Agenda of Audit, Risk and Finance Subcommittee

Audit, Risk and Finance Subcommittee

25 November 2021

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 14 September 2021 7 - 13

Document number M18926

Recommendation

That the Audit, Risk and Finance Subcommittee

1. Confirms the minutes of the meeting of the Audit, Risk and Finance Subcommittee, held on 14 September 2021, as a true and correct record.

6. Health, Safety and Wellbeing Report, July - September 2021 14 - 28

Document number R26171

Recommendation

That the Audit, Risk and Finance Subcommittee

1. Receives the report Health, Safety and Wellbeing Report, July - September 2021 (R26171) and its attachment (A2782852).

7. Quarterly Finance Report for the three months ending 30 September 2021 29 - 50

Document number R26191

Recommendation

That the Audit, Risk and Finance Subcommittee

1. Receives the report Quarterly Finance Report for the three months ending 30 September 2021 (R26191) and its attachments (A2776828, A2766313, A2777804 and A2771754).

8. Quarterly Internal Audit Report - 30 September 2021 51 - 56

Document number R26312

Recommendation

That the Audit, Risk and Finance Subcommittee

1. Receives the report Quarterly Internal Audit Report - 30 September 2021 (R26312) and its attachment (A2763671).

9. Quarterly Risk Report - 30 September 2021 57 - 85

Document number R26313

Recommendation

That the Audit, Risk and Finance Subcommittee

1. Receives the report Quarterly Risk Report – 30 September 2021 (R26313) and its attachment (A2587873).

Confidential Business

10. Exclusion of the Public

Recommendation

That the Audit, Risk and Finance Subcommittee

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

2. The general subject of each matter to be considered while the public is excluded, the reason for passing this resolution in relation to each matter and the specific grounds under section 48(1) of the Local Government Official Information and Meetings Act 1987 for the passing of this resolution are as follows:

Item	General subject of each matter to be considered	Reason for passing this resolution in relation to each matter	Particular interests protected (where applicable)
1	Audit, Risk and Finance Subcommittee Meeting - Confidential Minutes - 14 September 2021	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)(j) To prevent the disclosure or use of official information for improper gain or improper advantage
2	Quarterly Update On Debts - 30 September 2021	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	Quarterly Report 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)(c)(ii) To protect information which is subject to an obligation of confidence or which any person has been or could be compelled to provide under the authority of any enactment, where the making available of the information would be likely otherwise to damage the public interest · Section 7(2)(g) To maintain legal professional privilege
4	Cyber Security Matters	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)(j) To prevent the disclosure or use of official information for improper gain or improper advantage

Item

General subject of each matter to be considered

Reason for passing this resolution in relation to each matter

Particular interests protected (where applicable)

Audit, Risk and Finance Subcommittee Meeting - Confidential Minutes - 14 September 2021

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)(j)

To prevent the disclosure or use of official information for improper gain or improper advantage

Quarterly Update On Debts - 30 September 2021

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

Quarterly Report 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)(c)(ii)

To protect information which is subject to an obligation of confidence or which any person has been or could be compelled to provide under the authority of any enactment, where the making available of the information would be likely otherwise to damage the public interest

· Section 7(2)(g)

To maintain legal professional privilege

Cyber Security Matters

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)(j)

To prevent the disclosure or use of official information for improper gain or improper advantage

Audit, Risk and Finance Subcommittee Minutes - 14 September 2021

Minutes of a meeting of the

Audit, Risk and Finance Subcommittee

Te Kōmiti Āpiti, Kaute / Tūraru / Pūtea

Held via Zoom on Tuesday 14 September 2021, commencing at 9.03a.m.

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

In Attendance: Councillor T Brand, Group Manager Corporate Services (N Harrison), Group Manager Strategy and Communications (N McDonald) and Governance Advisers (J Brandt and K McLean)

Apologies : Nil

1. Apologies

There were no apologies.

2. Confirmation of Order of Business

There were no changes to the order of business.

3. Interests

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

The meeting was adjourned from 9.04a.m. to 9.05a.m. during which time Councillor Lawrey joined the meeting.

4. Public Forum

There was no public forum.

5. Confirmation of Minutes

5.1 25 May 2021

Document number M17659, agenda pages 6 - 14 refer.

Resolved ARF/2021/032

That the Audit, Risk and Finance Subcommittee

1. Confirms the minutes of the meeting of the Audit, Risk and Finance Subcommittee, held on 25 May 2021, as a true and correct record.

Murray/Her Worship the Mayor Carried

6. Chairperson's Report

Document number R26218, agenda pages 15 - 17 refer.

