Agenda of Audit and Risk Committee - Tuesday, 22 February 2022

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.

Code of conduct

For information relating to Auckland Council’s elected members code of conduct, please refer to this link on the Auckland Council website - https://www.aucklandcouncil.govt.nz/about-auckland-council/how-auckland-council-works/elected-members-remuneration-declarations-interest/Pages/elected-members-code-conduct.aspx

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, 7 December 2021, including the confidential section, as a true and correct record.

4 Petitions

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

5 Public Input

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

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

6 Local Board Input

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

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

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

7 Extraordinary Business

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

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

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

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

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

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

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

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

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

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

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

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

No.	Title	Page
a ⇩	Forward Work Programme	13

Audit and Risk Committee

22 February 2022

Komiti Tātari me te Mātai Raru Tūpono / Audit and Risk Committee
Forward Work Programme 2020-2022

This committee assists and advises the Governing Body in discharging its responsibility and ownership of governance, risk management and internal control across Auckland Council group.

Responsibilities include reviewing the effectiveness of enterprise risk management, internal and external audit assurance, health safety and wellbeing, business continuity and resilience, integrity and investigations. The Committee monitors compliance, risk management in significant projects and programmes of work and procurements and has oversight of risk management and assurance of CCOs, the preparation of the LTP, Annual Report and other statutory financial reports.
Full terms of reference can be found here.

Area of work and lead		Expected reporting 2021
Audit and Risk Committee GM Risk and Assurance	Work programme Link to decision	Work programme Link to decision		Work programme Link to decision	Work programme Link to decision	Work programme Link to decision Committee’s Annual performance report Link to decision
Assurance GM Risk and Assurance	Assurance Services Strategy and activities update (fraud and integrity, elected members, internal audits and reviews, speak up) Audit Programme reporting – updated plan and audits completed Link to decision - confidential			Assurance Services Strategy and activities update (fraud and integrity, elected members, internal audits and reviews, speak up) Audit Programme reporting – updated plan and audits completed Link to decision – confidential Assurance Services performance against 2019-2022 Strategy, approval of annual assurance plan, and approval of Assurance Services Charter Link to decision		Assurance Services Strategy and activities update (fraud and integrity, elected members, internal audits and reviews, speak up) Audit Programme reporting – updated plan and audits completed Link to decision - confidential
Independent Maori Statutory Board - Treaty Audit GM Risk and Assurance	Treaty Audit Monitoring update Link to decision Preparations for Independent Maori Statutory Board upcoming 2022 Te Tiriti o Waitangi audit.			Treaty Audit Monitoring update Link to decision
Enterprise Risk Risk Services	Enterprise Risk Update Link to decision	Enterprise Risk Update Link to decision			Enterprise Risk Update Link to decision	Enterprise Risk Update Link to decision
CCO Risk management Facilitated by Risk Services	CCO quarterly risk report Attendance by Auckland Transport Link to decision - confidential	CCO quarterly risk report Attendance by Panuku Link to decision - confidential		CCO quarterly risk report Attendance by Auckland Unlimited Link to decision - confidential	CCO and POAL annual reports on risk (matters raised through annual audit process and summary of any significant findings raised by auditors) Attendance by Watercare, Auckland Transport, Auckland Unlimited, Panuku and Ports of Auckland Link to decision – confidential CCO Link to decision – confidential POAL	CCO quarterly risk report Attendance by Watercare Link to decision – confidential
Auckland Council partner/ shareholder risk management Director Infrastructure and Environmental Services & CCO/ External Partnerships Dept	America’s Cup 36 (included in Enterprise Risk Update)	City Rail Link – this item was withdrawn and will be presented on 23 August 2021		City Rail Link Link to decision
Health, Safety and Wellbeing Head of Health, Safety and Wellbeing	Health, safety and wellbeing update Link to decision	Health, safety and wellbeing update Link to decision Auckland Council Hauora / Wellbeing Review Link to decision			Health, safety and wellbeing update Link to decision Hauora (Wellbeing) Review – Wellbeing Programme Update Link to decision	Health, safety and wellbeing update Link to decision
Legal Risk General Counsel		Legal Risk report Link to decision - confidential				Legal Risk Report Link to decision - confidential
Insurance Manager Insurance - Risk and Insurance Dept	Update on insurance activities Insurance Strategy 2021-23 Link to decision	Indicative Insurance Renewal Report Link to decision - confidential		Update to Committee post placement of Insurance Programme Link to decision - confidential
Interim Report Group Financial Controller	31 December 2020 Interim Report and NZX Announcement clearance Link to decision - confidential	Audit New Zealand Review engagement management report 31 December 2020 Link to decision				Review arrangements 31 December 2021 Link to decision 31 December 2021 Interim Financial Statements & NZX announcement Update Link to decision Link to decision - confidential Proforma interim financial statements and accounting policies 31 December 2021 Link to decision - confidential
Annual Report Group Financial Controller	30 June 2021 Arrangements (extended audit plan) Link to decision Audit New Zealand final audit management report 30 June 2020 Link to decision	NZX Announcement 30 June 2021 / Annual Report 30 June 2022 update for committee Proforma Annual Report 30 June 2021 (financial statements and accounting policies) Link to decision Link to decision - confidential		NZX Announcement 2021/ Annual Report 30 June 2021 update for committee Link to decision Link to decision - confidential Audit New Zealand Interim audit management report 30 June 2021 Link to decision	30 June 2021 Annual Report Link to decision Link to decision - confidential	Audit New Zealand final audit management report 30 June 2021 Link to decision
Annual Green Bond Report		Process for Annual Green Bond Report 30 June 2021. Link to decision			Annual Green Bonds Report 30 June 2021 Link to decision - confidential
Long Term Plan 2021/2031 Annual Plan GM Financial Strategy and Planning	Consultation Document and supporting information – key controls and risks Link to decision		LTP Key controls and risks Link to decision	Audit NZ Final Report on 2021-2031 LTP Link to decision		2021-2031 LTP Amendment (draft)/ 2022-2023 Annual Plan (draft) N/A
External Audit Office of Auditor-General (OAG)	Briefing paper provided Link to decision - confidential	Briefing paper provided Link to decision - confidential	Briefing paper provided Link to decision - confidential	Briefing paper provided Link to decision - confidential	Briefing paper provided Link to decision - confidential	Briefing paper provided Link to decision – confidential

Area of work and lead

Expected reporting 2021

22 Feb

18 May

22 June (extraordinary meeting)

23 Aug

13 Sep

7 Dec

Audit and Risk Committee

GM Risk and Assurance

Work programme

Work programme

Work programme

Work programme

Work programme

Committee’s Annual performance report

Link to decision

Assurance

GM Risk and Assurance

Assurance Services Strategy and activities update (fraud and integrity, elected members, internal audits and reviews, speak up)

Audit Programme reporting – updated plan and audits completed

Link to decision - confidential

Assurance Services Strategy and activities update (fraud and integrity, elected members, internal audits and reviews, speak up)

Audit Programme reporting – updated plan and audits completed

Link to decision – confidential

Assurance Services performance against 2019-2022 Strategy, approval of annual assurance plan, and approval of Assurance Services Charter

Link to decision

Assurance Services Strategy and activities update (fraud and integrity, elected members, internal audits and reviews, speak up)

Audit Programme reporting – updated plan and audits completed

Link to decision - confidential

Independent Maori Statutory Board - Treaty Audit

GM Risk and Assurance

Treaty Audit Monitoring update

Link to decision

Preparations for Independent Maori Statutory Board upcoming 2022 Te Tiriti o Waitangi audit.

