Agenda of Audit, Risk and Finance Subcommittee

N-logotype-black-wide Audit, Risk and Finance Subcommittee

10 May 2016

Page No.

1. Apologies

1.1 An apology has been received from Mr John Peters

2. Confirmation of Order of Business

3. Interests

3.1 Updates to the Interests Register

3.2 Identify any conflicts of interest in the agenda

4. Public Forum

5. Confirmation of Minutes

5.1 31 March 2016 6 - 12

Document number M1801

Recommendation

THAT the minutes of the meeting of the Audit, Risk and Finance Subcommittee, held on 31 March 2016, be confirmed as a true and correct record.

Please note that as the only business transacted in public excluded was to confirm the minutes, this business has been recorded in the public minutes. In accordance with the Local Government Official Information and Meetings Act, no reason for withholding this information from the public exists.

6. Status Report - Audit, Risk and Finance Committee - 10 May 2016 13 - 14

Document number R5861

Recommendation

THAT the Status Report Audit, Risk and Finance Subcommittee 10 May 2016 (R5861) and its attachment (A1324298) be received.

7. Chairperson's Report

8. Council's Key Organisational Risks - Progress Report 2 15 - 31

Document number R5490

Recommendation

THAT the report Council's Key Organisational Risks - Progress Report 2 (R5490) and its attachment (A1519755) be received.

9. Balance Sheet reconciliation review 32 - 38

Document number R5505

Recommendation

THAT the report Balance Sheet reconciliation review (R5505) and its attachment (A1540192) be received.

10. Audit, Risk and Finance subcommittee work plan 39 - 41

Document number R5654

Recommendation

THAT the report Audit, Risk and Finance subcommittee work plan (R5654) and its attachment (A1389278) be received;

AND THAT the Subcommittee provide feedback on the Subcommittee work plan.

11. Internal Audit Report to 31 March 2016 42 - 48

Document number R5793

Recommendation

THAT the Internal Audit Report to 31 March 2016 (R5793) and its attachments (A1533053 and A1532989) be received.

Recommendation to Governance Committee and Council

THAT Council note the internal audit findings, recommendations and status of action plans up to 31 March 2016 (R5793).

12. Corporate Report to 31 March 2016 49 - 61

Document number R5872

Recommendation

THAT the report Corporate Report to 31 March 2016 (R5872) and its attachments (A1544370 and A1544028) be received;

Recommendation to Governance Committee and Council

THAT the transfer of legal budget from the Corporate activity to the Planning activity in 2015/16 in order to obtain economic and traffic evidence for the submission to Tasman District Council on the proposed Progressive Enterprises Ltd Private Plan Change be noted.

Minutes of a meeting of the Audit, Risk and Finance Subcommittee

Held in the Council Chamber, Floor 2A, Civic House, 110 Trafalgar Street, Nelson (previously advertised to take place in Ruma Marama, Floor 2A, Civic House)

On Thursday 31 March 2016, commencing 12.21pm

Present: Mr J Peters (Chairperson), Her Worship the Mayor R Reese, Councillors I Barker and B McGurk, and Mr J Murray

In Attendance: Councillors E Davy, M Lawrey, P Matheson, and G Noonan, Chief Executive (C Hadley), Group Manager Infrastructure (A Louverdis), Group Manager Community Services (C Ward), Group Manager Corporate Services (N Harrison), Manager Communications (P Shattock), Manager Capital Projects (S Davies), Administration Adviser (S Burgess), and Audit New Zealand Auditor (B Kearney)

1. Apologies

There were no apologies.

Attendance: The meeting adjourned for lunch from 12.22pm to 12.43pm.

2. Confirmation of Order of Business

The Chairperson advised that item 10, Extension of loan facility to the Melrose Society, would be brought forward and considered after item 7, Chairperson’s Report.

3. Interests

There were no updates to the Interests Register, and no interests with items on the agenda were declared.

4. Public Forum

There was no public forum.

5. Confirmation of Minutes

5.1 18 February 2016

Document number M1712, agenda pages 8 - 17 refer.

It was noted there was a spelling error on page two of the minutes. It was asked that the final paragraph of the minutes be amended to reflect the issue was raised in response to a question.

Resolved AUD/2016/018

THAT the amended minutes of the meeting of the Audit, Risk and Finance Subcommittee, held on 18 February 2016, be confirmed as a true and correct record.

