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.

1 Apologies

An apology from Mayor P Goff has been received.

2 Declaration of Interest

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

3 Confirmation of Minutes

That the Audit and Risk Committee:

a) confirm the ordinary minutes of its meeting, held on Tuesday, 15 September 2020 and the extraordinary minutes of its meeting, held on Wednesday, 14 October 2020, including the confidential sections, as true and correct records.

4 Petitions

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

5 Public Input

Standing Order 7.7 provides for Public Input. Applications to speak must be made to the Governance Advisor, in writing, no later than one (1) clear working day prior to the meeting and must include the subject matter. The meeting Chairperson has the discretion to decline any application that does not meet the requirements of Standing Orders. A maximum of thirty (30) minutes is allocated to the period for public input with five (5) minutes speaking time for each speaker.

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

6 Local Board Input

Standing Order 6.2 provides for Local Board Input. The Chairperson (or nominee of that Chairperson) is entitled to speak for up to five (5) minutes during this time. The Chairperson of the Local Board (or nominee of that Chairperson) shall wherever practical, give one (1) day’s notice of their wish to speak. The meeting Chairperson has the discretion to decline any application that does not meet the requirements of Standing Orders.

This right is in addition to the right under Standing Order 6.1 to speak to matters on the agenda.

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

7 Extraordinary Business

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

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

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

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

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

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

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

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

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

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

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

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

No.	Title	Page
a ⇩	Forward Work Programme 2020-2022	13

Audit and Risk Committee

08 December 2020

Health, Safety and Wellbeing Update - December 2020

File No.: CP2020/18166

Te take mō te pūrongo

Purpose of the report

1. To update the committee on Auckland Council’s health, safety and wellbeing (HSW) performance.

Whakarāpopototanga matua

Executive summary

2. In response to a government request, Auckland Council closed corporate offices and community facilities on Friday 13 November 2020. While only impacting a limited range of staff and services, the deployment tested Council procedures should changes in COVID-19 Alert Levels take place.

3. Procedures for appropriate closing and deep cleaning are in place and subject to regular drills should a staff member or customer test positive for COVID-19.

4. Initial changes to the operating model for council’s health, safety and wellbeing activities, recommended by the Transition Unit’s recent review, have been implemented. A new General Manager position reporting to the Director Group Services has been created with Ian Maxwell appointed as acting General Manager.

5. There have been two notifiable incidents in the period August to October 2020.

6. Lost time injuries and medical treatment injuries have reduced compared to pre-COVID-19 levels.

7. The most common incidents have been verbal threats from customers together with slips, trips and falls.

8. A greater focus is required to encourage the reporting of hazards and near misses as well as deployment of corrective actions and closure of reported incidents.

Ngā tūtohunga

Recommendation/s

That the Audit and Risk Committee:

a) note the summary and organisational responses in the report and refer this report to the Governing Body of Auckland Council along with any commentary the committee thinks appropriate.

b) forward the report to Local Boards for their information.

Horopaki

Context

9. This report provides suitable information to enable the committee to provide objective advice and recommendations to the Governing Body on the adequacy and functioning of the council’s Health Safety and Wellbeing risk management system.

Tātaritanga me ngā tohutohu

Analysis and advice

Organisation and culture

10. In November 2020, the Executive Leadership Team of council reinforced that the risk of health, safety and wellbeing harm to staff, contractors and community is one of the top risks faced by council. This risk is driven by:

· threats to personal and physical security

· increased work loads

· health and safety culture

· limited understanding and capability

· stressed disengaged staff.

11. Led by council’s Transition Unit, a review of the operating model for council’s health, safety and wellbeing was completed in October 2020. In November implementation of insights arising from the review commenced with the creation of a new General Manager position reporting to the Director Group Services. Ian Maxwell was appointed as acting General Manager.

12. Actions recommended by the review are currently being deployed. These include:

· clarity about roles and accountabilities of teams and staff working to ensure health, safety and wellbeing

· processes to ensure insights and learnings from incidents and experiences are shared across the council group including council controlled organisations.

13. Other projects include:

· self-auditing by departments of their health, safety and wellbeing processes in preparation for the ACC audit scheduled for the first quarter of 2021

· deployment of mandatory people leader training

· reviewing staffing levels

· a review of contractors and suppliers

· acquisition and deployment of an enhanced safety recording and management information system replacing ‘Risk Manager’.

COVID 19

14. Auckland Council’s focus as part of the all of government response to COVID-19 is on:

· ensuring hygiene requirements

· staff remaining home when sick

· encouraging staff to be tested when they have symptoms

· enabling track and tracing in council buildings for both staff and customers.

15. Procedures for appropriate closing and deep cleaning are in place and subject to regular drills should a staff member or customer test positive for COVID-19.

16. In response to a government request, Auckland Council closed corporate offices and community facilities on Friday 13 November 2020. While only impacting a limited range of staff and services, the deployment represented a successful test of council’s procedures should future changes in COVID-19 Alert Levels take place.

17. Council maintains both stocks and supply arrangements for Personal Protective Equipment sufficient for council’s essential workers. These stocks may be shared across the wider council group as necessary.

18. During the September to October 2020 period council has made available various facilities for COVID-19 testing stations operated by the Ministry of Health. Recent examples include Ellen Melville Hall and Victoria Park within the city centre.

Working from home

19. Auckland Council provides for ‘agile working’ where appropriate, and staff may work from home according to the needs of the individual, the team and the organisation.

