Notice is hereby given that a Meeting of the Finance and Assurance Committee will be held on:

 

Date:

Time:

Meeting Room:

Venue:

 

Monday, 22 June 2020

9am

Council Chamber
15 Forth Street
Invercargill

 

Finance and Assurance Committee Agenda

OPEN

 

 

MEMBERSHIP

 

Chairperson

Bruce Robertson

 

 

Mayor Gary Tong

 

Councillors

Don Byars

 

 

John Douglas

 

 

Paul Duffy

 

 

Julie Keast

 

Deputy Chair

Ebel Kremer

 

 

IN ATTENDANCE

 

Chief Financial Officer

Anne Robson

Committee Advisor

Fiona Dunlop

 

 

Contact Telephone: 0800 732 732

Postal Address: PO Box 903, Invercargill 9840

Email: emailsdc@southlanddc.govt.nz

Website: www.southlanddc.govt.nz

 

Full agendas are available on Council’s Website

www.southlanddc.govt.nz

 

 


Terms of Reference – Finance and Assurance Committee

 

TYPE OF COMMITTEE

Council standing committee

RESPONSIBLE TO

Council

SUBCOMMITTEES

None

LEGISLATIVE BASIS

Committee constituted by Council as per schedule 7, clause 30 (1)(a), LGA 2002.

Committee delegated powers by Council as per schedule 7, clause 32, LGA 2002.

MEMBERSHIP

Mayor, three councillors and one external appointee

FREQUENCY OF MEETINGS

Quarterly or as required

QUORUM

Three members

SCOPE OF ACTIVITIES

The Finance and Assurance Committee is responsible for:

•      ensuring that Council has appropriate financial, risk management and internal control systems in place that provide:

-      an overview of the financial and non-financial performance of the organisation

-      effective management of potential opportunities and adverse effects

-      reasonable assurance as to the integrity and reliability of Council’s financial and non-financial reporting. 

•      exercising active oversight of information technology systems 

•      exercising active oversight of Council’s health and safety policies, processes, compliance, results and frameworks

•      relationships with external, internal auditors, banking institutions and insurance brokers.

The Finance and Assurance Committee will monitor and assess the following:

•      the financial and non-financial performance of Council against budgeted and forecasted outcomes

•      consideration of forecasted changes to financial outcomes

•      Council’s compliance with legislative requirements

•      Council’s risk management framework

•      Council’s control framework

•      Council’s compliance with its treasury responsibilities

            Council’s compliance with its Fraud Policy.

DELEGATIONS

The Finance and Assurance Committee shall have the following delegated powers and be accountable to Council for the exercising of these powers. 

In exercising the delegated powers, the Finance and Assurance Committee will operate within:

•      policies, plans, standards or guidelines that have been established and approved by Council

•      the overall priorities of Council

•      the needs of the local communities

•      the approved budgets for the activity.

The Finance and Assurance Committee will have responsibility and delegated authority in the following areas:

Financial and Performance Monitoring

a)     monitoring financial performance to budgets

b)     monitoring service level performance to key performance indicators.

Internal Control Framework

a)     reviewing whether Council’s approach to maintaining an effective internal control framework is sound and effective

b)     reviewing whether Council has taken steps to embed a culture that is committed to probity and ethical behaviour

c)     reviewing whether there are appropriate systems, processes and controls in place to prevent, detect and effectively investigate fraud.

Internal Reporting

a)     to consider the processes for ensuring the completeness and quality of financial and operational information being provided to Council

b)     to seek advice periodically from internal and external auditors regarding the completeness and quality of financial and operational information that is provided to the Council.