Murray/McGurk Carried

6. Status Report - Audit, Risk and Finance Subcommittee - 31 March 2016

Document number R5657, agenda pages 17 - 18 refer.

Resolved AUD/2016/019

THAT the Status Report Audit, Risk and Finance Subcommittee 31 March 2016 (R5657) and its attachment (A1324298) be received.

Barker/Murray Carried

7. Chairperson's Report

The Chairperson thanked officers for the new format for the Corporate Report. He asked the Subcommittee to provide feedback to ensure the reporting fulfilled the needs of the Subcommittee.

8. Extension of loan facility to the Melrose Society

Document number R5575, agenda pages 56 - 74 refer.

Group Manager Community Services, Chris Ward, presented the report.

A suggestion was made that the full remaining cost of the toilet refurbishment, being up to $57,000, be granted to Melrose House, and that no funding be provided for the chiller installation. The Subcommittee supported this suggestion, highlighting that the building was deserving of good bathroom facilities.

Mr Ward highlighted that Council, through the current lease to the Melrose Society, had originally not supported a grant towards the bathroom renovations. He added that the Heritage Asset Management Plan was the mechanism for allocating funding in the area of heritage facilities, and if additional funding was available this should be prioritised from an asset management perspective.

Attendance: The meeting adjourned from 1.00pm to 1.04pm.

Resolved AUD/2016/020

THAT the report Extension of loan facility to the Melrose Society (R5575) and its attachments (A1509577 and A1416892) be received.

Her Worship the Mayor/Murray Carried

Recommendation to Governance Committee and Council AUD/2016/021

THAT the $15,000 funding allocated towards asbestos remediation in Melrose House in 2016/17 be brought forward to 2015/16 and be used to grant fund the Melrose Society for the purpose of toilet refurbishment;

AND THAT an additional unbudgeted grant of up to $42,000 is provided to the Melrose Society for the purpose of toilet renovations in the 2015/16 financial year;

AND THAT the Melrose Society be informed that no further grants will be made by Council to the Melrose Society for the toilet refurbishment and chiller installation project.

Her Worship the Mayor/Murray Carried

9. Corporate Report to 31 January 2016

Document number R5334, agenda pages 19 - 33 refer.

Senior Accountant, Tracey Hughes, and Manager Capital Projects, Shane Davies, presented the report

Mr Davies and Ms Hughes explained the new format of the Corporate Report and Subcommittee members provided feedback.

In response to questions, Ms Hughes gave further detail on underspends and operating expenditure. Group Manager Corporate Services, Nikki Harrison, further explained the variances in staff costs.

Attendance: The meeting adjourned from 1.23pm to 1.25pm.

In response to questions, further information was provided regarding staff vacancies, holiday pay, smart metering, long term plan budgets, debtors and capital projects. In response to a question, Mr Davies confirmed the $20,000 allocated to the Queens Garden Toilet was for design work.

There was discussion about funding being transferred from 2016/17 to 2015/16 for capital projects and the delegated authority for these decisions. Group Manager Infrastructure, Alec Louverdis, undertook to look into this matter to ensure the correct process was being followed.

Resolved AUD/2016/022

THAT the report Corporate Report to 31 January 2016 (R5334) and its attachments (A1513082, A1311288, and A1514038) be received and the variations noted.

Barker/Murray Carried

Recommendation to Governance Committee and Council AUD/2016/023

THAT the unspent 2015/16 Community Investment Fund operational budget of $21,300 be carried forward to the 2016/17 financial year, bringing the total budget for 2016/17 for the Community Investment Fund to $327,000.

Barker/Murray Carried

10. Audit Arrangement letter 2015/16

Document number R5508, agenda pages 34 - 55 refer.

Group Manager Corporate Services, Nikki Harrison, and Mr Bede Kearney of Audit New Zealand, presented the report.

In response to questions, Mr Kearney provided detail on performance measures, audit fee negotiation, sensitive expenditure, and Audit New Zealand’s use of baseline information.

Resolved AUD/2016/024

THAT the report Audit Arrangement letter 2015/16 (R5508) and its attachment (A1511332) be received;

AND THAT the Subcommittee provide feedback on the Audit Arrangement letter to Audit NZ if required, noting the Mayor will sign the letter once the Subcommittee’s feedback has been incorporated.

