Audit, Risk and Finance
Subcommittee Minutes - 21 May 2019
Present: Her
Worship the Mayor R Reese, B Dahlberg and Mr J Murray
In
Attendance: Councillors P Matheson and B McGurk, Group
Manager Infrastructure (A Louverdis), Group Manager Community Services (R
Ball), Group Manager Corporate Services (N Harrison), Group Manager Strategy
and Communications (N McDonald) and Governance Adviser (J Brandt)
Apologies: Councillor
Barker and Mr Peters
1 Appointment of
Chairperson
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The Group Manager Corporate
Services, Nikki Harrison, called for nominations from members to appoint a
chairperson for the meeting, as an apology had been received from the
appointed Chairperson and there was no appointed Deputy Chairperson for the
Subcommittee.
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Resolved AUD/2019/013
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That the Audit, Risk and Finance Subcommittee
1. Appoints Mr John Murray
as Chairperson of the Audit, Risk and Finance Subcommittee meeting on 21 May
2019.
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Dahlberg/Her Worship the Mayor Carried
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2. Apologies
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Resolved AUD/2019/014
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That the Audit, Risk and Finance Subcommittee
2. Receives
and accepts the apologies from Councillor Barker and Mr Peters.
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Murray/Dahlberg Carried
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3. Confirmation of
Order of Business
It was noted that agenda item 12
would be considered after item 7 due to time constraints of the speaker.
4. Interests
There were no updates to the
Interests Register, and no interests with items on the agenda were declared.
5. Public Forum
There was no public forum.
6. Confirmation of
Minutes
6.1 19
February 2019
Document number M4041, agenda
pages 7 - 13 refer.
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Resolved AUD/2019/015
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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.
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Murray/Dahlberg Carried
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7. Chairperson's Report
There was no
Chairperson’s Report.
8. Quarterly Report to
31 March 2019
Document number R10169, agenda
pages 14 - 44 refer.
Tracey Hughes, Senior Accountant,
tabled a replacement chart for agenda page 23 (document A2194360) and noted
that the $50,000 debtor payment listed on agenda page 26 had been received
since the agenda was published.
Questions were answered regarding
dividends ahead of budget, reporting for the Investment Performance Audit
undertaken by NZTA, impacts on Council resulting from the Pigeon Valley fire
emergency in February 2019, management of methane levels at Founders Park, the
increased share of NRSBU costs for Council, progress putting a management plan
for Andrews Farm in place to address issues between user groups and the
predicted shortfall in capital expenditure.
A number of questions regarding the
Greenmeadows Centre and Queens Gardens Toilets in attachment 3 of the report
were noted for discussion later in the meeting, as part of the public excluded
section of the meeting.
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Resolved AUD/2019/016
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That
the Audit, Risk and Finance Subcommittee
Receives the report Quarterly Report to 31
March 2019 (R10169) and its
attachments (A2175573, A2176515 and A2180205).
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Her Worship the Mayor/Murray Carried
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Attachments
1 A2194360 -
Replacement table for page 23 of ARF Agenda 21 May 2019
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9. Audit plan for the
year ending 30 June 2019
Document number R10202, agenda
pages 93 - 120 refer.
Jacques Coetzee of Audit New
Zealand spoke to the report, noting that he envisaged all Councils would be
provided with comparative data for benchmarking purposes by the end of the
year.
The meeting adjourned from
9.57a.m. until 10.33a.m.
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Resolved AUD/2019/017
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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).
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Murray/Her Worship the Mayor Carried
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10. Quarterly Key Risks Report - 1
January to 31 March 2019
Document number R10167, agenda
pages 45 - 67 refer.
Arlene Akhlaq, Manager Business
Improvement, presented the report. She made a point of clarity regarding item
3.2 of the report (middle bullet point), noting that it was the consolidation
of options that was planned for June, with analysis already under way. Ms
Akhlaq further noted that a new rating system had been applied to Quarter 3
risk assessments.
Malcolm Hughes, Health and Safety
Advisor, explained the increased rating on higher hazard work situations (5.11)
as a result of the March terrorist attack in Christchurch. Mr Hughes answered
questions about levels of stress experienced by frontline staff and measures
the organisation was taking to provide support.
Ms Akhlaq answered questions
about the rating for environmental and legal liability risks, the order of
risks in the report, and whether the ratings reflected residual risk.
