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I hereby give notice that an ordinary meeting of the Audit and Risk Committee will be held on:

Date:
Time:
Meeting Room:
Venue:

Wednesday, 29 July 2015


1.30pm
Room 1, Level 26
135 Albert Street
Auckland

Audit and Risk Committee


OPEN AGENDA
MEMBERSHIP
Chairperson
Deputy Chairperson
Members

Ex-officio

Cr Sir John Walker, KNZM, CBE


Cr Dr Cathy Casey
Cr Cameron Brewer
Cr Bill Cashmore
Mr Paul Conder, CA
Cr Sharon Stewart, QSM
Mr Roy Tiffin, FCA
Cr Penny Webster
Mayor Len Brown, JP
Deputy Mayor Penny Hulse

(Quorum 4 members)
Mike Giddey
Democracy Advisor
23 July 2015
Contact Telephone: (09) 890 8143
Email: mike.giddey@aucklandcouncil.govt.nz
Website: www.aucklandcouncil.govt.nz
Please note: Any attachments listed within this agenda as Under Separate Cover can be found
at the Auckland Council website http://infocouncil.aucklandcouncil.govt.nz/ or can be provided on
request.

Note:

The reports contained within this agenda are for consideration and should not be construed as Council policy
unless and until adopted. Should Members require further information relating to any reports, please contact
the relevant manager, Chairperson or Deputy Chairperson.

TERMS OF REFERENCE
Responsibilities
The Audit and Risk Committee will be responsible for:

Providing objective advice and recommendations to the Governing Body regarding the
sufficiency, quality and results of assurance on the adequacy and functioning of the councils
risk management, control and governance frameworks and processes.

Exercising active oversight of all areas of Auckland Council control and accountability (including
Council Controlled Organisations), in an integrated and systematic way, such that the results of
risk and assurance reviews and external audits may be incorporated in the priority-setting and
strategic planning processes.

Liaison with Audit NZ and, where necessary, the audit committees of CCOs to ensure robust
financial audits and reviews of the Auckland Council group

Exclusion of the public who needs to leave the meeting


Members of the public
All members of the public must leave the meeting when the public are excluded unless a resolution
is passed permitting a person to remain because their knowledge will assist the meeting.
Those who are not members of the public
General principles

Access to confidential information is managed on a need to know basis where access to the
information is required in order for a person to perform their role.
Those who are not members of the meeting (see list below) must leave unless it is necessary
for them to remain and hear the debate in order to perform their role.
Those who need to be present for one confidential item can remain only for that item and must
leave the room for any other confidential items.
In any case of doubt, the ruling of the chairperson is final.

Members of the meeting

The members of the meeting remain (all Governing Body members if the meeting is a
Governing Body meeting; all members of the committee if the meeting is a committee meeting).
However, standing orders require that a councillor who has a pecuniary conflict of interest leave
the room.
All councillors have the right to attend any meeting of a committee and councillors who are not
members of a committee may remain, subject to any limitations in standing orders.

Independent Mori Statutory Board

Members of the Independent Mori Statutory Board who are appointed members of the
committee remain.
Independent Mori Statutory Board members and staff remain if this is necessary in order for
them to perform their role.

Staff

All staff supporting the meeting (administrative, senior management) remain.


Other staff who need to because of their role may remain.

Local Board members

Local Board members who need to hear the matter being discussed in order to perform their
role may remain. This will usually be if the matter affects, or is relevant to, a particular Local
Board area.

Council Controlled Organisations

Representatives of a Council Controlled Organisation can remain only if required to for


discussion of a matter relevant to the Council Controlled Organisation.

Audit and Risk Committee


29 July 2015
ITEM TABLE OF CONTENTS

PAGE

Apologies

Declaration of Interest

Confirmation of Minutes

Petitions

Public Input

Local Board Input

Extraordinary Business

Notices of Motion

Office of the Auditor-General and Audit New Zealand briefing

10

Audit New Zealand report on LTP consultation document

13

11

Management Report Interim Audit 2015

35

12

2015 Pro forma Group Financial Statements

49

13

Update on Targeted rates / reserves

51

14

Compliance (Do it Right) Programme

53

15

Update on Enterprise Risk Management and Insurance Activities

67

16

Council Controlled Organisation's Risk Report

71

17

Consideration of Extraordinary Items

PUBLIC EXCLUDED
18

Procedural Motion to Exclude the Public

79

C1

Council-Controlled Organisations Risk Management Information

79

C2

Update on Integrity and Investigation Activity

79

C3

Update on Internal Audit Activities

80

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1

Apologies
Apologies from Mayor LCM Brown and Deputy Mayor PA Hulse have been received.

Declaration of Interest
Members are reminded of the need to be vigilant to stand aside from decision making
when a conflict arises between their role as a member and any private or other external
interest they might have.

Confirmation of Minutes
That the Audit and Risk Committee:
a)

confirm the ordinary minutes of its meeting, held on Wednesday, 20 May 2015,
including the confidential section, as a true and correct record.

Petitions
At the close of the agenda no requests to present petitions had been received.