McGurk/Murray Carried

11. Letter to Council on the audit for the year ended 30 June 2015 - further information

Document number R5640, agenda pages 75 - 84 refer.

Group Manager Corporate Services, Nikki Harrison, presented the report.

Resolved AUD/2016/025

THAT the report Letter to Council on the audit for the year ended 30 June 2015 - further information (R5640) and its attachment (A1493673) be received.

Barker/McGurk Carried

12. Insurance renewal 2016/17 - infrastructure assets

Document number R5649, agenda pages 85 - 88 refer.

Group Manager Corporate Services, Nikki Harrison, presented the report.

In response to questions, Ms Harrison provided further detail regarding the timing of the Treasury consultation on insurance cost sharing arrangements. She clarified that, although Council’s loss limit needed to be increased, the value of Council’s asset pool was appropriately insured.

The Subcommittee agreed that further information would be available in the coming months, therefore it would be appropriate to refer the matter to the Governance Committee, for its consideration and recommendation to Council.

Attendance: The meeting adjourned from 2.57pm to 3.00pm.

Resolved AUD/2016/026

THAT the report Insurance renewal 2016/17 - infrastructure assets (R5649) be received;

AND THAT the Subcommittee refers the matter of insurance renewal for Council’s infrastructure insurance to the Governance Committee for its consideration and recommendation to Council.

Barker/McGurk Carried

13. Exclusion of the Public

Resolved AUD/2016/027

THAT the public be excluded from the following parts 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 are as follows:

Her Worship the Mayor/Murray Carried

Item	General subject of each matter to be considered	Reason for passing this resolution in relation to each matter	Particular interests protected (where applicable)
1	Audit, Risk and Finance Subcommittee Meeting - Public Excluded Minutes - 18 February 2016	Section 48(1)(a) The public conduct of this matter would be likely to result in disclosure of information for which good reason exists under section 7.	The withholding of the information is necessary: · Section 7(2)(b)(ii) 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. · Section 7(2)(h) To enable the local authority to carry out, without prejudice or disadvantage, commercial activities.

Item

General subject of each matter to be considered

Reason for passing this resolution in relation to each matter

Particular interests protected (where applicable)

Audit, Risk and Finance Subcommittee Meeting - Public Excluded Minutes - 18 February 2016

Section 48(1)(a)

The public conduct of this matter would be likely to result in disclosure of information for which good reason exists under section 7.

The withholding of the information is necessary:

· Section 7(2)(b)(ii)

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.

· Section 7(2)(h)

To enable the local authority to carry out, without prejudice or disadvantage, commercial activities.

The meeting went into public excluded session at 3.04pm and resumed in public session at 3.05pm.

14. Confirmation of Minutes – Public Excluded

Please note that as the only business transacted in public excluded was to confirm the minutes, this business has been recorded in the public minutes. In accordance with the Local Government Official Information Meetings Act, no reason for withholding this information from the public exists.

Document number M1713, public excluded agenda pages 3 - 5 refer.

A correction was requested to the attendance section of the minutes.

Resolved AUD/2016/028

THAT the amended minutes of part of the meeting of the Audit, Risk and Finance Subcommittee, held with the public excluded on 18 February 2016, be confirmed as a true and correct record.

Barker/McGurk Carried

15. Re-admittance of the Public

Resolved AUD/2016/029

THAT the public be re-admitted to the meeting.

Reese/Barker Carried

There being no further business the meeting ended at 3.05pm.

Confirmed as a correct record of proceedings:

Chairperson Date

Audit, Risk and Finance Subcommittee

10 May 2016

REPORT R5490

Council's Key Organisational Risks - Progress Report 2

1. Purpose of Report

1.1 To update the Subcommittee on progress with identifying and managing key organisational risks.

2. Delegations

2.1 The Audit Risk and Finance Subcommittee has oversight of the Council’s management of risk.

3. Recommendation

THAT the report Council's Key Organisational Risks - Progress Report 2 (R5490) and its attachment (A1519755) be received.

4. Background

4.1 At its meeting on 18 February 2016 the subcommittee considered and received the first progress report on the Council’s key organisational risks. This report was based on a series of broad brush business unit risk assessments conducted during the last quarter of calendar 2015. These risk assessments were based on very broad statements of each business unit’s objectives so the resulting aggregation of risks was also necessarily broad.