External Reporting and Accountability

a)        agreeing the appropriateness of Council’s existing accounting policies and principles and any proposed change

b)        enquiring of internal and external auditors for any information that affects the quality and clarity of Council’s financial statements and statements of service performance, and assess whether appropriate action has been taken by management in response to the above

c)        satisfying itself that the financial statements and statements of service performance are supported by appropriate management signoff on the statements and on the adequacy of the systems of internal control (ie letters of representation), and recommend signing of the financial statements by the chief executive/mayor and adoption of the Annual Report, Annual Plans, Long Term Plans

Risk Management

a)    reviewing whether Council has in place a current, comprehensive and effective risk management framework and associated procedures for effective identification and management of the Council’s significant risks

b)    considering whether appropriate action is being taken to mitigate Council’s significant risks.

Health and Safety

a)        review, monitor and make recommendations to Council on the organisations health and safety risk management framework and policies to ensure that the organisation has clearly set out its commitments to manage health and safety matters effectively.

b)        review and make recommendations for Council approval on strategies for achieving health and safety objectives

c)        review and recommend for Council approval targets for health and safety performance and assess performance against those targets

d)        monitor the organisation’s compliance with health and safety policies and relevant applicable law

e)        ensure that the systems used to identify and manage health and safety risks are fit for purpose, being effectively implemented, regularly reviewed and continuously improved.  This includes ensuring that Council is properly and regularly informed and updated on matters relating to health and safety risks

f)         seek assurance that the organisation is effectively structured to manage health and safety risks, including having competent workers, adequate communication procedures and proper documentation

g)        review health and safety related incidents and consider appropriate actions to minimise the risk of recurrence

h)        make recommendations to Council regarding the appropriateness of resources available for operating the health and safety management systems and programmes

i)          any other duties and responsibilities which have been assigned to it from time to time by Council.

Internal Audit

a)    approve appointment of the internal auditor, internal audit engagement letter and letter of understanding 

b)    reviewing and approving the internal audit coverage and annual work plans, ensuring these plans are based on Council’s risk profile

c)    reviewing the adequacy of management’s implementation of internal audit recommendations

d)    reviewing the internal audit charter to ensure appropriate organisational structures, authority, access, independence, resourcing and reporting arrangements are in place.

 

 

 

External Audit

a)    confirming the terms of the engagement, including the nature and scope of the audit, timetable and fees, with the external auditor at the start of each audit

b)    receiving the external audit report(s) and review action(s) to be taken by management on significant issues and audit recommendations raised within

c)    enquiring of management and the independent auditor about significant business, political, financial and control risks or exposure to such risks.

Compliance with Legislation, Standards and Best Practice Guidelines

a)    reviewing the effectiveness of the system for monitoring Council’s compliance with laws (including governance legislation, regulations and associated government policies), with Council’s own standards, and best practice guidelines as applicable

b)    conducting and monitoring special investigations, in accordance with Council policy, and reporting the findings to Council 

c)    monitoring the performance of Council organisations, in accordance with the Local Government Act. 

Business Case Review

a)    review of the business case of work, services, supplies, where the value of these or the project exceeds $2 million or the value over the term of the contract exceeds $2 million.

Insurance

a)    consider Council’s insurance requirements, considering its risk profile

b)    approving the annual insurance renewal requirements

Treasury

a)    oversee the treasury function of Council ensuring compliance with the relevant Council policies and plans

b)    ensuring compliance with the requirements of Council’s trust deeds are met

c)    recommend to Council treasury policies.

Fraud Policy

a)        receive and consider reports relating to the investigation of suspected fraud

b)        monitor the implementation of the Fraud Policy.

Power to Recommend

The Finance and Assurance Committee is responsible for considering and making recommendations to Council regarding:

a)    policies relating to risk management, rating, loans, funding and purchasing

b)    accounting treatments, changes in generally accepted accounting practice, and new accounting and reporting requirements

c)    the approval of financial and non-financial performance statements including adoption of the Annual Report, Annual Plans and Long Term Plans.

The Finance and Assurance Committee is responsible for considering and making recommendations to the Services and Assets Committee on business cases completed under the ‘Power to Act’ section above.

