Audit and Risk Committee

03 December 2024

ITEM TABLE OF CONTENTS PAGE

1 Ngā Tamōtanga | Apologies 5

2 Te Whakapuaki i te Whai Pānga | Declaration of Interest 5

3 Te Whakaū i ngā Āmiki | Confirmation of Minutes 5

4 Ngā Petihana | Petitions 5

5 Ngā Kōrero a te Marea | Public Input 5

6 Ngā Kōrero a te Poari ā-Rohe Pātata | Local Board Input 5

7 Ngā Pakihi Autaia | Extraordinary Business 5

8 Forward Work Programme 2024-2025 7

9 Storm Recovery Risk and Quality Assurance 9

10 Local Water Done Well update 17

11 Health, Safety and Wellbeing Q1 FY25 Update 21

12 Enterprise Risk Update - December 2024 27

13 Sustainable Finance Programme Update 35

14 Risk Management Approach for the Annual Plan 2025/2026 43

15 Final Office of the Auditor- General report to the Council for the year ended 30 June 2024 51

16 Endorsement of the draft Office of the Auditor-General Interim Review Engagement Letter for the 6 months ended 31 December 2024 55

17 Climate disclosure work programme update December 2024 59

18 Review of the draft Auditor-General limited assurance engagement letter on consolidated greenhouse gas emissions disclosures for the year ended 30 June 2025 65

19 Preparation of the interim report and NZX release for the six months ending 31 December 2024 69

20 Annual report on the performance of the Audit and Risk Committee 75

21 Te Whakaaro ki ngā Take Pūtea e Autaia ana | Consideration of Extraordinary Items

PUBLIC EXCLUDED

22 Te Mōtini ā-Tukanga hei Kaupare i te Marea | Procedural Motion to Exclude the Public 83

C1 CONFIDENTIAL: Substantive Council-Controlled Organisations' Quarterly Risk Update - December 2024 83

C2 CONFIDENTIAL: Legal Risk Report 83

C3 CONFIDENTIAL: Cyber Security strategic risks update 84

C4 CONFIDENTIAL: Internal Audit Update 84

C5 CONFIDENTIAL: Enterprise Risk Update - December 2024 85

C6 CONFIDENTIAL: Interim report and NZX release for the six months ending 31 December 2024 85

C7 CONFIDENTIAL: Office of the Auditor-General and Audit New Zealand briefing 86

C8 CONFIDENTIAL: City Rail Link risk update 86

Audit and Risk Committee

03 December 2024

Forward Work Programme 2024-2025

File No.: CP2024/16291

Te take mō te pūrongo

Purpose of the report

1. To review and approve the Audit and Risk Committee’s Forward Work Programme for December 2024 – December 2025 (Attachment A).

Whakarāpopototanga matua

Executive summary

2. Each December the committee adopts a new forward work programme covering the next calendar year. In accordance with best practice, the committee then reviews the approved forward work programme at each meeting to ensure it remains relevant and can be adapted to changes in Auckland Council’s risk profile.

3. The proposed forward work programme 2024-2025 (FWP) attached to this report covers the period from December 2024 to December 2025. Before proposing this FWP, feedback has been sought from all report writers, key stakeholders, including those who have reported to the committee during the last twelve months, and from the committee’s chair.

4. The FWP differs from last year’s forward programme in a number of ways. These changes are outlined in detail below.

5. The risk management approach for the Annual Plan 2025-2026 has been added and references to the Long-Term Plan 2024-2034 have been removed. This reflects this year’s position in the Auckland Council financial planning cycle.

6. A quarterly Cyber Security Update has been added. This follows the workshop delivered by Council’s Technology Services team to the committee in August 2024 and the committee’s interest in exercising more oversight over the council group’s response to cyber security risk.

7. A report covering data and privacy updates and progress has been added to the May 2025 and December 2025 committee meetings. Following internal audit reports relating to both data management and privacy, these updates are intended to support the committee’s oversight of these important areas.

8. It is proposed that from February 2025 a Group Shared Services (GSS) risk update is included in the quarterly CCO risk report. The purpose of GSS is to integrate common functions and technologies across the council group, eliminating duplication and ensuring consistent, scalable, resilient, secure, and high-quality shared services. The GSS Director, Richard Jarrett oversees more than 1000 staff delivering support services across the group and reports through to a Board consisting of the council’s Chief Executive, CCO Chief Executives and an independent Board Chair. As with the CCOs, if agreed, GSS will report in writing quarterly, with senior GSS staff and the independent Board Chair presenting in person before the committee on an annual basis to enable the committee to look closely at the risks and issues relating to GSS.

9. Reports on water-related reform have been included in the Audit and Risk Committee forward work programme for some time. Following the passing of the Local Government (Water Services Preliminary Arrangements) Act 2024 which sets out specific requirements relating to Watercare, it is proposed that a report covering this legislative change comes to this committee meeting. A further update will then be reported to the May 2025 committee meeting ahead of the interim economic regulation for Watercare coming into force on 1 July 2025. Thereafter, staff will monitor the need for updates on an ongoing basis and seek the committee’s approval to add these to the work programme as necessary.

10. An update on Auckland Emergency Management (AEM) that was scheduled as a workshop item for this committee meeting has been removed together with a February 2025 update on the AEM Prioritised Plan. This is because a report on the Prioritised Plan work programme, focusing on items that were not progressing well, was presented in February 2024 and AEM has confirmed that the work programme has subsequently been completed and closed.

11. An update regarding the limited assurance engagement for the 2024-2025 Climate Statement has been added to the FWP and will be presented at this committee meeting. For context, Audit NZ will provide limited assurance over the Auckland Council Group’s GHG emissions disclosures within its 2024-2025 climate statement and this agenda item is to discuss Audit NZ’s audit approach.

12. We have not included any specific workshop items for the year 2024-2025 and seek the committee’s feedback on topics for workshop items on an ongoing basis. Topics will be added when identified, with approval by the committee.

13. Staff also invite the committee’s feedback on the FWP as a whole and note there will be an opportunity at each upcoming committee meeting to review the FWP to ensure it remains relevant and responsive to the council group’s changing risk profile.

Ngā tūtohunga

Recommendation/s

That the Audit and Risk Committee:

a) whakaae / approve the Audit and Risk Committee forward work programme 2024-2025.

Ngā tāpirihanga

Attachments

No.	Title	Page
a ⇨	Audit and Risk Committee’s Forward Work Programme for December 2024 – December 2025

Ngā kaihaina

Signatories

Authors

Neil Rodrigues - Senior Risk Advisor

Sathya Ashok - Head of Risk and Audit

Yas Puzino - Risk Advisor

Authorisers

Max Hardy - Director Group Strategy and Chief Executive Office

Meredith Webb - Chief Risk and Assurance Officer

Audit and Risk Committee

03 December 2024

Storm Recovery Risk and Quality Assurance

File No.: CP2024/16371

Te take mō te pūrongo

Purpose of the report

1. To provide an update on Recovery Office activities to the Audit and Risk Committee, including the office’s processes to identify and manage risk, and actions to respond to findings from two reviews.

Whakarāpopototanga matua

Executive summary

2. This report presents an update on the Recovery Office’s key activities and risk management systems since the last report on 19 February 2024. Risk management processes are in place to guide Recovery Office activities, aligning with best practice and reporting standards. With the refresh of council structures at the end of June 2024, the Recovery Office has been incorporated into the Resilience and Infrastructure Directorate. This means that the Recovery Office is now operating within Auckland Council’s regular business structures.

3. Two separate audits (one internal, one commissioned - PWC) have been conducted. Both identified areas for improvement, particularly around data management and systems for monitoring and oversight of grants. These improvements are either completed or underway. A further audit is planned, to review application of the risk assessment methodology in the property categorisation process.

4. There are currently 32 open risks on the recovery risk register, 26 of which are considered low to medium. The risks and associated mitigations of highest priority at present are:

a. Funding decisions are needed to invest more money in the scheme to purchase additional Category 3 properties and deliver ‘Tranche 2’ risk mitigation projects

b. Category 2C projects in Māngere may encounter delays or cost escalations, with impacts for residents awaiting resolution of intolerable risk to life

c. Kaimahi (staff) within the recovery programme are working in high pressure situations over an extended period – there is a risk of burnout and attrition

d. Data management and security risks, including the handling of confidential and sensitive data, and the use of third party services.

5. A Transition Plan was presented to the Governing Body in June 2024, describing the expected timeframes for completion of different recovery activities. The Recovery Office is expected to be in place in a gradually-reducing form until December 2026, when the bulk of recovery activities will be completed and any residual functions are transitioned into other parts of the business.

Ngā tūtohunga

Recommendation/s

That the Audit and Risk Committee:

a) tuhi ā-taipitopito / note the Recovery Office update.

Horopaki

Context

Recovery is fast-moving and wide-ranging

6. Recovery from the severe weather events of early 2023 is a significant project for Auckland Council. As such, it is within the scope of the Audit and Risk Committee to review the project’s appropriate management of risk. This report presents an update on the Recovery Office’s key activities and risk management systems since the last report on 19 February 2024.

7. Recovery is a fast-moving and wide-ranging process, engaging with thousands of Aucklanders with different levels of urgency and need. The coordination of recovery efforts is carried out by the Recovery Office, established in March 2023 and funded specifically for this purpose.

8. Recovery efforts are described in the Tāmaki Makaurau Recovery Plan, published January 2024. They are organised into four whenu (programmes):

· Community and social recovery

· Māori partnership and participation

· Natural and built environment

· Economic recovery

9. The whenu are supported by an extensive communications, customer engagement and data management infrastructure, necessary to engage with the thousands of affected Aucklanders.

10. Since the last report to the Audit and Risk Committee, the Recovery Office has provided Recovery Navigation support to 2000 whānau, conducted risk assessments on more than 2500 properties (out of 3500 registered for risk assessment), and identified more than 1000 properties with intolerable risk to life (918 Category 3 and 112 Category 2P as of 18 November 2024). Three hundred and forty-six Category 3 properties have been purchased, to date.

11. The Recovery Office has a finite life: as activities are completed, the office will reduce in size and transition any outstanding matters to the appropriate council programme. A Transition Plan was presented to the Governing Body in June 2024, describing the expected timeframes for completion of different recovery activities. With the ‘refresh’ of the council’s organisational structure at the end of June 2024, the Recovery Office was incorporated into the Resilience and Infrastructure Directorate. This means that the Recovery Office is now operating within Auckland Council’s regular business structure.

Tātaritanga me ngā tohutohu

Analysis and advice

Risks and issues are actively managed by the Recovery Office

12. A Risks and Issues Management Plan has been developed to ensure risks are appropriately identified and managed by the Recovery Office. The plan outlines responsibilities and process for managing risks, including a requirement for regular (six-weekly) risk reviews by the Recovery Office Leadership Team. It aligns with Auckland Council’s risk framework and was reviewed by the Risk and Audit team.

13. Currently, the Recovery Office has 32 open risks – one critical, five high, 18 medium and 8 low. Priority risks are described in Table 1.

Table 1: Current Recovery Office risks

Risk	Control
Funding decisions are needed to invest more money in the scheme to purchase additional Category 3 properties and deliver Tranche 2 risk mitigation projects	Working with Crown (Auckland Crown Funding Agreement), we have moved funding from the Category 2 Risk Mitigation Projects funding allocation to the Category 3 Voluntary Buy-out allocation, to provide for purchasing 900 properties. This is being revisited now, to provide for in the range of 1200 properties. Further consideration is required through the council’s Annual Plan process. The funding agreement with government allows good faith renegotiations if its original estimates are found to be sufficiently inaccurate.
Category 2C projects in Māngere may encounter delays or cost escalations, with impacts for residents awaiting resolution of intolerable risk to life	The council’s project management practices and monthly monitoring are in place. An Order in Council has allowed Resource Consents to be issued to accelerate the projects’ delivery and mitigate the risk to at risk residents.
Kaimahi (staff) within the recovery programme are working in high pressure situations over an extended period – there is a risk of burnout and attrition	Introduction of a Kaimahi Ora Framework. Effective workforce planning and transition planning to provide staff with certainty through the wind-down of recovery activities.
Data management and security including the handling of confidential and sensitive data, and the use of third party services (Separately identified as three risks in the risk register)	Transfer responsibility of the process to manage data to Auckland Council’s Data Services. Remove access to data for third parties. Induction to policies. Control access to minimum set required and regularly reviewed.

Internal audit findings are being implemented

14. An internal audit was undertaken in April 2024, with an overall assessment of ‘Needs Improvement’ with four key observations and one moderate observation. These observations, and the subsequent actions are described in Table 2. This resulted in 13 recommendations. Of these, 11 have been completed with remaining 2 on track for 20 June 2025 completion.

Table 2. Internal audit observations

Risk mitigation observation	Actions in response
1. Lack of substantive evidence of involvement from external agencies in forming a governance structure, executing their governance role, and developing the final plan	- Governance structure finalised and adopted in the Tamaki Makaurau Recovery Plan (TMRP) - Increased documentation of engagement with external agencies to evidence their involvement in decisions and any actions coming from that said engagement.
2. Untimely finalisation of roles and responsibilities of internal and external stakeholders, and lack of documentation for operational processes	- Updated governance framework developed, which includes terms of reference for key governance group - Standard Council processes and standards utilised for key processes eg DFA, budget management and risk management implemented - High level transition plan developed and approved, with detailed implementation planning to be underway
3. Inadequate training/guidance provided to the Governing Body on the complexity of recovery matters	- Reporting format provided to Governing Body now aligns with Tamaki Makaurau Recovery Plan (TMRP) - Engagement workshops with councillors will be held in early 2025, with a focus on lessons learned
4. Inconsistent and/or informal reporting processes	- Revised reporting format developed for Governing Body and Transport, Resilience and Infrastructure Committee which includes standardised reporting processes and metrics to ensure consistency and ease of understanding
5. Inadequate practices and processes in managing risk and issues	- Revised risk framework that aligns with Council processes implemented

External review findings are similar, and responses are nearly complete

15. PWC were engaged to complete a review of Recovery Office activities, with the scope to ‘assess the design and operation of processes and controls that are in place within the recovery programme, and to understand whether the processes were carried out according to the requirements that have been set out by the Recovery Office.’

16. Good practices and controls were identified by the review, including:

· Use of qualified specialists and standardised reporting templates and guidelines to promote consistency and thoroughness in the property categorisation process

· Opportunities for homeowner feedback on categorisation and reports, promoting transparency and involvement, along with a process for handling disputes

· Proactive use of communications templates to ensure consistency in communication with homeowners

· Regular reporting on fund payment, including amounts allocated and spend to date.

17. The review noted, however, that the rapid setup of the Recovery Office – necessary to meet community needs – has meant that recovery-specific policies and procedures are not complete or are still in progress, security controls are insufficient, and further guidance for grant allocation, oversight and monitoring is needed.

18. The overall assessment of the review was ‘Needs Improvement’ with four key and two moderate issues raised, with 15 supporting recommendations. These issues, and subsequent actions are described in Table 3. Eleven of the 15 recommendations have now been completed, and the remaining four are underway.

Table 3. PWC Review observations

Risk mitigation observation	Actions in response
Data security policies should be developed, and controls over access and security to data should be implemented	· Recovery Office in coordination with Council’s Data Services team are reviewing newly released Information Security Policy to determine if Recovery Office requires additional policy and procedures · User permissions have been reviewed for recovery information held in SharePoint and key business functions migrated to Salesforce CRM · Recovery Office working with Council’s Data Services team to provide information security training to Recovery Office staff
Formal criteria for the assessment of the appropriateness of repair reimbursements should be developed and monitoring should be performed	· Guidelines have been established for category 2P (Property Interventions) reimbursements · Process for external 6 monthly check of reimbursement established
Grant assessment guidelines should be formally established, and monitoring through independent checks and reporting activities should be strengthened	· Established a funding panel to assess discretionary fund applications · Established process for Team Leads to document support for discretionary funds in addition to Navigator rationale · Reports required from all organisations who have received funding to enable evaluation and assurance
User access to relevant systems should be reviewed and tightened and monitoring over access should be performed	· Process established to regularly review and amend access to critical systems
Relevant reports that influence and inform the categorisation decision should be retained, and consistency in the peer review process including retaining evidence of review should be established	· Quality assurance programme to be established for categorisation, including the Independent Expert Review Panels
There should be more rigour and diligence in retaining review evidence, including those supporting the approval of costs and grant budget, as well as evidence of the verification of buy-out settlement amount	· Templates developed for grant 2P funding grant decisions · No further action required for buy-out as additional controls are in place. These include the raising of purchase order by legal team on verification of settlement documents. This is followed by DFA approvals, goods receipting and accounts payable team processing payment.