4.2 Since then, the Council’s Risk and Procurement Analyst has commenced work and begun working with each business unit to frame risk assessments on the basis of objectives which are specific, measurable and achievable within specified timeframes. Given the work already underway on the Council’s health and safety management system, the focus for the Risk and Procurement Analyst has been on risks other than health and safety related ones. This work is on-going.

4.3 In parallel with this, and as promised to the subcommittee at its February meeting, the previous report has been updated so that the key organisational risks are stated in terms of the relevant Council objectives. In this context, key risks are those which may have the largest effect on the Council meeting its objectives, considering both magnitude of the effect and likelihood of it occurring.

4.4 The report is also framed in standard risk management language –i.e. following AS/NZS ISO 31000 2009 Risk Management - Principles and Guidelines. An annex has been added to explain these.

4.5 Given the short time since the last report, the largely well established controls in place to manage risks, and the broad brush nature of the earlier work, there has been no change in the key risks.

5. Discussion

5.1 At the February meeting of the subcommittee, members made a number of salient points which have helped shape the development of both the attached document and our thinking in relation to the risks the Council faces. These points included:

5.1.1 Extension of customer aggression threats to include elected representatives acting on Council business. This is acknowledged and the risk and its management (as described in the attachment) have been modified accordingly.

5.1.2 The critical importance of retaining key skills in ensuring that Council can deliver on its programme. The fact that this is a key risk, especially given the relatively small number of staff the Council has and its broad range of functions, underlines its importance. Preliminary evidence suggests that controls are working in this area and (for example) the staff turnover rate is trending downward.

5.1.3 High proportion of risks owned by the Chief Executive. Many of the key risks extend across large parts of the organisation, so stated ownership by the CEO in fact means that several senior managers carry some part of the ownership.

5.1.4 The importance of risks in relation to core lifeline services (water supply, wastewater etc.) The events triggering failures in this area are often natural hazard related and risk #1 in the attached document has been modified both to reflect Council’s role and respond to the point. It should also be noted that reducing threats in this area requires long term and consistent decision making on maintaining assets which are often less visible.

5.1.5 The importance of risks around the many laws which Council acts under. Nearly half of the current key risks relate directly to statutory obligations on the Council. This will also be considered further in relation to risk criteria as the Council’s risk profile is developed.

6. Options

6.1 Accept the recommendation – receive the Council’s second Key organisational Risks Progress Report.

6.2 Reject the recommendation – not receive the Council’s second Key organisational Risks Progress Report

7. Alignment with relevant Council policy

7.1 This report is in alignment with the Council’s Risk Management Framework approved in 2015.

8. Assessment of Significance against the Council’s Significance and Engagement Policy

8.1 This is not a significant decision under the Council’s Significance and Engagement Policy.

9. Consultation

9.1 No consultation has been undertaken in preparation of this report.

10. Inclusion of Māori in the decision making process

10.1 There has been no consultation with Maori in the preparation of this report.

Steve Vaughan

Risk & Procurement Analyst

Attachments

Attachment 1: A1519755 Key organisational risks Report April 2016

Audit, Risk and Finance Subcommittee

10 May 2016

REPORT R5505

Balance Sheet reconciliation review

1. Purpose of Report

1.1 To inform the subcommittee on the detail of the balance sheet, the status of reconciliations, and any areas of risk identified.

2. Delegations

2.1 The Audit, Risk and Finance Subcommittee has oversight of the Council’s management of risk.

3. Recommendation

THAT the report Balance Sheet reconciliation review (R5505) and its attachment (A1540192) be received.

4. Background

4.1 As part of the Corporate Report, the subcommittee is presented at every meeting with a summarised balance sheet. The purpose of presenting the summarised balance sheet is to identify and explain any significant movements month on month.

4.2 The balance sheet is otherwise known as a statement of financial position. Balance sheet reconciliations are conducted to ensure the legitimacy of the organisation’s reported financial position.

4.3 Attachment 1 allows the subcommittee to see the detail that lies beneath the summary balance sheet. For each account, the spreadsheet indicates the balance at February (the latest month for complete data), the frequency that reconciliations are required, whether the reconciliation has been completed in February and any risk associated with balance.

5. Discussion

5.1 Accounts with a large number of transactions (debtors, creditors, fixed assets) are reconciled monthly or more frequently.

