Agenda of Audit, Risk and Finance Subcommittee

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

21 May 2019

Page No.

1. Apologies

1.1 An apology has been received from Councillors Barker and 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 19 February 2019 7 - 13

Document number M4041

Recommendation

That the Audit, Risk and Finance Subcommittee

1. Confirms the minutes of the meeting of the Audit, Risk and Finance Subcommittee, held on 19 February 2019, as a true and correct record.

6. Chairperson's Report

7. Quarterly Report to 31 March 2019 14 - 44

Document number R10169

Recommendation

That the Audit, Risk and Finance Subcommittee

Receives the report Quarterly Report to 31 March 2019 (R10169) and its attachments (A2175573, A2176515 and A2180205).

8. Quarterly Key Risks Report - 1 January to 31 March 2019 45 - 67

Document number R10167

Recommendation

That the Audit, Risk and Finance Subcommittee

1. Receives the report Quarterly Key Risks Report - 1 January to 31 March 2019 (R10167) and its attachment (A2179264).

9. Health & Safety Quarterly Performance Report 1 January to 31 March 2019 68 - 83

Document number R10138

Recommendation

That the Audit, Risk and Finance Subcommittee

1. Receives the report Health & Safety Quarterly Performance Report 1 January to 31 March 2019 (R10138) and its attachment (A2173565).

10. Internal Audit - Quarterly Progress Report to 31 March 2019 84 - 86

Document number R10129

Recommendation

That the Audit, Risk and Finance Subcommittee

1. Receives the report Internal Audit - Quarterly Progress Report to 31 March 2019 (R10129) and its attachment (A2173040).

11. Internal Audit - Summary of New or Outstanding Significant Risk Exposures and Control Issues to 31 March 2019 87 - 92

Document number R10130

Recommendation

That the Audit, Risk and Finance Subcommittee

1. Receives the report Internal Audit - Summary of New or Outstanding Significant Risk Exposures and Control Issues to 31 March 2019 (R10130) and its attachment (A2174097).

12. Audit plan for the year ending 30 June 2019 93 - 120

Document number R10202

Recommendation

That the Audit, Risk and Finance Subcommittee

1. Receives the report Audit plan for the year ending 30 June 2019 (R10202) and its attachment (A2186543).

Public Excluded Business

13. Exclusion of the Public

Recommendation

That the Audit, Risk and Finance Subcommittee

1. Excludes the public from the following parts of the proceedings of this meeting.

2. 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:

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 - 19 February 2019	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)(g) To maintain legal professional privilege
2	Quarterly Report to 31 March 2019 - Debtor Discussion	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)(a) To protect the privacy of natural persons, including that of a deceased person
3	Quarterly Update on Legal Proceedings	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)(g) To maintain legal professional privilege
4	Tax planning 10-year outlook report	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)(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 - 19 February 2019

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)(g)

To maintain legal professional privilege

Quarterly Report to 31 March 2019 - Debtor Discussion

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)(a)

To protect the privacy of natural persons, including that of a deceased person

Quarterly Update on Legal Proceedings

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)(g)

To maintain legal professional privilege

Tax planning 10-year outlook report

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)(h)

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

Audit, Risk and Finance Subcommittee Minutes - 19 February 2019

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

Held in the Council Chamber, Civic House, 110 Trafalgar Street, Nelson

On Tuesday 19 February 2019, commencing at 1.00p.m.

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

In Attendance: Councillors B McGurk, G Noonan, M Rutledge, S Walker, T Skinner, Chief Executive (P Dougherty), Acting Group Manager Infrastructure (M Parfitt), Acting Group Manager Community Services (R Bartlett), Group Manager Corporate Services (N Harrison), Group Manager Strategy and Communications (N McDonald) and Governance Adviser (J Brandt)

Apologies : Her Worship the Mayor for lateness

1. Apologies

Resolved AUD/2019/001

That the Audit, Risk and Finance Subcommittee

Receives and accepts an apology from Her Worship the Mayor R Reese for lateness.

Peters/Barker Carried

2. Confirmation of Order of Business

There were no changes to the order of business

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 13 November 2018

Document number M3892, agenda pages 7 - 12 refer.

A correction was made to the minutes to reflect that Her Worship the Mayor was present at the meeting held on 13 November 2018.

