Notice
is given that an ordinary meeting of the Audit and Risk Committee will be held
on:
MEMBERSHIP
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Chairperson
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Mr G McGlinn
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Councillors
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Deputy Mayor S Bryant
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Councillor C Butler
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Ms A Elstob
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Mayor T King
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Councillor C Mackenzie
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Councillor T Walker
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(Quorum 3 members)
Audit and Risk
Committee
Agenda – 03 October 2024
AGENDA
1 Opening, Welcome, KARAKIA
2 Apologies
and Leave of Absence
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Recommendation
That apologies be accepted.
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3 Declarations
of Interest
4 LATE
ITEMS
5 Confirmation
of minutes
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That the minutes of
the Audit and Risk Committee meeting held on Wednesday, 10 July 2024, be
confirmed as a true and correct record of the meeting.
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That the confidential
minutes of the Audit and Risk Committee meeting held on Wednesday, 10 July
2024, be confirmed as a true and correct record of the meeting.
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6 Reports
6.1 2024-34
Long Term Plan Audit Report Update....................................................... 4
6.2 Risk
Appetite.......................................................................................................... 44
6.3 Audit
and Risk Committee Terms of Reference.................................................... 48
7 Confidential
Session
7.1 Procedural
motion to exclude the public............................................................... 55
7.2 Risk
and Audit Report............................................................................................ 55
7.3 Cybersecurity
Update............................................................................................ 55
7.4 Draft
Annual Report 2024...................................................................................... 55
7.5 Legal
Services Report........................................................................................... 56
8 CLOSING
KARAKIA
Audit and Risk
Committee
Agenda – 03 October 2024
6 Reports
6.1
2024-34 Long Term
Plan Audit Report Update
Information Only - No Decision
Required
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Report
To:
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Audit
and Risk Committee
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Meeting
Date:
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3
October 2024
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Report
Author:
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Matthew
McGlinchey, Financial Performance Manager; Alan Bywater, Team Leader - Community
Policy
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Report
Authorisers:
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John
Ridd, Group Manager - Service and Strategy
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Report
Number:
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RFNAU24-10-1
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1. Summary
/ Te Tuhinga Whakarāpoto
1.1 To table the
interim Audit Report on the Long-Term Plan (LTP) Consultation Document and final
Audit Report on the Long-Term Plan 2024-2034.
2. Recommendation/s
/ Ngā Tūtohunga
That the Audit and Risk
Committee
1. receives the 2024-34 Long Term Plan Audit Report Update report; and
2. notes Audit New Zealand’s feedback on the Long-Term Plan
2024-2034 process; and
3. notes that staff will organise a workshop to discuss how the Audit
and Risk Committee could best contribute to future Long-Term Plan and Annual
Plan processes.
3. Audit
Report on the LTP Consultation Document 2024-2034
3.1 On 12 April
2024, Audit New Zealand supplied its report on the audit the LTP 2024-2034
Consultation Document which is attached to this report (Attachment 1).
3.2 Audit New
Zealand made several recommendations to the Council around its findings. These
are listed below with Council’s response.
3.3 Capital expenditure
classification paragraph 4.1. Audit recommended that we revise the process
so that there is a consistent approach to classification in terms of growth,
renewal of levels of service capital projects. Council agreed to revise the
classifications going forward.
3.4 Infrastructure asset
management paragraph 4.2. Audit recommended that we improve the level of
integration of the Council’s processes and systems, for infrastructure
asset management, as part of its Digital Improvement Plan. Council agreed to
consider this.
3.5 Levels of service for water
supply – paragraph 3.3.2. Audit recommended that we set a 100% target but include
narrative to explain why it cannot currently achieve 100% and its
plans/timeframe to achieve compliance; or set targets that reflect the planned
compliance but include narrative to explain why it cannot currently achieve the
mandated 100% compliance and its plans/timeframe to achieve compliance
3.6 Council will
look to set a 100% target but include narrative to explain why it cannot
currently achieve 100% and its plans/timeframe to achieve compliance over the coming LTP cycle.
