement letter

18. The audit engagement letter outlines, for the three financial years ending 30 June 2020, 2021 and 2022:

· the terms of the audit engagement

· the nature and limitations of the annual audit

· the respective responsibilities of the Governing Body and the Deputy Auditor-General for the financial statements and performance information.

19. It outlines the objectives of the annual audit, being:

· to provide an independent opinion on the group and the council’s financial statements and performance information

· to report on other matters relevant to the group and the council’s financial and other management systems that come to the Deputy Auditor-General’s attention, need improvement or are significant (for example, non-compliance with statutory obligations or a lack of probity).

20. The letter details the council’s responsibility for the provision of timely, accurate and valid information and explanations, and the Deputy Auditor-General’s responsibilities for reporting on the annual report, summary annual report and on internal control matters.

21. Significant entities which will require audits and reporting to the Deputy Auditor-General are:

· Auckland Transport (AT)

· Watercare Services Limited (Watercare)

· Regional Facilities Auckland (RFA).

22. Auckland Tourism Events and Economic Development Limited and Panuku Development Auckland Limited are no longer considered significant entities as they were in prior years. Accordingly, the entities’ auditors will not be required to provide assurance for the purposes of the Auckland Council Group audit.

Audit proposal letter

23. The audit proposal letter provides information on:

· Audit fees

o the statutory basis for the audit

o how audit fees are set

o assumptions relating to the fees

o the proposed fees for the audit for the financial years ending 30 June 2020, 2021 and 2022

o reasons for any changes to fees

o what the Office of the Auditor-General (OAG) overhead charge covers

· Audit hours

o hours Audit New Zealand and the Office of the Auditor-General plan to spend on the audit for the financial years ending 30 June 2020, 2021 and 2022

o reasons for any changes to hours

· Entities covered by this proposal, as previously mentioned in the audit engagement letter

· Key members of the audit team.

24. The letter lists examples of items that could potentially cause an increase in the proposed fees. The most likely of these are:

· ongoing changes in financial reporting requirements, including new group accounting standards (PBE IPSASs 34 - 38) and employee entitlements (PBE IPSAS 39)

· ongoing work in relation to the controls over the reporting of statutory timeframes for building and resource consents

· any decision by the council to increase the use of Extended External Reporting within the annual report.

25. Audit fees proposed for each of the years, with a comparison to the 2018/2019 budgeted fees are:

Structure of audit fees	2019 budgeted fees	2020	2021	2022
Net audit fee (excluding OAG overhead, disbursements and GST)	$1,132,050	$1,134,399	$1,157,893	$1,179,974

26. The 2020 fee represents a 0.2 per cent increase on the 2018/2019 budgeted fee. Subsequent increases are two per cent.

Tauākī whakaaweawe āhuarangi

Climate impact statement

27. Although climate change will be included within disclosures for the interim and annual reports, there is no specific climate impact as a result of the audit and review engagements.

Ngā whakaaweawe me ngā tirohanga a te rōpū Kaunihera

Council group impacts and views

28. This report is about engagement of Audit New Zealand for the Auckland Council Group as a whole. Accordingly, the group impacts are outlined in the body of this document.

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

Local impacts and local board views

29. This report is about engagement of Audit New Zealand for the Auckland Council Group as a whole, with no impact at a local board level.

Tauākī whakaaweawe Māori

Māori impact statement

30. The report is about engagement of Audit New Zealand for the Auckland Council Group as a whole, with no impact specific to Māori.

Ngā ritenga ā-pūtea

Financial implications

31. The proposed fee for the review engagement is $121,816 plus disbursements which is an increase of two per cent on the fee charged for the same engagement last year.

32. The proposed fees for the audit engagement are $1,134,399 for 2019/2020, $1,157,893 for 2020/2021 and $1,179,974 for 2021/2022.

Ngā raru tūpono me ngā whakamaurutanga

Risks and mitigations

33. The key risk related to these letters is a potential increase in audit fees. This could occur if there is a significant increase in the audit scope which would require extra audit effort; such as ongoing work in relation to the controls over the reporting of statutory timeframes for building and resource consents.