Resolved AUD/2019/002

That the Audit, Risk and Finance Subcommittee

Confirms the minutes of the meeting of the Audit, Risk and Finance Subcommittee, held on 13 November 2018, as a true and correct record, subject to the correction being made that the Mayor was not on leave of absence for the meeting and did attend.

Barker/Murray Carried

6. Chairperson's Report

Document number R10004, agenda page 13 refers.

The Chairperson presented his report and reminded members that their feedback was valued to keep improving the reporting format of the quarterly report.

Attendance: Councillor Skinner joined the meeting at 1.03p.m.

Recommendation AUD/2019/003

That the Audit, Risk and Finance Subcommittee

Receives the report Chairperson's Report (R10004).

Peters/Dahlberg Carried

7. Quarterly Report 1 October - 31 December 2018

Document number R9976, agenda pages 14 - 38 refer.

Senior Accountant Tracey Hughes tabled replacement pages for agenda pages 28 and 30 (A2142779 and A2142783).

It was noted that these changes were due to staff capacity being compromised due to the civil defence response to the Pigeon Valley Fire.

Ms Hughes highlighted the changes made to the reporting format and answered questions regarding forestry harvesting activity, public transport and water metering income.

Discussion regarding the early release of the roading maintenance contractor took place and included the delegations for this decision, information flow to Elected Members and consequences for rate payers.

Group Manager Corporate Services, Nikki Harrison, answered questions about cross-committee reporting on budgets relating to Bay Dreams.

Attendance: Her Worship the Mayor joined the meeting at 1.33p.m.

A question was asked regarding the debtor analysis (refer agenda page 25) and the Chairperson decided that would be more appropriately answered in the public excluded section due to the need to protect privacy.

Resolved AUD/2019/004

That the Audit, Risk and Finance Subcommittee

Receives the report Quarterly Report 1 October - 31 December 2018 (R9976) and its attachments (A2119970, A2122871 and A2127285).

Dahlberg/Barker Carried

Attachments

1 A2142779 - replacement page 28 (tabled)

2 A2142783 - replacement page 30 (tabled)

8. Quarterly Key Risks Report - 1 October to 31 December 2018

Document number R9884, agenda pages 39 - 58 refer.

Manager Business Improvement, Arlene Akhlaq presented the report.

Discussion took place regarding reputational risk, with a request to include reputational risk in future reports, as well as consider taking a broader perspective i.e. by incorporating stakeholder feedback. It was recommended to refer to ‘trust and confidence’ rather than ‘reputational risk’.

Further discussion took place regarding Lifeline Service failure with a particular view to the effects of climate change.

Resolved AUD/2019/005

That the Audit, Risk and Finance Subcommittee

Receives the report Quarterly Key Risks Report - 1 October to 31 December 2018 (R9884) and its attachment (A2126109).

Dahlberg/Murray Carried

Attendance: Her Worship the Mayor left the meeting from 1.57p.m. to 2.06p.m.

9. Health & Safety Quarterly Performance Report 1 October to 31 December 2018

Document number R9893, agenda pages 59 - 74 refer.

Health and Safety Adviser, Malcolm Hughes presented the report and answered questions about the Halifax access to the Customer Services Centre, the assaults on EIL staff in January, and staff wellbeing in regards to the Pigeon Valley Fire response and incidents noted in the report.

Discussion took place regarding due diligence activities and the wish for a more structured approach to safe work observations undertaken by members was expressed.

Attendance: Councillor Barker left the meeting from 2.17p.m. until 2.19p.m.

Resolved AUD/2019/006

That the Audit, Risk and Finance Subcommittee

Receives the report Health & Safety Quarterly Performance Report 1 October to 31 December 2018 (R9893) and its attachment (A2118120).

Barker/Dahlberg Carried

10. Internal Audit - Quarterly Progress Report to 31 December 2018

Document number R9971, agenda pages 75 - 78 refer.

Lynn Anderson, Internal Audit Analyst, noted an error on agenda page 77, where the ratings in the column entitled ‘Findings/Ratings’ were the wrong way round for the two audits listed under the 2017/18 Annual Audit Plan. The first one should read High – 3; Medium – 1 and the second one High – 1; Medium – 5.

A further correction was noted for the bottom of page 77 under “Work Proposed” which should read ‘MagiQ’s contract management module’, not MagiQ’s risk management module.

