Minutes of Finance Audit & Risk Sub-committee

1. Welcome/Apologies/Notices

The Chairman welcomed everyone to the meeting.

2. Conflict of Interest Declarations

There were no conflict of interest declarations.

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

Resolution

Minutes of the Finance Audit & Risk Sub-committee meeting held on Wednesday, 10 May 2017, a copy having been circulated prior to the meeting, were taken as read and confirmed as a true and correct record.

Bailey/Dick

CARRIED

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

Jessica Ellerm updated the committee on the follow-ups, most of which were to be covered during the meeting. Item 4, the list of Council vehicles was tabled for Councillors’ information. Discussion ensued regarding whether or not whole of life costs were taken into account when purchasing vehicles and from where vehicles were purchased. Mr Palmer told the meeting:

· There is a policy for procurement.

· Whole of life costs are taken into consideration.

· There is an electric vehicles first policy, however Operational requirements trump that as HBRC predominantly requires off-road, long range vehicles, capable of carrying large loads.

· Staff do take vehicles home at the end of the day, and is considered an efficient use of storage space.

· There are very few private use vehicles.

· FBT only on executives’ vehicles that are available for private use, reflected in salaries of those concerned.

· All vehicles have electronic tracking so that movements can be monitored.

· Cleaning of vehicles is staff driven.

· After warranty servicing done at Guppy Road.

· Many vehicles sold at end of warranty because of purchasing advantages.

There have been discussions around fleet sharing with other TLAs, but HBRC does not tend to have vehicles sitting around unused, most vehicles are well used.

The amount of HBRC rates subsidised by the HBRC Investment income was not included in the latest rates demand, however the question had been asked, in the survey included in the latest rates demand, “Are you aware your rates are subsidised by Council income from its investment in property and Port of Napier? YES or NO.”

To itemise the subsidy through investment income, is on a work programme for future rates invoices. There are some choices of how this is done, and will be brought back to the committee in the future.

FIN40/17

Resolution

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

Kirton/Barker

CARRIED

Councillor Dick exited the meeting at 10:31 am.

Introduction to the Internal Audit Service Provider

Melissa des Landes introduced representatives from HBRC’s new Internal Audit Service providers Crowe Horwath, Mr Phil Sinclair and Ms Jessica Cranswick, before explaining their proposed work programme.

Mr Sinclair, partner in Crowe Horwath from Dunedin, and explained the first three proposed areas of audit, but that the document is fluid and can be changed as new risks occur.

Jessica Cranswick, Senior Manager for Crowe Horwath based in the Hastings Office, and is the point of call for the HBRC work being carried out.

Mr Sinclair explained why the payroll system was audited via the Data Analytics module, and that they look for anomalies like excessive overtime hours which may mean a health and safety issue, for example.

The audit on the Procurement and purchasing will be looking to see that procurement aligns with the policies and best practice, and initial screening could provide reason for a deep dive into a specific item.

Comment was made that it would be prudent to add Stormwater to item 3 Water/Wastewater Management, however it was pointed out that the Emergency response is in relation to water supply.

Mr Palmer told the committee that HBRC is in the process of procuring a dedicated review of compliance and consenting processes, which is part of the functional reviews being done leading into the Long Term Plan.

Councillor Dick returned to the meeting at 11.05am

It was suggested that insurance be added to the three year Internal Audit programme.

FIN41/17

Resolutions

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/Stormwater

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.

Benham/Bailey

CARRIED

Internal Audit Report - Event Response Review

Ms Liz Lambert spoke to this item, explaining this report was initially commissioned to look at the Summer Dry event and that the Waihi Dam came to be included in the review. The Audit examined how council communicated, both the communications team and the council engagement with outside agencies managing political and reputational risks.

Both events were described and had been assessed from a communications point of view. A drought event happened very slowly with usually adequate time to prepare communications, but with the Waihi dam, the event happened suddenly and needed a quick reaction, just before Christmas. Comment was made regarding the Waihi Dam event, disappointment that the review was only about the communications.

Ms Lambert explained the monthly State of Environment report and how the information is used in the community, Council always receives good feedback on the report.

When there was an incident of high public interest, Council needed to have a communications strategy to respond as soon as possible. Staff were in the process of development of a strategy to deal with events, and setting direction for the Comms team to be proactive. Comms will have regular engagement with an external expert advising them on communications matters.

Communications have improved with the Communications Manager attending Executive meetings on a weekly basis.

FIN42/17

Resolution

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

Barker/Bailey

CARRIED

Item 8 was taken before Item 7

2016-17 Annual Report - Audit NZ Discussions

Stephen Lucy from Audit NZ spoke to his report, highlighting three key points. Most significant being the Audit NZ qualified opinions required on both HBRIC and HBRC due to the recognition of asset/liability. As they stand they “contra” each other out, however not correct due to accounting standards requirement. (Stephen Lucy surmised due to intention of providing a conservative approach to balance sheet recognition.)

· Impairment of the RWSS intangible asset.

· Valuation of HBRC’s investment in HBRIC

· Financial information from the Port of Napier

Mr Benham made a suggestion regarding the impairment of the RWSS intangible asset, to have more alignment, and to make it easier to understand. He also suggested that the Port of Napier’s end of year should align with HBRC, or PON should do special purpose accounts for 30 June of each year in align with HBRC’s end of financial year.

Mr Benham, also raised that presentation about the statement of financial report and keeping the $14million extraordinary expenditure separate from the business as usual annual accounts.

Much discussion around the $7.8million, as it was referred to in the Annual Report. As previously advised, the valuation requires qualification due to lack of concrete evidence. A qualification of the value of the intangible asset was also required last year.

LTP document is for general information, Mr Lucy commenting that HBRC’s Consultation document last time was good. Discussion of reducing 325 KPIs by 75%, this is in hand.

Annual Report is still a working draft, almost complete as far as the financials go.

Introductory commentary, currently incomplete, still needs to be updated and signed off by Council, by end of October.

Mr Benham commented on a very strong balance sheet, it was apparent that there was quite a large amount of cash on short term deposit, a commentary was needed around where that was going.

FIN43/17

Resolutions

That the Finance Audit and Risk Sub-committee:

1. 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.

2. Recommends that the Port of Napier amend their balance date to 30 June in line with HBRC.

Kirton/Benham

CARRIED

Resource Management Information System Implementation Update

Jessica Ellerm explained that the project is tracking to plan, within budget, with the one item listed as overdue nearly complete.

FIN44/17

Resolution

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

Bailey/Barker

CARRIED

September 2017 Update on the Sub-Committee Work Programmes

Cr Barker’s Minor Item: Financial Expenditure Controls. Concern expressed about “unappropriated expenses”. Councillors are responsible for expenditure and need clarity about the processes, not finding out about things after the fact.

Cr Kirton spoke to Work Programmes listed on the agenda, and would like to see investment returns monitoring be included. As well as keeping an eye on the Port Dividend and any conversations that were progressing in relation to this.

FIN45/17

Resolution

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

Bailey/Barker

CARRIED

10.

Risk Assessment and Management

FIN46/17

Resolutions

1. 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:

2. That Mr Stephen Lucy from the Audit New Zealand be allowed to stay and attend the public excluded part of the meeting.

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.

Bailey/Benham

CARRIED

The meeting went into public excluded session at 12.40pm and out of public excluded session at 1.02pm

Closure:

There being no further business the Chairman declared the meeting closed at 1.02pm on Tuesday 19 September 2017.

Signed as a true and correct record.

DATE: ................................................ CHAIRMAN: ...............................................