Treaty Audit Monitoring update

Link to decision

Enterprise Risk

Risk Services

Enterprise Risk Update

Link to decision

Enterprise Risk Update

Link to decision

Enterprise Risk Update

Link to decision

Enterprise Risk Update

Link to decision

CCO Risk management

Facilitated by Risk Services

CCO quarterly risk report

Attendance by Auckland Transport

Link to decision - confidential

CCO quarterly risk report

Attendance by Panuku

Link to decision - confidential

CCO quarterly risk report

Attendance by Auckland Unlimited

Link to decision - confidential

CCO and POAL annual reports on risk (matters raised through annual audit process and summary of any significant findings raised by auditors)

Attendance by Watercare, Auckland Transport, Auckland Unlimited, Panuku and Ports of Auckland

Link to decision – confidential CCO

Link to decision – confidential POAL

CCO quarterly risk report

Attendance by Watercare

Link to decision – confidential

Auckland Council partner/ shareholder risk management

Director Infrastructure and Environmental Services & CCO/ External Partnerships Dept

America’s Cup 36 (included in Enterprise Risk Update)

City Rail Link – this item was withdrawn and will be presented on 23 August 2021

City Rail Link

Link to decision

Health, Safety and Wellbeing

Head of Health, Safety and Wellbeing

Health, safety and wellbeing update

Link to decision

Health, safety and wellbeing update

Link to decision

Auckland Council Hauora / Wellbeing Review

Link to decision

Health, safety and wellbeing update

Link to decision

Hauora (Wellbeing) Review – Wellbeing Programme Update

Link to decision

Health, safety and wellbeing update

Link to decision

Legal Risk

General Counsel

Legal Risk report

Link to decision - confidential

Legal Risk Report

Link to decision - confidential

Insurance

Manager Insurance - Risk and Insurance Dept

Update on insurance activities

Insurance Strategy 2021-23

Link to decision

Indicative Insurance Renewal Report

Link to decision - confidential

Update to Committee post placement of Insurance Programme

Link to decision - confidential

Interim Report

Group Financial Controller

31 December 2020 Interim Report and NZX Announcement clearance

Link to decision - confidential

Audit New Zealand Review engagement management report 31 December 2020

Link to decision

Review arrangements 31 December 2021

Link to decision

31 December 2021 Interim Financial Statements & NZX announcement Update

Link to decision

Link to decision - confidential

Proforma interim financial statements and accounting policies 31 December 2021

Link to decision - confidential

Annual Report

Group Financial Controller

30 June 2021 Arrangements (extended audit plan)

Link to decision

Audit New Zealand final audit management report 30 June 2020

Link to decision

NZX Announcement 30 June 2021 / Annual Report 30 June 2022 update for committee

Proforma Annual Report 30 June 2021 (financial statements and accounting policies)

Link to decision

Link to decision - confidential

NZX Announcement 2021/ Annual Report 30 June 2021 update for committee

Link to decision

Link to decision - confidential

Audit New Zealand Interim audit management report 30 June 2021

Link to decision

30 June 2021 Annual Report

Link to decision

Link to decision - confidential

Audit New Zealand final audit management report 30 June 2021

Link to decision

Annual Green Bond Report

Process for Annual Green Bond Report 30 June 2021.

Link to decision

Annual Green Bonds Report 30 June 2021

Link to decision - confidential

Long Term Plan 2021/2031

Annual Plan

GM Financial Strategy and Planning

Consultation Document and supporting information – key controls and risks

Link to decision

LTP Key controls and risks

Link to decision

Audit NZ Final Report on 2021-2031 LTP

Link to decision

2021-2031 LTP Amendment (draft)/ 2022-2023 Annual Plan (draft)

N/A

External Audit

Office of Auditor-General (OAG)

Briefing paper provided

Link to decision - confidential

Briefing paper provided

Link to decision - confidential

Briefing paper provided

Link to decision - confidential

Briefing paper provided

Link to decision - confidential

Briefing paper provided

Link to decision - confidential

Briefing paper provided

Link to decision – confidential

Workshops

The Audit and Risk Committee holds workshops on matters where a background briefing/ more informal discussion and opportunity for questions from the committee is necessary to perform its role and responsibilities.

Workshops are not used to make decisions - that is for formal committee or Governing Body Meetings. Workshop material will be appended to a summary of information items in the next committee meeting, unless it has been clearly marked as confidential.

The following topics have been identified as proposed workshops necessary to discharge the Committee’s duties. Workshops will be scheduled over the three-year programme based on strategic priorities, risk and time available. Additional topics may be added if circumstances change or require a topic to be the subject of a workshop.

The workshop schedule is currently under review due to the “Top Risk” refresh.

Komiti Tātari me te Mātai Raru Tūpono / Audit and Risk Committee
Forward Work Programme 2021-2022

This committee assists and advises the Governing Body in discharging its responsibility and ownership of governance, risk management and internal control across Auckland Council group.