Nikki Harrison, Group Manager
Corporate Services answered a question about the Council’s disaster
recovery fund, noting the fund remained in deficit.
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Resolved AUD/2019/018
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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).
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Dahlberg/Her Worship the Mayor Carried
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11. Health & Safety Quarterly
Performance Report 1 January to 31 March 2019
Document number R10138, agenda
pages 68 - 83 refer.
Malcolm Hughes, Health and Safety
Advisor, answered questions about security incidents in the libraries, and
plans to limit access to certain internet sites in the libraries. Safe Work
Observation visits for Elected Members were discussed and it was noted that
Councillors would be invited to attend along with senior staff.
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Resolved AUD/2019/019
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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).
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Dahlberg/Murray Carried
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12. Internal Audit - Quarterly
Progress Report to 31 March 2019
Document number R10129, agenda
pages 84 - 86 refer.
Lynn Anderson, Internal Audit
Analyst, spoke to the report and answered questions about the amounts of cash
handled in the libraries, the financial system used by the Building Unit and
how this was linked in with other Council systems. It was noted that the debtor
invoicing for the marina was being managed by Nelmac, and while debtors were
transferred to Council monthly, the overall system was separate from
Council’s financial system. Discussion took place regarding reporting
mechanisms where Audit New Zealand might raise issues with Nelmac for this
council asset.
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Resolved AUD/2019/020
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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).
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Murray/Her Worship the Mayor Carried
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13. Internal Audit - Summary of New
or Outstanding Significant Risk Exposures and Control Issues to 31 March 2019
Document number R10130, agenda
pages 87 - 92 refer.
Lynn Anderson, Internal Audit
Analyst, provided a number of updates regarding business continuity planning
measures being introduced, training for the Incident Management Team, and
working with Civil Defence and Police to inform evacuation plans for Maitai
flood zones.
Alec Louverdis, Group Manager
Infrastructure, answered questions about the risk of water contamination as a
wilful act, and regular ongoing monitoring at the dam.
In regards to asset management
plans coming to committee meetings, it was requested that where plans were not
as developed as others, due to delays from the Pigeon Valley fires, this should
be highlighted in the report and assistance be given by finance officers to
assist members with robust decision-making.
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Resolved AUD/2019/021
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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).
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Murray/Dahlberg Carried
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14. Exclusion
of the Public
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Resolved AUD/2019/022
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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:
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Dahlberg/Her Worship the Mayor Carried
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Item
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General subject of each matter to be
considered
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Reason for passing this resolution in
relation to each matter
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Particular interests protected (where
applicable)
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1
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Audit, Risk and Finance Subcommittee Meeting -
Public Excluded Minutes - 19 February 2019
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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.
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The withholding of the information is necessary:
· Section 7(2)(g)
To maintain
legal professional privilege
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2
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Quarterly Report to 31 March 2019 - Debtor
Discussion, Greenmeadows Centre and Queens Gardens Toilets
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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
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The withholding of the information is necessary:
· Section 7(2)(a)
To protect the privacy of
natural persons, including that of a deceased person
· Section
7(2)(h)
To enable the local
authority to carry out, without prejudice or disadvantage, commercial activities
· Section
7(2)(g)
To maintain legal
professional privilege
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3
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Quarterly Update on Legal Proceedings
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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
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The withholding of the information is necessary:
· Section 7(2)(g)
To maintain legal
professional privilege
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4
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Tax planning 10-year outlook report
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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
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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
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The meeting went into public excluded session at 11.36a.m.
and resumed in public session at 1.11p.m.
Restatements
It was resolved while the public was
excluded:
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2
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PUBLIC EXCLUDED: Quarterly Update on Legal Proceedings
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That
the Audit, Risk and Finance Subcommittee
1. Receives the report Quarterly
Update on Legal Proceedings (R10173)
and its attachment (A2186227); and
2. Agrees
that the decision (AUD/2019/026) only be released from public excluded
business; and
3. Agrees that Report (R10173) and its attachment (A2186227) be excluded from public release at this time.
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3
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PUBLIC EXCLUDED: Tax planning 10-year outlook report
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That
the Audit, Risk and Finance Subcommittee
1. Receives
the report Tax planning 10-year outlook report (R10163) and its attachment
(A2179101); and
2. Agrees
that the decision (AUD/2019/027) only be released from public excluded
business; and
3. Agrees that Report (R10163) and attachment (A2179101) be excluded from public release at this time.
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There being no further business the meeting ended at 1.11p.m.