19. A further audit is planned, to complete a technical review of the risk assessment methodology in the property categorisation process.

Tauākī whakaaweawe āhuarangi

Climate impact statement

20. This report is about the Recovery Office’s risk management processes. It therefore has no specific impacts on climate change. Climate change impacts themselves are factored into the design considerations and risk assessments of the project, for example in the technical assessments of future flooding and land instability risk, and in the remediation projects for roads and community facilities. These are considered well-controlled by those delivering the projects.

Ngā whakaaweawe me ngā tirohanga a te rōpū Kaunihera

Council group impacts and views

21. The Recovery Office works across the council group, with guidance from the Storm Recovery Senior Executive Group. Elements of the recovery programme sit across the council group and are reported into the Recovery Office. In June 2024, the Recovery Office was integrated into the Resilience and Infrastructure Directorate.

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

Local impacts and local board views

22. Local Board views were not required for this report. Local boards continue to be engaged with on an as-needs basis for areas that were more significantly impacted by the severe weather events.

Tauākī whakaaweawe Māori

Māori impact statement

23. Māori partnership and participation is one of the four whenu (strands) of the Tāmaki Makaurau Recovery Plan, which includes several actions to support this objective. Mana whenua are also well-placed and have an expectation to play a key role and/or participate in local recovery planning and make decisions on things that are important to them in their own rohe.

24. Delivery of work programmes such as Making Space for Water create opportunities for mana whenua to exercise their kaitiakitanga, drawing on mātauranga Māori to deliver outcomes for the natural and built environments, consistent with tikanga.

25. The recovery also provides procurement opportunities for Māori businesses, including in relation to sustainable deconstruction of Category 3 properties. Auckland Council's deconstruction supplier panel includes objectives to work with Māori businesses. Mana whenua are also providing cultural monitoring to assist the council to manage risks relating to deconstruction in sensitive sites.

Ngā ritenga ā-pūtea

Financial implications

26. The committee is not being asked to make decisions with financial implications.

Ngā raru tūpono me ngā whakamaurutanga

Risks and mitigations

27. Risks and mitigations are the focus of this report, discussed in the Analysis and Advice section above.

Ngā koringa ā-muri

Next steps

28. The Recovery Office will implement an audit of risk assessment methodologies as used in the Property Categorisation process.

29. The Recovery Office will continue to work with the Crown on Funding Agreement changes, and will seek Annual Plan decisions to secure council funding.

Ngā tāpirihanga

Attachments

There are no attachments for this report.

Ngā kaihaina

Signatories

Authors

Mace Ward - Group Recovery Manager

Tanya Stocks - Recovery Office Strategic Support

Authorisers

Barry Potter - Director Resilience and Infrastructure

Meredith Webb - Chief Risk and Assurance Officer

Audit and Risk Committee

03 December 2024

Local Water Done Well update

File No.: CP2024/18099

Te take mō te pūrongo

Purpose of the report

1. To update the committee on progress implementing the Local Water Done Well solution for Auckland.

Whakarāpopototanga matua

Executive summary

2. Steady progress is being made to implement the Local Water Done Well solution for Auckland.

3. The Local Government (Water Services Preliminary Arrangements) Act 2024 includes specific requirements for Watercare to be financially separate from Auckland Council, introduces interim economic regulation for Watercare under the oversight of a Crown monitor, and the requirement for a Watercare charter.

4. The Commerce Commission has been appointed as the Crown monitor for Watercare and will also be the regulator under the future enduring economic regulatory regime.

5. Work is underway for the Cabinet to approve a Watercare charter in December 2024. Part 1 of the Charter includes minimum service quality standards, financial performance objectives and it may contain a customer compensation scheme; Part 2 includes a price-quality path and performance requirements.

6. Completion of the Charter and a Watercare business plan will be important milestones in the process for Watercare to secure a credit rating and raise debt by 1 July 2025.

7. Councill will need to prepare a water service delivery plan under the Act for stormwater by September 2025.

Ngā tūtohunga

Recommendation

That the Audit and Risk Committee:

a) whiwhi / receive the update on progress implementing the Local Water Done Well – Auckland solution.

Horopaki

Context

8. Following the 2023 election, the new government repealed the previous water services reform legislation that established new water services entities separate from councils. Water, wastewater and stormwater remained in the Auckland Council Long-term plan 2024-2034.

9. The committee received a confidential update in May 2024 that outlined the council’s preference for a solution for Auckland within the Government’s Local Water Done Well Policy.

10. The council proposed provisions for Watercare that were agreed by the Government in May 2024 as the Local Water Done Well – Auckland solution. The solution agreed provided for Watercare to borrow in its own name, independently of Auckland Council, and maintained Watercare as a council-controlled organisation.

11. The Local Government (Water Services Preliminary Arrangements) Act (the Act) was enacted in September 2024. It gives effect to the Auckland-specific solution and establishes the framework and preliminary arrangements for water services delivery and funding. The enduring framework is expected to be introduced to Parliament in a proposed Local Government Water Services Bill before the end of 2024.

Tātaritanga me ngā tohutohu

Analysis and advice

12. The Act includes the following regarding Watercare:

i) Watercare remains a council-controlled organisation of Auckland Council.

ii) Obligation for the provision of water supply and wastewater services has passed from Auckland Council to Watercare.

iii) Watercare achieves financial separation from Auckland council by 1 July 2025. Watercare will be required to raise debt in its own name from that date and is also required to fully repay all debt due to Auckland Council within five years. Auckland Council cannot provide financial support to Watercare.

iv) Watercare is subject to interim economic regulation prior to the establishment of full economic regulation for the sector to be established through the future Water Services Bill.

v) The Minister of Local Government is enabled to appoint a Crown review team, Crown observer, or Crown manager to Watercare in the event of significant problems.

13. The Act also sets out the requirement for councils to develop Water Services Delivery Plans by September 2025 that outline future water services delivery arrangements, and baseline information about water services operations, assets, revenue, expenditure, pricing, and projected capital expenditure, as well as necessary financing arrangements, as a first step towards future economic regulation. The plans are for councils to demonstrate that they will deliver water services that meet regulatory requirements, support growth and urban development, and that are financially sustainable.

14. The water services delivery plan for Auckland Council will only cover stormwater, as water and wastewater are covered in the arrangements in the Act for Watercare.

15. Auckland Council and Watercare are working through the documentation of debt repayment by Watercare. The council will provide treasury services to Watercare on an arms-length basis. This is to avoid Watercare having to duplicate a treasury function which is a cost effective and efficient solution for the group.

16. The Minister of Local Government, Simeon Brown, appointed the Commerce Commission as the monitor for Watercare in September 2024. The role of the Crown monitor, as defined in the Act, is to monitor and report on Watercare’s performance against the Watercare charter (Charter), and to take action to address any failure by Watercare to comply with the Charter or its obligations to provide information. Following interim regulation for Watercare, the Commission will also be the regulator for the whole water sector under the enduring economic regulatory regime.

17. The Act sets out the process and content for the Charter. The Charter is being prepared by the Department of Internal Affairs in consultation with Auckland Council and will be made by Order in Council on the recommendation of the Minister.

· Part 1 of the Charter must contain minimum service quality standards for Watercare (which may include the timeframe during which Watercare must meet the standards) and financial performance objectives for Watercare and may include a customer compensation scheme.

· Part 2 of the Charter must contain a price-quality path for Watercare and specify the time period during which the Charter applies.

18. Under the Act, Watercare must submit a business plan to the Department of Internal Affairs that covers at least 10 years and includes:

· the sources and intended approach to funding, revenue, and pricing

· water infrastructure growth charging policy

· Watercare’s financial strategy for each financial year covered by the plan

· intended efficiency improvements for operating and capital expenditure

· investment priorities for its infrastructure assets

· how Watercare will operate, maintain, and renew its infrastructure assets and provide new infrastructure assets

· information about how the plan helps to achieve Watercare’s proposed activities and intentions (as set out in its statement of intent).

19. To provide for Watercare’s financial separation from council by July 2025, the preparation of the Charter and business plan is proceeding at pace, with the objective of final drafts being substantially complete in early December 2024. To support the achievement of this timeline, the Transport, Resilience and Infrastructure Committee delegated the review and provision of feedback on Part 1 and Part 2 of the Charter and Watercare business plan to the Mayor, Deputy Mayor, Councillor Baker, Councillor Fletcher, Councillor Turner and a member of Houkura - Independent Māori Statutory Board (TICCC/2024/128).

Tauākī whakaaweawe āhuarangi

Climate impact statement

20. This report does not seek any decisions that would impact climate or would be impacted by climate change.

21. Sustainable investment in water, wastewater and stormwater will increase the region’s resilience to climate change.

22. Council will continue to be able to provide direction on climate change matters to Watercare.

Ngā whakaaweawe me ngā tirohanga a te rōpū Kaunihera

Council group impacts and views

23. Staff are working closely with Watercare to support it achieving financial separation from council by 1 July 2025.

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

Local impacts and local board views

24. There has been no engagement with local boards on the work to prepare the Charter or the Watercare business plan. This work gives effect to the provisions in the Act and is an important step in enabling Watercare to achieve financial separation from council by 1 July 2025.

25. Local Boards will be involved in engagement on any submission to the proposed Water Services Bill, which is expected to be introduced to the House by December 2024. Timeframes and process will be confirmed once this information is made available.

Tauākī whakaaweawe Māori

Māori impact statement

26. Water is a taonga to Māori and water reform is of high importance to Māori.

27. The Mayor has led hui with iwi leaders on water reform. Iwi expect the government, Auckland Council and Watercare to uphold Te Tiriti obligations, and existing settlement and relationship agreements in any legislation, and national or local requirements.

28. Water reform was also discussed at the joint Houkura - Independent Māori Statutory Board and Governing Body hui on 15 April 2024 which included entity design, water sources, prices and further engagement.

29. Member Pongarauhine Renata of Houkura is a member of the delegated group approving council feedback on the Charter and Watercare business plan.

Ngā ritenga ā-pūtea

Financial implications

30. Council and Watercare will agree the repayment of Watercare debt.

31. Watercare borrowing for its capital programme will be separate from council. It supports Watercare investment at levels to look after its existing networks while supporting growth and delivering on environmental and public health requirements.

Ngā raru tūpono me ngā whakamaurutanga

Risks and mitigations

32. The key risk is that the arrangements for the financial separation of Watercare from council are not in place by 1 July 2025.

33. Delegated approval has been obtained to support the council’s provision of feedback on the Charter and Watercare business plan as this work is moving at pace to meet the July 2025 timeframe.

34. The work is currently on-track and Auckland Council continues to meet all of the timeframes it has been given to enable Government to make decisions and for Watercare to achieve financial separation.

Ngā koringa ā-muri

Next steps

35. The focus on work currently is:

· The delegated group of the Mayor and governing body and Houkura members will provide feedback on the Charter and review the Watercare business plan by December 2024.

· Watercare is progressing work with council to achieve debt separation from the council from 1 July 2025.

· Work is underway on the development of the Auckland Stormwater Delivery Plan for September 2025.

Ngā tāpirihanga

Attachments

There are no attachments for this report.

Ngā kaihaina

Signatories

Authors

Megan Tyler - Director Policy, Planning and Governance

Trudi Fava - Principal Advisor

Authoriser

Meredith Webb - Chief Risk and Assurance Officer

Audit and Risk Committee

03 December 2024

Health, Safety and Wellbeing Q1 FY25 Update

File No.: CP2024/17960

Te take mō te pūrongoPurpose of the report

1. To provide an update on enterprise risk controls for health, safety, and wellbeing (HSW), initiatives underway to improve HSW outcomes, and the current state of key performance indicators as at 30 September 2024.

Whakarāpopototanga matua

Executive summary

2. Significant work is required to ensure the workplace health and safety management system is fully developed and implemented – in particular safety risk management (including critical risks and controls), and contractor safety management. Refer to Attachment A for detail on enterprise risk and key work programmes.

3. The HSW Team is currently completing a structural change process to ensure the required resources and positions are in place to develop and implement the workplace health and safety management system and meet legislative requirements. The new structure went live on 23 November 2024.

4. A performance dashboard for Q1, FY25 (July – September 2024) is found in Attachment B. The dashboard provides data on incidents and risk mechanisms, high potential events, and wellbeing measures for the quarter. Worksafe was notified of three incidents during Q1 FY25, and 12 high potential events occurred (33 per cent related to violence and aggression).

5. The ACC Accredited Employer Programme annual injury management audit was completed at the end of October 2024, and Auckland Council retains tertiary accreditation.

6. A review of our Hauora (Wellbeing) strategy is underway to ensure the required framework and resources are in place to support our people. For Q1 FY25, the Hauora Team provided 223 support sessions (individual, team, or workshop formats). The number of new EAP sessions has increased in the past quarter (17 per cent higher than Q4 FY24), with an increase in the number of ongoing cases (18 per cent higher than Q4 FY24).

Ngā tūtohunga

Recommendation/s

That the Audit and Risk Committee:

a) tuhi a-taipitopito / note the information in this report and the associated health, safety, and wellbeing indicators

b) whakaae / agree to refer this report to the Governing Body, along with any commentary the committee deems appropriate, and recommend that the Governing Body forwards this report to Local Boards for their information.

Horopaki

Context

7. This report provides commentary and a range of health, safety, and wellbeing performance indicators to enable the Audit and Risk Committee to provide objective advice and support to Auckland Council’s officers (as defined within the Health and Safety at Work Act 2015) for meeting due diligence obligations.

8. Recommendations on the adequacy and functioning of Auckland Council’s HSW risk management system and associated programmes are subsequently shared with the Governing Body.

Tātaritanga me ngā tohutohu

Analysis and advice

Enterprise Risk Control Effectiveness

9. There are three key HSW enterprise level risks as per the extract from Attachment A:

Risk title	Inherent risk	Current residual risk	Improvement plan summary
Failure to comply with requirements within H&S legislation			· A significant review of the HSW risk and critical risks programme and management system framework is underway through to end of FY25. This includes reviewing current risks to ensure they accurately reflect Council operations.
Failure to effectively manage ACC injury claims and entitlements			· Maintain current status for injury management and implement occupational health surveillance programme. · The Injury Management audit was passed in October 2024 with Auckland Council remaining at tertiary level. · Change proposal for HSW Team is underway, including additional injury management advisor, with go live 23 November 2024.
Insufficient effort applied to improve wellbeing of kaimahi			· Hauora (Wellbeing) strategy is under review. · Current EAP provider contract has been extended into the new year to allow for a procurement process.

Critical Risk Programme and Safety Risk Management

10. The approach to HSW risk management and critical risk management is under review and being updated to reflect the requirements of ISO 31000:2018 (Risk management) and ISO 45001:2018 (Occupational health and safety management systems), as well as the ACC Accredited Employer Programme (AEP) Audit Standard. Work has commenced on aligning HSW risk management practices with these standards and is expected to be completed by the end of FY25.

11. Current risks are being reviewed to ensure an accurate reflection of Council operations, which will contribute to developing local risk registers and local controls.

Contractor Management Improvements

12. A Strategic Assessment has been approved to set up a formal, enterprise-wide project to focus specifically on this work, with a Project Lead (and two Business Analysts if required).

13. The role of the Project Manager and their team will be to carry out further discovery work, develop a project plan, co-ordinate the build of the required framework and resources, develop and run an implementation plan and establish ongoing monitoring and verification processes.