Area of work and lead	Expected reporting 2022 (dates TBC)
Area of work and lead	22 Feb	17 May	23 Aug	12 Sep	TBA
Audit and Risk Committee Head of Assurance Services	Work programme	Work programme	Work programme	Work programme Committee’s Annual performance report	Work programme
Assurance GM Risk and Assurance		Assurance Services Strategy and activities update (fraud and integrity, elected members, internal audits and reviews, speak up) Audit Programme reporting – updated plan and audits completed		Assurance Services Strategy and activities update (fraud and integrity, elected members, internal audits and reviews, speak up) Audit Programme reporting – updated plan and audits completed
Independent Maori Statutory Board - Treaty Audit GM Risk and Assurance	Treaty Audit Monitoring update		Treaty Audit Monitoring update		Preparations for Independent Maori Statutory Board upcoming 2022 Te Tiriti o Waitangi Audit
Enterprise Risk Risk Services	Enterprise Risk Update		Enterprise Risk Update		Enterprise Risk Update
CCO Risk management Risk Services	CCO quarterly risk report Attendance by Auckland Transport	CCO quarterly risk report Attendance by Panuku	CCO quarterly risk report Attendance by Auckland Unlimited	CCO annual reports on risk (matters raised through annual audit process and summary of any significant findings raised by auditors) Attendance by Watercare, Auckland Transport, Auckland Unlimited	CCO quarterly risk report Attendance by Watercare
Auckland Council partner/ shareholder risk management Director Infrastructure and Environmental Services & CCO/ External Partnerships Dept		City Rail Link		City Rail Link
Health, Safety and Wellbeing Head of Health, Safety and Wellbeing	Health, safety and wellbeing update	Health, safety and wellbeing update	Health, safety and wellbeing update		Health, safety and wellbeing update
Legal Risk General Counsel		Legal Risk report			Legal Risk report
Insurance Manager Insurance - Risk and Insurance Dept	Update on insurance activities	Indicative Insurance Renewal Report	Update to Committee post placement of Insurance Programme
Interim Report Group Financial Controller	31 December 2021 Interim Report NZX Announcement clearance	Audit New Zealand Review engagement management report 31 December 2021			Review arrangements 31 December 2022 31 December 2022 Interim Financial Statements & NZX Announcement Update Proforma interim financial statements and accounting policies 31 December 2022
Annual Report Group Financial Controller	30 June 2022 Arrangements (extended audit plan)	NZX Announcement 30 June 2022 / Annual Report 30 June 2022 update for committee Proforma Annual Report 30 June 2022 (financial statements and accounting policies)	NZX Announcement 2022/ Annual Report 30 June 2022 update for committee Audit New Zealand Interim audit management report 30 June 2022	30 June 2022 Annual Report	Audit New Zealand Audit Engagement and Audit Proposal letters for 2023, 2024 and 2025 30 June 2023 Arrangements (extended audit plan) Audit New Zealand final audit management report 30 June 2022 Proforma interim financial statements and accounting policies 31 December 2022
Annual Green Bond Report		Process for Annual Green Bond Report 30 June 2022.		Annual Green Bonds Report 30 June 2022.
Long Term Plan 2021/2031 Annual Plan GM Financial Strategy and Planning		Audit New Zealand final 2021 LTP amendment management report			2023/24 Annual Plan (draft)
External Audit Office of Auditor-General (OAG)	Briefing paper provided	Briefing paper provided	Briefing paper provided	Briefing paper provided	Briefing paper provided

Audit and Risk Committee

22 February 2022

Health, Safety and Wellbeing Report

File No.: CP2022/01315

Te take mō te pūrongo

Purpose of the report

1. To provide the committee with the information needed to understand the progress of initiatives underway to improve health, safety and wellbeing, as well as the current state of selected key performance indicators covering the period December 2021 to January 2022.

Whakarāpopototanga matua

Executive summary

2. There are a number of projects and initiatives currently underway across council to improve the health, safety and wellbeing of workers and to deliver on the recommendations of the hauora (wellbeing) review. These are broadly on track and progressing well.

3. The COVID-19 Omicron outbreak is continuing to result in significant refocussing of resources to support the health, safety and wellbeing of our people.

4. Key performance indicators are provided in Attachment A, covering the period from December 2021 through to January 2022. This report provides further information relating to the analysis of these key indicators, and so should be read in conjunction with this attachment.

Ngā tūtohunga

Recommendation/s

That the Audit and Risk Committee:

a) note the information in this report and associated health, safety and wellbeing indicators

b) refer this report to the Governing Body along with any commentary the committee deems appropriate

c) forward this report to Local Boards for their information.

Horopaki

Context

5. This report provides commentary and a range of indicators on the performance of health, safety and wellbeing systems and programmes at Auckland Council. This will 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 and associated programmes. Health, safety and wellbeing key performance indicators are in Attachment A.

Tātaritanga me ngā tohutohu

Analysis and advice

COVID-19

6. While the latter half of 2021 was disrupted due to an outbreak of the Delta COVID-19 variant, the Omicron variant is now dominant within New Zealand, and continues to have an impact on the activities delivered by Auckland Council. This variant is driving a more rapid increase in case numbers and has resulted in New Zealand moving into the ‘red’ed setting of the COVID Protection Framework. While this does not pose a significant limitation on most operations, the risk of many of our staff being isolated at once is driving activity to introduce greater resilience to those services. Planning is now well-advanced on this, with these preparations involving a number of teams from across council, collaborating to deliver a consistent and appropriate approach to delivering our services safely and with minimal disruption.

7. Council is currently implementing an approach to COVID-19 vaccinations which requires staff and other workers, including elected members, volunteers, and certain contractors to hold a My Vaccine Pass to undertake work in our facilities and spaces. This approach is on the basis of a robust risk assessment that considered the risk that these groups would be exposed to without vaccination, and the impact of vaccination on the residual risk levels. The government-mandated vaccination requirement for certain roles, including teachers, has also been implemented. An interim position, until 30 June 2022, has been put in place for customers accessing our facilities.

Project Hīra

8. Project Hīra is a programme of work that is underway to improve the management of health, safety and wellbeing through the replacement of Risk Manager (our current health and safety reporting system). This programme includes the procurement and platform configuration elements of the project, alongside change management, process improvement, people leader training and an awareness campaign. This is intended to ensure that any changes are cooperatively designed, value-adding, and sustainable.

9. Contract negotiations are currently being finalised, and the project is moving from the procurement phase to the configuration and build phase.

10. Delivery of process improvement and change management activities is now currently underway, and configuration workshops are underway to ensure that the configuration of the platform meets the needs of our staff, people leaders and health, safety and wellbeing staff.

ACC Accredited Employer Programme (AEP) Audit

11. The ACC AEP audit took place in late November 2021 with a target set of achieving Primary Status. This audit was delayed from October 2021 in consultation with ACC and the auditor due to the impacts of COVID-19 restrictions. The audit was undertaken virtually, with a number of online interviews conducted. The auditor was impressed with the current state of improvements and progress and made a recommendation to award Secondary Accreditation status. This was reviewed by ACC, and in January was confirmed as Secondary, exceeding the set target. A series of improvement opportunities were identified, and the Health, Safety and Wellbeing Team are working on implementation plans to address these opportunities.

Hauora Review Recommendation: Speak Up

12. Procurement has been concluded for an external Speak Up channel^{^[1]}, which will strengthen the independence of the system and increase trust and confidence in the process for raising confidential and sensitive issues and complaints. System implementation will occur in early March 2022, and an update of associated processes will be developed and communicated in the period preceding this.

Hauora Review Recommendation: No Excuse for Abuse

13. The initial launch of the No Excuse for Abuse campaign was undertaken immediately prior to the COVID-19 outbreak in August 2021, and all external engagement was paused until restrictions eased to the extent that permitted utilising the channels planned. Once restrictions allowed, the campaign was then launched externally, commencing in mid-October 2021, with billboards, Adshel placement, and social media posts by the Chief Executive all in place and achieving high levels of engagement.

14. Further work to strengthen support structures, lift capability, and improve onboarding is being planned to support the key messages behind No Excuse for Abuse. This will include building the necessary collateral and systems to support front line staff who experience aggressive behaviours.

Incident Numbers and Mechanisms

15. The total number of health and safety incidents reported in January 2022 was 419, up slightly from 406 in December 2021. This includes all injuries, near misses, unsafe conditions, and security reports submitted into Risk Manager.

16. The primary risk mechanism of many of these incidents was workplace violence and aggression, with over 140 incidents occurring in January 2022, down from 152 in December 2021. A large number of these were directly related to issues associated with face-mask or vaccination requirements, however many were low level issues.

Risk Manager Incident Closure

17. Closure rates for Risk Manager incidents has reduced, with 66% of incidents closed by the due date at the end of January 2022. This is down from 71% at the end of December 2021.