Ms Anderson answered questions about the timeframe for business improvement of project management, noting the audit was to be completed by the end of this financial year.

Resolved AUD/2019/007

That the Audit, Risk and Finance Subcommittee

Receives the report Internal Audit - Quarterly Progress Report to 31 December 2018 (R9971) and its attachment (A2123169).

Barker/Her Worship the Mayor Carried

11. Internal Audit - Summary of New or Outstanding Significant Risk Exposures and Control Issues to 31 December 2018

Document number R9938, agenda pages 79 - 84 refer.

Lynn Anderson, Internal Audit Analyst, presented the report and answered questions regarding the need for a central contracts register. The Chief Executive answered questions regarding water contamination risk and water supply.

Attendance: Councillor Barker left the meeting from 2.47p.m. to 2.53p.m.

Resolved AUD/2019/008

That the Audit, Risk and Finance Subcommittee

Receives the report Internal Audit - Summary of New or Outstanding Significant Risk Exposures and Control Issues to 31 December 2018 (R9938) and its attachment (A2119039).

Her Worship the Mayor/Dahlberg Carried

12. Letter from Audit NZ on Annual Report for year ending 30 June 2018

Document number R9978, agenda pages 85 - 113 refer.

Group Manager Corporate Services, Nikki Harrison, answered questions regarding the streamlining of audit processes. Ms Harrison agreed to prepare a report recommending audit process changes for Nelson Regional Sewerage Business Unit, Nelson Regional Landfill Business Unit and Civil Defence.

Resolved AUD/2019/009

That the Audit, Risk and Finance Subcommittee

Receives the report Letter from Audit NZ on Annual Report for year ending 30 June 2018 and its attachment (A2104464).

Murray/Barker Carried

13. Exclusion of the Public

Resolved AUD/2019/010

That the Audit, Risk and Finance Subcommittee

Excludes the public 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:

Barker/Dahlberg 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	Quarterly Update on Legal Proceedings	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)(g) To maintain legal professional privilege
2	Quarterly report 1 Oct -1 Dec 2019 *Debtor discussion*	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)(a) To protect the privacy of natural persons, including that of a deceased person.

Item

General subject of each matter to be considered

Reason for passing this resolution in relation to each matter

Particular interests protected (where applicable)

Quarterly Update on Legal Proceedings

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)(g)

To maintain legal professional privilege

Quarterly report 1 Oct -1 Dec 2019

Debtor discussion

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)(a)

To protect the privacy of natural persons, including that of a deceased person.

The meeting went into public excluded session at 3.11p.m. and resumed in public session at 3.43p.m.

There being no further business the meeting ended at 3.43p.m.

Confirmed as a correct record of proceedings:

Chairperson Date

Item 7: Quarterly Report to 31 March 2019

Audit, Risk and Finance Subcommittee

21 May 2019

REPORT R10169

Quarterly Report to 31 March 2019

1. Purpose of Report

1.1 To inform the subcommittee of the financial and non-financial results for the third quarter for the activities under its delegated authority.

2. Recommendation

That the Audit, Risk and Finance Subcommittee

Receives the report Quarterly Report to 31 March 2019 (R10169) and its attachments (A2175573, A2176515 and A2180205).

3. Background

3.1 Quarterly reports on performance are being provided to each Committee on the performance and delivery of projects and activities within their areas of responsibility.

3.2 The financial reporting focuses on the nine-month performance compared with the year-to-date approved budgets.

3.3 Unless otherwise indicated, all measures are against approved operating budget, which is the 2018/19 Long Term Plan budget plus any carry forwards, plus or minus any other additions or changes as approved by Council throughout the year.

3.4 Officers have assessed budgets and applied a range of phasing mechanisms depending on the nature of the expenditure to reflect the anticipated timing of actual income and expenditure.

3.5 In order to meet reporting timeframes, accruals for both operating and capital expenditure are made for transactions in the third month of each quarter, reversing in the first month of the following quarter. The effect of these accruals on the year to date results decreases as we go through the year.

3.6 Forestry and Festivals budgets have now been grossed up for income and expenditure and Public Transport budgets have been netted off to better reflect actual activity in those cost centres. The net surplus/deficit positions and rates funding have not been impacted.

4. Discussion

4.1 For the nine months ending 31 March 2019, the activity surplus/deficits are $1.9 million favourable to budget. This is made up of income ahead of budget by $1.7 million and expenditure behind budget by $0.2 million.

