Agenda of Audit, Risk and Finance Subcommittee

Audit, Risk and Finance Subcommittee

22 February 2022

Page No.

Karakia and Mihi Timatanga

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 25 November 2021 8 - 14

Document number M19121

Recommendation

That the Audit, Risk and Finance Subcommittee

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

6. Chairperson's Report 15 - 16

Document number R26631

Recommendation

That the Audit, Risk and Finance Subcommittee

1. Receives the report Chairperson's Report (R26631).

7. Service Delivery Reviews (s17A reviews) work programme 17 - 25

Document number R26275

Recommendation

That the Audit, Risk and Finance Subcommittee

1. Receives the report Service Delivery Reviews (s17A reviews) work programme (R26275) and its attachment (A2762199).

Recommendation to Council

That the Council

1. Approves the increase in the value threshold that triggers a service delivery review under section 17A of the Local Government Act 2002 from $100,000 to $250,000 per annum for contracts and activity areas; and

2. Approves applying the two exemptions under the Local Government Act 2002 sections 17A(3)(A) and 17A(3)(b) for the Nelson Regional Sewerage Business Unit and Utilities – Stormwater/Flood Protection/Wastewater (including Wastewater Treatment Plant(s)/Water Supply.

8. Quarterly Finance Report - 31 December 2021 26 - 50

Document number R26519

Recommendation

That the Audit, Risk and Finance Subcommittee

1. Receives the report Quarterly Finance Report - 31 December 2021 (R26519) and its attachments (A2829541, A2821555, and A2750424).

9. Quarterly Health, Safety and Wellbeing Report - 31 December 2021 51 - 67

Document number R26521

Recommendation

That the Audit, Risk and Finance Subcommittee

1. Receives the report Quarterly Health, Safety and Wellbeing Report - 31 December 2021 (R26521) and its attachment (A2818999).

10. Quarterly Internal Audit Report - 31 December 2021 68 - 71

Document number R26485

Recommendation

That the Audit, Risk and Finance Subcommittee

1. Receives the report Quarterly Internal Audit Report - 31 December 2021 (R26485) and its attachment (A2813648).

11. Quarterly Risk Report - 31 December 2021 72 - 100

Document number R26486

Recommendation

That the Audit, Risk and Finance Subcommittee

1. Receives the report Quarterly Risk Report - 31 December 2021 (R26486) and its attachment (A2587873).

Confidential Business

12. 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 - 25 November 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 · 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)(j) To prevent the disclosure or use of official information for improper gain or improper advantage
2	Quarterly Update On Debts - 31 December 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

Karakia Whakamutanga

Audit, Risk and Finance Subcommittee Minutes - 25 November 2021

Minutes of a meeting of the

Audit, Risk and Finance Subcommittee

Te Kōmiti Āpiti, Kaute / Tūraru / Pūtea

Held in the Council Chamber, Civic House, 110 Trafalgar Street, Nelson on Thursday 25 November 2021, commencing at 9.04a.m.

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

In Attendance: Councillor G Noonan, Group Manager Infrastructure (A Louverdis), Group Manager Corporate Services (N Harrison), Group Manager Strategy and Communications (N McDonald), Team Leader Governance (R Byrne), Governance Adviser (J Brandt) and Governance Support Officer (A Bryce-Neumann)

Apology: Mr J Peters

1. Apologies

Resolved ARF/2021/044

That the Audit, Risk and Finance Subcommittee

1. Receives and accepts an apology from Mr J Peters.

Murray/Edgar Carried

2. Confirmation of Order of Business

There was no change to the order of business. However items 8 and 9 from the open agenda had confidential elements discussed in the confidential part of the meeting.

3. Interests

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

4. Public Forum

There was no public forum.

5. Confirmation of Minutes

5.1 14 September 2021

Document number M18926, agenda pages 7 - 13 refer.

Resolved ARF/2021/045

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.

Lawrey/Sanson Carried

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

Document number R26171, agenda pages 14 - 28 refer.

Health Safety and Wellness Adviser, Malcolm Hughes, presented the report.

Mr Hughes noted that since the writing of the report, the Government had announced the introduction of a COVID-19 traffic light system, which would commence on 3 December 2021.

It was noted that there was a lack of clarity in regards to responsibilities relating to Elected Members under the Health and Safety at Work Act, including interactions with the public and wellbeing. An additional clause was added to the resolution to request a report.

The meeting was adjourned from 9.56a.m. until 10.02a.m.

Resolved ARF/2021/046

That the Audit, Risk and Finance Subcommittee

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

2. Requests a report to come to the Audit Risk and Finance Subcommittee outlining the responsibilities of Nelson City Council applicable to Elected Members under the Health and Safety at Work Act 2015.

Edgar/Her Worship the Mayor Carried

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

Document number R26191, agenda pages 29 - 50 refer.

Group Manager Corporate Services, Nikki Harrison, supported by Manager Finance, Prabath Jayawardana, and Policy Coordinator, Laura Bruce, presented the report.

Resolved ARF/2021/047

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).

Her Worship the Mayor/Lawrey Carried

8. Quarterly Internal Audit Report - 30 September 2021

Document number R26312, agenda pages 51 - 56 refer.

Audit and Risk Analyst, Chris Logan, presented the report. A correction to agenda page 55 was noted for Key Findings, item 2, in that the sentence should read: Although difficult to quantify, the magnitude of avoided costs ~~savings~~ from the more open relationship and early involvement of contractors is in the order of 5% of the counter-factual contract cost.