The Chairperson spoke to his report, noting that some of the matters that were to be addressed at the Risk Management workshop were being progressed offline to meet reporting deadlines.

Members noted concerns around the possibility of Audit NZ not meeting their commitments and the potential issues this could pose for Council to meet its statutory deadlines.

Group Manager Corporate Services, Nikki Harrison, answered questions about the approval process for amendments to the audit plan.

Resolved ARF/2021/033

That the Audit, Risk and Finance Subcommittee

1. Receives the Chairperson's Report (R26218).

Sanson/Murray Carried

7. Annual Report 2020/21

Document number R25905, agenda pages 18 - 241 refer.

Group Manager Corporate Services, Nikki Harrison, presented the first part of the report. She noted that Audit NZ intended to be on site from 27 September until the end of October 2021 and that the expectation was that the 31 December 2021 statutory deadline for adoption of the Annual Report would be met.

Group Manager Strategy and Communication, Nicky McDonald, presented the non-financial part of the report.

Members of the Audit, Risk and Finance Subcommittee provided detailed feedback regarding the draft annual report.

Attendance: Councillor Brand joined the meeting at 9.21a.m.

The meeting was adjourned from 10.11a.m. until 10.21a.m.

Ms Harrison answered questions about the sign off process for the draft annual report.

It was noted that for future draft Annual Reports Group Managers would engage with Committee Chairs to review wording of sections that related to their committee’s respective areas of responsibility, prior to the draft annual report being presented to the Audit Risk and Finance Subcommittee.

Resolved ARF/2021/034

That the Audit, Risk and Finance Subcommittee

1. Receives the report Annual Report 2020/21 (R25905) and its attachment (A2739259); and

2. Notes the draft Annual Report 2020/21 has been prepared and will be audited before being presented to Council for adoption following audit, prior to the 31 December 2021 statutory deadline; and

3. Agrees that the Audit Risk and Finance Subcommittee Chair, the Group Manager Corporate Services and Group Manager Strategy and Communication be delegated to approve amendments to the draft Annual Report 2020/21 to reflect feedback provided by the Subcommittee, prior to audit.

Edgar/Lawrey Carried

8. Audit Reports on the Consultation Document and Long Term Plan 2021-31

Document number R26112, agenda pages 242 - 265 refer.

Group Manager Corporate Services, Nikki Harrison, presented the report. She noted that both audit reports were received in August, despite the May date on Audit NZ’s cover letter for the audit on the long term plan consultation document.

The Subcommittee discussed Council’s proposed response to Audit NZ’s recommendation to evaluate whether additional resources should be deployed in planning and management of the Council’s transport infrastructure, and to have future infrastructure strategies and activity management plans peer reviewed, as per section 3.10 of the Audit NZ Report to the Council on the audit of Nelson City Council’s long term plan consultation document (A2720857). It was noted that resourcing was a matter for the Chief Executive to address. An additional clause was added to the resolution.

The meeting was adjourned from 11.17a.m. until 11.21a.m.

Resolved ARF/2021/035

That the Audit, Risk and Finance Subcommittee

1. Receives the report Audit Reports on the Consultation Document and Long Term Plan 2021-31 (R26112) and its attachments (A2720857 and A2718269).

2. Notes Council’s response to two recommendations from Audit New Zealand on asset planning (‘Management Comment’), highlighted in section 3.10, pages 10 and 11 of Attachment 1 (A2720857); and

3. Refers the matters raised in section 3.10 (of attachment 1 of Report R26112) to the Chief Executive for further review and analysis, and requests a report back to the Subcommittee.

Edgar/Sanson Carried

9. Bad Debts Writeoff - Year Ending 30 June 2021

Document number R25901, agenda pages 266 - 269 refer.

Group Manager Corporate Services, Nikki Harrison, presented the report, supported by Manager Accounting Services, Victoria Harper. It was noted that this report was originally scheduled to come to the August meeting, which was cancelled due to COVID-19.

The Subcommittee noted its disappointment that the debt of the Brook Valley Community Group Inc had to be paid by the ratepayers of Nelson.

Resolved ARF/2021/036

That the Audit, Risk and Finance Subcommittee

1. Receives the report Bad Debts Writeoff - Year Ending 30 June 2021 (R25901).

Murray/Her Worship the Mayor Carried

Recommendation to Council ARF/2021/037

That the Council

1. Approves the balance of $41,990.31 owed by the Brook Valley Community Group Inc be written off as at 30 June 2021.

Murray/Her Worship the Mayor Carried

10. Carry Forwards 2020/21

Document number R26143, agenda pages 270 - 277 refer.

