Meeting of the Finance Audit & Risk Sub-committee
Date: Wednesday 17 February 2021
Time: 9.00am
Venue: |
Council Chamber Hawke's Bay Regional Council 159 Dalton Street NAPIER |
Agenda
Item Title Page
1. Karakia /Welcome/ Apologies
2. Conflict of Interest Declarations
3. Confirmation of Minutes of the Extraordinary Finance Audit & Risk Sub-committee meeting held on 15 December 2020
4. Six Monthly Risk Report and Risk Maturity Update 3
5. Internal Audit Work Programme Update 37
6. Assurance Framework Relevant to S17a Reviews 53
7. Quarterly Treasury Report for 1 October - 31 December 2020 55
8. HBRC 2019-20 Annual Report Adoption (late item to come)
Finance Audit & Risk Sub-committee
Wednesday 17 February 2021
Subject: Six Monthly Risk Report and Risk Maturity Update
Reason for Report
1. This item and accompanying presentation present the Regional Council’s (Council) six-monthly enterprise risk report as well as an update on progress towards risk maturity.
Background
2. At the Corporate and Strategic Committee meeting held on 10 June 2020 the Committee endorsed the risk maturity roadmap for Council. At that meeting it was agreed that the FARS would oversee implementation of the maturing risk management system. With the focus on ensuring the evolving risk system is progressively delivering value to the organisation, and that the roadmap deliverables remain on track. Oversight of Council’s risk maturity by FARS can be evidenced through improvements to governance risk reporting. Therefore, the risk maturity update and Council’s six-monthly risk report have been combined into one agenda item.
Discussion
3. As part of the risk management maturity roadmap both a risk management policy and framework were developed and approved by Council. By applying the risk methodologies outlined in the risk framework a ‘new look’ risk report with refreshed enterprise risks was presented to, and endorsed by, the FARS at the August 2020 meeting. The August 2020 enterprise risk report and the accompanying enterprise risks have now formed the baseline for presenting changes to the Council’s risk profile. All updates between risk reports are denoted as tracked changes or red text.
4. At the August 2020 meeting it was noted that due to timing of the meeting each enterprise risk had not been subject to bowtie analysis as required in the framework. Therefore, some changes noted from the August 2020 report to this current risk report reflect Council’s continual risk maturity and improved risk synthesisation resulting from undertaking the bowtie analysis, rather than reflecting a change to Council’s risk profile.
5. At the November 2020 FARS meeting and as a milestone for risk maturity it was agreed over the proceeding risk reporting period to February 2021 at least six enterprise risk would have bowtie analysis applied. And, the bowtie analysis output to be reflected in the enterprise risk report. Bowtie analysis was subsequently undertaken for the following risks with the enterprise risk report updated accordingly:
5.1. Information Management and Security Not Fit for Purpose (incl. cyber)
5.2. Business Interruption
5.3. People Capability
5.4. Fraud
5.5. Heath, Safety and Wellbeing
5.6. Infrastructure and Asset Management Not Fit for Purpose.
6. As per the agreed risk maturity roadmap the remaining enterprise risks will have bowtie analysis undertaken over the next risk reporting period to April 2021. Completion of bowties by April 2021 is in preparation for meeting the target date of setting the Council’s risk appetite within the first half of 2021.
Summary of Risk Reporting Changes
7. The following material changes are noted in the current enterprise risk report compared to the August 2020 report.
8. Risk 5 - Information Not Fit for Purpose (incl. Cyber) formally titled Information Security (Cyber)
8.1. Through the bowtie analysis it is clearer that this risk has two distinct components, being:
8.1.1. information management, and
8.1.2. information security.
8.2. Analysis of information management has determined that without implementing additional controls to improve information storage over the next 12 months it is ‘likely’ that increased storage costs will exceed $500k. Therefore, the residual likelihood risk assessment has been elevated from ‘possible’ to ‘likely’. There was no resulting change to the risk rating. It is noted that without changing information management processes and staff behaviours storage cost increases will likely be exponential and not linear over proceeding years. A deeper dive into this risk and proposed corrective action initiatives will be presented to the FARS at the meeting.
9. Risk 8 – Business Interruption
9.1. There has been no change to the risk or overall control rating for Business Interruption. However, the risk has been updated to reflect structured activities that Council has initiated to ensure the pandemic safety response plan remains relevant for the more virulent mutations of Covid19. Especially as the more virulent strains are now being detected at New Zealand’s border.
10. Risk 9 - People Capability
10.1. There has been no change to the risk or overall control rating for People Capability. However, bowtie analysis undertaken has helped reinforce that the People and Culture (P&C) strategy is successfully targeting improvements to ‘People Capability’ by focussing on core P&C activities and critical P&C controls. Therefore, the residual risk commentary and control corrective action plan has been updated to better reflect the current state.
11. Risk 11 - Health, Safety and Wellbeing
11.1. Over the last six months several improvements have been implemented to Council’s Health and Safety System. While continual improvement to Council’s Health and Safety System will endure, the overall control assessment has improved from ‘requires improvement’ to ‘effective’. Resulting in the residual likelihood assessment changing from ‘possible’ to ‘unlikely’. The change in the residual likelihood reflects the focus for control corrective actions being on reducing the likelihood for a ‘major’ health and safety incident. There was no resulting change to the residual risk rating.
12. Risk 13 - Third Parties and Contractors
12.1. Critical contracts such as Council’s Work’s Group and other key contracts that expose Council’s to direct material financial risks are well managed. These contracts follow structured procurement practices from initiation to ongoing performance monitoring. However, services or supply arrangements that do not attract high direct financial risks are not explicitly included in the formalised procurement management system. Some contracts or MOU’s arrangements while not attracting significant direct financial risk could present elevated qualitative risks to Council e.g. reputation. Therefore, a feasibility review on incorporating such arrangements into the procurement management system is being considered. For this reason, the overall control assessment has changed from ‘effective’ to ‘requires improvement’ and the residual likelihood assessment has been elevated from ‘unlikely’ to ‘possible’. There was no resulting change to the residual risk rating.
13. The remainder of changes noted within the enterprise risk report relate to minor updates due to new information contained within the supporting risk information. Or, because of risk clarification due to bowtie analysis having been undertaken.
Strategic Fit
14. The six-monthly risk report facilitates discussions to ensure that any emerging matters within Council’s internal or external environment are being managed. And, therefore unlikely to impinge of Council’s ability to deliver on its strategy. In addition, the maturity of Council’s risk management system contributes towards achieving excellence in execution of strategy. A mature risk system provides consistent risk intelligent decision making enabling the efficient prioritisation of finite organisational resources to deliver on strategy.