4.2 Following the results to December 2018 and the subsequent questioning of this subcommittee, further work has been done to understand variances in water income. Actual income was looked at closely leading up to the last meeting and officers were satisfied that it was accurate. However the effect of accruals on the monthly results has now been considered and while the accrual that was processed last quarter was found to be reasonable, accruals had not been reflected in the phasing of the budget (as the total accrual budget for the year is zero). The absence of monthly budgeted accruals produced the positive variance reported in quarter two.

4.3 Accruals for water income were introduced at a time when all budgets were phased evenly over the year – it was a mechanism to smooth the actual income to avoid variances caused by the billing cycle. However, now that budgets are being phased to better reflect when the actual transactions occur, there is really no reason to continue accruing water income (apart from at year end). That being the case the water income accrual has been reversed and actual income is now reported against properly phased budget.

4.4 Total water income to March 2019 is just ahead of budget. Commercial Water by Meter charges are ahead of budget by $282,000. Residential Water by Meter charges are behind budget by $278,000. The residential year-to-date income relates to the October/November meter reading, which typically accounts for about 45% of the full year income. The April/ May readings are currently being completed.

4.5 The most significant variances to budget are:

· Dividends are ahead of budget by $1.9 million reflecting:

- the unbudgeted special dividend of $750,000 declared by Port Nelson Limited in September 2018;

- the 2017/18 Nelson Airport Limited dividend of $375,000 that was expected in the last financial year but declared too late to be accrued;

- an ordinary dividend payment from Port Nelson Ltd of $750,000 received in March 2019 but not budgeted until April 2019.

· Interest income on short term investments is ahead of budget $377,000, as Council holds deposits to offset the pre-funding of debt which is maturing in 2019.

· Forestry harvesting income is behind budget by $566,000 due to Maitai forest not yet recording any income. Harvesting of the Maitai block has been moved out to the Winter of 2020. Expenditure is also behind budget ($649,000) largely for the same reason.

· There are numerous variances in staff operating costs in the cost centres. However overall, total business unit costs are behind budget by $509,000, including salaries and wages by $315,000, training costs by $168,000 and computer maintenance costs by $73,000. Relieving and contractor costs are ahead of budget by $193,000, offsetting salaries and wages, and recruitment costs are ahead by $74,000.

· Unbudgeted recovery costs from the February 2018 storms have been incurred in the Parks and Transport activities particularly, $290,000 YTD (note that this expenditure is funded through the Disaster Recovery Fund and income from insurance of $302,000 has been received in relation to these events against expenditure over 2017/18 and 2018/19).

· Although resource consent income is behind budget by $225,000 it is also 12% ahead of prior year to date. Expenditure is ahead of budget by $234,000, largely consultancy costs and a new contract price.

· NRSBU net income is behind budget by $346,000 resulting from an increased share of greater than budget management and maintenance costs.

4.6 Financial information provided in Attachment 1 includes:

· A financial measures dashboard with information on rates revenue, operating revenue and expenditure, and capital revenue and expenditure. The arrow icon in each applicable measure indicates whether the variance is increasing or decreasing and whether that trend is favourable or unfavourable (green or red).

· Operating income and expenditure displayed against budget for both committee and category. Significant variances are noted against committees. Each committee will receive a more detailed analysis of variances by cost centre.

· A summary profit and loss statement also including the latest forecast position.

· A treasury measures dashboard with a compliance table (green = compliant), a forecast of the debt/revenue ratio for the year where available, and a graph showing debt levels over a rolling 13 month period.

· High level balance sheet. The current year balance sheets do not include consolidations.

· A debtor analysis graph over 13 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 – The line graph records actual expenditure against approved budget, and quarter two forecast (current understanding of most likely outcome). The bar graph records year to date expenditure against approved budget by committee.

4.7 Capital expenditure is $10.1 million under approved budget year to date (including NRSBU). Expenditure phasing was completed early in the financial year, sometimes using limited information. As such the timing of expenditure may differ significantly from that expected when phasing was set.

· The chart in Attachment 2 represents project health for all projects reported to other committees.

· Project health is analysed based on three factors; quality, time and budget. From the consideration of these three factors the project is summarised as being on track (green), some issues/risks (yellow), or major issues/risks (red). Projects that are within 5% of their total budget are considered to be on track for the budget factor.

