I hereby give notice that a Risk and Audit Committee Meeting will be held on:
Date: |
Thursday, 19 September 2019 |
Time: |
9.00am |
Location: |
Council Chamber 28-32 Ruataniwha Street Waipawa |
AGENDA
Risk and Audit Committee Meeting
19 September 2019
Our vision for Central Hawke’s Bay is a proud and prosperous district made up of strong communities and connected people who respect and protect our environment and celebrate our beautiful part of New Zealand.
Monique Davidson
Chief Executive
Risk and Audit Committee Meeting Agenda 19 September 2019
2 Declarations of Conflicts of Interest
5.2 Internal Audit Follow Up Audit
6.1 Risk and Audit Committee Briefing
2 Declarations of Conflicts of Interest
RECOMMENDATION THAT the following standing orders are suspended for the duration of the meeting: · 20.2 Time limits on speakers · 20.5 Members may speak only once · 20.6 Limits on number of speakers And that Option C under section 21 General procedures for speaking and moving motions be used for the meeting. Standing orders are recommended to be suspended to enable members to engage in discussion in a free and frank manner. |
Risk and Audit Committee Meeting - 15 August 2019
That the minutes of the Risk and Audit Committee meeting from the 15th August 2019 be confirmed as a true and accurate record.
Risk and Audit Committee Meeting Agenda 19 September 2019
MINUTES OF Central HAwkes Bay
District Council
Risk and Audit Committee Meeting
HELD AT THE Council Chamber, 28-32
Ruataniwha Street, Waipawa
ON Thursday, 15 August 2019 AT the conclusion of the Finance and Planning
Meeting
PRESENT: Mayor Alex Walker
Cr Tim Aitken
Cr Gerard Minehan
Cr Brent Muggeridge
Cr David Tennent
Dr Roger Maaka
IN ATTENDANCE: Joshua Lloyd (Group Manager, Community Infrastructure and Development)
Monique Davidson (CEO)
Bronda Smith (Group Manager, Corporate Support and Services)
Doug Tate (Group Manager, Customer and Community Partnerships)
Nicola Bousfield (People and Capability Manager)
1 Apologies
None
2 Declarations of Conflicts of Interest
None
3 Standing Orders
Committee Resolution Moved: Cr David Tennent Seconded: Cr Gerard Minehan THAT the following standing orders are suspended for the duration of the meeting: · 20.2 Time limits on speakers · 20.5 Members may speak only once · 20.6 Limits on number of speakers And that Option C under section 21 General procedures for speaking and moving motions be used for the meeting. Standing orders are recommended to be suspended to enable members to engage in discussion in a free and frank manner. Carried |
4 Confirmation of Minutes
Committee Resolution Moved: Mayor Alex Walker Seconded: Cr Gerard Minehan That the minutes of the Risk and Audit Committee Meeting held on 28 March 2019 as circulated, be confirmed as true and correct. Carried |
5 Report Section
5.1 Risk and Audit Update |
PURPOSE The purpose of this report is to update the Committee of Risk and Audit activities for monitoring and review purposes.
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Committee Resolution Moved: Cr Brent Muggeridge Seconded: Mayor Alex Walker That, having considered all matters raised in the report, the report be noted. Carried |
Cr Tennent asked whether the civic insurance refund could be used to replenish the capital assets fund. Officers recommended that that refund be used to pay for the risk pool call due.
However it was noted that with future land sales in the pipeline and higher land values than previously expected, the return on these could be used to replenish the fund instead.
5.2 Drinking Water Compliance Report |
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PURPOSE The purpose of this report is to provide an update to the Risk and Audit Committee (the Committee) on Council’s adherence to the New Zealand Drinking Water Standards and to highlight key completed work and work in progress.
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Mayor Walker asked whether the Council had credibility risks around safe drinking water. And what officers are doing to ensure coordinated communications help the organisation to manage this. Officers agreed that this enforced the need to take a planned approach to communications.
Cr Aitken asked how much reporting was automated. Officers confirmed the intention to move toward full automation to enable data to get directly to drinking water assessors.
5.3 Safety & Wellbeing Update |
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PURPOSE The purpose of this report is to provide the Risk & Audit Committee a summary of the 2018/2019 activities in the Safety & Wellbeing space and to provide an overview of the upcoming 2019/2020 plan.
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Mayor Walker noted that different departments have different approaches to risk management. Officers confirmed that the organisation would be upskilled and provided with training to ensure consistency.
5.4 Governance Risk Reporting |
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PURPOSE This report is to update the Risk and Audit Committee on the progress of actions included in the Governance Risk Register.