FINANCIAL DELEGATIONS

Council authorises the following delegated authority of financial powers to Council committees in regard to matters within each committee’s jurisdiction.

Contract Acceptance:

            accept or decline any contract for the purchase of goods, services, capital works or other assets where the total value of the lump sum contract does not exceed the sum allocated in the Long Term Plan/Annual Plan and the contract relates to an activity that is within the scope of activities relating to the work of the Finance and Assurance Committee

            accept or decline any contract for the disposal of goods, plant or other assets other than property or land that is provided for in the Long Term Plan

Budget Reallocation

The committee is authorised to reallocate funds from one existing budget item to another.  Reallocation of this kind must not impact on current or future levels of service and must be:

            funded by way of savings on existing budget items

            within the jurisdiction of the committee

            consistent with the Revenue and Financing Policy.

LIMITS TO DELEGATIONS

Matters that must be processed by way of recommendation to Council include:

•      amendment to fees and charges relating to all activities

•      powers that cannot be delegated to committees as per the Local Government Act 2002 and sections 2.4 and 2.5 of this manual.

Delegated authority is within the financial limits in section 9 of this manual.

RELATIONSHIPS WITH OTHER PARTIES

The committee shall maintain relationships with each of the nine community boards.

Professional advisors to the committee shall be invited to attend all meetings of the committee including:

•      external auditor

•      internal auditor/risk advisor (if appointed)

•      chief financial officer. 

At each meeting, the chairperson will provide the external auditor and the internal auditor/risk advisor (if appointed) with an opportunity to discuss any matters with the committee without management being present.  The chairperson shall request the chief executive and staff in attendance to leave the meeting for the duration of the discussion.  The chairperson will provide minutes for that part of the meeting.

The chief executive and the chief financial officer shall be responsible for drawing to the committee’s immediate attention any material matter that relates to the financial condition of Council, material breakdown in internal controls and any material event of fraud.

The committee shall provide guidance and feedback to Council on financial performance, risk and compliance issues.

The committee will report to Council as it deems appropriate but no less than twice a year.

CONTACT WITH MEDIA

The committee chairperson is the authorised spokesperson for the committee in all matters where the committee has authority or a particular interest.

Committee members, including the chairperson, do not have delegated authority to speak to the media and/or outside agencies on behalf of Council on matters outside of the committee’s delegations.

The chief financial officer will manage the formal communications between the committee and its constituents and for the committee in the exercise of its business.  Correspondence with central government, other local government agencies or other official agencies will only take place through Council staff and will be undertaken under the name of Southland District Council.

 


Finance and Assurance Committee

22 June 2020

 

TABLE OF CONTENTS

ITEM                                                                                                                                                                                  PAGE

Procedural

1             Apologies                                                                                                                                                             11

2             Leave of absence                                                                                                                                              11

3             Conflict of Interest                                                                                                                                          11

4             Public Forum                                                                                                                                                      11

5             Extraordinary/Urgent Items                                                                                                                     11

6             Confirmation of Minutes                                                                                                                             11

Reports

7.1         Finance & Assurance Committee Work plan for the year ended 30 June 2020           25

7.2         Engagement Letter - Limited Independent Assurance Report of the debenture trust deed                                                                                                                                                                         27

7.3         Audit Engagement Letters                                                                                                                        57

7.4         Interim Management Report from Audit New Zealand for the year ended 30 June 2020                                                                                                                                                                                    87

7.5         Draft Annual Plan 2020/2021                                                                                                                  113

7.6         Annual Report 2019/2020 - Key dates                                                                                               125

7.7         Accounting Policies for the year ended 30 June 2020                                                             131

7.8         Quarterly risk management report - June 2020                                                                         151

7.9         New Zealand Transport Agency investment audit report for the period 2017/2018 to 2019/2020                                                                                                                                                           187

7.10       Monthly Financial Report - April 2020                                                                                              199

7.11       Health and Safety Update                                                                                                                        215

7.12       Draft Health and Safety Plan for 2020/21                                                                                        225

Public Excluded

Procedural motion to exclude the public                                                                                                       233

C8.1      Annual Insurance Renewal

C8.2      Deloitte Fraud Risk Assessment

C8.3      Operational Risk Report


1             Apologies

 

At the close of the agenda no apologies had been received.