Group Manager Corporate Services, Nikki Harrison, presented the report, supported by Manager Finance, Prabath Jayawardana, and Management Accountant, Alistair Roper.

Resolved ARF/2021/038

That the Audit, Risk and Finance Subcommittee

1. Receives the report Carry Forwards 2020/21 (R26143) and its attachment (A2724698).

Her Worship the Mayor/Edgar Carried

Recommendation to Council

That the Council

1. Approves the carry forward of $2.6 million unspent capital budget for use in 2021/22: and

2. Notes that this is in addition to the carry forward of $4.8 million approved during the Long Term Plan 2021-31, taking the total carry forward to $7.4 million of which $827,000 is for the 2022/23 year, $349,000 is for the 2023/24 year and the balance of $6.2 million is for the 2021/22 year; and

3. Notes that the total savings and reallocations in 2020/21 capital expenditure of $1.7 million including staff time which is in addition to the $2.3 million savings and reallocations already recognised in the May 2021 deliberations; and

4. Notes that the total 2021/22 capital budget (including staff costs and excluding consolidations and vested assets) will be adjusted by these resolutions from a total of $67.1 million to a total of $69.7 million; and

5. Approves the carry forward of $567,000 unspent operating budget for use in 2021/22.

Her Worship the Mayor/Edgar

11. Exclusion of the Public

Resolved ARF/2021/039

That the Audit, Risk and Finance Subcommittee

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

Edgar/Sanson Carried

Item	General subject of each matter to be considered	Reason for passing this resolution in relation to each matter	Particular interests protected (where applicable)
1	Audit, Risk and Finance Subcommittee Meeting - Confidential Minutes - 25 May 2021	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	IT Funding Request	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)(j) To prevent the disclosure or use of official information for improper gain or improper advantage

Item

General subject of each matter to be considered

Reason for passing this resolution in relation to each matter

Particular interests protected (where applicable)

Audit, Risk and Finance Subcommittee Meeting - Confidential Minutes - 25 May 2021

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

IT Funding Request

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)(j)

To prevent the disclosure or use of official information for improper gain or improper advantage

The meeting went into confidential session at 11.48a.m. and resumed in public session at 12.20p.m.

There being no further business the meeting ended at 12.20p.m.

Confirmed as a correct record of proceedings by resolution on (date)

Resolved

Item 6: Health, Safety and Wellbeing Report, July - September 2021

Audit, Risk and Finance Subcommittee

25 November 2021

REPORT R26171

Health, Safety and Wellbeing Report, July - September 2021

1. Purpose of Report

1.1 To provide the Subcommittee with a report on health, safety and wellbeing data collected over the period July to September 2021.

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

2. Summary

2.1 Significant incidents reported for this period are an explosive substance being identified in a Founders Heritage Park display and a large group of protesters causing disruption in the customer service centre and not complying with COVID-19 controls.

2.2 Council’s key health and safety risks have been assessed as unchanged for this period.

3. Recommendation

That the Audit, Risk and Finance Subcommittee

1. Receives the report Health, Safety and Wellbeing Report, July - September 2021 (R26171) and its attachment (A2782852).

4. Background

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

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

5. Discussion

5.1 Incidents of note

5.1.1 In July the explosive substance picric acid was identified in a collection on display at Founders Heritage Park. Picric acid was historically used in surgical dressings and high explosives, and it can become particularly volatile when solutions of picric acid age and crystalize.

5.1.2 A defence force specialist team removed the picric acid and other potentially dangerous items identified in the collection. Further specialist support has been engaged to manage the risk of hazardous materials in the remainder of the Founders collections.

5.1.3 In September a large group of protesters overcame security measures and entered the Customer Service Centre while a Council meeting was in progress. This occurred during alert level two restrictions and COVID-19 control requirements were largely ignored by the protesters.

5.1.4 CSC staff followed procedures for such situations and evacuated to secure back-office areas. Council’s Chief Executive addressed the protesters prior to the police moving them out of the CSC.

5.1.5 The investigation into this incident has concluded that appropriate risk assessment and response procedures were followed. Some improvements to controls have been identified.

5.2 COVID-19 Response

5.2.1 The sudden change to alert level 4 in August and ongoing requirements to operate under alert level 2 restrictions has disrupted Council operations including the health and safety work plan.

5.2.2 The ongoing work carried out by Council’s Covid Response Readiness Group had anticipated such an alert level change allowing a fast response that somewhat minimised disruption during the initial stages. Improvements in the Incident Management Team processes since the March 2020 lockdown also allowed a more agile response.