· More detailed project sheets are supplied in Attachment 3 for all projects with a red health assessment along with all projects with a budget greater than $1m in the current financial year.

· The quarter three forecast for capital expenditure is $5.3 million less than approved budget ($36.7 million vs $42.0 million excluding NRSBU, vested assets and consolidations).

5. Quarterly Review of Key Performance Indicators

5.1 The pie chart below shows overall Council performance to 31 March 2019 against performance measures set in the Long Term Plan. To date, 68% of measures are on track to achieve the target by the end of the financial year (20% are not measured yet).

5.2 Other committees will receive more detailed information including a table showing the measure, target, a comment on performance and the result to date for the performance areas relevant to their delegations.

6. Fire Emergency

6.1 The February fires had a number of impacts across Council, most notably the ongoing effects from staff being seconded to the Emergency Operations Centre over the extended emergency period.

6.2 The combination of staff absence during the emergency and accommodating the accumulated time in lieu (TOIL) and special leave since, has meant that while other staff have kept the organisation ticking over, work programmes in some business units have been delayed. The quarterly reports to the other committees have more detail on this, and where appropriate the capital project sheets have been updated to reflect this. Business units continue to work on prioritising their work programmes for the remainder of the year.

6.3 Additional work was required by the Parks and Facilities team in the assessment and monitoring of parks and reserves for closure. Close liaison with the Principal Rural Fire Officer and Council’s contractors was required to ensure continued public safety. Three significant events were either postponed, offered alternative locations or cancelled due to the extreme fire risk. Regular updates to the public in respect of the closures were provided.

7. Other notable achievements or issues

7.1 An Investment Performance Audit was undertaken by NZTA during the quarter, seeking assurance that their investment in Council’s land transport programme is being well managed and delivering value for money. The last audit was in 2015. The audit found that NCC’s systems and procedures are effective, but some opportunities to improve management practices do exist. Steps towards these improvements are now being undertaken.

7.2 The severe drought experienced in the region from January through to mid-March 2019 ultimately resulted in stage three water restrictions (a total ban on the use of sprinklers and hoses). Council supplied up to 1,600m3 of water per day to Tasman District Council for approximately five weeks to alleviate pressure on their supply. As a result of the drought, the water level in the Maitai Dam dropped to approximately 4.5 meters below the spill level resulting in discoloured water distributed into the network and requiring the use of water from the second dam intake. The discoloured (but safe to drink) water prompted a number of complaints. Water pipelines to affected properties were flushed and some customers were advised to consider installing a filter onto their water supply lateral in order to avoid any possible recurrence of issues resulting from water discolouration.

7.3 The drought conditions put significant pressure on Parks assets and work programmes. Irrigation was restricted to critical assets and hanging baskets and annual plantings were removed. Water was recycled from line flushing for irrigation. Staff liaised closely with sports codes around ground conditions and the codes were proactive in looking for solutions. Scheduled maintenance and capital and renewal works were put on hold. A large number of service requests were received as maintenance levels and irrigation programmes were questioned.

7.4 The Bay Dreams event was held on 4 January at Trafalgar Park. The success of the event has resulted in negotiations aimed at hosting the event in Nelson again, with discussions underway for a longer term arrangement (subject to certain conditions being met).

7.5 As a result of routine testing, high levels of methane were detected in the Energy Centre at Founders Park, initially closing the venue until an investigation into the cause was completed. As a result of the investigation measures have been taken to reseal the area where methane was escaping, and a long term solution has been identified and will be explored. Weekly monitoring of the venue is now taking place along with additional monitoring the day before venue bookings.

7.6 The Brook Recreation Hub on Andrews Farm is nearing completion, aiming to improve parking and traffic congestion on Brook Street at the entrance to Codgers Mountain Bike Park and provide facilities for recreation users and events.

7.7 The Council adopted the Consultation Document for the 2019/20 Annual Plan/Community Housing on 27 March 2019 for public consultation. The Consultation Document for the Potential Sale of Land for Commercial Development Wakatu Square was adopted at the same meeting.

7.8 The Utilities team is now fully staffed, however four vacancies remain in Capital Projects (one appointment and one resignation occurring during the quarter).