3.7 Infrastructure Strategy (IS) paragraph
3.2. Audit recommended we clarify in the IS, that most overall levels of
service are unchanged and include examples of the reductions in services
planned. Council comment on this point was that statements on the key points of
focus around levels of service were included in sections for each activity
3.8 National policy Statement on
Urban Development (NPS-UD – paragraph 2.3.2. Audit New Zealand did
not make a recommendation, however the Council responded as follows to ensure
that Audit understood its position. A letter about the NPS-UD with the content
described above was sent to the Minister for the Environment on 1 July 2024. We
felt it was inappropriate to pre-empt the final form of the LTP until it was
adopted. The risk of development occurring over a longer period than expected
is disclosed on our forecasting assumptions. We have established a growth
governance board to closely monitor the level of development against our
estimates and to recommend changes to the programme of growth infrastructure
investment where necessary
4. Audit Report to Governors – Final LTP
2024-2034
4.1 The Audit Report
to Governors on the Final LTP, received in August 2024, (Attachment 2)
notes that Audit NZ issued an unmodified audit report with an emphasis of
matter over the New Zealand Transport Agency,
Waka Kotahi (NZTA) funding for roading programmes. The
emphasis of matter drew attention to the assumptions and judgements made by the
Council given the heightened level of uncertainty with this funding assistance.
4.2 We notified Audit NZ of a number of
budget changes totalling $8.3 million that we became aware of after the
consultation commenced. Audit NZ reviewed these changes and satisfied
themselves that the consequential impacts on various parts of the LTP were
clear and consistent. They determined that the conclusions reached
at the CD stage were still consistent with the conclusions reached at the final
LTP. However, the forecast opening balances for the LTP were reforecast
and consequential updates were made to the rates, revenue and expenses to address
the flow on impacts.
4.3 Audit NZ noted in the report that
the NZTA released its indicative allocations for continuous programmes on 6
June 2024. This is very late in the LTP process and we decided not to
make adjustments to the LTP. Audit NZ was satisfied that neither the
financial amount nor the consequential impact on service levels were material.
4.4 In paragraph 3.3, Audit indicated
that the Asset information and the first set of overall financials for the
Consultation Document were not delivered on time. TDC believes they were
delivered on time.
4.5 In paragraph 6.1, Audit NZ noted
that limited use was made of the knowledge and expertise of the Audit Committee
in the LTP process and Council’s deliberations. Audit NZ recommended we
review the LTP preparation process with the aim of maximising the knowledge and
expertise of the Audit Committee in the preparation and audit of the LTP.
4.6 We are conducting a review of the
overall LTP process. Part of that will involve a discussion with our
Independent Audit chair. We are also considering a workshop with the Audit and
Risk committee to better utilise the skill set it has. As always, the time
required to loop in the Audit and Risk committee is a challenge.
4.7 In August 2024, Audit NZ notified the
Council that it was commencing a process to confirm the costs of the LTP audit
process. In this letter Audit NZ indicated that the costs above the
$114,000 audit fee in the letter of engagement, it was looking to recover
$87,850 (or 77% more) for additional work carried out on the LTP. Audit
NZ specifically noted the following areas of additional work:
· Additional work auditing the impact the NZTA indicative funding
announcement.
· Reviewing two drafts plus and final version of the consultation
(compared with the two drafts anticipated) and ensuring that flow on impacts of
changes were addressed.
· Lack of alignment between the rates affordability and service levels
options in the Financial Sustainability key issue and uncertainty over the
prudence of the Financial Strategy in terms of headroom to enable funding of
future flooding events.
· Three matters in the performance framework relating to setting
realistic targets for roading, targets for the different water supplies
compliance with Drinking Water Standards and the measures and targets for
active transport.
· Additional work carried out by their asset management specialist.
· End of 2023/2024 forecast projections not being available until
after the consultation document was adopted requiring further Hot Review and
Opinion Review Committee meetings.
· Additional work on the climate change strategy development and
implementation.
· The approach to the community fundraising contributions towards the
new community facilities planned in the LTP.
· Ensuring adequate disclosures for financial prudence in the
Financial Strategy.
· Additional work on negative reserves.