20. As indicated by building occupancy statistics for the week of 10 November 2020 (see below) a significant proportion of staff on any particular day are not working from their normal place of work. This reflects a trend first established following the initial COVID-19 lockdowns in March – April 2020.

21. Support for employees working from home is the subject of continual review. Guidance is provided for both people leaders and team members on this matter.

22. The issue of health and safety in a workplace that is a private residence, and which is not directly managed by the employer is an issue that council along with other employers in general are grappling with.

23. Our records indicate a rise in incidents concerning home based workstations. The Executive Leadership Team are currently considering options for addressing this matter.

Earthquake Prone Building Programme

24. Council is the owner of a significant portfolio of buildings and structures. Many are associated with the delivery of community services. A number of council owned buildings have been assessed as being earthquake prone and more are expected.

25. Following the adoption of an operational policy by the Executive Leadership Team about the occupation and management of council owned earthquake prone buildings, a Building Programme has been established within the Community Facilities Department.

26. The intention of the Programme is to mitigate over an extended period the risk that earthquake prone buildings present to community users and staff.

27. The Earthquake Prone Building Program will be the subject of discussion at a Committee Workshop prior to the meeting.

Well-being

28. Two staff surveys in May and September 2020 have been undertaken since the initial COVID-19 lockdowns. The aim of each was to highlight issues and trends in wellbeing, especially given the change for many staff to more remote working.

29. Comparing the two surveys it is evident that:

· people’s sense of belonging and connection to Auckland Council when working from home has decreased

· the stress people are feeling in relation to COVID-19 has increased

· staff perception of their employee hauora (health and wellbeing) has reduced

· the organisation’s communication about the changes to the way we work due to COVID-19 has been less effective.

30. The use of the Employee Assistance Programme (EAP) during the initial lockdown period did decline but has since recovered. There have been a small number of complex cases reflecting issues such as stress, depression, anxiety, relationship discord with family.

31. Additionally, the impact of the recession, job insecurity and loss of income by other family members is displayed by growing requests from staff for council to buy out leave provisions.

32. In response to these issues:

· EAP is available 24 hours / 7 days a week for our people who have concerns

· people leaders have received advice and support regarding effective communication and team building with particular relevance for teams working remotely

· courses and webinars, including resilience training and budgeting have been reviewed or developed and are now being delivered.

Notifiable Incidents

33. Two incidents have been notified to Worksafe in the period September to October 2020 as detailed in the table below.

Incident Details

Location

Status

Person trapped between barrier and reversing vehicle.

Waste Transfer Station, Henderson

Potential fatality.

Under investigation by Worksafe and Auckland Council.

Local resident reported to Worksafe that dust was being blown onto new playground area during its construction.

Greenhithe Park

No action taken by Worksafe.

Incident closed

34. The investigation undertaken by the Corporate Health Safety and Wellbeing Team of the near drowning at Glenfield Pool and Leisure Centre has been completed. The incident arose from a shallow water black-out. Following the incident Active Recreation took swift action to raise awareness of shallow water blackout amongst their lifeguards. The investigation supported this action and identified 22 other recommendations.

35. A review of a chainsaw injury by Asset Infrastructure Maintenance Services (AIMS) has resulted in a change in Personal Protection Equipment.

Incidents

36. Of the incidents lodged into council’s Risk Manager during September and October 2020, 51 per cent were health or safety related. Of these, half involved an injury of some type.

37. This is a high proportion when compared to New Zealand and Australian benchmarks and suggests that across council we are under-reporting hazards and near misses. This is a concern as experience indicates a greater reporting of hazards and near misses results in a reduction in injury over time.

38. Other incidents concerned a host of non-health and safety concerns.

Risk Manager

39. In September 2020, a report to this committee outlined actions that were being undertaken to remedy some of the difficulties with Risk Manager as a risk management platform. Three options are being explored:

· design and build a new platform by an internal solutions architect. This was the preferred option.

· purchase a solution from a third-party supplier. Following initial product demonstrations in November this has become the preferred option.

· reconfigure risk manager to better meet our needs.

40. Information in the following graphs use data from WellNZ from accepted injury claims which is considered to be a more reliable data source than council’s Risk Manager.

Lost time injuries and medical treatment injuries

41. Lost time injuries (LTI) in September and October 2020 were fewer than in previous months.

42. Medical treatment injuries (MTI) have also reduced when compared to periods prior to lockdowns associated with COVID-19. This indicates an improved injury management performance.

43. There were three lost time injuries in September and none in October 2020.

44. The chart below presents incidents by risk category. The data shows that workplace violence / aggressive behaviour is the most common risk, followed by slips, trips and falls.

45. In September and October 2020 all workplace violence / aggressive behaviour incidents involved verbal threats, mostly from customers.

46. The graphs below show that the management of corrective actions and closure of incidents within targeted timelines has slipped since August 2020 indicating that ongoing focus is required. Additional measures are being considered to ensure accountability throughout the business for closing off actions.

Incidents

Actions

Tauākī whakaaweawe āhuarangi

Climate impact statement

47. The information in this report does not impact on climate change.

Ngā whakaaweawe me ngā tirohanga a te rōpū Kaunihera

Council group impacts and views

48. This report is based on council activities only and 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

49. Local boards are aware of the changing environment and financial impact on council.

Tauākī whakaaweawe Māori

Māori impact statement

50. No additional Māori impact.

Ngā ritenga ā-pūtea

Financial implications

51. We have gained agreement from the relevant Finance Department staff that there are no additional financial implications in this report.