34. To mitigate this risk, Audit New Zealand and Auckland Council staff meet fortnightly to discuss audit issues to ensure they are managed and resolved efficiently.

Ngā koringa ā-muri

Next steps

35. Following the approval of the draft documents by the committee, Audit New Zealand will issue the letters in final form and the mayor and chief executive will sign the finalised letters. Auckland Council staff will also confirm and finalise the council and Audit New Zealand’s delivery timelines, to ensure a timely and efficient annual audit process.

Ngā tāpirihanga

Attachments

No.	Title	Page
a ⇩	Draft review engagement letter for the six months to 31 December 2019	111
b ⇩	Draft audit engagement letter for financial years ending 30 June 2020, 2021 and 2022	133
c ⇩	Draft audit proposal letter for financial years ending 30 June 2020, 2021 and 2022	149

Ngā kaihaina

Signatories

Authors

Tracy Gers - Group Accounting & Reporting Manager

Francis Caetano - Group Financial Controller

Authorisers

John Bishop - Group Treasurer

Matthew Walker - Group Chief Financial Officer

Phil Wilson - Governance Director

Audit and Risk Committee

09 December 2019

Financial process update for the preparation of the interim report and NZX release for the 6 months ended 31 December 2019

File No.: CP2019/19542

Te take mō te pūrongo

Purpose of the report

1. To provide the Audit and Risk Committee with an update on the status of financial processes in preparation of the half year interim report and the NZX (New Zealand’s stock exchange) release for the six months ending 31 December 2019; including key aspects of the Auckland Council Group’s financial reporting and the review engagement requirements.

Whakarāpopototanga matua

Executive summary

2. On 24 February 2020 the Audit and Risk Committee will recommend to the chair and deputy chair of the Finance and Performance Committee, that the mayor and chief executive approve and release the following documents to the NZX on 28 February 2020:

· the NZX announcement

· the associated media release

· the interim report for the half year ending 31 December 2019.

3. This update assists the committee in the review of the quality of the reports, and processes undertaken to prepare them, for the half-year ending 31 December 2019, including:

· key audit matters for the review engagement at 31 December 2019

· review milestones

· quality assurance and compliance sign-off processes

· management representation letters and management confirmations

· the Audit and Risk Committee’s oversight of the management of fraud.

4. Updates on key areas of judgement and assumptions and on issues and risks will be presented to the committee in the confidential report in this meeting “Confidential discussion on key judgements and assumptions and endorse the pro forma for the interim report and NZX release for the six months to 31 December 2019”.

5. Additionally, five documents will be provided in the confidential item relating to the preparation for the half year reporting to 31 December 2019, those being the:

· draft NZX announcement

· draft memo of representation (based on prior year)

· draft letter of representation for the group interim report (based on prior year)

· draft fraud questionnaire (for endorsement)

· pro forma interim report for the half year ending 31 December 2019 (for approval).

Ngā tūtohunga

Recommendation/s

That the Audit and Risk Committee:

a) note the information contained in this financial process status update for the Auckland Council group NZX announcement and interim report for the half year ending 31 December 2019

b) note an update on the matters outlined in paragraph four and that the five draft documents under paragraph five will be discussed later in this meeting in confidence.

Horopaki

Context

6. Auckland Council has bonds listed on the NZX and is therefore designated as an issuer.

7. As in the prior year, to comply with the NZX continuous disclosure requirements, annual and half year financial reporting to the Audit and Risk Committee, Finance and Performance Committee and the Governing Body will be conducted in the confidential section of the meeting.

8. Under the NZX listing rules the Auckland Council Group must release financial information within 60 days after the half year ending 31 December 2019.

9. Included in the NZX release are the following documents:

· NZX announcement

· media release

· interim report for the half year ending 31 December 2019.