Public Input
Standing Order 7.7 provides for Public Input. Applications to speak must be made to the
Democracy Advisor, in writing, no later than one (1) clear working day prior to the
meeting and must include the subject matter. The meeting Chairperson has the discretion
to decline any application that does not meet the requirements of Standing Orders. A
maximum of thirty (30) minutes is allocated to the period for public input with five (5)
minutes speaking time for each speaker.
At the close of the agenda no requests for public input had been received.

Local Board Input


Standing Order 6.2 provides for Local Board Input. The Chairperson (or nominee of that
Chairperson) is entitled to speak for up to five (5) minutes during this time. The
Chairperson of the Local Board (or nominee of that Chairperson) shall wherever practical,
give one (1) days notice of their wish to speak. The meeting Chairperson has the
discretion to decline any application that does not meet the requirements of Standing
Orders.
This right is in addition to the right under Standing Order 6.1 to speak to matters on the
agenda.
At the close of the agenda no requests for local board input had been received.

Extraordinary Business
Section 46A(7) of the Local Government Official Information and Meetings Act 1987 (as
amended) states:
An item that is not on the agenda for a meeting may be dealt with at that meeting if(a)

The local authority by resolution so decides; and

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29 July 2015
(b)

The presiding member explains at the meeting, at a time when it is open to the
public,(i)

The reason why the item is not on the agenda; and

(ii)

The reason why the discussion of the item cannot be delayed until a
subsequent meeting.

Section 46A(7A) of the Local Government Official Information and Meetings Act 1987 (as
amended) states:
Where an item is not on the agenda for a meeting,(a)

(b)

That item may be discussed at that meeting if(i)

That item is a minor matter relating to the general business of the local
authority; and

(ii)

the presiding member explains at the beginning of the meeting, at a time


when it is open to the public, that the item will be discussed at the meeting;
but

no resolution, decision or recommendation may be made in respect of that item


except to refer that item to a subsequent meeting of the local authority for further
discussion.

Notices of Motion
At the close of the agenda no requests for notices of motion had been received.

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Item 9

Office of the Auditor-General and Audit New Zealand briefing


File No.: CP2015/14525

Purpose
1.

To provide an opportunity for representatives from the Office of the Auditor-General and
Audit New Zealand to address the committee.

Executive Summary
2.

Sarah Lineham Sector Manager Local Government from the Office of the Auditor-General
and Jo Smaill Audit Director from Audit NZ will be in attendance.

3.

A briefing paper from Audit New Zealand providing an audit status update is attached.

Recommendation
That the Audit and Risk Committee:
a)

receive the verbal update from Sarah Lineham Sector Manager Local Government
from the Office of the Auditor-General and Jo Smaill Audit Director from Audit NZ.

Attachments
No.

Title

Audit Status Update to the Audit and Risk Committee

Page
11

Signatories
Author

Mike Giddey - Democracy Advisor

Authoriser

Phil Wilson - Governance Director

Office of the Auditor-General and Audit New Zealand briefing

Page 9

Attachment A

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Office of the Auditor-General and Audit New Zealand briefing

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Item 10

Audit New Zealand report on LTP consultation document


File No.: CP2015/14743

Purpose
1.

This report sets out Audit New Zealands findings from the audit of the Auckland Councils
Consultation Document for the 2015-2025 Longterm Plan (LTP).

Executive Summary
2.

Audit New Zealands report on the audit of Auckland Councils Consultation Document for
the 2015-2025 Longterm Plan (LTP) is included as attachment A. This report sets out
Audit New Zealands findings from this audit and draws attention to areas where the council
is doing well or where they have made recommendations for improvement.

3.

Audit New Zealand found that the councils process for developing the consultation
document included effective control processes and worked well in terms of creating strong
buy-in from all parts of the council group and providing a clear focus on a small number of
strategic issues.

4.

Audit New Zealands report did not identify any areas that needed urgent attention but did
make a total of nine recommendations for improvement. Of these recommendations:
three relate to learnings for future LTPs
four relate to ongoing improvement work
two relate to specific actions to be progressed in the near future.

5.

In addition, a number of their recommendations were addressed as the final LTP document
was prepared.

6.

The two specific actions relate to the establishment, monitoring and reporting of formal
budget holder and Treasury sign-off processes as part of the councils standard budgeting
processes. The Financial Planning team will work with the Internal Audit team to implement
these two actions.

Recommendation
That the Audit and Risk Committee:
a)

receive the Audit New Zealand report on the audit of Auckland Councils Consultation
Document for the 2015-2025 Longterm Plan.

Comments
7.

Audit New Zealands report on the audit of Auckland Councils Consultation Document for
the 2015-2025 Longterm Plan (LTP) is included as attachment A. This report sets out
Audit New Zealands findings from this audit and draws attention to areas where the council
is doing well or where they have made recommendations for improvement.

Audit New Zealand report on LTP consultation document

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Item 10

Areas where the council is doing well


8.

Audit New Zealand found that the councils process for developing the consultation
document worked well in a number of areas including:
creating strong buy in and commitment from all parts of the council group including, staff,
CCOs and elected members
providing a clear focus on a small number of key strategic issues as intended by the new
legislation
good coordination, strong budget controls and effective risk management, all of which
contributed to a smooth audit process
good progress in areas such as asset management planning, and a good response to
new legislative requirements such as the requirement for a 30-year infrastructure
strategy.

