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

 

Date:

Time:

Meeting Room:

Venue:

 

Tuesday, 22 June 2021

10.00am

Room 1, Level 26
135 Albert Street
Auckland

 

Komiti Tātari me te Mātai Raru Tūpono /

Audit and Risk Committee

 

OPEN AGENDA

 

 

 

 

MEMBERSHIP

 

Chairperson

Sue Sheldon, CNZM

 

Deputy Chairperson

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

 

 

 

 

 

 

(Quorum 3 members)

 

Quorum must include two Governing Body members

 

Mike Giddey

Kaitohutohu Mana Whakahaere / Governance Advisor

 

15 June 2021

 

Contact Telephone: (09) 890 8143

Email: mike.giddey@aucklandcouncil.govt.nz

Website: www.aucklandcouncil.govt.nz

 

 



Terms of Reference

 

Purpose

 

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

 

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

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

·         internal and external audit and assurance

·         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

22 June 2021

 

ITEM   TABLE OF CONTENTS                                                                                         PAGE

1          Apologies                                                                                                                        9

2          Declaration of Interest                                                                                                   9

3          Petitions                                                                                                                          9  

4          Public Input                                                                                                                    9

5          Local Board Input                                                                                                          9

6          Extraordinary Business                                                                                                9

7          Update on Key Controls and Risks related to the Recovery Budget (10-year Budget 2021-2031)                                                                                                                     11

8          Consideration of Extraordinary Items

PUBLIC EXCLUDED

9          Procedural Motion to Exclude the Public                                                                 27

C1       CONFIDENTIAL: Office of the Auditor-General and Audit New Zealand Briefing 27


1          Apologies

At the close of the agenda no apologies had been received.

 

2          Declaration of Interest

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

 

3          Petitions

There is no petitions section.

 

4          Public Input

There is no public input section.

 

5          Local Board Input

There is no local board input section.

 

6          Extraordinary Business

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

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

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

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

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

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

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

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

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

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

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

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


Audit and Risk Committee

22 June 2021

 

Update on Key Controls and Risks related to the Recovery Budget (10-year Budget 2021-2031)

File No.: CP2021/07698

 

  

 

Te take mō te pūrongo

Purpose of the report

1.       To outline the final status of key controls and the management of significant risks related to the development of the Recovery Budget - 10-year Budget 2021-2031 (10-year Budget) before adoption at the Governing Body on 29 June 2021.

Whakarāpopototanga matua

Executive summary

2.       The Audit and Risk Committee has a key oversight role over control processes and risks associated with the development of the 10-year Budget and supporting information.

3.       The 10-year Budget must be audited and include an audit opinion. Audit New Zealand and the Office of the Auditor General will advise the committee directly on their progress.

4.       Following the decisions of the Governing Body regarding the content of the 10-year Budget on 25 May 2021, Ngā Ratonga Ture (Legal Services) is conducting a review and will confirm whether all applicable legislative requirements have been met.

5.       All key control processes for the development of the 10-year Budget have been completed apart from final legal sign-off and final sign-off regarding transport service levels. These are both expected to be complete by the date of this meeting. All key controls are summarised in Attachment A.

6.       The key risks and mitigations associated with the 10-year Budget are set out in Attachment B. There are currently three open medium risks with actions that are on track. These are risks with respect to:

·    the 10-year Budget not being adopted on time

·    there not being a clear and coherent narrative that will enable the Governing Body to adopt the 10-year Budget

·    Audit New Zealand’s expectations not being met.

7.       The following risks have been monitored and were closed on 27 May 2021:

·    failure to engage adequately with local boards and the Mana Whenua Kaitiaki Forum

·    resourcing

·    unacceptable and sub optimal risks to council assets and services.

Ngā tūtohunga

Recommendation/s

That the Audit and Risk Committee:

a)      receive the report on the key controls and risks relating to the development of the Recovery Budget (10-year Budget 2021-2031)

b)      advise the Governing Body that effective internal control and risk management processes have been followed during the preparation of the Recovery Budget (10-year Budget 2021-2031)

c)      advise the Governing Body that there are no significant outstanding audit issues [If there are any outstanding issues this will be noted in the resolution].

Horopaki

Context

8.       The Local Government Act 2002 requires local authorities to prepare and adopt a long-term plan (the 10-year Budget) every three years.

9.       The Audit and Risk Committee has a key oversight role (reflected in its Terms of Reference) over control processes and risks associated with the development of Auckland Council’s 10-year Budget.