10. The Audit and Risk Committee will review the NZX release and the processes used to prepare the documents. The chair and deputy chair of the Finance and Performance Committee will review and enquire into the financial and operational performance of the group.

11. Audit New Zealand will attend the committee meeting on 24 February 2020 to enable the Audit and Risk Committee to liaise with Audit New Zealand to ensure that a robust financial review of the Auckland Council Group has occurred.

12. In fulfilment of its terms of reference, on 24 February 2020 the Audit and Risk Committee will recommend to the chair and deputy chair of the Finance and Performance Committee that the mayor and chief executive approve the NZX announcement, media release and interim report.

Tātaritanga me ngā tohutohu

Analysis and advice

Audit New Zealand’s key audit matters

13. Audit New Zealand’s key review matters for the review engagement at 31 December 2019 are:

· internal control matters:

o treasury and funding management controls

o management override of controls

o legislative compliance

· accounting matters:

o fair value assessment of fixed assets

o accounting for impairment and capitalisation of work in progress

o valuation of derivatives

o provisions including weathertightness and Eden Park

o Crown Funding Initiatives including Housing Infrastructure Fund, Crown Infrastructure Partners agency agreement, and the regional fuel tax

o early adoption of new accounting standards

o rates revenue recognition.

Key milestones

Quality assurance and compliance approvals

14. Quality assurance reviews will be performed on the consolidated results and commentary of the NZX release documents. The reviews will focus on accuracy, completeness and reasonableness of disclosures, legislative compliance and adherence to council communications standards. A summary of the reviews is as follows:

Reviewer	Consolidated results and commentary	Interim report	NZX release	Media release
Group chief financial officer		ü	ü	ü
Group treasurer	ü	ü	ü	ü
Group financial controller	ü	ü	ü	ü
Manager group accounting and reporting	ü	ü	ü	ü
Senior group reporting technical accountant	ü	ü	ü	ü
Head of group financial planning		ü	ü	ü
Senior specialist corporate communications			ü	ü
Senior Solicitor and Mayne Wetherell		ü	ü	ü

15. All the quality assurance reviewers performing reviews from a financial perspective are Chartered Accountant (CA) and Chartered Financial Analyst (CFA) qualified and have the appropriate technical accounting skills and knowledge.

Management representation letters and management confirmations

16. Audit New Zealand will require the mayor and chief executive to sign a letter providing assurance that the control environment adequately supports the validity, accuracy and completeness of financial reporting, and that the financial statements comply with applicable standards and regulations.

17. To support the mayor and the chief executive’s representations, the group chief financial officer, group treasurer and the group financial controller will sign a back-to-back representation letter.

Draft representation on fraud and fraud questionnaire

18. Audit New Zealand make formal enquiries of the Audit and Risk Committee, senior management and the Assurance Services department in relation to fraud using a questionnaire. The questionnaire covers risk assessment, monitoring controls, mitigating systems and controls, risk communication and the assessment of fraud risk.

19. The Audit and Risk Committee formally respond to these enquiries in writing. The representations made are supported by questionnaires completed by senior management and the Assurance Services department.

20. A copy of the fraud questionnaire is included in the confidential report in this meeting titled “Confidential discussion on key judgements and assumptions and approval of the pro forma for the interim report and NZX release for the 6 months to 31 December 2019”.

Other matters

21. During the half year end process, it is proposed that the group financial controller will communicate, between Audit and Risk Committee meetings, any significant risks or material judgements to the chair of the committee, along with any unresolved significant disagreements between Auckland Council management and Audit New Zealand.

Tauākī whakaaweawe āhuarangi

Climate impact statement

22. This paper relates to a financial reporting process only and as such has no climate implications. Information relating to the Auckland Council Group’s climate impact will be included in the interim report released on 28 February 2019.

Ngā whakaaweawe me ngā tirohanga a te rōpū Kaunihera

Council group impacts and views

23. Feedback will be sought from substantive CCOs to ensure that any matters that apply to them have been considered in preparation for the 31 December 2019 interim report. All matters have been incorporated into the work plan.