Mr Logan noted that there was capacity for two internal audit topics for the next quarter. The Subcommittee suggested the following topics for internal audits to be undertaken:

· Review of the Environmental Inspections Ltd contract

· Review of workplace health and safety, particularly from a wellbeing perspective (stress audit).

Resolved ARF/2021/048

That the Audit, Risk and Finance Subcommittee

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

Lawrey/Sanson Carried

9. Quarterly Risk Report - 30 September 2021

Document number R26313, agenda pages 57 - 85 refer.

Audit and Risk Analyst, Chris Logan, presented the report.

Group Manager Corporate Services, Nikki Harrison, made a clarification regarding the reference to remedial actions concerning non-compliance of Council owned campgrounds alluded to in report section 7.2; noting that no decisions had been made regarding Council owned campgrounds and that an options paper was scheduled to go to the Strategic Development and Property Subcommittee on 3 December 2021.

Resolved ARF/2021/049

That the Audit, Risk and Finance Subcommittee

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

Sanson/Her Worship the Mayor Carried

10. Exclusion of the Public

Resolved ARF/2021/050

That the Audit, Risk and Finance Subcommittee

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

Her Worship the Mayor/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)
	Quarterly Internal Audit Report – 30 September 2021 Discussion	Section 48(1)(a) The public conduct of this matter would be likely to result in disclosure of information for which good reason exists under section 7	The withholding of the information is necessary: · Section 7(2)(j) To prevent the disclosure or use of official information for improper gain or improper advantage
	Quarterly Risk Report – 30 September 2021 Discussion	Section 48(1)(a) The public conduct of this matter would be likely to result in disclosure of information for which good reason exists under section 7	The withholding of the information is necessary: · Section 7(2)(g) To maintain legal professional privilege
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)

Quarterly Internal Audit Report – 30 September 2021

Discussion

Section 48(1)(a)

The public conduct of this matter would be likely to result in disclosure of information for which good reason exists under section 7

The withholding of the information is necessary:

· Section 7(2)(j)

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

Quarterly Risk Report – 30 September 2021

Discussion

Section 48(1)(a)

The public conduct of this matter would be likely to result in disclosure of information for which good reason exists under section 7

The withholding of the information is necessary:

· Section 7(2)(g)

To maintain legal professional privilege

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

The meeting went into confidential session at 11.12a.m. and resumed in public session at 12.20p.m.

11. Restatements

It was resolved while the public was excluded:

CONFIDENTIAL: Quarterly Update On Debts - 30 September 2021

That the Audit, Risk and Finance Subcommittee

2. Agrees that the Report (R26196) and its attachment (A2216183) remain confidential at this time.

CONFIDENTIAL: Quarterly Report on Legal Proceedings

That the Audit, Risk and Finance Subcommittee

2. Agrees that the report Quarterly Report on Legal Proceedings (R26359) and its attachment (A2782657) remain confidential.

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 7: Service Delivery Reviews (s17A reviews) work programme

Audit, Risk and Finance Subcommittee

22 February 2022

REPORT R26275

Service Delivery Reviews (s17A reviews) work programme

1. Purpose of Report

1.1 To outline the 2022 service delivery review work programme.

1.2 To align the value threshold for service delivery reviews with Council’s Procurement Policy.

1.3 To make three waters services exempt from service delivery reviews due to Central Government’s reform programme.

2. Recommendation

That the Audit, Risk and Finance Subcommittee

1. Receives the report Service Delivery Reviews (s17A reviews) work programme (R26275) and its attachment (A2762199).

Recommendation to Council

That the Council

3. Update

3.1 A service delivery review determines whether the existing means of delivering a service remains the most efficient, effective and appropriate method. This includes consideration of the current method of governance, funding, and delivery of the service alongside the alternative options that are available. This is to encourage good quality local infrastructure, local public services, and performance of regulatory functions.

3.2 It is important to note that a s17A review of services covers how the services are delivered. It is not about the quality of the services, which are reviewed as part of activity management plan development.

3.3 There are two types of reviews:

3.3.1 Review of service areas, such as a business activity, within Council (activity reviews)

3.3.2 Review of services which are delivered via contract, such as a maintenance contract (contract reviews).

3.4 Under section 17A of the Local Government Act 2002 Council is required to undertake activity reviews ‘not later than six years following the last review’ and contract reviews ‘within two years before the expiry of the contract’.

3.5 In November 2015, Council agreed to the approach staff would take to meet the new legislative requirements. This included an agreed schedule of activity review areas, use of a review template, and a review timeline.

3.6 The first round of service reviews focused on 42 service delivery areas across the full range of Council’s activities. Reviews in these areas were completed in 2017 and overseen by Council’s Audit and Risk Committee.

3.7 Service delivery reviews were discussed at the 25 May 2021 Audit, Risk and Finance subcommittee meeting. The subcommittee noted that there are other factors, other than the size of the activity budget, which could enable an exemption – such as the staff resource required to conduct a review. It was also noted that exemptions could be applied following a ‘desktop review’ and that there may not be a need for a full review.

3.8 The subcommittee agreed to defer the matter pending discussion with relevant chairs of committees. Officers have met and discussed work programmes with the chairs who have s17A reviews within their committee’s delegations.

3.9 The subcommittee requested officers to report back on options for how the service review exemptions could best be applied with reference to community wellbeing and the significance of the services.

4. Discussion

There are exemptions available to Council

4.1 Section 17A(3) provides two exemptions to the review requirements:

17A(3)(a) A local authority is not required to undertake the review in respect of a function to the extent that delivery arrangements are bound by legislation, contract or binding agreement so that they cannot be changed within the next two years;

17A(3)(b) A local authority is not required to undertake the review if it is satisfied that the potential benefits do not justify the cost of the review.