10.     Section 94 of the Local Government Act 2002 requires the 10-year Budget to be audited by and contain a report from the Auditor-General. Audit New Zealand and the Office of the Auditor-General will advise the committee directly on progress with that audit.

11.     To deliver a 10-year Budget that achieves an unqualified audit opinion, it is critical for the council group to ensure that:

·   processes are robust

·   information contained in the 10-year Budget is materially complete and reliable

·   any risks associated with the 10-year Budget process are minimised

·   the 10-year Budget complies with the statutory requirements for a long-term plan, including those set out in the Local Government Act 2002, and the Local Government (Auckland Council) Act 2009.

Risk and Mitigations

12.     On 24 August 2020, the Audit and Risk Committee endorsed the risk management and assurance approach for the 10-year Budget (AUD/2020/50). This report provides an update on that process.

13.     The Risk and Assurance department have supported and advised on risk and issues management across the 10-year Budget governance programme and, since September 2020, are represented on the Project Control Group (PCG). 

14.     Council’s standard risk management and assurance approach has been followed when monitoring the development of the 10-year Budget and the operation of key controls and sign-offs.

15.     A risk management update was reported to and considered by the Audit and Risk Committee on 8 December 2020 and updated and reported to the committee again on 9 February 2021.  The committee noted that effective internal controls were followed and that there were no significant legislative compliance issues relating to the consultation phase of the 10-year Budget development process. By way of resolution, the committee provided assurance to the Governing Body that effective internal control and risk management processes had been followed during the preparation of the 10-year Budget consultation document and supporting information and that there were no significant outstanding audit issues at the time of the resolution.

16.     Risk workshops have been conducted with the governance PCG and subject matter experts to validate/identify and assess top strategic risks and controls, to identify risk owners, and fortnightly reviews and escalation of risks and issues has been completed.

17.     Risks to the 10-year Budget related to COVID-19, climate change and potential impacts of asset condition on council services have been included in the risk analysis.

18.     The Risk and Assurance team has continued to support the 10-year Budget programme to identify, manage and minimise risks at both a strategic and operational level.

19.     Ongoing identification of risks, implementation of mitigations, and escalations to manage strategic and operational risks are embedded as part of the programme rhythm.

20.     The top strategic risk areas and mitigations are reviewed, reassessed and reported fortnightly to the PCG.

Tātaritanga me ngā tohutohu

Analysis and advice

Decision making

21.     On 25 May 2021, following the consideration of feedback received and political discussions, the Governing Body agreed to finalise the 10-year Budget. The final budget included in the draft 10-year Budget documentation has been prepared reflecting these decisions.

22.     Staff have incorporated the decisions made by the Governing Body into the 10-year Budget in line with the appropriate legislation. This document includes an updated Financial Strategy, Infrastructure Strategy, Revenue and Financing Policy, and Funding Impact Statement.

Update on key controls

Programme management and governance

23.     In February 2021, we reported on the programme management and governance of the 10-year Budget. That programme management and governance has continued to operate since the adoption of the consultation document in February 2021.

24.     A project execution plan has been approved by the Group Chief Financial Officer (CFO), with approval of the process by the Mayoral Office. This plan clearly sets out workstream structures, roles and responsibilities and schedules of key milestones.  It has been implemented by the project team and is monitored by the PCG. The Group CFO is the sponsor of the PCG.

25.     Clear roles and responsibilities have been allocated to various work-streams who report to the PCG. Membership of this group consists of senior and executive managers from the Finance, Planning and Governance divisions, along with a representative from the Mayoral Office.

26.     The PCG includes members with the necessary delegated authority to make key decisions that impact the process and accountability of:

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

·   understanding and supporting the project process, objectives and deliverables

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

27.     Elected members have been included as part of the process from the outset, in the form of committee meetings and workshops with the Finance and Performance Committee, Governing Body and the local boards.

28.     The PCG and workstream leads have met regularly to track progress, monitor risks and respond to issues.

29.     Representatives from Ngā Mātārae and the Independent Māori Statutory Board attend the regular workstream leads’ meetings.

30.     The PCG receives a fortnightly status report on project risks. The PCG reviews the assessment and effectiveness of the risk mitigations.

31.     The PCG will also ensure that an appropriate lessons learnt exercise is undertaken following adoption of this 10-year Budget to help improve the process and risk management approach for future 10-year budgets.  