Confirmed as a correct record of proceedings:
Chairperson
Date
Item 7: Interim audit
letter for the year ending 30 June 2019
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Audit, Risk and Finance Subcommittee
25 June 2019
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REPORT R10240
Interim
audit letter for the year ending 30 June 2019
1. Purpose of Report
1.1 To provide the
letter to the Subcommittee on the interim audit for the year ending 30 June 2019
from Audit New Zealand.
2. Recommendation
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That
the Audit, Risk and Finance Subcommittee
1. Receives the report Interim
audit letter for the year ending 30 June 2019 (R10240) and its attachment (A2206215); and
2. Notes
the status updates to previous audit recommendations.
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3. Discussion
3.1 In mid-April
Audit New Zealand carried out an interim audit for the year ending 30 June 2019
on the Council's internal controls and the overall control environment. It
issued the draft letter on 11 June 2019 (Attachment 1).
3.2 There were no
minor or significant issues identified during the audit which is a good
result.
3.3 The Audit New
Zealand interim letter also contains a section on previous recommendations made
and an update on the status of these recommendations. Officers are
working to resolve these issues as soon as practical, while weighing up the
relative priority to other business improvement initiatives and internal audit
actions.
3.4 Audit NZ are
currently undertaking a review of the Councils procurement, contract management
and project management practices to support the planning, design, procurement
and delivery of renewals and new capital infrastructure. This will be
reported back on during the final audit.
4. Options
4.1 That the Subcommittee
note the status updates on previous matters in the letter to the Council on the
interim audit of Nelson City Council for the year ending 30 June 2019.
Author: Nikki
Harrison, Group Manager Corporate Services
Attachments
Attachment 1: A2206215
- Interim management letter from Audit NZ 11 June 2019 ⇩
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Important considerations for decision making
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1. Fit with Purpose of
Local Government
Section 99 of the Local Government Act 2002 requires
the audit of information contained in the Annual Report and Summary and the
interim audit forms part of that process.
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2. Consistency with
Community Outcomes and Council Policy
This report supports the community outcome that
Council provides leadership, which includes the responsibility for protecting
finances and assets, and to have infrastructure which is efficient and
effective.
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3. Risk
There is a risk that Council will not meet all its
legislative responsibilities if the recommendations from Audit NZ are not
accepted and actioned.
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4. Financial impact
There is no financial impact.
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5. Degree of significance
and level of engagement
This matter is of low significance because there are
no decisions to be made. Therefore no engagement has occurred.
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6. Inclusion of
Māori in the decision making process
Māori have not been consulted in preparation of
this report.
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7. Delegations
The Audit, Risk and Finance Subcommittee has the
responsibility for considering audit processes and management of financial
risk.
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Item 8: Draft Annual
Internal Audit Plan - 30 June 2020
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Audit, Risk and Finance Subcommittee
25 June 2019
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REPORT R10266
Draft
Annual Internal Audit Plan - 30 June 2020
1. Purpose
of Report
1.1 To
approve the Draft Annual Internal Audit Plan to 30 June 2020.
2. Recommendation
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That the Audit, Risk and Finance Subcommittee
1. Receives the report Draft Annual
Internal Audit Plan - 30 June 2020 (R10266)
and its attachment (A2202709).
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Recommendation to Council
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That the Council
1. Approves
the Draft Annual Internal Audit Plan - 30 June 2020 (A2202709).
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3. Background
3.1 The
Internal Audit Charter approved by Council on 15 October 2015 requires that
at least annually, the Audit, Risk and Finance Subcommittee consider the Annual
Internal Audit Plan.
3.2 The
Internal Audit Charter cl. 8.2 requires the Internal Audit Plan to respond
to changes in the business.
3.3 Management
continues to assess how to allocate the internal audit resource to provide most
benefit to the organisation. This report reflects Management’s decision.
4. Discussion
4.1 The
Draft Internal Audit Plan (Attachment 1 A2202709) was compiled following
discussions with the Group Manager Corporate Services, Manager Business
Improvement, Chair of Audit, Risk and Finance subcommittee and Audit NZ.
Council’s most recent Quarterly Key Risks Report has also been reviewed.
4.2 Due
to the organisation’s current stretched capacity throughout and the
downstream impact on the organisation of internal audits, the Draft Plan
continues to provide a split plan incorporating internal audits and business
improvement activities.
