Meeting of the Finance Audit & Risk Sub-committee

 

 

Date:                 Tuesday 19 September 2017

Time:                10.00am

Venue:

Council Chamber

Hawke's Bay Regional Council

159 Dalton Street

NAPIER

 

Agenda

 

Item       Subject                                                                                                                  Page

 

1.         Welcome/Notices/Apologies 

2.         Conflict of Interest Declarations  

3.         Confirmation of Minutes of the Finance Audit & Risk Sub-committee held on 10 May 2017

4.         Follow-ups from Previous Finance Audit & Risk Sub-committee Meetings                 3

Decision Items

5.         10.30am Introduction to the Internal Audit Service Provider                                        7

Information or Performance Monitoring

6.         Internal Audit Report - Event Response Review                                                        33

7.         Resource Management Information System Implementation Update                       59

8.         11.00am 2016-17 Annual Report - Audit NZ Discussions                                          65

9.         September 2017 Update on the Sub-committee Work Programmes                         89

Decision Items (Public Excluded)

10.       Risk Assessment and Management                                                                           91

 


HAWKE’S BAY REGIONAL COUNCIL

Finance Audit & Risk Sub-committee

Tuesday 19 September 2017

SUBJECT: Follow-ups from Previous Finance Audit & Risk Sub-committee Meetings

 

Reason for Report

1.      In order to track items raised at previous meetings that require follow-up, a list of outstanding items is prepared for each meeting. All follow-up items indicate who is responsible for each, when it is expected to be completed and a brief status comment. Once the items have been completed and reported to the Committee they will be removed from the list.

Decision Making Process

2.      Council is required to make every decision in accordance with the Local Government Act 2002 (the Act). Staff have assessed the in relation to this item and have concluded that as this report is for information only and no decision is required, the decision making procedures set out in the Act do not apply.

 

Recommendation

That the Finance, Audit and Risk Sub-committee receives and notes the report “Follow-ups from Previous Finance Audit and Risk Sub-committee Meetings”.

 

 

Authored by:

Melissa des Landes

Management Accountant

 

Approved by:

Jessica Ellerm

Group Manager
Corporate Services

 

 

Attachment/s

1

Follow-ups from Previous Finance, Audit & Risk Sub-committee Meetings

 

 

  


Follow-ups from Previous Finance, Audit & Risk Sub-committee Meetings

Attachment 1

 

 


HAWKE’S BAY REGIONAL COUNCIL

Finance Audit & Risk Sub-committee

Tuesday 19 September 2017

Subject: Introduction to the Internal Audit Service Provider

 

Reason for Report

1.      To introduce the Sub-committee to the successful Internal Audit service provider and propose an internal audit programme for the current financial year.

Background

2.      At its meeting on 10 May, the Sub-committee was provided an update on the combined HBLASS Councils request for proposal (RFP) for internal audit services process, with shortlisted suppliers undergoing final evaluation at that time.

3.      The internal audit RFP process concluded in June with the successful tenderer being Crowe Horwath. Representatives in attendance are Phil Sinclair, Engagement Partner, and Jessica Cranswick, Senior Manager & Account Manager.

4.      Crowe Horwath was awarded the highest scoring tender in unanimous agreement with all HBLASS Council representatives. This process assessed both price and non-price information. Non price-information included capability, capacity, approach and methodology, and value add.

5.      The contract for services has been executed by both parties, including signing by the Hawke’s Bay Regional Council, Chief Executive as noted as having delegation to enter such an agreement at the Sub-committee meeting 10 May.

6.      The contract has been signed as agreed for a three year period, with a possibility of a two-year extension. The contract is valued at $30,000 + GST per annum, which is in line with Council budget provisions.

Advantages of HB Lass Approach

7.      As requested at the previous subcommittee meeting, advantages of the combined HBLASS approach to Internal Audit Services are explained below.