5.2 Some accounts (largely equity and loans receivable) are reconciled quarterly or annually as part of the annual report and audit process. These accounts may have only one movement during the year.

5.3 Reconciliations are completed by a named member of the finance team and are checked by a senior member, or in some cases, Audit.

5.4 As part of their audit process, Audit NZ check some (but not all) reconciliations either during their interim visit (which tends to focus on control and process) or their final visit (the reconciliations being in support of the final results).

6. Options

6.1 Accept the recommendation – receive the Balance Sheet Reconciliation Review report.

6.2 Reject the recommendation – not receive the Balance Sheet Reconciliation Review report.

7. Alignment with relevant Council policy

7.1 This section is not applicable.

8. Assessment of Significance against the Council’s Significance and Engagement Policy

8.1 This is not a significant decision under the Council’s Significance and Engagement Policy.

9. Consultation

9.1 No consultation has been undertaken in preparation of this report.

10. Inclusion of Māori in the decision making process

10.1 There has been no consultation with Maori in the preparation of this report.

Tracey Hughes

Senior Accountant

Attachments

Attachment 1: Balance Sheet reconciliations summary February 2016 (A1540192)

Audit, Risk and Finance Subcommittee

10 May 2016

REPORT R5654

Audit, Risk and Finance subcommittee work plan

1. Purpose of Report

1.1 To present and seek feedback on the Subcommittee work plan.

2. Delegations

2.1 The subcommittee work plan is within the Subcommittees delegations to consider.

3. Recommendation

THAT the report Audit, Risk and Finance subcommittee work plan (R5654) and its attachment (A1389278) be received;

AND THAT the Subcommittee provide feedback on the Subcommittee work plan.

4. Background

4.1 The Chair of the Subcommittee has requested that the work plan be presented to the Subcommittee.

5. Discussion

5.1 Officers have collated a work plan for the Audit, Risk and Finance Subcommittee which covers the areas of:

5.1.1 Financial policies and reviews;

5.1.2 Procurement;

5.1.3 Risk management;

5.1.4 Audit (external);

5.1.5 Audit (internal);

5.1.6 Sensitive expenditure;

5.1.7 Fraud; and

5.1.8 Finance

5.2 Officers seek feedback from the Subcommittee on the specific items being brought to the Subcommittee over a three year program (Attachment 1).

6. Options

6.1 Accept the work plan or provide feedback to be incorporated into the work plan.

7. Alignment with relevant Council policy

7.1 This recommendation is not inconsistent with any previous Council decision.

8. Assessment of Significance against the Council’s Significance and Engagement Policy

8.1 This is not a significant decision.

9. Consultation

9.1 No consultation has been undertaken in preparing this report.

10. Inclusion of Māori in the decision making process

10.1 No consultation with Maori has been undertaken in preparing this report.

Nikki Harrison

Group Manager Corporate Services

Attachments

Attachment 1: A1389278 - Audit, Risk and Finance Subcommittee workplan

Audit, Risk and Finance Subcommittee

10 May 2016

REPORT R5793

Internal Audit Report to 31 March 2016

1. Purpose of Report

1.1 To update the Subcommittee on the Internal Audit activity relative to the Internal Audit Plan to 30 June 2016, and to provide information on significant or high risks identified from audits completed to 31 March 2016.

2. Delegations

2.1 The Audit, Risk and Finance Subcommittee have oversight of the internal audit activity.

3. Recommendation

THAT the Internal Audit Report to 31 March 2016 (R5793) and its attachments (A1533053 and A1532989) be received.

Recommendation to Governance Committee and Council

THAT Council note the internal audit findings, recommendations and status of action plans up to 31 March 2016 (R5793).

4. Background

4.1 The Audit, Risk and Finance Subcommittee require a periodic update on the progress of internal audit activities relative to the Internal Audit Plan to 30 June 2016 and to be informed of any significant risk exposures and control issues identified from internal audits completed.

4.2 The Internal Audit Charter was approved by the Audit, Risk & Finance Subcommittee on 12 November 2015.

4.3 Under section 9.4, the Charter requires that the Internal Audit & Procurement Analyst report periodically to the Senior Leadership Team and Audit, Risk and Finance Subcommittee on performance relative to the Internal Audit Plan. A table summarising activity against the workplace, which shows progress slower than planned, is attached. Under section 9.1 of the Charter, the Audit, Risk & Finance and the Governance Committees are to be informed of internal audit results where appropriate.