5.3 Lead Indicators

5.3.1 Many lead indicators were impacted by the COVID-19 response including an extended period with many staff working at least partly from home.

5.4 Safe Driving

5.4.1 ERoad in vehicle monitoring data continues to show a very low rate of overspeed events.

5.4.2 When the ERoad system was first implemented in 2016 the rate of over speed events was close to 2 per 100km travelled, for this quarter it is remains around 0.3 events per 100km.

5.4.3 Where individual drivers are identified with concerning overspeed reports this is followed up with their Business Unit manager. One driver had a concerning overspeed report in this period.

5.5 Staff Wellbeing

5.5.1 Sick leave data shows a pattern somewhat consistent with National flu-tracking data in that the rate of sick leave taken has dipped below previous years following a peak during winter.

5.5.2 The high peak rate of sick leave taken in July is likely to be due to the very low tolerance for anyone who is unwell to be in the workplace.

5.6 Contractor Health and Safety

5.6.1 Contractor safe work observations (SWOs) or contractor monitoring reported for this period were impacted by the time spent at alert levels 3 and 4 when less monitoring on worksites could occur.

5.7 Due Diligence Activities

5.7.1 Seven elected or appointed members attended four separate site safety visits during this period.

5.7.2 Four SLT members attended seven separate site safety visits.

5.7.3 These due diligence activities are detailed in the attachment and continue to occur at a frequency that indicates targets will be met for the year.

6. Key Health and Safety Risk Update

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

6.2 An emerging risk has been identified in regard to staff safety due to a likely increase in customer irritation over enforcement of further mandatory COVID-19 controls in Council workplaces. This will be carefully monitored and treatments identified where required.

6.3 Progress on treatments has in some cases been delayed due to the COVID-19 response and other temporary unexpected capacity limitations for health and safety staff.

6.4 A planned comprehensive review of the key health and safety risks has been rescheduled to be included in the next quarterly report.

6.5 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.

6.6 Where possible timeframes are indicated for treatments.

Author: Malcolm Hughes, Health Safety and Wellness Adviser

Attachments

Attachment 1: A2782852 - Health, Safety and Wellbeing Report - July - September 2021 ⇩

Item 7: Quarterly Finance Report for the three months ending 30 September 2021

Audit, Risk and Finance Subcommittee

25 November 2021

REPORT R26191

Quarterly Finance Report for the three months ending 30 September 2021

1. Purpose of Report

1.1 To inform the Subcommittee of the financial results for Council for the first three months of 2021/22, and to highlight any material variations.

2. Recommendation

That the Audit, Risk and Finance Subcommittee

1. Receives the report Quarterly Finance Report for the three months ending 30 September 2021 (R26191) and its attachments (A2776828, A2766313, A2777804 and A2771754).

3. Background

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

3.2 The whole of Council financial reporting provided to this subcommittee focuses on the three-month performance (1 July 2021 to 30 September 2021) compared with the year-to-date (YTD) approved capital and operating budgets.

3.3 Unless otherwise indicated, all information is against approved operating budgets, which is year one of the Long Term Plan 2021-31 (2021/22), plus any carry forwards, plus or minus any other additions or changes as approved by the Council.

3.4 Commentary is provided below for significant variances of +/- $50,000.

4. Financial Performance

4.1 For the three months ending 30 September 2021, the Council’s draft deficit is $305,000 unfavourable to budget.

4.2 Profit and Loss

4.3 Income

4.4 Rates income is on budget.

4.5 Other income is less than budget by $66,000 with significant variances as follows:

4.5.1 Investment Management income is greater than budget by $360,000. An unbudgeted special dividend was received from Port Nelson of $280,000 which has been used to repay debt in accordance with Council policy. This dividend was paid in September 2021 for the 2020/2021 financial year in addition to the $2 million dividend already recognized in that financial year. Rental relief is also under budget by $124,000 due to lower-than-expected rental relief granted. During the year, Council granted rental relief of $97,000 across various cost centres but mainly in Esplanade & Foreshore Reserves, Greenmeadows Centre, Millers Acre Centre and Rental properties.

4.5.2 Forestry income is less than budget by $411,000. Maitai Forestry income is behind budget by $389,000 with no income year-to-date. Harvesting commenced in October with income now expected to occur later this calendar year.

4.5.3 Building Services income is greater than budget by $170,000. Building consent income and Quality Assurance levies are ahead of budget by $147,000 and $18,000 respectively with stronger market demand than anticipated.