4.8 Staff accept in some instances this
additional work and costs are valid. In other instances we do not agree
that there should have been additional work and/or that it was not included in
the work planned in the letter of engagement.
4.9 A process to resolve the level of
additional costs Council will pay is underway. A verbal update will be provided
at the meeting.
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1.⇩
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Report on
the Audit of the LTP Consultation Document 2024-2034
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7
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2.⇩
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Draft
Governors' Audit Report - LTP stage
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28
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Audit and Risk
Committee
Agenda – 03 October 2024
Audit and Risk Committee Agenda – 03 October 2024
Audit and Risk Committee Agenda – 03 October 2024
6.2 Risk Appetite
Information Only - No Decision
Required
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Report
To:
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Audit
and Risk Committee
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Meeting
Date:
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3
October 2024
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Report
Author:
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Amy
Clarke, Risk & Assurance Advisor
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Report
Authorisers:
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Steve
Manners, Chief Operating Officer
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Report
Number:
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RFNAU24-10-3
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1. Summary
/ Te Tuhinga Whakarāpoto
1.1 A Risk Appetite
Statement (Attachment 1) has been drafted based on information from
Councillors.
1.2 The Audit and Risk Committee is invited
to provide feedback before the Risk Appetite Statement is presented to the
Council for adoption.
2. Recommendation/s
/ Ngā Tūtohunga
That the Audit and Risk Committee
1. receives the Risk Appetite report RFNAU24-10-3; and
2. recommends to Council the adoption of the Risk Appetite Statement.
3. Risk
Appetite Statement
3.1 The Risk
Appetite Statement describes the amount and type of risk that Council is
willing to pursue or retain in the execution of its strategic and business
objectives.
3.2 The Risk
Appetite Statement is a guide from Council to staff. While the Risk
Appetite Statement provides a framework for staff to respond to in most
circumstances, there remains is an expectation that staff act with prudence,
good judgement and be open to pursuing opportunities outside of the risk
appetite where appropriate.
4. Developing the Risk Appetite Statement
4.1 Two workshops
were held with Councillors to develop the Risk Appetite Statement.
4.2 At the first
workshop, Councillors provided individual assessments of each risk type.
These individual assessments were consolidated into a draft risk appetite
statement.
4.3 At the second
workshop Councillors had the opportunity to discuss if the consolidation of the
risk appetite was a fair representation of the views of Council as a
whole. Feedback from this workshop has been incorporated into the draft
Risk Appetite Statement (attached).
5. Risk Appetite Statement
5.1 The Risk
Appetite Statement covers the categories of risk as described in the Risk
Framework (Financial, Relationships and Reputations, Operational, Legal and
Regulatory Compliance, People & Wellbeing/ Health & Safety,
Environmental, Project Performance).
5.2 A pictorial
summary is provided as well as descriptions for each category.
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1.⇩
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DRAFT Risk
Appetite Statement
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46
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Audit and Risk
Committee
Agenda – 03 October 2024
Audit and Risk Committee Agenda – 03 October 2024
6.3 Audit and Risk Committee Terms of Reference
Information Only - No Decision
Required
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Report
To:
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Audit
and Risk Committee
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Meeting
Date:
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3
October 2024
|
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Report
Author:
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Amy
Clarke, Risk & Assurance Advisor
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Report
Authorisers:
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Steve
Manners, Chief Operating Officer
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Report
Number:
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RFNAU24-10-2
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1. Summary
/ Te Tuhinga Whakarāpoto
1.1 An amendment to
the Audit and Risk Committee (ARC) Terms of Reference (TOR) is proposed to
allow for continuity of membership in extraordinary circumstances.
1.2 The opportunity
has also been taken to consider the entirety of the TOR, and additional changes
are proposed to clarify the responsibilities of the committee and amend an
error in elected member numbers.
1.3 With ARC
endorsement, the TOR will be submitted to the Council for approval.
2. Recommendation/s
/ Ngā Tūtohunga
That the Audit and Risk Committee
1. receives the Audit and Risk Committee Terms of Reference report RFNAU24-10-2; and
2. recommends to Council the adoption of the revised Audit and Risk
Committee Terms of Reference.