18. While systemic challenges do exist, and will be addressed through Project Hīra, lower numbers in January 2022 appear to be a result of a number of managers taking leave in January 2022 after the summer break.

Tauākī whakaaweawe āhuarangi

Climate impact statement

19. There are no specific climate impacts to note in this report

Ngā whakaaweawe me ngā tirohanga a te rōpū Kaunihera

Council group impacts and views

20. This report is based on Auckland Council organisation activities only, and does not provide a group-wide view

21. Health, Safety and Wellbeing teams across the council group do collaborate on common health, safety and wellbeing issues, such as ensuring visibility of approaches on COVID-19 policy development.

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

Local impacts and local board views

22. Like governing body members, local board members are ‘officers’ under the Health and Safety at Work Act 2015 and must exercise a duty of due diligence in a way that reflects the nature and responsibility of their role.

23. It is recommended that this report is referred to Governing Body and (as with previous health, safety and wellbeing reports) forwarded to Local Boards for their information.

Tauākī whakaaweawe Māori

Māori impact statement

24. The information in this report has a similar impact on Māori staff as to all staff.

Ngā ritenga ā-pūtea

Financial implications

25. The work in this report is being managed within current budgets and there are no additional financial implications to report.

Ngā raru tūpono me ngā whakamaurutanga

Risks and mitigations

26. 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

27. No actions have been identified in this report.

Ngā tāpirihanga

Attachments

No.	Title	Page
a ⇩	Key performance indicators for December 2021 - January 2022	23

Ngā kaihaina

Signatories

Author

Paul Robertson – General Manager Health, Safety and Wellbeing

Authorisers

Patricia Reade - Deputy Chief Executive

Phil Wilson - Director, Governance & CCO Partnerships

Audit and Risk Committee

22 February 2022

Enterprise Risk Management Activity Update - February 2022

File No.: CP2022/00763

Te take mō te pūrongo

Purpose of the report

1. To update the Audit and Risk Committee on:

i) the status of and any changes to the Auckland Council top risks assessed and evaluated in the period December 2021 to February 2022

ii) risk management activities since the last report to this committee in December 2021

iii) priorities for the next quarter.

Whakarāpopototanga matua

Executive summary

2. Auckland Council’s top risk profile remains stable. No new significant risks have emerged since the last enterprise risk update report to this committee. The heightened risk drivers that we reported to this committee in December 2021 remain heightened.

3. Our primary focus has been providing support, and advice to support council’s response to Covid-19 challenges.

Ngā tūtohunga

Recommendation/s

That the Audit and Risk Committee:

a) note the Enterprise Risk Management Activity Update – February 2022 report

b) refer the Enterprise Risk Management Activity Update – February 2022 report to the Governing Body for information.

Horopaki

Context

4. This report provides an update on Auckland Council’s top risks, risk activities and risk management for the period ending February 2022.

5. This information enables the Audit and Risk Committee to fulfil their governance and oversight role of the effectiveness of risk management within Auckland Council. This includes recognition of emerging risks, risk assessments and risk management.

Tātaritanga me ngā tohutohu

Analysis and advice

6. Auckland Council’s top risk profile remains stable. No new significant risks have emerged since December 2021 to require a recommendation to add any new risks.

7. The Risk and Assurance department continues to work with the owners of actions to improve top risk mitigations to progress with the actions assigned to them.

Emerging risks and heightening risk drivers

8. There are no new emerging risks identified in this quarter.

9. The heightened risk drivers that we reported to this committee in December 2021, remain heightened this quarter, those being:

· the impact of central government regulatory reforms

· increasing workforce challenges being experienced across Auckland Council

· the emergence of the Covid-19 Omicron variant.

10. The impact of Covid-19 remains prominent, especially the Health, Safety and Wellbeing impacts and financial implications placing increasing budgetary pressure in terms of financial performance and next year’s annual plan.

11. Common themes emerging from the heightened risk drivers and divisional risk profiles that are being monitored and responded to by management include:

· financial pressures: The impact of Covid-19 heightened the challenges the Executive Leadership Team faces to balance the combined impact of inflation, wage inflation, growth pressures and the cost escalation of major capex projects including the delays caused by Covid-19

· consenting performance: The challenges to attract and retain skilled employees combined with the changes, recent and upcoming, of resource and building regulations and the obligations that effect Auckland Council’s ability to maintain agreed performance standards

· return to work dynamics and challenges for Aucklanders and Auckland Council staff due to evolving Covid-19 risk landscape and government mandates

· business continuity risks: A potential wide-spread impact of Covid-19 may impact Auckland Council’s ability to deliver essential services, heightening the importance of effective business continuity plans

· risk of sub-optimal investment in assets because of supply chain constraints and critical skills shortages.

12. We report separately to this committee on the results of the Covid-19 Assurance programme. Our assurance work since December 2021 confirms that key internal controls are continuing to operate.

Risk activity

13. The Risk and Assurance department’s primary focus this quarter has been in the provision of support and advice in response to the Covid-19 challenges. This has been in the following areas of:

· Covid Resilience Plans reviews:

o all departments have been required to document their plans for preparedness in an Omicron outbreak

o all the plans are being reviewed by the Risk and Assurance department. At the date of this report all priority department plans have been reviewed

o findings are being communicating to department lead teams, and the Executive Leadership team on an ongoing basis

· Crisis Management Team support - The Risk and Assurance team have continued to support this team over the last quarter with ongoing advice, support and working closely with the general manager: health, safety, and wellbeing and managers to address Omicron-related mitigants and communication. This includes the responses to the various Covid-related mandates Auckland Council implemented in the past quarter

· Redirection support – engaging with key staff to start building a database of skills and experience (both available and potentially needed). The objective is to have staff identified, available and pre-trained for redirection into essential service delivery functions where needed.

14. The review of Covid Resilience Plans has focussed on assessing whether the plans address critical risks, are realistic and doable – for continued service delivery if critical or large sections of our workforce and contractors are not available due to Covid. In particular, we have focussed on:

o critical services - to both the public, and back- office support functions

o key person risk - functions that require specific competencies, skills and experience

o contractor risk - where services are delivered by third parties

o critical procurement, and projects

o dependencies between departments.

15. In December 2021 we informed this committee that a key focus area for the remainder of this year was the refresh of council’s risk appetite statements. That work has commenced and a timeline for the resulting planned work is attached at Attachment A of this report.

16. The Risk and Assurance department has continued to support the Enterprise Portfolio Management Office/Te Tari Whakahaere Kōpaki ā-Hinonga and the Enterprise Change team to grow the risk capability of project managers by supporting the application of consistent risk methodology tools and advice to key strategic projects, amongst others:

· HĪRA: The future Health, Safety and Wellbeing enablement solution being implemented

· the Rates Rating Revaluations for 2021

· the 2022/2023 Annual Plan.