4.5.4 Parking and CBD Enhancement income is less than budget by $58,000. Off Street Meter Fees are under budget by $19,000 and income from rent is under budget by $37,000 both due to the impacts from Covid shutdown periods.

4.5.5 Environmental Advocacy/Advice income is less than budget by $53,000. Maitai ERP grant income is $74,000 behind budget with funding to be received on submitting the quarterly report in the second quarter. Unbudgeted grant income of $19,000 has been received from Forest and Bird for Rush Pool pest plant control.

4.5.6 Recycling income is less than budget by $70,000. Local Disposal Levies recoverable from Landfill is $69,000 behind budget due to lower than expected expenditure with the Curbside contract September invoice not being received in time.

4.5.7 Wastewater income is less than budget by $189,000. Commercial Trade Waste income is under budget by $119,000 mainly due to the impacts of Covid lockdown.

4.6 Expenses

4.7 Staff Operating expenditure is greater than budget by $139,000.

4.8 Base Expenditure is less than budget by $5,000.

4.8.1 Forestry expenditure is less than budget by $171,000. Maitai Harvest cost is $237,000 behind budget with harvesting commencing in October which is partially offset by higher than planned Brook Harvesting costs of $44,000.

4.8.2 Recycling expenditure is less than budget by $132,000. Provide: Curbside contract is $137,000 behind budget with the September invoice not having been received on time.

4.8.3 Resource Consents expenditure is greater than budget by $52,000. Job purchases are ahead of budget by $47,000 and External Expert Services are ahead of budget by $6,000, with consultants required to be used due to lack of staffing to deal with the increased volume of consents being sought.

4.9 Unprogrammed expenditure is greater than budget by $372,000 with significant variances as follows:

4.9.1 Subsidised Roading expenditure is greater than budget by $122,000 due to an unexpected weather event and expected to rise to $150,000 by the end of October 2021. This is for clearing slip material off the roads including Walters Bluff and Iwa Road.

4.9.2 Unsubsidised Roading expenditure is greater than budget by $44,000. Unbudgeted expenditure of $35,000 was incurred in September when a sinkhole appeared on Main Road Stoke while work was being undertaken on Stage 4 of the Saxton Creek Upgrade.

4.9.3 Landscape Reserves expenditure is greater than budget by $44,000. Heavy Rain events are $53,000 over a nil budget due to slips from rain events happened in Grampians, Botanical Hill and Sir Stanley Whitehead. Total remedial work is forecasted to be about $370,000.

4.9.4 Brook Camp expenditure is greater than budget by $59,000. This is mainly due to Campground Compliance works being $49,000 over a nil budget. This was due to spending being necessary on a relocatable home park at Brook Camp to comply with legislative requirements.

4.10 Programmed expenditure is less than budget by $361,000 with significant variances as follows:

4.10.1 Saxton Field expenditure is less than budget by $235,000. The Grant to TDC for Champion Drive is under budget by $235,000 which is a saving as the project did not cost as much as anticipated.

4.10.2 Monitoring The Environment expenditure is less than budget by $59,000. Hill Country Erosion expenditure is behind budget by $33,000 and Healthy Streams is behind budget by $24,000. These are expected to be spent by the end of the year and the budgets will be phased to reflect this in the next quarter.

4.11 Finance expenditure is greater than budget by $59,000.

4.12 Depreciation expenditure is greater than budget by $70,000.

5. Capital Expenditure

5.1 Capital Expenditure (including staff time, excluding vested assets)

5.2 As at 30 September 2021, Capital Expenditure is $1.5 million behind the Operating Budget of $8.6 million of which $702,000 relates to Infrastructure, $184,000 relates to Environment, $346,000 relates to Corporate Services, and $257,000 relates to Community and Recreation. Out of the $1.5 million variance above, $831,000 relates to Level of Service, $515,000 relates to Renewals and $200,000 relates to Growth projects.

6. Fundraising Adviser

6.1 In September 2020 a fundraising adviser position (20 hours per week) was established to identify funding opportunities for priority Council projects/activities and develop and submit applications. It was modelled on a previous role which had operated successfully from 2010 to 2014 but was not replaced when the incumbent left.

6.2 Over the last 12 months the role has worked with business units to submit the following successful funding proposals:

Stoke Youth Park - Grant of $150,000 (Rata Foundation)

Arts Strategy development - Grant of $30,000 (CreativeNZ)

Builders waste processing – Grant of $430,000 (Ministry for the Environment)

Montgomery Sq. toilets – Grant of $460,000 (Tourism Infrastructure Fund)

6.3 It is intended to provide an annual update to the Audit Risk and Finance Subcommittee on fundraising undertaken by this role.