Financial and Resource Implications
15. Maturity of the risk management system is phased to minimise budgetary implications. Some facilitated workshops will be required to establish the risk appetite with Council.
Next Steps
16. Implementation of the risk management maturity roadmap continues. Scheduled actions for the next quarter include:
16.1. Finalising the bowtie analysis for all remaining enterprise risks
16.2. Analysing the feasibility of continuing with the scheduled risk appetite workshop between the ELT and Council due to ongoing border closures and the inability to get the preferred workshop facilitator in person
16.3. Identification of Risk Champions within each Group
16.4. Training of those Risk Champions on Regional Council’s risk management policy, framework and practices, and finally
16.5. Approval of the draft Regional Council internal assurance framework
17. The FARS should note that while these activities are targeted for the next quarter, there is some dependency on the speed at which a replacement Risk and Assurance Lead can be appointed.
Decision Making Process
18. 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:
18.1. 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 on 25 March 2020, specifically the Finance, Audit and Risk Sub-committee shall have responsibility and authority to:
18.1.1. 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
18.1.2. Undertake periodic monitoring of corporate risk assessment, and the internal controls instituted in response to such risks
18.1.3. report on the robustness of risk management systems, processes and practices to the Corporate and Strategic Committee to fulfil its responsibilities.
That the Finance, Audit and Risk Sub-committee: 1. Receives and considers the “Six Monthly Risk Report and Risk Maturity Update” staff report, specifically noting the changes in the February 2021 Enterprise Risk Report. 2. Confirms that the management actions undertaken and planned, as detailed in the February 2021 Enterprise Risk Report, adequately respond to the Risk Management Maturity Roadmap as endorsed by Hawke’s Bay Regional Council on 24 June 2020. 3. Reports to the Corporate and Strategic Committee, the Sub-committee’s satisfaction that the Six Monthly Risk Report and Risk Maturity Update provides adequate evidence of the robustness of Council’s risk management policy and framework and progress to implement the maturing risk management system. |
Authored by:
Helen Marsden Risk and Assurance Lead |
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Approved by:
Jessica Ellerm Group Manager Corporate Services |
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⇩1 |
February 2021 Enterprise Risk Report |
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Finance Audit & Risk Sub-committee
Wednesday 17 February 2021
Subject: Internal Audit Work Programme Update
Reason for Report
1. This item updates the Finance Audit and Risk Sub-Committee (FARS) on the progress of corrective actions that respond to internal assurance review findings that have previously been reported to the FARS, along with a status update on the current annual enterprise internal assurance plan. The plan was approved by FARS at the meeting in August 2020.
Officers’ Recommendation
2. Council officers recommend that the FARS members consider and note the internal assurance dashboard and corrective action status update, and the internal assurance plan status update.
Discussion
3. At the November 2020 FARS meeting the Sub-committee endorsed two ‘new look’ internal assurance dashboards, being the:
3.1. corrective actions status update, and
3.2. annual enterprise internal assurance plan status update.
4. The purpose of the corrective action status update is to provide oversight to the FARS of open internal assurance findings from previously reported internal assurance reviews. The dashboard tracks progress of the corrective actions against agreed milestones, until the action is closed.
5. The purpose of the annual enterprise internal assurance plan status update is to provide the FARS with oversight of progress of individual internal assurance reviews that were approved by the Committee as part of the annual enterprise internal assurance plan.
6. Both internal assurance dashboards have been updated as at February 2021, and are attached.
Financial and Resource Implications
7. There are no financial implications or additional resource requirements resulting from this internal audit programme update.
Decision Making Process
8. 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:
8.1. The agenda item is in accordance with the Sub-committee’s Terms of Reference, specifically:
8.1.1. The purpose of the Finance, Audit and Risk Sub-committee is to report to the Corporate and Strategic Committee to fulfil its responsibilities for (1.3) the independence and adequacy of internal and external audit functions
8.1.2. The Finance, Audit and Risk Sub-committee shall have responsibility and authority to (2.6) receive the internal and external audit report(s) and review actions to be taken by management on significant issues and recommendations raised within the report(s)
8.1.3. The Finance, Audit and Risk Sub-committee is delegated by Council to (3.6) review the objectives and scope of the internal audit function, and ensure those objectives are aligned with Council’s overall risk management framework; and (3.7) assess the performance of the internal audit function, and ensure that the function is adequately resourced and has appropriate authority and standing within Council.
8.2. As this report is for information only, the decision making provisions do not apply.
That the Finance, Audit and Risk Sub-committee: 1. receives and notes the ‘Internal Audit Work Programme Update’ staff report and accompanying dashboards. 2. Confirms that management actions undertaken or planned for the future adequately respond to the findings and recommendations of previously reported internal assurance reviews. 3. Reports to the Corporate and Strategic Committee, the Sub-committee’s satisfaction that the Internal Audit Work Programme Update provides adequate evidence of the adequacy of Council’s internal assurance functions and management actions undertaken or planned to respond to internal assurance review findings and recommendations.
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Authored by:
Helen Marsden Risk and Assurance Lead |
|
Approved by:
Jessica Ellerm Group Manager Corporate Services |
|
⇩1 |
Dashboard 1 - Internal Assurance Dashboard - Corrective Action Status Update |
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⇩2 |
Dashboard 2 - Internal Assurance Annual Plan FY20-21 Status Update |
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Dashboard 1 - Internal Assurance Dashboard - Corrective Action Status Update |
Attachment 1 |
HBRC Covid-19 Response Debrief Report – November 2020 |
||||||
Finding / Theme |
Priority |
Action and Owner |
Due Date |
Milestone Achieved |
Milestone |
Tracking Status |
Business Continuity, Pandemic Plans and Technology
To enable a holistic based response and maintenance of critical pandemic supplies (e.g. PPE) for future pandemic events HBRC’s pandemic safety plan should be linked to business continuity plan (BCP)
Consider feasibility of restructuring HBRC’s BCP’s to take a denial type approach rather than an external hazard approach i.e. denial of: people, systems, suppliers, facilities.
Strengthen the Disaster Recovery (DR) and BCP linkage. |
Medium |
Review current suite of BCP documents to identify improvements. Develop an implementation plan. Risk & Assurance Lead & Senior Health and Safety Advisor
Refer - Cyber security audit - resilience finding and action |
March 2021 |
Reviewed current Covid response plan to reflect MOH updates.