14. A specific Contractor Safety Management function has been confirmed as part of the current HSW Team change proposal and a Contractor Safety Manager has been appointed. Recruitment is underway for two further Contractor Safety Specialists.

Wellbeing

15. Pastoral care support continues to be in high demand, with our people presenting with issues related to mental health, wellbeing, stress, and preventative care. August 2024 in particular saw a peak in demand for pastoral care services.

16. A review of the Hauora (Wellbeing) strategy has commenced and aims to simplify and clarify our existing strategy and ensure we have realistic targets/goals for the next 12-24 months.

17. Our EAP contract with the current provider has been extended into 2025 to allow for a full procurement process to be carried out. A range of EAP providers are currently being reviewed, with the purpose of finding a provider than can meet our diverse range of needs.

HSW reporting refresh

18. The HSW reporting refresh project has commenced with a discovery process. The purpose of this project is to ensure our HSW reporting supports the officers of Auckland Council to meet due diligence requirements under Section 44(4) of the Health and Safety at Work Act 2015.

19. Recruitment for a HSW Data and Reporting Analyst role has been confirmed as part of the current HSW Team change proposal.

ACC Accredited Employer Audit (AEP)

20. The annual ACC AEP audit was completed at the end of October 2024. Auckland Council retained tertiary accreditation. This audit was focused solely on injury management – the 2025 audit will include all health and safety management requirements.

Worker engagement, participation, and representation (WEPR)

21. Health and Safety Representative (HSR) elections are currently in progress across the business, with 54 nominations received to date.

22. An external supplier for HSR training has been secured and work is underway to roll out this opportunity for HSRs across the business.

HSW induction

23. The Health and Safety at Work (General Risk and Workplace Management) Regulations 2016 require persons conducting a business or undertaking (PCBUs) to provide workers with information, supervision, training, and instruction (Reg 9) – including induction.

24. The external supplier is presenting HSW induction initial designs early in Q2 FY25, and the HSW Team will review and provide any feedback before the module design is confirmed for further development.

Peakon Survey results

25. The September Peakon survey results highlighted an improved Health and Wellbeing score of +0.1 since March 2024. Highlights include organisational fit and managing competing demands. Recommended focus areas include mental health and organisational support. Auckland Council’s overall Health and Wellbeing score remains 0.2 below the Peakon benchmark.

Tauākī whakaaweawe āhuarangi

Climate impact statement

26. Te Taruke-a-Tawhiri: Auckland’s Climate Plan acknowledges that if we do not take care of the environment, we are not taking care of our own health and wellbeing. While there are no climate impacts specifically arising from this report, the services Auckland Council provides, and related health, safety and wellbeing risk controls may have varying climate impacts that need to be considered on a case-by-case basis.

27. Changes to the climate can influence other health- and safety-related risks. Examples include, but are not limited to, the frequency and severity of natural disasters, emergence of new diseases, and the risk of working in high temperature environments. Climate is therefore considered a factor that may escalate existing risks.

Ngā whakaaweawe me ngā tirohanga a te rōpū Kaunihera

Council group impacts and views

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

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

Local impacts and local board views

29. It is recommended that this report is referred to the Governing Body and that the Governing Body then forwards this report to Local Boards for their information.

Tauākī whakaaweawe Māori

Māori impact statement

30. While this report does not have specific impacts for Māori, staff acknowledge the importance of taking a holistic, Kaupapa Māori approach to health, safety, and wellbeing.

31. In particular, the Hauora (Wellbeing) programme utilises an approach that reflects Kaupapa Māori values and interventions. The council’s current mental health improvement programme, Iti Kahurangi, is based on Te Whare Tapa Wha, a holistic Māori health model. This model acknowledges the different elements needed to sustain hauora, including wairua (spiritual), hinengaro (mental and emotional), tinana (physical) whanau (family and social) and whenua (land and roots).

Ngā ritenga ā-pūtea

Financial implications

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

33. Funding for the Contractor Safety Management Project has been secured within the Group Strategy and Chief Executive Office directorate and confirmed by General Manager Financial Advisory.

Ngā raru tūpono me ngā whakamaurutanga

Risks and mitigations

34. The risk of non-compliance with health and safety is recorded in Auckland Council’s top risk register. This risk register entry provides an overview of the controls and mitigations in place.

35. Refer to the Enterprise Risk Register (Attachment A).

Ngā koringa ā-muri

Next steps

36. Following the 3 December 2024 Audit and Risk Committee meeting, it is recommended that this report be referred to the Governing Body for its information. It is also recommended the Governing Body forwards this report to local boards for their information.

Ngā tāpirihanga

Attachments

No.	Title	Page
a ⇨	HSW Enterprise Risk Controls Q1 FY25
b ⇨	HSW Performance Dashboard Q1 FY25

Ngā kaihaina

Signatories

Author

Brigitta Wassenaar - Health Safety and Wellbeing Programme

Authorisers

Becki Abbott - Head of Health Safety and Wellbeing

Mirla Edmundson - Chief People, Safety and Wellbeing Officer

Max Hardy - Director Group Strategy and Chief Executive Office

Meredith Webb - Chief Risk and Assurance Officer

Audit and Risk Committee

03 December 2024

Enterprise Risk Update - December 2024

File No.: CP2024/17487

Te take mō te pūrongo

Purpose of the report

1. To update the Audit and Risk Committee on:

i) progress of risk management activities in the period July 2024 to November 2024; and

ii) changes to the Auckland Council strategic risks since the last update to the committee in May 2024.

Whakarāpopototanga matua

Executive summary

2. Since the last report to the committee in May 2024, the Risk team has collaborated with risk sponsors and risk leads to update and document key changes to Auckland Council’s strategic risks. As part of this update, the Risk Team has for the first time mapped strategic risks to risk appetite, identifying an appropriate risk appetite level based on the most relevant risk categories. The most recent strategic risk update was presented to the council’s Executive Leadership Team (ELT) in November 2024. Refer to Attachment A.

3. Following the approval of Auckland Council’s Risk Appetite Statements (RASs) at the May 2024 committee meeting, the Risk team has focused on rolling out the RAS document and principles as a measure of enabling Auckland Council kaimahi to work with risk appetite levels and consider risk appetite along with other factors as part of decision-making processes.

4. The Risk team is supporting business planning and performance reporting processes with the aim of including and enabling the consistent collection and reporting of risks-to-objectives information from across the organisation.

5. While the Risk team has made progress on the Enterprise Risk Management (ERM) solution, the organisational restructure including the relocation of the technology function to Group Shared Services and the subsequent changes within the ICT team has caused a delay in advancing the ERM solution. The Risk team is currently awaiting the assignment of ICT resources to the project.

6. A refreshed activity plan that aims to build and improve the risk management capability of Risk Champions while increasing engagement has been introduced this financial year.

7. The Risk team is currently focused on the regular two-yearly update of the Enterprise Risk Framework. The updated Auckland Council Enterprise Risk Framework is intended for presentation to this committee for approval in May 2025.

Ngā tūtohunga

Recommendation/s

That the Audit and Risk Committee:

a) tuhi ā-taipitopito / note the Enterprise Risk Update – December 2024 report and updated strategic risks

b) tūtohungia / recommend the Enterprise Risk Update – December 2024 report to the Governing Body for information.

Horopaki

Context

8. This report provides the committee with its regular twice-yearly update on Auckland Council’s risk activities and risk management, including strategic risk developments and key programmes. The Risk team last reported to the committee in May 2024 and this report covers risk activities for the period from July 2024 to November 2024.

9. This information enables the Audit and Risk Committee to exercise oversight over Auckland Council risk management activities in order to fulfil its governance and oversight role over the effectiveness of risk management within Auckland Council.

Tātaritanga me ngā tohutohu

Analysis and advice

Strategic risks

10. Each quarter the council’s strategic risks are reviewed by nominated risk leads, after which they are considered and approved by the respective risk sponsor and reported to the ELT. The most recent report on strategic risks was presented to the ELT in November 2024.

11. The focus during this update cycle has been on reviewing and updating information related to the strategic risks, including but not limited to controls and treatment actions. While ratings have remained unchanged from the last update, minor changes have been made to the risk description and risk title for the Assets and IT Currency and Security strategic risks.

12. All nine strategic risks have remained stable in their residual risk ratings, and target risk ratings have remained unchanged.

13. The Risk team has mapped each of the strategic risks to a corresponding risk appetite from the Auckland Council Audit and Risk Committee approved risk appetite statements (RAS). Attachment A provides detail on each risk’s mapped risk appetite and the aligned risk rating that would bring it within appetite.

14. The Risk team followed a consistent approach across all strategic risks to select an appetite level. This included identifying the primary risk categories for each strategic risk, linking primary risk categories to appropriate risk appetite statements and selecting the most conservative risk appetite level.

15. The Risk team intends to facilitate a review of the current strategic risks with the ELT in 2025, with a focus on refreshing them and aligning them with the changes of roles and responsibilities following the organisational restructure, including but not limited to, the formation and establishment of Group Shared Services and the pursuit of investment area objectives.

16. Refer to Attachment A for the strategic risks including risk descriptions and risk ratings (inherent, residual and target ratings). Detail about controls and actions is reported in the attachment to the closed agenda of this meeting.

Risk Appetite Statements (RAS)

17. Following the approval of Auckland Council’s RAS at the May 2024 committee meeting, the Risk team has focused on rolling out the RAS document and principles to enable Auckland Council kaimahi to work with risk appetite levels and consider risk appetite along with other factors as part of decision-making processes.

18. The Risk team worked on and delivered seven workshops entitled “An Introduction to RAS” to kaimahi across various council departments. In addition to offering background and foundational information on the RAS, the workshops featured hands-on activities that allowed attendees to apply the risk appetite framework to different scenarios. This gave them a deeper understanding of how incorporating risk appetite into decision-making can add significant value.

19. Similar presentations and process demonstrations were given to specific kaimahi and department leadership teams upon request. Where needed and when requested, the Risk team will continue with these capacity building sessions.

20. To support long-term kaimahi learning, the Risk team developed a dedicated ‘RAS Guidance’ document that provides a consistent approach for kaimahi on how to use the RAS effectively. In addition, the Risk team has developed the first of a two-part animated video series that aims to explain risk appetite and its purpose in a simple, engaging, and interactive format. More interactive content will be developed in the new year.

21. As part of embedding the RAS into key decision-making processes, the Risk team also mapped the AC strategic risks to appropriate risk appetite levels. This was reported to the ELT in November 2024 and is included in this report to the committee. Over time we expect this reporting to support improved understanding of the appropriateness of risk appetite levels and the implications, financial and otherwise, of setting conservative risk appetite levels. Details of the mapping can be found in Attachment A.

22. The nine strategic risks as shown in Attachment A were updated to show the associated risk appetite and aligned residual risk rating of each.

Business planning and performance reporting

23. Council’s Group Performance Reporting Team is in the process of rolling out the General Manager Performance View (GPMV), which will enhance and streamline organisational reporting.

24. The GMPV is intended to work in alignment with the organisational planning process, which encourages the deployment of departmental business plans that are developed at the conclusion of every LTP, guided by the Group Strategy and Chief Executive Office.

25. The Risk team is supporting business planning and performance reporting processes with the aim of including and enabling the consistent collection and reporting of risks-to-objectives information from across the organisation.

26. In light of the organisational restructure, shifting focus to coordinated approaches across investment areas, and department-led planning and performance management, the Risk team has paused the development of the Directorate Risk Profiles (DRP)

27. We will continue to deliver monthly reporting to the ELT and will work closely with the Performance Reporting Team to ensure our reporting evolves constructively to align with, enhance, and support the implementation of the GMPV.

Enterprise risk management (ERM) solution

28. The Risk team has made progress toward the development of the group ERM solution. During the reporting period, the Risk team dedicated considerable effort to conducting solution demonstrations with selected vendors. These sessions were well-attended by CCO representatives, and as a result, the Risk team has narrowed down the options to a few preferred solutions and vendors.

29. However, the organisational restructure, including the relocation of the technology function to Group Shared Services and the subsequent changes within the ICT team, has caused a delay in advancing the ERM solution. The Risk team is currently awaiting the assignment of ICT resources to the project and the communication on the new ways of working being established within the technology team. Once this is complete, the team will proceed with finalising the business case and securing funding pathways.

30. The Risk team has maintained strong, positive engagement with the CCOs throughout the process. This continues to be a collaborative group effort, with ongoing robust support from the CCOs.

Strategic projects and programmes

31. The Risk team continues to provide ongoing support to key projects and programmes. See the table below for details.

Project/Programme	Update
Project Galaxy	Project Galaxy has now commenced the planning phase following the completion of commercial agreements. The biggest issues and risks currently being faced are the alignment of the different entities and Group Shared Services, and the potential impacts the recently announced CCO review may have on the project deliverables. Preparations are underway to engage with the GSS Board on mitigating options for these risks and issues.
Tamaki Makaurau Recovery Programme	The recovery programme completed the campaign to ensure all potentially qualifying affected properties had a chance to register their properties with the recovery office. This and other recovery office activities are covered extensively in their own reporting to the Governing Body and relevant committees. Their risk register is reviewed at a 6-weekly Recovery Office lead team risk meeting. Following the recent restructure, this programme has been incorporated into a department. Future support from the Risk team will shift to regular department-level interactions as opposed to project-level engagement.
Re-evaluation and Rates	The revaluation project has consistently kept its risks up to date against rapid developments in the programme. Recently the Office of the Valuer General had an onsite visit and audit of council’s revaluation data file, identifying data issues for remediation. This resulted in a delay in programme delivery. However, the programme team had recorded this as a risk early into the programme and has been proactively taking action to minimise this risk materialising. The programme team are now working through an action plan to remediate issues identified through the Valuer General’s audit and aims to minimise the delay in delivery of this programme of work.
Climate change disclosures	The AC Group Climate Disclosures (AR Volume 4) were adopted by the Governing Body on 26 September 2024. Forward planning and priority setting for FY24/25 are underway, along with consideration of the appropriate mechanisms for ongoing engagement with group entities. Initial working group meetings, as well as entity quarterly risk reporting across the group, have highlighted challenges in the requirements for resourcing this programme of work. The Chief Sustainability Office has developed a Group Climate Risk Methodology for climate-related scenarios, risks and opportunities. The purpose of the document is to provide information and guidance on the elements of climate risk management in a clear and transparent way. The Risk team is working to incorporate elements of this methodology into the Enterprise Risk framework, which will be reported to the committee in May 2025.
Digital Customer Platform (DXP) / Customer Experience ART	The Digital Customer Platform team has actively engaged in risk identification workshops and sought to improve the delivery of risk management practices across the programme. However, the programme has recently begun transitioning into the Customer Experience ART (Agile Release Train) which will manage risks in an agile delivery programme. The Risk team currently have limited oversight of this work. The Risk team will continue to engage with appropriate teams to review the approach to risk management and its alignment with expected practice.
Elections Programme	Work is ongoing to assess key risks identified in the initial development of the Elections Programme risk register. Initial risks identified include serious defamatory or violent behaviour by candidates, as well as the global rise of anti-democratic, conspiracy-minded sentiments. These risks may impact local elections and undermine public trust in the electoral process. While mitigations are being developed to reduce the impact of these risks, council’s ability to control them remains limited.

Risk champions

32. A refreshed activity plan that aims to build and improve Risk Champions’ risk management capability while increasing engagement has been introduced this fiscal.

33. The Risk Champions activity plan now includes half-yearly Risk Kōrero, bi-monthly drop-in sessions to foster direct interaction and discussion with the Risk team, focused directorate huis to allow Risk Champions within each directorate to collaborate on risk initiatives and share their experiences, and a bi-monthly newsletter to share key risk developments and initiatives.

34. Risk Kōrero with Risk Champions were held in July 2024 and October 2024 to promote cross-function networking, engagement, and learning. The latest Risk Kōrero was opened up to Risk Champions from the CCOs to foster collaboration and networking across the group, and this format will be continued for ongoing Risk Korero.

