Agenda of Finance Audit & Risk Sub-committee

HAWKE’S BAY REGIONAL COUNCIL

Finance Audit & Risk Sub-committee

Tuesday 12 February 2019

Subject: Six Monthly Report on Risk Assessment and Management

Reason for Report

1. To provide the Sub-committee with the six monthly review of the risks that Council is exposed to and the mitigation actions in place to manage Council’s risk profile.

Background

2. The Sub-committee last considered the risk management report at its meeting held 19 September 2018.

3. Subsequent to this meeting, Executive were briefed and then committed to further risk management discussion at Executive meetings. Executive also met with Corporate Accountant individually to commit to delivering on one or more mitigation strategies within the register. Staff will feedback at future Finance, Audit & Risk sub-Committee (FARS) meetings as to progress on actions - which would also be reflected by an update in the risk register.

4. Following on from a series of six monthly risk management workshops held in January 2019 and examination of findings at several Executive meetings, attached is the latest risk management update for councillors’ review.

5. At the September 2018 meeting, the sub-committee was advised of the update to risks and risk owners as a reflection of the recent LTP restructure. As part of the risk management maturity process, each risk has had a risk owner commit to an action(s) in order to further mitigate their risks. This is in addition to the reassessment of current risks and their impacts within Council.

6. The sub-committee also requested feedback from the Group Manager – Office of the Chief Executive & Chair. This commentary is provided in the “Summary of Risk Management” section following, along with further detail around other aspects of Risk Management at Council and future plans including a proposed review of internal processes.

Risk Management Progress

7. Overall there has been a series of tangible mitigation strategies employed as Council evolves its risk management process. This has been assisted by the recent LTP process whereby additional resource has been added and has enabled Council to be more proactive.

8. A key example of this is within the Contamination of Drinking Water risk, a series of proposed “management options” have now become current practice for this risk. This is due to the additional resource added to the Compliance team which has enabled Council to do more testing after Priority One consents have been identified.

9. In addition, there has been better communication with stakeholders which has been aided by streamlined Council communication, additional clarity provided in the form of brochures and review of disclaimers, and the Joint Drinking Water committees which are now up and running.

10. There is a programme in place for improving Health & Safety within Council which is driven out of a recent Health & Safety audit which was presented to this Sub-Committee on 21 November last year. Feedback from the risk workshops has been positive, with other additional suggestions made to improve Health & Safety, with a focus on physical competence to complete a job, such as operation of a Land Use Vehicle.

11. It is noted that in this example (and others) some of the mitigation options will never necessarily be “complete” as some will require regular monitoring and progress, as such the narrative within the register has been updated to reflect that Council should continue to drive its risk mitigation strategies.

12. In addition, the level of engagement across the organisation has increased generally around risk management, with additional executive meetings, and further staff engagement on risks and communication. There is an improved culture of understanding and engagement with senior staff which Council will continue to progress.

13. Key changes to the matrix are outlined further below. These changes are in addition to reassessment of current practices and treatment options which have also been updated in the register. Risk descriptors have also been updated to better reflect the actual risk to Council.

Key Changes to the Risk Matrix

14. Three previous risks have been renamed to better reflect the actual risk to Council.

Previous Risk Title	Amended Risk Title	Commentary
Failure to meet unrealistic public expectations	Ability to effectively engage with public and stakeholders	Recognition that the risk is not so much in Council’s ability to meet expectations, but the ability to effectively educate and communicate with stakeholders
Infrastructure Failure	Infrastructure Exceedance	Recognition that flood and drainage systems are designed to meet minimum standards and the risk is that systems exceed such standards
Risk of staff providing incorrect or sensitive information to stakeholders	Risk of Council providing incorrect or sensitive information to stakeholders	Recognition that the risk of providing incorrect or sensitive information extends to beyond staff.

15. Risk trend ratings have been amended as follows.

Risk	Previous Trend Rating	New Trend Rating	Commentary
Risk of Contaminated Site contaminating Aquifer			Recognition of additional resourcing within this space including improvement monitoring capacity and better information programmes
Implementation of National Policy for Freshwater Management			TANK implementation lessons learned
Ability for Council to deliver on Planned Projects			Recognition of Project Management Office up and running with dedicated resource to ensure project service delivery.