Ngā raru tūpono me ngā whakamaurutanga

Risks and mitigations

52. The risk of non-compliance with health and safety is recorded in the council’s top risk register. This risk register entry details the controls and mitigations in place.

Ngā koringa ā-muri

Next steps

53. The following actions will be undertaken:

a) ongoing deployment of organisational initiatives highlighted by the review of health safety and wellbeing undertaken by the Transition Unit such as:

· re-establishing roles and responsibilities of the corporate HSW team and the embedded HSW staff

· establishing closer working relationships with the HSW staff of council-controlled organisations

b) review the implication for council’s accountabilities for health safety and wellbeing associated with staff working from home

c) review of the utilisation of the EAP to determine whether additional capacity is needed

d) investigation regarding layout and operation of the Focused Waste Transfer Station Henderson (noted in paragraph 33).

e) focused management of corrective actions and closure of incidents reported within Risk Manager with the aim of achieving target timeframes.

Ngā tāpirihanga

Attachments

There are no attachments for this report.

Ngā kaihaina

Signatories

Authors

Ian Maxwell – General Manager Health, Safety and Wellbeing

Graham Ross – Senior Advisor Health, Safety and Wellbeing

Authorisers

Jim Stabback - Chief Executive

Phil Wilson – Director, Governance and CCO Partnerships

Audit and Risk Committee

08 December 2020

Annual Report on the Performance of the Audit and Risk Committee

File No.: CP2020/17886

Te take mō te pūrongo

Purpose of the report

1. This purpose of this report is to review and summarise the activities of the Audit and Risk Committee in 2020.

Whakarāpopototanga matua

Executive summary

2. The committee’s responsibilities are set out in its Terms of Reference.

3. The Terms of Reference provide that 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.

4. It is good practice that the Audit and Risk Committee should review their performance on an annual basis.

5. This report summarises the key actions performed by the committee, in response to the committee’s responsibilities as contained in the committee’s Terms of Reference.

6. This report is the first report for this term of council. The report covers the activity of this committee from December 2019 to present.

7. In the last term of Council, the chair reported that the committee had particularly focussed on the development of a healthy and productive relationship with the Office of the Auditor-General and Audit New Zealand, and on supporting senior management’s development of Enterprise Risk Management across Council. It has provided guidance and stretch to ensure the continuing advancement of capability.

8. In the first year of the current term of Council, the committee has been called upon to take a role in the development of Council’s response to COVID-19. Elected members of Council have found it helpful to hear the committee’s view on the robustness of process supporting management’s recommendations with respect to the Emergency Budget. The committee took a similar approach to that used with respect to the 2018-2028 Long-term Plan, but with significant changes to both assumptions supporting the Emergency Budget and the analysis of risk. It is pleasing to note the heavy attendance of Councillors at key Audit and Risk Committee meetings, and the agility with which the committee was able to offer support through briefings of senior Councillors and the Mayor.

9. The framework of Top Risk reporting, which is now well developed, supported both management and the committee in their approach to the Emergency Budget. Management was able to refer to the Risk Framework, identify three new key risks as a direct result of the impact of COVID-19, and bring those to the committee for approval. Council’s response to COVID-19 and particularly the usefulness of its refocussed risk management processes, were the subject of a presentation by the Chair to a large number of other local government audit and risk committee Chairs, and on-going discussion within the Office of the Auditor-General.

10. The Chair of the committee took a role at management’s request as a member of the internal Disclosure Committee, which met a number of times to test the appropriateness of disclosures to the NZX and the public.

11. The committee has discharged its responsibilities as contained in its Terms of Reference.

12. The relationship that the committee has with the mayor, elected members , the chief executive, management, the Office of the Auditor-General and Audit New Zealand is pitched at the right level, achieving a productive working relationship, whilst maintaining an independent oversight of key organisational risks and the management of those risks.

Ngā tūtohunga

Recommendation/s

That the Audit and Risk Committee:

a) receive this annual report on the Performance of the Audit and Risk Committee.

b) recommend that the chief executive place the report on the next available agenda of the governing body.

Horopaki

Context

13. The Audit and Risk Committee makes a valuable contribution to improving the governance and performance of council. The role and purpose of the committee is unique and different to most other committees. It is advisory in nature. In summary it acts as an independent check on council’s systems of governance and internal control. It provides assurance to council that key organisational risks are being identified and appropriately managed.

14. The Terms of Reference of the committee are based on good practice – focusing on governance, enterprise risk management and internal control.

15. The Terms of Reference require the chair of the committee to 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.

16. The committee is chaired by an independent Chairperson, Sue Sheldon CNZM.

Tātaritanga me ngā tohutohu

Analysis and advice

Key actions performed by the Committee since December 2019

17. A three-year forward work programme was developed and approved by the committee in December 2019. This has been reviewed at every meeting of the committee. This has provided for in-depth sessions in either workshops, or in the meeting proper for the committee to be briefed on, have oversight of, and provide direction on:

· the Enterprise Risk Management, and Assurance Services work programme. This has included oversight and direction of both programmes in response to the risks, issues and themes that have emerged during the COVID-19 pandemic

· quarterly updates on council-controlled organisation risk management

· six-monthly updates on legal risk

· six monthly updates on the ongoing monitoring of the council’s Te Tiriti o Waitangi Audit Response Programme (Treaty Audit Response Programme) to implement the recommendations contained in Te Tiriti o Waitangi Audits (Treaty Audits) of the council

· updates on health, safety and wellbeing performance information – to discharge the committee’s due diligence responsibilities under the Health and Safety at Work Act 2015

· governance over the Americas Cup Programme, and the City Rail Link project

· the 2020/21 Insurance Renewal.