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5.5 Internal Audit Program |
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PURPOSE The purpose of this report is to update the Committee on the agreed 3 Year Internal Audit Program following the completion of the previous plan
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Mayor Walker raised that an independent audit of the Hawke’s Bay Civil Defence Management Group highlighted business continuity planning of Hawke’s Bay councils as a priority for improvement.
Cr Tennent asked whether business continuity planning would address irregularities in asset data. Officers confirmed that it would not, but that it would outline whether the council was following policy, legislative requirements, auditor general guidelines and provide confidence of checks and balances.
6 Date of Next Meeting
Committee Recommendation Moved: Mayor Alex Walker Seconded: Cr Brent Muggeridge THAT the next meeting of the Central Hawke's Bay District Council be held on 19 September 2019.
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7 Time of Closure
The Meeting closed at 11.46am.
The minutes of this meeting were confirmed at the Risk and Audit Committee Meeting held on 19 September 2019.
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CHAIRPERSON
File Number: COU1-1408
Author: Bronda Smith, Group Manager, Corporate Support and Services
Authoriser: Monique Davidson, Chief Executive
Attachments: 1. EY Audit Closing Report ⇩
2. Draft Annual Report 2018/19 ⇩
PURPOSE
The matter for consideration by the Risk and Audit Committee is the recommendation to Council that the Annual Report 2018/19 be adopted.
RECOMMENDATION for consideration That having considered all matters raised in the report:
a) The Risk and Audit Committee recommend to Council that the Annual Report for 2018/19 be adopted.
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compliance
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Significance |
This matter is assessed as being of some importance |
Options |
This report identifies and assesses the following reasonably practicable options for addressing the matter:
1. The Risk and Audit Committee recommend to Council that the Annual Report for 2018/19 be adopted.
2. The Risk and Audit Committee recommend to Council that the Annual Report for 2018/19 not be adopted. |
Affected persons |
The persons who are affected by or interested in this matter are the ratepayers of Central Hawke’s Bay. |
Recommendation |
This report recommends option 1 for addressing the matter. |
Long-Term Plan / |
None |
Significant |
None |
BACKGROUND
The two main purposes of the Annual Report are:
(a) To compare the actual activities and the actual performance of Council in the year with the intended activities and the intended level of performance as set out in a Long Term Plan or Annual Plan.
(b) To promote Council’s accountability to the community for the decisions made throughout the year.
According to section 98(3) of the Local Government Act 2002, the Annual Report must be adopted within four months after the end of the financial year to which it relates.
Once the Annual Report is adopted by Council, copies must be made available to the public within one month, and a summary of the Annual Report produced. Copies of both these documents must be sent to the Secretary of Local Government, the Auditor General and the Parliamentary Library.
overall year end result
Statement of Comprehensive Income
Set out below is a summary of the financial operating results for the 2018/19 financial.
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Budget 2018/19 $000 |
Actuals 2018/19 $000 |
Variances $000 |
Operating Income |
30,225 |
35,754 |
5,529 |
Less Operating Expenditure |
30,081 |
34,303 |
4,222 |
Net Surplus/(Deficit) from Operating |
144 |
1,451 |
1,307 |
Other Expenses |
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0 |
0 |
(Gains)/Losses on Public Debt |
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(17) |
(17) |
(Gains)/Losses on Investments |
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39 |
39 |
Operating surplus/(deficit) |
144 |
1,429 |
1,285 |
Gains/(losses) on the revaluation of property, plant and equipment |
13,777 |
47,287 |
33,510 |
Total Comprehensive Income |
13,921 |
48,716 |
34,795 |
It is important to note that the above is based on accounting results and is different from the funding requirements of Council. Funding information is provided in the Funding Impact Statement.
Summaries of the major variances are below:
Operating Income
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Budget 2018/19 $000 |
Actuals 2018/19 $000 |
Variances $000 |
Subsidies and Grants |
6,984 |
11,167 |
4,183 |
Fees & Charges |
2,946 |
3,416 |
470 |
Other Revenue |
376 |
788 |
412 |
· Higher subsidies were received primarily from NZTA for weather event funding - $3.9m
· Higher Fees and Charges across Solid Waste - $272k
· Higher Fees and Charges across Wastewater - $183k
· Higher Other Revenue includes Economic Development Funding - $262K
Operating Expenditure
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Budget 2018/19 $000 |
Actuals 2018/19 $000 |
Variances $000 |
Personnel Costs |
4,774 |
5,147 |
(373) |
Depreciation and Amortisation |
12,028 |
11,946 |
82 |
Other Operating Expenditure |
13,015 |
17,037 |
(4,022) |
· Higher Personnel Costs of $373K
· Land Transport cost for maintenance were higher by $712k which is offset by a reduction in renewals approved by NZTA
· Land Transport cost for maintenance were higher by $1.329m due to the flooding events mainly offset by subsidy from NZTA
· Economic Development cost for projects were higher by $301k which is primarily offset from funding from Provincial Growth Fund
· Solid Waste costs were higher by $394K including the increase prices for Carbon Credits for extra waste not anticipated
· Water Supply Costs were higher than budget by $405K due to increased compliance costs and other remedial work required in the network. This was offset by extra Water Meter Rates of $42K and savings for loan repayments. The net deficit of $267K has been loan funded.