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

Local impacts and local board views

24. This report relates to the financial reporting of the Auckland Council Group, which does not include reporting at a local board level.

Tauākī whakaaweawe Māori

Māori impact statement

25. The report relates to the financial reporting of the Auckland Council Group and does not impact the achievement or reporting of council’s contribution to Māori outcomes.

Ngā ritenga ā-pūtea

Financial implications

26. This report is for information only and accordingly, there are no financial implications.

Ngā raru tūpono me ngā whakamaurutanga

Risks and mitigations

27. No risks have been identified related to the information provided in this report.

28. Any risks and mitigations relating to the key judgements and assumptions will be outlined in the confidential section of this meeting under the report “Confidential discussion on key judgements and assumptions and the approval of the pro forma for the interim report and NZX release for the 6 months ended 31 December 2019”.

Ngā koringa ā-muri

Next steps

29. The committee will review the confidential key judgements and assumptions and attachments relating to this report in the confidential section of this meeting under the report “Confidential discussion on key judgements and assumptions and endorse the pro forma for the interim report and NZX release for the 6 months ended 31 December 2019”.

30. The Auckland Council Group NZX announcement, media release and interim report for the half year ending 31 December 2019 will be presented to the Audit and Risk Committee on 24 February 2020 for review and approval.

Ngā tāpirihanga

Attachments

There are no attachments for this report.

Ngā kaihaina

Signatories

Authors

Tracy Gers - Group Accounting & Reporting Manager

Francis Caetano - Group Financial Controller

Authorisers

John Bishop - Group Treasurer

Matthew Walker - Group Chief Financial Officer

Phil Wilson - Governance Director

Audit and Risk Committee

09 December 2019

Pro forma Auckland Council Group interim report for 31 December 2019

File No.: CP2019/19486

Te take mō te pūrongo

Purpose of the report

1. To provide information on the purpose and process for the pro forma Auckland Council Group interim report and relevant accounting policies for the half year ending 31 December 2019.

Whakarāpopototanga matua

Executive summary

2. The Audit and Risk Committee is asked to approve the format of the group’s pro forma interim report, including the financial statements and the relevant accounting policies for the half year ending 31 December 2019.

3. The interim report will be issued on 28 February 2020 as part of the reporting of the group’s financial results to the NZX (New Zealand’s stock exchange).

Ngā tūtohunga

Recommendation/s

That the Audit and Risk Committee:

a) note the information in this report related to the 31 December 2019 pro forma interim report, including relevant accounting policies for the Auckland Council Group, subject to any required changes identified by management and Audit New Zealand during the half year close and auditor review

b) note that the committee has considered the confidential report “Confidential discussion on key judgements and assumptions and endorse the pro forma for the interim report and NZX release for the 6 months ended 31 December 2019”

c) endorse the pro forma Auckland Council Group interim report subject to any further feedback from committee members

d) request committee members give further feedback to staff by 14 January 2020 on the pro forma interim report

e) delegate the authority to the committee chair to endorse any significant subsequent amendments to the pro forma interim report.

Horopaki

Context

Reporting requirements

4. Auckland Council is an issuer of bonds on the NZX. Under the NZX listing rules, the group must release financial information within 60 days of the half year end.

5. Included in the NZX release is the NZX announcement, media release and interim report.

6. A draft of the group’s NZX announcement has been included in the report “Confidential discussion on key judgements and assumptions and endorse the pro forma for the interim report and NZX release for the 6 months ended 31 December 2019” in the confidential agenda of this meeting.

7. The council also has foreign currency bonds listed on the Singapore and Swiss stock exchanges which require us to disclose the differences between our reporting standards and International Financial Reporting Standards.

Interim report

8. The group pro forma interim report has been prepared in accordance with New Zealand Generally Accepted Accounting Practice and complies with Public Benefit Entity - International Accounting Standard 34 - Interim Financial Reporting.

9. There have been no significant changes impacting the disclosures within the pro forma interim report for the half year ending 31 December 2019 from the prior year; with the exception of the disclosure around adoption of newly implemented accounting standards and climate change risk.