Assumptions

32.     All significant forecasting assumptions that were used to produce the consultation document have been reviewed and updated – to ensure they remain complete, reasonable and supportable.

 

 

33.     To ensure consistent application of assumptions, the following controls and sign-offs have been executed:

·   written communication / guidance issued to all business areas

·   the use of pre-populated templates with assumptions where practical, e.g. budget submission templates

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

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

34.     The Office of the Auditor General (OAG) has continued to focus on key risks and assumptions related to the impacts of COVID-19, climate change and asset condition on council services.

35.     Key forecasting assumptions related to the impact of COVID-19 were reported to this committee on 14 October 2020. These had been prepared by the Financial Strategy and Planning department, in conjunction with the Auckland Plan Strategy and Research department and the Chief Economist.

36.     The COVID-19 related assumptions including three scenarios and detailed financial projections were prepared based on the balanced scenario. These assumptions covered the following areas:

·    government health restrictions

·    growth (population and buildings)

·    economic growth (GDP and unemployment)

·    inflation

·    behavioural trends.

37.     On 22 February 2021, this committee received an update on the approach used to update the key COVID-19 related significant forecasting assumptions that have been used to refresh the 10-year Budget. The committee resolved that the methodology used to update the assumptions continues to be complete, reasonable and supportable.

38.     These assumptions represent a subset of the significant forecasting assumptions included in the supporting information and summarised in the consultation document. The full set of significant forecasting assumptions has been signed-off by the Group CFO. 

39.     In addition to the COVID-19 related assumptions, there are three key significant forecasting assumptions with a high degree of uncertainty and a significant potential impact on this 10-year Budget: 

·    Climate change is a key area of interest to Aucklanders, and we have included evidence-based assumptions covering warming temperatures, changes to rainfall patterns, sea-level rise and more frequent and severe weather events. Further details and research were distributed to support Asset Management Plan (AMP) development and is referenced in our Infrastructure Strategy.

·    Central government have announced that they intend to make substantial changes to how three waters services are delivered across New Zealand. Work on this continues and direction from the OAG to the local government sector is that long-term plans should be prepared on the basis of no change (given the uncertainty) but should highlight this level of uncertainty. A “no change” assumption on water reform has been included in accordance with this guidance.

·    Government funding of transport activities was agreed through the Auckland Transport Alignment Project (ATAP) in March 2021. We have included assumptions about government funding based on that agreement. Waka Kotahi has provided some initial indicative advice on National Land Transport Funding (NLTF) funding levels for the next three years for certain transport programmes which is not aligned to the ATAP agreement. The ATAP agreement included an agreement that the parties would work together on funding changes to ensure the ATAP programme will be fully delivered. Overall, there remains a high level of uncertainty about the amount of government funding of transport activity that will be received over the next ten years. This high level of uncertainty and the potential impacts are clearly stated in the 10-year Budget document.

40.     More detailed asset-based assumptions are included in our Infrastructure Strategy.  The work on AMPs by the Risk and Assurance department included consideration of the completeness and reasonableness of those assumptions, and the consistent application of key assumptions related to assets. 

41.     The Research and Evaluation Unit has revalidated the detailed growth assumptions that were used in the preparation of the AMPs, the consultation document and the supporting information. These are aligned to the COVID-19 based scenarios and were widely communicated to asset managers across the group as early as possible in the process.

42.     Council Treasury department have updated and revalidated assumptions to reflect the most up-to-date interest rates and debt projections which are being used in financial models.

43.     The following controls are ongoing with council’s Treasury department:

a)   regular updates on any changes to Watercare’s underlying debt and/or derivatives

b)   regular updates on changes to revenue and expenses, leading to changes in debt levels

c)   regular updates for changes to forward interest rates

d)   regular reviews of market conditions for material changes to debt credit margins

e)   review by Treasury Management Steering Group meeting in late February 2021 and in May 2021.

Asset management plans and linkages to consultation material

44.     In February 2021, we reported that an internal audit review was conducted on council’s AMPs.

45.     The objective of the review was to assess whether council’s asset management planning framework and processes are sufficiently robust, and the information contained in council’s AMPs is materially complete and reliable – such that the AMPs provide a reasonable basis for the draft Infrastructure Strategy, Financial Strategy, financial forecasts and service performance framework that will be contained in the consultation document and supporting information.

46.     The review has focused on both the overall governance of asset management planning, as well as review and testing of individual AMPs.

47.     The following AMPs have been specifically reviewed and tested:

a)   Healthy Waters AMP

b)   Community Facilities AMP.