16. Residual Risk assessments have been amended as follows.

Risk

Previous Assessment

New Assessment

Commentary

Inadequate Contractor Management

Effectiveness:

Effective

Likelihood:

Unlikely

Risk Factor:

Low

Effectiveness:

Satisfactory

Likelihood:

Likely

Risk Factor:

Moderate

Recognition of recent procurement and contract management audit which identified a number of inconsistencies in approach between groups.

Staff are working through this internally and with other agencies to improve contract management within Council.

Summary of Risk Management

External Review

17. As proposed at its previous meeting, a risk management review is proposed for the 2019-20 financial year. This review will form part of the agreed Crowe Horwath internal audit programme included in existing internal audit budgets. A timeline and scope will be presented at the 22 May 2019 sub-committee meeting. The scope will include an assessment of the effectiveness of current risk management policies and practices within Council.

Council Collaboration

18. Council staff have been meeting with Hastings District Council risk managers on an informal basis. Initial meetings indicated that there was a lot of overlap with risks within the two councils’ registers. As a result it was decided to invite representatives of all five councils to the meetings, which have proven to be insightful in terms of risk management information sharing and discussion of emerging risks within our region.

Hawke’s Bay Forums

19. In addition to the above, it was recognised that risk mitigation can benefit from sharing collective expertise with other agencies within Hawke’s Bay. As a result a Hawke’s Bay Risk Management Forum was created which includes representatives from local Councils, local government departments, and local industries.

20. Its first official meeting was held in December 2018, facilitated by Price Waterhouse Coopers, and a Terms of Reference is being drafted. Future meetings are intended to be scheduled on a quarterly basis, with the purpose of these meetings being to discuss topical risks within our region, along with shared best practice for risk management.

Project Risks

21. Reporting on Council’s project risks has been incorporated into the Project Management Office (PMO). The PMO has created a reporting format for project risks that is in line with the current risk management reporting framework.

22. The PMO and Risk Management team meet on at least a quarterly basis to discuss any Project risk trends that may need to be incorporated into the Council wide strategic risk register.

23. To date, the key risks arising throughout the PMO process are aligned with the current risk register and are focused mainly around staff resourcing and ability to prioritise projects based on capacity and demands.

Risk Management Group Manager Commentary

24. Group Manager – Office of the Chief Executive and Chair is unable to attend this meeting due to previously booked leave, however notes that in the previous six months, risk management capacity within Council has increased with further resource assisting with the risk management process. The process has also extended from its original recording and awareness nature, to increased utilisation of the register as a tool to drive change and progress in the risk management space. Specifically, risk owners have each committed to actions which will be monitored by risk staff to allow for increased visibility and accountability on mitigation strategies.

25. Risk management is also on the Executive Leadership Team (ELT) meeting agenda once a month, on average, to ensure that the risks have full and regular executive oversight, along with frequent updates on progress.

26. Whilst the risk management process has gained traction and maturity over the recent two years with regular and frequent Executive interrogation of all strategic level risks, it is recognised that there is still work to be done to filter risk management understanding and awareness throughout the rest of the organisation. Staff will report back on progress on this at the next risk management update to FARS.

Decision Making Process

27. Council and its committees are required to make every decision in accordance with the requirements of the Local Government Act 2002 (the Act). Staff have assessed the requirements in relation to this item and have concluded:

27.1. The decision does not significantly alter the service provision or affect a strategic asset, and is not inconsistent with an existing policy or plan.

27.2. The use of the special consultative procedure is not prescribed by legislation.

27.3. The decision does not fall within the definition of Council’s policy on significance.

27.4. The decision of the sub-committee is in accordance with the Terms of Reference and decision making delegations adopted by Hawke’s Bay Regional Council 9 November 2016, specifically:

27.4.1. The Finance, Audit and Risk Sub-committee shall have responsibility and authority to review whether Council management has a current and comprehensive risk management framework and associated procedures for effective identification and management of the council’s significant risks in place, and

27.4.2. undertake periodic monitoring of corporate risk assessment, and the internal controls instituted in response to such risks

27.4.3. report on Council’s risk management systems, processes and practices to the Corporate and Strategic Committee to fulfil its responsibilities.

Recommendations

That the Finance, Audit and Risk Sub-committee:

1. receives and considers the “Six Monthly Risk Assessment and Management” staff report

AND

2. confirms the Sub-committee’s confidence that Council management has a current and comprehensive risk management framework and associated procedures for effective identification and management of the Council’s significant risks

3. recommends that the Corporate and Strategic Committee receives and notes the resolutions of the sub-committee, confirming the robustness of Council’s risk management systems, processes and practices.