 

2             Leave of absence

 

At the close of the agenda no requests for leave of absence had been received.

 

3             Conflict of Interest

 

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

 

4             Public Forum

Notification to speak is required by 5pm at least two days before the meeting. Further information is available on www.southlanddc.govt.nz or phoning 0800 732 732.

 

5             Extraordinary/Urgent Items

To consider, and if thought fit, to pass a resolution to permit the committee to consider any further items which do not appear on the Agenda of this meeting and/or the meeting to be held with the public excluded.

Such resolution is required to be made pursuant to Section 46A(7) of the Local Government Official Information and Meetings Act 1987, and the Chairperson must advise:

(i)            the reason why the item was not on the Agenda, and

(ii)          the reason why the discussion of this item cannot be delayed until a subsequent meeting.

Section 46A(7A) of the Local Government Official Information and Meetings Act 1987 (as amended) states:

“Where an item is not on the agenda for a meeting,-

(a)           that item may be discussed at that meeting if-

(i)        that item is a minor matter relating to the general business of the local authority; and

(ii)       the presiding member explains at the beginning of the meeting, at a time when it is open to the public, that the item will be discussed at the meeting; but

(b)          no resolution, decision or recommendation may be made in respect of that item except to refer that item to a subsequent meeting of the local authority for further discussion.”

 

6             Confirmation of Minutes

6.1             Meeting minutes of Finance and Assurance Committee, 30 April 2020


 

Finance and Assurance Committee

 

OPEN MINUTES

 

 

 

Minutes of a meeting of Finance and Assurance Committee held via Zoom (digital technology) on Thursday, 30 April 2020 at 9am (9am – 10.31am, 10.42am – 12.17pm, 12.49pm – 2.18pm, 2.25pm – 3.50pm (Public excluded 11.11am – 12.17pm, 12.49pm – 2.18pm, 2.25pm – 3.50pm)).

 

present

 

Chairperson

Bruce Robertson

 

Mayor Gary Tong

Councillors

Don Byars

 

John Douglas

 

Paul Duffy (9am – 10.31am, 10.42am – 12.17pm, 12.49pm – 1.25pm)

 

Julie Keast

 

Ebel Kremer

 

 

IN ATTENDANCE

Councillor Ruddenklau (9am -10.31am)

Chief Executive – Steve Ruru

Chief Financial Officer – Anne Robson

Committee Advisor – Fiona Dunlop

 


1             Apologies

 

There were no apologies.

 

 

2             Leave of absence

 

There were no requests for leave of absence.

 

 

3             Conflict of Interest

 

There were no conflicts of interest declared.

 

 

4             Public Forum

 

There was no public forum.

 

 

5             Extraordinary/Urgent Items

 

There were no Extraordinary/Urgent items.

 

 

6             Confirmation of Minutes

 

Resolution

Moved Chairperson Robertson, seconded Deputy Chairperson Kremer and resolved:

That the Finance and Assurance Committee confirms the minutes of the meeting held on 13 December 2019 as a true and correct record of that meeting.

 

Reports

 

 

7.2

Internal Audit Terms of Reference - Cyber Health Check

Record No: R/20/3/5910

 

Chief Financial Officer – Anne Robson was in attendance for this item.

 

Crispin Deans – Deloittes Director Risk Advisory was in attendance via Zoom for this item.

 

Miss Robson advised that the purpose of the report was to consider and agree the terms of reference for the second of six internal audit for a cyber-security health check.