Supporting risk maturity

35. Overall, the Risk team continues to support and expand risk maturity at the council, delivering guidance and support as per the agreed risk workplan for the financial year.

36. This includes but is not limited to tailored risk management sessions that are provided to various groups including department lead teams, Risk Champions, projects and programmes, regular presentations to directorate lead teams and General Managers individually, and consistent risk reporting to the ELT.

37. The Risk page on Kotahi is continually updated and expanded with new risk-related dashboards and insights, as well as short educational video clips for all kaimahi to access and improve their risk knowledge and maturity. Feedback from kaimahi has been positive.

38. The Risk team is currently focused on the regular two-yearly update of the Enterprise Risk Framework. This is a substantial undertaking, involving extensive coordination and analysis, and includes the development of an impact table that reflects impact levels for the new set of risk categories that were finalised as part of the RAS in May 2024.

39. The updated Auckland Council Enterprise Risk Framework is intended for presentation to this committee for approval in May 2025.

Tauākī whakaaweawe āhuarangi

Climate impact statement

40. Climate change and its impacts remain a strategic risk for the council group and mitigations and responses remain a priority for Auckland Council.

41. The Risk and Assurance department continues to collaborate with the Chief Sustainability Office, Finance Division, and relevant departments across the council group to support Auckland Council’s adaptation and mitigation workstreams, as well as the group’s climate-related financial disclosures.

42. The Risk team has also actively been engaging with the Group Climate Risk Specialist to ensure alignment across all support activities.

Ngā whakaaweawe me ngā tirohanga a te rōpū Kaunihera

Council group impacts and views

43. The Risk and Assurance department works with risk managers and key staff in council-controlled organisations to collaborate and share knowledge on common risks. The risk profiles and updates from council-controlled organisations are covered in a separate report in this meeting.

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

Local impacts and local board views

44. A strong culture of risk management supports local boards, but local board views are not required for this report.

Tauākī whakaaweawe Māori

Māori impact statement

45. The Risk team continues to promote Māori Outcomes as a prominent strategic priority for Auckland Council and the Risk team communicated the expectation that Māori Outcomes should feature where relevant in risk registers and risk management activities.

46. The Risk team engages with the Tumuaki Huanga Māori and is in regular contact with his teams to ensure that the Risk team’s promotion and prioritisation of Māori Outcomes are aligned with the plans and strategy of Ngā Mātārae under his leadership.

47. The Risk team is also actively monitoring the progress of Ngā Mātārae to address the recommendations in the He Waka Kōtuia – Te Tiriti o Waitangi audit report 2024 (2024 Treaty Audit Report) and reported on the 2024 Treaty Audit Report to this committee in May 2024.

Ngā ritenga ā-pūtea

Financial implications

48. 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

49. The Risk and Assurance department continuously reviews the external and internal environment to identify emerging or heightened risks and trends, which are presented to the ELT on a regular basis.

Ngā koringa ā-muri

Next steps

50. The Risk team will continue to engage with kaimahi to uplift risk maturity and capability, support their management of risks, and identify emerging or heightened risks for reporting to ELT and this committee.

51. The Risk team will continue to support the understanding and incorporation of risk appetite considerations into decision-making across the council.

52. The Risk team will continue to deliver on the risk workplan, which was submitted to the committee in May 2024.

53. The Risk team will engage with the ELT for a refresh of Auckland Council’s strategic risks in 2025.

54. The next Enterprise Risk Update will be reported to the Audit and Risk Committee in May 2025.

Ngā tāpirihanga

Attachments

No.	Title	Page
a ⇨	Strategic Risks Update - October 2024

Ngā kaihaina

Signatories

Authors

Sathya Ashok - Head of Risk and Audit

Andre de Wet - Senior Risk Advisor

Joel Kirk - Senior Risk Advisor

Yas Puzino - Risk Advisor

Authorisers

Max Hardy - Director Group Strategy and Chief Executive Office

Meredith Webb - Chief Risk and Assurance Officer

Audit and Risk Committee

03 December 2024

Sustainable Finance Programme Update

File No.: CP2024/17577

Te take mō te pūrongo

Purpose of the report

1. To provide an update on Auckland Council’s Sustainable Finance Programme.

Whakarāpopototanga matua

Executive summary

2. This report provides information to inform the Audit and Risk Committee of the developments in Auckland Council’s Sustainable Finance Programme over the last twelve months. This programme covers the council’s green bond issuance and sustainability-linked transactions, as set out in the Sustainable Finance Framework (Framework). It is intended to align the council’s funding with Te Tāruke-ā-Tāwhiri: Auckland’s Climate Plan to help reinforce sustainability commitments and accelerate climate action.

3. No substantive changes were required to the council’s Framework this year. However, following the release of the International Capital Market Association 2024 Sustainability Linked Bond Principles, some updates were required to provide more information on the council’s sustainability KPIs and corresponding sustainability performance targets (SPTs), which can be linked to the council’s sustainability-linked transactions. The Framework now sets out the four sustainability KPIs and corresponding SPTs that the council will be measured against up to FY27. Three of these are linked to the council’s existing sustainability-linked bank standby facilities. The fourth was newly developed this year. The council engaged Sustainalytics to provide a Second Party Opinion of the updated Framework which confirmed it continues to align with Market Standards.

4. During FY24, the council issued three green bonds to the value of NZ$ 1.6 billion. The issue of these brings the total value of the council’s green bonds outstanding to NZ$ 3.7 billion. The issue of the council’s green bonds is against a green bond eligible asset register with a current value of NZ$ 4.4 billion. This leaves NZ$ 700 million of green bond borrowing headroom, of which NZ$ 500 million relates to Watercare’s assets. These Watercare assets will be removed from the register as of 1 July 2025 given the updated legislation surrounding Watercare’s financial separation. To ensure the council can continue to issue green bonds, council staff are prioritising work to identify current and future assets and investment, which may be added to the green bond eligible asset register over the next few years.

5. For the sustainability-linked bank standby facilities, the council’s FY24 performance against the three SPTs was assessed. The council achieved one SPT, therefore no adjustment is made to the commitment fee on these facilities over the next year. The council has elected to extend these bank standby facilities up to FY27, therefore new SPTs using the same three sustainability KPIs have been set for FY25 to FY27.

6. The council is exploring alternative sustainability-linked transactions which comply with the Framework. This will help ensure the council remains a leader in the New Zealand sustainable finance market and is able to increase the amount of funding raised through its Sustainable Finance Programme.

Ngā tūtohunga

Recommendation/s

That the Audit and Risk Committee:

a) tuhi ā-taipitopito / note the developments in the council’s Sustainable Finance Programme over the last twelve months.

Horopaki

Context

7. The Sustainable Finance Framework (Framework), established in 2018, enables the council to raise sustainable debt through:

· green financing transactions, including green bonds or loans, where the proceeds are allocated to finance or refinance eligible assets; and

· sustainability-linked transactions, in the form of bonds, loans, or derivatives, with terms tied to sustainability performance targets (SPTs).

8. The Framework outlines the detailed criteria and guidelines for issuing and managing the council’s sustainable debt in line with the latest globally agreed sustainable finance market principles and guidance (Market Standards).

9. The council is committed to following best practice. As such, the Framework is reviewed annually and updated as required to ensure continued alignment with Market Standards, as these are updated from time to time. The council has pledged that updated versions of the Framework will either maintain or improve the current levels of transparency and reporting disclosures.

10. A comprehensive review of the Framework was undertaken in 2023 to ensure it aligned with the latest Market Standards at that time, being:

· Green Financing Transactions

- International Capital Market Association (ICMA) 2021 Green Bond Principles

- Loan Market Association (LMA) 2023 Green Loan Principles

· Sustainability-Linked Financing Transactions

- Asia Pacific Loan Market Association (APLMA) 2023 Sustainability Linked-Loan Principles

- ICMA 2023 Sustainability Linked Bond Principles

- International Swaps and Derivatives Association (ISDA) 2021 Sustainability-Linked Derivatives: KPI Guidelines

11. The council is committed to ensuring that following any material updates to the Framework, a third-party assurance provider will be engaged to complete an external review. This review is to confirm the Framework continues to align with Market Standards.

12. Under the Framework the council has issued several green bonds and is required to report annually on these. This includes a description of the eligible assets funded by the bonds (use of proceeds) and a summary of the environmental outcomes that have been delivered by the underlying assets (impact report).

13. In 2022, under the Framework, the council converted NZ$ 800 million of existing bank standby facilities into sustainability-linked facilities. The commitment fee on these facilities is linked to the achievement of SPTs each financial year. At the time of the conversion the sustainability KPIs used to develop the SPTs for these facilities were:

Sustainability KPI	Description
Diverse procurement	Annual proportion of procurement influenceable spend with identified Māori and/or Pasifika owned business or social enterprises
Transition of bus fleet	Number of operational low emissions buses within the Auckland Transport bus fleet
Emissions reduction	Reduction of the Auckland Council Group’s^{^[1]} scope 1 and 2 greenhouse gas emissions, aligned with reducing emissions by 50 per cent by 2030 and reaching net-zero emissions by 2050

14. The council is required to report its performance against the SPTs to the lenders of its standby facilities in a SPT Compliance Certificate no later than 90 days from the financial year end.

Tātaritanga me ngā tohutohu

Analysis and advice

Updates to Sustainable Finance Framework

15. In accordance with the council’s commitments, a review of the Framework’s alignment with the Market Standards was performed in 2024.

16. While there were no substantive changes to the Market Standards over the last twelve months, the ICMA 2024 Sustainability Linked Bond Principles (SLBPs) were issued in June 2024. When compared to the 2023 SLPBs, the 2024 SLBPs include some new clarifications to support issuers with their sustainability KPI selection.

17. Given the limited changes to the Market Standards, no substantive changes to the Framework were required. However, minor updates were made to the Framework, primarily at Section 5 – Sustainability-Linked Debt, to align the Framework with the 2024 SLBPs. The Framework now sets out the four sustainability KPIs which, following a review this year, have been selected by the council to link to existing and future sustainability-linked transactions. Three of these sustainability KPIs are those already linked to the council’s existing sustainability-linked bank standby facilities, the fourth was newly developed this year.

18. The new sustainability KPI included in the Framework is:

Sustainability KPI	Description
Native ngahere (forest) restoration	Planting of native ngahere stems in the council’s regional parks

19. This sustainability KPI has been selected as increased urban ngahere will deliver numerous social, environmental, economic, and cultural benefits to Auckland and therefore it is a key strategic priority for the council. Further, the council is aware investors want issuers to make use of biodiversity targets.

20. A new Appendix 1 was also introduced into the Framework. This appendix provides additional information on each of the sustainability KPIs and gives details of the corresponding SPTs to be achieved by FY27.

21. The new SPTs included in the Framework are:

Sustainability KPI	By FY27
Diverse procurement	Increase spend to 6.00 per cent
Transition of bus fleet	Increase operational low emission buses to 290
Emissions reduction	33.4 per cent reduction of the group’s scope 1 and 2 GHG emissions (from a 2021 baseline and excluding Watercare and POAL)
Native ngahere (forest) restoration	Plant 200,000 stems annually between FY25 and FY27 and reach more than one million stems planted by FY27

22. Regarding native ngahere restoration, the Urban Ngahere (Forest) Strategy sets out the council’s plans for restoring, protecting and increasing urban ngahere. In 2021 the council committed to plant 200 hectares of native ngahere in its regional parks by 2031. Therefore, the SPT set for this under the Framework advances the council’s planting commitments.

23. During FY24, the council changed its third-party assurance provider of the Framework (and other reporting under the Framework), from EY to Sustainalytics Corporate Solutions (Sustainalytics). This decision was in response to feedback received from the council’s investors around Sustainalytics’ capabilities.

24. Sustainalytics has provided a Second Party Opinion (SPO) on the updated Framework. This SPO confirms that the updated Framework, including the four sustainability KPIs and corresponding SPTs, align with Market Standards.

25. The updated Framework was approved by the Treasury Management Steering Group (TMSG) in June 2024. It was published on the council’s website in September 2024, after receiving the SPO from Sustainalytics. The SPO has since been published on the council’s website.

Green Bonds

26. In FY24 the council issued three new green bonds to the value of NZ$ 1.6 billion:

Issue date	Issue currency	Term	Bond face value (NZ$m equivalent)
27 September 2023	NZD	5 years	300
30 November 2023	CHF	6 years	215
18 March 2024	EUR	10 years	1,063

27. The issue of these three green bonds brings the total value of the council’s green bonds outstanding to NZ$ 3.7 billion.

28. The draft Green Bond Annual Report 2024, which reports on the council’s use of green bond proceeds and the impacts, was presented to the Audit and Risk Committee for approval on 17 September 2024. This report also contains Sustainalytics’ 2024 assurance review that the council has met the Framework’s use of proceeds criteria for the projects financed by its green bonds and its annual reporting commitments. The Green Bond Annual Report 2024 has since been published on the council’s website.

29. To support the issuance of green bonds, the council maintains a green bond eligible asset register. This register contains details (including values) of all group assets confirmed to align with the green bond eligibility criteria set out in the Framework, and therefore eligible to be (re)financed with green bond debt.

30. As at 30 September 2024, the value on the green bond eligible asset register totalled NZ$ 4.4 billion. Of this value, NZ$ 300 million relates to eight assets which have been added to the register in the last twelve months. Considering the outstanding value of the council’s green bonds of NZ$ 3.7 billion, this provides the council with approximately NZ$ 700 million of current green bond borrowing headroom.

31. However, of the assets included on the green bond eligible asset register, approximately NZ$ 500 million relates to Watercare assets. Following the passing of the Local Government (Water Services Preliminary Arrangements) Act 2024 in September, which prevents the council from providing any financial support to Watercare, as of 1 July 2025 the council needs to remove these Watercare assets from the register. While currently there is sufficient green bond borrowing headroom to manage this removal, it reduces the council’s capacity to raise additional funds through green bonds, at least in the near term.

32. To ensure that the council continues to have adequate capacity to issue green bonds, council staff are prioritising work to identify other potentially eligible group assets and investment which may be included on the register now, and in future years. This includes both existing group assets (not previously identified as eligible) and future assets and investment, which will be funded through the Long-term Plan 2024-2034. Based on an initial assessment, approximately NZ$ 2.0 billion of asset value has been identified as potentially eligible for inclusion on the green bond eligible asset register over the next five years.

Sustainability-Linked Bank Standby Facilities - Assessment of FY24 Performance

33. In line with the Framework requirements, the council assessed its performance over FY24 against the three SPTs linked to its sustainability-linked bank standby facilities.

34. In FY24, the council achieved the SPT relating to the transition of Auckland Transport’s bus fleet. The council did not achieve the other two SPTs set for diverse procurement or emissions reduction. For diverse procurement, the SPT was only narrowly missed. For emissions reduction, not achieving the SPT was mainly due to Watercare updating its approach to calculating emissions (namely around processing wastewater) to align with best practice, which resulted in large increases to its emissions. Based on achieving one SPT, no adjustment to the council’s commitment fee on these bank standby facilities is made for the next financial year.^{^[2]}

35. As required by the Framework, the council reported its performance to its investors in a SPT Compliance Certificate dated 26 September 2024. This certificate was accompanied by the third-party review performed by Sustainalytics which provides assurance that the council’s FY24 measurement and reporting against the SPTs conform with the requirements of the Framework.

36. The council has elected to extend its sustainability-linked bank standby facilities up to FY27, using the same three sustainability KPIs and corresponding SPTs now set for the next three financial years (as detailed in the Framework). The council has introduced measures to enable its achievement of these SPTs in future years. For diverse procurement, an Emerging Suppliers Programme was launched in April 2024 to support diverse businesses with the procurement process and to help identify opportunities for spend with them. For emissions reduction, the council has several programmes in place to decarbonise its operations. The emissions reduction SPTs set up to FY27 currently exclude Watercare, given the existing uncertainty around its funding, however, once there is more certainty around this, the intention is to review the SPTs for FY26 and FY27 to include Watercare.