4. advises staff of the specific risks (following) that require reassessment to confirm the level of risk is accurate and internal controls are adequate, for reporting back to the 22 May 2019 Sub-committee meeting.

4.1. …

4.2. …

5. recommends that the Corporate and Strategic Committee receives and notes the resolutions of the sub-committee, including the specific risks that require reassessment.

Authored by: Approved by:

Melissa des Landes

Corporate Accountant

Jessica Ellerm

Group Manager Corporate Services

Attachment/s

⇩1

Risk Management Register Feb 2019

HAWKE’S BAY REGIONAL COUNCIL

Finance Audit & Risk Sub-committee

Tuesday 12 February 2019

Subject: Proposed Scope for Follow-up Water Management Internal Audit

Reason for Report

1. To present a proposed scope for a Water Management Follow-up Internal Audit for the sub-committee’s review and feedback.

Background

2. At its meeting 6 June 2018, an internal audit report on HBRC’s Water Management processes was presented to the sub-committee. This report contained a series of findings, recommendations, and management’s responses to each finding.

3. At the same meeting, the sub-committee was presented with a proposed internal audit programme for the 2018-19 financial year. Councillors requested at that meeting that a Water Management “Follow up” audit be included within the 2019-20 work programme.

4. The primary purpose of this audit is for Crowe Horwath to independently investigate Council’s progress on implementing and maintaining agreed action points that were stated as a response to the original audit, and the proposed scope is attached.

5. Staff note that there are less hours allocated to this follow-up audit than the original audit, due to the groundwork already having been completed. The number of hours allocated are within Council’s agreed internal audit budget for the year.

Decision Making Process

6. Council and its committees are required to make every decision in accordance with the requirements of the Local Government Act 2002 (the Act). Staff have assessed the requirements in relation to this item and have concluded:

6.1. The decision does not significantly alter the service provision or affect a strategic asset, and is not inconsistent with an existing policy or plan.

6.2. The use of the special consultative procedure is not prescribed by legislation.

6.3. The decision does not fall within the definition of Council’s policy on significance.

6.4. The decision of the sub-committee is in accordance with the Terms of Reference and decision making delegations adopted by Hawke’s Bay Regional Council 9 November 2016, specifically:

6.4.1. The Finance, Audit and Risk Sub-committee shall have responsibility and authority to confirm the terms of appointment and engagement of external auditors, including the nature and scope of the audit, timetable, and fees.

Recommendations

That the Finance, Audit and Risk Sub-committee:

1. Receives and notes the “Proposed Scope for the Follow-up Water Management Internal Audit” staff report.

2. Confirms the proposed Scope for the Follow-up Water Management Internal Audit including amendments agreed 12 February 2019.

Authored by:

Melissa des Landes

Corporate Accountant

Approved by:

Jessica Ellerm

Group Manager
Corporate Services

Attachment/s

⇩1

HBRC Internal Audit Scoping document - follow-up Water Management Audit

HAWKE’S BAY REGIONAL COUNCIL

Finance Audit & Risk Sub-committee

Tuesday 12 February 2019

Subject: Data Analytics Internal Audit Report

Purpose of Report

1. To present the internal audit report (attached) for the Data Analytics audit undertaken by Crowe Horwath in late 2018.

Background

2. The Finance, Audit and Risk Sub-committee (FARS) agreed at its meeting on 6 June 2018, as part of the internal audit work programme, to engage Crowe Horwath to conduct an internal audit of Council’s Data Analytics.

3. The agreed scope and purpose of the audit was to review payables and payroll, and master and transactional data for the financial year ended 30 June 2018. This data was then analysed independently by Crowe Horwath for any potential anomalies or suspicious transactions.

4. The report was then provided to staff, along with a separate spreadsheet listing the transactions that required review. This report was initially analysed by the Corporate Accountant and then reviewed by the Chief Financial Officer. Any findings requiring further interrogation were actioned where deemed necessary. The process included questioning the Payroll officer and the Accounts Payable officer and examination of relevant invoices and authorisations.

5. Following the review of findings, commentary has been provided alongside each finding within the report. For ease of reference, a key findings analysis is provided in the “Report Analysis” section following.