Author: Tracey Hughes, Senior Accountant

Attachments

Attachment 1: A2175573 - Dashboards and charts to 31 March 2019 ⇩

Attachment 2: A2176515 - Project Health Summary ⇩

Attachment 3: A2180205 - Project sheets for projects > $1m or project health = red ⇩

Item 8: Quarterly Key Risks Report - 1 January to 31 March 2019

Audit, Risk and Finance Subcommittee

21 May 2019

REPORT R10167

Quarterly Key Risks Report - 1 January to 31 March 2019

1. Purpose of Report

1.1 To provide information to the Audit, Risk and Finance Subcommittee on the key organisational risks.

2. Recommendation

That the Audit, Risk and Finance Subcommittee

1. Receives the report Quarterly Key Risks Report - 1 January to 31 March 2019 (R10167) and its attachment (A2179264).

3. Background

3.1 Following the previous meeting of the Subcommittee held on 19 February 2019, further work has been completed to identify objectives related to Council’s top priorities as set out in the Long Term Plan 2018-28 (section four). The Subcommittee advised that the risk area related to reputational risk should be included in the report, and this has been completed.

3.2 Upcoming risk management activities include:

· Review of risk management processes, to be completed during quarter four;

· Analysis of options for consolidating the organisation’s tools for recording risks, to be scheduled from June 2019; and

· Risk maturity benchmarking exercise, to be scheduled for completion during the annual plan year 2019/20.

4. Risks to Achieving Council Long Term Plan Top Priorities

4.1 Since the quarter two report, initial risk assessment for all four priorities have been completed. Some further work to confirm existing controls and develop treatment plans is required, and this is scheduled for quarter four. Updated information for quarter three is summarised below, with further detail on the risk areas, their controls and treatments set out in attachment one.

4.2 Priority area Infrastructure (Risk 1). During quarter three, there were no reported exceptions to the risk controls. The timetable for planned risk treatments is to be reviewed during quarter four.

4.3 Priority area Environment (Risk 2). The objectives for this priority area were further developed during quarter three, and as a result the risk rating has initially been assessed as High (previously estimated at Medium).

4.4 Priority area CBD Development (Risk 3). The initial risk assessment was completed during quarter three, and has been assessed as High.

4.5 Priority area Lifting Council Performance (Risk 4). The initial risk assessment was completed during quarter three, and has been assessed as Medium. Whilst the planned treatment for Civic House refurbishment is on hold, it should be noted that a number of workplace improvements have been achieved to date, including: interim relocation of the customer call centre to a workspace with better ventilation and natural light; provision of modern adjustable desks to the majority of staff in the Infrastructure Group and Parks and Facilities team; upgrade of the Administration team’s workspace to provide more privacy and noise reduction; reorganisation of the Governance Advisers workspace to provide a more spacious working environment with a central team area.

5. Key Organisational risks

5.1 With the re-inclusion of the risk of reputation damage from negative public perceptions, there are eight key organisational risks which could affect the whole organisation’s capacity to deliver on its objectives. Changes to risk ratings are as follows:

5.1.1 Illness, injury or stress from higher hazard work situations has an increased rating of High (previously Medium), taking into consideration public spaces and events provided by Council, in light of the recent attacks in Christchurch;

5.1.2 Risk 8 Compromise of Council service delivery from information technology failures has an increased rating of Medium (previously Low), based on a thorough review of risk areas by the Manager Customer and Information Services. It should be noted that a number of planned treatments are scheduled for completion during quarter four, with the expectation that the risk rating will reduce to Low, once the effect of treatments has been reviewed during quarter one 2019/20.

5.2 At end of quarter three, the known key risk areas for the four LTP top priorities, and the eight key organisational risks, are as summarised in the heat map, and table below.

ID	Risk Area	Rating	Owner
1	Council priority area: Infrastructure	High	Group Manager Infrastructure
2	Council priority area: Environment	High	Group Manager Environmental Management
3	Council priority area: CBD Development	High	Chief Executive
4	Council priority area: Lift Council Performance	Medium	Chief Executive
5	Lifeline service failure from natural hazards and similar events	High	Group Manager Infrastructure
6	Illness, injury or stress from higher hazard work situations	High	Group Manager Corporate Services
7	Loss of service performance from ineffective contracts and contract management	Medium	Chief Executive
8	Compromise of Council service delivery from information technology failures	Medium	Group Manager Corporate Services
9	Compromised decision making and public information from incomplete and difficult to access records	Medium	Group Manager Strategy and Communications
10	Council work compromised by loss of and difficulties in replacing skilled staff	Medium	Manager People and Capability
11	Legal liability and reputation loss from inadequate consideration of the law in decision making	Medium	Group Manager Strategy and Communications
12	Loss of public trust in the organisation	Medium	Group Manager Strategy and Communications

6. Risk Areas for Each Group

6.1 Infrastructure Group: The key risks being reported to the Works and Infrastructure Committee this quarter relate to delivery of the capital programme.

