Notice of the Ordinary meeting of
Audit and Risk Subcommittee
Kōmiti Iti mō te Tātari Kaute me te
Tūraru
|
Date: Thursday
21 May 2020
Time: Commencing
at the conclusion of the Governance and Finance Committee meeting
Location: via
Zoom
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Agenda
Rārangi take
Chairperson Mr
John Peters
Members Her
Worship the Mayor Rachel Reese
Cr Judene Edgar
Mr John Murray
Cr Rachel Sanson
Quorum 3 Pat
Dougherty
Chief
Executive
Nelson City Council Disclaimer
Please
note that the contents of these Council and Committee agendas have yet to be
considered by Council and officer recommendations may be altered or changed by
the Council in the process of making the formal Council decision. For enquiries
call (03) 5460436.
Areas of Responsibility
· Council’s Treasury policies
· Council’s Annual Report
· Audit processes and management of
financial risk
· Monitoring organisational risks,
including debtors and legal proceedings
· Internal audit
· Health and Safety
· Any matters raised by Audit New
Zealand or the Office of the Auditor-General
Powers to Decide
·
None
Powers to Recommend to Governance and Finance
Committee
· To write off outstanding accounts
receivable or remit fees and charges of amounts over the Chief
Executive’s delegated authority
· Any matters within the areas of
responsibility or such other matters referred to it by the Council
Powers to Recommend to Council
· Adoption of
Council’s Annual Report
For the Terms of Reference for the Audit and Risk Subcommittee
please refer to document A1437349.
Audit and Risk Subcommittee
21
May 2020
Page
No.
1. Apologies
Nil
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 18
February 2020 7 - 13
Document number M6695
Recommendation
|
That the Audit and Risk Subcommittee
1. Confirms the minutes of the meeting
of the Audit and Risk Subcommittee, held on 18 February 2020, as a true and
correct record.
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6. Chairperson's Report
7. Audit NZ: Audit Plan
for year ending 30 June 2020 and Audit Proposal Letter 14 - 41
Document number R14857
Recommendation
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That
the Audit and Risk Subcommittee
1. Receives
the report Audit NZ: Audit Plan for year ending 30 June 2020 and Audit
Proposal Letter (R14857) and
its attachments (A2376650 and A2381428); and
2. Notes the Subcommittee can
provide feedback on the Audit Proposal Letter to Audit New Zealand if
required and the Mayor will sign the letter once the
Subcommittee’s feedback has been incorporated.
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8. COVID-19: Assessment
of Financial Risk to Annual Plan 2020/21 42
- 46
Document number R17017
Recommendation
|
That
the Audit and Risk Subcommittee
1. Receives
the report COVID-19: Assessment of Financial Risk to Annual Plan 2020/21
(R17017) and its attachment
(A2372220).
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9. Health Safety and
Wellbeing Report, COVID-19 Response, April 2020 47
- 60
Document number R16993
Recommendation
|
That
the Audit and Risk Subcommittee
1. Receives
the report Health Safety and Wellbeing Report, COVID-19 Response, April 2020
(R16993) and its attachment
(A2380485).
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10. Internal Audit Quarterly
Progress Report to 31 March 2020 61 - 65
Document number R14817
Recommendation
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That
the Audit and Risk Subcommittee
1. Receives
the report Internal Audit Quarterly Progress Report to 31 March 2020 (R14817)
and its attachment (A2365059).
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11. Draft Internal Audit Plan for
year to 30 June 2021 66 - 73
Document number R14816
Recommendation
|
That
the Audit and Risk Subcommittee
1. Receives
the report Draft Internal Audit Plan for year to 30 June 2021 (R14816) and its attachment (A2357411).
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12. Reserves Contributions for Unit
Titles – Final Report
Note: This report will be
circulated under separate cover.
CONFIDENTIAL Business
12. Exclusion
of the Public
Recommendation
That the Audit
and Risk 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
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General subject of each matter to be
considered
|
Reason for passing this resolution in
relation to each matter
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Particular interests protected (where
applicable)
|
|
1
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Audit and Risk Subcommittee Meeting - Public
Excluded Minutes - 18 February 2020
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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.
|
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)(g)
To maintain
legal professional privilege
|
|
2
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Reserves Contribution for Unit Titles –
Breakdown of Discrepancies
Note: This report will be circulated under
separate cover
|
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
|
|
3
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Quarterly Update On Debts - 31 March 2020
|
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
· Section
7(2)(g)
To maintain legal
professional privilege
|
Audit and Risk Subcommittee Minutes
- 18 February 2020
Present: Mr
J Peters (Chairperson), Her Worship the Mayor R Reese, Mr J Murray (Deputy
Chairperson), Councillor J Edgar and Councillor R Sanson
In
Attendance: Chief Executive (P Dougherty), Group Manager
Corporate Services (N Harrison) and Governance Adviser (E Stephenson)
Apologies : Nil
1. Apologies
2. Confirmation of
Order of Business
There was no change 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
4.1 Sue
Grey, Brook Valley Community Group - Legal Proceedings
|
Sue Grey, representing the
Brook Valley Community Group, was present to talk about the Group’s
legal proceedings. Supporting information was tabled (A2342297).