Recommendations for improvement


9.

Audit New Zealand made a total of nine recommendations for improvement in their report,
none of which were categorised as urgent. Of these recommendations:
three relate to learnings for future LTPs
four relate to ongoing improvement work
two relate to specific actions to be progressed in the near future.

10.

In addition, the process we used to develop the final LTP has already addressed some
aspects of their recommendations that relate to legal, treasury and budget controls. The
content of the final LTP document also addressed some aspects of their recommendations
on the infrastructure and financial strategies.
Learning for future LTPs
a) Significant assumptions

11.

Audit New Zealand recommended that the council should identify significant assumptions
early in the LTP development process and ensure that there is a sufficient evidential base to
support those assumptions. A key example was the assumption about the timing of central
government funding for the City Rail Link.

12.

For future LTPs, we will ensure that there is a sufficient evidential base to support significant
assumptions. This approach was also applied in the development of the final LTP, where it
was clear that there was insufficient evidence to support an assumption of government
support for motorway tolls or increased fuel taxes at this stage.
b) Communication

13.

Audit recommended that the consultation document is clearly and unambiguously utilised as
the key document for consultation with the community. We note that for this LTP our
household summary, our Have Your Say Events and our website content all requested that
people read the full consultation document before making their submission.

14.

In our view, providing all households with a summary of the key issues and questions in a
widely accessible format helped to significantly boost the level of engagement compared to
previous consultations. Giving minimal information to households, and relying on peoples
willingness to seek out a more detailed consultation document for substantive information,
would most likely have resulted in much lower levels of engagement and ultimately fewer
submissions. In this case we received a significantly higher number of submissions (at
27,000) than for any previous Auckland Council consultation.

Audit New Zealand report on LTP consultation document

Page 14

15.

For future LTPs we will consider how to ensure that it is always clear that consultation
document is the key document. We are currently undertaking a full review of the consultation
process including assessing the experience of Aucklanders. This review will give a more
reliable picture of the experience of Aucklanders with both the household summary and the
wider consultation process, and help inform how we consult on future LTPs.
c) Legislation

16.

Audit New Zealand also recommended that for future consultation documents, legal review
and assurance on legislative compliance is completed prior to the audit review. We support
this approach, and will implement this to the extent that timeframes permit.
Ongoing improvement work
a) Asset Management

17.

While Audit New Zealand acknowledged good progress with asset management planning,
they found that this was more advanced for some asset classes than others. They therefore
recommended that council facilities the sharing of best practice across the group. We
already take this approach and will continue to make these kinds of ongoing improvements
with progress monitored by our Asset Management Steering Group.
b) Infrastructure strategy

18.

Audit New Zealand made a number of recommendations for improving the councils draft 30year infrastructure strategy, which they note was developed when there was no precedent in
the sector or elsewhere. Their specific comments on the content of the strategy were
addressed as part of preparing the revised strategy for the final LTP. Their main
recommendation looking forward was that council continue to develop the infrastructure
strategy so that it reflects a coherent and joined up plan to respond to the infrastructure
issues facing the region. We agree, and have already commenced some preliminary work
to support future iterations of the infrastructure strategy.
c) Financial strategy

19.

Audit New Zealand recommended that the financial strategy more clearly show the tradeoffs between spending more on maintaining existing assets to reduce the risk of asset failure
and maintaining sufficient financial flexibility to deal with any unexpected asset
replacements. We made these trade-offs as clear as possible in the final LTP. Our ability to
articulate these trade-offs will improve as the improvements to asset management and our
infrastructure strategy described above progress.
d) Performance measures

20.

In the area of performance measures, Audit New Zealand acknowledged good progress
(particularly with the use of a smaller number of more effective measures in the LTP) and
recommended that the council embed and build on this progress by improving how the
councils hierarchy of performance measures can support more effective management of the
councils operations. This means working towards a system of detailed operational
management-level measures that align to LTP measures that are in turn aligned to overarching Auckland Plan outcome measures. We will continue to work towards this, with a key
opportunity for improvement being the review of the Auckland Plan outcome measures that
will occur as part of the early work on the Auckland Plan refresh that is required by
legislation to occur by 2018.
Specific actions
a) Budget control

21.

Audit New Zealand found that strong budget controls were developed for the LTP process,
including a formal sign-off process by CCOs and budget holders within the Auckland Council
organisation. They recommend that these controls be formally embedded into standard

Audit New Zealand report on LTP consultation document

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council processes. We will implement this formal budget sign-off process for each annual
plan budget refresh cycle, with our Internal Audit team monitoring and reporting on the
operation of this control.
b) Treasury management
22.

Audit New Zealand were pleased to note improved and formalised linkages between the
councils Financial Planning and Treasury teams, particularly given the important role that
budget information plays in informing financial markets. They recommend that these
linkages are formally established and regularly monitored. We will implement a formal
Treasury sign-off process for each annual plan budget refresh cycle, with our Internal Audit
team monitoring and reporting on the operation of this control.