IT DR test scheduled for March 27th 2021. |
Develop project plan to prioritise updating HBRC’s BCP documents.
Add reviewed Covid19 response plan to the BCP suite of docs in Herbi.
Analyse the feasibility of restructuring the BCP approach. If required, develop a roadmap.
IT DR test to be executed. Review lessons learnt from DR test and allocate resourcing to quick wins / high risks. |
On track
On track |
Communication (Internal & External)
Internal communication in lockdown were positive. Therefore, the approach should be documented to ensure it is repeatable for future requirement to work remotely.
There are a number of key stakeholder groups that may need to be specifically commuicated with tailored messages depending on the event.
Telephony processes need to be consistent regardless of whether the call is being responded to by Council or Contact Centre staff. |
Low |
Update BCP suite of documents. Marketing and Communications
Identify HBRC’s key stakeholdder groups through developing a key stakeholder wheel and document in HBRC’s BCP. Marketing and Communications
Taking into account new capability of the recently upgraded telephony system. Review and improve processes for calls currently managed by the Palmerston North Contact Centre in a BCP situation. Corporate Support Manager |
March 2021
|
|
Capture internal comms practices that were initiated as part of the Covid19 lockdown response and link to the BCP Suite iof docs on Herbi
Finalise key stakeholder wheel and link to HBRC’s BCP suite of documents in Herbi.
Review current telephony BCP practices to identify improvements. Develop a project plan for implementation |
On track
On track
On track |
The corrective actions to control the risk of cross contamination of work bubbles at Guppy Road should now be documented. |
Low |
Ensure the pandemic safety plan is up to date with the most recent pandemic response process. Senior Health and Safety Advisor |
Febuary 2021 |
|
Review underway for Guppy Road staff bubbles to ensure continuity in case of a second Covid wave. |
On track |
Improve the rostering system for prolonged and slow-moving events (e.g. pandemics) with the aim of ensuring equitable distribution of tasks. |
Medium |
Improved rostering system to better manage staff resourcing requirements. Team Leader Hazard Reduction |
December 2020 |
Worked with HBRC ICT to present draft proposal October 2020 to HBCDEM using rostering app. |
Obtain approval from HBCDEM of proposed rostering app. |
Behind – due to Napier Flood and HBCDEM staff departures. |
Internal Audit – Risk Management Maturity – June 2020 |
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Finding / Theme |
Priority |
Action and Owner |
Due Date |
Milestone Achieved |
Milestone |
Tracking Status |
Risk, Governance, Policy and Accountabilities - to improve risk and assurance challenge. With clearer risk escalation. |
Not Stated |
Develop risk management policy and framework that includes roles and responsibilities. Risk & Assurance Lead |
September 2020 |
Council approved single Regional Council risk management policy and framework. |
|
Closed as at Nov 2020 FARS |
Leadership and Direction - Improve linkage of risk informed decision making to strategy. Improving clarity of boundaries for decision making. |
Not Stated |
Develop a comprehensive risk appetite statement that defines tolerance levels for individual enterprise risks. ELT |
March 2021 |
Bowties for six enterprise risks completed and update the FARS risk report one pagers.. |
Finalise bowties for remaining enterprise risks and run risk appetite workshop. Subject to accessibility of facilitator. |
At risk – borders may limit access to trainer / facilitator. Viability of Zoom v delay will be analysed |
Leadership and Direction - Risk system continuous improvement. |
Not Stated |
Incorporate into the risk policy and framework a risk vision. Tailor the Council’s risk policy and framework to align to the strategy. Develop a risk maturity roadmap to execute the risk vision. Risk & Assurance Lead |
September 2020 |
Council approved risk policy includes a risk vision that aligns to the C&S approved risk maturity roadmap. And, the risk policy and framework tailored based on HBRC’s strategy. |
|
Closed as at Nov 2020 FARS |
Not Stated |
Develop a competency framework to upskill staff on risk and embed the risk policy. Communicate and train BU on the risk policy and framework. Provide targeted training to specialist risk roles e.g. risk champions. ELT and Risk and Assurance Lead |
October 2021 |
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In conjunction with Group Managers identify a Risk Champion in each Group. Risk and Assurance Lead to develop Risk Champion Training.. |
On track |
|
Processes and Tools - For risk assessment and mitigation. |
Not Stated |
Through a single risk management policy and framework ensure that clear risk and control identification and assessment criterion exists. Risk and Assurance Lead |
September 2020 |
Council approved risk framework includes a criteria of risk and control identification and assessment. With recommended tools. |
|
Closed as at Nov 2020 FARS |
Processes and Tools - For assurance. |
Not Stated |
Develop a formal assurance framework based on the ‘three lines of defence model’. Framework should ensure assurance targets critical council functions and activities applying a risk based approach. Risk and Assurance Lead |
July 2021 |
Regional Council assurance framework drafted and awaiting ELT approval. |
Develop a targeted approach to implement the framework subject to ELT and FARS approval. |
On track |
Process and Tools - For risk monitoring and reporting. |
Not Stated |
Reformatted risk reporting to enhance visibility can be developed when the risk policy and framework is approved by Council. However, risk reporting will be subject to continuous improvement as the risk system matures e.g. the incorporation of key risk/control indicator trend reporting. Risk and Assurance Lead |
September 2021 |
Enterprise risk report updated to reflect completed bowties. |
Update risk reporting to reflect insights from risk bowties as thes final bowties are completed.