4.4 To strike the right balance between significant findings and minor recommendations, significant and high findings only are reported to the Subcommittee.

5. Discussion

5.1 In March, the Senior Leadership Team requested that the audit on compliance with the Privacy Act be brought forward following concern that there may be issues of non-compliance. This has now been planned for April/May 2016, in place of the review of the Rates Modelling Processes which has been extended to the next financial year.

5.2 Some of the turnaround timeframes in the Audit Charter are proving challenging for officers. This will be monitored during the next quarter, and any recommended changes to the timeframes will be referred back to the Subcommittee later in the year.

6. Options

6.1 The recommendation is to receive the report and note the internal audit findings, recommendations and status of action plans.

7. Alignment with relevant Council policy

7.1 This report is in alignment with the Council’s Internal Audit Charter approved in 2015.

8. Assessment of Significance against the Council’s Significance and Engagement Policy

8.1 This is not a significant decision under the Council’s Significance and Engagement Policy.

9. Consultation

9.1 No consultation has been undertaken in preparation of this report.

10. Inclusion of Māori in the decision making process

10.1 There has been no consultation with Maori in the preparation of this report.

Lynn Anderson

Internal Audit Analyst

Attachments

Attachment 1: A1533053 - Internal Audit Plan Progress Report to 31 March 2016

Attachment 2: A1532989 - Summary of New or Overdue High or Significant Risk Exposures and Control Issues at 31 March 2016

Audit Plan – All Audits on 30 June 2016 plan to Third Quarter 31 March 2016	Audits Not Included in Audit Plan	Recommendations Agreed with Manager	Progress		Findings Risk Ratings from Finalised, Approved Audits		Date Reviewed by SLT	Audit Conclusion	Audits Proposed April/May 2016
Payroll		Yes and agreed actions entered in InControl	InControl actions Open Overdue	22 9	Significant 0 High Moderate Minor	0 0 21 18		With few minor exceptions, payroll has strong controls which give reasonable assurance that payroll is being accurately processed
Electronic Purchase Orders – controls		With Managers
IT Systems controls			Report being finalised
Segregation of Duties			Report being finalised
Cash Handling – Civic House		Yes and agreed recommend-ations entered in InControl	Report waiting for final approval by Managers		Significant High Moderate Minor	0 2 26 7	2/5/16
Accounts Payable – new suppliers			Report being finalised
Cash Handling – Founders									Cash Handling – Founders
Banking controls									Time permitting*
Privacy Act (request by GMCS to complete earlier than on plan)									Privacy Act (request by GMCS to complete earlier than on plan)
Accounts Receivable – credit notes									Time permitting*
Insurance Renewals									Time permitting*
Community Grants									Community Grants
Reconciliations									Time permitting*
Cash Processing – General Ledger									Time permitting*
Festivals controls & contracts									Time permitting*
Parking Meter collections									Time permitting*

Internal Audit Plan to 30 June 2016 approved by Audit, Risk & Finance 12 November 2015

*Time permitting –

These audits are on the Internal Audit Plan for the quarter to 31 March 2016 but have not yet been started.

The approved Internal Audit Plan to 30 June 2016 has proven to be unrealistic for a number of reasons which include the initial ‘embedding’ period; unrealistic timeframes for Officers to turnaround their responses to audit; and some aspects of the reporting of audit findings and recommendations, which are not turning out as well as expected. We are looking to improve these in the near future.

The intention is to have as many of these “Time Permitting” audits completed by the 30 June 2016 or soon thereafter.

Audit, Risk and Finance Subcommittee

10 May 2016

REPORT R5872

Corporate Report to 31 March 2016

1. Purpose of Report

1.1 To inform the members of the Audit, Risk and Finance Subcommittee of the financial results of activities for the 9 months ending 31 March 2016 compared to the approved operating budget, and to highlight and explain any permanent and material variations.

2. Delegations

2.1 The Audit, Risk and Finance Subcommittee has oversight of the management of financial risks.

3. Recommendation

THAT the report Corporate Report to 31 March 2016 (R5872) and its attachments (A1544370 and A1544028) be received;

Recommendation to Governance Committee and Council

4. Background

4.1 The financial reporting focuses on the 9 month performance compared with the year to date approved operating budget.

4.2 The intention of this redesigned report is to provide information that is more visual and more focussed, and high-level commentary that is better aligned with variance information as provided in the annual report. Feedback from the last meeting of the sub-committee has been incorporated into this report.