6. As a reminder, this is the second Data Analytics audit conducted by Crowe Horwath, having reported the findings of the 2016-17 audit to the sub-committee on 4 December 2017. A comparison to previous findings is also provided in separate analysis following.

Report Analysis

7. It is important to note that when a transaction is identified; it does not necessarily indicate that there is anything suspicious. There are often legitimate business reasons for a transaction being identified, such as different types of payments to a Council (rates credits versus payment for services) by way of pure example. These types of transactions may display in areas such as “duplicate address”, “GST/non-GST transactions”, or “duplicate IRD number” for example.

8. In addition, some transactions are listed purely for review purposes due to their higher risk nature, such as “review of top 50 vendors” as a further example. This in itself allows staff to easily assess that vendors are in line with expectations and would highlight any vendors that may appear erroneous.

9. As a result, only transactions that require further attention are outlined following. A full commentary of each finding, however, is provided in the attachment.

10. Given the small size of Hawke’s Bay, there are often times when an employee may share the same address as a vendor, usually a spouse. Accounts processing staff ensure that employee approvals are not allowed where any conflicts exist between an employee and a vendor.

11. There were a selection of payments to some vendors that had a combination of GST and non-GST applied to the transactions. There were two instances where the incorrect GST treatment was applied and staff have since corrected this in the latest GST return.

12. There was a small number of invoices paid twice. This is often due to a supplier providing several small value invoices which staff have approved a second time without realising. It is noted that this occurred within Q1 of the 2017-18 financial year, prior to staff receiving findings of the initial data analytics audit discussed further following. Staff have worked through with vendors to receive a refund/credit note where applicable. The financial implication of these is low in value.

13. In terms of the payroll master file and transactional data, there were fewer records identified during this year, with no major issues to note. There were some records that require tidying up however, such as 17 employees that did not yet have addresses recorded in their master file. Payroll is working on following up with those employees.

2016-17 Comparison

14. There are several notable improvements since the initial 2016-17 audit was presented to FARS.

15. The list of duplicates within the supplier master file has decreased substantially. For example, duplicate bank accounts have decreased from 146 to 89. Of these 89, some will be legitimate duplicates, such as when a vendor has more than one business function i.e. Hastings District Council. Duplicate named vendors have decreased from 48 to 8.

16. While there were a small number of minor duplicate payments, these all occurred within the first quarter of the 2017-18 financial year and there have not been any duplicate payments made to vendors since the 2016-17 audit was presented in December 2017.

17. There are also significantly fewer GST/non-GST transactions paid to the same vendor. This has decreased from 77 transactions, to 16. It is noted that 14 of these transactions had correct GST treatment, with only two minor adjustments being required, with a net value of less than $100.

18. Overall improvement in internal processes is noticeable since the prior data analytics assignment was performed, with additional checks reducing the number of transactions arising within the review. Staff recognize, however, that there is still further work to be done to further reduce errors.

19. A proposed 2019-20 internal audit schedule will be presented at the 22 May 2019 FARS meeting. Staff are seeking feedback as to whether this Sub-committee would like to see another data analytics assignment included in that proposal, as Auditors recommend completing a data analytics audit every year.

Decision Making Process

20. Council and its committees are required to make every decision in accordance with the requirements of the Local Government Act 2002 (the Act). Staff have assessed the requirements in relation to this item and have concluded:

20.1. The decision does not significantly alter the service provision or affect a strategic asset, and is not inconsistent with an existing policy or plan.

20.2. The use of the special consultative procedure is not prescribed by legislation.

20.3. The decision does not fall within the definition of Council’s policy on significance.

20.4. The decision of the sub-committee is in accordance with the Terms of Reference and decision making delegations adopted by Hawke’s Bay Regional Council 9 November 2016, specifically:

20.4.1. The Finance, Audit and Risk Sub-committee shall have responsibility and authority to receive the internal and external audit report(s) and review actions to be taken by management on significant issues and audit recommendations raised within the report(s)

20.4.2. Report to the Corporate and Strategic Committee, on whether appropriate action has been taken by management in response to the Data Analytics Internal Audit recommendations.

Recommendations

That the Finance, Audit and Risk Sub-committee:

1. receives and notes the “Data Analytics Internal Audit Report”

AND

2. confirms its confidence that appropriate action has been taken by management in response to the Data Analytics Internal Audit recommendations

3. recommends that the Corporate and Strategic Committee receives and notes the resolutions of the sub-committee, confirming that appropriate action has been taken by management in response to the Data Analytics Internal Audit recommendations.

