Agenda of Audit and Risk Subcommittee

Audit and Risk Subcommittee

11 August 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 21 May 2020 8 - 14

Document number M9879

Recommendation

That the Audit and Risk Subcommittee

1. Confirms the minutes of the meeting of the Audit and Risk Subcommittee, held on 21 May 2020, as a true and correct record.

6. Chairperson's Report 15 - 16

Document number R18151

Recommendation

That the Audit and Risk Subcommittee

1. Receives the report Chairperson's Report (R18151).

7. Audit New Zealand - Audit Engagement Letter 17 - 31

Document number R18115

Recommendation

That the Subcommittee

1. Receives the report Audit New Zealand - Audit Engagement Letter (R18115) and its attachment (A2409696); and

2. Notes that following feedback from the Audit and Risk Subcommittee, Her Worship the Mayor will sign the Audit Engagement letter to Audit NZ.

8. Annual Tax Update 32 - 83

Document number R14819

Recommendation

That the Audit and Risk Subcommittee

1. Receives the report Annual Tax Update (R14819) and its attachments (A2415912, A2358418 and A2417124).

9. Interim Audit Report for the year ending 30 June 2020 84 - 108

Document number R14821

Recommendation

That the Audit and Risk Subcommittee

1. Receives the report Interim Audit Report for the year ending 30 June 2020 (R14821) and its attachment (A2414826); and

2. Notes the suggested responses to the recommendations (as per A2414826).

10. Health, Safety and Wellbeing Report, January to June 2020 109 - 126

Document number R18135

Recommendation

That the Audit and Risk Subcommittee

1. Receives the report Health, Safety and Wellbeing Report, January to June 2020 (R18135) and its attachment (A2404161).

11. Key Organisational Risks Report - 01 January to 30 June 2020 127 - 158

Document number R14813

Recommendation

That the Audit and Risk Subcommittee

1. Receives the report Key Organisational Risks Report - 01 January to 30 June 2020 (R14813) and its attachment (A2415845).

12. New and Outstanding Significant Risk Exposures and Control Issues Identified from Internal Audits - 30 June 2020 159 - 162

Document number R14818

Recommendation

That the Audit and Risk Subcommittee

1. Receives the report New and Outstanding Significant Risk Exposures and Control Issues Identified from Internal Audits - 30 June 2020 (R14818) and its attachment (A2417196).

13. Internal Audit - Quarterly Progress Report to 30 June 2020 163 - 168

Document number R18111

Recommendation

That the Audit and Risk Subcommittee

1. Receives the report Internal Audit - Quarterly Progress Report to 30 June 2020 (R18111) and its attachment (A2408483).

14. Bad Debt Writeoff - Year Ending 30 June 2020 169 - 171

Document number R14820

Recommendation

That the Audit and Risk Subcommittee

1. Receives the report Bad Debt Writeoff - Year Ending 30 June 2020 (R14820).

Recommendation to Governance and Finance Committee

That the Governance and Finance Committee

1. Approves the balance of $20,462.37 excluding GST owing by Concrete & Metals Ltd be written off as at 30 June 2020.

CONFIDENTIAL Business

15. 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	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 and Risk Subcommittee Meeting - Public Excluded Minutes - 21 May 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 · Section 7(2)(h) To enable the local authority to carry out, without prejudice or disadvantage, commercial activities
2	Quarterly Update On Debts - 30 June 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
3	Internal Audit Report - Transfer Station Kiosk	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
4	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

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 and Risk Subcommittee Meeting - Public Excluded Minutes - 21 May 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

· Section 7(2)(h)
To enable the local authority to carry out, without prejudice or disadvantage, commercial activities

Quarterly Update On Debts - 30 June 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

Internal Audit Report - Transfer Station Kiosk

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

Audit and Risk Subcommittee Minutes - 21 May 2020

Minutes of a meeting of the Audit and Risk Subcommittee

Held via Audio-visual (Zoom)

On Thursday 21 May 2020, commencing at 4.14p.m.

Present: Mr J Peters (Chairperson), Her Worship the Mayor R Reese, Councillors J Edgar and R Sanson, and Mr J Murray

In Attendance: Chief Executive (P Dougherty), Group Manager Environmental Management (C Barton), Group Manager Corporate Services (N Harrison), Governance Adviser (E-J Ruthven), and Governance Support (K McLean)

Apologies : Nil

1. Apologies

There were no 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.

Her Worship the Mayor subsequently declared an interest in relation to discussion regarding item 2 on the confidential agenda, Reserves Contributions for Unit Titles – Breakdown of Discrepancies.

4. Public Forum

4.1 Scott Syndicate Development Company Ltd - The Calculation of Reserve Contribution for Unit Title Developments

Mr Craig Dennis spoke on behalf of Scott Syndicate Development Company Ltd. He noted his concerns regarding the financial contribution methodologies in relation to the Bett Carpark and Malthouse Lane developments he had been involved with. He emphasised equity and fairness principles, and the need for different parties to be treated in the same manner with regards to financial contributions related to developments.