Consideration
Local Board views and implications
23.

There are no specific implications for local boards.

Mori impact statement


24.

There are no specific implications for Mori outcomes.

Implementation
25.

The Financial Planning team will work with the internal audit team to implement the
monitoring and reporting of the two specific actions identified in this report.

Attachments
No.

Title

Report to Council on the audit of the Consultation Document

Page
17

Signatories
Author

Ross Tucker - Manager Financial Policy & Strategy

Authorisers

Matthew Walker - General Manager Financial Plan Policy & Budgeting


Phil Wilson - Governance Director

Audit New Zealand report on LTP consultation document

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Attachment A

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Audit New Zealand report on LTP consultation document

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Attachment A

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Audit New Zealand report on LTP consultation document

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Attachment A

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Audit New Zealand report on LTP consultation document

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Audit New Zealand report on LTP consultation document

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Audit New Zealand report on LTP consultation document

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Audit New Zealand report on LTP consultation document

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Audit New Zealand report on LTP consultation document

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Audit New Zealand report on LTP consultation document

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Attachment A

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Audit New Zealand report on LTP consultation document

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Audit New Zealand report on LTP consultation document

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Attachment A

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Audit New Zealand report on LTP consultation document

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Audit New Zealand report on LTP consultation document

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Audit New Zealand report on LTP consultation document

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Audit New Zealand report on LTP consultation document

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Attachment A

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Audit New Zealand report on LTP consultation document

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Item 11

Management Report Interim Audit 2015


File No.: CP2015/10530

Purpose
1.

This report summarises the issues identified by Audit New Zealand during their planning and
first interim audit visits.

Executive Summary
2.

Audit New Zealand has issued a letter detailing the findings arising from their interim audit
visit. Overall, Audit New Zealand has assessed that Auckland Council has an effective
management control environment. This assessment of the management control
environment is used by Audit New Zealand to plan the most effective and efficient audit
approach.
The other key areas identified where Audit New Zealand believe the control environment can
be improved are the authorisation and supporting documentation for credit notes, refunds
and expenditure on purchasing cards, and a recommendation to regularly review and
reinforce councils sensitive expenditure policies.

Recommendations
That the Audit and Risk Committee:
a)

receive the interim management report from Audit New Zealand on the findings
arising from their planning and first interim audit visits of Auckland Council for the
year ended 30 June 2015.

b)

note the responses to the issues identified by Audit New Zealand.

Comments
3.

Audit New Zealand uses the interim visits to assess the Auckland Councils control
environment and follow up on issues raised in prior years management reports.
It was noted by Audit New Zealand that there has been positive progress made by council
on the collation and reporting of non-financial information. However, further improvements
to support the results reported in a few areas is required.
The other key areas identified where Audit New Zealand believe the control environment can
be improved are the authorisation and supporting documentation for credit notes, refunds
and expenditure on purchasing cards, and a recommendation to regularly review and
reinforce councils sensitive expenditure policies.
Management responses are included in the letter which indicates the specific actions
management are taking to address the matters identified by Audit New Zealand.
We are confident that improved processes are in place to address the issues identified with
many of the enhancements already in progress by Auckland Council.
We are working closely with Audit New Zealand to ensure none of the identified issues will
impact on the audit opinion. Financial Control is working with the business to ensure
processes are robust, particularly in relation to non-financial information, to mitigate
business risk.

Management Report Interim Audit 2015

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Item 11

Consideration
Local Board views and implications
4.

Local boards have not been consulted because the report deals primarily with internal
management issues.

Mori impact statement


5.

The report does not have any particular benefit or adverse effects on Mori.

Implementation
6.

No issues.

Attachments
No.

Title

Management Report on the interim audit of Auckland Council for the year
ending 30 June 2015

Page
37

Signatories
Author

Francis Caetano - Group Financial Controller

Authorisers

Kevin Ramsay - General Manager Finance


Phil Wilson - Governance Director

Management Report Interim Audit 2015

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Management Report Interim Audit 2015

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Management Report Interim Audit 2015

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Management Report Interim Audit 2015

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Item 12

2015 Pro forma Group Financial Statements


File No.: CP2015/14479

Purpose
1.

To present the 2015 pro forma group financial statements for approval.

Executive Summary
2.

The 2015 group financial statements are the first set of annual financial statements
presented in accordance with the new Public Sector Public Benefit Entities accounting
standards (PBE accounting standards). The changes resulting from the adoption of the PBE
accounting standards predominately affect disclosures, which have been reflected in the
2015 pro forma group financial statements. There have been no changes to the financial
performance and financial position of the Auckland Council Group (the Group) as a result of
the adoption.

Recommendation
That the Audit and Risk Committee:
a)

approve the 2015 pro forma group financial statements.

Comments
3.

All public sector entities are required to apply the PBE accounting standards for periods
beginning on or after 1 July 2014. The New Zealand Accounting Standards Framework
defines public benefit entities as reporting entities whose primary objective is to provide
goods or services for community or social benefit and where any equity has been provided
with a view to supporting that primary objective rather than for a financial return to equity
holders. The Group is classified as a public sector PBE for financial reporting purposes,
and applies New Zealand Tier 1 Public Sector PBE accounting standards.