Future Issuance under the Framework – Alternative Sustainability-Linked Transactions

37. To ensure the council remains a leader in New Zealand’s sustainable finance market, and to drive ambitious climate action across the group, the council is exploring alternative sustainability-linked transaction structures which continue to align with the Framework. These alternative structures are designed to better meet the council’s unique needs as a local government issuer, while remaining investor friendly.

38. The use of alternative product structures will increase the council’s capacity to raise sustainable finance in the domestic markets over the next couple of years. In this near term, before the value of the green bond eligible asset register can be increased, it is likely any available green bond borrowing headroom will be used to raise funds in offshore markets, where investor demand for green bonds is particularly strong.

Tauākī whakaaweawe āhuarangi

Climate impact statement

39. This report is for noting, and therefore does not contain any decision that might have an impact on the climate.

40. However, the Sustainable Finance Programme enables the council to align its funding with Te Tāruke-ā-Tāwhiri: Auckland’s Climate Plan, which helps to reinforce sustainability commitments. The inclusion of a biodiversity KPI in the Framework, and the setting of new SPTs up to FY27 to use with sustainability-linked transactions, will increase the council’s accountability and should serve to further accelerate climate action across the group as will the council’s future issuance of alternative product structures under the Framework.

Ngā whakaaweawe me ngā tirohanga a te rōpū Kaunihera

Council group impacts and views

41. The council’s treasury team manages funding for the group. This funding includes green bonds and sustainability-linked transactions which all sit under the Sustainable Finance Programme.

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

Local impacts and local board views

42. The Sustainable Finance Programme is managed at a group level. It has no additional impact on local boards, therefore local board views have not been sought.

Tauākī whakaaweawe Māori

Māori impact statement

43. The funding raised under the Sustainable Finance Programme forms part of the group’s wider funding programme which collectively enables the council to carry out its activities, including those focused on Māori outcomes.

44. Specifically, by incorporating in the Framework a sustainability KPI (and related SPTs) around increasing the proportion of influenceable procurement spend with Māori and Pasifika-owned businesses, it seeks to advance the Māori and Pasifika prosperity in line with the Auckland Plan 2050.

Ngā ritenga ā-pūtea

Financial implications

45. This report is for noting, and therefore does not contain any decision which results in a financial impact on the council.

46. As with all Treasury funding decisions, future decisions made around raising any funds under the Sustainable Finance Programme, whether through green bonds or sustainability-linked transactions, will have financial implications to the council. Whether the council considers it appropriate to raise future funding under the Framework over other financial products will depend on an assessment of the relative demand and pricing of each product type, the diversity of the investor pool, and the capability of the council to achieve the SPTs.

Ngā raru tūpono me ngā whakamaurutanga

Risks and mitigations

47. This report is for noting, and therefore does not contain any decision that might have associated risks.

48. The Second Party Opinion from Sustainalytics confirms that the Framework, and the associated sustainability KPIs and SPTs, align with Market Principles.

49. There is a risk the council is not able to increase the value of the green bond eligible asset pool as indicated. Several of the assets already identified as potentially green bond eligible require further assessment. There is a risk that the eligible value of these assets may reduce, if the assets include aspects that do not meet the eligibility criteria set out in the Framework. Council staff are completing a review of these potentially eligible assets as a priority, to ensure there is more clarity over the value of the eligible asset pipeline and therefore capacity for future green bond financing. The council also continues to review assets across the group to identify existing assets not currently included in the eligible asset register. This is alongside ongoing work to develop and deliver projects which enhance the council’s sustainability outcomes, and therefore are likely to generate future assets which are green bond eligible.

50. There is a risk that the SPTs set for FY25 to FY27 will not be met, particularly if planned funding to progress the work programmes required to meet them is reduced. Regarding GHG emissions reduction, the council has several programmes in place to decarbonise its operations. Further, the GHG emissions reduction plan and emissions reduction SPTs for FY26 and FY27 will be reviewed during FY25. This review will carefully consider the available budget and ensure the SPTs are sufficiently ambitious but are in line with what is financially feasible.

Ngā koringa ā-muri

Next steps

51. The council treasury team to work closely with asset owners across the group to identify and complete assessments of potentially green bond eligible assets. This will confirm which assets can be added to the council’s green bond eligible asset register at present, and which assets may be added in future years.

52. The TMSG will consider the proposed alternative sustainability-linked transaction structure in December 2024, and decide on whether to proceed with issuing this product. An issue would likely take place in the first quarter of 2025.

Ngā tāpirihanga

Attachments

There are no attachments for this report.

Ngā kaihaina

Signatories

Authors

Sophie Baillie - Manager Group Sustainable Finance

Andrew John - Head of Group Treasury

Authorisers

John Bishop - Group Treasurer

Ross Tucker - Group Chief Financial Officer

Meredith Webb - Chief Risk and Assurance Officer

Audit and Risk Committee

03 December 2024

Risk Management Approach for the Annual Plan 2025/2026

File No.: CP2024/18407

Te take mō te pūrongo

Purpose of the report

1. To provide an update on the process, next steps and associated risks for the Annual Plan 2025/2026.

Whakarāpopototanga matua

Executive summary

2. Auckland Council (the council) is required, under the Local Government Act 2002, to prepare and adopt an annual plan for each financial year.

3. The Annual Plan for 2025/2026 (this annual plan) represents year two of the Long-term Plan 2024-2034 (the LTP).

4. This report includes information on the legislative requirements associated with the preparation and adoption of the annual plan, as well as a high-level summary of both the economic trends that continue to impact the group's financial position and options/levers available to mitigate this.

5. The process to develop this annual plan began in September 2024 with two facilitated sessions with the Mayor and councillors, who provided direction to the council group on the following areas of focus:

· funding major events, destination marketing and visitor attraction

· council controlled organisation (CCO) reform; and

· planning and paying for growth.

6. The output of these sessions was articulated in the Mayoral and Councillor Direction to Council Group document.

7. A series of workshops and briefings, with councillors and local board chairs, were then undertaken between October and November 2024 to respond and advise on this direction and inform decision-making. This also included an overview of the annual plan process and a budget update.

8. The draft Mayoral Proposal was released to elected members on 18 November 2024, and then publicly on 19 November 2024. Budget Committee members provided informal feedback and input on the draft Mayoral Proposal at a workshop on 20 November 2024. Local boards have also considered the draft Mayoral Proposal and formally resolved their feedback on regional issues at business meetings in November 2024.

9. Decisions from the Mayoral Proposal, and other items for consultation, will be considered by the Budget Committee on 4 December 2024, and the Governing Body on 4 and 12 December 2024. Following decision-making, staff will prepare a consultation document and supporting information for approval by the Budget Committee in February 2025.

10. Public consultation is expected to be undertaken between late February to late March 2025.

11. Following feedback from public consultation and local boards, the Budget Committee will reconsider budgets and make recommendations in May/June 2025 before the Annual Plan 2025/2026 is adopted by the Governing Body in June 2025.

12. The risks outlined in this report directly impact on the preparation and adoption of the group’s annual plan and could potentially impact political decision-making. Several risks which were included in the budget update, and relate to the annual plan have been identified in this report, they include:

· Category 3 Property buy-out costs

· returns from the Auckland Future Fund

· City Rail Link related costs

· Auckland Transport revenue and funding

· Central government changes to the Income-Related Rent Subsidy and Haumaru Housing

· further increases to inflation and interest rates increasing cost pressures

· implementation of operating savings

· relationship with Central Government; and

· delay in the rates re-valuation process due to issues identified during the Valuer General certification process that need addressing.

13. At this stage of the annual plan process, staff advise no audit review is required, as there are no proposed amendments to the council’s Long-term Plan 2024-2034. If the Governing Body’s decision-making in December 2024 triggers the requirement for an audit review, an update will be provided to the Audit and Risk Committee prior to the Budget Committee adopting the consultation material in February 2025.

Ngā tūtohunga

Recommendation/s

That the Audit and Risk Committee:

a) tuhi ā-taipitopito / note the identified risks relating to the Annual Plan 2025/2026, as contained in this report

b) tuhi ā-taipitopito / note that there remains a need for careful and ongoing monitoring and management of key financial risks

c) whakaae / agree to advise the Governing Body that an appropriate approach is being taken to manage the key financial risks associated with the Annual Plan 2025/2026

d) tuhi ā-taipitopito / note that if the Governing Body’s decision-making in December 2024 triggers an audit review, an update will be provided to the Audit and Risk Committee prior to the Budget Committee adopting the consultation material in February 2025.

Horopaki

Context

14. The Local Government Act 2002 requires the council to prepare and adopt an annual plan for each financial year. The exception is the first year of the long-term plan when the financial statement and funding impact statement included in the LTP for that year acts as that year’s annual plan.

15. This annual plan represents year two of the recently adopted LTP and it will outline what council plans to do and how it will be funded for the 2025/2026 financial year.

16. The Audit and Risk Committee (the committee) has several roles relevant to financial risks for the group. These include:

· oversight of the preparation of the annual plan

· monitoring and oversight of key high-level risks to the group

· considering the validity of management processes and thinking in relation to these risks and the associated controls; and

· advising the Governing Body on key matters of compliance including compliance with the Local Government Act 2002, debt market listing rules and Local Government Funding Agency debt covenants.

17. The financial risks outlined in this report directly impact on the preparation and adoption of the group’s annual plan and could potentially impact political decision-making.

This Annual Plan builds on the progress made in the Long-term Plan 2024-2034

18. As noted, the starting budget for this annual plan is year two of the LTP. Budgets are regularly updated to incorporate any council decisions made since the LTP was adopted, and any changes to our significant forecasting assumptions.

19. The process to develop this annual plan began in September 2024 with two facilitated sessions with the Budget Committee, who provided direction to the council group on the following areas of focus:

· funding major events, destination marketing and visitor attraction

· council controlled organisation (CCO) reform; and

· planning and paying for growth.

20. The output of these sessions was outlined in the Mayoral and Councillor Direction to Council Group document.

21. A budget update briefing was held to provide an overview of the council group's starting point budget projections for the annual plan in October 2024.

22. A series of workshops and briefings were undertaken between October and November 2024 to respond and advise on this direction and inform decision-making. This also included an overview of the annual plan process. The following table outlines the workshops and briefings undertaken during this period:

Month

Budget Committee - workshop topics

October

· Options for funding visitor attraction and events, including reinstating the Accommodation Provider Targeted Rate (APTR).

· Budget update on the council group’s starting point budget projections for the annual plan.

November

· CCO reform – overview, Eke Panuku Development Auckland and Tātaki Auckland Unlimited.

· CCO reform – Auckland Transport.

· Planning and paying for growth and update from Te Tupu Ngātahi / Supporting Growth Alliance.

· Proposed waste rates and fees proposals.

· Approach to communications and engagement.

· Discussion on the draft Mayoral Proposal.

· Local board input into proposed regional topics.

23. Local board chairs also participated and provided informal input on the topics that were discussed at workshops throughout October and November 2024.

The draft Mayoral Proposal and next steps

24. The draft Mayoral Proposal was released on 19 November 2024. This was supported by reports containing staff advice on the topics included in the direction document. Budget Committee members provided informal feedback and input on the draft Mayoral Proposal at a workshop on 20 November 2024.

25. Decisions from the Mayoral Proposal, and other items for consultation, will be considered at a Budget Committee meeting on 4 December 2024 and the Governing Body on 4 and 12 December 2024.

26. Local boards considered the draft Mayoral Proposal and supporting advice at their business meetings in November and their feedback will be included in a report to the Budget Committee meeting on 4 December 2024.

27. Once decisions are made, staff will prepare consultation material to give effect to those decisions. This will be presented to the Budget Committee in February 2025.

28. At this stage of the annual plan process, staff advise no audit review is required, as there are no proposed amendments to the council’s LTP. If the Governing Body’s decision-making in December 2024 triggers the requirement for an audit review, an update will be provided to the Audit and Risk Committee prior to the Budget Committee adopting the consultation material in February 2025.

29. Final decisions on the budget will be made following public consultation and the final annual plan will be adopted by 30 June 2025, prior to setting rates for the 2025/2026 financial year.

Tātaritanga me ngā tohutohu

Analysis and advice

Key identified risks

30. Throughout the annual plan process, the council group has outlined areas of risk. Staff will continue to monitor these risks for potential financial impacts and update elected members as appropriate. The section below outlines the identified key risks in relation to this annual plan.

Category 3 Property buy-out costs

31. Council remains focused on addressing the impacts of the extreme weather events of 2023, including recovery efforts and implementing the property categorisations. In partnership with central government, council has established a buy-out scheme to purchase ‘Category 3’ homes enabling Aucklanders affected by the severe weather events to voluntarily relocate from residential housing where council has identified an ‘intolerable risk to life’ which cannot otherwise be mitigated. Grant funding is also available for ‘Category 2P’ homeowners affected by the 2023 severe weather events, where there is a practical way to mitigate intolerable risk to life at their property.

32. Entry into the categorisation process has now closed and has resulted in a higher number of total properties than previously estimated. The categorisation process will take several months to complete, and the Recovery Office projects that there is a risk that there will be more Category 3 properties than the 900 projected in the LTP.

33. There is also risk that there could be movement in the average cost of the individual buyouts, property removal costs and the number and value of Category 2P grants.

34. If these risks materialise and the costs of the Category 3 buy-out and/or Category 2P grant programmes exceed the budgeted amount in the LTP this will result in additional borrowing requirements for the council. Potential mitigations for these impacts, over the longer term, include offsetting reductions in the level of investment in resilience infrastructure and seeking opportunities to reuse or redevelop purchased properties.

35. Ongoing updates on these programmes are provided to the Transport Resilience and Infrastructure Committee.

Auckland Future Fund

36. There is risk that the returns from the Auckland Future Fund will be lower than projected in the LTP if the realised value of the Auckland International Airport Limited shares does not match the LTP assumption and/or the timing of when this occurs is later than assumed.

37. As the distribution percentage has already been set over the short to medium term, the payments to the council can be more accurately forecast once the realised value is known.

City Rail Link related costs

38. The City Rail Link is forecast to be complete and open in 2026. The LTP included council’s share of around $0.6 billion of capital investment for the first three years of the LTP, and the full operating costs that will need to be funded from operating revenue post go-live. Operating revenue will need to be sufficient to cover the increased expenditure associated with the new line, stations, and the enhanced train frequency, as well as interest associated with the project and the funding of depreciation for the new assets.

39. Given the significant scale of this project and the approaching go-live date, staff are closely monitoring progress and any potential impact on our budget projections.

Auckland Transport revenue and funding

40. While AT is committed to managing operating pressures within its approved funding levels in the LTP, several budget risks and mitigations within AT’s budget were highlighted to the council through the 30 October budget update workshop and will be revisited during the budget refresh process in early 2025.

41. Potential budget risks for 2025/2026 include lower than anticipated public transport patronage and revenue, lower parking & enforcement revenue and less NZTA funding for new public transport services. In addition, KiwiRail has signalled higher track access charges for rail maintenance, and slowed progress with the ferry capital programme may lead to increased operating costs.

Haumaru Housing

42. Central government has recently made changes to the Income-Related Rent Subsidy (IRRS) funding criteria and the amount of IRRS funding Haumaru receives is now capped at the current level from 1 July 2024.

43. Council staff are working with Haumaru Housing staff to understand the medium-long term impact of the funding reductions over time and closely monitor any financial risks in relation to council as 49 per cent shareholder and owner of the land/buildings.

Further increases to inflation and interest rates increasing cost pressures

44. Further rises in inflation and interest rates could put further pressure on the council’s operating position.

45. An additional 1 percentage point rise in inflation could add around $20 million of net operating pressure, depending on how it flows through to specific cost and revenue lines.

46. Interest rate hedging provides a relatively high degree of (but not complete) protection from rising interest rates in the short-term, and some protection over the medium to long-term.

47. Emerging trends will be closely monitored and managed by council staff. Budgetary adjustments will be considered as part of this process and for each following year via the annual plan or LTP process.