6.2 Community Services Group: The impact of the fire emergency (with subsequent time in lieu overhang) and response to the drought has put pressure on timelines for the Group’s work. This has been reported through the relevant quarterly reports to committees.

The scope of the Stoke Library remediation work is still to be defined (a report to the Community Services Committee is being prepared), putting the project timeframes at risk.

A recent fire in the Elma Turner Library switchboard required urgent electrical maintenance, and indicates that further assessment of the ETL electrical systems is required.

Elevated levels of methane gas have been detected in the Energy Centre at Founders Park (the gas leaches from the old landfill). A management plan has been put in place which includes enhanced monitoring, however there is an ongoing risk that high readings could require a closure of the Energy Centre and disrupt venue bookings.

6.3 Environmental Management Group: At the end of quarter three, risks relating to staff recruitment in the resource consents, planning and building teams are the biggest concern, with the likely impact of non-delivery within statutory timeframes for resource and building consents.

6.4 Strategy and Communications Group: No new emerging risks to report at this time. Existing risks related to the management of social media, and the volume of reactive work, continue to be locally managed.

6.5 Corporate Services Group: No new emerging risks to report at this time.

Author: Arlene Akhlaq, Manager Business Improvement

Attachments

Attachment 1: Key organisational risks report Quarter 3 January to March 2019 (A2179264) ⇩

Item 9: Health & Safety Quarterly Performance Report 1 January to 31 March 2019

Audit, Risk and Finance Subcommittee

21 May 2019

REPORT R10138

Health & Safety Quarterly Performance Report 1 January to 31 March 2019

1. Purpose of Report

1.1 To provide the subcommittee with a quarterly report of health, safety and wellbeing data collected over the January to March quarter of 2019.

1.2 To update the subcommittee on key health and safety risks, including controls and treatments.

2. Summary

2.1 Notable incidents were assaults on two enforcement officers in January.

2.2 There was a high number of security incidents reported for this quarter.

2.3 Council’s key risk ‘Customer aggression threatening the health & safety of those who work for and with Council’ has been assessed as high.

3. Recommendation

That the Audit, Risk and Finance Subcommittee

1. Receives the report Health & Safety Quarterly Performance Report 1 January to 31 March 2019 (R10138) and its attachment (A2173565).

4. Background

4.1 Councillors, as ‘Officers’ under the Health and Safety at Work Act 2015, are expected to undertake due diligence on health and safety matters. Council’s Health and Safety Governance Charter states that Council will receive quarterly reports regarding the implementation of health and safety. Council has delegated the responsibility for health and safety to the Audit, Risk and Finance Subcommittee.

4.2 Health, safety and wellbeing performance data reports provide an overview of health and safety performance based on key lead and lag indicators. Where a concerning trend is identified more detail is provided in order to better understand issues and implement appropriate controls.

4.3 Reporting on key health and safety risks provides further depth and detail to the health and safety risks reported in the organisational risk report.

5. Discussion

5.1 Data Reports

5.1.1 There were considerably more security incidents (32) reported during this quarter than in previous years. For February the total (15) reported incidents was more than 3 times the average (4.7) for the same month in the previous 3 years. The majority of these security incidents occurred at libraries however the Customer Service Centre also reported more than usual with 5 incidents.

5.1.2 When this increase in security incidents was noticed SLT was advised and further controls considered. A large number of the incidents at libraries involved just two individuals. Once trespass notices were served on these people the number of reported incidents reduced considerably and further controls were not deemed necessary.

5.1.3 This trend will be monitored closely to understand if it was an isolated ‘spike’ or whether it relates to a more general trend requiring further controls.

5.1.4 The number of over-speed events for the period as recorded by the E-Road in vehicle monitoring system has moved back into line with the downwards trend seen since 2016.