3.1 It has been
identified that some flexibility in the membership of the committee would be
valuable to allow for more than two terms (or six years total) in extraordinary
circumstances. This would allow for elected or independent members to be
reappointed if required to provide continuity of support to Council.
Situations this might apply to include the need for a specific skill set,
significant change in the organisation (e.g. change of leadership), or a
significant event impacting Council or the region. The draft TOR (Attachment
1) includes the following:
3.1.1 “Any member of the committee, either elected or
independent, may serve no more than six years (the equivalent of two terms of
three years) on the committee. In extraordinary circumstances, Full Council may
approve an additional term for a member of an appropriate length to ensure the
committee is able to provide continuity of support to the Council.”
3.2 The opportunity has been taken to
consider the entirety of the TOR and several amendments are recommended:
3.2.1 widening the scope of ARC to include Health and Safety,
Governance and Integrity. These areas are already included in principle,
but specific detail is not provided within the TOR.
3.2.2 providing more specific detail on the responsibilities
of ARC.
3.2.3 specifying what information should be included in the
Chair’s annual report to Council.
3.2.4 amending the number of elected members to reflect the
appointments.
3.3 Feedback and endorsement of the TOR (attached)
is sought from ARC prior to submission for Council approval.
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1.⇩
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ARC TOR
2024 DRAFT
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50
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Audit and Risk Committee Agenda – 03 October 2024
Audit and Risk Committee Agenda – 03 October 2024
7 CONFIDENTIAL SESSION
7.1 Procedural
motion to exclude the public
The following
motion is submitted for consideration:
That the
public be excluded 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:
7.2 Risk and Audit Report
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Reason for passing this resolution in
relation to each matter
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Particular interest(s) protected (where
applicable)
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Ground(s) under section 48(1) for the
passing of this resolution
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The public conduct of the part of the
meeting would be likely to result in the disclosure of information for which
good reason for withholding exists under section 7.
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s7(2)(g) - The withholding of the
information is necessary to maintain legal professional privilege.
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s48(1)(a)
The public conduct of the part of the
meeting would be likely to result in the disclosure of information for which
good reason for withholding exists under section 7.
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7.3 Cybersecurity Update
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Reason for passing this resolution in
relation to each matter
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Particular interest(s) protected (where
applicable)
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Ground(s) under section 48(1) for the
passing of this resolution
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The public conduct of the part of the meeting
would be likely to result in the disclosure of information for which good
reason for withholding exists under section 7.
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s7(2)(j) - The withholding of the
information is necessary to prevent the disclosure or use of official
information for improper gain or improper advantage.
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s48(1)(a)
The public conduct of the part of the
meeting would be likely to result in the disclosure of information for which
good reason for withholding exists under section 7.
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7.4 Draft Annual Report 2024
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Reason for passing this resolution in
relation to each matter
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Particular interest(s) protected (where
applicable)
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Ground(s) under section 48(1) for the
passing of this resolution
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The public conduct of the part of the
meeting would be likely to result in the disclosure of information for which
good reason for withholding exists under section 7.
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s7(2)(b)(ii) - The withholding of the
information is necessary to protect information where the making available of
the information would be likely unreasonably to prejudice the commercial
position of the person who supplied or who is the subject of the information.
In particular, financial information for
Waimea Water Ltd, and Infrastructure Holdings Ltd has not yet been made
publicly available. The attached Marsh Valuations report contains personnel
details
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s48(1)(a)
The public conduct of the part of the
meeting would be likely to result in the disclosure of information for which
good reason for withholding exists under section 7.
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7.5 Legal Services Report
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Reason for passing this resolution in
relation to each matter
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Particular interest(s) protected (where
applicable)
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Ground(s) under section 48(1) for the
passing of this resolution
|
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The public conduct of the part of the
meeting would be likely to result in the disclosure of information for which
good reason for withholding exists under section 7.
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s7(2)(g) - The withholding of the
information is necessary to maintain legal professional privilege.
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s48(1)(a)
The public conduct of the part of the
meeting would be likely to result in the disclosure of information for which
good reason for withholding exists under section 7.
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