No.	Title	Page
a ⇨	Forward Work Programme 2022-2023

Audit and Risk Committee

15 September 2023

Long-term Plan 2024-2034 (LTP) approach to risk and assurance

File No.: CP2023/10971

Te take mō te pūrongo

Purpose of the report

1. To outline the Long-term Plan 2024-2034 (LTP) process including risk and assurance measures and the role of the Audit and Risk Committee in this process.

Whakarāpopototanga matua

Executive summary

2. As set out in the Local Government Act 2002, the council must have an LTP adopted before the beginning of the first year to which it relates and utilise the special consultative procedure to consult with its community.

3. Section 94 of the Local Government Act 2002 requires the LTP to be audited by and contain a report from the Auditor-General. To deliver an LTP that achieves an unqualified audit opinion, it is critical for the council group to ensure that:

· LTP processes are robust

· information contained in the LTP is materially complete and reliable

· any risks associated with the LTP process are minimised

· the LTP meets the requirements of all relevant legal requirements, including those set out in the Local Government Act 2002, and the Local Government (Auckland Council) Act 2009.

4. A programme of work has now commenced to develop Auckland Council’s Long-term Plan 2024-2034. Various workstreams are currently being setup to deliver this programme, overseen by an LTP Project Control Group.

5. The Audit and Risk Committee will have an oversight role throughout the LTP process as prescribed in its Terms of Reference. The committee's role is to ensure aspects of the process like governance, risk management and internal key controls are operating well and there are no significant outstanding audit issues.

6. Top project risks that have been identified to date are included in the body of this report along with associated mitigations.

7. The council’s internal Risk and Assurance department, and specifically the risk team, has proposed changes to the LTP process that is intended to strengthen the risk management approach in the workstreams and the project overall. Each workstream and the programme office will proactively manage and monitor risks and issues connected to the workstream, as will the programme office, with the risk team providing support and guidance. The approach was endorsed by the LTP Project Control Group on 29 August 2023.

Ngā tūtohunga

Recommendation/s

That the Audit and Risk Committee:

a) whiwhi / receive the report on the process for Auckland Council’s upcoming Long-term Plan 2024-2034 that includes the approach to risk and assurance measures and the oversight role of the Audit and Risk Committee

b) tuhi ā-taipitopito / note that further updates and information on the approach to assumptions will be provided to the committee later in the process.

Horopaki

Context

8. The Auckland Council LTP is a key statutory document for Auckland Council, enabling the implementation of its strategic plans and identifying what people can expect over the next 10 years.

9. The process for this upcoming LTP started with direction setting by the Governing Body through a series of facilitated workshops in June, as requested by councillors during the Annual Budget 2023/2024. This direction has since been provided to staff from across the group and will provide the basis for the preparation of advice and analysis to support decision-making.

10. Political working groups have also been initiated by the Mayor and endorsed by Governing Body relating to areas associated with the LTP. These working groups will have the opportunity to input into the process and this will form part of the political engagement that will take place between now and October.

11. Local boards not only play a key role in local decision-making through their local board plans process but also provide input into regional decision-making.

12. The development of the LTP is a collaborative effort across the group with key accountabilities for delivery of the financial aspects lying with the Financial Strategy and Planning team. The Chief Planning Office will also be heavily involved in ensuring the LTP continues to meet the strategic direction set by the Governing Body at the beginning of the process.

13. Auckland Council will be providing an opportunity for all stakeholders, mana whenua, mataawaka and the community at large to submit on the LTP consultation document in March 2024.

14. Phase one of the LTP focuses on developing the LTP consultation document and supporting information to be adopted by the Governing Body in February 2024. This will be made available throughout the region for public consultation in March 2024.

15. Phase two of the LTP focuses on developing the final LTP as a key document which enables the implementation of the council group’s strategic plans and identifies what people can expect over the next 10 years. The final LTP document will need to be adopted by the Governing Body by 30 June 2024.

Tātaritanga me ngā tohutohu

Analysis and advice

Long-term Plan 2024-2034 (LTP) assurance process

Phase one: consultation document

Programme management and governance

16. A high-level draft roadmap has been developed that sets out the intended path of the entire LTP process. This draft roadmap has been provided to Audit New Zealand to assist with their resource planning and is attached to this document as Attachment A.

17. Elected members are part of the process at the outset and have been integral to setting the direction for this upcoming LTP. Through a series of facilitated discussions, the Governing Body identified set areas of focus across the group to guide future LTP discussions.

18. The Audit and Risk Committee will have oversight of key aspects of LTP governance, assurance, risk management and internal control, as per the committee’s Terms of Reference.