Mr Dennis also spoke about the 2018 updates to the Development Contributions Policy. He explained that changes to the Policy acted as a disincentive for inner city developments, aside from those at the highest end of the market.

5. Confirmation of Minutes

5.1 18 February 2020

Document number M6695, agenda pages 7 - 13 refer.

Resolved AR/2020/012

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.

Murray/Edgar Carried

Attendance: Councillor Sanson left the meeting at 4.30p.m.

6. Chairperson's Report

Mr Peters gave a verbal Chairperson’s Report. He noted that risk factors now included the Covid-19 pandemic and its consequences, and spoke about the financial health and resilience of Council and the Nelson community. He emphasised the need for continued prudent financial oversight and high standards of governance as Council responded to the Covid-19 pandemic.
Resolved AR/2020/013
	*That the Audit and Risk Subcommittee* 1. Receives the verbal Chairperson’s Report.
Peters/Murray Carried

7. Audit NZ: Audit Plan for year ending 30 June 2020 and Audit Proposal Letter

Document number R14857, agenda pages 14 - 41 refer.

Manager Finance, Clare Knox, presented the report, and Auditor John Mackey, from the Office of the Auditor-General, joined the meeting.

Mr Mackey spoke about how the audit process would be affected as a result of Covid-19. He answered questions regarding the challenges in establishing valuations, given the uncertainties arising from Covid-19, the likely timeframe for the Council’s audit process this year, and the proposed audit fee increase. He undertook to provide further advice regarding mitigating and managing construction contract risks, particularly with regards to Crown Infrastructure Fund projects.

Attendance: Councillor Sanson returned to the meeting at 4.55p.m.

Ms Knox answered further questions regarding how Council Controlled Organisations were identified in the Annual Report.

Resolved AR/2020/014

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).

2. Notes the Subcommittee can provide feedback on the Audit Proposal Letter to Audit New Zealand if required, noting the Mayor will sign the letter once the Subcommittee’s feedback has been incorporated.

Sanson/Murray Carried

8. COVID-19: Assessment of Financial Risk to Annual Plan 2020/21

Document number R17017, agenda pages 42 - 46 refer.

Group Manager Corporate Services, Nikki Harrison, presented the report. She answered questions regarding the proposed deferral of fee increases, the proposed drawdown on the Disaster Recovery Fund, how the best and worst case scenario and base case assumptions were reached, rates collection, and Council’s borrowing facilities.

Resolved AR/2020/015

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).

Edgar/Sanson Carried

9. Health Safety and Wellbeing Report, COVID-19 Response, April 2020

Document number R16993, agenda pages 47 - 60 refer.

Health and Safety Adviser, Malcolm Hughes, presented the report. He answered questions regarding Council’s health and safety obligations and support available in relation to officers and elected members working from home, the extensive hours worked by some officers during the Covid-19 lockdown, and the consequential risks of exhaustion, and mental health risks in relation to COvid-19.

The Subcommittee requested a vote of thanks be recorded to Council’s Health and Safety officers for work undertaken during the Covid-19 pandemic.

Resolved AR/2020/016

That the Audit and Risk Subcommittee

1. Receives the report Health Safety and Wellbeing Report, COVID-19 Response, April 2020 (R16993) and its attachment, COVID – 19 Activities and Controls Overview (A2380485); and

2. Records a vote of thanks to Council’s Health and Safety officers for the work undertaken during the Covid-19 pandemic.

Sanson/Edgar Carried

10. Internal Audit Quarterly Progress Report to 31 March 2020

Document number R14817, agenda pages 61 - 65 refer.

Internal Audit Analyst, Lynn Anderson, presented the report. She answered questions regarding audit and business improvement work undertaken, and Manager Governance and Support Services, Mary Birch, answered questions regarding Elected Members’ declarations of interests.

Resolved AR/2020/017

That the Audit and Risk Subcommittee

1. Receives the report Internal Audit Quarterly Progress Report to 31 March 2020 (R14817) and its attachment (A2365059).

Edgar/Sanson Carried

11. Draft Internal Audit Plan for year to 30 June 2021

Document number R14816, agenda pages 66 - 73 refer.

Internal Audit Analyst, Lynn Anderson, presented the report. She noted that the reference in paragraph 4.6.1 to a self-assessment being presented to this meeting should refer to the next Subcommittee meeting.

Ms Anderson answered questions regarding the proposed plan, taking into account the uncertainties created by Covid-19.

Resolved AR/2020/018
	*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).
Murray/Sanson Carried
Recommendation to Governance and Finance AR/2020/019
	*That the Governance and Finance Committee* *1. Approves the Draft Annual Internal Audit Plan for the year to 30 June 2021 (A2357411).*
Murray/Sanson

The meeting was adjourned from 6.02p.m until 6.07p.m.

13. Reserves Contributions for Unit Titles - Final Report

Document number R16954, late items agenda pages 4 - 13 refer.