Implementation of operating savings

48. Given the size of the operating savings targets set in the Long-term Plan 2024-2034, there is a risk that targets will not be met, particularly with ongoing embedded savings. Some one-off savings may be used to mitigate this in the short-term.

Relationship with Central Government

49. Ongoing reform led by central government has the potential to impact council operations and financials. Current reform programmes look at issues such as land use planning, resource management, and growth infrastructure funding.

50. A consistent relationship with central government presents the council with an opportunity to work collaboratively with the Crown to find structural fixes for shared concerns. Ongoing updates are provided to elected members as legislative programmes evolve.

Rates revaluation

51. The council’s property revaluation was submitted to the Valuer-General in September 2024 for certification. As part of the audit process, the Valuer-General requested additional work on the revaluations prior to certification to ensure that these reflect the market as at 1 May 2024 as accurately as possible so that rates from 1 July 2025 can be fairly and consistently shared. In October 2025, we advised publicly that this means Aucklanders’ property valuations will now be released in 2025, rather than late 2024.

52. The new timeline means the council will not have the updated information to establish rates to be paid by individual properties, or the overall rates increases by rating category in time for public consultation on the Annual Plan 2025/2026.

53. Consultation on the annual plan will therefore need to include advice on rates based on the current (2021) property valuations. Once the revaluation is finalised, it is likely the level of rates for individual properties and/or rating categories will change. It is possible that further public consultation may be needed, depending on the materiality of the changes.

54. The council will be clear in its consultation material for the annual plan that the rates that apply to individual properties for that year will depend on changes that occur through the revaluation process.

55. It is possible the Valuer-General does not certify the current revaluation. Any delay could impact on adoption of the Annual Plan 2025/2026 by the statutory deadline of 30 June 2025. We will establish a plan to manage the legal and financial implications if that were to occur.

Tauākī whakaaweawe āhuarangi

Climate impact statement

56. There are no climate impacts associated with the recommendations of this report.

Ngā whakaaweawe me ngā tirohanga a te rōpū Kaunihera

Council group impacts and views

57. This report considers the financial risks for the group as a whole and has been informed by information collated from across the group.

58. All council departments, CCOs and other entities funded by the council could be impacted by decisions made for the annual plan. Council’s executive leadership team and the chief executives of the CCOs were briefed on the budget and will continue to be regularly updated as the development of the budget progresses.

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

Local impacts and local board views

59. Local boards have a legislative role to provide input on regional plans.

60. Local boards have been briefed on the information provided to the Budget Committee. These briefings along with providing the local boards with the draft Mayoral Proposal aimed to help inform local board input on the items for consultation and these views will be set out in a report for consideration by the Budget Committee on 4 December 2024.

61. Local boards will continue to be provided with key information related to the annual plan, including any necessary advice on individual local consultation matters that will take place alongside regional consultation between February and March 2025. This includes consulting on any related impacts to the community (or actions to mitigate these impacts) if a reduction in local board funding is proposed.

Tauākī whakaaweawe Māori

Māori impact statement

62. There are no impacts for Māori associated with the recommendations of this report.

63. Planned engagement with Māori will be included as part of the annual plan communications and engagement plan that will be presented to the Governing Body in February 2025.

Ngā ritenga ā-pūtea

Financial implications

64. There are no financial implications associated with the recommendations of this report.

Ngā raru tūpono me ngā whakamaurutanga

Risks and mitigations

65. The financial risks for the group are a key subject of this report. The Audit and Risk Committee plays a key role in maintaining oversight and advising the Governing Body on the management of these financial risks and the associated compliance matters, including whether or not a robust process has been followed.

Ngā koringa ā-muri

Next steps

66. The next steps for the annual plan process are set out in the body of the report.

Ngā tāpirihanga

Attachments

There are no attachments for this report.

Ngā kaihaina

Signatories

Authors

Tristan Coulson – Programme Manager

Authorisers

Michael Burns - General Manager Financial Strategy

Ross Tucker - Group Chief Financial Officer

Meredith Webb - Chief Risk and Assurance Officer

Audit and Risk Committee

03 December 2024

Final Office of the Auditor- General report to the Council for the year ended 30 June 2024

File No.: CP2024/17534

Te take mō te pūrongo

Purpose of the report

1. To provide committee members with an overview of the internal control and financial/non-financial reporting matters identified by the Office of the Auditor-General during the final audit for the year ended 30 June 2024 and outline how Auckland Council is addressing these matters.

Whakarāpopototanga matua

Executive summary

2. Audit New Zealand is Auckland Council’s external auditor appointed by the Office of the Auditor-General to conduct the audit on their behalf.

3. Audit New Zealand works with the council throughout the year reviewing our internal controls, half year report and disclosures to both the New Zealand and overseas stock exchanges and auditing our annual report.

4. The Office of the Auditor-General issues reports to the council throughout the year with recommendations on issues identified, and makes recommendations for improvements to our processes, controls, procedures, and disclosures.

5. We have received the report for the final audit for the year ended 30 June 2024. The report includes recommendations with priority ratings. The report is provided as Attachment A.

6. There are four new recommendations all of which have a ‘medium’ priority rating:

· Storm-affected property buy-outs – improvement to the provision’s accuracy

· Stormwater valuation – improvement to valuation’s accuracy

· Weathertightness claims – improvement to unreported claims model and ensuring that settled claims are not included in the provision

· Investment in managed funds – recommended key controls over funds and analysis of funds between current and non-current.

7. The report also includes an update on prior year recommendations which are all in progress. All these matters have a ‘medium’ priority.

· Review of delegated financial authority policy and SAP delegation

· Resource consent processing times

· Payroll processes and controls

· Payroll GL reconciliation.

8. The council accepts the Office of the Auditor-General’s recommendations and has provided a response outlining actions being taken to address each issue.

Ngā tūtohunga

Recommendation/s

That the Audit and Risk Committee:

a) tuhi a-taipitopito / note the matters identified by the Office of the Auditor-General in its report to governors for the year ended 30 June 2024, and Auckland Council’s responses to those matters.

Horopaki

Context

9. Audit New Zealand is Auckland Council’s external auditor appointed by the Office of the Auditor-General to conduct the audit on their behalf.

10. As part of the audit process, the auditors evaluate the council’s systems, processes and controls that have an impact on the annual report.

11. Following the completion of their audit each year, Audit New Zealand prepares a report to the Council on issues identified. It makes recommendations for improvements to our processes, controls, procedures and disclosures.

12. The council responds to the matters raised and describes the actions that will be undertaken to resolve them.

13. This committee report summarises the matters identified by the Office of the Auditor-General during the final audit for the year ended 30 June 2024 and outlines how the council is addressing the matters raised. The Audit New Zealand report uses a new rating scale for recommendations, being high, medium and low.

Tātaritanga me ngā tohutohu

Analysis and advice

14. The report to the council is in a new format. It now includes a summary of uncorrected misstatements for the year ended 30 June 2024. These misstatements are immaterial both individually and in total, however, are included in the report as they are above Audit New Zealand’s threshold for recording misstatements. They were communicated to the committee at its 17 September 2024 meeting.

15. Four new matters were raised in the report, all with a medium priority. These matters and our responses are summarised below.

Matter	Management’s response
Storm-affected property buy-outs Council should improve the accuracy of the provision estimate by using known property-level information.	We concur and will have a more informed dataset to complete the next valuation.
Stormwater valuation Council should re-establish detailed contract cost analysis for more accurate valuations.	We are reviewing our processes and are looking to either reinstate contract cost analysis or adopt another equally reliable methodology.
Weathertightness claims Council should enhance the accuracy of the unreported claims model and ensure settled claims are not included in the provision.	We are working with our actuary to respond appropriately to these recommendations.
Investment in managed funds Ensure key controls are in place and classify investments correctly between current and non-current assets.	We will work with Audit New Zealand to understand their requirements from the fund manager auditors and will provide a detailed assessment of classification of the funds between current and non-current.

16. Updates were provided on previous recommendations, all of which have a medium priority.

Matter	Management’s response
Review of Delegated Financial Authority Policy and SAP delegation	A sample of potential DFA in SAP was compared to the CE Delegation Register and management is working with the respective teams on how to avoid these issues occurring in the future.
Resource consent processing times	Audit New Zealand did not request a response.
Payroll processes and controls
Payroll GL reconciliation

Tauākī whakaaweawe āhuarangi

Climate impact statement

17. There are no items covered by this agenda item that impact climate change.

Ngā whakaaweawe me ngā tirohanga a te rōpū Kaunihera

Council group impacts and views

18. The is one item applicable to Auckland Transport, being the projected error in depreciation on renewals. Auckland Transport is aware of this misstatement which is immaterial to their and the group financial statements.

19. There are no other items covered by this agenda item that impact the Auckland Council Group, so the views of group entities have not been sought.

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

Local impacts and local board views

20. There are no local impacts from the audit report or issues relating to reporting at a local board level. Accordingly, the views of local boards have not been sought.

Tauākī whakaaweawe Māori

Māori impact statement

21. The report does not affect the achievement or reporting on Auckland Council’s or the Auckland Council Group’s contributions towards Māori outcomes. The council’s contributions to Māori outcomes are reported in the annual report.

Ngā ritenga ā-pūtea

Financial implications

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

Ngā raru tūpono me ngā whakamaurutanga

Risks and mitigations

23. There is a risk that actions undertaken by management to address internal control deficiencies may not be considered sufficient or appropriate to address Audit New Zealand’s concerns. To mitigate this risk, the financial control and risk teams have regular open discussions with Audit New Zealand to ensure that matters are being progressed to Audit New Zealand’s satisfaction.

Ngā koringa ā-muri

Next steps

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

Ngā tāpirihanga

Attachments

No.	Title	Page
a ⇨	Final Office of the Auditor-General report to the Council for the year ended 30 June 2024

Ngā kaihaina

Signatories

Authors

Tracy Gers - External Stakeholder Group Reporting Manager

Francis Caetano - Group Financial Controller

Yvonne Teo - Financial Accounting Manager

Authorisers

John Bishop - Group Treasurer

Ross Tucker - Group Chief Financial Officer

Meredith Webb - Chief Risk and Assurance Officer

Audit and Risk Committee

03 December 2024

Endorsement of the draft Office of the Auditor-General Interim Review Engagement Letter for the 6 months ended 31 December 2024

File No.: CP2024/18393

Te take mō te pūrongo

Purpose of the report

1. To review and endorse the draft Office of the Auditor-General Interim Review Engagement Letter for the six months ending 31 December 2024 (Attachment A).

Whakarāpopototanga matua

Executive summary

2. Audit New Zealand has provided the Office of the Auditor-General’s draft interim review engagement letter for the six months ending 31 December 2024 (the draft letter).

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

4. The review fee has been agreed at $146,168 plus disbursements. This is approximately 9 per cent of the Auckland Council fee for the audit of the 30 June 2024 annual report. It is a 5 per cent increase on the fee for the review of the prior year’s interim report for the six months ended 31 December 2023.

5. The draft letter is substantially the same as in prior years with the removal of materials recovery facility, food scraps partnership, and central government funding, and the addition of Auckland Future Fund and subsequent events to the areas of focus.

6. Other areas of review focus from the prior year include:

· valuation of storm-affected property buyout provision

· valuation of property, plant, and equipment

· construction costs and impairment assessments

· valuation of the weathertightness and associated building defect claims provision

· valuation and disclosure of derivatives

· Impact of the Local Government (Water Services Preliminary Arrangements) Act

· valuation of investment properties

· management override of controls

· rates

· legislative compliance.

7. The Audit and Risk Committee has responsibility for reviewing and endorsing the draft letter before Audit New Zealand issues the final letter for approval by the mayor and chief executive.

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

9. Audit New Zealand Audit Director Wikus Jansen van Rensburg will be in attendance to answer any questions the committee may have in relation to the draft letter.

Ngā tūtohunga

Recommendation/s

That the Audit and Risk Committee:

a) arotake / review and ohia / endorse Audit New Zealand’s draft interim review engagement letter, including the proposed review engagement fee

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

c) tono / request the mayor and chief executive sign the final interim review audit engagement letter.

Horopaki

Context

10. Management has reviewed the draft letter and provided feedback to Audit New Zealand, which has been incorporated.

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

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

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

Tātaritanga me ngā tohutohu

Analysis and advice

Review engagement letter

14. The draft letter outlines:

· Responsibilities:

o Auditor: Conduct a limited review, not a full audit, and provide a conclusion based on the review.

o Council: Provide all necessary information, ensure the accuracy of financial statements, and maintain internal controls.

· areas of the review focus

· engagement logistics and timelines.

15. The areas of focus are substantially the same as in prior years with the removal of materials recovery facility, food scraps partnership, central government funding, and the addition of Auckland Future Fund and subsequent events. The areas of focus are:

· Valuation of storm-affected property buyout provision - Disclosures should provide an updated view of the progress of cost‐sharing arrangements and any change in estimates.

· Valuation of property, plant and equipment - Fair value assessment should be performed and where there are significant changes in fair value, an independent valuation may be required.

· Construction costs and impairment assessments – Work in progress should be capitalised when the asset becomes operational, and an impairment assessment is required of assets including significant work in progress balances.

· Valuation of the weathertightness and associated building defect claims provision - The provision needs to be reviewed and updated.

· Valuation and disclosure of derivatives – Derivatives should be correctly valued and significant movements in fair value should be appropriately explained in the interim financial statements.

· Impact of the Local Government (Water Services Preliminary Arrangements) Act – There should be disclosures about any significant impacts on the group.

· Valuation of investment properties – Investment properties should be properly classified and valued in the financial statements.

· Auckland Future Fund – Accounting implications and disclosures of the fund should be considered.

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

· Rates – Annual rates should be appropriately discounted to reflect present value.

· Legislative compliance – Audit New Zealand will follow up on the completion of a review of the interim report by Legal Services

· Subsequent events – Audit New Zealand will follow up on management’s identification and assessment of subsequent events.

Tauākī whakaaweawe āhuarangi

Climate impact statement

16. This report is about an independent review of the group’s interim report and does not have any climate implications. The Auckland Council Group’s climate impact is not covered in the interim report unless a material climate event takes place in the six months to 31 December 2024, and so far there has not been one.

17. Similarly, this report does not seek any decisions that affect greenhouse gas emissions or the council’s plans to reduce them. The activities reported in the interim report may influence our climate action efforts, however this can only be determined after 31 December 2024

Ngā whakaaweawe me ngā tirohanga a te rōpū Kaunihera

Council group impacts and views

18. The timing, extent of procedures and areas of focus of the independent review engagement has been discussed with council-controlled entities, Port of Auckland Limited, and City Rail Link and their views have been incorporated where possible.

19. In January and February 2025, we will get their feedback on the interim report content and ensure their relevant issues are included.

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

Local impacts and local board views

20. This report relates to the independent review of the group’s interim report, which does not include reporting at a local board level. No decision is sought that would impact local boards and accordingly the views of the local boards have not been sought.

Tauākī whakaaweawe Māori

Māori impact statement

21. This report relates to the independent review of the group’s interim report. The interim report does not include reporting on the group’s contribution to Māori outcomes unless a material matter arises in the six months to 31 December 2024, and so far there has not been one.

Ngā ritenga ā-pūtea

Financial implications

22. As in the past, the interim review engagement fee has been set at 9 per cent of Auckland Council’s annual audit fee. The proposed fee for the review engagement is $146,168 plus disbursements which is an increase of 5 per cent on the fee charged for the same interim review engagement last year. This is provided for within existing budgets.

Ngā raru tūpono me ngā whakamaurutanga

Risks and mitigations

23. There is a risk of a potential further increase in the auditor’s fees. This could occur if there is a significant increase in the review scope which would require extra audit effort, or if Audit New Zealand engages experts (e.g. valuers).