19. The following table provides a summary of controls and sign-offs for key areas of the LTP:

Area	Key controls and sign-offs
Programme management and governance	· An LTP Project Control Group monitors LTP alignment with council priorities and ensures that significant risks are being actively managed. · Councillors and the Mayor provide early direction and are engaged throughout the LTP process so risks to the timeline for adoption are monitored and managed.
Asset management plans (AMPS)	· Internal audit team will conduct a review to evaluate the effectiveness of processes and controls involved in the development of AMPs across the group. The group here includes Auckland Council, Eke Panuku, Tataki Auckland Unlimited (TAUL) and Auckland Transport. · Department manager and CCO sign off that the planned services and AMPs are consistent with available funding and strategies.
Infrastructure investment	· Mitigate risks of uncoordinated planning by areas working together in one workstream on an integrated programme of infrastructure provision. · Engagement with community and stakeholders on scenario trade-offs and decisions.
Levels of service and performance measures/ performance targets	· Validate existing set of performance measures for better alignment to strategic direction, relevancy with meaningful targets, underpinned by a robust reporting methodology. · Following approval of budgets, performance measure targets will be realigned and signed-off by managers and/or executives to ensure that the planned services are consistent with available funding.
Key alignment and linkages	· Key steps will be taken to ensure that financial and non-financial information included in the LTP is consistent with council’s strategies, policies and assumptions. · Appropriate managers and/or executives from council and CCOs will review and sign-off whether information included for each group of activities has been incorporated into the underlying information.
Assumptions	· Ensure assumptions are documented in the consultation documentation and the final Long-term Plan, and are complete, reasonable and supportable. · Financial statements will include documentation of significant forecasting assumptions, the level of uncertainty, and the potential impacts of that uncertainty. · Sign-off on budgets by business financial managers to confirm consistent application of assumptions.
Accounting standards	· Document review against accounting standard FRS-42 Prospective financial statements as well as New Zealand Society of Local Government Managers guidance. · Peer review of financials by Financial Control team.
Financial model and data	· Monitor built-in checks in model of treasury ratios, prudential benchmarks and the balanced budget requirement. · Review the financial model against significant commitments, policies and strategies e.g. City Rail Link commitments, Financial Strategy, Infrastructure Strategy.
Legal sign off/Document preparation	· Council has an experienced legal team who will conduct a review of the consultation document, supporting information, and the final LTP, and provide legal support and guidance during the process.
Prudent financial management	· Financial scenarios presented to elected members will illustrate the impact of different scenarios on rates and debt levels in the short and long term. · Final published documents will include assessment of council’s borrowing against its prescribed limits and of its operating budget through a prescribed Balanced Budget Benchmark.
Right debate with the community	· Engagement options will be provided to the Governing Body earlier in the process and will include a range of options to ensure we’re providing fit for purpose, best practice engagement with Aucklanders. · The Communication and Engagement Plan will be workshopped with the Budget Committee before it is agreed to in December 2023.
Budget refresh for Final LTP	· Budget refresh process will incorporate alignment of budgets with AMP and performance targets and any new investment or changes in budget request will require a full justification. · Prior to submission of all budgets, there will be a review and signoff by boards of CCOs and council’s Executive Leadership Team.

20. The Project Control Group membership has delegated authority to make key decisions that will impact the process and accountability of:

· understanding and supporting the project objectives, process and deliverables

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

21. The Strategic Integration Group, which is part of the governance structure for the overall management of the project, has representatives from key areas across the group and is responsible for monitoring the strategic direction of the project to ensure ongoing alignment with council priorities.

22. Representatives from Nga Mātarae and the Independent Māori Statutory Board are included in the project governance structure to ensure the council is being consistent with its approach towards Māori Outcomes and the way it engages with Māori through the process.

23. The council’s internal Risk and Assurance department, and specifically the risk team, has proposed changes to the LTP process that is intended to strengthen the risk management approach in the workstreams and the project overall. Each workstream will proactively manage and monitor risks and issues connected to the workstream, as will the programme office, with the risk team providing support and guidance. The approach was endorsed by the LTP Project Control Group on 29 August 2023.

24. The risk team will report independently to the Project Control Group and the ELT on a regular basis. Major and critical risks can also be escalated by the risk team to the Project Control Group outside of the regular meetings cycle.

25. The following top project risks have been identified to date along with proposed mitigations. The project risks continue to be developed in coordination with the internal risk team, including identification, assessment, assignment of risk and action ownership across the project and workstreams. Updates on key risks will be provided to the Audit and Risk Committee in its upcoming meetings.

Risk title	Description	Mitigation
Three waters role in the budget	Current water reform legislation removes three waters from the LTP . The risk that a change of government sees three waters remain with councils, or transition delayed.	Align LTP content to current legislation while also closely monitoring central government decision-making. Continue to collaborate with Watercare and Healthy Waters teams to ensure enough underlying data is collected for three waters to meet minimum audit requirements.
Change of government policy direction post-election	The risk that, iIn addition to water reform, changes in government policy direction in areas such as housing, transport and climate has significant implications for the LTP.	Closely monitor central government decision-making and regularly engage with central government at different levels. Clearly state significant assumptions (including around government policy), the level of uncertainty and the potential impact of that uncertainty.
Consideration of climate risks and opportunities	Auckland Council group will need to describe how climate-related risks and opportunities serve as an input to its internal capital deployment and funding decision-making processes in its climate disclosure. The risk that elected members do not sufficiently consider these risks and opportunities, and/or that this consideration cannot be clearly demonstrated.	Brief the governing body on the climate standards, what is expected from them under the ‘governance’ section of the standards and the risks associated with an unfavourable disclosure. Identify key staff resources and expertise to support decision-makers as needed and ensure adequate information is provided to enable effective consideration of climate risks and opportunities throughout the LTP.
Uncertain economic environment	The risk that unexpected changes in population projections, economic growth, employment, inflation and interest rates could impact the context of the priorities, decisions, options and advice that support the development of the LTP.	Closely monitor economic trends and undertake sensitivity analysis. Transparently disclose significant assumptions, the level of uncertainty, and the potential impact of that uncertainty.
Lack of clear and consistent strategic direction	The risk that new or changed strategic direction late in the process could put significant pressure on timelines.	Staff to work with Mayor and councillors to ensure work is aligned to the early strategic direction as much as possible, and clearly references this direction. Ensure that the constraints around late changes in direction are well understood by all elected members.
Delay in political decision-making	The risk that elected members do not feel ready or informed enough to make decisions(this could be due to a delay in advice being provided to elected members due to slippage with timeframes).	Appropriate resource planning to ensure key staff are available to provide the support and advice required. Key communications and guidance material provided to the group to ensure advice and information meets the needs and requests of the elected members. Provide an extensive series of briefings and workshops to support decision-makers, supplemented by staff availability to answer emailed questions or be present and elected member drop-in sessions.
Key person dependencies	The risk that specific knowledge about the LTP process or systems is held by a single person and/or a small group of stakeholders, resulting in delays or problems should that person no longer be available.	Undertake an assessment of critical skills and knowledge concentration and put appropriate succession plans in place. Comprehensive documentation drafted to capture the specialised knowledge.
Unclear roles and responsibilities	The risk that specific deliverables are not done or done incorrectly or late due to gaps or discrepancies in the roles and responsibilities of all the key participants.	1. Clearly define roles and responsibilities between co-sponsors, divisions, and stakeholders from each division and workstreams. 2. A critical scrutiny of all roles and responsibilities by a suitably experienced subject matter expert to identify any gaps or overlaps. 3. Mapping and documenting of roles, responsibilities, and accountabilities (RASCI) through all workstreams.
Management of Audit process	The risk that poor coordination or communication between council and Audit NZ which results in slippage to key deliverables and elements of the audit process. The subsequent risk that this impacts delivery of the consultation document and final signed LTP.	1. Audit NZ relationship is clearly owned by one workstream within LTP. 2. Communication with Audit NZ is maintained and is clear throughout the project, especially in the planning stage and when there are areas of change to workstream objectives or plans, and/or the deliverables required by Audit NZ.
Data management	The risk that data is inadequate or of poor quality which in turn impacts the ability to analyse or understand potential impacts of decisions.	Robust review of data included in internal review processes for the financial and infrastructure workstreams. Internal risk and audit teams to work with relevant workstream leads and key staff to ensure review processes of data are adequate and, where necessary, make recommendations for improvement.