 

The committee noted that Deloittes had been appointed as Councils Internal Auditor in 2018 and as part of the appointment the committee had asked Deloitte to work with staff and the committee to form a three year internal audit work programme.

 

 

 

Resolution

Moved Mayor Tong, seconded Chairperson Robertson and resolved:

That the Finance and Assurance Committee:

a)            Receives the report titled “Internal Audit Terms of Reference - Cyber Health Check” dated 1 April 2020.

 

b)           Determines that this matter or decision be recognised as not significant in terms of Section 76 of the Local Government Act 2002.

 

c)            Determines that it has complied with the decision-making provisions of the Local Government Act 2002 to the extent necessary in relation to this decision; and in accordance with Section 79 of the Act determines that it does not require further information, further assessment of options or further analysis of costs and benefits or advantages and disadvantages prior to making a decision on this matter.

 

d)           Approve the Terms of Reference (as attached to the officers report) for the Cyber Security Health Check.

 

 

7.3

Internal Audit Report, Procure to Pay Processes

Record No: R/20/3/6295

 

Chief Financial Officer – Anne Robson was in attendance for this item.

 

David Seath – Deloittes Partner Risk Advisory was in attendance via Zoom for this item.

 

1               Miss Robson advised that the purpose of the report was to report to the committee on the Deloittes completed first audit of the Councils procure to pay processes.

2                

The committee noted that Deloittes completed the first audit in October 2019 and reports the findings and also includes Council management responses.  The report found that the Council procure to pay processes are adequately controlled and as as part of the audit Deloitte have identified a number of examples of good practice as well as noting five areas for improvement.

 

 

Resolution

Moved Deputy Chairperson Kremer, seconded Cr Keast and resolved:

That the Finance and Assurance Committee:

a)            Receives the report titled “Internal Audit Report, Procure to Pay Processes” dated 1 April 2020.

 

b)           Requests staff report back to the August 2020 committee meeting the status of the outstanding points

 

 

 

7.1

Finance & Assurance Committee Work plan for the year ended 30 June 2020

Record No: R/20/3/6291

 

Chief Financial Officer – Anne Robson was in attendance for this item.

 

 

Resolution

Moved Chairperson Robertson, seconded Cr Keast and resolved:

That the Finance and Assurance Committee:

a)            Receives the report titled “Finance & Assurance Committee Work plan for the year ended 30 June 2020” dated 1 April 2020.

 

b)           Notes the changes made to the Finance and Audit Committee Work plan for the year ended 30 June 2020 since the last meeting.

 

 

7.5

Health and Safety Update

Record No: R/20/3/5457

 

People and Capability Manager – Janet Ellis was in attendance for this item

 

Mrs Ellis advised that the purpose of the report was to provide and update on the health and safety related incidents and activity.

 

 

Resolution

Moved Chairperson Robertson, seconded Deputy Chairperson Kremer and resolved:

That the Finance and Assurance Committee:

a)            Receives the report titled “Health and Safety Update” dated 16 March 2020.

 

 

7.6

Monthly Financial Report - March 2020

Record No: R/20/4/9681

 

Project Accountant – Dee Patel was in attendance for this item.

 

Mrs Patel advised that the purpose of the report was to provide the Committee with an overview of the financial results to date by the nine activity groups of Council, as well as the financial position, and the statement of cash flows for the nine months to 31 March 2020.

 

Resolution

Moved Chairperson Robertson, seconded Deputy Chairperson Kremer and resolved:

That the Finance and Assurance Committee:

a)            Receives the report titled “Monthly Financial Report - March 2020” dated 24 April 2020.

 

 

7.7

Forecasted Financial Position for the year ending 30 June 2020

Record No: R/20/3/5139

 

Management Accountant – Joanie Nel was in attendance for this item.

 

Mrs Nel advised that the purpose of the report was to update the committee of the expected year-end financial result compared to the published 2019/2020 Annual Plan and seek the committee’s recommendation to Council to approve the resulting forecasted position.