8.      Councils previously had different providers of internal audit and the development of these audits were at varying levels of sophistication and delivery. Endorsement of the HBLASS approach was received at the 20 September 2016 sub-committee meeting. Merits determined at this meeting of a combined approach included:

8.1.      Councils would have the same provider

8.2.      There would be a sharing of knowledge between councils on internal audit requirements and delivery

8.3.      There would be economies of scale achieved in both approach and learnings, which can be used in each subsequent audit in the participating councils

8.4.      Improved access to skills, specifically in the specialist area audits, i.e. non-traditional financial audits.

9.      A consistent service delivery team would be able to identify learning opportunities for sharing across the Councils and provide a mechanism for doing this. A combined approach will enable informed decisions to be made with respect to whether review activity should be duplicated or rather findings/recommendations be shared across the Councils (subject to confidentiality/privacy issues being cleared). Where an element of duplication existed in the performance of assignments across the Councils there may be opportunities to realise performance efficiencies.


Proposed Internal Audit Programme

10.    In consultation with Crowe Horwath and internal staff, based on current risk register, emerging issues, and areas of focus, the areas of internal audit proposed for the current financial year are:

10.1.    Data Analytics

10.2.    Procurement and Purchasing

10.3.    Water Supply/Wastewater Management.

11.    It is proposed that the Data Analytics internal audit be completed initially, with intention to provide the audit report at the 4 December Finance, Audit and Risk Sub-committee meeting. Scoping document for this is appended as Attachment One. The second and third audit reports would be presented at the first and second Sub-committee meetings respectively in 2018 (dates to be confirmed).

12.    Further areas discussed that may require the attention of an internal audit in future years are also provided in the Proposed Internal Audit Plan appended as Attachment Two. A decision on these areas is not required immediately.

Decision Making Process

13.    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.

Recommendations

That the Finance, Audit and Risk Sub-committee:

1.      Receives and notes the Introduction to the Internal Audit Service Provider staff report

2.      Agrees to the schedule of Internal Audits to be carried out during the 2017-18 year, being:

2.1.   Data Analytics

2.2.   Procurement and Purchasing

2.3.   Water Supply/Wastewater Management

3.      Notes that the cost of the internal audits carried out in 2017-18 will be funded from the financial provisions set aside for such audits in the Annual Plan.

 

Authored by:

Melissa des Landes

Management Accountant

 

Approved by:

Jessica Ellerm

Group Manager
Corporate Services

 

 

Attachment/s

1

Crowe Horwath Data Analysis Scoping Document

 

 

2

Proposed Internal Audit Plan 2017-18

 

 

  


Crowe Horwath Data Analysis Scoping Document

Attachment 1

 










Proposed Internal Audit Plan 2017-18

Attachment 2

 




Proposed Internal Audit Plan 2017-18

Attachment 2

 









Proposed Internal Audit Plan 2017-18

Attachment 2

 

   


HAWKE’S BAY REGIONAL COUNCIL

Finance Audit & Risk Sub-committee

Tuesday 19 September 2017

Subject: Internal Audit Report - Event Response Review

 

Reason for Report

1.      PricewaterhouseCoopers (PWC) has completed the internal audit for Event Response, and their report is attached for review by the Sub-committee.

Background

2.      The Finance, Audit & Risk Sub-committee agreed at its meeting on 20 September 2016, as part of the internal audit work programme to engage PWC to conduct an internal audit on Event Response with a focus on communications.

3.      Prior to commencement, PWC agreed, with the Group Manager – External Relations, to proceed with the 2016-17 ‘Summer Dry’ event. It was subsequently decided to increase the scope of the agreement to include the ‘Waihi Dam’ event in addition.

Decision Making Process

4.      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.

 

Recommendations

That the Finance, Audit and Risk Sub-committee receives and notes the “Internal Audit Report - Event Response Review” report.