26. Staff are working closely with Audit New Zealand to ensure that the scope of assurance reflects the work that they will be performing when they audit the LTP. By doing this work in advance of the external audit, staff will be able to identify any issues early and address them prior to the beginning of the external audit process.

Asset management plans

27. As part of its approved FY2024 plan, the internal audit team will assess processes, controls, systems, and approaches to evaluate their effectiveness in the development of Asset Management Plans (AMPs) across the group. The group here includes Auckland Council, Eke Panuku, Tātaki Auckland Unlimited (TAUL) and Auckland Transport.

28. Recommendations will be made, at the conclusion of the review, with the aim of identifying strengths and areas of improvement in the AMP processes to enhance the group’s overall asset management practices. These conclusions and recommendations will be presented to the LTP Project Control Group who place significant reliance on AMPs as a basis on which the LTP is determined.

29. The final report will be issued to review sponsors, relevant general managers and directors. The executive summary will be distributed to the Audit and Risk Committee members.

Infrastructure Investment

30. The infrastructure investment work focuses on council’s capital build over the next three, 10 and 30 years. Infrastructure providers across the council family are working together to provide an integrated programme view of infrastructure for the next 30 years. Together with the work on the AMPs, this information will inform the development of the 30-year Infrastructure Strategy.

31. Staff are mitigating risks of uncoordinated planning by working together on an integrated programme of infrastructure provision. The work includes taking a spatial view of planned infrastructure investment to ensure alignment with the council’s strategic growth priority areas.

32. There will be engagement with community and stakeholders on scenario trade-offs and decisions.

33. Any funding risks or issues are being managed in conjunction with Finance staff to ensure alignment with relevant financial, audit and legal requirements.

Assumptions

34. Controls and sign-off on completeness and appropriateness of significant forecasting assumptions will consist of the following:

· ensure assumptions are complete, reasonable and supportable

· engage with the Chief Economist’s Office to provide a review of assumptions

· review assumptions against Local Government Act 2002 and New Zealand Society of Local Government Managers guidance to identify mandatory and recommended assumptions

· identify council specific assumptions e.g., central government funding for transport

· support assumptions by way of reference to external supporting documentation where practical

· sign-off of assumptions, including assessment of risk and potential impacts, by the LTP financial workstream.

35. To ensure consistent application of assumptions, the following controls and sign-offs are intended:

· send clear written communication/guidance to all business areas

· design and pre-populate templates with assumptions where practical, e.g. budget templates

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

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

36. Staff will provide an update to this committee later in the process on key assumptions for this LTP. This will include an update on assumptions related to the key review areas indicated by the Office of the Auditor-General.

Financial model and data

37. Data integrity review will consist of the following:

· confirm access controls exist to prevent unauthorised changes to data and models

· reconcile base data for modelling to existing 2023/24 budgets

· reconcile the financial model results to budget submissions/ templates

· clearly identify the impact of consultation options and reconcile back to base data

· monitor built-in data checks in the financial model.

38. To ensure consistency with other strategies and policies, the following reviews will be carried out:

· monitor built-in checks in model of treasury ratios, prudential benchmarks and the balanced budget assumption

· review the financial model against significant commitments, policies and strategies such as City Rail Link commitments, Financial Strategy, and Infrastructure Strategy.

39. The financial model will also go through an overall review, reconciliation and sign-off process:

· document analytical review of year-on-year movements by activity

· reconcile the result of different financial statements in the model, e.g. funding impact statement, statement of comprehensive income, statement of cash flows and movements in balance sheet

· acceptance of budgets by operational and senior management by way of sign-off.

Consultation document preparation

40. Staff will work with various stakeholders to produce a user friendly and fit for purpose LTP consultation document that informs and engages the public about the key issues for this upcoming LTP.

41. Council has an experienced legal team who will conduct a legal review of the consultation document, supporting information, and the final LTP, and provide legal support and guidance during the process.

Prudent financial management

42. Auckland Council’s approach to prudence is laid out in the Financial Strategy and supported by the Treasury Management Policy, and the Revenue and Financing Policy. In phase two, an updated Financial Strategy and Revenue and Financing Policy will be provided for. The plan development process may also include an update to our Treasury Management Policy.

43. The key factors in the council’s approach to ensuring long-term financial prudence and sustainability are the parameters around prudent borrowing and funding of depreciation. All financial scenarios presented to elected members will clearly illustrate the impact of the scenario on these factors.

44. Due to the ongoing challenges with the financial environment coupled with climate related risks (including the storm events), these factors will be a key focus when considering the prudent and affordable levels of capital and operating expenditure for this LTP.

45. Final published documents will include, in accordance with regulations, assessment of the group’s planned financial performance in relation to various benchmarks to enable the assessment of whether the group is prudently managing its revenues, expenses, assets, liabilities, and general financial dealings.