Internal Audit Analyst, Lynn Anderson, presented the report. She answered questions regarding the valuation process for quantifying Council’s loss of reserve contributions, how the error in calculations was able to occur over a number of years, and changes in practice to ensure the error would not occur again in the future.

Resolved AR/2020/020

That the Audit and Risk Subcommittee

1. Receives the report Reserves Contributions for Unit Titles - Final Report (R16954) and its attachment (A2369193).

Her Worship the Mayor/Edgar Carried

14. Exclusion of the Public

Resolved AR/2020/021

That the Audit and Risk Subcommittee

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

Sanson/Edgar Carried

Item	General subject of each matter to be considered	Reason for passing this resolution in relation to each matter	Particular interests protected (where applicable)
1	Audit and Risk Subcommittee Meeting - Public Excluded Minutes - 18 February 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
2	Reserves Contributions for Unit Titles - Breakdown of Discrepancies	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 · Section 7(2)(h) To enable the local authority to carry out, without prejudice or disadvantage, commercial activities
3	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

The meeting went into public excluded session at 6.25p.m. and resumed in public session at 7.03p.m.

Restatements

It was resolved while the public was excluded:

PUBLIC EXCLUDED: Reserves Contributions for Unit Titles - Breakdown of Discrepancies

That the Audit and Risk Subcommittee

2. Agrees that the report Reserves Contributions for Unit Titles – Breakdown of Discrepancies (R16985); and its attachment (A2346183) remain confidential at this time.

CONFIDENTIAL: Quarterly Update On Debts - 31 March 2020

That the Audit and Risk Subcommittee

2. Agrees that the Report (R16960) and its attachment (A2216183) remain confidential at this time.

There being no further business the meeting ended at 7.04p.m.

Confirmed as a correct record of proceedings:

Chairperson Date

Item 8: Annual Tax Update

Audit and Risk Subcommittee

11 August 2020

REPORT R14819

Annual Tax Update

1. Purpose of Report

1.1 To advise the Subcommittee of Council’s tax activities over the prior year and provide some context for the current tax environment.

2. Recommendation

That the Audit and Risk Subcommittee

1. Receives the report Annual Tax Update (R14819) and its attachments (A2415912, A2358418 and A2417124).

Do not delete this line

2. Background

2.1 The Tax Risk Governance Framework was adopted by Council in May 2017 as a proactive step towards identifying and managing tax risk to maintain its low risk profile. This Annual Tax Update has been prepared as part of that framework.

2.2 This report provides:

· A summary of the tax advice that Council has sought during the period 1 July 2019 to 30 June 2020

· Commentary on tax matters currently being addressed as at 30 June 2020

· A more general high level update on the wider tax environment as it might affect Council

· An overview of the PAYE compliance evaluation undertaken in the last financial year

· An overview of the FBT compliance evaluation undertaken in May 2019

2.3 The Annual Tax Update report from Council’s tax advisors (PWC), the PAYE compliance evaluation and FBT compliance evaluation are included with this report as attachments 1, 2 and 3 respectively.

Tax Advice received and matters addressed to 30 June 2020

2.3 For the most part, the tax compliance of Council has been ‘business as usual’ for much of the year with the various tax returns (GST, PAYE, FBT, etc) being filed on time and without any concerns being raised.

2.4 That said, it is appropriate to comment on the following areas where assistance has been provided to Council:

· A PAYE compliance evaluation was completed in August 2019.

· A FBT compliance evaluation was performed in the May 2019 financial year and the report was finalised in July 2019.

· A voluntary disclosure was made to the Inland Revenue regarding a specific issue identified during the PAYE evaluation.

· A voluntary disclosure was made in relation to GST on Brook Camp accommodation.

2.5 As per the tax risk strategy adopted by Council in 2017, a comprehensive PAYE compliance evaluation was undertaken in August 2019. The finalised report (Attachment 2) can be summarised as follows:

· Council has a high level of PAYE compliance. The payroll risk areas often seen at other organisations and targeted by Inland Revenue in investigations do not appear to be significant risks for Council.

· The principal risk areas are MyIR account reconciliations, KiwiSaver employer contributions and Pay data which are discussed in further detail in Appendix One - Summary of Findings.

· There were 13 areas of focus identified in Appendix One - Summary of Findings and recommendations were made for action to maximise efficiency and risk reduction. Six of the recommendations have already been completed, three require no action and the remaining four are in progress.

2.6 As per the tax risk strategy adopted by Council in 2017, a FBT compliance evaluation was undertaken in May 2019 with the finalised report (Attachment 3) sent in July 2019 which can be summarised as follows:

· Council has a high level of FBT compliance.

· The principal risk areas are Rewards and Recognition, De Minimis Exemption (the de-minimis exemption threshold for FBT is $300 per quarter per employee or $22,500 per employer at Group Level) and Motor Vehicles, which are discussed in further detail in Appendix One - Summary of Findings.

· There were 21 areas of focus identified in Appendix One - Summary of Findings and recommendations were made for action to maximise efficiency and risk reduction. One of the recommendations has already been completed, eleven require no action and the remaining nine are in progress.