Ms Grey noted there were
different views on the matter. She reiterated that the Group’s only
debt was court costs and clarified that the Group was requesting that Council
withdraw its application to wind-up the Group and undertake an enquiry on
lessons learned.
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Attachments
1 A2342297 - Brook
Valley Community Group public forum supporting information
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5 Chairperson's
Report
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The Chairperson, Mr John
Peters, welcomed members to the first subcommittee meeting of the triennium.
He noted that the Audit NZ report to be received at this meeting was largely
positive and congratulated staff.
Mr Peters said that he was
pleased to see future focus in areas that the Subcommittee had been
interested in. He raised the issue of the current significant risk of
Covid-19, the coronavirus.
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Resolved AR/2020/001
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|
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That the Audit and Risk Subcommittee
1. Receives
the Chairperson’s Report .
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Murray/Sanson Carried
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6. Internal Audit
Quarterly Progress Report to 31 December 2019
Document number R13707, agenda
pages 7 - 10 refer.
Internal Audit Analyst, Lynn
Anderson, presented the report.
Manager Business Improvement,
Arlene Akhlaq, answered questions regarding asset registers and gap analysis.
Group Manager Corporate Services,
Nikki Harrison, answered questions regarding accounting systems.
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Resolved AR/2020/002
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|
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That
the Audit and Risk Subcommittee
1. Receives
the report Internal Audit Quarterly Progress Report to 31 December 2019
(R13707) and its attachment
(A2278558).
|
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Murray/Sanson Carried
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7. New and Outstanding
Significant Risk Exposures and Control Issues Identified from Internal Audits -
31 December 2019
Document number R13708, agenda
pages 11 - 16 refer.
Internal Audit Analyst, Lynn
Anderson, presented the report and answered questions.
Health and Safety Adviser,
Malcolm Hughes, answered questions regarding Council’s response to the
emerging coronavirus risk.
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Resolved AR/2020/003
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|
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That
the Audit and Risk Subcommittee
1. Receives
the report New and Outstanding Significant Risk Exposures and Control Issues
Identified from Internal Audits - 31 December 2019 (R13708) and its attachment (A2316401).
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Her Worship the Mayor/Sanson Carried
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8. Key Organisational
Risks Report - 01 July to 31 December 2019
Document number R13718, agenda
pages 17 - 44 refer.
Manager Business Improvement,
Arlene Akhlaq, presented the report and answered questions regarding
earthquake-prone buildings and fire risk on reserves.
In response to a question, Chief
Executive, Pat Dougherty, confirmed that Council did have a duty of care to
people using public buildings and it was subsequently confirmed that notices
were required to be displayed on them.
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Resolved AR/2020/004
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|
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That the Audit and
Risk Subcommittee
1. Receives the report Key Organisational Risks
Report - 01 July to 31 December 2019 (R13718) and its attachment (A2332487).
|
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Murray/Sanson Carried
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9. Health, Safety and
Wellbeing Report, July to December 2019
Document number R13724, agenda
pages 45 - 58 refer.
Health and Safety Adviser,
Malcolm Hughes, answered questions on the report.
Mr Hughes answered questions
regarding marina hardstand risks and discussion took place regarding the need
to improve monitoring and enforce conditions at the Marina and on Elected
Members’ due diligence and site visits.
The following health and safety site visits were
noted:
· Councillor Noonan
- the Maitai Bridge works
· Mr John Murray,
Forestry Advisory Group Chair; Group Manager Infrastructure, Alec Louverdis;
and Independent Forestry Expert, Peter Gorman - a forestry site visit on 10
September 2019.
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Resolved AR/2020/005
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That
the Audit and Risk Subcommittee
1. Receives
the report Health, Safety and Wellbeing Report, July to December 2019 (R13724) and its attachment (A2323649).
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Edgar/Sanson Carried
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10. Letter from Audit NZ on Annual
Report for year ending 30 June 2019
Document number R13731, agenda
pages 59 - 95 refer.
In response to a question, Group
Manager Corporate Services, Nikki Harrison, confirmed that the GST audit
actions would be reported through the Annual Tax Review.
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Resolved AR/2020/006
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|
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That
the Audit and Risk Subcommittee
1. Receives
the report Letter from Audit NZ on Annual Report for year ending 30 June 2019
and its attachment (A2320712); and
2.
Notes Audit New Zealand’s responses on the Annual Report for
year ending 30 June 2019.
|
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Edgar/Sanson Carried
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11. Exclusion
of the Public
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Resolved AR/2020/007
|
|
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That the Audit and Risk 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:
|
|
Sanson/Her Worship the Mayor Carried
|
|
Item
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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 Debts - 31 December 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)(a)
To protect the privacy of
natural persons, including that of a deceased person
· Section
7(2)(g)
To maintain legal
professional privilege
|
|
2
|
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
|
|
3
|
Internal Audit - Investigation into the Calculation
of Reserves Contributions
|
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
· Section
7(2)(g)
To maintain legal
professional privilege
|
The meeting went into confidential session at 3.30p.m.
and resumed in public session at 5.26p.m.
Restatements
It was resolved while the public was
excluded:
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1
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CONFIDENTIAL: Quarterly Update On Debts - 31 December
2019
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|
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That
the Audit and Risk Subcommittee
3. Agrees that the
Report (R13726) and its attachment (A2216183) remain confidential at this
time.