Activity planned for the next quarter (March to May 2022)

17. The following are the focus areas for risk management activity in the next quarter:

· continuing focus on monitoring emerging risks, heightened risk drivers and the impacts of these

· ongoing risk support to Auckland Council’s Covid-19 response

· refreshing the Auckland Council Risk Appetite Statements with the Executive Leadership Team

· building risk management knowledge and skills through training programmes

· assessing independence and conflict of interest at Auckland Council and addressing any identified issues

· ongoing risk support for key strategic projects

· development of divisional risk profiles for the remaining divisions and risk registers for departments and identifying common risk themes across the divisions

· continued monitoring of Auckland Council’s top risks and work with action owners to progress with risk mitigations

· on-going monitoring of the implementation of the recommendations of the review of Auckland Council-controlled organisations that are relevant to risk. Specifically, Climate Change Disclosures required by the Taskforce on Climate Related Financial Disclosures and Auckland Council Group reporting.

Tauākī whakaaweawe āhuarangi

Climate impact statement

18. Climate change and its impacts remain a top risk for the council group. Climate change is incorporated as a critical driver for the “council and Auckland’s resilience and recovery” risk.

19. The Risk and Assurance department continue to collaborate with the Chief Sustainability Office, Finance Division, and relevant departments across the council group to support the council’s adaptation and mitigation workstreams and to prepare for the group’s task force on climate-related financial disclosures by 2023.

20. The key areas of focus for 2022 are to set up a coordinated group approach to manage and respond to climate risk, scenario analysis, roles and responsibilities and to expand monitoring and reporting.

Ngā whakaaweawe me ngā tirohanga a te rōpū Kaunihera

Council group impacts and views

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

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

Local impacts and local board views

22. There are no direct impacts on local boards.

Tauākī whakaaweawe Māori

Māori impact statement

23. The delivery of Māori outcomes is a key strategic priority for Auckland Council.

24. The Risk and Assurance department is actively supporting the delivery of Māori Outcomes and will engage with the newly appointed Herewini Te Koha as Tumuaki Huanga Māori (Director Ngā Mātārae - Māori Outcomes) to ensure activities remain aligned.

25. Risk and Assurance is partnering with Ngā Mātārae and Māori outcomes representatives at a divisional level to support them in achieving their objectives at a divisional level.

Ngā ritenga ā-pūtea

Financial implications

26. Financial management continues to be a top risk for Auckland Council, and the risk team closely monitor the drivers and impacts associated with this risk.

27. There are no financial costs associated with the committee receiving this report on enterprise risk management activities, and there are no funding decisions required.

Ngā raru tūpono me ngā whakamaurutanga

Risks and mitigations

28. The top risks and mitigations for Auckland Council are discussed within the main body of this report and within the attachment.

29. Risk and Assurance continuously reviews the external and internal environment to identify emerging or heightened risks and trends.

Ngā koringa ā-muri

Next steps

30. This report is to be referred to the next meeting of the Governing Body for its information.

Ngā tāpirihanga

Attachments

No.	Title	Page
a ⇩	Indicative Timeline - Risk Appetite Refresh	33

Ngā kaihaina

Signatories

Authors

Caroline Innes Mehta - Senior Risk Advisor

Ann Brown - Senior Risk Advisor

Andre de wet - Senior Risk Advisor

Gemma Wensor - Risk Advisor

Matthew Kerly - Risk Advisor

Authorisers

Mark Maloney - General Manager Risk and Assurance

Phil Wilson - Director, Governance & CCO Partnerships

Audit and Risk Committee

22 February 2022

Treaty Audit Monitoring Report

File No.: CP2022/01203

Te take mō te pūrongo

Purpose of the report

1. This report provides an update 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

· the fourth Treaty Audit – He Waka Kōtuia / Te Tiriti o Waitangi 2021 (Attachment A)

· the Treaty Audit Response Work Programme 2021-2024 (Attachment B) which has been developed by Nga Mātārae on behalf of the chief executive and received by the Joint Governing Body and Independent Māori Statutory Board in response to the recommendations contained in He Waka Kōtuia / Te Tiriti o Waitangi 2021.

Whakarāpopototanga matua

Executive summary

2. In the past six months one Treaty Audit recommendation has been closed. Of the original 80 recommendations four recommendations remain open. All have project plans in place. Two of the outstanding recommendations are planned to be closed in the next six months.

3. Recommendation 10 (Relationship Agreements Framework) was closed after being presented at the 20 September 2021 hui of the Governing Body and Independent Māori Statutory Board.

4. The Treaty Audit Response Work Programme 2021-24 will be used as the basis to monitor progress in implementing the remaining and new Treaty audit recommendations, including reporting to this committee over the next three years.

Ngā tūtohunga

Recommendation/s

That the Audit and Risk Committee:

a) receive the update on the monitoring and progress of the Treaty Audit Response Programme

b) note the findings and recommendations contained in He Waka Kōtuia / Te Tiriti o Waitangi 2021

c) note the 2021-2024 Treaty Audit Response Work Programme

d) note the oversight and monitoring that has been performed by the Risk and Assurance department in relation to the Treaty Audit Response Programme

e) note that the Risk and Assurance department will continue to report on a six-monthly basis on progress against the 2021-2024 Treaty Audit Response Programme to this committee.

Horopaki

Context

5. The Independent Māori Statutory Board’s Treaty Audit sets out a framework for assessing council’s performance against council’s statutory responsibilities and requirements relating to Te Tiriti o Waitangi and to Māori.

6. Te Tiriti o Waitangi Audit Report 2018 (the third Treaty audit) recommended that the Risk and Assurance department continue monitoring and reporting to the Audit and Risk Committee and that the council’s ‘follow-up’ framework is used by the Waharoa group.

7. He Waka Kōtuia is the fourth Te Tiriti o Waitangi audit to be undertaken by the Independent Māori Statutory Board. The previous Te Tiriti o Waitangi audits identified a total of 80 recommendations, of which 76 have now been closed. The 2021 audit makes 13 recommendations, building on previous audit findings, and with strong alignment to the CCO review recommendations.

8. The 2021 audit acknowledges a positive shift in the maturity of the council group’s framework and embedded processes that meet Te Tiriti o Waitangi statutory responsibilities. However, the audit identifies scope for further process improvements, and the need to continue to build capability, to lift the Māori outcomes performance of the council group.

9. The Independent Māori Statutory Board (the Board) presented He Waka Kōtuia/Te Tiriti o Waitangi audit report 2021 at the 20 September Joint Governing Body and Independent Māori Statutory Board hui.

10. The 20 September hui directed that a formal response to He Waka Kōtuia - Te Tiriti o Waitangi Audit Report 2021 be presented at the 6 December 2021 joint meeting of the Governing Body and Independent Māori Statutory

11. The Treaty Audit Response Programme 2021-2024 is the basis for the Risk and Assurance department’s monitoring and reporting to the Audit and Risk Committee.

12. This monitoring report covers the period from September 2021 to February 2022.

Tātaritanga me ngā tohutohu

Analysis and advice

The Waharoa group

13. The Waharoa group comprises representatives from the Risk and Assurance department, Nga Mātārae and the Independent Māori Statutory Board Secretariat.

14. The Waharoa group provides oversight of the Treaty Audit Response Programme, including monitoring, guidance and support to action owners and their executives, and agrees closure of recommendations. The Risk and Assurance department provides independent oversight and reporting of progress.