7. Audit on Annual Report 2020/21

7.1 Audit New Zealand commenced auditing of the draft Annual Report 2020/21 in September 2021 and the audit work is still ongoing. Although the Nelson City Council audit is almost complete, audit on Nelson City Council Group has not been finalised due to delays in finalising the Nelson Airport Limited financial statements. No significant issues were found during the audit and Audit New Zealand is expecting to issue an unmodified audit report once the audit work is completed. Audit has indicated that the audit will be completed in time to adopt the Annual Report at the Council meeting on 9th December 2021.

8. Project Health

8.1 A table summarising the health of projects across Council for which project sheets have been generated is included as Attachment 2. It gives a red, amber, or green rating for quality, time, and budget factors.

8.2 The full project sheets are included as attachments to the Infrastructure, Community and Recreation, and Environment and Climate Committees’ quarter one reports. Attachment four of this report contains the Whakamahere Whakatū Nelson Plan project sheet.

9. Performance Measures

9.1 Council reports on 67 non-financial performance measures across its activity areas, as set out in the Long Term Plan 2021-31. These are evaluated as ‘on track/not on track/not measured yet’ for the first three quarters of the year. As this is the first quarterly report of the new Long Term Plan period, the performance measures have been updated to reflect those set for the period 2021-31.

9.2 Of the 67 measures, 44 are on track to achieve, 8 are not on track, and 15 have not been able to be measured yet as at quarter one.

9.3 Attachment 3 details Council’s performance measure results so far across all its activities. They will also be discussed in the Infrastructure, Environment and Climate, and Community and Recreation Committees’ respective quarterly reports.

Author: Nikki Harrison, Group Manager Corporate Services

Attachments

Attachment 1: A2776828 - Finance Dashboard and Graphs - Quarter One 2021/22 ⇩

Attachment 2: A2766313 - All of Council Project Health Summary Quarter One 2021/22 ⇩

Attachment 3: A2777804 - All activities' performance measure results - Quarter One 2021/22 ⇩

Attachment 4: A2771754 - The Nelson Plan Project Sheet ⇩

Item 7: Quarterly Finance Report for the three months ending 30 September 2021: Attachment 1

Audit, Risk and Finance Subcommittee

25 November 2021

REPORT R26312

Quarterly Internal Audit Report - 30 September 2021

1. Purpose of Report

1.1 To update the Audit, Risk and Finance Subcommittee on the internal audit activity for the quarter to 30 September 2021.

2. Recommendation

That the Audit, Risk and Finance Subcommittee

1. Receives the report Quarterly Internal Audit Report - 30 September 2021 (R26312) and its attachment (A2763671).

3. Background

3.1 Under Council’s Internal Audit Charter approved by Council on 15 November 2018 the Audit, Risk and Finance Subcommittee requires a periodic update on the progress of internal audit activities. The 2021-22 Internal Audit Plan (the Plan) was approved by the Audit, Risk and Finance Subcommittee on 25 May 2021. The Plan provides for three planned audits, with an allowance for a further two unplanned audits.

3.2 A new section on upcoming or completed significant external audits that are not reported separately to the Audit, Risk and Finance Subcommittee is included. This section includes:

3.2.1 The Port and Harbour Safety Management System (PHSMS) review;

3.2.2 International Accreditation New Zealand’s (IANZ) Building Consent Authority (BCA) audit;

3.2.3 Waka Kotahi NZ Transport Agency’s (NZTA) investment audit; and

3.2.4 the Office of the Valuer General’s (OVG) rating revaluation audit.

4. Overview of Progress on the 2020-22 Internal Audit Plan

4.1 One of the five audit items have been completed as at 30 September 2021. Further details of plan progress is provided in attachment Annual Audit Plan Progress to 30 September 2021 (A2601420), and an overview provided below.

4.2 The Internal Audit of the Streamlined Procurement process was completed in August. Very broadly, streamlined procurement involves substituting (open) tenders with greater discretion in allocating physical works contracts and pseudo market testing through buildability/price reviews. The audit’s focus was on probity & value for money audit. The audit resulted in six recommendations (two medium, five low and one very low). It is noted that to avoid duplication with the NZTA investment audit, the internal audit did not consider compliance with NZTA’s funding requirements.

4.3 In July, the internal audit analyst met with the two external appointees of the Audit, Risk and Finance Subcommittee to discuss potential topics for the two ‘unplanned internal audits’. No further progress has been made in determining these topics.

5. New and Outstanding Significant Risk Exposures and Control Issues Identified from Internal Audits

5.1 There are no new significant risk exposures identified from internal audits and one outstanding items at end of quarter four 2020-21.