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2
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CONFIDENTIAL: Quarterly Update on Legal Proceedings
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|
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That the Audit and Risk Subcommittee
2. Agrees that the Report
(R13737) and its attachment (A2333508) remain confidential at this time.
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3
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CONFIDENTIAL: Internal Audit - Investigation into the
Calculation of Reserves Contributions
|
|
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That the Audit and Risk Subcommittee
3. Agrees that the report Internal
Audit - Investigation into the Calculation of Reserves Contributions (R13745)
remain confidential at this time.
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There being no further business the meeting ended at 5.26p.m.
Confirmed as a correct record of proceedings:
Chairperson
Date
Item 7: Audit NZ: Audit
Plan for year ending 30 June 2020 and Audit Proposal Letter
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Audit and Risk Subcommittee
21 May 2020
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REPORT R14857
Audit
NZ: Audit Plan for year ending 30 June 2020 and Audit Proposal Letter
1. Purpose
of Report
1.1 To
provide the subcommittee with the Audit Plan from Audit NZ for the year ending
30 June 2020.
1.2 To
provide the subcommittee with the Audit Proposal Letter for the 2020, 2021 and
2022 financial years and ask for any feedback before the letter is signed by
the Mayor.
2. Recommendation
|
That the Audit and Risk Subcommittee
1. Receives
the report Audit NZ: Audit Plan for year ending 30 June 2020 and Audit
Proposal Letter (R14857) and
its attachments (A2376650 and A2381428); and
2. Notes the Subcommittee can provide feedback on the Audit
Proposal Letter to Audit New Zealand if required and the Mayor will sign the
letter once the Subcommittee’s feedback has been incorporated.
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2. Background
2.1 The
Audit Plan (Attachment 1) sets out the audit arrangements and covers:
· Audit risks and issues,
both specific focus areas for council and areas of interest for all local
authorities
· Group audit
· Audit process
· Reporting protocols
· Audit logistics
· Expectations
2.2 The
Audit Proposal letter sets out the proposed audit fees and audit hours covering
the years 30 June 2020, 2021 and 2022 agreed with the Office of the Auditor
General (Attachment 2). Section 6 of this letter outline the reasons for the
proposed increase in audit fees. The Auditor General has decided that for the
30 June 2020 audit, audit fees are to be held to a 1.5% increase over the
agreed fee for the 30 June 2019 audit.
2.3 There
is no Audit Engagement letter to be signed this year as there have been no
changes in circumstances since it was signed after being brought to the
subcommittee meeting on 26 June 2018.
2.4 John
Mackey, the appointed auditor, will be in attendance at this subcommittee
meeting to answer any questions that may arise
Author: Clare
Knox, Manager Finance
Attachments
Attachment 1: A2376650
- NCC Audit Plan 2020 final ⇩
Attachment 2: A2381428
- 2020-22 Audit Proposal Letter ⇩
Item 7: Audit NZ: Audit Plan for year ending 30 June 2020 and Audit
Proposal Letter: Attachment 1
Item 7: Audit NZ: Audit
Plan for year ending 30 June 2020 and Audit Proposal Letter: Attachment 2
Item 8: COVID-19:
Assessment of Financial Risk to Annual Plan 2020/21
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|
Audit and Risk Subcommittee
21 May 2020
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REPORT R17017
COVID-19:
Assessment of Financial Risk to Annual Plan 2020/21
1. Purpose
of Report
1.1 To
present a high level analysis of the financial risks associated with setting
the rates for the 2020/21 year during the COVID-19 crisis.
2. Recommendation
|
That the Audit and Risk Subcommittee
1. Receives
the report COVID-19: Assessment of Financial Risk to Annual Plan 2020/21
(R17017) and its attachment
(A2372220).
|
3. Background
3.1 At
the Council meeting on 23 April 2020, a report was considered about the effects
of setting the 2020/21 rates increase to zero. There were questions from
elected members regarding the potential worst case, best case and the base case
scenarios for the Annual Plan. The base case scenario will form the basis
of the Annual Plan deliberations report.
3.2 Whatever
scenario is included in the Annual Plan, the reality is that the results across
a number of areas are almost certain to be different – it is still too
early to understand the COVID-19 impacts and how this will affect our budgets.
Staff are still working on the potential impacts on work programmes and any
further budget implications will be brought to the Annual Plan deliberations.
3.3 The Local
Government Sector COVID-19 Financial Implications Report 2 – Alert Level
Scenarios, Assumptions and Updated Analysis report was released on 4 May
2020. The report confirms there will be highly variable impacts on
different types of councils, but key overall findings are revenues for 2020/21
are likely to be 2.3% – 11% less than pre-COVID-19 forecasts. This
projected impact is lower than the first report, which indicated potential
revenue reductions ranging between 15% and 20%.
3.4 Overall
Council base case scenario reflects a reduction in revenue of approximately 3%.
Council receives a large proportion (67%-70%) of its operating revenue from
rates income.
4. Discussion
Resource Consent and Building Consent Fees
4.1 In
the base case scenario, the volume of resource consents is estimated to drop by
20% and together with an assumption of deferring the proposed fee increase
(currently out for consultation) until 1 September 2021 this results in reduced
income of $239,000 from the Draft Annual Plan. There are associated
savings in contractor costs of $65,000.