4. advises staff of the specific action required in response to the Data Analytics Internal Audit recommendation stated following, as agreed, for reporting back to the 22 May 2019 Sub-committee meeting.

4.1 … …

4.2 … …

5. recommends that the Corporate and Strategic Committee receives and notes the resolutions of the sub-committee, including the specific actions required in response to the Data Analytics Internal Audit recommendations.

Authored by:

Melissa des Landes

Corporate Accountant

Approved by:

Jessica Ellerm

Group Manager
Corporate Services

Attachment/s

⇩1

Data Analytics Internal Audit Report

HAWKE’S BAY REGIONAL COUNCIL

Finance Audit & Risk Sub-committee

Tuesday 12 February 2019

Subject: Financial Delegations

Reason for Report

1. To provide the Finance, Audit and Risk Sub-committee with the opportunity to discuss the current financial delegations for the Chief Executive (CE) and Group Managers.

2. Any changes to financial delegations need to be approved by Council, so this item enables debate thought the sub-committee, the Corporate and Strategic Committee and then recommendations to Council.

Background

3. Council last changed the financial delegations for the CE and Group Managers in 2009, and the levels decided then are still current as below.

4. Since 2009 Council’s annual expenditure has increased from $32 million to $45 million but the delegation limits have remained the same. Staff believe that an update of the financial delegations is well overdue and should be updated to allow for efficient operation, especially to implement the ambitious workload of the 2018-28 long term plan.

5. Staff have investigated the delegation limits of other regional councils whose delegations were online, with the results shown below.

Council	Role	Delegation
Greater Wellington	CE	Authority to implement the Annual Plan
Greater Wellington	Group Managers	$200,000
Environment Canterbury	CE & Group Manager (Jointly)	Authority to implement the Annual Plan
	CE	$250,000
	Group Manager	$250,000
Bay of Plenty	CE	$2,000,000
Bay of Plenty	Group Manager	Delegated by CE

Proposal

6. Staff propose that the financial delegation levels for the CE and Group Managers be increased to levels that reflect the organisational growth over the last 10 years, align more closely to other regional councils and allow for the organisation to operate efficiently.

7. The following recommendations are based on simplifying the current system and allowing for practical governance.

Financial Delegations – Where provision is made in the LTP / Annual Plan
CE	Authority to implement the LTP/Annual Plan as approved by Council – with a tolerance of up to the higher of $100,000 or 5%
Group Managers	Up to $150,000
Staff	Delegations provided by their Group Manager up to a level of $100,000

8. The Tenders Committee is only used for competitive procurement processes over $400,000.

Financial Delegations – Where no provision is made in the LTP / Annual Plan
Operating Expenditure
Council	In excess of $100,000
CE	Up to $100,000
Capital Expenditure
Council	In excess of the limits below
CE	Up to $50,000 per asset if funded via asset replacement reserve Up to $20,000 if funded elsewhere
Group Managers	Up to $20,000 per asset if funded via asset replacement reserve Up to $5,000 if funded elsewhere

Decision Making Process

9. Council and its committees are required to make every decision in accordance with the requirements of the Local Government Act 2002 (the Act). Staff have assessed the requirements in relation to this item and have concluded:

9.1. The decision does not significantly alter the service provision or affect a strategic asset, and is not inconsistent with an existing policy or plan.

9.2. The use of the special consultative procedure is not prescribed by legislation.

9.3. The decision does not fall within the definition of Council’s policy on significance.

9.4. The decision of the sub-committee is in accordance with the Terms of Reference and decision making delegations adopted by Hawke’s Bay Regional Council 9 November 2016, specifically:

9.4.1. The purpose of the Audit and Risk Sub-committee is to report to the Corporate and Strategic Committee to fulfil its responsibilities for the provision of appropriate controls to safeguard the Council’s financial and non-financial assets, the integrity of internal and external reporting and accountability arrangements.

Recommendations

1. That the Finance, Audit and Risk Sub-committee receives and notes the “Financial Delegations” staff report.

2. That the Finance, Audit and Risk Sub-committee provides feedback on the “Financial Delegations” levels proposed.

3. The Finance, Audit and Risk Sub-committee recommends that the Corporate and Strategic Committee:

3.1. Agrees that the decisions to be made are not significant under the criteria contained in Council’s adopted Significance and Engagement Policy, and that the Committee can exercise its discretion and make decisions on this issue without conferring directly with the community or persons likely to be affected by or have an interest in the decision.