Progress on Implementation of the Third Te Tiriti O Waitangi audit

15. The following recommendation has been closed in this reporting period:

· Recommendation 10 – Relationship Agreements.

16. All of the four remaining open audit recommendations have approved project plans in place which are being monitored by the Waharoa group:

· Recommendation 13: Taonga Management

· Recommendation 6 and 7: Māori Responsiveness Plans

· Recommendation 14: Sensitive Information.

17. Recommendations 13 and 14 are planned for closure in the next six-month period. While significant progress has been made with respect to Recommendations 6 and 7, which have been reported previously to this Committee, these are not planned to be closed until December 2022 to allow for developing and approval of a monitoring and reporting regime for Māori Responsiveness Plans.

The fourth Te Tiriti O Waitangi Audit

18. The 2021 audit made 13 recommendations across five audit observation areas:

a) greater clarity/guidance is required to support targeted engagement with individual iwi to achieve Treaty relationship objectives in decision-making

b) clearer guidance, training and increased capability/ capacity is required to improve the quality of Māori Impact Statements demonstrating engagement with Māori in decision-making processes

c) minimum baseline training and additional data points are required to improve measurement and reporting of staff capability to deliver Treaty commitments and statutory responsibilities to Māori

d) reporting requires comparative period data and targets to better inform directorate recruitment and progression decision-making

e) consistent Māori Responsiveness Plan action tracking and monitoring is required to enable ‘course correction’.

19. He Waka Kōtuia - Te Tiriti o Waitangi Audit Report 2021 was received at the 20 September 2021 joint hui of the Governing Body and the Independent Māori Statutory Board, who directed that a formal response to the findings be presented at the 6 December 2021 joint meeting of the Governing Body and Independent Māori Statutory Board.

20. The Auckland Council Response Work Programme (Attachment B) addresses the joint directive.

21. The next phase of the programme is for project plans to be developed. These will be reviewed and approved, and implementation monitored by the Waharoa.

22. As with the previous audit recommendations, the 2021 audit recommendations will support council’s responsiveness and delivery of Māori outcomes.

Tauākī whakaaweawe āhuarangi

Climate impact statement

23. There are no impacts on climate from this report. However, the Māori Outcomes Framework is based on wellbeing and includes environmental wellbeing.

Ngā whakaaweawe me ngā tirohanga a te rōpū Kaunihera

Council group impacts and views

24. The Treaty Audit Response Programme work enables the council group to strengthen responsiveness to Māori through targeted actions and improvements described in Auckland Council’s Māori Outcomes Framework. The Māori Outcomes Framework is intended to provide clarity and guidance to the council group.

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

Local impacts and local board views

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

Tauākī whakaaweawe Māori

Māori impact statement

26. The Treaty Audit Response Programme enables the council group to strengthen responsiveness to Māori through targeted actions and improvements described in the Māori Outcomes Framework.

Ngā ritenga ā-pūtea

Financial implications

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

Ngā raru tūpono me ngā whakamaurutanga

Risks and mitigations

28. Key risks to achieving completion of the Treaty Audit Response Programme are

· lack of resources and capability

· lack of oversight and monitoring of the work programme.

29. This risk is heightened in the Covid-19 environment.

30. The independent oversight and monitoring by the Risk and Assurance department, membership of the Waharoa group and six-monthly reporting to the Audit and Risk Committee are key mitigations of these risks.

Ngā koringa ā-muri

Next steps

31. The Risk and Assurance department will continue to attend the Waharoa group and monitor the Treaty Audit Response Programme and report to the Audit and Risk Committee in accordance with the Assurance plan, and the committee’s forward work programme.

Ngā tāpirihanga

Attachments

No.	Title	Page
a ⇩	He Waka Kotuia - Fourth Te Tiriti O Waitangi Audit	39
b ⇩	Treaty Audit Response Work Programme 2021-2024	81

Ngā kaihaina

Signatories

Author	Mark Maloney - General Manager Risk and Assurance
Authoriser	Phil Wilson - Director, Governance & CCO Partnerships

Audit and Risk Committee

22 February 2022

Insurance Activity Update

File No.: CP2022/00762

Te take mō te pūrongo

Purpose of the report

1. To provide a progress update on the 2022/2023 insurance renewal, the cumulative loss modelling study and preparation for the establishment of the self-insurance fund.

Whakarāpopototanga matua

Executive summary

2. Work is underway in preparation for the 2022/2023 insurance renewal, and the establishment of the self-insurance fund which will commence 1 July 2022.

3. The cumulative loss modelling work is a key component of the Auckland Council group insurance strategy 2021-2023. The results of this work will allow council to understand the impact of natural hazards on our assets and make informed decisions around insurance arrangements. Work is currently being performed on the effect of flood and earthquakes. The results of this work will be available for the 2022/2023 insurance renewal.

4. The next phase of modelling will focus on hazards such as volcanic activity, tsunami, liquefaction, landslide and the impacts of climate change, will take place in the 2022/2023 year.

5. Oversight arrangements have been confirmed for the establishment of the self-insurance fund, and the insurance strategy. The Insurance Management Steering Group (IMSG) has been established.

Ngā tūtohunga

Recommendation/s

That the Audit and Risk Committee:

a) note the progress update on the 2022/2023 insurance renewal, cumulative loss modelling study and preparation for the establishment of the self-insurance fund.

Horopaki

Context

6. The Auckland Council Group Insurance Strategy 2021-2023 was reviewed by this committee in February and May 2021 and approved by the Finance and Performance Committee in June 2021 (FIN/2021/67).

7. The key objectives of the strategy are to:

i. facilitate sustainable and diversified insurance arrangements by using a combination of risk transfer options

ii. improve the insurance programme’s maturity by implementing a common group approach

iii. centralise group claims management

iv. optimise insurance arrangements to reflect the group’s size, scale, and risk profile, including fuller assessment of cumulative loss exposure and risk funding options

v. proactively deal with the impact of climate change risks on group insurance

vi. maximise the use of insights and risk modelling scenarios into long term asset planning

vii. achieve better value for money by providing better quality of data for assets and risk disclosures.

8. A copy of the strategy, including its key objectives, is attached to this report as Attachment A.

9. Key to the strategy is an increasing reliance on self-insurance. Alternative insurance options were workshopped with the Finance and Performance Committee on 30 June 2021. The Finance and Performance Committee requested that the Audit and Risk Committee review the assessment of the options and provide feedback on them, before referring them back to that Committee in October 2021 with a preferred option and recommendation for a decision. The establishment of a self-insurance fund commencing 1 July 2022 was approved by the Finance and Performance Committee in October 2021 (FIN/2021/97).

Tātaritanga me ngā tohutohu

Analysis and advice

Insurance renewal activities

10. The group’s current insurance programme expires on 30 June 2022. Work is underway to prepare for the upcoming renewal of policies for the 2022/2023 year. The programme will be presented to this committee in May 2022 for review and to the Finance and Performance Committee in June 2022 for approval.