4.2 Building
consent volumes are also estimated to reduce by 20% and together with an
assumption of deferring the proposed fee increase (currently out for
consultation) until 1 January 2021 this reduces income by $675,000. There are
associated savings in contractor and training costs of $170,000.
4.3 Officers
have also modelled the impact of a 35% drop in revenue (worst case) and a 5%
drop in revenue (best case) in Attachment 1 and the associated savings in
contractor costs.
Parking and Infringement Income
4.4
Under the base case scenario, there is an expectation that there will be
ongoing subdued CBD activity and the anticipated shortfall in parking revenue
is $329,000 – about 50% of the budgeted income.
4.5 Officers
have also modelled the impact of a 60% drop in revenue (worst case) and a 40%
drop in revenue (best case) in Attachment 1.
4.6 The
volume of enforcement activity is estimated to drop by 30% resulting in reduced
infringement income of $174,000. There are associated savings in contractor
costs of $40,000.
4.7 Officers
have also modelled the impact of a 40% drop in revenue (worst case) and a 20%
drop in revenue (best case) in Attachment 1.
Council’s
commercial revenue
4.8 Council
earns revenue from leases and licenses and dividends from Council Controlled
Trading Organisations (CCTOs).
4.9 It
is too early to forecast the potential impact on Council’s commercial
revenue and a provision of $2.1 million has been made as a reduction in overall
commercial revenue (35% reduction). Officers will be working on refining the
potential impacts on dividends prior to the deliberations meeting.
4.10 Officers
have also modelled the impact of a 47% drop in revenue (worst case) and a 28%
drop in revenue (best case) in Attachment 1.
Additional
savings since 23 April 2020 report
4.11 Attachment
1 includes other net savings of approximately $313,000 in operating income and
expenses which need to be worked through in detail to ensure there are no
impacts on levels of service. With the drop in interest rates from COVID-19
crisis the assumed interest rate has also been recalculated at 0.7% less
leading to a $625,000 saving.
Council
debt levels
4.12 To
bring the proposed overall increase in rates revenue down to zero it is
proposed to not rates fund and instead staff are recommending a draw down
against the Disaster Recovery Fund. The proposed contribution to the Disaster
Fund in 2020/21 was $1.150m. Drawing down against the Fund would require
borrowing, as the fund is overdrawn as a result of Nelson experiencing several
emergencies in recent years. The balance of the Fund as at 30 June 2021 was
projected to be $659,000 overdrawn.
4.13 Using
the base case scenario, bringing the rates increase to zero will at this stage
require an additional $3m to be drawn down (borrowed) from the Disaster
Recovery Fund taking the projected balance at 30 June 2021 to $3.6m
deficit.
4.14 This
will have an overall impact on Council debt of $3m taking the projected debt at
30 June 2021 to $116m (compared to the Long Term Plan 2018-28 of $139m and
Draft Annual Plan pre COVID-19 of $109m).
4.15 With
the increase in debt drawdown from the Disaster Recovery Fund combined with the
reduction in revenue sources the debt to total revenue ratio will be
approximately 101% as at 30 June 2021 versus the limit of 150% (worse case 103%
and best case 99%). The Long Term Plan 2018-28 had a projected debt to total
revenue ratio of 117.4% and the Draft Annual Plan 2020/21 (pre COVID-19) of
90%.
4.16 Projected
debt includes movements required to bring the increase in rates revenue down to
zero only. It does not account for any rating deficit in the current year,
which if it occurred would be debt funded. The current year forecast has been
delayed to give staff time to understand the implications of the timing of
Alert levels on work programmes and is being updated for the deliberations
meeting.
|
Debt Ratios (as at 30 June 2021)
|
Draft Annual Plan
|
Scenario 1 Worst Case
|
Scenario 2 Base Case
|
Scenario 3 Best Case
|
|
Projected Net Debt
|
108,900
|
117,122
|
115,985
|
115,025
|
|
|
|
|
|
|
Debt Affordability Benchmark (quantified limit 150%)
|
90%
|
103%
|
101%
|
99%
|
|
|
|
|
|
|
Balanced Budget Benchmark (benchmark 100%)
|
97%
|
93%
|
94%
|
95%
|
4.17 It
will likely take a three to four year period to fully recover from the impacts
of COVID-19 which will require ongoing use of the Disaster Recovery Fund to
offset lower revenue – both rating and from other sources. This will
ensure Council can maintain services and capital spending to support the
economic recovery in our region.
5. Conclusion
5.1 This
report presents a high level analysis of the financial risks associates with
setting the rates for the 2020/21 year during the COVID-19 crisis.
5.2 Under
the scenarios presented, the financial risks are manageable due mainly to the
strong financial position of the Council and relatively low debt burden.
Author: Nikki
Harrison, Group Manager Corporate Services
Attachments
Attachment 1: A23772220 - rates
scenarios for Annual Plan 2020/21 ⇩
Item 8: COVID-19: Assessment of Financial Risk to Annual Plan
2020/21: Attachment 1
Item 9: Health Safety
and Wellbeing Report, COVID-19 Response, April 2020
|
|
Audit and Risk Subcommittee
21 May 2020
|
REPORT R16993
Health
Safety and Wellbeing Report, COVID-19 Response, April 2020
1. Purpose
of Report
1.1 To
provide the subcommittee with an overview of health, safety and wellbeing
matters in regard to the COVID-19 response.