18. The committee’s forward work programme was amended to respond to the risks, issues and themes that have emerged during the COVID-19 pandemic. An extraordinary meeting of the Committee was held in April 2020 where the committee received updates, reviewed and provided feedback on:

· emerging pandemic risks and mitigations

· the refocussed assurance programme in response to the heightened risk of control breakdown

· the assumptions underlying the 2020/21 Emergency Budget.

19. Subsequently the Committee has reviewed and provided feedback on the process for the identification and sale of assets – to provide assurance to Elected Members on the integrity of that process.

20. The committee has regularly reviewed the Enterprise Risk Management work programme. This has included:

· reviewing the council’s ‘Top Risks’ and risk mitigations

· monitoring the implementation of the Enterprise Risk Management Strategy and Plan

· receiving and reviewing risk updates from council’s substantive council-controlled organisations

· meeting with senior management and board representatives from substantive council-controlled organisations to better understand their risk management processes, especially at board level.

21. The committee has reviewed on a regular basis through the period, the Assurance Services work programme. This has included:

· approving the Assurance Services Charter, which establishes the independence, mandate, scope and authority of the Assurance Services department

· reviewing, approving and monitoring the implementation of the Assurance Services three –year strategy

· reviewing, approving and monitoring the implementation of the detailed annual Assurance Services programme

· reviewing the status of outstanding audit recommendations.

22. The committee has reviewed the key professional judgements, assumptions and management assertions with respect to the:

· announcement to the New Zealand Stock Exchange (NZX) for the release of financial information for:

o the six months ended 31 December 2019

o the 12-month period ended 30 June 2020

o the 2020/21 “Emergency Budget”

· the interim financial statements for the six months ended 31 December 2019

· the Annual Report (including financial statements) for the year ended 30 June 2020.

23. The Committee is performing a review role with respect to the production of the 2021-31 Long-term Plan (including the Consultation Document), including the management of risks specific to the Long-term Plan. To date the committee has reviewed the approach to the development of assumptions that will drive the projections, levels of service and performance framework in the Long-term Plan.

24. The committee has placed particular emphasis on maintaining a productive working relationship with the Office of the Auditor-General and Audit New Zealand. This has included:

· reviewing the areas of audit focus as contained in the Arrangements letter for the Audit of the 2021-31 Long-term Plan (including Consultation Document), the Annual Audit Arrangements letter (audit of annual report) and the Interim financial Statements Review Engagement letter (review of six-month interim group financial statements)

· reviewing the interim and final management reports with respect to each engagement

· reviewing the status of outstanding external audit recommendations (including management responses to these recommendations).

25. Regular committee-only sessions have been held with the Office of the Auditor-General and Audit New Zealand

Conclusions

26. The committee has discharged its responsibilities under its Terms of Reference.

27. The relationship that the committee has with the mayor, elected members, the chief executive, management, the Office of the Auditor-General and Audit New Zealand is pitched at an appropriate level, achieving a productive working relationship, whilst retaining independence.

Tauākī whakaaweawe āhuarangi

Climate impact statement

28. There are no climate change impacts arising from this report.

Ngā whakaaweawe me ngā tirohanga a te rōpū Kaunihera

Council group impacts and views

29. The committee has oversight of and receives regular reporting on the risk and assurance activities of Council-Controlled Organisations.

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

Local impacts and local board views

30. Local board views were not required for this report.

Tauākī whakaaweawe Māori

Māori impact statement

31. The committee has responsibility for oversight of progress in implementing audit recommendations arising from the Te Tiriti o Waitangi audit. This is included in the committees forward work programme. The committee receives six monthly reports on progress.

Ngā ritenga ā-pūtea

Financial implications

32. There are no financial implications arising from the recommendations for this report.

Ngā raru tūpono me ngā whakamaurutanga

Risks and mitigations

33. There are no risks arising from the recommendations for this report.

Ngā koringa ā-muri

Next steps

34. This report is to be placed on the agenda of the next available meeting of the Governing Body.

Ngā tāpirihanga

Attachments

There are no attachments for this report.

Ngā kaihaina

Signatories

Author

Chairperson, Sue Sheldon, CNZM

Audit and Risk Committee

08 December 2020

Approval of the draft Audit New Zealand Interim Review Engagement Letter for the six months ended 31 December 2020

File No.: CP2020/17289

Te take mō te pūrongo

Purpose of the report

1. To review and endorse the draft Audit New Zealand Interim Review Engagement Letter for the six months ending 31 December 2020 (Attachment A).

Whakarāpopototanga matua

Executive summary

2. Audit New Zealand has provided a draft interim review engagement letter for the six months ending 31 December 2020 (the draft letter).

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

4. The draft letter is substantially the same as in prior years.

5. The Audit and Risk Committee have responsibility for approving the draft letter before Audit New Zealand issues the final letter for approval by the mayor and chief executive.

Ngā tūtohunga

Recommendation/s

That the Audit and Risk Committee:

a) review and endorse Audit New Zealand’s draft interim review engagement letter, including the proposed review engagement fee (Attachment A of the agenda report)

b) request Audit New Zealand issue the final interim review audit engagement letter

c) recommend the mayor and chief executive sign the final interim review audit engagement letter.