 

Authored by:

Melissa des Landes

Management Accountant

 

Approved by:

Jessica Ellerm

Group Manager
Corporate Services

Liz Lambert

Group Manager
External Relations

 

Attachment/s

1

Event Response Internal Audit Report

 

 

  


Event Response Internal Audit Report

Attachment 1

 
























HAWKE’S BAY REGIONAL COUNCIL

Finance Audit & Risk Sub-committee

Tuesday 19 September 2017

Subject: Resource Management Information System Implementation Update

 

Reason for Report

1.      At its meeting on 28 June 2017 the Council confirmed the expenditure of $1,100,000 as included in the 2017-18 Annual Plan for the implementation of the resource management information system software and related mobile technology, and confirmed the selection of the Integrated Regional Information System (IRIS) as the resource management information system to be implemented.

2.      Staff have undertaken to provide an update on progress of the implementation of the new software on a regular basis to the Finance, Audit and Risk sub-committee. This report is the first of these updates.

3.      Attachment 1 to this paper presents the status report for this project as presented to the IRIS Governance Group meeting on 13 September 2017.

4.      Attachment 2 is the risk register for the project which is reviewed at each governance group meeting.

Decision Making Process

5.      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:

Kahl Olsen

Information and Communications Technology Manager

 

Approved by:

Liz Lambert

Group Manager
External Relations

 

 

Attachment/s

1

IRIS Project Status Report

 

 

2

IRIS Project Risk Register

 

 

  


IRIS Project Status Report

Attachment 1

 



IRIS Project Risk Register

Attachment 2

 


HAWKE’S BAY REGIONAL COUNCIL

Finance Audit & Risk Sub-committee

Tuesday 19 September 2017

Subject: 2016-17 Annual Report - Audit NZ Discussions

 

Reason for Report

1.      To provide the sub-committee with an opportunity to discuss matters in relation to the audit of Hawke’s Bay Regional Council’s (HBRC) and Group financial statements for the year ending 30 June 2017 with Stephen Lucy, Director Audit NZ.

2.      Stephen Lucy will also provide information and matters relating to the Long Term Plan for the sub-committee’s consideration.

Comment

3.      At the time of writing this paper the audit work for HBRC has been completed and Audit NZ is awaiting the final HBRIC Ltd financial statements so that the consolidated group financial statements can be confirmed.

4.      To enable discussions, attached are:

4.1.      the current Draft 2016-17 Annual Report (included under separate cover for Sub-committee members only in accordance with LGOIMA section 2(b)(ii) the withholding of the information is necessary to protect information where the making available of the information would be likely unreasonably to prejudice the commercial position of the person who supplied or who is the subject (HBRIC Ltd) of the information)

4.2.      Stephen Lucy’s comments on the HBRC financial statements for the year ending 30 June 2017

4.3.      areas relating to the HBRC 2018-28 LTP that that Stephen Lucy proposes to discuss.

5.      The final audited Annual Report will be presented to Council for adoption at its meeting on 25 October 2017.

6.      If required, there will be an opportunity for Sub‑committee member only discussions with Stephen at the conclusion of these discussions.

Decision Making Process

7.      As this report is for information only and no decision is to be made, the decision making provisions of the Local Government Act 2002 do not apply.

 

Recommendations

That the Finance Audit and Risk Sub-committee receives and notes the issues raised by Stephen Lucy, Director Audit NZ, for discussion on HBRC’s Annual Report for Year Ending 30 June 2017 and the 2018-28 Long Term Plan.

 

Authored by:

Manton Collings

Corporate Accountant

Jessica Ellerm

Group Manager
Corporate Services

Approved by:

James Palmer

Chief Executive

 

 

Attachment/s

1

Audit NZ Comments on 2016-17 Annual Report

 

 

2

Audit NZ Comments on Long Term Plan Development

 

 

  


Audit NZ Comments on 2016-17 Annual Report

Attachment 1

 




Audit NZ Comments on Long Term Plan Development

Attachment 2

 



















HAWKE’S BAY REGIONAL COUNCIL

Finance Audit & Risk Sub-committee

Tuesday 19 September 2017

Subject: September 2017 Update on the Sub-committee Work Programmes

 

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.