3.2. Reviews and considers the proposed Financial Delegations and provides feedback for recommendations to Council for decision.

Authored by:

Manton Collings

Chief Financial Officer

Approved by:

Jessica Ellerm

Group Manager
Corporate Services

Attachment/s

There are no attachments for this report.

HAWKE’S BAY REGIONAL COUNCIL

Finance Audit & Risk Sub-committee

Tuesday 12 February 2019

Subject: 2017-18 Audit NZ Management Report

Reason for Report

1. To provide the opportunity for the sub-committee to review and discuss the Report to the Council on the Audit of Hawke’s Bay Regional Council for the year ended 30 June 2018.

Background

2. Each year Audit NZ provides Council with a report on how the audit went for the previous year. This includes any significant matters and recommendations that came out of the audit process.

3. Review of these reports provides the sub-committee with the chance to ask further questions and gain comfort from the audit process. It also gives an indication of any changes that might be occurring in the next financial year.

4. Unfortunately our Audit NZ director, Stephen Lucy cannot be at the meeting but had previously talked with the sub-committee on a number of these matters and will continue to do so over the 2019/20 audit.

Decision Making Process

5. Council and its committees are required to make every decision in accordance with the requirements of the Local Government Act 2002 (the Act). Staff have assessed the requirements in relation to this item and have concluded:

5.1. The decision does not significantly alter the service provision or affect a strategic asset, and is not inconsistent with an existing policy or plan.

5.2. The use of the special consultative procedure is not prescribed by legislation.

5.3. The decision does not fall within the definition of Council’s policy on significance.

5.4. The decision of the sub-committee is in accordance with the Terms of Reference and decision making delegations adopted by Hawke’s Bay Regional Council 9 November 2016, specifically:

5.4.1. The purpose of the Audit and Risk Sub-committee is to report to the Corporate and Strategic Committee to fulfil its responsibilities for the independence and adequacy of internal and external audit functions.

5.4.2. The Finance, Audit and Risk Sub-committee shall have responsibility and authority to receive the internal and external audit report(s) and review actions to be taken by management on significant issues and audit recommendations raised within the report(s)

5.4.3. The Finance, Audit and Risk Sub-committee shall have responsibility and authority to conduct a sub-committee members-only session with Audit NZ to discuss any matters that the auditors wish to bring to the Sub-committee’s attention and/or any issues of independence.

Recommendation

1. That the Finance, Audit and Risk Sub-committee receives and notes the “2017-18 Audit NZ Management Report”.

2. The Finance, Audit and Risk Sub-committee recommends that the Corporate and Strategic Committee:

2.1. Agrees that the decisions to be made are not significant under the criteria contained in Council’s adopted Significance and Engagement Policy, and that the Committee can exercise its discretion and make decisions on this issue without conferring directly with the community or persons likely to be affected by or have an interest in the decision.

2.2. Confirms the Finance, Audit and Risk Sub-committee’s satisfaction that the “2017-18 Audit NZ Management Report” is sufficient and that there are no outstanding issues of concern.

Authored by:

Manton Collings

Chief Financial Officer

Approved by:

Jessica Ellerm

Group Manager
Corporate Services

Attachment/s

⇩1

Report to the Council on the audit of HBRC for the year ended 30 June 2018

HAWKE’S BAY REGIONAL COUNCIL

Finance Audit & Risk Sub-committee

Tuesday 12 February 2019

Subject: Treasury Report

Reason for Report

1. This item provides an update on the development of Council’s diversified investment portfolio and application to join the Local Government Funding Agency (LGFA).

Background

2. On 26 September 2018 Council resolved to appoint dual fund managers, being Mercer and First New Zealand Capital. Since that time staff have been working with both fund managers to get all of the paperwork and signing-on process completed before funds could be transferred.

3. First NZ Capital was the first to finalise and the first transfer of $5,000,000 was made on 5 December 2018.

4. Mercer had some suggested minor amendments to the Statement of Investment Policy Objectives (SIPO) and Treasury Policy to allow for more practical implementation of the portfolio. These amendments included making reference to having two investment fund managers, allowing some infrastructure assets in the growth asset mix and allowing some unhedged equities. The changes did not impact the overall asset mix or risk profile and had been reviewed by Council’s Treasury advisors who provided a view that the changes are consistent with the previous SIPO and minor in nature.