4.

This is the first set of annual group financial statements presented in accordance with the
new PBE accounting standards. The key changes arising from first time adoption are
disclosed in note 29. Major changes include:

Disclosure of exchange and non-exchange split for revenue and receivables


Exchange revenue arises when one entity receives assets or services and directly
gives approximately equal value in exchange. Non-exchange revenue arises from
transactions without an apparent exchange of approximately equal value. Audit NZ
agreed that it is appropriate for council to apply the activity funding approach to
classify revenue into exchange and non-exchange. The funding policy contained in
the Long-term Plan 2012-2022 (LTP) identifies the groups of activities that are
funded by rates and those that are self-funded. If an activity is funded or partially
funded by rates then the associated revenue stream is classified as non-exchange.
The exchange and non-exchange splits of revenue and receivables are disclosed
in note two and note eight respectively.

Related party disclosures The new standard requires public sector PBEs to
disclose only those related party transactions and balances which have been
entered into on terms other than at arms length. As a result the size of the related
party note (note 27) has been substantially reduced, as most related party

2015 Pro forma Group Financial Statements

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Item 12

transactions and balances are at arms length.


Service concession arrangements a service concession arrangement is a binding
arrangement between a grantor and an operator, in which the operator uses the
service concession asset to provide a public service on behalf of the grantor for a
specified period of time. The group has identified a service concession
arrangement between Watercare and Veolia Water Services (Veolia). The
agreement grants Veolia the right to use water and wastewater infrastructure
assets owned by Watercare for the provision of water and wastewater services in
the Papakura District. The arrangement is disclosed in note 11.

As noted above, the adoption of the new PBE accounting standards had no impact on the
financial performance and financial position of the Group. The changes described above
affect disclosures only. To ensure compliance these pro forma group financial statements
have been reviewed against the latest Audit NZ model financial statements applicable to
local authorities.
The attached pro forma group financial statements have been provided to Audit NZ for
review and comment. At date of writing we are still awaiting feedback from Audit NZ.
5.

There have been no changes in local government legislation affecting financial reporting and
disclosures during the year. The structure and layout of the group financial statements have
remained consistent with prior year.

Consideration
Local Board views and implications
6.

No impact.

Mori impact statement


7.

No impact.

Implementation
8.

None

Attachments
No.

Title

2015 Pro forma Group Financial Statements (Under Separate Cover)

Page

Signatories
Author

Francis Caetano - Group Financial Controller

Authorisers

Kevin Ramsay - General Manager Finance


Phil Wilson - Governance Director

2015 Pro forma Group Financial Statements

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Item 13

Update on Targeted rates / reserves


File No.: CP2015/14058

Purpose
1.

To provide an update to the Audit and Risk Committee as to the status of the following
targeted rate and reserve accounts: Harbourview - Orangihina Targeted Rate, Waitakere
Quarry Aftercare Fund Reserve Account (WQAF), Hillary Commission Reserve Account,
Retrofit Your Home - Financial Assistance Programme.

Executive Summary
2.

Since the last report in May 2015, Harbourview and the Hillary Commission await the
outcome of court hearings and committee decisions respectively. WQAF remains pending
consultation and agreement with all relevant stakeholders. The retrofit programme will
remain as part of the NewCore solution as there was no perceived benefit from an interim
solution.

Recommendation
That the Audit and Risk Committee:
a)

receive this Update on Targeted rates/reserves report.

Comments
3.

Harbourview Orangihina Targeted Rate


Status
No further update awaiting the Court of Appeal fixture for the appeal hearing on 12 and 13
August 2015. A decision is not expected till early 2016.

4.

Waitakere Quarry Aftercare Fund Reserve Account


Status
A review is underway into the scope of the rehabilitation works to be carried out (by Perry
Resources) on the quarry. As part of this review an assessment is to be made as to whether
the works meet the expectations of the community and other relevant stakeholders.
Discussions are ongoing with all interested parties, including the local board. It is
anticipated that once agreement is reached on the accounting treatment of the WQAF,
council will be in a position to conclude.

5.

Hillary Commission Reserve Account


Status
A workshop was held in June 2015 with the Parks, Recreation and Sport Committee where
this reserve account was discussed. Various options are to be tabled in a wider funding
report now to be submitted to the Parks, Recreation and Sport Committee in late July 2015.

Update on Targeted rates / reserves

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6.

Retrofit Your Home Financial Assistance Programme


Status
Council have considered options for outsourcing or purchasing an interim automated
software solution for retrofit to remove the reliance on spreadsheets and decided not to
proceed with either option as the costs exceed any benefit. The NewCore solution will be
operational for NSCC/RDC/WCC legacy areas from 1 July 2016 and for other legacy council
areas from 1 July 2017.

Consideration
Local Board views and implications
7.

Discussions are ongoing with the local board as the review into the WQAF rehabilitation
works continue. The resulting outcome of this review will require engagement with the
relevant local board.

Mori impact statement


8.

Nil.

Implementation
9.

None.