10. The pro forma interim report for the half year ending 31 December 2019 includes the financial statements and relevant accounting policies for the group.

Tātaritanga me ngā tohutohu

Analysis and advice

11. The accounting policies applied in the pro forma interim report are consistent with those used at 30 June 2019; except for the adoption of the following standards and amendments as outlined in the accounting policies section:

· PBE IPSAS 34 Separate Financial Statements

· PBE IPSAS 35 Consolidated Financial Statement

· PBE IPSAS 36 Investments in Associates and Joint Ventures

· PBE IPSAS 37 Joint Arrangements

· PBE IPSAS 38 Disclosure of Interests in Other Entities

· Amendments to PBE IPSAS 21 Impairment of Non-Cash-Generating Assets

· Amendments to PBE IPSAS 26 Impairment of Cash-Generating Assets

· PBE IPSAS 39 Employee Benefits.

12. Management intends to take the first steps towards disclosing climate change in line with the Task Force on Climate Related Financial Disclosures (TCFD) recommendations. Initial draft disclosures are being developed in conjunction with the Sustainability Office in the Auckland Plan Strategy and Research unit. They will be available for the committee to review shortly after half year end.

13. Unlike the annual report, the interim report does not include reporting of non-financial performance measures, and accordingly Audit New Zealand will not be required to review non-financial performance measures in so far as they do not affect the financial performance or position at 31 December 2019.

Tauākī whakaaweawe āhuarangi

Climate impact statement

14. This report applies to the preparation the Auckland Council Group pro forma interim report for the half year ending 31 December 2019 and as such has no climate implications. Information relating to the group’s climate impact will be included in the final interim report.

Ngā whakaaweawe me ngā tirohanga a te rōpū Kaunihera

Council group impacts and views

15. The pro forma interim report relates to the Auckland Council Group, and as such takes group impacts and views into account.

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

Local impacts and local board views

16. This report applies to the preparation of the Auckland Council Group pro forma interim report for the half year ending 31 December 2019, including the financial statements and accounting policies, which do not include reporting at a local board level. Accordingly, the views of local boards have not been sought.

Tauākī whakaaweawe Māori

Māori impact statement

17. The Auckland Council Group pro forma interim report for the half year ending 31 December 2019 has no impact on the achievement or reporting of council’s contribution towards Māori outcomes.

Ngā ritenga ā-pūtea

Financial implications

18. This paper pertains to the reporting of the financial performance of the Auckland Council Group. As such, there are no financial decisions required, and there are no financial implications as a result of this paper.

Ngā raru tūpono me ngā whakamaurutanga

Risks and mitigations

19. No risks have been identified related to the information in this report.

Ngā koringa ā-muri

Next steps

20. The committee will review and approve the draft pro forma in the confidential section of this meeting under the report “Confidential discussion on key judgements and assumptions and endorse the pro forma for the interim report and NZX release for the 6 months ended 31 December 2019”.

21. The Auckland Council Group NZX announcement, media release and interim report for the half year ended 31 December 2019 will be presented to the Audit and Risk Committee on 24 February 2020 for review and approval.

Ngā tāpirihanga

Attachments

There are no attachments for this report.

Ngā kaihaina

Signatories

Authors

Tracy Gers - Group Accounting & Reporting Manager

Francis Caetano - Group Financial Controller

Authorisers

John Bishop - Group Treasurer

Matthew Walker - Group Chief Financial Officer

Phil Wilson - Governance Director

Audit and Risk Committee

09 December 2019

Quarterly Risk Update - December 2019

File No.: CP2019/19602

Te take mō te pūrongo

Purpose of the report

1. This report updates the Audit and Risk Committee on risk management activities at Auckland Council for the period September 2019 - November 2019.

Whakarāpopototanga matua

Executive summary

2. Risk Champions from the business groups and departments are scheduled to meet at the next Risk Korero (Risk Forum) on 29 November 2019. This is part of the wider strategy to continuously improve risk capability for first line representatives and build bottom up momentum.