 

Task

Item

Scheduled / Status

Internal Audits

Fraud Detection and Prevention Review Report

Completed 2016

Taxation Review

Completed & presented to May 2017 FA&R meeting

Event Response Review

Completed – to be presented to September 2017 FA&R meeting

Agree and schedule Internal Audit Programme for the remainder of 2017-18. Proposed are:

1.    Data Analytics

2.    Procurement and Purchasing

3.    Water Supply/Wastewater Management

19 September FA&R meeting

Risk Assessment & Management

Reporting on risks (6-monthly) affecting Council

January & September FA&R meetings

 

Review previous 6-month Risk Assessment to note changes / improvements / areas that require attention

 

Sub-committee to carry out detailed review of individual Groups’ Risk Management (as part of the programmed reviews of activities)

Insurance

Council’s proposed 2017-18 Insurance programme

Insurance Broker presented at May 2017 FA&R meeting

Annual Report

Discussion on the major issues (if any) in the audit report on the Annual Report.

Auditor to attend September 2017 FA&R meeting

Discussion on Audit Management Letter

Auditor scheduled to attend December 2017 FA&R meeting

Reviews

Review of Council expenditure on delivery of functions with a view to ensuring and/or enhancing efficiency

Completed and findings reported to 31 May 2017 Council meeting, which resolved: Refers the recommendations made by the Operational Efficiency Review report to the incoming Chief Executive for consideration and reporting back to Council, where appropriate, on initiatives for implementation. This work is ongoing and forms part of the LTP process.

Review of the Council’s capital structure, taking into account the values of dividends in supporting Council operations

The panel has met three times, and on 15 September received a presentation from Flagstaff on potential Capital Ownership options for PONL. A report writer has been appointed to collate background information on each of the three organisations involved, and is in contact with staff and panel members to ensure the views of the panel will be synthesized. Draft report of the review findings to be presented in to the 11 October Council LTP workshop.

Comprehensive review of the HBRC Risk Assessment and Management process to ensure major strategic risks to the public and environment are appropriately managed

Review completed and updated report presented to 19 September 2017 FA&R meeting

LTP Process

Update on Process

External Funding

Rates Review

Feedback from Audit NZ from 2015 LTP audits included on 19Sept agenda

Assessment of External Funding options and Rates Review is currently underway.

Full LTP development update on 20 Sept Corporate & Strategic Committee agenda

 

Decision Making Process

2.      As this report is for information only and no decision is to be made, the decision making provisions of the Local Government Act 2002 do not apply.

 

Recommendation

That the Finance, Audit and Risk Sub-committee receives and notes the “September 2017 Update on Sub-committee Work Programmes” staff report.

 

Authored by:

Manton Collings

Corporate Accountant

Melissa des Landes

Management Accountant

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 19 September 2017

Subject: Risk Assessment and Management

That Council excludes the public from this section of the meeting, being Agenda Item 10 Risk Assessment and Management with the general subject of the item to be considered while the public is excluded; the reasons for passing the resolution and the specific grounds under Section 48 (1) of the Local Government Official Information and Meetings Act 1987 for the passing of this resolution being:

 

GENERAL SUBJECT OF THE ITEM TO BE CONSIDERED

REASON FOR PASSING THIS RESOLUTION

GROUNDS UNDER SECTION 48(1) FOR THE PASSING OF THE RESOLUTION

Risk Assessment and Management

7(2)(b)(ii) That the public conduct of this agenda item would be likely to result in the disclosure of information where the withholding of that information is necessary to protect information which otherwise would be likely unreasonably to prejudice the commercial position of the person who supplied or who is the subject of the information.

7(2)(i) That the public conduct of this agenda item would be likely to result in the disclosure of information where the withholding of the information is necessary to enable the local authority holding the information to carry out, without prejudice or disadvantage, negotiations (including commercial and industrial negotiations).

The Council is specified, in the First Schedule to this Act, as a body to which the Act applies.

 

 

 

Authored by:

Melissa des Landes

Management Accountant

 

Approved by:

Jessica Ellerm

Group Manager
Corporate Services