2. Summary
2.1 In
late January 2020 the Novel Corona virus later named COVID-19 was identified as
a potential risk to Council and a scaled response initiated. Council’s
full Incident Management Team was established on 20 March, six days prior to
the Government lockdown of all non-essential workplaces and activities.
2.2 This
report and the attachment, COVID–19 Activities and Controls Overview
(A2380485) provides an overview of Council’s response with a particular
focus on health, safety and wellbeing of staff, contractors and customers.
3. Recommendation
|
That the Audit and Risk Subcommittee
1. Receives
the report Health Safety and Wellbeing Report, COVID-19 Response, April 2020
(R16993) and its attachment
(A2380485).
|
4. Background
4.1
Elected members, as ‘Officers’ under the
Health and Safety at Work Act 2015 (HSWA), are expected to undertake due
diligence on health and safety matters.
4.2
Health and safety reports that include lead and lag data in regard to
Council’s key health and safety risks are provided to the Audit and Risk
subcommittee quarterly. Due to the COVID-19 Response these data reports for the
period January to March 2020 are delayed and will be included with the April to
June data as a six monthly report.
4.3
The Audit and Risk Subcommittee has requested a report covering health,
safety and wellbeing in regard to Councils Response to COVID-19.
5. Discussion
Response
Planning
5.1 COVID-19
was identified as a potential risk to Council in late January. Initial
preparation work focused primarily on promoting good hygiene habits, and
reassuring staff with a focus on preparation without panic. By mid-February
weekly updates on the international situation and potential impacts on Council
were being provided to the Senior Leadership Team and key staff were involved
in briefings from NMDHB.
5.2 Council’s
business continuity priorities were found to be current in the context of a
potential pandemic and business unit skeletal continuity plans had been
reviewed in January as a scheduled review. Council’s pandemic business
continuity plan based on the stages of pandemic as outlined in the National
Pandemic Plan 2017 underwent a significant review with input from business
units responsible for delivering essential services.
5.3 On
20 March, Council’s Incident Management Team for the COVID-19 Response
(IMT) was established with Alec Louverdis leading the response as Incident
Manager. On 21 March a new national COVID-19 alert level system was announced
with New Zealand moving immediately to alert level 2. On 23 March the
transition to alert level 3 followed by level 4 at midnight on 25 March
was announced. By 24 March Council staff were working from home with very few
exceptions.
5.4 Early
planning based on the stages of pandemic had a significant focus on maintaining
essential services if a significant proportion of the workforce was unable to
work due to illness caused by the pandemic. The introduction of the alert
system and the rapid escalation in alert levels provided assurance that the
measures introduced by the Government would prevent widespread illness.
5.5 Operational
planning shifted to focus on delivering business as usual as far as practicable
with all staff working from home. A new planning document was developed that
aimed to eventually provide an overview of all Council activities and control
measures through each of the alert levels. The attachment, COVID–19
Activities and Controls Overview (A2380485) is an abridged version of this
document prepared for the Audit and Risk Subcommittee.
5.6 In
some areas the attachment provides a high level of detail regarding COVID-19
controls, this is provided as an indication of specific controls for activities
of particular interest, however planning to an even greater level of detail is
contained in business unit and contractor planning documents.
5.7 A
Covid-19 Local Government Response Unit (LGRU) has been established and is
providing guidance on Council services and operations through each of the alert
levels. Finalised guidance from both the LRGU, central government, and industry
bodies is often provided with only short timeframes before it is required to be
implemented as New Zealand moves down through the alert levels. This requires
response planning to be flexible and results in ongoing changes to the planning
documents.
Ergonomics
While Working from Home
5.8 Previous
decisions to improve organisational resilience and ongoing support from
Council’s IT team ensured that the majority of Council staff were able to
work effectively from home as soon as possible. To improve the ergonomics of
workstations, staff were encouraged to take monitors and keyboards home so they
would not need to work for extended periods using only a laptop computer. A few
staff were able to be provided with folding cardboard desks Council had been
trialling, and many others improvised very functional workstations from
household items.
5.9 It
was identified that the change to working from home would increase the
likelihood of discomfort, pain or injury (DPI). Staff were reminded of
reporting procedures and provided documents and tips for self-assessment of
workstation setups. Very few cases of DPI have been reported since staff have
been working from home. Virtual workstation assessments are able to be
provided, and in most cases discomfort has been able to be resolved by just
having a discussion about how a person is working.
Staff Wellbeing
5.10 A
number of factors relating to COVID-19 and the working from home situation have
been identified as having a potential negative impact on staff wellbeing.
Managers are encouraged to check in regularly with their team members and
People and Capability business partners also maintain regular contact with
teams focusing on wellbeing. Regular internal communications keep staff
informed and include information to help with managing causes of stress that
emerge as a result of COVID-19 and a new way of working.
5.11 A
working from home survey sent to all staff after one week at Alert Level 4 had
a response rate of 67%, with 94% of those who responded answering either
Somewhat Agree (23%), Agree (50%), or Strongly Agree (21%) to the statement
“Overall, I’m feeling good about working remotely.” This
indicates that while there are potential negative impacts, the actual outcome
has been generally good for most, and very positive for around one in five
employees. This is likely to be a reflection of the strong relationships within
many teams, the range of organisational support mechanisms available, and good
technology infrastructure for most staff.