Financial considerations for exemptions

4.2 Section 17A(3)(b) is for circumstances where the service is small or where cost savings resulting from a review may be minor. In 2015, Council, using the Procurement Policy as a guide, set a threshold that activities with a value below $100,000 be exempt from review.

Other considerations for exemptions

4.3 Under the legislation costs and benefits other than financial matters (such as staffing resources) can also be considered.

4.4 Council’s review template provides for other considerations for exemption including; time, policy and regulatory changes, cost and capacity implications and the views of service users. This is part of the required ‘desktop review’, at which point officers can recommend a full review to the relevant committee if one is required.

4.5 Although there is a financial threshold operating, reviews below this level can be brought to the relevant committee if it is considered that other factors warrant it.

2022 and 2023 work programme for activity reviews

4.6 Council has a schedule of activity reviews for services which exceed the financial threshold. Most of these reviews are scheduled for 2022 and 2023. Full details can be found in Attachment 1 (A2762199). Since the triggers for contract reviews are different (paragraph 4.2), these are undertaken when needed and are not included in the schedule.

4.7 Council will be able to monitor progress on the completion of the reviews through an annual update report to the Audit, Risk and Finance subcommittee.

4.8 In situations where a change to the way a service is delivered is proposed, that decision will need to consider Council’s Significance and Engagement Policy and any public engagement required.

Recommendation to align the financial value threshold with Council’s Procurement Policy

4.9 Under the current process, the threshold is $100,000 for contracts and activity areas. This threshold was adopted using Council’s Procurement Policy as a guide, specifically aligning with the requirement to publicly advertise tenders which was set at $100,000 in 2015.

4.10 Under the current Procurement Policy 2021-2026, the open competitive threshold is $250,000. It is recommended that the s17A threshold for both contracts and activity areas be increased to align with this.

4.11 This change in threshold would not materially impact the number of service area delivery reviews which are required to be undertaken. Based on 2021/22 figures, only one review would no longer be required – for Natureland. Staying at a $100,000 threshold would not increase the number of activity reviews required, as all Council’s activities between $100,000 and $250,000 would be captured in current programme.

4.12 This change would have a more significant impact on contract reviews. There would be a reduction in contract reviews of approximately 9 over the 2022-2023 period. However, it is important to note that these contracts are still reviewed as part of Council’s due diligence obligations (such as Council’s tendering process), and regular reviews of contract performance are undertaken as part of normal business.

Three Waters Reform programme and impacts on s17A reviews

4.13 Central Government is currently undertaking its Three Waters Reform programme. This includes reviewing the governance, management and service delivery of three water services, the same aspects which are part of a service delivery review.

4.14 Officers propose that an exemption should be applied to Council’s three waters related service delivery areas:

4.14.1 Nelson Regional Sewerage Business Unit (NRSBU)

4.14.2 Utilities - Stormwater/Flood Protection/Wastewater (including Wastewater Treatment Plant(s)/Water Supply) (due in 2023)

4.15 The Government has outlined its reform programme, which will see these activity areas transfer to the new Water Service Entities by July 2024. Therefore, the resource demand and costs to Council involved in undertaking a review of these services outweigh any potential benefits, as Council will not be able to materially change aspects of its three waters services prior to the reform.

4.16 If the Government’s Three Waters Reform does not proceed, Council can then undertake a s17A review of the NRSBU and Utilities activities.

5. Options

5.1 Two matters are considered - threshold for s17A reviews and Three Waters exemptions as outlined below.

Threshold recommendation
Option 1: Increase threshold to $250,000 (for activities and contracts) - Recommended
Advantages	· Aligns the threshold to Council’s Procurement Policy · Reduces the number of reviews required compared to a threshold of $100,000 · Frees staff time to focus on areas of higher priority
Risks and Disadvantages	· None obvious
Option 2: Do not increase threshold to $250,000 (for activities and contracts)
Advantages	· More contracts and services are reviewed
Risks and Disadvantages	· Lack of consistency with Council’s Procurement Policy · Requires more staff time reducing resources available for higher priority work · No/little gain expected from the lower value reviews

Three waters service delivery reviews
Option 1: Exempt three waters services from service delivery reviews - Recommended
Advantages	· Avoids duplication with the current Three Waters Reform programme · Frees staff resources to focus on other work priorities
Risks and Disadvantages	· None obvious
Option 2: Do not exempt three waters services from service delivery reviews
Advantages	· None
Risks and Disadvantages	· Council is unlikely to be able to implement any potential changes prior to Central Government-led reform

6. Conclusion

6.1 A $250,000 per annum threshold is recommended as this aligns with Council’s Procurement Policy and balances the need to review activities and contracts against the risk of directing resource to work that is not expected to provide value to the ratepayer.

6.2 Other exemptions may be determined as part of the ‘desktop reviews’ of service delivery areas which conclude that full reviews may not be required.

6.3 Exempting the three water service areas from review for the 2022 and 2023 years is recommended due to the Government’s Three Waters Reform programme.

7. Next Steps

7.1 Business Units will undertake relevant s17A service delivery reviews, reporting to the appropriate committees.

7.2 A report outlining progress, and the 2023 work programme, will be prepared for the subcommittee in late 2022.

Author: Gareth Power Gordon, Economic and Policy Adviser

Attachments

Attachment 1: A2762199 - 2022 and 2023 s17A activity review schedule ⇩

Important considerations for decision making

1. Fit with Purpose of Local Government

The recommendations support Council’s requirements under section 17A of the Local Government Act 2002. Undertaking Council activities in the most effective manner possible contributes to all four community wellbeings.