Horopaki

Context

6. The council’s group financial controller and group treasurer have reviewed the draft letter, provided feedback to Audit New Zealand which they have incorporated.

7. A review engagement provides readers with a moderate level of assurance that nothing has come to the auditor’s attention that causes the auditor 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 and is usual process for interim reporting.

8. 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.

9. The draft letter outlines the scope of responsibilities, group entities subject to review, areas of review focus and administration matters such as logistics, proposed fee and timetables. It is substantially the same as in prior years.

10. The Audit and Risk Committee have responsibility for approving the draft letter before Audit New Zealand issues the final letter for approval by the mayor and chief executive.

Tātaritanga me ngā tohutohu

Analysis and advice

11. The draft 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, proposed fee and timelines.

12. This draft letter includes the following areas of focus which are similar to the prior year with the removal of the Eden Park provision, Housing Infrastructure Fund and Regional Fuel Tax, and the addition of the impact of COVID-19 and shovel ready funding. The areas of focus are summarised as follows:

· 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 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.

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

· Business combination/early adoption of accounting standards – an early adoption of PBE IPSAS 40 PBE Combinations should comply with transition requirements.

· 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.

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

14. The proposed fee for the review engagement is $123,910 plus disbursements. This is approximately 10 per cent of the 30 June 2020 audit fee and represents an increase of 1.7 per cent on the fee charged for the same engagement last year.

15. We consider the areas of review focus and the proposed fee are appropriate, given the size and complexity of the review engagement.

16. The group financial controller will present any amendments to this draft letter at the committee meeting.

17. Audit New Zealand Audit Director Athol Graham will be in attendance to answer any questions the committee may have in relation to the draft letter.

Tauākī whakaaweawe āhuarangi

Climate impact statement

18. Climate change risk disclosures were included in the prior year interim report. Following a more fulsome disclosure of climate change risks in the annual report, management considers that there has not been significant change to warrant disclosure in the 31 December 2020 interim report. Going forward management propose to only disclose climate change risks in the annual report if there has been significant change.

Ngā whakaaweawe me ngā tirohanga a te rōpū Kaunihera

Council group impacts and views

19. This report is about the 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

20. 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

21. 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

22. The proposed fee for the review engagement is $123,910 plus disbursements which is an increase of 1.7 per cent on the fee charged for the same engagement last year.

Ngā raru tūpono me ngā whakamaurutanga

Risks and mitigations

23. The key risk related to this draft letter is a potential increase in the auditor’s fees. This could occur if there is a significant increase in the review scope which would require extra audit effort.

24. 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

25. Following the approval of the draft letter by the committee, Audit New Zealand will issue the letter in its final form for the mayor and chief executive to sign it. Auckland Council staff will also confirm and finalise the council and Audit New Zealand’s delivery timelines, to ensure a timely and efficient review process.

Ngā tāpirihanga

Attachments

No.	Title	Page
a ⇩	Draft Audit New Zealand Interim Review Engagement Letter 31 December 2020	39

Ngā kaihaina

Signatories

Authors

Tracy Gers - Group Accounting & Reporting Manager

Francis Caetano - Group Financial Controller

Authorisers

John Bishop - Group Treasurer

Kevin Ramsay - Acting Group Chief Financial Officer

Phil Wilson – Director, Governance and CCO Partnerships

Audit and Risk Committee

08 December 2020

Preparation of the interim report and NZX release for the six months ending 31 December 2020

File No.: CP2020/17298

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 for the preparation of the interim report and the NZX release for the six months ending 31 December 2020.

Whakarāpopototanga matua

Executive summary

2. On 22 February 2021 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 26 February 2021:

· NZX announcement

· associated media release

· interim report for the six months ending 31 December 2020.

3. This update assists the committee in the review of the quality of the documents and processes undertaken to prepare them, for the six months ending 31 December 2020, including:

· key audit matters for the review engagement at 31 December 2020

· 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, estimates and assumptions and on issues and risks will be presented to the committee in the confidential report in this meeting “Confidential: Interim report and NZX release for the six months ending 31 December 2020”.

5. Additionally, five documents will be provided in the confidential item relating to the preparation of the reporting for the six months ending 31 December 2020:

· 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

· pro forma interim report for the six months ending 31 December 2020 (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 six months ending 31 December 2020.

b) note that an update on the confidential matters and confidential draft documents related to the interim report and NZX release 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 prior years, to comply with the NZX continuous disclosure requirements, and on the basis that the withholding of the information is necessary to enable the council group without prejudice or disadvantage to carry out commercial activities; 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 sections of the meetings.

8. Under the NZX listing rules the Auckland Council Group must release financial information within 60 days after the six months ending 31 December 2020.

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

· NZX announcement

· media release

· interim report for the six months ending 31 December 2020.

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 Audit and Risk Committee meeting on 22 February 2021 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 22 February 2021 the Audit and Risk Committee will recommend to the chair and deputy chair of the Finance and Performance Committee that they recommend the mayor and chief executive approve the NZX announcement, media release and interim report.

Tātaritanga me ngā tohutohu

Analysis and advice

13. Audit New Zealand’s key review matters for the review engagement at 31 December 2020 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 Trust loan

o early adoption of new accounting standards

o rates revenue recognition.

Key milestones

14. The key milestones for the NZX release and interim report are:

Quality assurance and compliance approvals

15. 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 are 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
GM financial strategy and planning		ü	ü	ü
GM financial and business performance*		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
Financial accounting manager*	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

16. All the quality assurance reviewers performing technical reviews (denoted with *) are Chartered Accountant (CA) or equivalent and have the appropriate technical accounting skills and knowledge.