Attachments
There are no attachments for this report.

Signatories
Author

Francis Caetano - Group Financial Controller

Authorisers

Kevin Ramsay - General Manager Finance


Phil Wilson - Governance Director

Update on Targeted rates / reserves

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Audit and Risk Committee


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Item 14

Compliance (Do it Right) Programme


File No.: CP2015/14056

Purpose
1.

This report is to:


(a) Brief the Committee on the Compliance (Do it Right) Programme
(b) Ask that the Committee note that on 10 July 2015, the Executive Lead Team (ELT)
endorsed the Compliance (Do it Right) Programme and its implementation.

Executive Summary
2.

On 18 February 2015, the Committee endorsed the high level principles and outline of a new
Framework for Legislative Compliance.

3.

Since February, a cross council steering group led by Legal Services have been working to
develop the detail of the framework and a compliance programme (including tools and
systems).

4.

This report is to update the work that has been completed to develop the detail of the
approved framework outline and commence implementation.

5.

On 10 July 2015, Executive Lead Team (ELT) received the attached power point, and
endorsed the Compliance (Do it Right) Programme including the implementation roadmap,
resources and investment.

6.

The programme has been developed to provide an integrated framework with activities to
manage the councils legislative obligations and applies to all council staff. It is intended that
some aspects of the programme will be extended to the CCOs in time.

7.

The following key aspects of the programme will be implemented in the next 12-18 months:
(a) Compliance Plan Pilots in 4 groups targeting priority areas (LGOIMA, Finance, Health
and Safety, Resource consents);
(b) Establishing the monitoring and reporting pathways;
(c) Developing and launching intranet platform (including an Obligation register);
(d) Adopt a Corporate Policy for Legislative Compliance;
(e) Develop an organisational and development (training) strategy.

Recommendation/s
That the Audit and Risk Committee:
a)

note that, on 10 July 2015, Executive Lead Team endorsed the Compliance (Do it
Right) Programme and implementation roadmap, resources and investment.

Comments
8.

On 18 February 2015, the Committee received a presentation about the proposed


Legislative Compliance Framework for Council. The Committee endorsed the high level
principles and the outline of the Framework.

Compliance (Do it Right) Programme

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9.

The project plan for this initiative included a report back to the Committee in July 2015 to
update the Committee on progress with implementation of the framework outline.

10.

A programme for legislative compliance has now been developed called the Do it Right
Programme for Legislative Compliance. This programme was considered and endorsed for
implementation by ELT on 10 July 2015.

11.

Key parts of the Do it Right programme include:


(a) Developing a plan for staff training and development that responds to leadership,
knowledge and training needs;
(b) Creating an intranet platform/portal to house the Obligation Register, compliance
information/checklists to support staff;
(c) Compliance planning by business units (part of business planning);
(d) Response and reporting pathways and mechanisms linking legal, risk, internal audit,
ELT, Audit and Risk Committee;
(e) A council corporate policy for legislative compliance;
(f) Induction/on-boarding and communication strategies.

12.

Various tools and templates have also being developed to assist staff understand their legal
obligations and to systematically monitor and track compliance across council. Quarterly
reporting on legislative compliance will be provided to the Audit and Risk Committee in
accordance with the programme.

13.

The programme has been developed to manage the councils legislative obligations and
applies to council staff.

14.

The programme will not immediately apply to CCOs however, the intention is to share the
programme with, and potentially apply aspects of it to CCOs and discussions with the CCOs
about this have started.

15.

The programme will support and enhance the quality of decision making in council through
providing good information and advice to elected members as decision makers, consistent
with a high performing council.

16.

The programme will be implemented gradually starting with a pilot programme and
expanding to council wide in 2016/17.

17.

The following key aspects of the programme will be implemented in the next 12-18 months:
(a) Compliance Plan Pilots in 4 groups targeting priority areas (LGOIMA, Finance, Health and
Safety, Resource consents);
(b) Establishing the monitoring and reporting pathways;
(c) Developing and launching intranet platform (including an Obligation register);
(d) Adopt a Corporate Policy for Legislative Compliance;
(e) Develop an organisational and development (training) strategy.

Consideration
Local Board views and implications
18.

Local boards have not been consulted because the report deals with internal management
issues. The programme is focused on council staff activities and responsibilities and
therefore does not directly affect Local Board members.

Compliance (Do it Right) Programme

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Mori impact statement


19.

The programme will assist and support the delivery of councils statutory obligations
concerning the Treaty of Waitangi and Mori.

Implementation
20.

None

Attachments
No.

Title

Report to ELT 10 July 2015: Legislative Compliance Programme

Page
57

Signatories
Authors

Emma Mosely - Senior Solicitor


Cecilia Tse - Manager Public Law

Authorisers

Katherine Anderson - Director Legal and Risk


Phil Wilson - Governance Director

Compliance (Do it Right) Programme

Page 55

Attachment A

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Compliance (Do it Right) Programme

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Attachment A

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Compliance (Do it Right) Programme

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Attachment A

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Compliance (Do it Right) Programme

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Attachment A

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Compliance (Do it Right) Programme

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Attachment A

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Compliance (Do it Right) Programme

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Attachment A

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Compliance (Do it Right) Programme

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Attachment A

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Compliance (Do it Right) Programme

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Attachment A

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Compliance (Do it Right) Programme

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Attachment A

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Compliance (Do it Right) Programme

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Attachment A

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Compliance (Do it Right) Programme

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Audit and Risk Committee


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Item 15

Update on Enterprise Risk Management and Insurance Activities


File No.: CP2015/13413

Purpose
1.