2. Consistency with Community Outcomes and Council Policy

The recommendations support the following Community Outcomes:

· Our infrastructure is efficient, cost effective and meets current and future needs

· Our urban and rural environments are people-friendly, well planned and sustainably managed

· Our communities have access to a range of social, educational and recreational facilities and activities.

3. Risk

Setting the threshold at $250,000 reduces the risk that resources are allocated to reviews which are not expected to provide benefits.

4. Financial impact

Staff resources and a budget of $25,000 in non-LTP years are allocated to complete the reviews.

5. Degree of significance and level of engagement

This matter is of low significance as it does not impact levels of service and has a low financial impact and therefore no community engagement has been undertaken.

6. Climate Impact

No impact on the climate results from this recommendation.

7. Inclusion of Māori in the decision making process

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

8. Delegations

The Audit, Risk and Finance subcommittee has the following delegations to consider in relation to the requirements of the Local Government Act 2002

Areas of Responsibility:

· Council’s financial performance

· Internal Audit

· Procurement Policy

Powers to Recommend to Council:

· All other matters within the areas of responsibility or any other matters referred to it by the Council

Item 8: Quarterly Finance Report - 31 December 2021

Audit, Risk and Finance Subcommittee

22 February 2022

REPORT R26519

Quarterly Finance Report - 31 December 2021

1. Purpose of Report

1.1 To inform the Subcommittee of the financial results for Council for the first half 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 - 31 December 2021 (R26519) and its attachments (A2829541, A2821555, and A2750424).

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 six-month performance (1 July 2021 to 31 December 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 six months ending 31 December 2021, the Council’s draft deficit is $731,000 favourable to budget.

4.2 Profit and Loss

4.3 Income

4.4 Rates income is greater than budget by $72,000. Wastewater Rates are over budget by $54,000 due to additional wastewater connections being added after wastewater charges had been set, resulting in more units than budgeted paying charges for the year.

4.5 Other income is less than budget by $1.3m with significant variances as follows:

4.5.1 Investment Management income is greater than budget by $442,000. 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 recognised in that financial year. Interest on Short Term Investment is over budget by $102,000 due to more funds being invested than planned as a result of pre-funding some debt to get the advantage of low interest prevailed at the time.

An adjustment for reduced income from rent relief provided by Council to tenants due to COVID-19 was made with the full budget held in this cost centre. However, the actual rent relief is being utilised within the cost centre that the rent relief relates to which is creating a lower than planned YTD variance of $165,000 in Investment Management. Actual rent relief provided totals $119,000 and been granted across various cost centres but mainly in Esplanade & Foreshore Reserves, Greenmeadows Centre and Rental properties. Rent relief is tracking under budget, with YTD rent relief budget being $217,000.

4.5.2 Forestry income is less than budget by $1.2m. Maitai Forest income is behind budget by $1.6 million with no income year-to-date as the bulk of the income now expected to be received in 2022/23. Brook/York Valley Forest income is $348,000 over budget with income forecast to be $582,000 over budget by the end of the year.

4.5.3 Landscape Reserves income is greater than budget by $92,000. An unbudgeted grant of $20,000 has been received from MBIE for the Maitai Mountain Bike Hub. Unbudgeted recovery income of $42,000 has been received from other impacted parties from the winter heavy rain event that caused multiple slips.

4.5.4 Nelson Library income is greater than budget by $88,000. Unbudgeted DIA income of $86,000 has been received which is used to fund seconded staff and library electronic resources.

4.5.5 Parking Regulation income is greater than budget by $111,000. Infringement Fees are over budget by $94,000 with the new system capturing more incidents of non-compliance.

4.5.6 Parking and CBD Enhancement income is less than budget by $104,000. Rental Income is under budget by $97,000 due to rental relief for outdoor dining as well as credits being provided to tenants who are on income-based rental agreements for the last financial year due to impacts from Covid restrictions.

4.5.7 Building Services income is greater than budget by $309,000. Building Consent income and Quality Assurance levies are ahead of budget by $223,000 and $64,000 respectively with stronger market demand than anticipated.

4.5.8 Resource Consents income is less than budget by $102,000. Consent Fees are $95,000 behind budget although the consent numbers are similar compared to last year. This is due to a lag in invoicing.

4.5.9 Waste Minimisation income is less than budget by $93,000. Local Disposal Levies recoverable from Landfill is $89,000 behind budget due to expenditure items it funds being behind budget. The details of the expenditure items are in the below programmed expenditure section.

4.5.10 Transfer Station income is greater than budget by $190,000. Local Disposal Levies recoverable from Landfill is $159,000 ahead of budget due to expenditure items it funds being ahead of budget. The details of the expenditure items are in the below base expenditure section.

4.5.11 Wastewater income is less than budget by $379,000. Commercial Trade Waste income is under budget by $250,000 due to the impacts of covid lockdown. Three Waters Stimulus Grant is $198,000 behind budget with no income yet recognised as no eligible expenditure incurred that could be claimed.

4.5.12 Stormwater income is less than budget by $99,000. Three Waters Stimulus Grant is behind budget by $97,000 with no income yet recognised as no eligible expenditure incurred that could be claimed.

4.5.13 Water Supply income is less than budget by $488,000. Residential Water Meter income is behind budget by $449,000 due to lower demand than planned.