2.7 Officers have committed to remaining up to date with tax issues in the sector and have attended tax updates as provided by SOLGM and PWC, as well as a refresher overview of indirect taxes and specific training aimed at officers new to the sector provided by PWC.

2.8 Finally, it is noted that Council has continued to obtain support via:

· Subscribing to PwC’s online Indirect Tax Policies and Guides;

· Maintaining a Tax Risk Governance Framework; and

· Adhering to a Tax Risk Management Strategy.

Tax Strategy

2.9 Page 6 of the Annual Tax Update (Attachment 1) outlines work planned for the 2019/20 financial year compared with work done. It has been a more active year than anticipated illustrating that officers are mindful of retaining Council’s low risk tax profile and seek to address risks before they crystallise.

2.10 Page 7 sets out work planned for the 2020/21 financial year and up to 2023/24, including a review of Council systems in relation to IRD’s payday reporting readiness and a tax technology and automation assessment.

Other relevant matters

2.11 Pages 9 to 10 of Attachment 1 itemise COVID-19 related income tax, tax administration and social assistance proposals relevant to Council.

2.12 Pages 11 to 13 of Attachment 1 summarise other tax developments during the period. Of particular interest or relevance to Nelson City Council:

· From 1 July 2019, dividends derived by local authority from a CCO will no longer be excluded income for income tax purposes.

· The criteria for self-correction of errors has been replaced with monetary and materiality thresholds, being equal to or less than the lower of $10,000 of tax; and 2% of GST output tax.

2.13 Page 14 of Attachment 1 gives an overview of sector specific developments. Of particular interest or relevance to Nelson City Council:

· It is understood that there are a total of 802 ‘shovel ready’ projects on the list for government consideration. Depending on the project, there is an inevitability that tax considerations will exist.

· Taumata Arowai – The Water Services Regulator Bill establishes the agency that will act as independent regulator of drinking water and the evolution of how Three Waters are managed.

Council’s tax figures

2.14 Generally Council is exempt from income tax with the main exception being income from CCTOs. However, Council has significant tax obligations in relation to GST and PAYE in particular. The quantum is highlighted in this section.

2.15 In the 12 months ending 31 March 2020, Council has accounted for:

Tax	12 month period ending	Amount
GST output tax	31 March 2020	$19,925,066
GST input tax	31 March 2020	$15,238,824
PAYE & ACC	31 March 2020	$7,288,093
FBT	31 March 2020	$23,323

2.16 Council also acts as agent for the Nelson Regional Sewerage Business Unit, Nelson Tasman Regional Landfill Business Unit and Nelson Tasman Civil Defence and Emergency Management. The numbers above exclude these entities.

3. Conclusion

3.1 Council formally adopted the Tax Governance Framework on 18 May 2017 and the Tax Risk Management Strategy on 14 December 2017. These form a solid foundation for managing tax risk.

3.2 The Tax Risk Management Strategy is a simple tool to ensure that tax risk is being identified and managed appropriately while providing the Subcommittee with a quick visual tool to see the steps Council has taken to manage tax risk and the forward looking strategy.

3.3 The adoption of the Framework and the Strategy ensures that complacency does not arise amongst the finance team, senior leadership team or those with oversight for audit and risk.

Author: Clare Knox, Manager Finance

Attachments

Attachment 1: A2415912 Tax - PWC - Annual Tax Review 2020 ⇩

Attachment 2: A2358418 Tax - PWC - PAYE Compliance Evaluation ⇩

Attachment 3: A2417124 Tax - PWC - FBT Compliance Evaluation ⇩

Item 10: Health, Safety and Wellbeing Report, January to June 2020

Audit and Risk Subcommittee

11 August 2020

REPORT R18135

Health, Safety and Wellbeing Report, January to June 2020

1. Purpose of Report

1.1 To provide the subcommittee with a report on health, safety and wellbeing data collected over the period January to June 2020

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

2. Summary

2.1 A notable incident for this period was a contractor’s worker falling from the marina wharf while relaunching a vessel.

2.2 Additional data has been provided regarding the COVID-19 response in the wellbeing section of the attachment.

2.3 There has been no change in the assessed risk ratings of key health and safety risks since the previous report.

2. Recommendation

That the Audit and Risk Subcommittee

1. Receives the report Health, Safety and Wellbeing Report, January to June 2020 (R18135) and its attachment (A2404161).

3. Background

3.1 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. 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 and Risk Subcommittee.

3.2 This report covers a six month period as no report was provided to the subcommittee following the January to March 2020 quarter due to Council’s COVID-19 response. However a COVID-19 specific report was provided to the subcommittee in May 2020.

3.3 Health, safety and wellbeing performance data reports provide an overview 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.

