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

Order Of Business

1          Apologies. 3

2          Declarations of Conflicts of Interest 3

3          Standing Orders. 3

4          Confirmation of Minutes. 3

5          Report Section. 10

5.1            Annual Report 2018/19. 10

5.2            Internal Audit Follow Up Audit 162

6          Public Excluded. 173

6.1            Risk and Audit Committee Briefing. 173

7          Date of Next Meeting. 173

8          Time of Closure. 173

 

 


1            Apologies

2            Declarations of Conflicts of Interest

3            Standing Orders

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.

 

4            Confirmation of Minutes

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.

 

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

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.

 

Committee Resolution  

Moved:       Mayor Alex Walker

Seconded:  Cr Brent Muggeridge

That, having considered all matters raised in the report, the report be noted.

 

Carried

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

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.

 

Committee Resolution  

Moved:       Cr Gerard Minehan

Seconded:  Cr Tim Aitken

That, having considered all matters raised in the report, the report be noted.

 

Carried

 

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

PURPOSE

This report is to update the Risk and Audit Committee on the progress of actions included in the Governance Risk Register.

 

Committee Resolution  

Moved:       Cr Brent Muggeridge

Seconded:  Cr Gerard Minehan

That, having considered all matters raised in the report, the report be noted.

 

Carried

 

5.5         Internal Audit Program

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

 

Committee Resolution  

Moved:       Cr Gerard Minehan

Seconded:  Cr David Tennent

That, having considered all matters raised in the report, the report be noted.

Carried

 

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.

 

 

 

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.

 

...................................................

CHAIRPERSON


 

5            Report Section

5.1         Annual Report 2018/19

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.

 

 

 

compliance

 

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 /
Annual Plan Implications

None

Significant
Policy and Plan Inconsistencies

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.

 

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

 

0

0

(Gains)/Losses on Public Debt

 

(17)

(17)

(Gains)/Losses on Investments

 

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

 

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

 

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

 

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

The Annual Report 18/19 will be presented to Council at the Council meeting on 26 September for adoption.

 

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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Risk and Audit Committee Meeting Agenda                                                            19 September 2019

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5.2         Internal Audit Follow Up Audit

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.

 


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Risk and Audit Committee Meeting Agenda                                                          19 September 2019

6            Public Excluded   

RESOLUTION TO EXCLUDE THE PUBLIC

Recommendation

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:

General subject of each matter to be considered

Reason for passing this resolution in relation to each matter

Ground(s) under section 48 for the passing of this resolution

6.1 - Risk and Audit Committee Briefing

s7(2)(a) - the withholding of the information is necessary to protect the privacy of natural persons, including that of deceased natural persons

s7(2)(f)(i) - free and frank expression of opinions by or between or to members or officers or employees of any local authority

s7(2)(f)(ii) - the withholding of the information is necessary to maintain the effective conduct of public affairs through the protection of Council members, officers, employees, and persons from improper pressure or harassment

s48(1)(a)(i) - the public conduct of the relevant part of the proceedings of the meeting would be likely to result in the disclosure of information for which good reason for withholding would exist under section 6 or section 7

 

 

 

 

 

7            Date of Next Meeting

Recommendation

This is the final meeting of the Risk and Audit Committee for the Council term.

 

8            Time of Closure