4.6 Expenses

4.7 Staff Operating expenditure is greater than budget by $232,000.

4.7.1 Increased activity in Building Consents has necessitated the use of contractors and additional staff causing Staff Operating Expenditure to be over budget, with this largely being offset by increased income. Additional external funding has also been secured (such as in the libraries) to fund extra roles.

4.8 Base Expenditure is less than budget by $1.8m.

4.8.1 Forestry expenditure is less than budget by $519,000. Maitai Harvest costs are $1.1m behind budget with the bulk of the harvesting pushed back until the 2022/23 Financial Year. Brook/York Valley are $474,000 over budget which is partially offset by increased income.

4.8.2 Esplanade & Foreshore Reserves expenditure is greater than budget by $53,000. Property Maintenance Contract is over budget by $37,000 and is forecast to increase to $50,000 due to contract variations caused by new subdivisions providing additional esplanade reserves to be maintained.

4.8.3 Monitoring The Environment expenditure is less than budget by $166,000. Several expenditure items are behind budget as majority of the programme will be completed over Autumn.

4.8.4 Developing the Resource Management Plan expenditure is less than budget by $396,000. Significant changes have been approved by Council in November 2021 to change the programme of works. This has delayed major work that was to occur this year which has resulted in underspends across expenditure items with Nelson Plan expenditure being under budget by $446,000 and forecasting to be $1.2m under budget by the end of the year.

4.8.5 Resource Consents expenditure is greater than budget by $137,000. External Consultants are over budget by $140,000 and forecast to be $265,000 over budget by the end of the year. This is driven by staff vacancies requiring consultants to perform work to deal with the increased volume of consent being sought.

4.8.6 Stormwater expenditure is greater than budget by $129,000. Stormwater Reticulation Maintenance is over budget by $53,000 due to the larger volume of rainfall requiring increased checks. Insurance is ahead of budget by $72,000 due to higher than anticipated asset revaluations which was not known at the time of budgeting.

4.8.7 Transfer Station expenditure is greater than budget by $103,000. The Hopper Operation Contract is over budget by $30,000 due to the new contract now including some additional services previously paid out of different budget lines and forecast to finish $40,000 over budget. A budgeting error is causing a $71,000 variance and has been fixed for the Annual Plan 2022/23.

4.8.8 Civic House expenditure is less than budget by $95,000. Cleaning expenditure is under budget by $21,000 with savings from Covid restrictions. Electricity is behind budget by $30,000 with the December invoice had not been received when the reporting process commenced.

4.8.9 Nelson Library expenditure is less than budget by $94,000. Insurance for Nelson library is behind budget by $19,000 due to an allocation issue offset by an over budget variance of $16,000 for the Stoke Library. Electricity is behind budget by $25,000 with the December invoice not received when the reporting process commenced. There are also several other small variances which are expected to be spent.

4.8.10 Economic Development expenditure is less than budget by $81,000. The Grant to the Economic Development Agency is behind budget by $60,000 due to timing and is on track to be fully spent.

4.8.11 Subsidised Roading expenditure is less than budget by $72,000. This is mainly due to some work being delayed by Covid restrictions.

4.8.12 Sports Parks expenditure is less than budget by $69,000. Water expenditure is behind the budget by $25,000 but expected to be on track over the summer months, while the Base Contract is behind budget by $19,000 due to timing and forecast to be spent by the end of the year.

4.8.13 Marina expenditure is less than budget by $66,000. Various repairs & maintenance expenditure items are behind budget by $55,000 in an effort to find savings for Hardstand maintenance project. These savings will be spent on that project in the second half of the year.

4.8.14 Water Supply expenditure is less than budget by $65,000. Electricity is $55,000 behind budget with the December invoice not received when the reporting process commenced.

4.8.15 Recycling expenditure is less than budget by $64,000. The Kerbside Collection Contract expenditure is behind budget by $54,000 with this variance expected to reduce over the back half of the year.

4.8.16 Communities of Greatest Need expenditure is less than budget by $56,000. Youth Programmes expenditure is $45,000 behind budget with applications currently being assessed and likely to be finalised in February.

4.9 Unprogrammed Expenditure is greater than budget by $709,000.

4.9.1 Forestry expenditure is less than budget by $100,000. Tantragee Hazardous Tree Removal is under budget by $100,000 and forecast to finish under budget by $200,000.

4.9.2 Landscapes Reserves expenditure is greater than budget by $163,000. Heavy Rain events are $159,000 over a nil budget due to slips from rain events at Grampians, Botanical Hill and Sir Stanley Whitehead which is forecast to reach $360,000 by the end of the financial year. Savings across the activity of $150,000 have been found to fund this, with the Emergency Response Fund funding the remainder.

4.9.3 Subsidised Roading expenditure is greater than budget by $191,000. Winter Storm Damage is over budget by $145,000 due to an unexpected weather event but is not forecast to increase much further. These costs are subsidised by Waka Kotahi. Covid Response is over budget by $42,000 which is a one-off cost claimed by a contractor as part of a wider contract due to Covid related costs. This is expected to be subsidised by Waka Kotahi.

4.9.4 Unsubsidised Roading expenditure is greater than budget by $126,000. Unbudgeted expenditure of $87,000 was incurred when works were required on Main Road Stoke during Stage 4 of the Saxton Creek Upgrade.

4.9.5 Wastewater expenditure is greater than budget by $61,000. Wastewater Reticulation Reactive Maintenance is over budget by $61,000 with higher costs than anticipated. This variance is forecast to increase to $72,000 by the end of the year.

4.9.6 Public Transport expenditure is greater than budget by $50,000. Covid Response expenditure is over budget by $44,000 with additional bus cleaning costs incurred which are subsidised by Waka Kotahi.

