Notice of the Ordinary meeting of
Audit, Risk and Finance Subcommittee
Te Kōmiti Āpiti, Kaute / Tūraru /
Pūtea
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Date: Tuesday
9 August 2022
Time: 9.00a.m.
Location: via
Zoom
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Agenda
Rārangi take
Chairperson Mr
John Peters
Members Her
Worship the Mayor Rachel Reese
Cr
Judene Edgar
Cr
Matt Lawrey
Cr
Rachel Sanson
Mr
John Murray
Ms
Shanell Kelly
Quorum 3 Pat
Dougherty
Chief Executive
Nelson City Council Disclaimer
Please note that the contents of these
Council and Committee agendas have yet to be considered by Council and officer
recommendations may be altered or changed by the Council in the process of
making the formal Council decision. For enquiries call (03) 5460436.
Audit, Risk and Finance
Subcommittee
This is a subcommittee of Council
Areas of
Responsibility
·
Any matters raised by Audit New Zealand or the Office of the Auditor-General
·
Audit processes and management of financial risk
·
Chairperson’s input into financial aspects of draft
Statements of Expectation and draft Statements of Intent for Nelson City
Council Controlled Organisations, Council Controlled Trading Organisations and
Council Organisations
·
Council’s Annual Report
·
Council’s financial performance
·
Council’s Treasury policies
·
Health and Safety
·
Internal audit
·
Monitoring organisational risks, including debtors and legal
proceedings
·
Procurement Policy
Powers to Decide
·
Appointment of a deputy Chair
Powers to
Recommend to Council
·
Adoption of Council’s Annual Report
·
To write off outstanding accounts receivable or remit fees and
charges of amounts over the Chief Executive’s delegated authority.
·
All other matters within the areas of responsibility or any other
matters referred to it by the Council
For the Terms of Reference for the
Audit, Risk and Finance Subcommittee please refer to document A1437349.
Item 5: Review into
events leading to issue of Civic House Earthquake Prone Building notices
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Audit, Risk and Finance Subcommittee
9 August 2022
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REPORT R27007
Review
into events leading to issue of Civic House Earthquake Prone Building notices
1. Purpose
of Report
1.1 To
report on the review of events leading to the issuance of Civic House
Earthquake Prone Building notices in March and April.
2. Recommendation
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That
the Audit, Risk and Finance Subcommittee
1. Receives
the report Review into events leading to issue of Civic House Earthquake
Prone Building notices (R27007 and its attachment (1759736513-10).
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3. Background
3.1 Earthquake
prone building notices were issued to Nelson City Council on 3 March 2022 for
ceiling tiles in the Savings Bank part of the "Civic House” complex,
and on 1 April 2022 for the ceiling tiles and roof structure of the Tower Block
part of the complex. The notices were issued to the Group Manager
Corporate Services (acting in the capacity of the nominated building
owner).
3.2 Questions
have been raised by the Chief Executive and the Audit, Risk and Finance
Subcommittee over the events that led to the issuance of the earthquake prone
building notices.
3.3 Members
of the Audit, Risk and Finance Subcommittee have queried why the issuance of
the earthquake prone building notices was not communicated to them prior to the
scheduled briefing for elected members on the Civic House Refurbishment
Project, held on 12 May 2022.
3.4 The
Chief Executive commissioned an internal review to explore the concerns raised,
and at a meeting of the Audit, Risk and Finance Subcommittee on 24 May 2022, it
was agreed that Council’s Manager Business Improvement, assisted by
Council’s Audit and Risk Analyst, would complete the internal review and
report findings to a subsequent meeting of the Audit, Risk and Finance
Subcommittee.
4. Internal
Review and Report
4.1 Terms
of reference for the internal review were drafted and concluded at the end of
May 2022. The internal review was completed during June 2022, followed by
analysis of findings and report preparation during 04 to 15 July 2022.
4.2 The
report from the internal review is attached. The report provides:
4.2.1 Information
on the background and methodology for the internal review;
4.2.2 Information
about legislation, guidance, policies, processes and frameworks that were
relevant to the review;
4.2.3 Summary
and detailed timelines of the events leading to the issuance of the earthquake
prone building notices for Civic House (Savings Bank and Tower Block);
4.2.4 Descriptions
of decisions, actions and information related to events leading to the issuance
of the earthquake prone building notices;
4.2.5 The
internal review findings and conclusions.
5. Findings
5.1 The
risk of falling ceiling tiles in the Civic House complex during a moderate
seismic event was a known risk with risk controls in place. The risk was
known to officers since at least 2016, and to elected members since December
2017. The risk assessment focuses on safety, financial, and legal
consequences, with other areas of risk consequence shown as “not
applicable”. The residual risk rating is Medium and Council’s risk
criteria indicates this to be a tolerable risk. Under Council’s
risk criteria, a Medium rated risk does not require notification to elected
members.
5.2 The
risk of an earthquake prone building notice being issued for the ceiling tiles
was known to officers from August 2020. This risk was not recorded in
Council’s risk register and was not formally notified to elected
members. The earthquake prone building notice for ceiling tiles in the
Savings Bank portion of Civic House was issued on 03 March 2022 and elected
members were notified on 12 May 2022. Although this specific risk was not
formally notified to Elected Members at an earlier stage, there were multiple
instances of reports to Council and Committees that referenced the risk of
falling ceiling tiles in a seismic event.
5.3 A
substantial amount of work was completed in the belief that this would avoid
the issuance of the earthquake prone building notice for ceiling tiles in Civic
House. There were several external parties involved and it is not clear
if the right advice was given at various intervals. Once decision making
on the remediation project became heavily influenced by the planned investment
in the Civic House refurbishment, the clear direction was to improve safety
with the least sunk cost; whilst these actions probably did reduce risk for
occupants of the building, they were not sufficient to avoid issuance of the
earthquake prone building notice.
5.4 The
risk from the roof structure was known to officers from January 2022. The
risk was discovered as part of engineering investigations to assess detailed
costs associated with the planned refurbishment of Civic House. From
information viewed by the authors, it is likely there was an initial assumption
by officers that the risk identified with the roof structure was similar to the
ceiling tile risk; that is, rated as a Medium risk with controls in
place. How this risk was assessed and managed is not recorded in
Council’s risk register, and elected members were not formally notified
of the risk.
5.5 The
risk of an earthquake prone building notice for the roof structure and ceiling
tiles in the Tower Block portion of Civic House was known to officers from
January 2022. This risk was not recorded in Council’s risk register
and was not formally notified to elected members. The notice was issued on 01
April 2022, and elected members were notified on 12 May 2022.
6. Conclusions
6.1 In
general, the internal review found that officers’ actions were aligned
with Council’s risk criteria and delegations. More robust
application of Council’s risk management processes, for both prompt
recording of newly identified risks, and considering elected member stakeholder
interests when assessing risks, may have led to increased direction from
elected members. However, it is not feasible to assess whether earlier
notification of risks to elected members, or increased direction from elected
members, would have been adequate intervention to avoid the issuance of the
earthquake prone building notices.
Author: Arlene
Akhlaq, Manager Business Improvement
Attachments
Attachment 1: 1759736513-10
- Internal review into events leading to issue of Civic House Earthquake Prone
Building notices 2022 v1.0 ⇩