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

4. Discussion

4.1 Incidents of note

4.1.1 Injury and illness incidents of note are outlined in the attachment.

4.1.2 The most significant of these in regard to potential consequences was when a contractor’s worker fell from the wharf at the marina while relaunching a vessel. Once the vessel had been lowered into the water from the travel-lift the worker was manoeuvring it along the wharf using a long aluminium boat hook. The boat hook slipped causing the worker to over balance and trip, falling onto the roof of the vessel several metres below. This resulted in a shoulder dislocation requiring 10 days off work. The contractor has completed an investigation and identified a number of remedial actions to prevent a reoccurrence, these primarily relate to staff training and risk assessment process for retrieval and launching of vessels. Further improvements are being made to the facility to reduce this risk.

4.2 Security Incidents

4.2.1 A higher than average number of security incidents reported at the Elma Turner Library occurred in the January to March period as also occurred in 2019. However this year a large number of the reported incidents occurred in areas surrounding the library rather than in the library itself. It has been reported by staff that Police are now more responsive to these incidents, many including the consumption of alcohol in a liquor ban area.

4.2.2 During April there were a number of security incidents reported at the Brook Valley Holiday Park involving customers sent there during the alert level 4 lockdown.

4.3 Lead Indicators

4.3.1 Hazard near miss and incident data in the attachment shows relatively low levels of hazard and near miss reporting for this period. This will be an area for staff to focus on as Health and Safety priorities are rebalanced following the significant focus on Covid-19 controls since February.

4.3.2 A significant Hazard was identified regarding the support for the ceiling grid containing heavy plaster ceiling tiles on level 6 of Civic house during January. This resulted in staff needing to relocate for several days while urgent remedial work was completed. Further work is planned throughout Civic House to manage the risk of heavy ceiling tiles falling in an earthquake.

4.3.3 Low numbers of workstation assessments completed for January to March is possibly due to variation in demand. Workstation assessments can be requested proactively by any staff member at any time however they generally occur for new starters, when the workstation changes or as a result of an early report of discomfort. Those workstation assessments completed as a result of an early report of discomfort are recorded as such and not as a separate workstation assessment.

4.3.4 A decrease in numbers of workstation assessments completed is to be expected for April and May with most staff working from home. Self-assessment information was provided to staff and remote support for discomfort was provided when requested.

4.4 Safe Driving

4.4.1 An increase in over speed events per 100km travelled for April has been investigated further. No individual has shown a concerning number of overspeed events. Most of April was the level 4 lockdown with minimal distance travelled by most fleet vehicles. Overspeed events occurred in vehicles driven by those providing essential services. Busy work schedules and low traffic volumes are not considered an excuse for speeding but do help to explain how it occurred during lockdown.

4.4.2 During June 16 staff completed either advanced driver training or 4wd training, this training was with a new provider and was very well received. It is proposed to deliver more of this training in the coming year with the addition of safe driving seminars for most staff who drive regularly while working for Council.

4.5 Staff Wellbeing

4.5.1 A working from home survey sent to all staff after one week at Alert Level Four 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.” A second survey was completed during the last week of alert level two at a time when approximately 25% of staff had returned to the workplace. This showed an increase in the level of agreement across all statements except for two relating to connection with teams and discussion of wellbeing at team meetings, this is understandable considering it was a transition stage with most teams split between home and the workplace.

4.5.2 Sick leave data shows a considerable reduction in sick leave taken since February when compared to the average in the same month for the past four years. A decrease in respiratory illness circulating in the general population and Council staff due to COVID-19 controls and the increased working from home have been identified as the cause of this. Ministry of Health data from their weekly flutracking survey shows that influenza like symptoms reported nationally follows a somewhat consistent pattern to the sick days taken by Council staff for each month.

4.5.3 Increased workloads and additional challenges as a result of the response to COVID-19 have been discussed previously. To provide some perspective on this data has been included in the attachment showing some of additional work that was directly related to management of the COVID-19 response. Although not specifically reflected in the available data at this point, there is anecdotal evidence of cumulative fatigue among staff that could have ongoing impacts on wellbeing.

4.6 Contractor Health and Safety

4.6.1 The increase in Safe work observations (SWOs) reported for January to March is a good indicator of improved uptake of the new health and safety database ‘Improvements’ and shows that Council is monitoring the health and safety of contractors work. The decrease for the most recent quarter is due to less work occurring during the COVID-19 response and a focus on COVID-19 controls. If the contractor Pandemic plan reviews shown in the COVID-19 response chart were included in this data the contractor H&S document reviews for April to June would be considerably higher than the previous quarter.

4.7 Due Diligence Activities

4.7.1 SLT members reported completing two safe work observations during this period.

4.7.2 The Audit and Risk Subcommittee attended a workshop and received a health and safety report on the COVID-19 response.

4.8 Key Health and Safety Risk Update

4.8.1 All of Council’s key health and safety risks are assessed to remain as medium risks.

4.8.2 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.

4.8.3 Where possible timeframes are indicated for treatments.

Author: Malcolm Hughes, Health and Safety Adviser

Attachments

Attachment 1: A2404161 - Health, Safety and Wellbeing Report, January - June 2020 ⇩

Item 11: Key Organisational Risks Report - 01 January to 30 June 2020

Audit and Risk Subcommittee

11 August 2020

REPORT R14813

Key Organisational Risks Report - 01 January to 30 June 2020

1. Purpose of Report

1.1 To provide information to the Audit and Risk Subcommittee on the key organisational risks through to end of quarter four 2019-20. This report covers risk management progress through both quarter three and quarter four 2019-20.