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

Ngā koringa ā-muri

Next steps

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

Ngā tāpirihanga

Attachments

No.	Title	Page
a ⇨	Draft review engagement letter 2024

Ngā kaihaina

Signatories

Authors

Tracy Gers - External Stakeholder Group Reporting Manager

Francis Caetano - Group Financial Controller

Authorisers

John Bishop - Group Treasurer

Ross Tucker - Group Chief Financial Officer

Meredith Webb - Chief Risk and Assurance Officer

Audit and Risk Committee

03 December 2024

Climate disclosure work programme update December 2024

File No.: CP2024/17731

Te take mō te pūrongo

Purpose of the report

1. To provide an update on the Auckland Council Group’s progress towards compliance with the Aotearoa New Zealand Climate Standards in accordance with the Financial Markets Conduct Act 2013.

Whakarāpopototanga matua

Executive summary

2. This report informs the Audit and Risk Committee of the Auckland Council Climate Disclosure (CD) team’s progress in preparing a climate statement that complies with relevant standards and legislation.

3. The group delivered a compliant climate statement for the year ended 30 June 2024, the first under the Financial Markets Conduct Act 2013 (FMCA). Its delivery was the result of collaboration and a well-coordinated approach across the council group.

4. The 2025 CD Work Programme structure continues to reflect the four thematic areas in the Aotearoa New Zealand Climate Standards (the climate standards). These are categorised as Governance, Strategy, Metrics and Targets, and Risk Management. The workstreams prioritise critical projects as the group continues to work towards preparation of its second climate statement under the FMCA which has fewer transitional provisions than last year.

5. Progress towards determining a robust work programme has been developed in collaboration with the Chief Sustainability Office (CSO) team, and as part of embedding key climate initiatives into “business as usual”.

Ngā tūtohunga

Recommendation/s

That the Audit and Risk Committee:

a) tuhi ā-taipitopito / note the Auckland Council Group’s progress towards compliance with climate disclosure standards and associated legislation which came into effect from 30 June 2024.

Horopaki

Context

6. Auckland Council Group is a listed issuer of debt on the New Zealand Exchange and is subject to the Financial Markets Authority Act. As such, the group is required to prepare a group Climate Statement under the climate standards issued by the External Reporting Board (XRB).

7. The Auckland Council climate reporting team has an ongoing work programme to ensure the group’s climate statement will be fully compliant with the FMCA and climate standards for the year ending 30 June 2025.

8. To be compliant the group must:

· prepare and file an annual climate statement in accordance with climate standards
(by responding to each disclosure within the climate standards).

· prepare and keep proper climate-related disclosure records.

· make the climate statement available to the public.

· obtain independent limited assurance over the disclosure of Scope 1 and 2 Greenhouse Gas (GHG) emissions at a minimum.

9. In November 2024, the XRB approved three out of four proposals related to climate and assurance standards:

· One-Year Extension for scope 3 GHG emissions disclosures adoption.

· One-Year Extension for anticipated financial impacts disclosures adoption.

· New One-Year Adoption Provision for the assurance of scope 3 GHG emissions.

10. The proposal to delay transition planning by an additional year was not adopted due to strong user demand for this information.

11. We intend to make use of all three provisions however, we are working towards these, and if in a reportable position next year, the Scope 3 and anticipated financial impacts will be disclosed.

Tātaritanga me ngā tohutohu

Analysis and advice

Work programme 2025

12. We have incorporated the XRB’s changes to adoption provisions into the 2025 work programme. However, we aim to continue working to complete the work on Scope 3 GHG emissions and anticipated financial impacts as soon as possible.

13. The Climate Disclosure (CD) and Chief Sustainability Office (CSO) teams have collaborated to identify key areas of priority for the 2025 work programme. We have clarified our teams’ joint, and individual delivery to ensure we deliver the required pieces of work that are not only needed for the group’s climate statement, but to drive the group’s response to climate change.

14. The climate disclosure work is governed by a governance group that comprises the Chief Financial Officers and sustainability leaders from across the Council Controlled Organisations (CCOs) and Port of Auckland (POAL). It meets regularly for updates on the programme, consideration of programme risks and to drive a coordinated approach to delivering the council group’s climate statement.

15. An overview of the programme’s key projects to achieve compliance and those that support delivering a disclosure that supports a favourable disclosure^{^[3]} are set out below:

Project overview	Led by
Projects required to achieve compliance
Prepare consolidated scope 1, 2 and 3 group GHG emissions inventory with commentary	Auckland Council – Led by CSO and supported by CD, CCOs and POAL sustainability teams
Implement a formal record keeping system to manage group record keeping and evidence gathering process	Auckland Council – CD Team
Determine materiality for annual climate statements	Auckland Council CD Team (refresh non-financial materiality) CSO Team (determine materiality for risks and GHGs)
Update the compliance plan based on lessons learned (originally presented at 5 Dec 2023 ARC)	Auckland Council – CD Team
Projects that support our climate disclosure
Develop training materials for the Governing Body and executive leadership teams across the group to build climate capability to enable better decision-making.	Auckland Council – led by CSO and CD team support
Develop a group transition plan	Auckland Council – CSO team
Create a plan to roll out the Auckland Council methodology for developing scenarios, identifying risks and opportunities, and aligning it to our transition plan, to substantive CCOs and POAL.	Auckland Council – CSO team
Determine current impacts of climate change – financial and non-financial	Auckland Council – CD Team
Develop methodologies for determining the percentage of assets and operations impacted by climate change	Auckland Council - CD, Asset Strategy, Risk and Assurance teams
Develop methodologies for determining anticipated impacts and financial impacts of climate risks and opportunities	Auckland Council - CD team
Develop metrics and targets that demonstrate our performance in addressing our top climate risks – both Auckland Council and entity led	Auckland Council – led by CD team with CSO support

Projects required to achieve a compliant statement

Record keeping approach

16. In October 2023, the Financial Markets Authority (FMA) released guidance on how climate reporting entities should create, keep, and maintain records to show that their climate statements comply with the Financial Markets Conduct Act and New Zealand Climate Standards.

17. The process of gathering records and evidence for the climate statement for the year ending 30 June 2024 provided useful insights.

18. EY reviewed our record-keeping policy, systems and processes and the final climate statement before its release on 30 September 2024 and provided useful recommendations for improvements.

19. For 2025, we plan to implement an improved centralised system for storing evidence to substantiate all facts in the climate statement.

Materiality assessment

20. In preparation for the group’s next climate statement, the CD team is continuing to develop levels of materiality in the context of climate-related disclosures.

21. We received useful insights from last year’s materiality survey to our bankers, insurers and Audit and Risk Committee independent members and Parks and Environment Committee chair and are considering building on this in the current year.

22. We do not expect that it will change substantially for 2024/2025.

Projects that support a favourable climate statement

Transition planning

23. The climate standards require the group to share details about its transition plan, which includes changes to its business model and strategy to address climate risks and opportunities and how these changes align with its funding decisions.

24. The CSO team is collaborating with other teams at Auckland Council and related organisations to develop this transition plan.

25. According to climate standards, a transition plan outlines an entity's targets and actions for moving towards a low-emissions, climate-resilient future. The goal is to adapt based on insights gained about climate-related risks and opportunities, enabling the organisation to manage risks and seize new advantages.

26. A pilot project with Waste Management was completed in October 2024, along with a report on findings and recommendations for future implementation. This pilot will inform the transition planning process.

27. We aim to complete a draft transition plan covering the most material areas of the group in quarter 4 2024/2025, and it will continue being expanded and updated to include more parts of the group.

28. The transition plan will be used to guide the next Long-term Plan (2027-2037).

Climate training for elected members and executive leadership teams

29. The CSO is prioritising building capability to improve decision-making. They are creating training modules to help elected members understand their climate disclosure obligations and make informed decisions. Staff will deliver these modules over about a year, depending on scheduling.

30. They will share all training content with the CCOs and POAL sustainability teams to help build a common knowledge and understanding across the group.

Climate risk management

31. The CSO has developed a methodology for creating climate-related scenarios and using the scenarios to identify and assess risks and opportunities. This methodology has been shared with members of the CD Governance Group.

32. The methodology was applied when rating the group climate risks in 2024 and the results were included in parts of the Strategy, Risk Management and Metrics and Targets sections of the 2023/2024 climate statement.

33. The CSO is preparing an integration plan to embed the methodology across the group. This plan will be ready by early 2025. A review of mitigations and the management of risks will form part of the integration and transition planning.

34. All work related to group climate risk management is being conducted as a coordinated effort between Auckland Council’s CSO, the risk managers and sustainability managers from Auckland Council, substantive CCOs and POAL.

Tauākī whakaaweawe āhuarangi

Climate impact statement

35. The CD programme includes activities that will highlight and quantify the impacts of the most material climate-related risks on the group and seeks to ensure that measures and activities are put in place to avoid, reduce, eliminate or mitigate those impacts.

Ngā whakaaweawe me ngā tirohanga a te rōpū Kaunihera

Council group impacts and views

36. The CD programme structure is designed to regularly engage with all group entities at a leadership and operational level through regular meetings and workshops. All group entities are supportive of the climate disclosure work programme although resourcing and capacity continues to be an ongoing challenge.

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

Local impacts and local board views

37. The overall work programme currently sets out workstreams and activities at a regional level and therefore local board views have not been sought.

Tauākī whakaaweawe Māori

Māori impact statement

38. The impact of climate risks on Māori has been considered and ongoing alignment with the Mana Outcomes mahi continues.

Ngā ritenga ā-pūtea

Financial implications

39. This report does not require any decision to be made, therefore there are no financial implications associated with the recommendations of this report.

Ngā raru tūpono me ngā whakamaurutanga

Risks and mitigations

40. The CD work programme includes projects to establish processes and structures that enable the effective and meaningful management of the group’s climate-risks and opportunities and in turn, a compliant and favourable disclosure.

41. A critical dependency for the success of this programme includes receiving GHG-related information from the CCOs and POAL on time and in full. To mitigate this risk, the CD team meets regularly with the group entities and reinforces our detailed timeline.

42. To comply with the climate standards, the group must prepare a complete and accurate climate statement, including all important information. This might mean disclosing negative information about the group. The CD team collaborate with various teams to ensure all material information is included, that explanations support any negative information, and actions are identified for areas of improvement.

Ngā koringa ā-muri

Next steps

43. Another progress report on the overall work programme 2025 is expected before this committee at its meeting in on 13 May 2025.

Ngā tāpirihanga

Attachments

There are no attachments for this report.

Ngā kaihaina

Signatories

Authors

Tracy Gers - External Stakeholder Group Reporting Manager

Hinewairere Warren - Programme Manager

Sophie Baillie - Manager Group Sustainable Finance

Carlien Kruger - Group Climate Risk Specialist

Francis Caetano - Group Financial Controller

Authorisers

John Bishop - Group Treasurer

Ross Tucker - Group Chief Financial Officer

Meredith Webb - Chief Risk and Assurance Officer

Audit and Risk Committee

03 December 2024

Review of the draft Auditor-General limited assurance engagement letter on consolidated greenhouse gas emissions disclosures for the year ended 30 June 2025

File No.: CP2024/17732

Te take mō te pūrongo

Purpose of the report

1. To review the draft Office of the Auditor-General limited assurance engagement letter (draft letter) on greenhouse gas (GHG) emissions disclosures for the year ended 30 June 2025 (Attachment A).

Whakarāpopototanga matua

Executive summary

2. The Audit and Risk Committee has responsibility for reviewing and endorsing the draft letter before the final letter can be issued for approval by the mayor and chief executive.

3. This report provides an outline of an early draft of Audit New Zealand’s limited assurance engagement letter.

4. Important matters such as the scope of the engagement, the timing and extent of procedures to be performed by component auditors, materiality and fees are still under discussion with Audit New Zealand. As a result, we anticipate some changes or clarifications before the letter is finalised.

5. The draft letter outlines the terms for a limited assurance engagement on Auckland Council Group's climate reporting disclosures for the year ending 30 June 2025.

6. It details the responsibilities of both the auditors and the Council.

7. The review will focus on the Group's climate reporting disclosures, ensuring they are accurate and comply with relevant standards.

8. The group financial controller will present the final engagement letter for endorsement at the 18 February 2025 committee meeting.

9. Audit New Zealand Audit Director Wikus Jansen van Rensburg is in attendance to answer any questions the committee may have on the early draft letter.

Ngā tūtohunga

Recommendation/s

That the Audit and Risk Committee:

a) arotake / review Audit New Zealand’s draft limited assurance engagement letter.

Horopaki

Context

10. The Financial Markets Conduct Act 2013 requires Auckland Council to prepare and file a group climate statement based on the Aotearoa New Zealand Climate Standards. Starting from 30 June 2025, a minimum of limited assurance on GHG emissions disclosures is required.

11. Audit New Zealand, as the appointed auditor, will perform this limited assurance engagement for the first time and has prepared an early draft of their engagement letter.

12. The limited assurance engagement is similar to a review engagement, providing moderate assurance that nothing has come to the auditor’s attention to suggest the disclosures are inaccurate or unfairly stated.

13. This engagement follows the review standards issued by the the New Zealand Auditing and Assurance Standards Board (NZAuASB) and involves enquiry, analytical procedures, obtaining representations, and reconciling GHG emissions to underlying calculations and records.

14. The draft letter outlines the scope of responsibilities, group entities subject to review, areas of review focus, and administrative matters such as logistics and timetable. Management has reviewed the letter and is having discussions with Audit New Zealand about various matters such as the scope of the engagement, the timing and extent of procedures to be performed by component auditors, materiality and fees.

15. The group financial controller will present the final engagement letter for endorsement at the 18 February 2025 committee meeting.

Tātaritanga me ngā tohutohu

Analysis and advice

Engagement letter

Key points

16. Significant group components include Auckland Council, Auckland Transport, Watercare Services, and Port of Auckland. Other components may be identified during the review.

17. The engagement scope will be the Group's climate reporting disclosures related to Scope 1 and 2 GHG emissions and related policies.

Engagement logistics

18. Team: There is a list of key members of the audit team and their roles.

19. Timetable: Provides a detailed schedule for the review process, including key dates for interim reports and sign-offs, still under discussion.

20. Fees: The fee for the engagement will be finalised in early 2025. Disbursements for experts or third-party assurance practitioners will be agreed upon in advance.

Detailed areas of focus

21. Audit New Zealand will focus on the following areas:

· Control Environment

o Assess the control environment and business processes related to climate reporting.

o Evaluate internal controls over GHG emissions data.

· Analytical Review

o Enquire about the Group’s climate reporting performance compared to prior periods.

o Ensure explanations for significant variances are reasonable and supported.

· Specific Matters

o Detail testing where required, based on their judgement.

o Review the completeness and accuracy of Scope 1 and 2 GHG emissions.

o Ensure the Group's climate policies are properly documented and followed.

o Coordinate with auditors of significant components to ensure consistent and accurate reporting.

o Testing of the actual consolidation.

Engagement fees

22. Audit New Zealand has indicated that the group fee for this limited assurance engagement is in the order of $100,000. Auckland Council currently pays Toitū (Toitū) Envirocare in the order of $12,000 for their assurance over the Auckland Council corporate emissions. Although Toitū provides assurance under a different framework, management is working through the quantum of differences, especially since Watercare, Auckland Transport and Tātaki Auckland Unlimited will have their Scope 1 and 2 GHG emissions audited in their annual report audits, as these measures are material performance measures in their Statements of Intent.

Tauākī whakaaweawe āhuarangi

Climate impact statement

23. GHG emissions reporting is integral to our assessment of the group’s impact on the climate and to inform our future emissions reduction plans. Assurance of GHG emissions provides assurance to investors of the group’s performance against its targets and commitments.

Ngā whakaaweawe me ngā tirohanga a te rōpū Kaunihera

Council group impacts and views

24. The limited assurance engagement will extend to Port of Auckland, Watercare and Auckland Transport. All of these entities are aware of the engagement and are putting plans in place to ensure they deliver the required information on time.

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

Local impacts and local board views

25. GHG emissions are not recorded and reported at a local board level, therefore local board views have not been sought.

Tauākī whakaaweawe Māori

Māori impact statement

26. Although the impacts from group GHG emissions have an impact on Māori, the measurement and reporting of emissions does not, but it provides transparency and accountability that will support our engagement with Māori.