Right debate with the community

46. Section 93(2) of the Local Government Act 2002 requires the council to consult with Aucklanders through a special consultative procedure (SCP) to adopt the LTP. Using the SCP places enhanced obligations on the council, specifying what must be done to consult with Aucklanders for this purpose.

47. Staff plan to drive an elevated conversation with Aucklanders on the big issues included for consultation. Our approach will provide opportunity to engage in, understand and shape the LTP. Staff will ensure the LTP consultation document, supporting material and final document is easily publicly available.

48. Staff from our Communication and Engagement teams are involved in ensuring that the consultation document and process adopted are effective in meeting their intended purpose.

Phase two: final Long-term Plan 2024-2034

Levels of service and performance measures/performance targets

49. In order to ensure a set of relevant, meaningful measures and targets, along with a robust methodology underpinning them, a review will be conducted between representatives from the appropriate departments to validate the information.

50. A performance measures framework and guidance material has been developed that articulates the linkages between community outcomes, LTP measures and AMP performance information.

51. LTP targets will be updated and signed-off to reflect any changes to levels of service due to proposed funding envelopes. Following Governing Body approval of the final envelopes, the targets will be realigned to ensure that the planned services are consistent with available funding.

Updates to budgets

52. Similarly, information relating to budgets from across the group will continue to be reviewed and updated throughout the process to reflect economic factors and relevant decisions. These will be regularly provided to elected members through workshops in advance of formal agreement.

53. Following final decision-making, final budgets will be updated to reflect those decisions and will be included in final documentation for adoption.

Key alignment and linkages

54. Key steps will be taken to ensure that information included in the LTP is consistent, such as:

· review and sign-off by managers and executives that key plans and policies are adequately applied

· review of consistency of assumptions with key plans and policies in the development of the underlying information

· review and sign-off whether information on capital expenditure included in the funding impact statements is consistent with underlying asset information

· review to ensure linkages between community outcomes, LTP measures and AMP performance information.

55. Appropriate managers and executives from council and CCOs will review and sign-off whether information for each group of activity has been incorporated into the underlying information.

Accounting Standards

56. The following key steps will be taken to ensure prospective financial information complies with General Accounting Accepted Practices:

· document review against accounting standard FRS-42 Prospective financial statements as well as New Zealand Society of Local Government Managers guidance

· confirm with Financial Control department that the accounting policies are consistent with those in the last audited annual report and those expected to be used for subsequent reporting

· peer review of financials by Financial Control department.

Final budget decision-making

57. Following consultation and engagement, a series of Budget Committee workshops will be held through April and May 2024 to discuss budget issues, implications, and trade-offs.

58. The mayor, in his role leading the planning process, will present a proposal to the Budget Committee at the end of May 2024.

59. The Budget Committee will debate the proposal and make recommendations to the Governing Body. Final decisions on the LTP will then be made by the Governing Body in late May/early June 2024.

Document preparation

60. Council staff will incorporate the decisions made by the Governing Body into the LTP document in line with the appropriate legislation. This document will include an updated Financial Strategy, Infrastructure Strategy, and Funding Impact Statement.

Audit and Risk Committee review

61. The draft final LTP will be presented to the Audit and Risk Committee in June 2024 to provide assurance that the document is compliant with all relevant legislative requirements and has received a clean audit.

62. The committee will then provide advice to the Governing Body on the adoption of the final document.

Long-term Plan 2024-2034 Adoption

63. The Governing Body must adopt the final LTP by 30 June 2024. This allows for the rates to be set for 2024/2025.

Tauākī whakaaweawe āhuarangi

Climate impact statement

64. The consideration of climate impacts will be a key focus for this LTP and criteria relating to climate outcomes will be included in any assessment of both capex and opex investment options.

65. Climate disclosure requirements and sustainable financing will also need to be considered through this LTP. Work is underway to better understand the scope of what should be included, as well as the consideration of any guidance material the council receives from Audit New Zealand.

Ngā whakaaweawe me ngā tirohanga a te rōpū Kaunihera

Council group impacts and views

66. Early direction setting from the Governing Body has been provided to the council group and work is underway to support the delivery of the requests that relate to individual CCOs.

67. Key staff from across the group will continue to provide input and support in the development of the LTP through various workstreams and working groups.

68. CCO chief executives and chairs have been briefed on the LTP process and there is ongoing involvement of CCO staff.

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

Local impacts and local board views

69. Local board plans are a key input to the LTP and are well progressed. Local board plans are scheduled to be adopted in October 2023. These plans identify priorities and preferences for local communities which provide direction for the next three years.

70. As a result of decisions through the Annual Budget 2022/2023 to increase local decision-making, staff will need to consider how to support and resource this appropriately for the LTP. A joined-up approach is currently being planned for across several council departments and will include facilitated opportunities for local boards to speak directly with the Governing Body ahead of decision-making milestones.

71. The Joint Governance Working Group will also provide input and direction to the Governing Body relating to both local decision-making and equitable funding of local boards.

72. Local board chairs are invited to Budget Committee workshops to attend and participate in LTP discussions. All local board members are provided with regular briefings throughout the process to ensure the same information is provided to all elected members.

73. Information is provided to local boards to help support their role as local decision-makers through this process, and to support their role to provide input on regional issues.

74. The role of local boards in the public consultation process for the LTP is an integral part of our approach. Locally held ‘Have Your Say’ events will be deployed across the region to collect feedback on regional and local issues to inform the LTP.

Tauākī whakaaweawe Māori

Māori impact statement

75. Engagement with mana whenua and mataawaka will begin later this year prior to consultation and will continue through the consultation period. Specific detail on engagement will be covered in the communication and engagement approach which will be presented to the Governing Body for formal agreement later this year.

76. Māori outcomes and impacts to Māori will be considered as part of an assessment of both capex and opex investment options.

77. Representatives from Nga Mātarae and the Independent Māori Statutory Board are included in the project governance structure to ensure the council is acting consistently with its approach towards Māori outcomes and the way it engages with Māori through the process.