5. These changes agreed by the Corporate and Strategic Committee on 12 December 2018 and recommended to Council for adoption on 19 December 2018. Once these changes were adopted the final sign on documents for Mercer were completed mid-January. The first transfer of $5,000,000 to Mercer was made on 18 January 2019.

6. Due to the delays getting the amendments to the SIPO and Treasury Policy adopted, the distribution of funds to the investment managers drifted out with the anticipation that the full allocation will take place by the end of February 2019. The table below sets out the anticipated movement of funds.

Completed
Date	Mercer	First NZ Capital	Total
05/12/18	-	$5 million	$5 million
18/01/19	$5 million	$5 million	$10 million

Proposed
Date	Mercer	First NZ Capital	Total
11/02/19	$10 million	$10 million	$20 million
21/02/19	$5 million	-	$5 million

TOTAL	$20 million	$20 million	$40 million

7. Forecast returns could be unfavourably affected by the delays and staff will continue to update the Sub-committee and full Council on any effects on investment income and any mitigation that may be required. A full finance report will be provided to Council on 27 February 2019.

Treasury Reports

8. At the last sub-committee a draft treasury report was presented for review.

9. Due to the fact that there were minimal funds invested by the end of the 31 December 2018 quarter, staff have decided to delay the first full treasury report until meaningful data is available. This will come to the sub-committee at the next meeting on 22 May 2019.

10. Attached is a detailed quarterly report from First NZ Capital for the $5,000,000 invested since 5 December 2018. Once full reporting is implemented, future reports will be wrapped up into a summary version.

Joining LGFA

11. Authority to execute all of the documentation for joining the LGFA was resolved by Council on 19 December 2018 and staff are working alongside Council’s solicitors to complete all of the documentation. It is anticipated that this transaction will be completed by the end of February 2019.

Decision Making Process

12. Staff have assessed the requirements of the Local Government Act 2002 in relation to this item and have concluded that as this report is for information only, the decision making provisions do not apply.

Recommendation

That the Finance Audit and Risk Sub-committee receives and notes the “Treasury Report”.

Authored by:

Manton Collings

Chief Financial Officer

Approved by:

Jessica Ellerm

Group Manager
Corporate Services

Attachment/s

⇩1

FNZC report dated 31 December 2018

HAWKE’S BAY REGIONAL COUNCIL

Finance Audit & Risk Sub-committee

Tuesday 12 February 2019

Subject: Resource Management Information System (IRIS) Implementation Update

Reason for Report

1. To provide an update on progress with the implementation of the new Resource Management Information System software (IRIS).

Milestones and Progress Update

2. The Business Case for the system implementation was approved on 28 June 2017 and expenditure was confirmed in the LTP.

3. Phase 1 of the project is on schedule and will close on 31 March 2019.

3.1. Consents and Compliance modules went live on 26 November 2018, in line with the revised forecasts received by this committee on 6 June 2018

3.2. Incidents and Enforcements modules are on schedule, and will ‘go live’ on 11 February 2019

3.3. The Water Information Services module has been deferred to Phase 2. This was to avoid potential disruption to services over the high risk weather period (November – April)

3.4. A lessons learnt workshop will be held in mid-February and learnings from this phase will be used in the planning and implementation of Phase 2.

Next Steps

4. Phase 2 of the project will soon be initiated. This will deliver modules for Biosecurity, Integrated Catchment Management and Water Information Systems (moved from Phase 1). The LTP includes the following provisions for Phase 2.

4.1. 2018-19: $650,000

4.2. 2019-20: $350,000

4.3. $600,000 of the cost is the capitalisation of internal labour, the remaining $400,000 is for external implementation services.

5. The following steps will be undertaken to validate the budget figures.

5.1. Review the business requirements in light of the changes to the organisation structure, especially the Integrated Catchment Management functions

5.2. Finalise the scope of engagement with external suppliers

5.3. Confirm internal resourcing requirements

5.4. Identify any improvements arising from Phase 1 that need to be addressed

5.5. Any significant budget variation brought back to Council for approval.

6. Staff are confident that there is no need to revisit our sourcing approach, because:

6.1. The initial RMIS selection explicitly included the Phase 2 functions and capabilities (Biosecurity and Land Management). The IRIS product was rated favourably in these areas compared to others.