To update the Audit and Risk Committee on Enterprise Risk Management (ERM) and
insurance activities at Auckland Council.

Executive Summary
2.

The Risk team continued with the implementation of the Enterprise Risk Management
Strategic Plan for 2015-17. The team have completed the first phase of the two-year work
programme earlier than planned and have commenced the second phase.

3.

The council group (including Council-Controlled Organisations (CCOs) but excluding


Watercare) insurance programme has been renewed for the 2015/16 financial year.
councils Treasurer and Head of Risk are implementing a work programme to define an
insurance strategy for council over the next 12 months.

Recommendation
That the Audit and Risk Committee:
a)

receive the Update on Enterprise Risk Management and Insurance activities report.

Comments
4.

The Risk team continue to implement the Enterprise Risk Management Strategic Plan for
2015-17. Due to the increased engagement and strategies used, the team were able to
complete Phase 1 earlier than planned, which allowed us to continue with Phase 2. Phase 1
of the Plan was to build the risk platform foundation and strengthen the three lines of
defence.

5.

Key achievements for the Phase 1 implementation of the Strategic Plan are:
i)

Risk Strategic Plan 2015-17 approved by the Executive Lead Team (ELT) and
endorsed by Audit and Risk Committee in May 2015.

ii)

Top risks are identified and risks being reviewed at least on a quarterly basis by the
ELT risk owners.

iii)

Consolidation of all risk source documents on risk intranet page and communicated
council-wide through intranet.

iv)

Increased risk management awareness and responsibilities through a news article


on the intranet highlighting the three lines of defence and the importance of all staff
in the management of risks as the first line of defence.

v)

Regular meetings with Executive Lead Team members and presentation to the
Senior Leadership Team at lead team meetings. The importance of the completion
of risk registers has been communicated to the Senior Leadership Team across all
divisions within council.

vi)

Disclosure Committee has been set up. The Disclosure Policy has been finalised
and communicated to all stakeholders, including CCOs. A Disclosure register has
been implemented and is now operating.

Update on Enterprise Risk Management and Insurance Activities

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29 July 2015
vii)

Reports can now be generated from the Hyperion system on number of risk
registers received. Risk analysis is now being included in the Monthly Performance
Report to ELT on a regular basis.

viii)

Greater collaboration with senior leaders and partnering arrangements. As a result,


risk champions have been appointed from each division to act as partners with the
risk team and build risk management awareness and capability across council.

ix)

Fortnightly meetings are being held with Financial Control, Integrity and
Investigations, and Internal Audit to ensure an efficient and integrated approach
across second and third lines of defence.

6.

Phase 2 of the implementation will have increased engagement and reporting. This phase
will enable the reporting of operational risks together with strategic risk that is currently being
reported and risk profiling for high risk/high opportunity areas. This phase will also include a
formalised risk champions programme and the development of increased risk management
capability at council. To measure the progress of risk maturity across council, an internal
risk maturity assessment will be completed.

7.

Councils insurance programme (including CCOs but excluding Watercare) has been
renewed as at 30 June 2015. Key changes to the programme for the 2015/16 financial year
include:
i)

Reduction in the limit of the Material Damage and Business Interruption Policy from
$1 billion down to $500 million as agreed by the Governing Body on 25 June 2015 and
supported by the latest loss modelling received by council;

ii) Placement of Public Liability and Professional Indemnity Insurance directly with London
markets at existing level of cover ($200 million);
iii) Substantial premium savings across all policies due to favourable market conditions
and councils strong risk profile.
8.

Councils Treasurer and Head of Risk are currently completing a work programme to create
a clear insurance strategy for council and to define appropriate levels of risk retention within
council. This work programme is expected to take 12 months and the results will be reported
through to the Audit and Risk Committee.

9.

The key areas of review for the work programme include:


a) Review risk retention options;
b) Investigate options with CCOs to consolidate further group based policies; and
c) Recommendation to council on wider insurance strategy.

Consideration
Local Board views and implications
10.

Local boards have not been consulted because the report primarily deals with internal
management issues.

Mori impact statement


11.

This report does not have any particular benefit or adverse effects on Mori.

Implementation
12.

None.

Attachments
There are no attachments for this report.

Update on Enterprise Risk Management and Insurance Activities

Page 68

Audit and Risk Committee


29 July 2015

Authors

Aashmita Naikar - Risk Manager


Jazz Singh - Head of Risk

Authorisers

Katherine Anderson - Director Legal and Risk


Phil Wilson - Governance Director

Update on Enterprise Risk Management and Insurance Activities

Item 15

Signatories

Page 69

Audit and Risk Committee


29 July 2015

Item 16

Council Controlled Organisation's Risk Report


File No.: CP2015/13414

Purpose
1.