Ngā ritenga ā-pūtea

Financial implications

78. The operational budget for the LTP is $1.4 million, plus the cost associated with the formal audit of budget documents (amount still to be confirmed). This is included in current budgets.

Ngā raru tūpono me ngā whakamaurutanga

Risks and mitigations

79. Top project risks that have been identified to date are included in the body of this report along with associated mitigations.

Ngā koringa ā-muri

Next steps

80. Staff will report back to this committee later this year to provide an update on the LTP process and key assumptions that will underpin this LTP.

Ngā tāpirihanga

Attachments

No.	Title	Page
a ⇨	LTP 2024-2034 Road Map

Ngā kaihaina

Signatories

Author

Tamsyn Matchett - Programme Manager

Authorisers

Ross Tucker - General Manager, Financial Strategy and Planning

Peter Gudsell - Group Chief Financial Officer

Anna Bray - Acting Director - Governance and CCO Partnerships

Audit and Risk Committee

15 September 2023

Preparation of Auckland Council Group's draft annual report 2022/2023 and draft summary annual report 2022/2023

File No.: CP2023/12741

Te take mō te pūrongo

Purpose of the report

1. To inform the Audit and Risk Committee of the process followed to prepare the draft Auckland Council Annual Report 2022/2023 and the draft Auckland Council Summary Annual Report 2022/2023 (together referred to as the annual reports).

Whakarāpopototanga matua

Executive summary

2. On 28 September 2023, the Governing Body will be asked to adopt the annual reports. Preparing and publishing these annual reports is a legislative requirement and ensures that we are transparent about our operations with investors and ratepayers.

3. The annual reports cover the 12 months to 30 June 2023. They have been prepared by council staff and audited by Audit New Zealand on behalf of the Auditor-General. The annual reports compare and comment on the performance of the Auckland Council group (the group) and Auckland Council (the council) against the budgets and performance targets set in the 10-year Budget 2021-2031 (Our Recovery Budget) and the Annual Budget 2022/2023.

4. The Deputy Auditor-General will attend this meeting to provide a confidential report on the:

· audit process

· draft representation letter

· draft proposed audit opinion, including commentary on the key audit matters, and

· status of the annual reports.

5. At the time of writing this report, there were some outstanding process issues relating to the audit which we expect to have resolved before the annual reports are approved by the Governing Body. These include:

· awaiting the results of the delegated financial authority testing currently being undertaken by the assurance services team and an updated version of Volume 1

· Audit New Zealand is engaged in discussions with the performance reporting team about the flooded floors measure; and

· audit reviews are ongoing as is audit work on performance information.

Ngā tūtohunga

Recommendation/s

That the Audit and Risk Committee:

a) tuhi ā-taipitopito / note that, other than the outstanding process issues noted in this report which are expected to be resolved prior to approval, there are no significant outstanding issues relating to the preparation of the draft Auckland Council Annual Report 2022/2023 and the draft Auckland Council Summary Annual Report 2022/2023

b) tuhi ā-taipitopito / note the draft Auckland Council Annual Report 2022/2023 and the draft Auckland Council Summary Annual Report 2022/2023 will be discussed later in this meeting in confidence.

Horopaki

Context

6. The Audit and Risk Committee reviews the quality of the annual reports and the processes followed to prepare them.

7. The Audit and Risk Committee liaises with Audit New Zealand to ensure a robust audit of the group.

8. This report, in conjunction with the associated confidential item, and comments from the Deputy Auditor-General at this meeting and his report, assists the Audit and Risk Committee to fulfil its duty as noted above.

9. Audit New Zealand will provide comment on any significant matters arising from the audit that they intend to include in their final audit report to the Governing Body following adoption of the annual reports.

Tātaritanga me ngā tohutohu

Analysis and advice

10. The draft reports referred to in the following sections are attached to the related confidential report on today’s agenda. Volumes 1 to 3 contain information that is required by legislation and accounting standards. Volume 4 is a voluntary disclosure based on the New Zealand Aotearoa Climate Standards. It will be required by legislation in 2023/2024.

11. Volumes 1 to 3 are subject to audit. Volume 4 is reviewed by Audit New Zealand as part of their review of “other information” that accompanies the annual report, however, they do not express an opinion on this volume.

Draft Annual Report 2022/2023 Volume 1: Overview and Service Performance

12. Volume 1 provides an overview of the financial and non-financial performance of the group.

13. It reports on the most material issues that the group faced during the year, and how the group responded.

14. The performance of each of Auckland Council’s groups of activities is described, and performance is measured against financial and performance measures set in the Recovery Budget.

Draft Annual Report 2022/2023 Volume 2: Local Boards

15. Volume 2 comprises annual reports for each local board.

16. Each report includes the local board’s service performance results and their funding impact statements. Local board performance is measured against the Recovery Budget.

17. The draft local board reports were presented to each local board for review. Their feedback has been incorporated where appropriate, and the reports have been approved by the respective local board chairs.

Draft Annual Report 2022/2023 Volume 3: Financial Statements

18. Volume 3 includes the group and council’s statutory financial statements and the group funding impact statement, all which measure the group and the council’s performance against the Annual Budget 2022/2023.

19. Also included are the funding impact statements of the council’s groups of activities, which measure financial performance against the Recovery Budget.

20. The financial statements also contain disclosures required by financial reporting standards, Local Government (Financial Reporting and Prudence) Regulations 2014 and the Local Government Act 2002.

21. The format and accounting policies of the funding impact statements are prescribed by the Local Government Act 2002.

22. The Audit and Risk Committee approved the pro forma statutory financial statements subject to any updates identified during the year-end close and audit process at its meeting on 9 May 2023.

23. To ensure completeness of disclosure, a financial statement disclosure checklist has been completed and will be available for inspection during the confidential part of this meeting.

Draft Annual Report 2022/2023 Volume 4: Climate Statement

24. Volume 4 was prepared by the virtual Climate Disclosure team and finance as well as sustainability officers at the council-controlled organisations and Port of Auckland Limited.