3. To further strengthen the ‘tone from the top’, a business partnering approach has now been put in place with Executive Leadership Team (ELT) members having a dedicated Enterprise Risk Advisor supporting each division.

4. A format enhancement is proposed for the Top Risk reporting to easily identify risk ownership, and the monitoring and effectiveness of controls for Auckland Council.

5. Since its beginning, the 36^th America’s Cup (AC36) programme operating model has continued to evolve. The Programme Management Office (PMO) is currently responsible for providing the Joint Chief Executives Group (JCEG) with oversight of programme risks through the support of the Programme Risk Lead, currently held by Auckland Council. The role of the PMO and Programme Risk Lead are currently under review. This may impact on the way risks are being managed and reported for the AC36 programme.

6. The scope and terms of reference for the Service Delivery deep dive review, have been presented to the ELT of Auckland Council and approved. The Risk team is now moving into the groundwork phase and the deep dive is due to be reported back to this committee at the next regular meeting in February 2020.

7. To ensure that the group’s insurance programme stays fit for purpose, the council and council-controlled organisation (CCO) staff have commenced work on a number of key policy and risk reviews to prepare for the 2020/2021 renewal.

Ngā tūtohunga

Recommendation/s

That the Audit and Risk Committee:

a) note the risk and insurance activities in this report

b) note the update of the 36^th America’s Cup (AC36) Programme

c) consider the proposed new format of the top risk reporting and provide any feedback.

Horopaki

Context

8. This report provides an update on risk activities for Auckland Council to enable the committee to fulfil their governance and oversight role for effective enterprise risk management.

9. The insurance update follows on from the Post Renewal report provided to this committee on 27 August 2019.

Tātaritanga me ngā tohutohu

Analysis and advice

Risk Champions

10. The Risk Champions network is an integral part of preparing for the organisation of the future where ideas and actions of continuously improving our risk culture are generated bottom up by our people who are closest to the customer and community.

11. The Risk Champions are individuals nominated by department and senior people leaders and has been in place since 2017.

12. Based on the feedback received at the last forum held in June 2019, there is a need to continuously review and improve the risk capability of our frontline risk representatives.

13. It is timely to revisit the Risk Champions framework to assess whether it is still fit for purpose. Some of the key considerations are:

· capability

· engagement.

14. Most business units and departments have at least one nominated representative which supports the department and manages the department’s Risk Register, which contributes to the Top Risk Register. It is noted that not all risk champions are actively contributing due to changes in roles, time commitments and understanding of their expectations.

15. As a result of having been actively engaged, capable risk champs will help strengthen our bottom up approach to risk management and raise the risk maturity of council.

16. Roles and responsibilities, as well as the title of “Risk Champs” or” Leads” or “Reps”, will be revisited over the next quarter with the aim of getting the right fit for championing risk. This will be part of the top down-bottom up business risk partnering activity that will be undertaken in conjunction with the business leaders.

17. The Risk Korero (Risk Forum) are held quarterly and the next korero is scheduled in November 2019.

Business Partnering

18. A business partnering approach is being rolled out across all divisions. This approach means that each ELT functional area is supported by dedicated Risk Advisors, who will provide strong support to lead risk from the front.

19. To further strengthen the tone from the top the business will be supported by the respective Executive Officers for each area, and they will work closely with the Risk Advisors and the ELT member.

Top Risk Reporting Format

20. The format of the top risk reports, including the level of information, has recently been reviewed, to better present key information to the ELT, the Audit and Risk Committee and the Governing Body.

21. The council’s top risks are currently recorded and reported in a comprehensive risk register. The same register is reported to the Audit Risk Committee and Governing Body every quarter following a review.

22. The Top Risk register has detailed information for each risk, but limited information on control gaps and actions to mitigate these gaps and to reduce the risk. This poses a threat to achieving Auckland Council’s strategic, financial and operational objectives. Please refer to attachment A.