5.2 Incidents of note

5.2.1 Two EIL enforcement officers were assaulted in separate incidents in January. The first incident occurred when an officer was struck from behind after issuing an infringement notice under the freedom camping bylaw. Later the same day a parking enforcement officer was also struck from behind by the same person while talking to a different member of the public.

5.2.2 The alleged offender was located by the Police and arrested a short time after the second attack. Both enforcement officers were treated at hospital and released the same day.

5.2.3 Occurring outside this reporting period was a significant near miss during April when a member of the public accidently drove a vehicle through a window at Stoke Library. There were no injuries resulting from this incident.

5.3 Key Health and Safety Risk Update

5.3.1 The key health and safety risk ‘Customer aggression threatening the health & safety of those who work for and with Council’ has been reassessed as a high risk. This is primarily due to New Zealand’s national terrorism threat level being raised from low to high following the events in Christchurch.

5.3.2 Council does not have any specific information relating to a local terrorism threat level. It may be reasonable to assess that there is less risk in the regions than in major cities from this type of attack, however due to the current unavailability of quality information to indicate a lower threat level locally and the need to consider the national threat level we have assessed the likelihood of an extreme event occurring as ‘possible’, resulting in a high risk rating.

5.3.3 Existing controls such as risk assessments for meetings already consider the national terror threat level. A further control already implemented is that the police are now advised of all large Council run gatherings such as citizenship ceremonies. Treatments planned include a review of current security controls in regard to the current threat environment.

5.3.4 Where new treatments have been planned or have been implemented as controls since the last report this is indicated by red text in the attachment.

5.3.5 Where possible timeframes are indicated for treatments.

5.4 Due Diligence Activities

5.4.1 SLT members completed safe work observations at Neale Park pump station, Nelson Marina and the Brook Camp.

5.5 Staff Wellbeing Initiatives

5.5.1 Following on from the Oranga Mahi wellbeing at work program that was completed in 2017, further wellbeing at work training is scheduled for staff who are new to Council or were unable to attend in 2017. There will also be refresher training provided for connectors and champions.

5.5.2 A new policy ‘supporting employees affected by family violence’ has been developed and took effect from 1 April 2019.

Author: Malcolm Hughes, Health and Safety Adviser

Attachments

Attachment 1: A2173565 - Health Safety and Wellbeing Report - Jan-March 2019 ⇩

Item 11: Internal Audit - Summary of New or Outstanding Significant Risk Exposures and Control Issues to 31 March 2019

Audit, Risk and Finance Subcommittee

21 May 2019

REPORT R10130

Internal Audit - Summary of New or Outstanding Significant Risk Exposures and Control Issues to 31 March 2019

1. Purpose of Report

1.1 To update the Subcommittee on new or outstanding risk exposures following internal audits included in the Internal Audit Plan to 31 March 2019.

2. Recommendation

That the Audit, Risk and Finance Subcommittee

1. Receives the report Internal Audit - Summary of New or Outstanding Significant Risk Exposures and Control Issues to 31 March 2019 (R10130) and its attachment (A2174097).

2. Background

2.1 Under section 9.1 of the Internal Audit Charter, the Audit, Risk & Finance Subcommittee and the Governance Committees are to be informed of internal audit results where appropriate.

2.2 Under section 9.4, the Audit, Risk and Finance Subcommittee requires a periodic update of any significant risk exposures and control issues identified from internal audits completed.

3. Summary

3.1 Issues identified in the attachment (A2174097), Summary of New and Outstanding Significant Risk Exposures and Control Issues Identified from Internal Audits, relate to internal audits performed to 31 March 2019.

3.2 The attached report shows nine high risks outstanding from the previous report presented to the Audit, Risk and Finance Subcommittee meeting of 19 February 2019. Details of progress in Quarter 3 (Q3) for each are shown in red.

3.3 One new high risk was identified in the Library Cash Collection Processes review. This relates to a less than ideal level of financial management expertise and oversight – primarily due to an unusually high turnover of management staff, and to the independence of library functions from the rest of Council which has occurred over time. We are pleased to report that there has been good progress made in addressing this risk.

Author: Lynn Anderson, Internal Audit Analyst

Attachments

Attachment 1: A2174097 - New of Outstanding High Risk Exposures and Control Issues from Internal Audits - 31 March 2019 ⇩