4.3 Unless otherwise indicated, all measures are against approved operating budget, which is LTP budget plus any carry forwards, plus or minus any other additions or changes as approved by Council throughout the year.

4.4 Budgets for operating income and expenditure are phased evenly through the year, whereas capital expenditure budgets are phased to occur mainly in the second half of the year.

5. Discussion

5.1 For the 9 months ending 31 March 2016, the activity surplus/deficits are $4.1 million favourable to budget.

5.2 Financial information provided in attachment 1 to this report are:

· A financial measures dashboard with information on rates revenue, operating revenue and expenditure, and capital revenue and expenditure. A new icon has been added to each applicable measure, indicating whether the variance is increasing or decreasing (arrows) and whether that trend is favourable or unfavourable (green or red).

· A grouping of more detailed graphs and commentary for operating income and expenditure. The first set of charts and the commentary is by category (as in the annual report) and highlights significant permanent differences and items of interest. Variances due to timing will not be itemised unless they become permanent. The second set of charts are by activity.

· A treasury measures dashboard with a compliance table (green = compliant), a forecast of the debt/revenue ratio for the year, and a graph showing debt levels over a rolling 12 month period.

· High level balance sheet (no change to that provided previously).

· A debtor analysis graph over 12 months, clearly showing outstanding debt levels and patterns for major debt types along with a summary of general debtors > 3 months and over $10,000 and other debtors at risk.

· Two capital expenditure graphs – actual expenditure against operating budget for the financial year (no change), and year to date expenditure against operating budget by activity.

5.3 Although operating income and expenditure variances have increased from the last report to this sub-committee (January figures) they have both decreased slightly from the February figures. Information from staff indicates that these variances (particularly in expenditure) will continue to decrease, and at a faster rate for the remainder of the year.

5.4 Capital revenue was on budget in January, and is now $2.3 million under budget. This is because the budget has been adjusted to reflect the fact that Council is now invoicing the Suter Gallery for their share of the redevelopment costs and the invoicing has not caught up to the phasing of the budget.

6. Progressive Enterprises Ltd Private Plan Change

6.1 The Planning and Regulatory Committee agreed on 21 April 2016 to approve the lodging of a submission to Tasman District Council on the proposed Progressive Enterprises Ltd Private Plan Change. As advised at the Committee meeting, economic and traffic evidence would be required. There was no advice provided regarding budget requirements to obtain the traffic and economic evidence. There is no contingency budget for these matters. $30,000 has been reallocated from the Corporate legal budget to the planning team budget to allow this evidence to be obtained.

7. Alignment with relevant Council policy

7.1 The financial reporting is prepared comparing current year performance against the year to date approved budget for 2015/16.

8. Assessment of Significance against the Council’s Significance and Engagement Policy

8.1 There are no significant decisions.

9. Consultation

9.1 No consultation is required.

10. Inclusion of Māori in the decision making process

10.1 No consultation is required.

Tracey Hughes

Senior Accountant

Attachments

Attachment 1: A1544370 - Consolidated information for corporate report

Attachment 2: A1544028 - Major Projects Status Report

Summary of New or Outstanding High & Significant Risk Exposures and Control Issues Identified from Internal Audits at 31 March 2016
Audit	New/ Overdue	Findings	Rating	Recommendations	Progress
York Valley Weighbridge	Overdue	The Solid Waste Procedures Manual is a very comprehensive practical document, and is the primary document used by operations staff, but is not up to date in places; there has been no attempt to create processes to match the new weighbridge operation	High	As the main source of truth, and to ensure compliance with best practice procedure, the Solid Waste Procedures Manual, which identifies the 'what' should be done and 'who' is responsible for this, should be updated; It should be available for use when the new weighbridge system is functional and matches agree operating practices – this may require input from a business analyst; Align Promapp to agreed improvements from this review.	Now completed. The high risk, high level documentation has been completed and in Promapp.
			Low	Internal Audit considers the high risk relating to this finding has been resolved but the action remains open (with a lower risk rating) as the functional 'how to' aspects (Work Instructions) development is still ongoing.	In Progress. Contracts Supervisor working with Business Analyst on a comprehensive review of the Work Instructions.