Management representation letters and management confirmations

17. 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.

18. 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

19. Audit New Zealand make formal enquiries of the Audit and Risk Committee, senior management and the Risk and Assurance 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.

20. 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 Risk and Assurance department.

21. A copy of the draft fraud questionnaire is included in the confidential report in this meeting titled “Confidential: Interim report and NZX release for the six months ending 31 December 2020”.

Other matters

22. During the reporting 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

23. This report relates to a financial reporting process only and as such has no climate implications.

Ngā whakaaweawe me ngā tirohanga a te rōpū Kaunihera

Council group impacts and views

24. 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 2020 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

25. This report relates to the financial reporting of the Auckland Council Group, which does not include reporting at a local board level and accordingly local board views have not been sought.

Tauākī whakaaweawe Māori

Māori impact statement

26. This 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

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

Ngā raru tūpono me ngā whakamaurutanga

Risks and mitigations

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

29. 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: Interim report and NZX release for the six months ending 31 December 2020”.

Ngā koringa ā-muri

Next steps

30. The committee will review the confidential key judgements, estimates and assumptions and attachments relating to this report in the confidential section of this meeting under the report “Confidential: Interim report and NZX release for the six months ending 31 December 2020”.

31. The Auckland Council Group NZX announcement, media release and interim report for the six months ending 31 December 2020 will be presented to the Audit and Risk Committee on 22 February 2021 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

Kevin Ramsay - Acting Group Chief Financial Officer

Phil Wilson – Director, Governance and CCO Partnerships

Audit and Risk Committee

08 December 2020

Enterprise Risk Quarterly Update - December 2020

File No.: CP2020/14599

Te take mō te pūrongo

Purpose of the report

1. To update the Audit and Risk Committee on enterprise risk management activities at Auckland Council in the period September - November 2020 including:

a) Auckland Council Top Risk Register annual reset process and current Top Risks

b) 36^th America’s Cup Programme (AC36) risks

c) Development of three-year Auckland Council Group insurance strategy

d) 10-year Budget 2021-2031 (Long-term Plan (LTP) top risks.

Whakarāpopototanga matua

Executive summary

Auckland Council Top Risk Reset

2. The council’s top risks have been reviewed and reset. The top risk register contains the 11 most significant strategic risks and opportunities for Auckland Council. The top risks inform consistent and effective risk management and decision making.

3. The reset has not revealed any significant variation in the risks that Auckland Council had previously identified and was monitoring and managing.

4. The Risk and Assurance team will work with the nominated Executive Leadership Team (ELT) sponsors to assess and evaluate each top risk and report the completed top risk register to the next Audit and Risk Committee in February 2021.

36th America’s Cup Programme

5. Operational planning and preparation are on track for the first race to commence on 17 December 2020.

6. The overall risk profile for the programme remains stable with no new material risks identified and all risks and issues remain under constant review. A verbal update will be provided in the meeting.

Insurance Strategy

7. Work is progressing by the council and council-controlled organisation representatives to develop the group three-year insurance strategy that will be implemented from July 2021.

8. The Governing Body has approved the performance objective relating to Balance Sheet Management, to optimise insurance arrangements to reflect the size and scale of the Auckland Council group and appropriate transfer and management of Auckland Council group risks.

9. The draft strategy and insurance options will be reported to the Audit and Risk Committee in February 2021 for feedback.

10-year Budget 2021-2031 (LTP)

10. A risk workshop has been held with the LTP Project Control Group and subject matter experts to identify, validate and own the top strategic risks and controls.

11. Six top strategic risk areas have been identified and rated as high. Operationally another eight high risks, 32 medium and 22 low rated risks are also being actively monitored and managed.

Ngā tūtohunga

Recommendation/s

That the Audit and Risk Committee:

a) note the Auckland Council Top Risk annual reset and top risks

b) note the updates on the 36^th America’s Cup programme, Auckland Council Group insurance strategy and the 10-year Budget 2021-2031 (Long-term Plan)

c) refer the Enterprise Risk Quarterly Update – December 2020 report to the Governing Body for information

Horopaki

Context

12. This report provides an update on the annual reset of Auckland Council’s Top Risks and other significant programme risk activities.

13. The risk work programme includes regular review of the Auckland Council top risks.

14. The report provides information to enable the Audit and Risk Committee to fulfil their governance and oversight role of the effectiveness of risk management within Auckland Council, and for evaluating the emerging risks and changes to the Auckland Council Top Risks.

Tātaritanga me ngā tohutohu

Analysis and advice

Auckland Council Top Risk Reset 2020

15. Auckland Council’s Top Risks have been reset as part of the ongoing risk programme to remain relevant in the changing risk environment.

16. The risk reset objectives were to:

· evaluate the risks against internal and external landscape to identify the top strategic risks and opportunities facing Auckland Council

· improve the effectiveness of the ELT top risks by improving alignment with strategic objectives and outcomes and focusing on strategic risk areas

· develop a simpler and more integrated risk register. Refine the top risk register to better enable Council’s performance reporting

· enable shared responsibility for enterprise risks across the ELT and support top down/bottom up risk management.

17. The top risk reset process considered a wide range of internal and external inputs including:

· internal survey responses – including ELT, Audit and Risk Committee members, risk champions, subject matter experts, risk and control owners

· external environment scanning – including other local governments in New Zealand, Brisbane City Council, and other global risk reports

· Our Strategy 2022, Kia Manawaroa Tātou

· Our Charter, Tā Tātou kawenata

· Chief Executives’ Objectives

· learnings from COVID-19

· 10-year Budget 2021-2031 (LTP)

· Other strategic work programmes.