25. It is a summary of the group’s response to climate-related risks and opportunities. It describes the group’s governance of climate change risk, its risk management approach, how climate risk is integrated into strategy and outlines the group’s climate change metrics and targets using New Zealand Aotearoa Climate Standards (NZ Climate Standards).

26. The NZ Climate Standards which were issued in December 2022 are based on the Taskforce for Climate related Financial Disclosures framework with modifications for the local environment. This is the first year that the group is preparing the climate statement using NZ Climate Standards.

27. The Audit and Risk Committee approved the pro forma climate statement subject to any updates identified during the year-end close at its meeting on 9 May 2023.

28. Management continues to acknowledge that as the group’s understanding of and responses to climate change mature, so will the disclosure.

Draft Summary Annual Report 2022/2023

29. The draft Auckland Council Summary Annual Report 2022/2023 is an abridged version of the first three annual report volumes and provides highlights, performance information and information about the group including governance, community engagement and the group’s commitment to sustainability.

Open items

30. Audit New Zealand is awaiting the results of the delegated financial authority testing currently being undertaken by the assurance services team and an updated version of Volume 1.

31. Audit New Zealand is also engaged in discussions with the performance reporting team about the flooded floors measure.

32. Audit reviews are ongoing as is audit work on the performance information.

33. Management is working with Audit New Zealand to finalise the audit of these matters and the group financial controller will update the committee on progress at this meeting.

Tauākī whakaaweawe āhuarangi

Climate impact statement

34. This committee paper relates to financial and non-financial statutory reporting. No decision is sought in this paper that has a direct impact on the group’s greenhouse gas emissions nor the group’s approach to preparing for climate change.

35. However, it is acknowledged that the activities undertaken by the group and reported on within the annual report have the potential to be impacted by climate change and can also reinforce or weaken our climate action response.

36. Climate risk disclosures included in Volume 4 play a key role in how external organisations direct capital flow towards climate positive solutions and investments. Reporting of the group’s response to climate change risk holds the group publicly accountable, and ensures the business maintains their focus on addressing climate change risk at all levels across the group.

Ngā whakaaweawe me ngā tirohanga a te rōpū Kaunihera

Council group impacts and views

37. The annual reports reflect the results of the group for the year ended 30 June 2023. The council-controlled organisations are involved in the preparation of this information. No decision is sought that would directly impact the group.

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

Local impacts and local board views

38. Volume 2 of the annual report includes a section featuring the achievements in each local board area. Local boards were engaged to collect and review this information and each local board chair has prepared a message which is included in their respective report. No decision is sought that would impact local boards.

Tauākī whakaaweawe Māori

Māori impact statement

39. The annual reports cover all aspects of the group’s governance and public accountability. Although the annual reports include commentary on the group’s contribution to outcomes for Māori, as well as the role of the Independent Māori Statutory Board and the council’s Ngā Mātārae – Māori Outcomes department, no decision is sought in this paper that has a direct impact on Māori.

Ngā ritenga ā-pūtea

Financial implications

40. There are no financial implications directly arising from the information contained in the report as no financial decision is sought.

Ngā raru tūpono me ngā whakamaurutanga

Risks and mitigations

Risk of error, omission or non-compliance in preparation of the annual report and summary annual report

41. There is a risk that errors or non-compliance with legislation and accounting standards could occur in the preparation of the annual reports. To mitigate this risk, quality assurance reviews were performed on the consolidated results and commentary and the year-end reports. The reviews focused on accuracy, completeness and reasonableness of disclosures, legislative compliance and adherence to the council’s communications standards.

42. There is also a risk that the annual reports present a biased view of the performance of the group. A trust lens reviewer was used to review the annual reports to ensure that we are telling a fair and balanced story, that good news stories are truthful and accurate and the poor performance stories are honest and transparent. They review the overall story for consistency through all volumes.

Compliance reviews

43. Auckland Council’s Legal Services department reviews the summary annual report and volumes 1-3 of the annual report for compliance with local government legislation.

44. The Chief Sustainability Office reviews volume 4 of the annual report for compliance with the NZ Climate Standards.

45. Mayne Wetherell also reviews Volume 1 to 3 for compliance with NZX listing rules, the Financial Reporting Act 2013 and the Financial Markets Conduct Act 2013.

Reviews of accuracy, completeness and fairness

46. Several reviews of the annual reports take place by people with differing levels and areas of involvement in financial reporting. A summary of the reviews is as follows:

Reviewer	Volume 1	Volume 2	Volume 3	Volume 4	Summary Annual Report
Group chief financial officer	ü	ü	ü	ü	ü
Group treasurer	ü	ü	ü	ü	ü
General manager financial strategy and planning	ü	ü	ü	ü	ü
Group financial controller	ü	ü	ü	ü	ü
Manager group performance reporting	ü	ü			ü
External stakeholder group reporting manager			ü	ü	ü
Manager financial stakeholder relations	ü		ü		ü
Senior group reporting technical accountant			ü		ü
Financial accounting manager			ü		ü
Trust lens reviewer	ü	ü	ü	ü	ü
Legal services	ü	ü	ü		ü
Chief Sustainability Office				ü
Mayne Wetherell	ü	ü	ü		ü

47. In addition to these reviews, the council’s Financial Control team completes a detailed reporting checklist to ensure all financial reporting and disclosure requirements have been met. The group financial controller will have an annual report checklist and sign-off document available at this meeting, providing assurance that reporting and disclosure requirements have been complied with.

48. A trust lens reviewer provided feedback on the financial statements. The reviewer is not within the council’s finance division and was not involved in the preparation of the annual reports.

49. All the technical quality assurance reviewers who perform reviews from a financial perspective are Chartered Accountant qualified or equivalent and have the appropriate technical accounting skills and knowledge.