Gains/(losses) on the revaluation of property, plant and equipment
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Budget 2018/19 $000 |
Actuals 2018/19 $000 |
Variances $000 |
Gains/(losses) on the revaluation of property, plant and equipment |
13,777 |
47,287 |
33,510 |
All asset classes are on a revolving revaluation cycle. This year the revaluation of the Land and Building assets have been the major revaluation activity. The Roading assets have also had a desktop revaluation.
The overall revaluation for the Roading assets showed an increase of $38.8m in value and Land and Buildings (excluding Land under Roads) showed an increase of $8.5m.
External Debt
Council Treasury Management Policy states
“The funds from all asset sales, operating surpluses, grants and subsidies will be applied to specific projects or the reduction of debt and/or a reduction in borrowing requirements, unless the Council specifically directs that the funds will be put to another use.”
As part of the Treasury function, external debt has been managed on an overall Council basis. Council was budgeted to raised $7.707m in External Debt. There was no long term debt raised this year. This is due to the major projects being in the planning stages in 2018/19. The majority of the projects have been scheduled or started. (Council should note that in July a $10m loan was drawn down to fund the capital projects).
The External Debt as at 30 June 2019 is $2.026m against External Debt of $2.737m last year.
transfers to reservers
The Special Funds and Trust accounts are allocated interest annually from the interest received by Council in the way of investments and interest from activities. It is allocated based on the opening balance and in 2018/19 a total of $203k was allocated to the funds.
Also transferred to the Reserves is the following
Reserve |
From Activity |
Amount |
Comment |
Landfill Aftercare Reserve |
Solid Waste |
50,743 |
Aftercare Provision |
Capital Project Fund |
Parks & Reserves |
(10,957) |
Expenses for the sale of reserves |
Bridge Replacement Fund |
Land Transport |
51,000 |
For future funding of Bridge Replacements |
Adverse Events Fund |
Solid Waste |
8,683 |
Landfill Fire Costs Repayment as budgeted |
Waste Minimisation Levy Fund |
Solid Waste |
18,625 |
Surplus Levy Funding |
Wastewater Upgrade Reserve |
Wastewater |
200,000 |
Funding for upgrade |
Retirement Housing Fund |
Retirement Housing |
216 |
Surplus from Retirement Housing |
changes to reporting standards
There have been no changes to the reporting standards for this annual report.
The Council is required to move to Tier 1 disclosure reporting when the operating expenditure exceeds $30m. As Council exceeded this expenditure limit last year this is the first year Council are reporting under the Tier 1 disclosure requirements.
This has included the following changes being made to the reporting requirements
· On Statement of Cashflows a reconciliation to of Net Operating Surplus/(Deficit) to Cash inflows from operating activities
· Additional breakdown of Revenue and Expenditure in Note 2
· Additional Financial Instruments information in Note 16.
audit opinion
Mr David Borrie, Partner, Ernst and Young, will be in attendance to discuss the outcome of the audit. Attached is the Auditor Closing Report for detail on the process and outcome of the audit.
The auditors have advised that they will issue an unmodified audit opinion for Annual Report 2018/19.
SIGNIFICANCE AND ENGAGEMENT
In accordance with the Council's Significance and Engagement Policy, this matter has been assessed as of some importance.
OPTIONS
The following analysis applies to all options
a) Financial and Resourcing Implications
There are no financial or resourcing implications identified from this report.
b) Risk Analysis
The Risk and Audit committee does not have any statutory responsibilities. The risks for the adoption of the Annual Report remain with Council.
c) Alignment to Project Thrive and Community Outcomes
All options align with Project Thrive and will allow us to achieve our key community outcomes
d) Statutory Responsibilities
The Risk and Audit committee does not have any statutory responsibilities. The statutory responsibilities for the adoption of the Annual Report remain with Council.
e) Consistency with Policies and Plans
This report is consistent with all policies and plans
f) Participation by Māori
This issue is not identified as requiring specific engagement with Maori.
g) Community Views and Preferences
This issue is not identified as requiring specific engagement with the community.
h) Advantages and Disadvantages
The recommendation from the Risk and Audit Committee to Council that the Annual Report be adopted ensures the Terms of References for the Committee are being carried out.