23. The proposal of the new format reflects best practice and the new ANZISO 31000:2018. In particular, the tailored reporting is intended to support and strengthen risk governance and leadership by focusing on the areas of controls and the relationship with the causes of the risks. It also focusses on identifying gaps in the controls.

24. The new format will highlight the following with the aim to provide a clear end to end profile of each top risk:

· the risk

· key causes

· the objectives impacted

· control gaps

· actions taken to mitigate the gaps with due dates

· action progress.

25. The proposed formats will provide the recipients with the relevant level of information to make informed decisions and to support the recipient’s understanding of the risks by:

· more succinctly articulating the risks, its impact and related causes

· the controls relevant to mitigating the causes

· actions to improve or enhance controls to reduce the residual risk

· actions required to be undertaken to monitor risks/controls, as identified from the previous quarter

· a comparison of any changes to the risk profile from the previous quarter, i.e. if the risk has increased, decreased or is stable and its rationale.

26. The proposed format was subject to discussion with ELT and approved subject to any feedback from this committee. It was also proposed that we use the same format when reporting to Governing Body.

27. The Top Risk Register is included in its current form as attachment B. There have been no changes to the top risks since they were last reported to this committee.

36th America’s Cup (AC36) Programme Update

28. The AC36 Programme risk register currently holds 26 risks, of which, two are rated ‘High’, 18 are rated ‘Medium’, and six are rated ‘Low’ – all post mitigation and treatment. The risk profile remains unchanged as at 26 November 2019.

29. The Joint Chief Executives Group (JCEG) has had the following changes:

· the Independent Chair is departing, and the new chair will be the Chief Executive of Auckland Tourism, Events and Economic Development

· Auckland Council’s Director of Infrastructure & Environmental Services will be representing Auckland Council

· there are new representatives from Panuku Development Auckland Limited and the Mayor’s Office.

30. Since its beginning, the AC36 operating model has continued to evolve. The Programme Management Office (PMO) is currently responsible for providing the AC36 Joint Chief Executives Group (JCEG) with oversight of programme risks through the support of the Programme Risk Lead, currently held by Auckland Council. The role of the PMO and Programme Risk Lead is currently under review. This may impact on the way risks are being managed and reported for the AC36 programme.

31. Given the evolution of the AC36 operating model and as we move closer towards the event, it has been observed and noted that the Programme Risk Lead (currently held by Auckland Council) needs to align with any future programme or project management structure in order to support JCEG’s risk oversight responsibilities effectively, including ensuring the most appropriate agency holds the Programme Risk Lead role.

32. The Risk Advisory Group also considered it prudent to remind JCEG of the very limited scope of risk governance and oversight of the Inter-Agency Steering Group (IASG) only. This was reported and discussed with JCEG in October 2019.

33. The advisory group consisting of the Programme Risk Lead (Auckland Council), the Crown (MBIE), its JCEG Representative (State Services Commission) and the Programme Director have discussed the potential oversight gaps and expressed the need for extending the role of this advisory group and its scope beyond IASG. This matter is currently under discussion with the Chair of JCEG.

Deep Dive on Top Risk Service Delivery

34. The scope and terms of reference for the deep dive have been presented to and approved by the ELT.

35. The scope of the deep dive review is to investigate the top risk identified as “Service Delivery”.

36. To achieve this the review will focus on services delivered on behalf of council, by third-party contractors, vendors and suppliers.

37. Due to the potentially wide scope, it was agreed that the review will be focussed on the following services:

· waste services – rubbish, recycling and inorganic collection;

· arboriculture services – maintenance of trees in parks and on berms;

· full facilities services – focussing on grass mowing, spraying and cleaning services.

38. This review will seek to get an understanding of how third-party contractors, vendors and suppliers manage the following key risks within the services they provide for council:

· health, safety and wellbeing

· integrity (theft, fraud and corruption)

· significant disruption risks (cyber security and business continuity).