11. The insurance market conditions are slowly moderating, however, with the impacts of climate change and COVID-19, negotiations with insurers remain complex. Challenges such as increased pricing, cover reductions, risk exclusions, lowered limits and changes to terms and conditions are expected to continue to impact insurance policies.

12. Property insurers are continuing to expect detailed risk disclosures around floods. This is due to the increased frequency and severity of flood events that have occurred recently and over the last few years. Staff continue to work on asset data integrity and to focus on emerging risks.

13. The cumulative loss modelling study that is in progress will provide a better sense of the group’s flood exposure, which will help manage the risk of reduced insurance coverage for flood damage.

14. A fire loss analysis has been conducted for the Aotea Precinct by Aon. The objective of the analysis was to determine the appropriate insurance fire loss limit for the precinct. A series of fire risk scenarios were modelled which indicated the loss limit could be reduced from the current limit of $500 million to $395 million. However, the modelling is subject to a number of assumptions which have levels of risk attached. This is being assessed in advance of the upcoming renewal.

15. Currently, the group buys a combined policy for professional indemnity and public liability with an overall limit of $200 million. We are reviewing the adequacy of the professional indemnity loss limit of $200 million, noting however that the increased number of claims and circumstances over the last few years has placed additional pressure on the professional indemnity markets' capacity.

16. Discussions have been held with relevant council departments and council-controlled organisations (CCOs) to understand the risk of, and mitigations in place to prevent a negligence claim. This information is being used to assess the financial risk of such a claim. This will enable us to make an informed decision as to the adequacy of the loss limit.

17. We are assessing risk scenarios, consequences, mitigation measures, residual risk exposure and approximate financial impact to develop a risk register. The risk register, along with historical claims data, will enable us to recommend (if required) separate loss limits for professional indemnity and public liability insurance.

Cumulative Loss Modelling

18. The purpose of the cumulative loss modelling study is to determine the range of potential financial losses the group could incur due to natural hazard events. The hazards in scope are earthquakes, volcanic eruption, flooding (pluvial, fluvial and coastal) and storms. The study results will be used to optimise the group's risk funding options, including insurance.

19. Key findings of the initial phase of the study were presented to the Audit and Risk Committee in May 2020.

20. This work brought together a region-wide view of the group’s asset distribution and values, overlaid with the available hazard data, which provided a basic exposure assessment.

21. Further integration of asset and hazard datasets, criticality/vulnerability analysis, business interruption and third-party liability analysis is now being carried out as part of the next phase of this work (Phase 2). Potential losses from flood and earthquake shaking hazards on Auckland Council Group assets are currently being modelled.

22. The results from this modelling, to inform the insurance strategy, and the 2022/2023 insurance renewal will be available from mid-April 2022.

23. We are currently planning for the next phase of modelling (including exposure to hazards such as volcanic activity, tsunami, liquefaction, landslide, and the impacts of climate change), which will take place in the 2022-2023 year.

Self- Insurance Fund

24. On 21 October 2021, the Finance and Performance Committee approved the establishment of a self-insurance fund to commence from 1 July 2022.

25. Planning is underway for the establishment of this fund.

26. Oversight arrangements for the self-insurance fund have been confirmed through the establishment of the Insurance Management Steering Group (IMSG)

27. Membership of the IMSG consists of the group chief financial officer, director governance and CCO partnerships, group treasurer, general manager risk and assurance, general counsel (or their delegate), Watercare chief financial officer (or delegate), Auckland Transport executive general manager finance (or delegate), council’s insurance broker and two independent members. The IMSG will be chaired by one of the independent members.

28. The IMSG’s terms of reference are attached at Attachment B.

29. Planning has commenced to procure an external funds manager.

Tauākī whakaaweawe āhuarangi

Climate impact statement

30. There are no direct climate change implications arising from this report. However, it has been noted that insurers continue to reassess the risks associated with climate change, which may have impacts on future cover.

Ngā whakaaweawe me ngā tirohanga a te rōpū Kaunihera

Council group impacts and views

31. The Insurance Leadership Forum (representatives from the council and council-controlled organisations) will continue to work cohesively to deliver various insurance-related projects in the current financial year and beyond.

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

Local impacts and local board views

32. The placement of insurance for the council group is a region-wide issue and does not specifically impact local boards. Accordingly, there has not been any consultation undertaken directly with local boards.

Tauākī whakaaweawe Māori

Māori impact statement

33. The group insurance programme extends to the Independent Māori Statutory Board, the Tūpuna Maunga o Tāmaki Makaurau Authority, the Ngāti Whātua Ōrākei Reserves Board and Te Poari o Kaipātiki ki Kaipara (formerly the Parakai Recreation Reserve Board). There are no proposed changes to the existing arrangements.

Ngā ritenga ā-pūtea

Financial implications

34. The placement of the annual insurance programme has a financial cost to council, which is closely managed with the finance division and is appropriately budgeted. Indicative costs associated with the programme are anticipated to be provided to this committee at its May 2022 meeting.

Ngā raru tūpono me ngā whakamaurutanga

Risks and mitigations

35. The insurance strategy and the annual renewal is integrated into the council group insurance policy, the treasury management policy, and risk framework. There is a close alignment between key areas assisting with transfer of council group risks onto insurance. However, there is a risk of sub-optimal insurance arrangements due to the evolving asset base and business activities.

36. The ongoing mitigation to this risk is improving the quality of data, effective communication and prudent risk disclosures of the group's assets and business activities to insurers.

Ngā koringa ā-muri

Next steps

37. The programme will be presented to the Audit and Risk Committee in May 2022 for review and to the Finance and Performance Committee in June 2022 for approval.

38. Council staff will report to this committee in May 2022 on progress with respect to establishing the self-insurance fund.

Ngā tāpirihanga

Attachments

No.	Title	Page
a ⇩	Insurance Strategy 2021-23	91
b ⇩	Insurance Management Steering Group Terms of Reference	95

Ngā kaihaina

Signatories

Authors

Varsha Prasad - Senior Insurance and Claims Advisor

Mark Maloney - General Manager Risk and Assurance

Authorisers

Peter Gudsell - Group Chief Financial Officer

Phil Wilson - Director, Governance & CCO Partnerships

Audit and Risk Committee

22 February 2022

Approval of the draft Audit New Zealand audit plan for the year ended 30 June 2022

File No.: CP2022/00020

Te take mō te pūrongo

Purpose of the report

1. To approve the draft Audit New Zealand audit plan for their audit of the Auckland Council Group’s 30 June 2022 annual report.

Whakarāpopototanga matua

Executive summary

2. Audit New Zealand has provided the draft audit plan for their audit of the council’s 30 June 2022 annual report for the council’s approval (Attachment A). The group financial controller has reviewed the draft letter, provided feedback and Audit New Zealand has made all requested amendments.

3. The draft audit plan outlines key audit matters, the areas of audit focus, significant business and reporting risks and administration matters such as logistics and timetables.

4. The audit plan is provided in draft and is required to be approved by the Audit and Risk Committee before Audit New Zealand issues the final audit plan.