4.3 The
proposed Plan would not compromise objectivity for the internal audit function.
4.4 This
proposal will not require additional budget this financial year.
Compilation of the Draft Internal Audit Plan and Best
Use of Internal Audit
4.5 The
availability of staff to respond to internal audits and their outcomes remains
limited. Alongside this, Council has a stated key goal in the Long Term Plan
2018-28 to lift Council performance.
4.6 The
officers believe that the best use of internal audit for this financial year is
to place some emphasis on business improvements which will contribute to the
achievement of the goal to lift Council performance.
4.7 This
proposal will not require additional budget for 2019/20 financial year.
4.8 The
Draft Plan allows for two currently unplanned audits and two pre-determined
audits. The planned topics are intentionally outside the business improvement
focus areas because: a) it ensures internal audit independence is not
compromised, and; b) it is considered too early to be auditing key areas such
as contract management where improvements are currently underway.
4.9 Following
discussions with Audit NZ, it is clear that priority areas for improvement are
contracts and contractor management. These have been included in the business
improvement section.
4.10 Other
key business improvement projects to help lift Council performance which
internal audit could contribute to include: a) improvements to asset management
systems and processes based on the drawing together of difference improvement
strands identified through audits; b) the simplification of procedures and
tools. Time has been provided for these in the Draft Plan.
5. Options
5.1 Option
1, is to approve the Draft Internal Audit Plan, which provides for a smaller
number of audits, as well as a contribution to business improvement. This
option is recommended.
5.2 The
alternative, Option 2, is for Council to decide the Internal Audit Plan should
only provide for internal audits this financial year. This is considered less favourable
as the downstream effect of a large volume of audits on the organisation is not
considered viable.
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Option 1: Approve Draft
Internal Audit Plan proposal
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Advantages
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· Remedying
some of the already known weaknesses, such as contracts and contractor
performance management, as soon as practicable is in Council’s best
interests.
· The primary goal of business improvement is to increase effectiveness and efficiency to
improve the organisation’s ability to deliver services. A good improvement
plan will focus on the organisation’s most important activities
and any associated risks, and will address any necessary mitigations. This is
closely aligned to the internal audit process but is forward-looking, while
internal audit informs past performance.
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Risks and Disadvantages
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· There
may be future costs where external audits are required in areas where
internal audit has had some responsibility or involvement in the previous 12
months.
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Option 2: Provide for Internal
Audits only in the Audit Plan
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Advantages
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· Council
will have a greater knowledge of areas across the organisation where there
have been systems or control failures.
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Risks and Disadvantages
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· A
higher volume of internal audits impacts on the organisation, taking scarce
organisational resources away from performing other key responsibilities,
which may have higher consequences to the organisation than those of the
risks found from an audit.
· While
control weaknesses are likely to be identified from an internal audit, the
ability to treat these is limited due to scarce resources throughout the
organisation.
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Author: Lynn
Anderson, Internal Audit Analyst
Attachments
Attachment 1: A2202709 -
Draft Internal Audit Plan to 30 June 2020 ⇩
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Important considerations for decision making
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1. Fit
with Purpose of Local Government
This decision will help to ensure the resources
available in internal audit contribute optimally to business improvement and
internal auditing that will help give confidence that Council will be able to
meet its responsibilities effectively and efficiently.
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2. Consistency
with Community Outcomes and Council Policy
This report supports the community outcome that
Council provides leadership, which includes the responsibility for protecting
finances and assets, and to have an infrastructure which is efficient and
effective.
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3. Risk
It is more likely that Council may not meet its
responsibilities effectively and efficiently if this recommendation is not
accepted.
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4. Financial
impact
This decision will fit within existing budgets.
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5. Degree
of significance and level of engagement
This matter is of low significance because it does
not affect the level of service provided by Council or the way in which
services are delivered. Therefore no engagement has been undertaken.
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6. Inclusion
of Māori in the decision making process
No engagement with Māori has been undertaken in
preparing this report.
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7. Delegations
The Audit, Risk and Finance Subcommittee has the
delegation to consider the Annual Internal Audit Plan and the resourcing for
this each year.
Areas of Responsibility:
· The
internal audit function
Powers to Recommend:
· To
Council any matters within the areas of their responsibility
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Audit, Risk and Finance
Subcommittee