5.2 The outstanding item, which related to updating Council’s NZS 3910 contract templates, has now been closed. The update resulted in two contract templates - one for direct engagements and one for tenders. The new templates were approved in August and training on their use was provided to the Capital Projects team during September.

6. Significant external audits that are not reported separately to the Audit, Risk and Finance Subcommittee

6.1 The PHSMS review panel report was tabled at the Environment and Climate Committee in November. Five areas of improvement for the Port and three overlapping areas of improvement for the Council were identified. These are in the process of being addressed.

6.2 IANZ’s BCA audit commenced in June resulting in zero serious non-compliances and eleven general non-compliances. All the non-compliances have been cleared and Council has returned to two-yearly audit rotation (prior non-compliance had resulted in Council being on an annual audit rotation).

6.3 Council received NZTA’s draft report following the investment audit in August 2021. One error relating to SuperGold public transport transactions was noted and has since been corrected. Council’s streamlined procurement approach, while reported positively, is not supported for continuation in the current format. To continue this type of approach Council would need to establish a formal panel to the approval of Waka Kotahi. Officers are working with Waka Kotahi to determine the best way forward. Waka Kotahi procurement procedures are being strictly adhered to for the current financial year for all Waka Kotahi subsidised works.

6.4 The audit of the 2021 rating revaluation will be performed by the OVG over December/January. Council is expecting a smooth audit – in May 2021, the OVG concluded that “Overall adequate management systems and office procedures were in place for the provision of the revaluation” with respect to Council in 2018 revaluation.

Author: Chris Logan, Audit and Risk Analyst

Attachments

Attachment 1: A2763671 - Annual Audit Plan Progress to 30 Sept 2021 ⇩

Item 7: Quarterly Finance Report for the three months ending 30 September 2021: Attachment 1

Audit, Risk and Finance Subcommittee

25 November 2021

REPORT R26313

Quarterly Risk Report - 30 September 2021

1. Purpose of Report

1.1 To provide information to the Audit, Risk and Finance Subcommittee on the organisational risks through to end of quarter one 2021-22.

2. Recommendation

That the Audit, Risk and Finance Subcommittee

1. Receives the report Quarterly Risk Report – 30 September 2021 (R26313) and its attachment (A2587873).

3. Background

3.1 This report includes information on risk management practice, a summary of council risks and a deeper dive into key risk areas, sliced by risk theme (organisational risks) and reporting group.

3.2 It is noted that updates on significant external audits were previously included in this report under the section Special-Request Reporting. Going forward, these updates appear in the quarterly internal audit report.

4. Risk Management Practice

4.1 The 2021-22 risk management work plan is on track:

4.1.1 risk training for two business units was completed over quarter one of 2021-22

4.1.2 partly automated risk reporting is now available to Group Managers to further embed management oversight of risk

4.1.3 no progress has been made on reporting enterprise level risk metrics in this report to inform and test against an organisation wide risk appetite however this is only due in the second half of the financial year

4.1.4 The risk management maturity self-assessment was completed in quarter one of 2021-22 using the All of Government template. Overall, the self-assessment was unchanged from last year. Council’s maturity assessed as level 2 (1 being weak, 5 being very strong), and Council’s target maturity, using the Minimum Maturity Level Calculator, assessed as level 2.

5. Putting Organisational Risks in Context

5.1 This section summarises risks relating to Council and joint operations. Risks relating to subsidiaries and joint ventures are limited to ownership risks. Risks relating to contracted-out activities is limited to residual/non-contracted-out risks. Specific asset, activity, or project risks, are rolled up into more general asset, activity or project risks however any significant items are summarised in the last section.

5.2 There were 435 risk entries in the centralised register at 30 Sept 2021 compared to 443 in the prior quarter, with 61 risks deleted and 47 risks added. Driving the change was:

5.2.1 a risk review by the Science and Environment Business Unit Manager resulted in rationalisation of risks (20 risks removed)

5.2.2 a series of risk workshops with the Transport and Solid Waste team resulting in a net reduction of 6 risks (22 risks removed and 16 added but noting there was some overlap between these numbers)

5.2.3 addition of Nelson Regional Sewage Business Unit risks (6 added) finalising the migration of risks to the enterprise risk register module

5.3 15 of the risk entries have status overdue as treatments have not been signed off compared to 47 in the prior quarter. This order of magnitude is considered reasonable given the treatment renewal process is new and the sign-off delays associated with newly identified risks.