48.     Review and testing of individual AMPs has focused on:

a)   the linkage between the underlying AMP and the consultation document and supporting information with respect to significant initiatives, risks, and assumptions

b)   reconciling of financial projections (capital and operating expenditure) as contained in the underlying AMP and the consultation document and supporting information

c)   integration of planned service levels with proposed measures and targets

d)   analytical review to understand and verify the reasonableness of renewals, capital expenditure and depreciation budgets

e)   assumptions for completeness, reasonableness, and consistency of application across AMPs

f)    consistency of depreciation assumptions (rates and useful lives) with council’s accounting policies

g)   assessing the reasonableness of any gap between depreciation and renewals funding

h)   updating of AMPs to reflect renewal and capital expenditure incurred

i)    the outcomes of quality assurance performed over AMPs, including the actions taken to respond to quality assurance findings.

49.     Assurance Services has updated its review to take into account the decisions of the Governing Body on 25 May 2021 and is satisfied that council’s AMPs provide a reasonable basis for the draft Infrastructure Strategy, Financial Strategy, financial forecasts and service performance framework.

Levels of service

50.     No significant changes to intended levels of service, performance measures or performance targets have been identified or proposed for this 10-year Budget.

51.     All performance information across the group relevant to the 10-year Budget has been reviewed to ensure that it is accurate, meaningful, and as relevant as possible. This has included reviewing and updating intended levels of service, performance measures and targets.

52.     Updated budgets and service levels for the substantive council-controlled organisations (CCOs) have been signed off by chief financial officers of those CCOs following input or approval from their respective Board of Directors except for Auckland Transport. Auckland Transport are still reviewing service levels as part of finalising their Statement of Intent and the final Regional Land Transport Plan. Final sign-off of transport service levels is expected to have been completed by the date of this committee meeting.

53.     Updated budgets and service levels for the council parent have been signed off by the Group CFO and commercial managers following input or approval from relevant activity managers and Executive Lead Team members.

54.     The key components considered as part of these reviews were:

·    budget inputs

·    updated asset management information and strategies

·    any new information related to levels of service

·    updates to significant forecasting assumptions that inform the 10-year Budget.

55.     We are satisfied that performance measures and targets are:

a)   relevant, meaningful and supported by robust reporting methodology

b)   aligned to expected funding levels and resources available

c)   linked to the outcomes of the Auckland Plan, the levels of service and activities

d)   aligned to final budgets and Statements of Intent for CCOs. 

Alignment and linkages  

56.     Review ensured consistency between budgets, AMPs, the Infrastructure Strategy and the Financial Strategy.

57.     This has been supplemented by review by Assurance Services when performing its work on AMPs.

 

 

Prudent financial management  

58.     Financial scenarios have been presented to elected members that illustrated the impact of different scenarios on rates and debt levels in the short and long term.

59.     The 10-year Budget includes an assessment of council’s borrowing against its prescribed limits and of its operating budget through the balanced budget requirement.

Financial model and data

60.     To ensure consistency of the financial model with other strategies and policies, the following review process was used:

a)      monitoring of built-in checks in model of treasury ratios, prudential benchmarks, and the balanced budget assumption

b)      review of the financial model against significant commitments, policies, and strategies such as the Financial Strategy and Infrastructure Strategy.

61.     Prudential benchmarks and treasury ratios were reviewed based on the latest updated financial statements.

Legal review

62.     Legal Services has provided ongoing input into the preparation of the 10-year Budget to ensure that these documents comply with the requirements for a long-term plan in relevant legislation.

63.     Final legal sign-off of the 10-year Budget by the General Counsel (Legal Services) is planned for 18 June 2021.

64.     The scope of the review encompasses:

·    compliance with the Local Government Act 2002, the Local Government (Auckland Council) Act 2009, the Local Government (Financial Reporting and Prudence) Regulations 2014, the Ngā Mana Whenua o Tāmaki Makaurau Collective Redress Act 2014, and other relevant legislation

·    compliance with the Governing Body resolutions of 25 May 2021 that relate to matters for inclusion in the 10-year Budget.

Generally Accepted Accounting Principles (GAAP) compliance

65.     The Financial Control team has completed a review of the financial model, accounting policies and primary financial statements for disclosure, logic, and treatment of key items.

66.     These reviews concluded that there were no material GAAP compliance issues with the prospective financial statements that form the basis of the 10-year Budget.