Update risk report to reflect approved risk appetite. |
On track |
Business Performance – Strategic risk management. |
Not Stated |
Strategic planning cycle to include a review of enterprise risks to better link and integrate the risk register and LTP. Risk & Assurance Lead & Strategy and Governance Manager |
September 2021 |
Complete bowties for six enterprise risks and update the FARS risk report one pagers accordingly. |
Finalise bowties for remaining enterprise risks and update risk report to enable a better linkage to the LTP. |
On track |
Business Performance – Managing Risk in Partnerships. |
Not Stated |
Develop risk and performance monitoring of key third parties. Ensure contingency planning is included. Risk & Assurance Lead |
December 2020 |
Bowtie analysis undertaken for the enterprise risk for third parties. With the risk report updated accordingly. |
Finalise bowtie and identify the top 20 highest risk third parties. |
At risk – this enterprise risk is not prioritised for bowtie pre Xmas |
Business Performance – Business resilience ensure continuity planning is sufficient to cover HILP events. |
Not Stated |
Develop a process to assess disruptive and extreme events (low probability high impact ‘HILP’ events). Risk & Assurance Lead |
December 2021 |
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Develop a roadmap to enhance continuity plans include business impact risk assessments based on HILP events. Stress test on a ‘denial’ premise. |
On track |
Business Performance – Change and transformation. |
Not Stated |
Develop a change management framework to ensure a portfolio view of risks related to significant change is managed. Marketing & Communications Manager |
September 2021 |
Recruited fixed term Change Management Resource to focus on corporate maturity / readiness that can develop a change management framework and strategy while managing current change projects. Has been recruited. It is expected to transition the role into a permanent position through the LTP. |
The new Change Manager to draft a change management framework for approval. |
On track |
Internal Audit – Procurement & Contract Management – May 2018 |
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Finding / Theme |
Priority |
Action and Owner |
Due Date |
Milestone Achieved |
Milestone |
Tracking Status |
|
Lack of evidence for procurement decisions. |
High |
Procurement plan template designed based on MBIE/NZTA best practice guidelines; implemented Procurement Lead |
Sept 2020 |
Completed as part of amendments to procurement manual, approved by Council Sept 2020. |
|
Closed as at Nov 2020 FARS |
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Lack of contract evaluation. |
Medium |
Policy and manual updated; evaluation criteria included in selection and post contract performance evaluation Procurement Lead |
Sept 2020 |
Policy and manual amendments approved by Council Sept 2020 - Completed. |
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Closed as at Nov 2020 FARS |
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Internal Audit – Health and Safety – Sept 2018 |
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Finding / Theme |
Priority |
Action and Owner |
Due Date |
Milestone Achieved |
Milestone |
Tracking Status |
Improve indicator risk control reporting. |
High |
Bow tie analysis for identified critical risks to ensure hierarchy of controls To enhance lead indicators. Senior Health, Safety & Wellbeing Advisor and Risk & Assurance Lead |
March 2021 |
H&S bowtie analysis complete. |
Now bowtie analysis complete the Lead Indicator Action below captures next steps |
Closed |
Update of Health and Safety Manual. |
Medium |
Review Manual Senior Health, Safety and Wellbeing Advisor |
October 2020 |
Health and Safety Manual scheduled for Executive Leadership Team final sign off February 2021. |
Safety Plan to be signed off. |
Behind – Bowtie analysis now complete and awaiting Safety Plan sign off. |
Move towards Lead Indicators. |
Medium |
Health and Safety Manual to include Lead Indicators Senior Health, Safety & Wellbeing Advisor |
June 2021 |
Key lag/lead indicators now reported as part of ELT Organisational Performance reporting. |
Further develop ELT lead and lag indicators. |
On track |
Improve Incident reporting detail to include Root Cause Analysis (5 Why's). |
High |
Update incident reporting form to include root cause analysis (5 Why's) Senior Health, Safety & Wellbeing Advisor |
June 2021 |
Updated incident formto include (5 Why’s). |
|
Closed |
Increased reporting to ELT. |
High |
Create dashboard report for health and safety reporting. Senior Health, Safety & Wellbeing Advisor |
March 2021 |
Agreement with Organisational Performance to specifically include health and safety as part of performance reporting. |
Finalise key H&S measures to include in HBRC performance reporting. |
On track |
Increased visibility of health and safety activity by ELT. |
High |
ELT representative attends quarterly Health and Safety Committee Meeting Senior Health, Safety & Wellbeing Advisor |
March 2021 |
Process for regular attendance by ELT at quarterly meetings established. |
|
Closed |
Improvement in Contractor Inductions. |
Medium |
Review induction process of contractors and service providers Senior Health, Safety and Wellbeing Advisor |
September 2020 |
Review of induction process via survey to be developed, delivered and corrective outcomes identified. |
Linked to below item – collaborate with procurement to confirm induction process and complile list of contractors that require corrective actions. Establish timetable for corrective actions. |
Behind |
Improvement in Contractor Engagement process. |
Medium |
A full review of contractor inductions across all risks Senior Health, Safety & Wellbeing Advisor |
August 2021 |
Procurement have endorsed working with H&S to oversee that H&S inductions and risk assessments. That occur as part of the wider procurement management system. |
Continue to work with Procurement to finalise contractor processes so that these include H&S risks.
|
On track |
Internal Audit – Cyber Security – August 2019 |
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Finding / Theme |
Priority |
Action and Owner |
Due Date |
Milestone Achieved |
Milestone |
Tracking Status |
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Asset management – Software & application inventory– IT oversight and value as a service. |
High |
Automate as many software updates as possible. Chief Information Officer |
Sept 2020 |
Software updates now automated. |
|
Closed as at Nov 2020 FARS |
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As above |
High |
Update and review software list annually. Chief Information Officer |
Sept 2020 |
2020 Annual Review completed |
|
Closed as at Nov 2020 FARS |
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Asset management – Software & application inventory – Legacy Systems. |
High |
Develop an architecture strategy that considers long term phased replacement of legacy systems, including documenting the legacy software components and systems. Chief Information officer |
December 2021 – if funding request accepted |
IT Projects have been identified and described in 1 page briefs. |
Projects are prioritised by exec team. Resourcing is recruited to begin scoping and delivery of prioritised projects. Resourcing is recruited to develop enterprise architecture artefacts. |
On track Note action is defining the strategy – implementation for legacy systems will take over 10 years with current resourcing |
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Asset management – Software & application inventory– Inventory |
High |
Reviewed and documented all software used at HBRC. Chief Information officer |
Oct 2019 |
Documented software inventory reviewed. |
|
Closed as at Nov 2020 FARS |
||
Asset management – Software & application inventory – Legacy Systems. |
High |
High-level documentation of software components. Chief Information officer |
Dec 2019 |
High level documentation complete. |
|
Closed as at Nov 2020 FARS |
||
As above. |
High |
Review software versions in use and compare to latest available. Chief Information officer |
Mar 2020 |
IT Support team reviewed the list of active software, and updated old versions – starting with areas of highest risk.
|
Our current approach to this has been adhoc. Reporting will be provided on the size of this issue, progress to date and target state. |
Behind |
||
As above. |
High |
Finance System Replacement Chief Information officer |
June 2021 |
Enterprise Budgeting is live.