Disclosures from council-controlled organisations, City Rail Link Limited and Port of Auckland Limited

50. There is a risk that significant matters that affect the financial performance, financial position or cash flows of council-controlled organisations, City Rail Link Limited or Port of Auckland Limited may not be adequately disclosed.

51. To mitigate this risk, each substantive council-controlled organisation, City Rail Link Limited and Port of Auckland Limited provide an audited financial reporting pack, based on a standardised pack issued by the council’s Financial Control team. This audited financial information is consolidated to form the group’s financial statements.

52. The group financial controller obtains short and long-form representation letters from the respective chief financial officers (CFOs)/chief executives and/or audit committee chairs/boards which cover the completeness, accuracy and adequacy of disclosures provided in their financial reporting packs. In addition, the group financial controller will obtain updates from the respective CFOs/delegate just prior to the Governing Body meeting at which the annual reports are adopted, to ensure nothing else has arisen since the representation letters were signed that could materially affect their financial reporting disclosures.

Delay in Audit New Zealand’s final clearance

53. There is a risk of delay in Audit New Zealand’s final clearance due to unresolved technical matters.

54. The Financial Control team has been working with Audit New Zealand to address technical issues early, however there is a risk that matters could arise that cannot be cleared by Audit New Zealand until they have audited the relevant information.

Ngā koringa ā-muri

Next steps

55. The Audit and Risk Committee will discuss the annual reports in confidence with staff and the Deputy Auditor-General and Audit New Zealand, after which it will recommend the annual reports’ adoption to the Governing Body. The committee will then have completed its responsibilities for the annual reports.

Ngā tāpirihanga

Attachments

There are no attachments for this report.

Ngā kaihaina

Signatories

Authors

Tracy Gers - Group Accounting & Reporting Manager

Francis Caetano - Group Financial Controller

Authorisers

Rhonwen Heath – Acting Group Treasurer

Peter Gudsell - Group Chief Financial Officer

Anna Bray - Acting Director - Governance and CCO Partnerships

Audit and Risk Committee

15 September 2023

Annual report on the performance of the Audit and Risk
Committee

File No.: CP2023/12523

Te take mō te pūrongo

Purpose of the report

1. To provide an annual report that reviews and summarises the activities of the Audit and Risk Committee in 2023, as required by the committee’s Terms of Reference.

Whakarāpopototanga matua

Executive summary

2. The Audit and Risk Committee assists and advises the Governing Body in discharging its responsibility and ownership of governance, risk management and internal control.

3. The committee makes a valuable contribution to governance and performance of the council, provides an independent check on the council’s systems of governance and internal control, and provides assurance to the council that key risks are being identified and managed appropriately.

4. The committee’s responsibilities are set out in its Terms of Reference, which also provide that the chair of the committee submit a written review of its performance to the chief executive on an annual basis.

5. This report summarises the key actions performed by the committee in discharging its responsibilities throughout the period from December 2022 to the present.

6. In 2023 there has been a particular focus by the committee on being briefed, having oversight of, and providing direction on:

· Water Services Reform

· City Rail Link Limited

· health, safety, and wellbeing

· Māori outcomes

· climate disclosure work programme

· the impacts of the Auckland Anniversary weekend floods and Cyclone Gabrielle

· insurance activity and renewal

· internal audit and integrity activity

· council’s enterprise risk, substantive council-controlled organisation (CCO) risk and the group risk profile

· legal activity

· annual reports and Audit New Zealand’s responses.

7. The committee continues to have a relationship with the mayor, other elected members, the chief executive and management, the Office of the Auditor-General and Audit New Zealand that is pitched at an appropriate level and achieves a productive working relationship whilst retaining independence.

Ngā tūtohunga

Recommendation/s

That the Audit and Risk Committee:

a) whiwhi / receive this annual report on the performance of the Audit and Risk Committee

b) tūtohungia / recommend that the chief executive place the report on the next available agenda of the Governing Body.

Horopaki

Context

8. 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.

9. The committee’s membership includes three external members, with an external member, Bruce Robertson, as independent chair of the committee, which is in line with best practice, as recommended by the Auditor-General, the New Zealand Stock Exchange (NZX) and the Institute of Directors.

10. The committee makes a valuable contribution to the governance and performance of council and provides an independent check on council’s systems of governance and internal control. The committee’s oversight provides assurance that key risks are being identified and managed appropriately.

11. The committee’s review and recommendations relating to the council’s audit and risk work is appreciated and valued by the Governing Body and other relevant committees.

12. The committee’s responsibilities are set out in its Terms of Reference, which, in line with good practice, also provide that the chair of the committee will submit a written review of the performance of the committee to the chief executive on an annual basis.

Tātaritanga me ngā tohutohu

Analysis and advice

Areas of focus since December 2022:

13. This report summarises the activities of the committee and how it has contributed to the council’s governance and strategic objectives during the period from December 2022 to the present.

Forward Work Programme

14. The committee agreed a forward work programme that it reviews at each meeting to ensure it remains relevant and adapts to any changes in council’s risk profile.

15. The committee’s work programme consists of in-depth briefings in either workshops or reports to committee meetings. These briefings and reports enable the committee to be updated and provide oversight or direction on the areas outlined above.

Water Services Reform

16. In August 2023, the committee received an update on council’s Water Services Reform Programme, including key risks and how they are being managed. This update provided the committee with an understanding of the risk management processes underway since the announcement that Auckland Council and Watercare water infrastructure and services are scheduled to transfer to Entity A on 1 July 2024.

City Rail Link Limited

17. The committee has maintained its focus on understanding the approach to risk management processes within City Rail Link Limited, with a focused update presented in May 2023 on sponsor risks, allowing the committee to have oversight of identification, management and assurance of risk.

Health, Safety and Wellbeing

18. The committee has received regular reporting on the projects and initiatives underway aimed at improving the health, safety and wellbeing of council staff. These reports included commentary and a range of indicators that enabled the committee to provide objective advice and recommendations to the Governing Body on the council’s health, safety, and wellbeing risk management.