5. Deputy Auditor-General Greg Schollum and Audit New Zealand Director Athol Graham will be in attendance to discuss the proposed key audit matters and answer any questions the committee may have.

Ngā tūtohunga

Recommendation/s

That the Audit and Risk Committee:

a) review and approve the draft audit plan for the audit of the 30 June 2022 annual report (Attachment A of the agenda report)

b) request Audit New Zealand to issue the final audit plan.

Horopaki

Context

6. The audit plan outlines how Audit New Zealand will conduct their audit to obtain reasonable assurance that the 30 June 2022 financial statements and performance information are free from material misstatement resulting from error, omission, or fraud.

7. The draft audit plan outlines the following:

· key audit matters

· Audit New Zealand’s response to accounting, business, and service performance risks

· the audit process

· reporting protocols, logistics and timelines.

8. As Auckland Council is an issuer of bonds on the New Zealand, Swiss and Singapore exchanges, the audit opinion on the group annual report is required to include the auditor’s comments of key audit matters. Key audit matters are defined as those matters that, in the auditor’s professional judgement, are of the most significance in the audit of the financial statements. The focus will be on:

· areas identified as involving significant risk or requiring significant auditor judgement

· areas in which the auditor encountered significant difficulty during the audit, such as obtaining sufficient, appropriate audit evidence

· circumstances that required significant modification of the auditor’s planned approach, such as the identification of a significant deficiency in internal controls.

Tātaritanga me ngā tohutohu

Analysis and advice

9. The draft audit plan is largely unchanged from prior years, except for the quantification of materiality within the plan. Materiality at a group level, accounts related to property, plant and equipment held at fair value are subject to materiality of $4.4 billion, and all other accounts are subject to materiality of $93.5 million.

10. The draft audit plan outlines the following key audit matters:

· valuation of operational and infrastructure assets – consideration of significant changes in fair value which might require an independent valuation to be carried out. Classes of assets being revalued should be appropriately valued and related disclosures, such as the sensitivity of the valuation to changes in key assumptions, must comply with accounting standards.

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

· valuation of the weathertightness and associated building defects provision are complex, subject to a high degree of judgement and estimation and there is inherent uncertainty in the quantum and value of unreported claims.

· reporting performance on three waters, transport and housing in relation to population growth.

11. These key audit matters are consistent with the prior year.

12. The draft audit plan also outlines other significant risks and areas of audit emphasis:

Business risk/issue	Audit response
The risk of management override of internal controls	· Test appropriateness of journal entries. · Review accounting estimates for bias. · Evaluate unusual and one-off transactions.
Valuation of investment properties	· Review valuations for reasonability, reliability and compliance with PBE IPSAS 16.
Ongoing effect of COVID-19	· Review appropriateness of the going concern assumption. · Understand key issues and how these are addressed and disclosed. · Consider effect of any further lockdowns on operations. · Review COVID-19’s effect on valuation of assets.
Service performance reporting	· Review progress related to consenting.
Legislative compliance	· Assess compliance systems and processes. · Enquire as to non-compliance and consider its effect, if any. · Review compliance with the Local Government (Rating) Act 2002, regional fuel tax legislation the Financial Markets Conduct Act and NZX rules. · Review disclosures for compliance with the Local Government Act, the Local Government (Financial Reporting and Prudence) Regulations 2014 and the Non-Financial Performance Measures Rules 2013.
Accounting for assets	· Review impairment assessment processes, and capitalisation policies and processes. · Review the Ports of Auckland’s impairment assessment in relation to the automation project.
Central government funding	· Review impact of funding and financing decisions. · Consider appropriateness of accounting treatment.
Configuration and customisation costs for Software-as-a-Service (SaaS)	· Review accounting treatment of costs relating to SaaS arrangements to ensure they are correctly accounted for and appropriately disclosed.
Legal risks	· Review legal provisions taking into account estimates provided by external lawyers and the status of any significant litigation and judicial reviews.

13. The emerging issues this year are three waters reform and climate change.

14. Material performance information measures for Auckland Council relate to consenting, new dwellings, beach safety and Aucklanders’ quality of life.

15. Material performance information measures at council-controlled organisations relate to:

· water and wastewater: the compliance of drinking water with relevant standards, water loss, complaints in relation to water and wastewater, response times to urgent calls, water consumption, sewage overflows.

· transport: peak period lane productivity, maintenance standards, cycle movements, numbers of deaths and serious injuries, transport boardings, punctuality of public transport, customer satisfaction.

· economic development: contribution to GDP by supporting or attracting major events, visitor nights.

16. The key audit matters, significant risks, other areas of audit emphasis and material measures have been reviewed by management and are considered appropriate. These matters are part of the council’s business as usual, and no specific items need to be brought to your attention.

17. The proposed fee for the 30 June 2022 audit is $1,262,657 plus estimated disbursements of $30,000 (excluding GST). This sum was set out in the Office of the Auditor-General’s Audit proposal letter for the years ending 30 June 2020, 2021, and 2022. The proposal letter, dated 17 December 2019 (Attachment B), was approved by this committee on 9 December 2019 (resolution as Attachment C) and signed by the mayor and chief executive on 18 December 2019.

18. The audit plan contains the audit timings and delivery dates for information. The council is currently working with Audit New Zealand to finalise dates.

Tauākī whakaaweawe āhuarangi

Climate impact statement

19. There is no impact arising directly from this report. However, climate change is an emerging issue identified by Audit New Zealand and reporting of the group’s response to climate change risk will be disclosed in the 2021/2022 annual report.

Ngā whakaaweawe me ngā tirohanga a te rōpū Kaunihera

Council group impacts and views

20. The audit plan covers the audit of the Auckland Council Group as a whole. Accordingly, information relating to entities in the group are outlined in the audit plan and will be communicated to the relevant Auckland Council Group staff.

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

Local impacts and local board views

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

Tauākī whakaaweawe Māori

Māori impact statement

22. The report is about the 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

23. This paper is about the reporting of the financial performance of the Auckland Council Group. As such, there are no financial decisions required (noting the audit fee and disbursements were previously approved), and there are no financial implications arising from this paper.

Ngā raru tūpono me ngā whakamaurutanga

Risks and mitigations

24. No decisions beyond document approval and related delegations are sought from the committee and accordingly no risks need be considered.

Ngā koringa ā-muri

Next steps

25. Following the approval of the audit plan by this committee, we will request that Audit New Zealand issue the audit plan in final. Staff will also confirm and finalise the delivery timelines with Audit New Zealand to ensure a timely and efficient annual audit process.

Ngā tāpirihanga

Attachments

No.	Title	Page
a ⇩	Draft Audit Plan for the year ended 30 June 2022	105
b ⇩	Audit Proposal Letter 2020-2022	143
c ⇩	ARC resolution 9 December 2019 - Audit Proposal Letter 2020-2022	151

Ngā kaihaina

Signatories

Authors

Tracy Gers - Group Accounting & Reporting Manager

Francis Caetano - Group Financial Controller

Authorisers

Peter Gudsell - Group Chief Financial Officer

Phil Wilson - Director, Governance & CCO Partnerships

Audit and Risk Committee

22 February 2022

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 update - February 2022

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