|
FMIS planned to go live 1/7/21. Payroll to go live 14/4/21 |
On track |
||
Access Control – Principle of least privilege – Periodic Review. |
High |
Perform an annual review of access to HR and Regulatory systems (adding this to the current AuditNZ reviews of core and finance systems). Chief Information officer |
Sept 2019 |
Reviewed access of HR and Regulatory systems. Request for new HR system in LTP. This included HR access review. |
If HRIS is prioritised – access review will be included as part of the project. If not, a thorough access review will be performed on the current system. |
Behind |
||
Access Control – Principle of least privilege – Enforce the principle of least privilege. |
High |
Reviewed and reduced domain administrator access. Chief Information officer |
Oct 2019 |
Domain administrator access reviewed and reduced. |
|
Closed as at Nov 2020 FARS |
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Access Control – Principle of least privilege – Legal & Regulatory requirements. |
High |
Identified systems containing confidential data and tightened up processes for assigning access rights for new users Chief Information officer in conjunction with Risk and Assurance Lead |
Oct 2019 |
Information Management Advisor recruited- due to commence in role on 30 November 2020. |
Stocktake with business to assess what information and records are held and where including PII. With Information re-baseline due date based on scope of remediation and linkage to ICT Governance below. |
Behind - Date needs rebaselining. Part of wider information management project – dedicated resource to strengthen data management now recruited |
||
Access Control – Principle of least privilege – Periodic Review. |
High |
Reviewed Active Directory Accounts – archiving accounts by last logon date > 60 days Chief Information officer |
Oct 2019 |
Accounts directory reviewed with >60days archived. |
|
Closed as at Nov 2020 FARS |
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Access Controls – External Information Systems – Password Managers. |
Medium |
Investigate and evaluate solutions for single sign-on / password management. Chief Information officer |
Sept 2020 |
Requested resourcing to evaluate solutions for implementation. |
|
Behind |
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Business Environment – Resilience requirements –– IT Disaster Recovery Plan – resilience requirements. |
High |
Implement DR Technology Changes and Test Disaster Recovery processes and environment. Chief Information officer |
Dec 2021 |
Scoped and designed a Disaster Recovery solution for when funding is available. |
IT DR test scheduled for March 27th 2021. Scenario - simulating the loss of the Dalton St building |
On track |
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As above. |
High |
Develop cybersecurity incident management processes based on CERT NZ guidelines. Including, developing templates for incident repsonse and post incident review. Chief Information officer |
Mar 2020 |
Response process drafted and response templates complete. |
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Closed as at Nov 2020 FARS |
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Governance – Information security policy framework – Policy Review Required. |
Medium |
ICT Governance - firstly, assess the quality of Councils ICT policy framework against good practice including the development of a RACI matrix for cybersecurity roles outlined in the matrix. Chief Information officer in conjunction with Risk and Assurance Lead |
June 2020 |
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Define Council's risk appetite for enterprise risk 5 ‘information security’. Assess gap to systemise, develop business case and project plan that incorporates updating ICT governance documentation. |
Behind – broader Information security strategy – also links to PII, DR and third parties |
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Anomalies & events, Security Continuous Monitoring & Detection Processes – Monitoring/Detection – Alerts. |
Medium |
Setup a central mailbox for system alerts. Chief Information officer |
Oct 2019 |
Central mailbox activated for alerts. |
|
Closed as at Nov 2020 FARS |
||
As above. |
Medium |
Add critical alerts to our monitoring dashboard. Chief Information officer |
Mar 2020 |
Central mailbox above is sufficient. |
|
Closed as at Nov 2020 FARS |
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Information Protection Processes & Procedures – Third parties – Contractors Responsibilities. |
Medium |
As part of policy review , ensure risk based decision is made around contractors including system access by contractors and third parties are covered by policy. Chief Information officer in conjunction with Risk and Assurance Lead |
June 2020 |
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Define Council's risk appetite for enterprise risk 5 ‘information security’. Assess gap to systemise, develop business case and project plan that incorporates managing information risks from third parties. |
Behind – refer update under ICT governance due date needs rebaselining as the solution requires integration with other key management systems. |
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Maintenance – remote access is managed (third parties) – Maintenance. |
Medium |
Implement ‘enable on demand’ access for third party providers. Chief Information officer |
Oct 2019 |
Accounts disabled by default, and enabled when requested for a fixed period. |
|
Closed as at Nov 2020 FARS |
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Access control – Remote access is managed (mobile devices)– Mobile device management. |
Low |
Continue the planned deployment of asset management tools for mobile devices. Chief Information officer |
Ongoing |
Implemented Microsoft Intune to manage mobile devices. Completed June 2020. |
|
Closed as at Nov 2020 FARS |
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Tracking Status |
Key |
On track |
Milestones on track to meet due date |
At risk |
Milestones falling behind putting at risk delivery on due date |
Behind |
Milestones outstanding due date will not be met |
Closed |
Corrective action fully implemented since last update |
Closed |
Corrective action fully implemented in previous period |
Dashboard 2 - Internal Assurance Annual Plan FY20-21 Status Update |
Attachment 2 |
Internal Assurance Annual Plan FY20-21 Status Update
Approved Audit FY20-21 |
Provider |
Quarter Due |
Date Commenced |
Management Comments |
Reported to FARS |
Data Analytics |
Crowe |
Q3 |
December 2020 |
|
|
People, Recruitment, Retention and Wellbeing |
Crowe |
Q4 |
IA scope and LOE being finalised with Crowe |
|
|
Retained Audit Capacity - 40 hours |
Crowe |
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Finance Audit & Risk Sub-committee
Wednesday 17 February 2021
Subject: Assurance Framework Relevant to S17a Reviews
Reason for Report
1. This item updates the Finance Audit and Risk Sub-committee (FARS) on progress made with the drafting of a Regional Council (Council) Internal Assurance Framework, and key next steps.
2. A specific focus of this update is how, within the draft framework, it is proposed requirements of S17a will be met and then operate in practice.
Background
3. At the Corporate and Strategic Committee meeting held on 10 June 2020 the Committee endorsed the risk maturity roadmap for Council. At that meeting it was decided the FARS would oversee implementation of the maturing risk management system. A key element of risk maturity is assurance.
4. Through the risk roadmap it was agreed that by mid-2021 Council would focus on embedding a structured and consistent approach to assurance. Therefore, the first step requires the development of an overarching assurance framework for Council.
Discussion
5. The intent of the assurance framework is to bring together the many different assurance review types that are undertaken across the business and apply a systematic and structured approach, therefore, improving oversight to Councillors and to the Executive Leadership Team (ELT). Examples of the different types of assurance reviews include internal audits, post incident debrief, post implementation review, and S17a.
6. The first draft of the assurance framework is complete and currently being prepared for presenting to the Executive Leadership Team (ELT) for endorsement on 23 February 2021. Once endorsed by the ELT the framework will then be presented to the FARS for recommending to C&S for Council adoption.