18. The top risk reset was informed by inputs gathered from a wide range of internal and external sources including from Audit and Risk Committee members, council risk owners, overseas councils, and the top risks identified by 10 New Zealand local authorities.

19. The following process was followed:

20. Risk identification and analysis has identified the top risks that may significantly impact Council’s achievement of Our Strategic goals 2022 Kia Manawaroa Tātou, Our Charter principles Tā Tātou kawenata and Council’s current strategic objectives and outcomes.

21. The analysis confirmed no significant surprises and reinforced many priority areas and issues the organisation has already identified and is working on. A summary of the risk themes identified through the external and internal scanning is in Attachment A.

22. The identified 11 top risks agreed by the Executive Leadership Team on 23 November 2020 are listed below. The risks are grouped against the four Council strategic goals and are not ranked:

· decision making – complex governance under pressure

· financial management

· strategic relationships (internal and external)

· organisational performance (accountability, measure and transparency)

· health, safety and wellbeing of staff, contractors and communities

· adaptability – ability to adapt to continuous evolution, change and growth

· fraud and corruption

· service delivery

· data and information – agile systems; good, integrated, accurate and secure

· Māori Outcomes

· resilience.

23. A summary of the 11 top risks (descriptions and key drivers) is in Attachment B.

24. Previous top risks not included above (Housing and Urban Growth, Fit for Purpose Community Assets) are now owned by and responsibility for management is at a divisional and departmental level.

25. The risk reset aims to achieve a more strategic and integrated approach to risk management. Linking operational bottom up and strategic top down risks will grow risk culture with more engaged and satisfied customers and communities.

26. Executive Leadership Team (ELT) sponsors have been agreed for each Top Risk. The role of the sponsor is to provide oversight and give direction on the mitigations and actions required to effectively manage enterprise risks on behalf of all ELT.

27. The Risk and Assurance department’s enterprise risk staff will work with nominated ELT sponsors to refine the risk descriptions and complete a full evaluation of each risk. Full risk reports, including the causes, drivers, likelihoods, consequences, controls, mitigations, gaps and actions and risk ratings, will be reported to ELT and the Audit and Risk Committee in February 2021.

36^th America’s Cup Programme Risk Update

28. The 36th America’s Cup risk management is now being managed directly by the Programme Management Office (PMO). The enterprise risk team from Auckland Council are no longer actively supporting the programme however, they are available on request. The following update has been provided by the PMO.

29. Auckland Council Group, Ministry of Business, Innovation and Employment (MBIE), mana whenua and America’s Cup Event Limited (ACE, the event organiser responsible for the Cup Village and on-water racing) are working together to prepare for the AC36 event cycle, which runs from December 2020 to March 2021. The first race of the three-event cycle, the four-day America’s Cup World Series / Christmas Cup takes place 17 to 20 December 2020.

30. Operational planning and preparation are reaching their conclusion, and pack-in of the Cup Village has commenced. The Event Permit was issued by Auckland Council on 13 November subject to:

· further evidence of crowd safety to be provided by close of business 30 November 2020 to satisfy Auckland Council Group that the dynamic space of Wynyard Quarter will be managed adequately to ensure crowd safety

· provision of a final event COVID-19 Management Plan before close of business 30 November 2020 to satisfy Auckland Council Group and to avoid the event not being able to go ahead should the COVID -19 alert level change from the current Alert Level 1.

31. Notwithstanding the recent media reporting regarding disagreements between Emirates Team NZ and challengers the overall risk profile remains stable. No new material risks have been identified. The risks and issues remain under constant review and a verbal update will be provided in the meeting.

Insurance Strategy Update

32. Auckland Council Group’s three-year insurance strategy for the period of 2021 to 2023 is currently being developed.

33. In October, staff held a workshop with the Insurance Leadership Group (council and council controlled-organisation representatives) to discuss the purpose, guiding principles, key objectives and deliverables for the next three year’s insurance strategy.

34. On 26 November 2020 the Governing Body approved the performance objectives of the Chief Executive.

35. Under the performance objective relating to Balance Sheet Management, the following insurance-related measure has been included:

· Optimise insurance arrangements to reflect the size and scale of Auckland Council group and appropriate transfer and management of Auckland Council group risks.

36. The strategy and options to optimise council group’s insurance arrangements will be reported to the Audit and Risk Committee in February 2021 for feedback, and presented to the Finance and Performance Committee before the end of the financial year in 2021.

10-year Budget 2021-2031 (LTP) Update

Update on the 10-year Budget 2021-2031 risk and assurance process

37. On 24 August 2020, the Audit and Risk Committee endorsed the risk management and assurance approach for the 10-year Budget 2021-2031 (also known as the Long-term Plan or LTP).

38. The Risk and Assurance team is supporting the 10-year budget programme to identify, manage and minimise risks at a strategic and operational level.

39. A risk workshop was conducted with the governance Project Control Group and subject matter experts to validate/identify top strategic risks and controls. Work is ongoing to identify and implement mitigations and manage risks.