5.4 The following chart is the heatmap for all the risk entries, noting that inherent risks are notionally before controls (including risk transfers), whilst residual risks are notionally after controls.

5.5 Risk entries are categorised in two ways:

5.5.1 risks with no apparent common theme or cause and hence are unlikely to pose a threat at an organisational level (316 risk entries), and

5.5.2 risks with identified common themes or causes which create risk concentrations that pose a threat at an organisational level (119 risk entries)

The latter is the focus of this report of which further detail is provided the next section.

6. Key Risk Areas By Theme (Organisational Risks)

6.1 Following the cancellation of the members’ risk workshop, feedback was received in September from the two external appointees of the Audit, Risk and Finance Subcommittee on refreshing the risk themes. The outcome being:

6.1.1 the four priority areas, which referred to the Long Term Plan 2018-28, have been removed.

6.1.2 ‘Compromised decision making and public information from incomplete and difficult to access records’ (rated Medium last quarter) has been removed on the basis that controls now are adequate.

6.1.3 ‘Central-government-led-reforms’ has been added with a rating of High.

6.1.4 The definition of ‘Lifeline services failure’ has been expanded to include non-natural-hazard causes such as water supply contamination and isolated critical asset failures.

6.2 Of the organisational risks that were retained from last quarter, there has been no risk movements to report during quarter one of 2021-22.

6.3 A summary of key risk themes is provided below. The attachment to this report describes each risk theme in more detail, its existing controls and planned risk treatments. For ease of comparison to the prior quarter, new text (with the exception of ‘Central-government-led-reforms’) in the attachment has been coloured red.

6.4 R1 - Central-government-led-reforms (Owner: Chief Executive). This risk theme captures risks related to three waters reform, RMA reform and the Review into the Future for Local Government. The High risk rating is currently driven by increased uncertainty, as opposed to risks contingent on the relevant bill(s’) royal assent.

6.5 R2 - Lifeline services failure (Owner: Group Manager Infrastructure). No new emerging risks to report at this time. The risk rating remains at Medium.

6.6 R3 - Illness, injury or stress from higher hazard work situations (Owner: Group Manager Corporate Services). Staff vacancies continue, impacting workloads and staff stress. Of note during the quarter was the customer services centre incursion by three waters protesters. The event rattled a number of customer-facing-staff with one staff member pointing to it as one of the reasons for their resignation. Security arrangements have been changed for anticipated protests.

6.7 R4 - Loss of service performance from ineffective contracts and contract management (Owner: Chief Executive). Completion of planned treatments are delayed due to staff vacancies.

6.8 R5 - Compromise of Council service delivery from information technology failures (Owner: Group Manager Corporate Services). Council continues to monitor the cyber risk landscape and respond accordingly as demonstrated by participation in the local government cyber security continuous improvement programme.

6.9 R6 - Council work compromised by loss of and difficulties in replacing skilled staff (Manager People and Capabilities). Previously, Council’s location in Nelson had provided a comparative advantage in terms of recruitment and retention. More recently, this advantage has been eroded by non-local employers offering full-time work-from-home and unavailability of affordable housing. Hence this organisational risk rating remains elevated at Medium.

6.10 R7 – Legal Risk (Group Manager Strategy and Communications). No new emerging organisational risks to report at this time. The risk rating remains at Medium.

6.11 R8 - Reputation damage and loss of public trust in the organisation (Group Manager Strategy and Communications). No new emerging risks to report at this time. The risk rating remains at Medium.

6.12 R9 - Disruption to Council service delivery due to significant increase in COVID-19 cases (Owner: Chief Executive). Council’s response readiness measures enabled a smooth transition to alert level 4 in August for staff. Council services continued as far as possible within the constraints of the alert level restrictions.

7. Key Risk Areas By Reporting Group

7.1 Infrastructure Group: COVID-19 related supply chain risks are now being realised, with price increases and delays on material delivery (local and overseas). More generally, there have been no reported exceptions to the risk controls. All treatments relating to increased flood protection, water supply resilience, pump station capacity, and reduction of wastewater overflows are progressing as planned.

7.2 Community Services Group: Non-compliance of Council owned campgrounds (one operated and two leased) represent some ongoing risks whilst remediation actions are implemented. This risk is magnified by the unavailability of affordable housing alternatives for current long-term-campers.

7.3 Environmental Management Group: All but one Business Unit in this group has at least one staff vacancy. Non-priority work is being deferred and risk of non-compliance with statutory timeframes (resource and building consents) is now elevated.

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: Chris Logan, Audit and Risk Analyst

Attachments

Attachment 1: A2587873 - Council risk profile - key organisational risks ⇩