7. With the application of a structured and systematic approach to assurance output between reviews can be easily compared and analysed improving the prioritisation of resources. In addition, Councillors and ELT are provided with a reasonable level of comfort that the spread of assurance reviews provides a good breadth and depth across council’s activities, strategy and risks. Opportunities sought for efficiencies and cost reduction are a key element of S17a.
8. The framework outlines that the FARS is responsible for identifying reviews that are contained in the enterprise annual internal audit plan. Internal audits are one of the main review types that make up the internal assurance programme. With an improved understanding of the breadth and depth of reviews a proactive risk-based approach can be applied to identify future internal audits.
9. While the framework encourages a proactive and risk-based approach to identifying future reviews it is noted that identification of S17a reviews are prescribed in legislation. S17a reviews prescribes the following.
9.1. A local authority must review the cost-effectiveness of current arrangements for meeting the needs of communities within its district or region for good-quality local infrastructure, local public services, and performance of regulatory functions. A review must be undertaken (a) in conjunction with consideration of any significant change to relevant service levels; and (b) within 2 years before the expiry of any contract or other binding agreement relating to the delivery of that infrastructure, service, or regulatory function; and (c) at such other times as the local authority considers desirable, but not later than 6 years following the last review.
10. The S17a exception to identifying reviews is noted in the framework. Therefore, while the FARS will be updated on the S17a reviews being undertaken the identification of these reviews will come from other channels.
11. All final reports for reviews that are undertaken as part of the annual enterprise internal audit plan are first reported to the FARS. However, for other assurance reviews that are not necessarily under the remit of internal audit e.g. S17a the final may first be provided to the appropriate oversight Committee for accepting. However, in these cases the final report will also subsequently be made available to the FARS Committee for noting.
Next Steps
12. Present the draft internal assurance framework to ELT for endorsement.
13. On ELT endorsement the internal assurance framework will be presented to the next scheduled FARS meeting for recommendation to Council for approval.
Decision Making Process
14. 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:
14.1. This agenda item is in accordance with the Finance, Audit and Risk Sub-committee Terms of Reference, specifically:
14.1.1. “The purpose of the Finance, Audit and Risk Sub-committee is to report to the Corporate and Strategic Committee to fulfil its responsibilities for (1.3) the independence and adequacy of internal and external audit functions” and
14.1.2. “The Finance, Audit and Risk Sub-committee is delegated by Council to (3.6) review the objectives and scope of the internal audit function, and ensure those objectives are aligned with Council’s overall risk management framework; and (3.7) assess the performance of the internal audit function, and ensure that the function is adequately resourced and has appropriate authority and standing within Council.”
14.2. As this report is for information only, the decision making provisions do not apply.
That the Finance, Audit and Risk Sub-committee: 1. receives and notes the “Assurance Framework Relevant to S17a Reviews” staff report 2. reports to the Corporate and Strategic Committee, the Sub-committee’s satisfaction with progress made to draft a Regional Council Internal Assurance Framework.
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Authored by:
Olivia Giraud-Burrell Business Analyst |
Helen Marsden Risk and Assurance Lead |
Approved by:
Jessica Ellerm Group Manager Corporate Services |
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Attachment/s There are no attachments for this report.
Finance Audit & Risk Sub-committee
Wednesday 17 February 2021
Subject: Quarterly Treasury Report for 1 October - 31 December 2020
Reason for Report
1. This item provides compliance monitoring of Hawkes Bay Regional Council (HBRC) treasury activity and reports the performance of Council’s investment portfolio for the quarter ended 31 December 2020.
Overview of the Quarter - ending 31 December 2020
2. The investment portfolio continued its strong performance with the global economy seemingly continuing its recovery from the lows seen in Q3 2019-20.
3. Managed Funds have provided a year-to-date gross income net of fees of ~9%, enabling a combined (Council and HBRIC) divestment of $7.7m. This ensures that previous gains are now realised, and a $2.6m reduction of the Covid-19 Impact Loan.
4. Napier Port paid a final dividend to HBRIC of $5.5m, of which HBRIC passed through dividend of $4.0m; $1.0m greater than the budgeted $3.0m in the Covid-19 impacted 2020-21 Annual Plan.
5. Earlier collection of rates resulted in a strong liquidity position right throughout the quarter.
Background
6. The Investment management reporting requirements, outlined within Council’s Treasury Policy, requires quarterly reporting to the Financial Audit & Risk Sub-Committee (FARS) of current investment allocation and investment performance.
7. All Treasury investments are to be reported on quarterly. As at 31 December 2020, Treasury Investments to be reported on consist of:
7.1. Liquidity
7.1.1. Cash and Cash Equivalents
7.1.2. Debt Management
7.2. Externally Managed Investment Funds
7.2.1. Long-Term Investment Fund (LTIF)
7.2.2. Future Investment Fund (FIF)
7.3. Investment properties
7.4. HBRIC Ltd
7.5. 2020-21 Year to Date Performance Summary.
8. Since 2018, HBRC has procured treasury advice and services from PwC. Their quarterly compliance report is attached.
Discussion
Liquidity - Cash & Cash Equivalents
9. To ensure HBRC has the ability to adequately fund its operations, current policy requires HBRC to maintain a liquid balance of $3.0m.
10. The following table reports the cash and cash equivalents as at 31 December 2020.
31 December 2020 |
$000 |
Cash |
4,534 |
HBRC Held Cash |
3,817 |
Works Group |
432 |
Other – managed trusts |
286 |
Short-term bank deposits |
9,000 |
Cash & and cash equivalents |
13,534 |
11. HBRC liquidity throughout Q2 benefited from the early collection of rates (~$18.0m), HBRIC Dividend ($4.0m), and divestment of returns achieved from the LTIF and FIF managed funds ($6.5m).
12. Any cash surplus to operating requirements is placed on term deposit. For 81 of the possible 91 days in the quarter an average of $5.5m was held in term deposits, returning an average of 0.36% or $4.3k for the period.
13. To further manage its liquidity risk, HBRC currently retains a Standby Facility with BNZ. This facility provides HBRC with a same day draw down option, to any amount between $0.3-$5.0m, and with no minimum draw period. The cost of the current facility is an annual line fee 0.30% ($15,000) + a margin above BKBM of 1.1% on any borrowings.
14. This facility is due to expire in April 2021 and Officers are currently pursuing options to extend this Facility for a further 3 years.