5.12 Council
uses Workplace Support to provide a counselling service for staff. For the
period 1 January to 31 March 2020, 20 in depth support sessions were reported
which includes formal counselling and in-depth onsite or phone conversations.
This number is consistent with the average for the previous three quarterly
periods. When available, data for the April to June quarter will provide
further insight into the uptake of counselling services in regard to the
impacts of COVID-19 on staff wellbeing.
5.13 With
Workplace Support counsellors unable to attend workplaces for their normal
proactive visits and informal discussions, they have been actively phoning
staff. A focus of these calls has been the corporate management team who are
under significantly increased workloads managing the COVID-19 response with
teams working remotely. This approach also provides counsellors with insight
into other staff that may benefit from a proactive call.
5.14 Although
detailed data reports have not been prepared, sick leave data for March show
lower levels of sick leave taken than for the same period in previous years. A
similar pattern is particularly evident in national influenza data which shows
considerably lower numbers of cases than at the same time in previous years.
Influenza vaccinations have been provided to approximately 100 staff in two
sessions and further flu vaccination sessions will be scheduled as soon as our
provider can obtain adequate supplies of vaccine.
Safe Return to Workplaces
5.15 The
safe return to workplaces as alert levels decrease is a significant undertaking.
At alert level 3 a small number of staff who were unable to work effectively
from home returned to Council workplaces. Site visits and remote work by
Council staff also resumed. To communicate required controls to staff and
contractors a number of COVID-19 specific procedures were developed, these
include; complete a site visit or any offsite work, manage contractors during
pandemic, record contacts for contact tracing, return to workplace safely,
vehicle use during pandemic and respond to a suspected case of COVID-19.
5.16 In
addition to the procedures, considerable work has been required to prepare
workplaces both from a building compliance perspective and COVID-19 controls.
This included the provision of signage, sanitizer stations, cleaning product
and reconfigured meeting rooms. A contact recording E-form was developed using
existing software tools and is in use by staff who attend workplaces.
5.17 The
transition to alert level two includes the re-opening of customer facing
services such as libraries, Founders Heritage Park and the Customer Service
Centre as well as a larger number of staff returning to workplaces. To manage
risks related to the customer interface requires detailed planning and
preparation, often with limited, detailed guidance and no established standards
in regard to good practice. Further information regarding these controls can be
found in the relevant section of the attachment, COVID–19 Activities and
Controls Overview (A2380485) and business unit specific plans.
Workplace Self-certification
5.18 A
workplace self-certification process was referred to in Government briefings
leading up to the transition to alert level three. The Audit and Risk
Subcommittee requested an update on Council’s involvement in this
process. Council officers have been unable to locate any information in regard
to a formal self-certification process.
5.19 There
is a safe business declaration poster available on the covid19.govt.nz
website for businesses to display to assure customers that key COVID-19
controls of; physical distancing, correct hygiene practices, contact tracing,
and contactless payment and delivery/collection are in place. The intended
approach at Council public facing workplaces is that instead of displaying this
generic poster, specific information is provided regarding expectations of
customers in regard to each of these controls using a variety of media that
includes: external communications, posters, physical barriers, floor markings
and verbal instructions from staff.
5.20 There
is guidance available from industry bodies and WorkSafe on what is required in
COVID-19 risk management plans. Councils approach to planning for return to
workplaces has been internally reviewed against the WorkSafe ‘COVID-19
safety plan template’. Contractor COVID-19 safety plans are reviewed
against relevant industry templates. A comprehensive template prepared for the
construction industry has been found to be particularly useful across a broad
range of contracts.
5.21 Council
requires COVID-19 safety plans from all contractors before they recommence
Council work. Reviews of these plans are completed in the
‘Improvements’ health and safety management system. A sample of
these reviews has shown that contractors have a good understanding of COVID-19
requirements, and a high level of commitment to providing adequate plans.
Ongoing site supervision will monitor the effectiveness of contractor’s
controls.
6. Conclusion
6.1 Councils
preparation and planning both in general organisational resilience and COVID
-19 specific work has ensured a response that has enabled a high level of
service delivery through lockdown and minimised the negative impacts on
Council.
6.2 Working
remotely has presented challenges and risks that need ongoing consideration to
manage. However it has is also highlighted opportunities in regard to future
ways of working and shown a highly resilient organisation.
6.3 Although
a considerable drain on resources, Council staff and contractors have a high
level of engagement with ensuring COVID-19 safe work practices are followed as
they return to workplaces.
6.4 The
ongoing impacts of COVID-19 and the resulting economic downturn are
significant, and need to be considered in the context of direct and indirect
health, safety and wellbeing, risks to staff.
Author: Malcolm
Hughes, Health and Safety Adviser
Attachments
Attachment 1: COVID-19 Activities
and Controls Overview (A2380485) ⇩
Item 9: Health Safety and Wellbeing Report, COVID-19 Response, April
2020: Attachment 1
Item 10: Internal Audit
Quarterly Progress Report to 31 March 2020
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Audit and Risk Subcommittee
12 May 2020
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REPORT R14817
Internal
Audit Quarterly Progress Report to 31 March 2020
1. Purpose
of Report
1.1 To
update the Audit and Risk Subcommittee on the internal audit activity for the
quarter to 31 March 2020.