2. Recommendation

That the Audit and Risk Subcommittee

1. Receives the report Key Organisational Risks Report - 01 January to 30 June 2020 (R14813) and its attachment (A2415845).

3. Background

3.1 This report includes information on risks to achieving Council’s priorities for the Long Term Plan 2018-28 (section 5), and the key organisational risks that could impact Council’s wider ability to deliver core functions and services (section 6). Risks related to specific assets, activities, or projects, are reported on a quarterly basis to the relevant Committee, and any significant items are summarised at section 7 of this report. In addition, section 7 provides a brief summary from each Group Manager on emerging risks for their areas of responsibility.

3.2 The attachment to this report describes each risk in more detail, its existing controls and planned risk treatments.

3.3 Note that the demands on staff time to respond to the COVID-19 emergency has impacted the ability to complete some planned risk treatments.

4. Risk Management Practice

4.1 During quarter three, a trial of software to support risk management was conducted, with positive results, and software licences were purchased during quarter four. A project to implement the risk management software across the organisation was initiated towards the end of quarter four. The advantages for Council are: consolidation of risk recording into a central repository; more effective risk ownership and visibility, and more efficient reporting on risk.

4.2 During quarter four, Council’s risk management processes were reviewed and updates completed to rationalise these processes.

4.3 A review and refresh of the key organisational risks for 2019-20 was scheduled for quarter four; this work was delayed and has been rescheduled for quarter one 2020-21.

4.4 The main focus for risk management improvement activities for quarter one 2020-21 is to complete configuration of the risk management software and begin a phased rollout across the organisation.

4.5 At the SOLGM Risk Management Forum in February 2020, the World Economic Forum’s Global Risk Report, published 15 January 2020, was presented. The report presents how key focus areas for risk management are changing globally and nationally, and is publicly available on the World Economic Forum’s website. The risk trends are summarised below for information.

4.5.1 Over last 10 years the biggest risk concerns globally have changed from mostly economic to mostly environmental. In 2010, of the top 5 most likely risks, three were economic, one was geopolitical and one was societal; in 2020 the top 5 most likely risks were all environmental. These top 5 global risks, in terms of likelihood are: extreme weather; climate action failure; natural disasters; biodiversity loss; and human-made environmental disasters.

4.5.2 Similarly, in 2010, of the top 5 most impactive risks, four were economic, and one was societal; in 2020, three are environmental, with one societal and one geopolitical. These top 5 global risks, in terms of impact are: climate action failure; weapons of mass destruction; biodiversity loss; extreme weather; and water crises.

4.5.3 In the World Economic Forum’s report Regional Risks for Doing Business, published 01 October 2019, the top 5 risks for New Zealand were: natural disasters; cyberattacks; failure of critical assets; failure of urban planning; and extreme weather.

5. Risks to Achieving Council Long Term Plan Top Priorities

5.1 Updated information to the end of quarter four is summarised below, with further detail on the risk areas, their controls and treatments set out in attachment one.

5.2 Priority area Infrastructure (Risk 1). There have been no reported exceptions to the risk controls. Some project and operational level work was delayed due to COVID-19 alert level restrictions, and as such treatment review dates have been adjusted. Treatments are being incorporated into the relevant draft Activity Management Plans (AMPs) being presented to Council during quarter two 2020-21. A review of the overall consequences and likelihood for this priority area has been scheduled for quarter one 2020-21; until then the risk rating remains at High, with no risk movement to report during quarters three and four 2019-20.

5.3 Priority area Environment (Risk 2). The residual risk rating remains at High, with no risk movement during quarters three and four 2019-20.

5.4 Priority area City Centre Development (Risk 3). New and improved parking meters were implemented during June 2020; at the time of writing this report, it is too early to assess the impact of this treatment on the risk rating. All other risk treatments are in progress. The impact from COVID-19 on retail, tourism and hospitality businesses may result in decreased city centre commercial activity, which could slow down Council’s ability to achieve its objectives for the city centre development. There was no risk movement during quarters three and four 2019-20, and the overall residual risk rating remains at Medium.

5.5 Priority area Lifting Council Performance (Risk 4). A variety of collaboration tools and facilities have been completed as planned – smartboards in meeting rooms, widespread rollout of zoom meeting technology, and development of the innovation workspace. Some staff recruitment was put on hold during the COVID-19 event, as was staff training in Te Reo, and these treatments will now be reviewed in September 2020. Te Kāhui Whiria, Māori Partnerships Team has made strong progress in developing processes and guidance for staff, with the implementation of a service request process for cultural guidance and advice, a weekly cultural clinic drop-in session, and ongoing promotion of Te Ao Māori resources to support staff development and understanding of te reo Māori me ōnā tikanga. The risk rating remains at Medium, with no risk movement during quarters three and four 2019-20.