14.1. Currently BNZ 3-year indicative cost is an Annual Line Fee 0.35% ($17,500) and a margin above BKBM of 1.3%. This pricing remains competitive when compared to the 15-month Standby Facility being offered by the LGFA whom price the Annual Line fee of 0.20% ($10,000) + a margin above BKBM of 0.90%. Additionally, the LGFA requires a business days’ notice, a minimum draw down of $1.0m and a 30 day minimum draw period.
15. The graph below shows the daily closing cash position and Term Deposits held throughout Q2.
16. Low interest rates are expected to remain throughout the remainder of the financial year impacting the 2020-21 budgeted income received from cash deposits - budgeted at $0.4m or 4.5%. A recent revised forecast based on current interest rates is $0.2m or 1.5%. The $0.2m shortfall will be offset by lower than budgeted borrowing rates.
Debt Management
17. As at 31 December 2020, current external debt was $22.2m, $38.9m when taking into consideration the internal $16.7m HBRIC Loan. All financial covenant ratios are currently at least 4 times under any internal or external limit. The financial covenant ratios can be seen in the attached PwC report.
18. The year end position is forecast at $38.1m. Accounting for the existing $22.2m plus forecast $15.9m requirement detailed below. This is slightly above that forecast in the 2018-28 LTP, which forecast borrowing to be $35.5m at the end of the 2020-21 year.
19. As the current debt profile continues to mature, and the 2020-21 forecast borrowing is not required yet, HBRC is currently outside its interest rate risk management policy. The policy is written to minimize any adverse movements in interest rates which could affect future Council Cash Flows. As per the Policy, Officers now have 90 days to correct the interest profile before it becomes a policy breach.
20. The borrowing discussed below will be raised with the LGFA via the scheduled March 2021 tender. Officers will work with PwC to ensure that HBRC realigns to its Interest Rate Risk Policy by the end of the next quarter.
21. The table below details forecast debt requirements compared to the 2020-21 Annual Plan.
Loan Requirements |
2020-21 |
2020-21 Debt Requirement |
Variance |
|
$000 |
$000 |
$000 |
Sustainable Homes |
3,527 |
3,527 |
- |
Systems Integration |
1,913 |
1,275 |
(638) |
Building Accommodation |
2,000 |
500 |
(1,500) |
HBRC Recovery Fund |
1,000 |
100 |
(900) |
Integrated Catchment |
2,250 |
4,700 |
2,450 |
Covid-19 Budget Impacts |
7,584 |
5,000 |
(2,584) |
Other |
755 |
755 |
- |
Total |
19,029 |
15,857 |
(3,172) |
22. 2020-21 borrowing is forecast at $15.9m, $3.2m lower than planned.
23. As at 31 December 2020, the borrowing forecast of $15.9m is based on the expected full year expenditure for 2020-21. The adjusted forecast requirements for “Systems Integration” and “Building Accommodation” is due to the timing of expenditure and request to carry forward this borrowing into 2021-22 is expected.
24. Borrowing required for the Covid-19 related reduction in investment income is subject to change. Any upside in investment income, from either an additional HBRIC dividend or managed fund returns, will reduce the current requirement.
25. The Recovery Fund has committed spend of $300k, $200k in outer years.
Managed Funds
26. For the purposes of this report, the following terms have been referred to and have the following meaning.
Term |
Meaning |
Gross Income Net of Fees |
The full amount the fund has returned for the period, net of any fees paid to the fund managers. This amount remains in the funds unless divested. |
Capital Protection |
The amount the fund must earn in relation to the rate of inflation to retain its real purchasing power. |
Funding Council Operating Costs |
The amount the fund must earn to fund Council operating costs (offsetting rating requirements). |
Divested Capital |
Unrealised Gross Income Net of Fees less Capital Protection and have now been withdrawn from the funds. |
Undivested Funds Available |
Unrealised Gross Income Net of Fees less Capital Protection that are still invested within the funds. |
27. The first six months of 2020-21 saw better than expected results achieved with an average gross income net of fees of 9% (annualised 17%) compared to the Post Covid-19 2020-21 Annual Plan of 3% (6% annualised).
28. This performance aligns with general market expectation given the results of the US election and the announcement of a successful COVID-19 vaccine trial. Both events reduce uncertainty either by reducing a tariff-inspired manufacturing recession or a clearer pathway out of the pandemic.
29. Officers remain cautiously optimistic regarding the expected full year 2020-21 performance. In mid-December, Officers, with FARS endorsement divested $6.4M from the Funds. Thereby ensuring prior gains are realised and available to fund operating costs.
30. Council’s current policy is silent on triggers which define at what point divestment from the managed fund should occur. With global markets seemly at a high in December 2020 Officers made the prudent decision to divest $6.4m, de-risking the future possibility of losing any of the unrealised gains.
31. At the time of the divestment, $6.4m equaled the current policy limit of what could have been withdrawn less the required capital protection for the remaining six months of the 2020-21 year ($1.1M).
32. After the December 2020 divestment, the Q2 actual closing position reflects that an additional $3.4m could have been divested, or $2.2m whilst still protecting the capital base until June 2021.
33. If the current strong performance of the funds continues, there will be potential for further divestment, reducing the forecast borrowing requirement arising from the Covid-19 adjusted 2020-21 Annual Plan.
34. The table and graphs below summarise the quarter end fund balances over the last 12 months.
Fund |
31 Dec 2019 |
31 Mar 2020 |
30 Jun 2020 |
30 Sep 2020 |
31 Dec 2020 |
|
$000 |
$000 |
$000 |
$000 |
$000 |
Long-Term Investment Fund |
50,674 |
46,305 |
49,950 |
51,810 |
49,925 * |
Future Investment Fund |
44,724 |
41,712 |
61,128 |
63,094 |
64,300 * |
Total |
95,398 |
88,017 |
111,078 |
114,904 |
114,224 |
* December 2020 saw Funds being divested for the first time, which explains the reduced fund balance.
Long-term Investment Fund
35. Invested since November 2018, the fund provides a return which, protects capital value first and then funds Council’s operating costs.