Māori outcomes

19. As well as a workshop item on Māori outcomes in February 2023, the committee provided oversight of the six-monthly review of council’s Te Tiriti o Waitangi Audit Response Programme which aims to implement the recommendations contained in Te Tiriti o Waitangi audit.

Climate disclosures

20. Updates on council’s progress towards compliance with the External Reporting Board’s climate standards, which become mandatory at 30 June 2024, has been provided through the period from December 2022. These updates are intended for the committee’s oversight and endorsement of the 2023 climate change work programme.

Annual budget

21. In December 2022, the committee reviewed the risk management approach and process for the Annual Budget 2022/2023, which reflects key financial risks due to the budgetary shortfall, the impacts of the Auckland Anniversary weekend flooding and Cyclone Gabrielle, rising inflation, interest rate increases, and labour and supply chain constraints.

22. The committee agreed to advise the Governing Body that an appropriate approach was being taken to manage the key financial risks associated with the Annual Budget 2023/2024, provided that the Governing Body agreed a budget proposal that addressed the financial pressures in a sustainable, credible and financially prudent manner.

Impacts of severe weather events

23. The committee has continuously reviewed and monitored updates relating to the ongoing impacts of the Auckland Council Group’s response and recovery from the Auckland Anniversary weekend floods and Cyclone Gabrielle since the February meeting. This monitoring includes updates on the Auckland Flood Response Report, insurance claims updates, CCO quarterly risk updates, and the Taskforce for Climate related Disclosures.

Insurance activity and annual renewal

24. The committee has provided oversight and review of the work being undertaken on the council’s 2023/2024 insurance renewal, endorsing the indicative programme to the Revenue, Expenditure and Value Committee. It also guided the continuation of with phase 3 of the cumulative loss modelling study and provided oversight of the self-insurance fund.

Enterprise, CCO and group risks

25. The committee has regularly reviewed the Enterprise Risk Management work programme, which includes:

· reviewing the council’s strategic risks, risk work programme and the refreshed risk management policy and framework

· identification and monitoring of group risks (including climate risks)

· receiving and reviewing regular risk updates from CCOs and Port of Auckland Limited, including with their senior management and board representatives, on a quarterly basis.

Internal audit and integrity activity

26. The committee has reviewed the internal audit work programme, including:

· activities undertaken to progress the internal audit plan for Dec 2022 - Jun 2023, which reflects more traditional forms of internal audit across identified areas of focus

· approving the revised Internal Audit Charter in both December 2022 and May 2023, with the next approval date being May 2024

· approving the 2023/2024 Internal Audit Plan in May 2023.

27. The committee has also reviewed the integrity activity, including aspects related to fraud, conflicts of interest, probity and ‘speak up’ mechanisms.

Legal activity update

28. The committee has reviewed and provided oversight on high-level legal risks known to Legal Services, including:

· active files spread across all divisions

· new risks created by severe weather events; emergency powers, building assessments, liability, potential for significant litigation etc.

· proposed expansion of the development contributions policy

· capital projects beyond 2031.

Annual reports and Audit New Zealand’s response

29. The committee has been updated and has provided oversight on the:

· interim and annual report

· annual budget

· annual green bond report

· external audit briefings.

30. The committee has reviewed the key changes in accounting policies, professional judgements, assumptions, estimates and management assertions with respect to the:

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

o the six months ended 31 December 2022

o the 12-month period ended 30 June 2023

· the interim financial statements for the six months ended 31 December 2022

· the Annual Report (including financial statements) for the year ended 30 June 2023.

31. At its 21 August 2023 meeting, the committee reviewed the draft response to Audit New Zealand’s fraud enquiries of the Audit and Risk Committee, and will consider (at this September meeting) recommending that management provide the updated fraud questionnaire responses to Audit New Zealand.

32. With the Office of the Auditor-General and Audit New Zealand the committee has:

· reviewed the areas of audit focus as contained in the Annual Audit Arrangements letter (audit of annual report) and the Interim Financial Statements Review Engagement letter (review of six-month interim group financial statements)

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

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

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

Conclusions

34. The committee has successfully discharged its responsibilities under its Terms of Reference.

35. The committee continues to have a relationship with the mayor, other elected members, the chief executive and management, the Office of the Auditor-General and Audit New Zealand that is pitched at an appropriate level and achieves a productive working relationship whilst maintaining an independent oversight of key organisational risks and the management of those risks.

36. The committee recommends that it continue to report directly to the governing body of Council.

37. At the conclusion of the 15 September 2023 Audit and Risk Committee meeting, the current chair retires by rotation. 2022/23 was an overlap between the Chair and the three new incoming independents appointed in October 2022 plus the elected member membership reconstituted after the October 2022 local body elections.

38. This refresh of the committee will enable it to review the current approach under its existing Terms of Reference and engagement with council.

Tauākī whakaaweawe āhuarangi

Climate impact statement

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

Ngā whakaaweawe me ngā tirohanga a te rōpū Kaunihera

Council group impacts and views

40. The committee has oversight of and receives regular reporting on the risk and assurance activities of the council parent and council-controlled organisations.

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

Local impacts and local board views

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

Tauākī whakaaweawe Māori

Māori impact statement

42. The committee has responsibility for oversight of progress in implementing audit recommendations arising from Te Tiriti o Waitangi audits. Six-monthly progress reports are included in the committee’s forward work programme.

Ngā ritenga ā-pūtea

Financial implications

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

Ngā raru tūpono me ngā whakamaurutanga

Risks and mitigations

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

Ngā koringa ā-muri

Next steps

45. This report will be placed on the agenda of the next available meeting of the Governing Body.

Ngā tāpirihanga

Attachments

There are no attachments for this report.

Ngā kaihaina

Signatories

Author

Bruce Robertson, Chairperson Audit and Risk Committee

Audit and Risk Committee

15 September 2023

Exclusion of the Public: Local Government Official Information and Meetings Act 1987

That the Audit and Risk Committee:

a) whakaae / agree to 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' audit and risk updates

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