 

 

Resolution

Moved Deputy Chairperson Kremer, seconded Mayor Tong and resolved:

That the Finance and Assurance Committee:

a)            Receives the report titled “Forecasted Financial Position for the year ending 30 June 2020” dated 24 April 2020.

 

b)           Determines that this matter or decision be recognised as not significant in terms of Section 76 of the Local Government Act 2002.

 

c)            Determines that it has complied with the decision-making provisions of the Local Government Act 2002 to the extent necessary in relation to this decision; and in accordance with Section 79 of the Act determines that it does not require further information, further assessment of options or further analysis of costs and benefits or advantages and disadvantages prior to making a decision on this matter.

 

d)           Recommends to Council that it approve the changes as detailed in appendix A of the officer report.

 

e)            Notes the forecasted changes to Council’s year-end financial performance and position as detailed in appendices B and C of the officers report.

 

f)             Recommends to Council that it approves the deletion of the following 2019-20 projects:

 

Business Unit

Project

Amount

Riverton

Project to investigate stormwater discharge around Soundshell area due to blocked outlets

$10,000

Stewart Island Jetties

Golden Bay Wharf rebuild project

$233,812

Te Anau

Te Anau Stormwater condition assessment project terminated

$12,834

Te Anau

Project to Improve Link Te Anau – Manapouri trail and lakefront

$10,220

SIESA

Replacement Generator

$110,000

SIESA

Replace circuit breakers

$80,000

SIESA

Network upgrade

$20,440

SIESA

Exhaust system renewal/service

$20,000

SIESA

Replace one transformer

$35,000

SIESA

Gates, signs, fence/ Security

$30,000

SIESA

Ringfeed project Stage 3

$31,000

SIESA

Ringfeed project Stage 4

$56,000

SIESA

Ringfeed project Stage 5

$32,193

SIESA

Service SCADA control

$25,000

SIESA

Upgrade SCADA control

$10,000

 

g)           Recommends Council approve the following unbudgeted expenditure and funding source:

Business Unit

Expense

Amount

Funding Source

Customer Service

Postage

$36,720

District Ops Reserve

District Water

Resource Consents

$29,560

Short term Internal Loan

District Water

Maintenance unplanned

$110,000

Short term Internal Loan

Wheelie bins

Waste Disposal

$57,026

Waste management reserve

Roading

Emergency Re-instatement of roads due to flooding

$1,825,000

Roading rate reserve, NZTA

Water Supply Manapouri

Water lateral renewals

$25,000

Internal Loan

Manapouri Airport

Civil Aviation Authority Compliance costs

$90,000

Manapouri-Te Anau Airport Reserve

Sewerage Scheme Otautau

SCADA renewals

$54,260

Internal Loan

Limehills

Community Centre Kitchen upgrade

$7,378

Limehills Community Centre reserve

 

 

 

 

 

j)             Recommends to Council to approve to defer the following projects to the 2020/21 financial year:

 

Business Unit

Expense

Amount

Funding Source

District Library

Library RFID project and refurbishment at Winton

$382,800

Internal Loan

District Water

District Water Monitoring

$131,478

Internal Loan

Buildings Te Anau

Te Anau Library Project deferred to 20/21

$33,587

Property Development Reserve

Sewerage scheme Ohai

New UV/Treatment Plant upgrade

$54,225

Internal Loan

Stewart Island

Trail Park Pavilion toilets, project deferred to 20/21

$11,314

Internal Loan

Te Anau

Metering District Metered Areas

$101,500

Internal Loan

Te Anau Sewerage scheme

Scheme capacity upgrade (demand portion

$4,000,000

Development  Contributions and Internal Loan

Thornbury Streetworks

Kerb and channel Foster Road

$48,365

Internal Loan and Thornbury General Reserve

Waikawa Hall

Exterior Reclad of Hall

$25,000

Internal Loan and Waikawa-Niagara Community Centre Reserve

Streetworks Otautau

Footpath upgrade

$12,492

Rates and Internal Loan

Information Management

Core system review

$350,000

Internal Loan

 

 

7.8

Finance and Assurance Committee Workplan for the year ended 30 June 2021

Record No: R/20/3/6296

 

Chief Financial Officer – Anne Robson was in attendance for this item.