6.2. IRIS has been specifically developed for Regional Council functions by a consortium of other regional councils. HBRC has similar needs to the other regional councils, so should be able to leverage the base functionality available.

6.3. Introducing alternative products or solutions for the Phase 2 functions would increase the complexity and cost of IT support and integrations.

Decision Making Process

7. Staff have assessed the requirements of the Local Government Act 2002 in relation to this item and have concluded that, as this report is for information only, the decision making provisions do not apply.

Recommendation

That the Finance, Audit & Risk Sub-committee receives and notes the “Resource Management Information System Implementation Update” report.

Authored by:

Andrew Siddles

Acting ICT Manager

Approved by:

Jessica Ellerm

Group Manager
Corporate Services

Attachment/s

There are no attachments for this report.

HAWKE’S BAY REGIONAL COUNCIL

Finance Audit & Risk Sub-committee

Tuesday 12 February 2019

Subject: February 2019 Sub-committee Work Programme Update

Reason for Report

1. In order to ensure the sub-committee’s ability to effectively and efficiently fulfill its role and responsibilities, an overall update on its work programme is provided following.

2. It should be noted that some non-urgent items in the work programme have been deferred due to current staff resourcing and capacity restraints. We have now successfully recruited for and appointed a Financial Accountant who commenced employment on 19 November 2018. This additional senior resource will provide much needed capacity to make good progress on a substantive work programme for this team.

Task	Item	Scheduled / Status
Internal Audits	Health & Safety	Presented to 21 November 2018 FARS meeting.
	Data Analytics	Presented to 12 February FARS meeting.
	Business Continuance	Deferred to future 2019-20 programme.
	Water Management	Scope to be agreed at 12 February FARS meeting to be presented to 22 May FARS meeting.
Risk Assessment & Management	Reporting on risks (6-monthly) affecting Council plus noting changes / improvements / areas that require attention from last report (3-monthly).	Presented to 19 September 2018 and 12 February meeting. Risk management now a monthly item on Executive agenda and action register now implemented.
Insurance	Council’s proposed 2018-19 Insurance programme.	Reported to 6 June 2018 FARS meeting next update to 22 May FARS meeting subject to timing.
Annual Report	Discussion on Audit Management Letter. Discussion on the major issues (if any) in the audit report on the Annual Report.	Audit Director attended 21 November 2018 FARS meeting to discuss Annual Report process.
S17a Efficiency Reviews (Section 17a Local Government Act)	Update on progress and findings of Section 17a Efficiency Reviews.	No reviews scheduled in Q1&2 of Year 1 of LTP (Long Term Plan). Q3 has Open Spaces and Surface Water Science reviews planned. Q4 has Fleet review planned. Staff member regularly attends Hawke’s Bay Council wide S17a Review collaboration meetings where opportunities for cost sharing are discussed.
Investment Returns & Treasury Monitoring	Update on progress in obtaining required level of dividend from PONL (Port of Napier Limited). Update on Treasury function within Council.	HBRIC Ltd 2018-19 SoI (Statement of Intent) adopted at 27 June 2018 Council meeting. SIPO (Statement of Investment Policy & Objectives) adopted at 27 June 2018 Council meeting. Amendment made to SIPO and Treasury Policy 19 December 2018 Council meeting. Fund managers appointed at 26 September Council meeting, updates now captured within treasury report. Application to join LGFA (Local Government Funding Agency) underway.
Living Wage	Procurement and Contract Management	Staff are currently undertaking a review of supplier contracts and will perform an exercise to quantify the financial impact of enforcing a procurement policy which requires suppliers to pay the Living Wage. The findings of this will be presented at 22 May FARS meeting, alongside an update on the PTOM (Public Transport Operating Model) review.

Decision Making Process

3. Staff have assessed the requirements of the Local Government Act 2002 in relation to this item and have concluded that, as this report is for information only, the decision making provisions do not apply.

Recommendation

That the Finance, Audit and Risk Sub-committee receives and notes the “February 2019 Sub-committee Work Programme Update” staff report.

Authored by:

Melissa des Landes

Corporate Accountant

Approved by:

Jessica Ellerm

Group Manager
Corporate Services

Attachment/s

There are no attachments for this report.