Ngā ritenga ā-pūtea

Financial implications

27. The draft letter does not contain an audit fee and therefore there are no financial implications to include.

Ngā raru tūpono me ngā whakamaurutanga

Risks and mitigations

28. There is a risk that the auditor’s fees exceed our budget, which was based on the current cost of Toitū Envirocare assurance costs, with an allowance for overruns.

29. To try mitigating this risk, Audit New Zealand and Auckland Council staff have been meeting regularly to discuss the engagement and the level of effort required.

Ngā koringa ā-muri

Next steps

30. The audit fee will be finalised in early 2025 in discussion with the chair of the committee.

31. Once the fee is finalised, using the endorsement of the draft letter by the committee, Audit New Zealand will issue the letter in its final form for the mayor and chief executive to sign.

32. Auckland Council staff will also confirm and finalise the council and Audit New Zealand’s delivery timelines, to ensure a timely and efficient assurance process.

Ngā tāpirihanga

Attachments

No.	Title	Page
a ⇨	Early draft Letter of Engagement for limited assurance on GHG disclosures for the year ended 30 June 2025

Ngā kaihaina

Signatories

Authors

Tracy Gers - External Stakeholder Group Reporting Manager

Francis Caetano - Group Financial Controller

Authorisers

John Bishop - Group Treasurer

Ross Tucker - Group Chief Financial Officer

Meredith Webb - Chief Risk and Assurance Officer

Audit and Risk Committee

03 December 2024

Preparation of the interim report and NZX release for the six months ending 31 December 2024

File No.: CP2024/17734

Te take mō te pūrongo

Purpose of the report

1. To provide the Audit and Risk Committee with an update on the status of financial processes for the preparation of the interim report and the NZX release for the six months ending 31 December 2024.

Whakarāpopototanga matua

Executive summary

2. As an issuer of debt on the NZX, listing rules require the Auckland Council Group to release financial information within 60 days after the six months ending 31 December 2024.

3. To promote good governance and meet investor expectations, management prepares an interim report and has negative assurance provided over it by Audit New Zealand on behalf of the Auditor-General.

4. On 18 February 2025, the Audit and Risk Committee will be asked to recommend that the deputy mayor approve, and recommend to the mayor and chief executive that they approve, the following documents for release to the NZX on 27 February 2025:

· NZX announcement

· associated media release

· interim report for the six months ending 31 December 2024.

5. This report assists the committee in its assessment of the adequacy of the processes and the controls in place for the preparation of the interim report. This report outlines:

· key areas where judgements and assumptions are applied

· Audit New Zealand’s key review matters for the review engagement as at 31 December 2024

· review engagement milestones

· quality assurance and compliance sign-off processes

· management representation letters and management confirmations

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

6. To encourage transparency in our committee reporting, we have endeavoured to include as much information as possible about the half year reporting and audit review requirements in this report. However, there is some information which cannot be released to the public due to disclosure requirements of the NZX. Instead, updates on key areas of judgement, estimates and assumptions, and on issues and risks will be presented to the committee in the confidential report at this meeting “Confidential: Interim report and NZX release for the six months ending 31 December 2024”.

7. Additionally, six other documents will be provided in the confidential item relating to the preparation of the reporting for the six months ending 31 December 2024:

· draft NZX announcement (based on prior year)

· draft memo to the group treasurer and group chief financial officer (based on prior year)

· draft memo to the mayor and chief executive (based on prior year)

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

· draft fraud questionnaire

· pro forma interim report for the six months ending 31 December 2024 (for endorsement).

Ngā tūtohunga

Recommendation/s

That the Audit and Risk Committee:

a) tuhi ā-taipitopito / note the information contained in this financial process status update for the Auckland Council Group NZX announcement and interim report for the six months ending 31 December 2024

b) tuhi ā-taipitopito / note that an update on the confidential matters and confidential draft documents related to the interim report and NZX release will be discussed later in this meeting in confidence.

Horopaki

Context

8. As an NZX debt issuer, Auckland Council Group must release financial information within 60 days after the six months ending 31 December 2024.

9. The NZX release includes:

· Results announcement

· Media release

· Interim report for the six months ending 31 December 2024

10. Management prepares an interim report, with negative assurance from Audit New Zealand, to promote good governance and meet investor expectations.

11. The interim report updates material information from the Auckland Council Group Annual Report 2023/2024. Committee members should read it alongside volume three of the annual report.

12. A pro forma interim report is included in the confidential report “Confidential: Interim report and NZX release for the six months ending 31 December 2024.” It outlines the format, policies, financial statements, and notes, with some sections to be updated after 31 December 2024.

13. On 18 February 2025, the Audit and Risk Committee will review the NZX release and the preparation processes and controls.

14. Audit New Zealand will attend the meeting to discuss their review and ensure a robust financial review has occurred.

15. Management will ask the Audit and Risk Committee to recommend that the deputy mayor:

· Approve the half-year NZX release for the six months ended 31 December 2024

· Recommend the mayor and chief executive approve and release the half-year NZX release on 27 February 2025

16. Before making their recommendation, the deputy mayor will review the financial and operational performance of the group, as delegated by the Governing Body on 15 December 2022.

Tātaritanga me ngā tohutohu

Analysis and advice

17. The pro forma interim report is similar to the 31 December 2023 report, with two notable changes:

· A breakdown of rates revenue to provide clarity over the material increase in rates revenue compared to the prior year.

· Reduced disclosure of the provision for Risk Category 3 buy-outs and Risk Category 2p grants. The prior year included detailed disclosure of the assumptions and judgements related to this provision as it was the first time reporting it.

18. Disclosures to be discussed at the 18 February 2025 committee meeting include:

· Auckland Future Fund, pending its capitalisation status.

· Changes to assumptions in provisions, dependent on ongoing actuarial work.

· Subsequent events.

19. We are monitoring for significant changes in financial performance, position, or cash flows due to climate change, but none have been identified since 30 June 2024.

20. Key areas of judgement and assumptions in the 31 December 2024 interim report are:

· Valuation of storm-affected property buyouts provision

· Valuation of weathertightness and associated building defect claims provision

· Valuation of investment property

· Valuation of property, plant, and equipment

· Assets held for sale

· Asset and work-in-progress impairment

· Time-value of rates revenue

21. Accounting memoranda are being prepared for these areas and will be reviewed by the Group Financial Controller. Significant changes will be discussed at the 18 February 2025 committee meeting.

22. Audit New Zealand’s key review matters in its review engagement letter broadly align with management’s key matters, including:

· internal control matters:

o management override of controls

o legislative compliance

· accounting matters:

o valuation of storm-affected property buyouts provision

o valuation of property, plant and equipment

o construction costs and impairment assessments

o valuation of the weathertightness and associated building defect claims provision

o valuation and disclosure of derivatives

o impact of Local Government (Water Services Preliminary Arrangements) Act

o valuation of investment property

o Auckland Future Fund

o rates

o subsequent events

Key milestones

Quality assurance and compliance approvals

23. We will review the consolidated results and commentary of the NZX release documents to ensure they are accurate, complete, reasonable, comply with laws, and meet council communication standards. Here is a summary of the reviews:

Reviewer	Consolidated results and commentary	Interim report	NZX release	Media release
Group chief financial officer*		ü	ü	ü
Group treasurer*	ü	ü	ü	ü
GM financial strategy and planning		ü	ü	ü
GM financial and business performance*		ü	ü	ü
Group financial controller*	ü	ü	ü	ü
Manager external stakeholder group reporting manager*	ü	ü	ü	ü
Senior group reporting technical accountant*	ü	ü	ü	ü
Financial accounting manager*	ü	ü	ü	ü
Senior specialist corporate communications			ü	ü
Senior solicitor and Mayne Wetherell		ü	ü	ü

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

Management representation letters and management confirmations

25. Audit New Zealand requires the mayor and chief executive to sign a letter confirming the accuracy and completeness of financial reporting and compliance with standards.

26. To support this, the group CFO, treasurer, and group financial controller will sign a supporting letter.

27. A draft of these letters is included in the confidential report titled “Confidential: Interim report and NZX release for the six months ending 31 December 2024.”

Draft representation on fraud and fraud questionnaire

28. Audit New Zealand asks about fraud risk using a questionnaire sent to the Audit and Risk Committee, senior management, and the Risk and Assurance department.

29. The committee responds in writing, with input from senior management and the Risk and Assurance department.

30. A draft of the fraud questionnaire is included in the confidential report titled “Confidential: Interim report and NZX release for the six months ending 31 December 2024.”

Other matters

31. The group financial controller will inform the committee chair of any significant risks, important judgements, or unresolved disagreements with Audit New Zealand that arise between meetings.

Tauākī whakaaweawe āhuarangi

Climate impact statement

32. This report is only about financial reporting and doesn't have any climate implications. The Auckland Council Group’s climate impact will be covered in the annual reports.

33. This report doesn't make any decisions that affect greenhouse gas emissions or the council’s plans to reduce them. However, the activities reported in the interim report can be affected by climate change and may influence our climate action efforts.

Ngā whakaaweawe me ngā tirohanga a te rōpū Kaunihera

Council group impacts and views

34. We will get feedback from council-controlled entities, Port of Auckland Limited, and City Rail Link Limited to ensure their relevant issues are included in the 31 December 2024 interim report.

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

Local impacts and local board views

35. This report relates to the financial reporting of the Auckland Council Group, which does not include reporting at a local board level. No decision is sought that would impact local boards and accordingly the views of the local boards have not been sought.

Tauākī whakaaweawe Māori

Māori impact statement

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

Ngā ritenga ā-pūtea

Financial implications

37. 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

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

39. Any risks and mitigations relating to the half-year interim reporting, key judgements and assumptions will be detailed in the confidential section of this meeting under the report “Confidential: Interim report and NZX release for the six months ending 31 December 2024”.

Ngā koringa ā-muri

Next steps

40. The committee will review the confidential key judgements, estimates and assumptions and attachments relating to this report in the confidential section of this meeting under the report “Confidential: Interim report and NZX release for the six months ending 31 December 2024”.

41. The Auckland Council Group NZX announcement, media release and interim report for the six months ending 31 December 2024 will be presented to the Audit and Risk Committee on 18 February 2025 for review and approval.

Ngā tāpirihanga

Attachments

There are no attachments for this report.

Ngā kaihaina

Signatories

Authors

Tracy Gers - External Stakeholder Group Reporting Manager

Francis Caetano - Group Financial Controller

Authorisers

John Bishop - Group Treasurer

Ross Tucker - Group Chief Financial Officer

Meredith Webb - Chief Risk and Assurance Officer

Audit and Risk Committee

03 December 2024

Annual report on the performance of the Audit and Risk Committee

File No.: CP2024/17911

Te take mō te pūrongo

Purpose of the report

1. To provide an annual report summarising the Audit and Risk Committee’s activities and outlining how the committee has contributed to the council’s governance and strategic objectives. The report is 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 the 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 will 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 between September 2023 and the date of this report. The slightly longer timeframe covered by this report reflects a return to an annual review based on a calendar year. The previous report was delivered in September rather than December 2023 to enable the outgoing chair to deliver a report before the end of his term.

6. In 2024 the committee has focused on being briefed, having oversight of, and providing direction on:

· City Rail Link Limited

· Health, safety, and wellbeing

· Māori outcomes

· Long-term plan processes and risks

· 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

· Cyber security risk

· Legal activity

· Annual reports and Audit New Zealand’s responses.

7. The committee continues to hold relationships with the mayor, other elected members, the chief executive and management, the Office of the Auditor-General and Audit New Zealand that are pitched at an appropriate level and achieve productive working relationships 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 meeting 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 one of these, Paul Connell, appointed as independent chair of the committee. This 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 contributes 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 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 September 2023:

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 September 2023 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 included in the forward work programme.

City Rail Link Limited

16. The committee has maintained its focus on understanding the approach to risk management processes within City Rail Link Limited, with focused updates presented in December 2023 and May 2024 on sponsor risks. This has enabled the committee to have oversight of identification, management and assurance of risk.

Health, Safety and Wellbeing

17. 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

18. Between September 2023 and August 2024, the committee provided oversight of the six-monthly review of council’s Te Tiriti o Waitangi Audit Response Programme 2021-2024 which aimed to implement the recommendations contained in Te Tiriti o Waitangi audit report 2021.

19. In August 2024 the committee also received an update on specific outcomes from the He Waka Kōtuia – Te Tiriti o Waitangi audit report 2024 (2024 Treaty Audit Report), which included a further 28 recommendations. The committee was briefed on these recommendations and on the actions underway to respond to them.

Long-term plan

20. The committee reviewed the risk management approach and process for the Long-term Plan 2024-2034 in December 2023. Key risks included the role of three waters in the long-term plan given existing legislation and changes in government policy, consideration of climate risks and opportunities and an uncertain economic environment.

21. The committee was kept updated on key controls employed and management of risks in relation to the preparation of the long-term plan between December 2023 and June 2024. In June 2024 the committee resolved to advise the Governing Body that effective internal control and risk management processes had been followed during the preparation of the Long-term Plan 2024-2034.

Climate disclosures

22. In December 2023 and May 2024, the committee received updates on the Auckland Council Group’s progress towards compliance with climate disclosure standards and associated legislation which became mandatory from 30 June 2024. This included work programme updates, updates on projects required to achieve a compliant statement and projects that support council’s climate statements. These updates were provided with the intent of obtaining the committee’s oversight and endorsement of the 2023/2024 climate change work programme.

23. The council’s climate-related disclosures comprised Volume 4 of the Auckland Council Annual Report 2023/2024. At its 17 September 2024 meeting the committee endorsed the Annual Report (including Volume 4) and recommended that it be adopted by the Governing Body.

Impacts of severe weather events

24. The committee has continued to monitor and review updates relating to the ongoing impacts of the Auckland Council Group’s response and recovery from the Auckland Anniversary weekend floods and Cyclone Gabrielle. This monitoring included updates on the Auckland Emergency Management Prioritised Plan, Recovery Office activities and risk management systems, insurance claims, and CCO quarterly risks.

Insurance activity and annual renewal

25. The committee provided oversight and review of risks relating to the council’s 2024/2025 insurance renewal and endorsed the indicative programme to the Revenue, Expenditure and Value Committee. It also guided the continuation of phase 3 of the cumulative loss modelling study and provided oversight of the Auckland Anniversary flood claim and the self-insurance fund.

Enterprise, CCO and group risks

26. The committee regularly reviewed the Enterprise Risk Management work programme, which included:

· 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).

· Approval of the Auckland Council Risk Appetite Statement.

· 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.

Cybersecurity risk

27. A committee workshop on cybersecurity risk was held in August 2024. The committee received information on how these risks are being managed by Auckland Council and identified a need to exercise more oversight over this important area. A cyber security update has subsequently been added to the committee’s forward work programme.

Internal audit and integrity activity

28. The committee reviewed the internal audit work programme, which included:

· Activities undertaken to progress the internal audit plan for 2023/2024.

· Approving the 2024/2025 Internal Audit Plan in May 2024.

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

Legal activity update

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

· legal issues arising out of the severe weather events.

· legislative reform

· ongoing litigation

· legal developments relating to climate change.

Annual reports and Audit New Zealand’s response

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

· interim and annual report

· annual budget

· annual green bond report

· external audit briefings.

32. 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 2023

o the 12-month period ended 30 June 2024

· the interim financial statements for the six months ended 31 December 2023

· the Annual Report (including financial statements) for the year ended 30 June 2024.

33. At its 20 August 2024 meeting, the committee reviewed the draft response to Audit New Zealand’s fraud enquiries of the Audit and Risk Committee, and recommended management provide the response to Audit New Zealand for their year-end audit.

34. 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).

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

Conclusion

36. The committee has successfully discharged its responsibilities under its terms of reference.

37. 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 independent oversight of key organisational risks and the management of those risks.

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

Authors

Paul Connell, Chairperson

Audit and Risk Committee

03 December 2024

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: Substantive Council-Controlled Organisations' Quarterly Risk Update - December 2024

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