4.10 Programmed Expenditure is less than budget by $1.5m.

4.10.1 Conservation Reserves expenditure is less than budget by $60,000. Programmed Maintenance and Weed Control are behind the budget by $39,000 and $24,000 respectively with work expected to be increasing in autumn and both forecast to be fully spent.

4.10.2 Sports Parks expenditure is greater than budget by $57,000. Programmed Property Maintenance is ahead of budget by $65,000 due to acceleration of some work programmes but forecast to be underspent at the end of the year by $47,000 due to contractor staffing issues.

4.10.3 Marina expenditure is less than budget by $103,000. Professional Advice is behind budget by $72,000 due to uncertain timing for the governance review which has now commenced. Maintenance Dredging Consent is behind budget by $30,000 with the work to take place in the second half of the year.

4.10.4 Saxton Field expenditure is less than budget by $232,000. 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.

4.10.5 Founders Park expenditure is less than budget by $52,000. Programmed Maintenance and Development Fund Expenditure are behind budget by $23,000 and $13,000 respectively with projects planned later in the year.

4.10.6 Economic Development expenditure is less than budget by $168,000. The Events Contestable Fund is behind budget by $87,000 while International Sporting Events are under budget by $48,000 and likely to finish $120,000 under by the end of the financial year due to the ongoing impacts of Covid.

4.10.7 Waste Minimisation expenditure is less than budget by $84,000. Community Engagement Contract is under budget by $40,000 and likely to be underspent as a result of low community uptake due to covid disruptions. Street Litter Bin Technology is behind budget by $23,000 with a start date in February 2022.

4.10.8 Unsubsidised Roading expenditure is less than budget by $232,000. Akersten Street rock repairs are behind budget by $220,000 with design work with the contractor nearing completion and work set to commence in quarter three.

4.10.9 Environmental Advocacy/Advice expenditure is less than budget by $146,000. Nelson Nature expenditure items are behind budget by $96,000 with some work completed and awaiting invoices, as well as contracts being in the process of finalizing to complete the remainder of the work. Insulation Grant Programme is under budget by $36,000 due to a prior year applicant refunding an unspent portion of their grant.

4.10.10Wastewater expenditure is less than budget by $124,000. Trade Waste Improvement Programme and Natural Hazards Risk Assessment are behind budget by $42,000 and $30,000 respectively due to timing but on track to be fully spent.

4.10.11Stormwater expenditure is less than budget by $94,000. Stormwater Detention, Tahuna Stormwater and Fresh Water Quality Assessments are behind budget by $37,000, $26,000 and $24,000 respectively. All budgets are anticipated to be fully utilised by the end of the year although there may be a small saving in the Fresh Water Quality Assessments.

4.10.12 Community Tools and Enablers expenditure is less than budget by $89,000. Grants to the Arts Council and Refinery Art Gallery are $41,000 behind budget with their invoices received late. Community Partnership Funds grants are $20,000 behind budget with applications having opened recently.

4.11 Finance expenditure is greater than budget by $230,000.

4.12 Depreciation expenditure is greater than budget by $160,000.

5. Capital Expenditure

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

As at 31 December 2021, Capital Expenditure is $11.1 million behind the Operating Budget of $31.2 million of which $5.9 million relates to Infrastructure, $711,000 relates to Environment, $1.4 million relates to Corporate Services, $362,000 relates to Strategic Development & Property, and $2.7 million relates to Community and Recreation. Out of the $11.1 million variance above, $6.1m relates to Level of Service, $3.9 million relates to Renewals and $1.0 million relates to Growth projects.

6. Whakamahere Whakatū Nelson Plan

6.1 Previous Audit, Risk and Finance subcommittee reports have contained information relating to the Whakamahere Whakatū Nelson Plan project. The project was a full review of Council’s resource management plans. On 23 November 2021 Council resolved to pause the Nelson Plan project until the Resource Management Act replacement legislation has been passed (Natural, Built and Environment Act; and Strategic Planning Act). Reporting to the Audit, Risk and Finance Subcommittee on the project will also pause until the project is re-started.

6.2 While the wider project is paused, staff anticipate that much of the work undertaken to date on the Nelson Plan will be able to be re-cast into replacement plans once new legislation is in place. Some project work will continue in relation to a housing plan change, coastal hazard planning, freshwater planning, and air quality. Expenditure on the Nelson Plan project will be significantly less than forecast in the Long Term Plan for the next three years. The Annual Plan 2022/23 will include a revised budget for the Environmental Planning project work.

7. Project Health

7.1 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.

7.2 The full project sheets are included as attachments to the Infrastructure, Community and Recreation, and Environment and Climate Committees’ quarter one reports.

8. Performance Measures

8.1 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.

8.2 Of the 67 measures, 49 are on track to achieve, seven are not on track, and 11 have not been able to be measured yet as at quarter two.

8.3 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: Prabath Jayawardana, Manager Finance

Attachments

Attachment 1: A2829541 - Finance Dashboard and Graphs - Quarter Two 2021/22 ⇩

Attachment 2: A2821555 - All of Council Project Health Summary - Quarter Two 2021/22 ⇩

Attachment 3: A2750424 - All activities' performance measure results - Quarter Two 2021/22 ⇩

Item 9: Quarterly Health, Safety and Wellbeing Report - 31 December 2021

Audit, Risk and Finance Subcommittee

22 February 2022

REPORT R26521

Quarterly Health, Safety and Wellbeing Report - 31 December 2021

1. Purpose of Report

1.1 To provide the Subcommittee with a report on health, safety and wellbeing data collected over the period October to December 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 enforcement contractor slipping on loose soil causing an ankle fracture and two cable strike incidents on a Council project.