6. Key Organisational risks

6.1 A new risk has been identified, relating to the potential for a significant future increase of COVID-19 cases to disrupt delivery of Council services.

6.2 At the end of quarter four, the known key risk areas for the four Long Term Plan top priorities, and nine key organisational risks, are as summarised in the heat map, and table below. Updates are provided below for the nine key organisational risk areas, with further detail in attachment one.

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: City Centre Development	Medium	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	Medium	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	Low	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
13	Disruption to Council service delivery due to significant increase in COVID-19 cases	Medium	Chief Executive

6.3 Lifeline service failure from natural hazards and similar events (Risk 5). The remaining updates to the Maitai Dam Emergency Action Plan were completed during quarter four. A new risk treatment is underway, to ensure Council has the contractual ability to require emergency out of hours operation of the transfer station. The overall risk profile for this risk is scheduled for review during quarter one 2020-21, and this review will aim to resolve areas of overlap with other risks; until then, the risk rating remains at High, with no risk movement to report during quarters three and four 2019-20.

6.4 Illness, injury or stress from higher hazard work situations (Risk 6). The health, safety and wellbeing aspects of the recent COVID-19 event which required prolonged working from home for all staff, has been monitored and reported by Council’s Health and Safety Advisor throughout the event. The remaining planned treatment could not be completed due to COVID-19 alert level restrictions, and the terrorism vulnerability assessments for key Council venues will now be rescheduled to complete by December 2020. Officers are exploring options to continue providing a level of driver safety training to all staff who drive for work; this has been an effective risk mitigation over the last year however there may be a more cost effective option for delivering this training. There was no risk movement during quarters three and four 2019-20, and so the overall risk rating remains at Medium.

6.5 Loss of service performance from ineffective contracts and contract management (Risk 7). Delivery of the work programme in this area has been impacted by previous staff vacancies, and diverting resources to the COVID-19 response. The contract management system being investigated during previous quarters was not a feasible solution; alternative solutions are now being assessed against prioritised requirements. A project to increase contract management consistency and staff skills will now be initiated during Q2 2020-21 once implementation of the contract management system is underway. Additional legal support advising on procurement and contracting matters is now available to staff. The risk rating remains at Medium, with no risk movement during quarters three and four 2019-20.

6.6 Compromise of Council service delivery from information technology failures (Risk 8). Risk controls have been reviewed and are considered to remain effective. Additional protections to further mitigate cyber-attacks are being brought forward for implementation. There is a robust incident management process triggered each time a cyber security threat arises. The overall residual risk rating remains at Low and as such, there is no risk movement during quarters three and four 2019-20.

6.7 Compromised decision making and public information from incomplete and difficult to access records (Risk 9). An “Information Asset Register” has been drafted to collate information about hardcopy archives in a format which is structured, and useable for most staff, however the eventual electronic reference system for hardcopy archives has been put on hold whilst a staff vacancy is filled, as have some other treatments. A temporary public reading space has been created in the archive processing area, which provides an improved service and privacy for customers. Improvements to the security and access to onsite hardcopy records have been completed, resulting in secure archive rooms, improved environmental controls, reduced exposure to some hazards and safer manual handling for staff (space and shelving quality). Plans are underway to address gaps in records management of information in cloud-based repositories; the need for improvements in this known area of risk was further highlighted in a recently completed internal audit. The risk rating remains at Medium, with no risk movement during quarters three and four 2019-20.

6.8 Council work compromised by loss of and difficulties in replacing skilled staff (Risk 10). Due to improved processes, technology, and information accessibility, our ability to replace staff in most roles has increased. With planned risk treatments either complete or well underway, the likelihood of some consequences has reduced, and these have been updated in the detailed risk profile. There are some local pockets within Council where recruitment and retention of qualified and skilled staff is more problematic. Whilst the short term impact of COVID-19 is favourable for Council recruitment, officers think it prudent to maintain the risk management response in line with a Medium residual risk rating. The risk rating therefore remains at Medium, with no risk movement during quarters three and four 2019-20.

6.9 Legal liability and reputation loss from inadequate consideration of the law in decision making (Risk 11). At the end of quarter two, the “LawVu” tool was being used by the internal Legal Services team. The planned implementation to other key officers, and the external legal services panel, has been completed during quarter three. The development of a structured training programme for staff, to ensure more awareness and knowledge across the organisation on local government specific legal requirements, has also been completed as planned, during quarter four. This training programme will be further developed to include content on relevant policies and procedures. A Legal Adviser has joined the team part-time to strengthen the Legal Services team’s provision of legal advice on procurement and contractual matters. The risk rating remains at Medium, with no risk movement during quarters three and four 2019-20. The risk owner remains satisfied that the residual risk is at a tolerable level.

6.10 Loss of public trust in the organisation (Risk 12). As previously reported, whilst it is unlikely that further reduction in the residual risk rating can be achieved, the risk owner is satisfied that the risk is at a tolerable level, considering the level of effective controls that are in place. The risk rating remains at Medium, with no risk movement during quarters three and four 2019-20.