40. The top strategic risks areas and mitigations identified at this time are:

LTP Top Strategic Risks	Key mitigations
Due to COVID-19 uncertainty, the LTP is not fit for purpose and not adopted on time.	Consistent assumptions and scenarios provided by subject matter experts, early engagement with central government, data provided in a usable format, robust programme management and governance structure including CCOs and Audit NZ and Office of Auditor-General, quality control performed by governance group and chief financial officers.
Staff do not articulate a clear, joined up narrative so that the Governing Body can make a fully informed decision to adopt the Consultation Document / LTP	Provide information on the trade-offs and complete information with a long-term view, better understand capex programme across the Group (capex risk prioritisation workstream), early engagement with elected members, Audit NZ, Central Government, provide focused options in Consultation Document to assist prioritisation.
Audit NZ expectations on LTP audit requirements are not agreed	Early engagement and agreement with the Office of Auditor-General (OAG) / Audit NZ on expectations regarding articulation of risks, assumptions, accuracy of projections and the impact on audit opinion.
Inadequate engagement with co-governance entities	Engagement with mana whenua, Maunga Authority, and local boards up front and ongoing.
Resourcing constraints	Business continuity planning, ELT prioritisation of resource requests/approvals concerning the LTP programme.
Unacceptable or sub-optimal risks to council assets and services	Capital investment prioritisation, provide elected members quality advice.

41. These strategic risks are rated high. At an operational level, there are eight high risks, 32 medium and 22 low rated risks that are being actively monitored and managed.

42. The LTP programme is progressing as planned despite significant uncertainty as described above. Risks are being actively monitored and managed by ELT and the LTP Project Control Group.

43. The next key date is 9 December 2020 when the Governing Body will be asked to agree to consultation items. Over the January period Audit New Zealand will be auditing the consultation material. Audit New Zealand will perform audit work to form a view as to:

· whether the plan gives effect to the purpose set out in section 93(6) of the Local Government Act 2002; and

· the quality of the information and assumptions underlying the forecast information in the plan.

Audit of Asset Management Plans

44. The Internal Audit team from the Risk and Assurance department is currently performing a health check on Asset Management Plans. The objective of the health check is to assess whether:

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

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

45. This process will ensure that the asset management plans will provide a reasonable basis for the Infrastructure Strategy, Financial Strategy, financial forecasts and service performance framework that will be contained in Council’s 2021-31 LTP.

46. The results of this Health Check will be reported to the Audit and Risk Committee on 9 February 2021.

Tauākī whakaaweawe āhuarangi

Climate impact statement

47. Climate change and its impacts continues to be identified as a key risk driver for Auckland Council.

48. Climate change is proposed for inclusion in the Top Risk Register as a driver for the risk “Council and Auckland’s resilience and recovery”.

49. This will enable adequate and ongoing executive and senior leadership oversight and effective top down / bottom up management of the risks related to climate change.

50. There are no direct climate change implications arising from this report.

Ngā whakaaweawe me ngā tirohanga a te rōpū Kaunihera

Council group impacts and views

51. The 36^th America’s Cup and 10-year Budget 2021-2031 both have impacts across the Council group.

52. The Risk and Assurance department continues to work with the risk managers and key staff in the council-controlled organisations to collaborate and manage group risks.

53. There are no direct impacts on the Council Group arising from this report.

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

Local impacts and local board views

54. There are no direct impacts on local boards, however they are affected by many of the top risks as they represent risks to Auckland Council.

Tauākī whakaaweawe Māori

Māori impact statement

55. The delivery of Māori Outcomes is a key strategic objective for Auckland Council and has been identified for inclusion in the new proposed top risk register.

56. The potential risk that the council may be unable to meet its responsibilities to Māori would have a range of significant impacts and consequences including social inequality, breach of statutory obligations and a loss of trust and confidence in the council.

57. Māori Outcomes is proposed for inclusion in the Top Risk Register to enable adequate and ongoing executive and senior leadership oversight and effective top down / bottom up management of the risks.

Ngā ritenga ā-pūtea

Financial implications

58. Financial Management has been identified as a key risk for council and is proposed for inclusion in the reset top risk register. This will enable adequate and ongoing management of the risks associated with it.

59. There are no financial funding decisions required as a result of this report, and consequently there are no direct financial implications.

Ngā raru tūpono me ngā whakamaurutanga

Risks and mitigations

60. Auckland Council’s emerging risks and issues are discussed in the body of this report.

Ngā koringa ā-muri

Next steps

61. The enterprise risk staff from the Risk and Assurance department will work with nominated ELT sponsors to develop each top risk. Causes, drivers, likelihoods, consequences, controls, mitigations, gaps and actions and risk ratings will be identified and assessed.

62. Progress on the development of the top risks will be reported to the next ordinary meeting of the Audit and Risk Committee in 2021.

63. The proposed insurance strategy will be presented to the Audit and Risk Committee for feedback and oversight in February 2021.

64. The Audit and Risk Committee will review the 10-year Budget Consultation Document and supporting information on 9 February 2021.

Ngā tāpirihanga

Attachments

No.	Title	Page
a ⇩	Internal and External Risk Landscape	73
b ⇩	ELT Top Risk Reset 2020	75

Ngā kaihaina

Signatories

Authors

Emma Mosely – Strategic Lead Risk and Assurance

Ann Brown - Senior Risk Advisor

Caroline Innes Mehta - Senior Risk Advisor

Matthew Kerly - Risk Advisor

Authorisers

Helen Wild - General Counsel

Phil Wilson – Director, Governance and CCO Partnerships

Audit and Risk Committee

08 December 2020

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 CONFIDENTIAL: Council-controlled Organisations' Quarterly Risk Updates - December 2020

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