Option 1 The Risk and Audit Committee recommend to Council that the Annual Report for 2018/19 be adopted.
Option 2 The Risk and Audit Committee recommend to Council that the Annual Report for 2018/19 not be adopted
Recommended Option
This report recommends option 1 for addressing the matter.
NEXT STEPS
RECOMMENDATION for consideration That having considered all matters raised in the report:
a) The Risk and Audit Committee recommend to Council that the Annual Report for 2018/19 be adopted.
b) That this report be released following the meeting.
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File Number: COU1-1408
Author: Bronda Smith, Group Manager, Corporate Support and Services
Authoriser: Monique Davidson, Chief Executive
Attachments: 1. Internal Audit Follow Up Audit Report ⇩
PURPOSE
The purpose of this report is to update the Risk and Audit Committee of the outcome of the Internal Audit Follow Up Audit.
Recommendation That, having considered all matters raised in the report, the report be noted. |
significance and engagement
This report is provided for information purposes only and has been assessed as being of some importance.
DISCUSSION
Crowe (formally Crowe Howarth) were appointed as Central Hawke’s Bay District Council’s internal auditors in July 2017.
The Risk and Audit Committee met with Crowe Howarth in a workshop on the 13th September 2017 to discuss the provision of the Internal Audit Plan and to seek feedback from the Committee on the high priority areas for the first 2 years of the Plan.
The Strategic Internal Audit Plan included areas of high residual risk that may expose the Council‘s reputation and image, operational, and/or financial perspective. The Internal Audit Plan was agreed in October 2017 and included the Internal Audits for Contract Management and Sensitive Expenditure.
The Internal Audits have since been conducted and reports have been presented to the Risk and Audit Committee for the following
· Contract Management – 13 June 2018
· Sensitive Expenditure – 14 February 2019
In July 2019, Crowe began the Follow Up Audit for the review of the management actions relating to the audit recommendations contained in the previously completed audits.
A copy of the outcome report is attached.
Of the 28 recommendations included in the two audits, 26 of the management actions have been implemented.
The two remaining recommendations from the Contract Management audit outstanding include:
· Development of Contract Management Plans
· Performance Reporting
Prior to being able to complete the Contract Management Plans and the resulting Performance Reporting, Officers worked through the development of the Procurement and Contract Management Policy which was adopted by Council on 31 October 2018. Following this a Procurement and Contract Management Manual has been developed to assist with the identification of contracts that require a contract management plan and the templates and process to follow.
Council will also recall the work underway as part of the Strategic Supplier Improvement Programme with Councils five strategic contracting partners. As part of this programme, an overarching Master Control Plan sets out the purpose and continuous improvement programme to ensure Council and the Community receive the maximum benefit from its contract partners. These are support by Supplier Specific Contract Management Plans for each contract, that provide the specific frameworks and detail of how the contracts are being managed and performance reporting will occur.
The Strategic Supplier Specific Contract Management Plans will be completed by the 30 September 2019. The remaining contract management plans will be developed by 30 November 2019.
Council approved the Internal Audit Plan in October 2017.Implications ASSESSMENT
This report confirms that the matter concerned has no particular implications and has been dealt with in accordance with the Local Government Act 2002. Specifically:
· There are no financial or resourcing implications contained in this report:
· Council staff have delegated authority for any decisions made;
· Council staff have identified and assessed all reasonably practicable options for addressing the matter and considered the views and preferences of any interested or affected persons (including Māori), in proportion to the significance of the matter;
· Any decisions made will help meet the current and future needs of communities for good-quality local infrastructure, local public services, and performance of regulatory functions in a way that is most cost-effective for households and businesses;
· Unless stated above, any decisions made can be addressed through current funding under the Long-Term Plan and Annual Plan;
· Any decisions made are consistent with the Council's plans and policies; and
· No decisions have been made that would alter significantly the intended level of service provision for any significant activity undertaken by or on behalf of the Council, or would transfer the ownership or control of a strategic asset to or from the Council.
Next Steps
Officers will continue to manage the actions required from the audits and include information in the update reports to Risk and Audit Committee.
RESOLUTION TO EXCLUDE THE PUBLIC
That the public be excluded from the following parts of the proceedings of this meeting. The general subject matter 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 of the Local Government Official Information and Meetings Act 1987 for the passing of this resolution are as follows:
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Recommendation This is the final meeting of the Risk and Audit Committee for the Council term. |