6.11 Disruption to Council service delivery due to significant increase in COVID-19 cases (Risk 13). This is a new risk that will remain in place for the foreseeable future, and relates to the impact on delivery of Council services. Whilst the impact to the provision of critical core services such as water and wastewater is considered insignificant, the recent COVID-19 restrictions have shown that there would be a moderate impact on Council’s ability to provide community facilities.

7. Risk Areas for Each Group

7.1 Infrastructure Group: COVID-19 implications for Infrastructure are being reported to each meeting of the Infrastructure Committee - services are now operating as usual, and officers continue to resolve the remaining time and financial impacts on project delivery. The suspension of construction work during alert levels four and three has created additional pressure on project delivery and local contractors; a streamlined procurement approach has been implemented to help mitigate the impact on project timeframes, however the impact on market pricing for new work is unknown. This streamlined procurement approach will remain in place through to the end of June 2021.

7.2 Community Services Group: No new emerging risks to report at this time.

7.3 Environmental Management Group: Council has requested that the Audit and Risk Subcommittee has oversight of risks related to the Nelson Plan - the key risk being managed is a financial risk. A Governance Liaison Group comprising Mayor Reese, Cllr McGurk and Cllr Fulton is in place. Quarterly project level reporting to the Environment Committee is being established, and is expected to be in place by December 2020.

7.4 Strategy and Communications Group: No new emerging risks to report at this time.

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

Author: Arlene Akhlaq, Manager Business Improvement

Attachments

Attachment 1: A2415845 - Key organisational risks report Quarters 3 and 4 - January to June 2020 ⇩

Item 14: Bad Debt Writeoff - Year Ending 30 June 2020

Audit and Risk Subcommittee

11 August 2020

REPORT R14820

Bad Debt Writeoff - Year Ending 30 June 2020

1. Purpose of Report

1.1 To inform the Audit and Risk Subcommittee on the level of bad debts written off, and to seek approval to write off one debt over $10,000 for the year ending 30 June 2020.

2. Recommendation

That the Audit and Risk Subcommittee

1. Receives the report Bad Debt Writeoff - Year Ending 30 June 2020 (R14820).

Recommendation to Governance and Finance

That the Governance and Finance Committee

1. Approves the balance of $20,462.37 excluding GST owing by Concrete & Metals Ltd be written off as at 30 June 2020.

3. Discussion

3.1 There is one bad debt over $10,000 to be written off for the year ending
30 June 2020. Concrete and Metals Ltd (Director Carolyn Margaret Wiffen) was liquidated with the Final Liquidators Report dated 28 January 2020. Council as an unsecured creditor was owed $25,529.85 however proceeds from the liquidation of $5,067.48 excluding GST were received. The remaining debt of $20,462.37 is to be written off.

3.2 The debt with Concrete and Metals was incurred through York Valley Landfill charges, therefore the cost is borne jointly by TDC & NCC.

3.3 Through the liquidation process, Concrete & Metals Ltd was sold as a going concern. There appears to be no connection between Concrete & Metals Ltd and the new company Concrete & Metals Tasman Bay Ltd which has different directors and shareholders.

3.4 The debt has been reported to the Audit and Risk Subcommittee in the Quarterly Update on Debts since June 2019, as at risk and requiring write off.

3.5 A number of accounts under $10,000 per debtor have been written off by the Group Manager Corporate Services under officer delegation. These totalled $7,901 excluding GST with the write-offs being $3,885 for 14 separate debts for dog impounding fees, $2,112 for marina fees, $1,266 for two debts for liquidated companies and $638 for a regulatory debt.

3.6 The decision is an administrative one and although the debts are written off from an accounting point of view, a record is still kept and if an opportunity to recover the debt arises, action will be taken. Most of this balance is with Credit Recoveries Limited Council’s debt recovery agency, who will continue recovery activities. Every possible effort has been made to locate and obtain payment from these debtors.

3.7 A summary of this year's write off compared to last year's is as follows:

	Write-off 2020 $	Write-off 2019 $
Over $2,500	20,462	4,829
Under $2,500	7,901	4,902
Cost for year	$28,363	$9,731

4. Options

4.1 The recommendation is to receive the report and write off one bad debt over $10,000 for accounting purposes.

Author: Victoria Harper, Accounting Services Manager

Attachments

Nil

Important considerations for decision making

1. Fit with Purpose of Local Government

This report deals with process matters in relation to cost effective service delivery.

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.

3. Risk

There is limited risk from writing off these bad debts as most of the bad debts will continue to be followed up by the credit agency.

4. Financial impact

Writing off the debts has a one off impact on revenue of $28,362.

5. Degree of significance and level of engagement

This matter is of low significance because the amounts being written off are immaterial.

6. Inclusion of Māori in the decision making process

No engagement with Māori has been undertaken in preparing this report.

7. Delegations

The Audit and Risk Subcommittee has the following delegations to consider bad debts.

Areas of Responsibility:

· Audit processes and management of financial risk

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