2.2 Council’s key health and safety risks have been reviewed resulting in significant changes to the categories reported on.

3. Recommendation

That the Audit, Risk and Finance Subcommittee

1. Receives the report Quarterly Health, Safety and Wellbeing Report - 31 December 2021 (R26521) and its attachment (A2818999).

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 An enforcement contractor slipped on loose soil during a visit to a residence causing an ankle fracture.

5.1.2 Two cable strike near miss incidents involving a high voltage cable occurred on the same Council project. A process was followed by Council’s contractor to identify services, however this incident has highlighted significant limitations in the way services are located by utility providers. Lessons learnt from the incident have been shared and procedures improved to prevent a reoccurrence.

5.1.3 A risk assessment has identified that some items in the Founders collection store may contain radioactive materials. This is considered a low risk as long as controls are in place when items are handled.

5.1.4 Tree branches fell near a camp site during high winds at the Brook Valley Holiday Park. Trees at the Brook Camp are periodically inspected by an arborist. The investigation of this incident is considering options to improve this process and reduce the risk further.

5.2 COVID-19 Response

5.2.1 Preparation for the COVID-19 protection framework required considerable resource across the organisation and impacted other work programs.

5.2.2 The implementation of the requirement for vaccine passes (CVCs) in libraries has resulted in an increase in difficult customer interactions but has also received a lot of positive feedback from customers.

5.2.3 COVID-19 controls are reviewed on an ongoing basis as new information becomes available. Additional controls being considered include increased use of N95 masks and CO2 monitoring in meeting rooms to indicate if airflow is adequate to reduce risk from COVID-19.

5.3 Lead Indicators

5.3.1 Low rates of overspeed events continue

5.3.2 Workgroup toolbox talk completion continues to be an area where some workgroups need to improve.

5.3.3 Although not as high as the previous year contractor health and safety oversight activities reported continue to exceed historical data.

5.4 Due Diligence Activities

5.4.1 Three separate Safe work observations or safety tours were completed. Three SLT members and four elected members attended these site visits.

5.4.2 There is now sufficient data to show these activities in a chart. Although targets were not reached for this quarter they were exceeded for the calendar year.

6. Key Health and Safety Risk Review

6.1 Key health safety risks have been reviewed with particular attention to the inclusion of emerging or new key risk areas and greater clarity through refined categories.

6.2 Changes or new work completed by Council staff that have been considered in this review includes: marina work, increased roles involved in environmental monitoring, the ongoing COVID-19 pandemic, increased remote working and upcoming changes in local government such as the three waters reform.

6.3 Previous reports included the following key risk categories:

· Health and safety oversight of contractors

· Customer aggression

· Workplace stress and sedentary work

· Lone, remote or isolated work

· Driving

· Marina risks (temporary category)

6.4 Two categories remain unchanged in this report:

· Contractor Health and Safety management, and

· Customer Aggression

6.5 Workplace stress and sedentary work, previously a single category has been separated into two new categories:

· Workplace stress, and

· Sedentary or strenuous work

6.6 Three categories have been removed or integrated into other categories:

· Driving

· Marina risks

· Lone, remote or isolated work.

Key aspects of the risks in these categories have been included in two new categories, high energy sources and emergency preparedness.

6.7 Two new categories have been added:

· COVID-19

· Emergency Preparedness

6.8 Further details of each risk including their controls and treatments are outlined in the attachment and can be summarised as:

6.8.1 Contractor Health and Safety management – medium (6), no change

6.8.2 Customer Aggression – medium (9), no change

6.8.3 Workplace stress – medium (8) new category to reflect upcoming period of considerable change.

6.8.4 Sedentary or strenuous work – medium (6) new category separated from workplace stress that is anticipated to move to a low risk following minor improvements in focus on controls. These risks are grouped together because the systems and processes for controlling them are to a large extent the same and rely on prevention or early detection as the most effective controls.

6.8.5 COVID-19 - medium (10) a new category to reflect the ongoing pandemic and the risk presented by new variants of the disease such as omicron. It is anticipated that this will be a temporary category.

6.8.6 High energy sources – medium (8) new category to better capture a range of high consequence low likelihood risks. And includes risks previously captured in Driving, Marina and Remote and Isolated Work.

6.8.7 Emergency preparedness – medium (6) new category that includes aspects of the previous lone or remote and isolated work risk.

Author: Malcolm Hughes, Health Safety and Wellness Adviser

Attachments

Attachment 1: Health, Safety and Wellbeing Report, October -December 2021 (A2818999) ⇩

Item 10: Quarterly Internal Audit Report - 31 December 2021

Audit, Risk and Finance Subcommittee

22 February 2022

REPORT R26485

Quarterly Internal Audit Report - 31 December 2021

1. Purpose of Report

1.1 To update the Audit, Risk and Finance Subcommittee on the internal audit activity for the quarter to 31 December 2021.

2. Recommendation

That the Audit, Risk and Finance Subcommittee

1. Receives the report Quarterly Internal Audit Report - 31 December 2021 (R26485) and its attachment (A2813648).

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.

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

4.1 Two of the three planned audits have been completed as at 31 December 2021. Further details of plan progress is provided in attachment Annual Audit Plan Progress to 31 December 2021, and an overview provided below.