For the Audit and Risk Committee to receive an update on the risks reported by Auckland
Councils substantive Council-Controlled Organisations (CCOs) as part of their regular
quarterly reports.

Executive Summary
2.

This report provides a summary of the key risks reported by the substantive CCOs in their
third quarter reports. The CCOs have been reporting the risks since the recommendation
from the Audit and Risk Committee from the 16 December 2014 meeting.

Recommendation
That the Audit and Risk Committee:
a)

receive an update on the risks reported by Council-Controlled Organisations.

Comments
3.

The Audit and Risk Committee have requested that the CCOs provide regular reporting to
the CCO Governance and Monitoring Committee on a quarterly basis providing risk
information. A summary of the risks identified is included (Attachment A).

4.

The key risk information requested from the CCOs were:


(i)

how key risks are identified, assessed and managed

(ii)

an update on the approach to risk management, internal audit and external audit

(iii)

progress on current internal and external audit issues

(iv)

any financial impacts that will affect the council group

(v)

any key risks that are of a senior management or governance level that could impact
on the wellbeing or reputation of the Council-Controlled Organisation or Auckland
Council.

Consideration
Local Board views and implications
5.

The matters raised in this report relate to CCO accountability and governance which is a
Governing Body function.

Mori impact statement


6.

Oversight of CCO risk by the councils Audit and Risk Committee has no specific
implications for Mori wellbeing and does not raise any matters requiring iwi consultation.

Implementation
7.

None.

Council Controlled Organisation's Risk Report

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Item 16

Attachments
No.

Title

CCO Risk Management Summary Report

Page
73

Signatories
Authors

Aashmita Naikar - Risk Manager


Alastair Cameron - Principal Advisor CCO Governance and External Partnerships

Authorisers

Jazz Singh - Head of Risk


Katherine Anderson - Director Legal and Risk
Phil Wilson - Governance Director

Council Controlled Organisation's Risk Report

Page 72

Attachment A

Item 16

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29 July 2015

Council Controlled Organisation's Risk Report

Page 73

Attachment A

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29 July 2015

Council Controlled Organisation's Risk Report

Page 74

Attachment A

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Council Controlled Organisation's Risk Report

Page 75

Attachment A

Item 16

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Council Controlled Organisation's Risk Report

Page 76

Attachment A

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Council Controlled Organisation's Risk Report

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Exclusion of the Public: Local Government Official Information


and Meetings Act 1987
That the Audit and Risk Committee:
a)

exclude the public from the following part(s) of the proceedings of this meeting.

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
follows.
This resolution is made in reliance on section 48(1)(a) of the Local Government Official
Information and Meetings Act 1987 and the particular interest or interests protected by section 6 or
section 7 of that Act which would be prejudiced by the holding of the whole or relevant part of the
proceedings of the meeting in public, as follows:
C1

Council-Controlled Organisations Risk Management Information

Reason for passing this resolution


in relation to each matter

Particular interest(s) protected


(where applicable)

Ground(s) under section 48(1) for


the passing of this resolution

The public conduct of the part of


the meeting would be likely to result
in the disclosure of information for
which good reason for withholding
exists under section 7.

s7(2)(h) - The withholding of the


information is necessary to enable
the local authority to carry out,
without prejudice or disadvantage,
commercial activities.

s48(1)(a)

In particular, the report contains


discussions on risks that may
jeopardise the business operations
of the entity..

C2

The public conduct of the part of


the meeting would be likely to result
in the disclosure of information for
which good reason for withholding
exists under section 7.

Update on Integrity and Investigation Activity

Reason for passing this resolution


in relation to each matter

Particular interest(s) protected


(where applicable)

Ground(s) under section 48(1) for


the passing of this resolution

The public conduct of the part of


the meeting would be likely to result
in the disclosure of information for
which good reason for withholding
exists under section 6.

s6(a) - The making available of the


information would be likely to
prejudice the maintenance of the
law, including the prevention,
investigation, and detection of
offences and the right to a fair trial.

s48(1)(a)
The public conduct of the part of
the meeting would be likely to result
in the disclosure of information for
which good reason for withholding
exists under section 6.

In particular, the report contains


operational information regarding
investigation and other activity ,
which if released may compromise
the effective delivery of our integrity
and investigative services .

Public Excluded

Page 79

Audit and Risk Committee


29 July 2015
C3

Update on Internal Audit Activities

Reason for passing this resolution


in relation to each matter

Particular interest(s) protected


(where applicable)

Ground(s) under section 48(1) for


the passing of this resolution

The public conduct of the part of


the meeting would be likely to result
in the disclosure of information for
which good reason for withholding
exists under section 7.

s7(2)(c)(ii) - The withholding of the


information is necessary 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 to
damage the public interest.

s48(1)(a)
The public conduct of the part of
the meeting would be likely to result
in the disclosure of information for
which good reason for withholding
exists under section 7.

In particular, the report contains


financial and operational
information and details of internal
audit activity, which if released may
jeopardise the effective delivery or
Internal Audit services..

Public Excluded

Page 80