Letter of Representation to the Office of Auditor General

67.     The mayor is expected to provide a letter of representation to the OAG for the audit of the 10-year Budget prior to its adoption.  A draft of this letter will be provided at the meeting.

68.     To enable this representation, the chief executive and the Group CFO will jointly authorise a back-to-back letter of representation to the mayor.

69.     An underlying memo to provide assurance that all key control processes related to the preparation of the 10-year Budget have been completed and will be provided to the chief executive and Group CFO.

Feedback from Office of the Auditor-General

70.     There will be an opportunity to hear an update on the audit review from the OAG and Audit New Zealand at this committee meeting.

 

 

Tauākī whakaaweawe āhuarangi

Climate impact statement

71.     The impact of climate change and the council’s proposed response is a key matter in the 10-year Budget. The strategic lenses workstream ensured that climate impacts were considered across all components of the 10-year Budget.

72.     The inclusion of a significant forecasting assumption on climate change is discussed in the body of the report.

Ngā whakaaweawe me ngā tirohanga a te rōpū Kaunihera

Council group impacts and views

73.     The 10-year Budget is prepared on a group basis and the involvement and sign-off of CCOs is discussed in the body of the report.

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

Local impacts and local board views

74.     While the 10-year Budget includes the council group’s planning and reporting at a local board level, the Governing Body is responsible for adopting the 10-year Budget.

75.     Local boards and their representatives have been involved throughout the process, including local board chairs being invited to attend Finance & Performance Committee workshops. Local boards provided formal feedback on regional issues on 11 November 2020 prior to the Governing Body decisions on the key issues for consultation.

76.     Local boards have continued to be involved for the remainder of the 10-year Budget process and have played a lead role in terms of engagement with their local communities.  Local community feedback was summarised and considered by the Governing Body as part of decision making on 25 May 2021. Local boards provided feedback on regional issues as part of final decision making.

77.     Local board agreements are currently being agreed by local boards, with the final ones due to be agreed by 17 June 2021. This will be agreed by the Governing Body on 29 June as part of the adoption of the 10-year Budget.

Tauākī whakaaweawe Māori

Māori impact statement

78.     The 10-year Budget includes the council group’s contributions towards Māori outcomes. The strategic lenses workstream ensured that Māori outcomes were considered across all components of the 10-year Budget.  

79.     To mitigate any risk around engagement with Māori, dedicated resources were committed.  Representatives from Ngā Mātārae and the Independent Māori Statutory Board attend the regular workstream leads’ meeting.

80.     As part of the public consultation process, 761 submissions were received from individuals who identified as Māori.

81.     The Governing Body held a hui with Mana Whenua to hear their views on the 10-year Budget. 25 Mana Whenua representatives, representing nine iwi authorities attended. Overall, we received 18 submissions from Mana Whenua (iwi authorities).

82.     Auckland Council received 18 submissions from 18 Mataawaka organisations.

Ngā ritenga ā-pūtea

Financial implications

83.     The 10-year Budget 2021-2031 includes the council group’s financial forecasts, this report does not specifically affect its achievement or reporting.

Ngā raru tūpono me ngā whakamaurutanga

Risks and mitigations

84.     Key risks and mitigations associated with the 10-year Budget 2021-2031 are set out in Attachment B.

Ngā koringa ā-muri

Next steps

85.     Following the presentation of this report, Audit New Zealand will present their status report on audit matters.

86.     The Local Government Act 2002 requires the council to adopt the 10-year Budget 2021-2031 before 1 July 2021.  Adoption of the 10-year Budget is required before the council can set rates for 2021/2022.

87.     The 10-year Budget is scheduled to be adopted by the Governing Body on 29 June 2021.

 

Ngā tāpirihanga

Attachments

No.

Title

Page

a

Summary of key controls

21

b

Top 10-year Budget risks

25

      

Ngā kaihaina

Signatories

Authors

Mark Maloney - General Manager Risk and Assurance

Michael Burns - Manager Financial Strategy

Authorisers

Ross Tucker - General Manager, Financial Strategy and Planning

Peter Gudsell - Group Chief Financial Officer

Phil Wilson – Director, Governance and CCO Partnerships

 


Audit and Risk Committee

22 June 2021

 

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Audit and Risk Committee

22 June 2021

 

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Audit and Risk Committee

22 June 2021

 

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

In particular, the report contains findings of the audit review engagement for the Recovery Budget (10-year Budget 2021-2031).

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.