Insurance Update

39. To ensure the group’s insurance programme stays fit for purpose, staff from the council group have commenced work on a number of key insurance policy reviews.

40. These reviews will provide an improved understanding of the group’s risk exposure in respect to:

· fine arts

· marina operator’s liability

· wreck removal

· cyber

· motor vehicle policies.

41. The outcome of these reviews will then inform an insurance procurement strategy for 2020/2021 renewal.

42. The council group and its insurance broker, Aon New Zealand, have also commenced the group loss modelling work to understand the cumulative impact of damage to key assets. This important work will help inform the council group’s future strategy and approach to insurance procurement and self-insurance.

Tauākī whakaaweawe āhuarangi

Climate impact statement

43. Climate change adaptation and mitigation has been identified as a top risk for Auckland Council.

44. There are no direct climate change implications directly arising from this information report.

Ngā whakaaweawe me ngā tirohanga a te rōpū Kaunihera

Council group impacts and views

45. The Enterprise Risk Team continue to work closely with the council-controlled organisations about their top risks and reporting these to the Auckland Council Group. Separately, council-controlled organisations provide individual risk update reports on a quarterly basis and there is regular interaction with the risk practitioners from the council-controlled organisations.

46. The Insurance Leadership Group continues to work closely across the group to prepare for the upcoming insurance renewal.

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

Local impacts and local board views

47. 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, the top risks presented in this format will assist local board in making informed decisions.

Tauākī whakaaweawe Māori

Māori impact statement

48. Given the specific legislative responsibilities to Māori and Te Tiriti o Waitangi across many of the council’s functions there may be some incidental impact to Māori by the risk council faces. Whilst no specific consultation has been undertaken with Māori for this report, the risk management activities will have benefit for the council’s Māori Responsiveness activities.

Ngā ritenga ā-pūtea

Financial implications

49. There are no financial implications directly arising from this information report.

Ngā raru tūpono me ngā whakamaurutanga

Risks and mitigations

50. This report addresses the format of the top risk reporting only.

51. More generally this information report relates to various risk matters which are summarised throughout this document.

Ngā koringa ā-muri

Next steps

52. The new format of reporting will commence in the first meeting of the new calendar year of the Audit and Risk Committee.

53. The next quarterly risk update will be provided to the committee at the next meeting.

54. The deep dive review into top risk Service Delivery will be presented to the committee at a subsequent regular meeting.

55. A progress update report on insurance policy reviews, cumulative loss modelling work and proposed insurance renewal strategy will be provided to the committee at its February meeting.

Ngā tāpirihanga

Attachments

No.	Title	Page
a ⇩	Proposed Top Risk Reporting Format	173
b ⇩	Current Top Risk Register November 2019	175

Ngā kaihaina

Signatories

Author

Matthew Kerly - Risk Advisor

Authorisers

Kevin Ramsay – Chief Risk Officer (Acting)

Dani Gardiner - General Counsel

Phil Wilson - Governance Director

Audit and Risk Committee

09 December 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' Quarterly Risk Updates - December 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 confidential to the council-controlled organisations' Boards or Audit and Risk Committees. The council-controlled organisations have provided their risk reports for the 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 Confidential discussion of key financial statement judgements and assumptions and endorse the pro forma interim report and NZX release for the 6 months ended 31 December 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 assumptions and judgements that have an impact on the financial results of the Auckland Council Group as at 31 December 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.

C3 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 interim report and financial results of the Auckland Council Group and Auckand Council as at 31 December 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 Assurance Services - Integrity activity and internal audit outcomes

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.

In particular, the report contains details of integrity and audit and review activity. The maintenance of confidentiality is required to ensure effective assurance processes for Council.

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.

Chairperson	Sue Sheldon, CNZM
Deputy Chairperson	Cr Daniel Newman, JP
Members	Deputy Mayor Cr Bill Cashmore
	Paul Conder
	Cr Shane Henderson
	Bruce Robertson

Ex-officio	Mayor Hon Phil Goff, CNZM, JP
	IMSB Chair David Taipari