36. The table below shows the LTIF income earned YTD against the 2020-21 Annual Plan.
Income |
Full Year Annual Plan 2020-21 |
YTD Ann. Plan |
YTD Q2 Actuals |
Variance to YTD Ann. Plan |
|||
|
$000 |
% |
$000 |
% |
$000 |
% |
$000 |
Capital Protection |
838 |
2% |
419 |
1% |
480 |
1% |
61 |
Fund Operating Costs |
1,876 |
4% |
938 |
2% |
3,973 |
8% |
3,035 |
2,715 |
6% |
1,357 |
3% |
4,453 |
9% |
3,096 |
37. The table below shows the key balances of the LTIF as at the end of Q2.
|
1 July 2020 – Opening Balances |
31 December 2020 – Closing Balances |
||||
|
Capital Protected Balance |
Undivested Funds Available |
Total Fund Balance |
Capital Protected Balance |
Undivested Funds Available |
Total Fund Balance |
|
$000 |
$000 |
$000 |
$000 |
$000 |
$000 |
LTIF |
47,996 |
1,954 |
49,950 |
48,476 |
1,449 |
49,925 |
38. The table above has been prepared as at 31 December 2020 (Q2), it should be noted, that the LTIF needs to earn a further $480k, to meet the required annual capital protection of $980k. This amount is slightly different to the 2020-21 Annual Plan, due to the budgeted numbers being set off the Fund Balances in March 2020.
Future Investment Fund (FIF)
39. Invested since September 2019, the fund provides a return which, protects capital value first and then funds Council’s operating costs.
40. The table below shows the FIF income earned YTD against the 2020-21 Annual Plan.
Income |
Full year Annual Plan 2020-21 |
YTD Ann. Plan |
Q2 YTD Actuals |
Variance to YTD Ann. Plan |
|||
|
$000 |
% |
$000 |
% |
$000 |
% |
$000 |
Capital Protection |
974 |
2% |
487 |
1% |
618 |
1% |
131 |
Fund Operating Costs |
1,690 |
4% |
845 |
2% |
4,496 |
7% |
3,651 |
Gross Income Net of Fees |
2,665 |
6% |
1,332 |
3% |
5,114 |
8% |
3,781 |
41. The table below shows the key balances of the FIF as at the end of Q2.
|
1 July 2020 – Opening Balances |
31 December 2020 – Closing Balances |
||||
|
Capital Protected Balance |
Undivested Funds Available |
Total Fund Balance |
Capital Protected Balance |
Undivested Funds Available |
Total Fund Balance |
|
$000 |
$000 |
$000 |
$000 |
$000 |
$000 |
FIF |
61,775 |
(647) |
61,128 |
62,394 |
1,906 |
64,300 |
42. As mentioned previously, the table above has been prepared as at 31 December 2020 (Q2), similar to the LTIF, the FIF will need to earn a further $618k, to meet the required annual capital protection of $1,236k.
Investment Property
43. In the current financial period, 2020-21, 5 Napier Endowment Leasehold Properties have been freeholded totaling $776k. $693k of this has been subsequently paid to ACC as settlement for the remaining 42 years rent for these properties.
44. HBRC has recently been contacted by a Leasehold occupier in Wellington regarding the Freeholding of the land. The Leasehold offer and how this aligns to HBRC investment strategy will be presented at the Corporate and Strategic Committee in March 2021 (publicly excluded).
HBRIC
45. On 18 December 2020, HBRC received a dividend payment of $4.0m from HBRIC, $1m favourable to the $3.0m budgeted in the Covid-19 adjusted Annual Plan.
46. Per Council Policy, HBRIC will separately provide a six-monthly update to Corporate at Strategic committee in March 2021. Main matters of relevance are:
46.1. PONL advised it would pay $0.05 per share as its interim dividend. HBRIC holds 110M shares (55%) resulting in a $5.5m dividend
46.2. There is potential in that the PONL will pay a final dividend in June 2021
46.3. The following table shows the key balances of the FIF (HBRIC) as at the end of Q2.
|
1 July 2020 – Opening Balances |
31 December 2020 – Closing Balances |
||||
|
Capital Protected Balance |
Undivested Funds |
Total Fund Balance |
Capital Protected Balance |
Undivested Funds |
Total Fund Balance |
|
$000 |
$000 |
$000 |
$000 |
$000 |
$000 |
FIF |
46,584 |
(964) |
45,620 |
47,000 |
1,314 |
48,314 |
2020-21 Year to Date Performance Summary
47. The following table shows investment income to date against the 2020-21 Annual Plan.
Income |
Annual Plan 2020-21 |
YTD Ann. Plan |
Q2 Actuals |
Variance to YTD Ann. Plan |
|
$000 |
$000 |
$000 |
$000 |
Other financial assets |
4,195 |
2,097 |
7,387 |
5,290 |
Managed Funds |
3,567 |
1,783 |
7,371 |
5,588 |
Other Interest* |
628 |
314 |
16 |
(298) |
Investment property |
2,343 |
1,171 |
830 |
(131) |
Endowment leasehold land |
1,502 |
751 |
620 |
(131) |
Wellington Leasehold land |
841 |
420 |
420 |
- |
Dividends |
5,369 |
4,184 |
7,012 |
4,328 |
PONL Dividend |
3,000 |
3,000 |
5,500 |
2,500 |
Managed Fund |
2,369 |
1,184 |
3,012 |
1,828 |
Total |
11,907 |
7,452 |
16,729 |
9,487 |
* Includes Interest budgeted to be earnt on scheme reserves.
48. The $9.5m favourable YTD performance should be considered cautiously. It is likely that the majority of this performance will be a point in time variance and it potentially will reduce significantly over the next 6 months, particularly when considering the performance of the managed funds. 20-year historical data suggests that an expected annual return for the funds should currently be 5.16%. With the funds returning an average six-month return of 8.64%, it would be prudent to expect that the future returns will equalise over the next six months and come more inline with a 5.16%. If performance does equalise, it could be expected that the full year performance will be ~$2.0m ahead of budget; not the current $7.4m.
49. The other material significant change could arise via Napier Port paying HBRIC an interim dividend in June 2021. Unlike the managed funds, this would continue to improve the actual performance when compared to the 2020-21 Annual Plan
Decision Making Process
50. 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:
50.1. The agenda item is in accordance with the Finance, Audit and Risk Sub-committee Terms of Reference, specifically “The Finance, Audit and Risk Sub-committee shall have responsibility and authority to (2.4) monitor the performance of Council’s investment portfolio”.
50.2. As this report is for information only, the decision making provisions do not apply.
That the Finance, Audit and Risk Sub-committee receives and notes the “Quarterly Treasury Report for 1 October - 31 December 2020” and confirms that the performance of Council’s investment portfolio has been reported to the Sub-committee’s satisfaction. |
Authored by:
Geoff Howes Treasury & Funding Accountant |
Bronda Smith Chief Financial Officer |
Approved by:
Jessica Ellerm Group Manager Corporate Services |
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⇩1 |
PWC HBRC Treasury Reporting to 31 December 2020 |
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