2. Background
2.1 Under
Council’s Internal Audit Charter approved by Council on 15 November 2018,
the Audit and Risk Subcommittee requires a periodic update on the progress of
internal audit activities relative to any current Internal Audit Plan approved
by Council.
2.2 The
current Internal Audit Plan (the Plan) for the year to 30 June 2020 was
approved by Council on 8 August 2019. The Plan provides for two planned audits,
with an allowance for a further two unplanned audits. As well, it provides for
a contribution towards business improvement work programmes.
3. Recommendation
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That the Audit and Risk Subcommittee
1. Receives
the report Internal Audit Quarterly Progress Report to 31 March 2020 (R14817)
and its attachment (A2365059).
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4. Summary
4.1 Activity
during the quarter focused primarily on internal audits. One audit was
completed and two others are well underway with completion anticipated within
the next few weeks.
4.2 The
remaining audit for 2019-2020 is Information Management Maturity. The priority
for this piece of work will be reconsidered in due course.
4.3 During
the quarter the Draft Annual Internal Audit Plan for 2020-21 was completed.
Following the Covid-19 outbreak it has been reconsidered and may need to remain
a dynamic document as risks emerge and internal audit’s role in the
recovery evolves. The Draft Plan is reported on separately.
4.4 A
quality assurance self-assessment for the internal audit activity was completed
during the quarter. As this is not a current priority, this will be reported on
at the next Audit and Risk Subcommittee meeting.
4.5 In
the business improvement realm, planned progress on the development and
implementation of a consolidated contracts database is behind schedule due to
competing priorities for resources. Further, as there is an IT systems change
freeze until 2 June 2020, increased priorities relating to the impact and
recovery from the COVID-19 outbreak and end-of-year activities, the
implementation date has been extended to the first quarter of 2020-2021.
4.6 There
are no further updates for the other business improvements included in the
Annual Internal Audit Plan for 2019-2020 due to the reporting officer’s
redeployment to help with the Emergency Management response planning.
4.7 The
Audit and Risk Subcommittee requested an update on whether the recommendations
from the Crowe Horwath 2016 audit on Members’ Interests had been
implemented. Officers reported back to the subcommittee meeting on 13 February
2018 confirming that the HIGH recommendations had been actioned. Staff
can report that the remaining recommendations were completed by July 2018.
Improvements implemented included: the Procurement Policy requires that
officers consider members’ interests during any procurement; elected
members who are creditors are identified as such; Finance monitors all payments
against elected members; there is an improvement Members’ Interests
Register; all newly elected members are made aware of their responsibilities
with respect to their interests during induction training.
Author: Lynn
Anderson, Internal Audit Analyst
Attachments
Attachment 1: A2365059 - Internal
Audit Quarterly Progress Report to 31 March 2020 ⇩
Item 10: Internal Audit Quarterly Progress Report to 31 March 2020:
Attachment 1
Item 11: Draft Internal
Audit Plan for year to 30 June 2021
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Audit and Risk Subcommittee
12 May 2020
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REPORT R14816
Draft
Internal Audit Plan for year to 30 June 2021
1. Purpose
of Report
1.1 To
approve the Draft Annual Internal Audit Plan (Plan) to 30 June 2021.
2. Recommendation
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That the Audit and Risk Subcommittee
1. Receives
the report Draft Internal Audit Plan for year to 30 June 2021 (R14816) and its attachment (A2357411).
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Recommendation to the Governance
and Finance Committee
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That the
Governance and Finance Committee
1. Approves the Draft Annual Internal
Audit Plan for the year to 30 June 2021 (A2357411).
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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 clause 8.2 requires the 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 view at
the time of writing.
4. Composition
of Plan
4.1 The
Draft Internal Audit Plan attached (A2357411) was compiled following
discussions with Senior Management and the preferences indicated by the members
of the Audit and Risk Subcommittee at an informal meeting held on 16 April
2020. As a result, there is a strong emphasis in the Plan on potential impacts
from the COVID-19 event.
4.2 In
these unusual times, the impacts on Council from COVID-19 are uncertain and as
such the composition of any approved Plan may need subsequent changes. A
generous allowance has been made for four adhoc audits, the topics of which
will be driven by the changing environment or at the direction of the
Subcommittee. Note that under the Internal Audit Charter cl. 8.2 any
significant deviation from the approved internal audit plan will be
considered by Audit and Risk after seeking guidance (if appropriate) from the
Chief Executive and if necessary the Council.
Impact of the Volume of Audits on the Organisation
4.3 On
8 September 2019 Council approved a portion of business improvement to be
included in the 2019/20 Plan. This was on the basis that it be reconsidered at
30 June 2020.
4.3.1 Management
still considers that the volume of internal audits should not take 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. This is particularly pertinent in the current uncertain environment.
4.3.2 With
this in mind a portion of time, albeit smaller than last year, is allocated to
business improvement work in this Draft Plan. The Plan allows for 54% of the
internal audit resource to be put to performing internal audits directly
connected with the COVID-19 event, and another 15% to developing internal
audit-related data analytics. Just 12% is allocated to other improvements
outside the internal audit activity, with the balance of time set aside for
administrative purposes.