4.2 The annual fraud internal audit was completed in November 2021. The audit assessed compliance with fraud related controls relating to asset disposals, sensitive expenditure, procurement, cash handling and conflicts of interest. The audit did not uncover any examples of non-compliance with in-scope procedures however documentation of asset disposals could be improved. The audit resulted in four recommendations (three low and one very low). As at the end of quarter two 2021-22, two of the recommendations have been resolved and one partially resolved.

4.3 The two unplanned internal audits placeholders have now been filled:

4.3.1 The Trafalgar Centre revenue audit is currently in progress. This audit was selected given the upcoming 2021/22 s17A review and review of the management contract (which expires in 2022/23).

4.3.2 The EIL regulator services value for money audit is yet to commence. This audit was selected following the potential topics raised at the Audit, Risk and Finance subcommittee last quarter and after management feedback on feasible scope and timing of each audit. This audit was selected as it was deemed to be the most feasible and the audit could assist in the related Section 17A review that is due by 30 June 2022. Audit topics that were not selected this year will be considered for inclusion in the 2022/23 audit plan.

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 there were no outstanding items at end of quarter one 2021-22.

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

6.1 As noted in the prior quarter, the audit of the 2021 rating revaluation will be performed by the Office of the Valuer General over December/January. Audit approval is expected at the end of January.

6.2 Terms of Reference and appointment of an external auditor for the review of Council’s management process for all large projects (including a section on the Greenmeadows Pūtangitangi building) was completed by the Working Group in December 2021.

Author: Chris Logan, Audit and Risk Analyst

Attachments

Attachment 1: A2813648 Annual Audit Plan Progress to 31 Dec 2021 ⇩

Item 11: Quarterly Risk Report - 31 December 2021

Audit, Risk and Finance Subcommittee

22 February 2022

REPORT R26486

Quarterly Risk Report - 31 December 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 two 2021-22.

2. Recommendation

That the Audit, Risk and Finance Subcommittee

1. Receives the report Quarterly Risk Report - 31 December 2021 (R26486) 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 Due to the summer holiday period, the reporting close date for this report is 21 December 2021. The early close was considered reasonable in light of the fact that normally the delay between the end of the reporting period and the date of the subcommittee is just under two months.

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 and reported in quarter one of 2021-22; and

4.2 Following feedback, it is proposed to change the descriptions for the consequence domain Asset Performance/Service Delivery as per below.

4.3 The proposed descriptions were adapted as to not change Council’s risk tolerance whilst providing a more intuitive and workable description in line with local government best practice.

4.4 A similar update of the descriptions for the consequence domain Legal Compliance will be completed as part of the development of the Legal Operations Framework in the third quarter of 2021-22.

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, legal matter or project risks, are rolled up into more general asset, activity, legal or project risks however any significant items are summarised in the last section.

5.2 There were 427 risk entries in the centralised register at 31 Dec 2021 compared to 422 in the prior quarter, with ten risks deleted and fifteen risks added. Changes came from:

5.2.1 an annual review by the Manager Community Partnerships resulted in one risk deleted, one risk added, and eleven treatments added to existing risks

5.2.2 refreshing the Accounting Services risks to reflect incoming and outgoing staff (three risks added)

5.2.3 splitting out a lifeline services risk into four separate risks based on asset type to better reflect risk ownerships and risk treatment differences (three risks added)

5.2.4 various updates from eleven other business units.

5.3 Six of the risk entries have status overdue as treatments have not been signed off compared to 15 in the prior quarter. Ten to twenty overdue risk entries 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)

5.6 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 There have been no organisational risk movements to report during quarter two of 2021-22.

6.2 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 in the attachment has been coloured red.

6.3 R1 - Central-government-led-reforms (Owner: Chief Executive). Three waters reform is now mandatory. A strategic review to define the projects within the program is in scoping and planning phase. The risk rating remains at High.

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

6.5 R3 - Illness, injury or stress from higher hazard work situations (Owner: Group Manager Corporate Services). Staff vacancies across various operating groups continue, impacting workloads and staff stress. The risk rating remains at High.

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

6.7 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.

6.8 R6 - Council work compromised by loss of and difficulties in replacing skilled staff (Manager People and Capability). Plans for additional controls have commenced in response to decreased “home advantage” and in light of ongoing skilled staff vacancies. As the planned controls are not yet effective, the organisational risk rating remains elevated at Medium.

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

6.10 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.

6.11 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 the Orange Level in December. Council services continued as far as possible within our interpretation of the alert level restrictions.

7. Key Risk Areas By Reporting Group

7.1 Infrastructure Group: COVID-19 related supply chain risks are being realised, with price increases and delays on material delivery (local and overseas). Work is underway to look at streamlining processes to meet COVID-19 challenges with: elected members’ input provided through a workshop held in December; and oversight provided by a report (in progress) to Council. There is an emerging infrastructure risk/uncertainty around roading maintenance costs due to the up-coming procurement. More generally, there have been no reported exceptions to the risk controls (as per the risk register). 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: Elevated risks around non-compliance of Council owned campgrounds (one operated and two leased) resulted in a notification to the Chair of the Audit, Risk and Finance subcommittee during this quarter. The risk has now returned to previous levels noting that risks remain whilst remediation actions are implemented.

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 where it can be including in City Development. The risk of non-compliance with statutory timeframes (resource and building consents) has changed from elevated to occurring.

7.4 Strategy and Communications Group: Ongoing recruitment challenges within the Governance and Support Services and Strategy business units means it is expected that work will need to be deferred or delivered in slower timeframes in calendar year 2022 due to lack of resources. There are likely to be impacts on provision of meeting services due to three vacancies in the Governance Advisers team.

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 organisational risk profile ⇩