Impact of Covid-19 on Existing Controls
4.4 Existing
controls have been developed on a business-as-usual scenario. Changes to
working practices and organisation arrangements in response to COVID-19,
introduce a range of new or enhanced risk areas and have the potential to
substantially disrupt the existing system of core internal controls.
4.4.1 Data
analytics can be used to look for potential fraud and other indicators that
controls may not be working as intended. These reduce the effort required for
manual checking and increase the volume of data able to be tested.
4.4.2 The
possibility of engaging an external contractor to provide such data analysis
services during 2020/21 was considered, but it was felt that the cost could not
currently be justified. In preference, data analytics will be developed
in-house using available tools and resources. The Chair and Deputy Chair
support this decision.
4.4.3 The
proposed Plan includes the development of data analytics modelling relating to
procurement to enable investigation and ongoing testing of key procurement
controls. There is an increased need for investigation into this area of
enhanced risk.
Procurement Costs Associated with the Internal Audit
Activity
4.5 Nelson’s
and Council’s financial impact relating to the COVID-19 outbreak will be
significant. Council must be able to show that it is spending prudently to
maintain public confidence.
4.5.1 In
recent years, Council has approved a spending budget of $40,000 for internal
audit. This has been allocated to the use of external consultants where
particular subject expertise has been required or where there have been limited
internal resources to accomplish audits included in Plans.
4.5.2 The
proposed Plan for 2020/21 includes a contingency of $25,000 for an external
consultant. As the impact of COVID-19 may change internal audit focus areas,
there is uncertainty as to whether even this reduced cost will prove necessary.
Quality Assurance/Improvements to
Internal Audit Activity
4.6 The
Internal Audit Charter (clauses 10.1 & 10.2) requires that the internal
audit activity maintains a quality assurance and improvement programme
4.6.1 The
Internal Audit Self-Assessment, which is reported separately to this meeting of
the Subcommittee, confirms that there is currently no formal internal audit
quality assurance and improvement programme in place. The recommendation from
that review was that this should be developed and implemented during 2020/21.
4.6.2 Time
had been set aside for this purpose in the 2020/21 Plan, however this has now
been replaced with an allowance for two additional adhoc audits. If there is
excess capacity, work on the initial development of the quality assurance and
improvement programme will begin.
5. Options
to Consider
Option 1
5.1 Approve
the Draft Internal Audit Plan, which provides for more audits than last year,
and allocates a reasonable amount of time for areas to be targeted as and when
they arise in response to the changing environment. It also provides for some
internal audit improvement initiatives, and the continuation of the centralised
contracts register development. This is the recommended option.
Option 2
5.2 Approve
an alternative Internal Audit Plan which provides for internal audits only
based entirely on the COVID-19 event and its impacts.
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Option 1: Approve Draft
Internal Audit Plan
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Advantages
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· Downstream
impact on the organisation is considered (estimated to be an organisational
total of one week per audit)
· Key
risks in key areas are targeted thus minimising unnecessary disruption to the
organisation
· Enables
the development of data analytics which will aid internal audit efficacy and
have flow-on advantages in other areas of Council where manual testing is
currently occurring
· The
Draft Plan can be altered as the impact from COVID-19 evolves
· Continuity
with the development of a centralised contracts register and contract
management database
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Risks and Disadvantages
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· There
may be some control weaknesses in areas which could have been reviewed by
internal audit if no planned business improvement work occurs
· Delay
with the establishment of a quality assurance and improvement programme for
internal audit
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Option 2: Provide for Internal
Audits only in the Draft Internal Audit Plan
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Advantages
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· Council
may gain greater knowledge of areas across the organisation where there have
been systems or control failures due to COVID-19
· The
Draft Plan can be altered as the impact from COVID-19 evolves
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Risks and Disadvantages
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· While
control weaknesses are likely to be identified from any internal audit, the
ability to treat these is limited due to scarce resources throughout the
organisation.
· Disruption
from audits should be kept to a minimum in this uncertain environment
· Delay
with the development of data analytics for improving the efficacy of internal
audit
· Delay
with the establishment of a quality assurance and improvement programme for
internal audit
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Author: Lynn
Anderson, Internal Audit Analyst
Attachments
Attachment 1: A2357411 - DRAFT
Internal Audit Plan to 30 June 2021 ⇩
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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 internal auditing, its
improvement, and other business improvements 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: scarce resources may be taken away from performing other key
responsibilities which may have higher consequences to the organisation than
responding to an internal audit finding.
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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 directly impact financial decisions, or the levels of services provided.
Therefore no consultation is required.
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6. Climate
Impact
There has been no specific climate change impact
considered in the preparation of this report.
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7. Inclusion
of Māori in the decision making process
No engagement with Māori has been undertaken in
preparing this report.
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· Delegations
The Audit and Risk Subcommittee has the following
delegations to consider the Annual Internal Audit Plan and the resourcing for
this each year.
Areas of Responsibility:
· Internal
audit
Powers to Recommend to the Governance and Finnce
Committee:
· Any matters within the areas of
responsibility or such other matters referred to it by the Council
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Item 11: Draft Internal Audit Plan for year to 30 June 2021:
Attachment 1