 

 

Resolution

Moved Chairperson Robertson, seconded Cr Douglas and resolved:

That the Finance and Assurance Committee:

a)            Receives the report titled “Finance and Assurance Committee Workplan for the year ended 30 June 2021” dated 17 March 2020.

 

b)           Adopts the Finance and Audit Committee Work plan for the year ended 30 June 2021.

 

 

7.9

Interim Performance Report - Period two - 1 July 2019 to 29 Feb 2020

Record No: R/20/3/8103

 

Planning and Performance Reporting Analyst – Shannon Oliver was in attendance for this item.

 

Miss Oliver advised that the purpose of the report was to provide the committee with the results of the interim performance report for the period 1 July 2029 to 29 February 2020.

 

 

Resolution

Moved Chairperson Robertson, seconded Cr Duffy and resolved:

That the Finance and Assurance Committee:

a)            Receives the report titled “Interim Performance Report - Period two - 1 July 2019 to 29 Feb 2020” dated 24 April 2020.

 

b)           Determines that this matter or decision be recognised as not significant in terms of Section 76 of the Local Government Act 2002.

 

c)            Determines that it has complied with the decision-making provisions of the Local Government Act 2002 to the extent necessary in relation to this decision; and in accordance with Section 79 of the act determines that it does not require further information, further assessment of options or further analysis of costs and benefits or advantages and disadvantages prior to making a decision on this matter.

 

 

The meeting adjourned for morning tea at 10.31am and reconvened at 10.42am.

 

(Councillor Ruddenklau left the meeting at 10.31am.)

 

 

7.4

Annual Report Audit Plan for year ending 30 June 2020

Record No: R/20/2/4487

 

Financial Accountant – Sheree Marrah was in attendance for this item.

 

Mrs Marrah advised that the purpose of the report was for the committee to approve the Annual Report Audit Plan as proposed by Audit New Zealand for the year ending 30 June 2020.

 

Audit NZ Audit Director – Dereck Ollsson was also in attendance via Zoom for this item.  Mr Ollsson explained the process that the Auditors would be taking for the annual report.  During discussion the committee were advised that the would be an increase in the fee that the Audit NZ charges for their services.

 

 

Resolution

Moved Cr Douglas, seconded Deputy Chairperson Kremer and resolved:

That the Finance and Assurance Committee:

a)            Receives the report titled “Annual Report Audit Plan for year ending 30 June 2020” dated 16 March 2020.

 

b)           Determines that this matter or decision be recognised as not significant in terms of Section 76 of the Local Government Act 2002.

 

c)            Determines that it has complied with the decision-making provisions of the Local Government Act 2002 to the extent necessary in relation to this decision; and in accordance with Section 79 of the Act determines that it does not require further information, further assessment of options or further analysis of costs and benefits or advantages and disadvantages prior to making a decision on this matter.

 

d)           Accepts the Annual Report Audit Plan for the year ending 30 June 2020, as set out in Attachment A of the officers report.

 


 

Public Excluded

 

Exclusion of the Public: Local Government Official Information and Meetings Act 1987

Resolution

Moved Chairperson Robertson, seconded Mayor Tong and resolved:

That the public be excluded from the following part(s) of the proceedings of this meeting.

C8.1 Annual Report - Management Report from Audit NZ for the year ended 30 June 2019

C8.2 Quarterly risk management report - March 2020

C8.3 Operational Risk Report

C8.4 Te Anau Wastewater Upgrade Update and Request for Unbudgeted Expenditure

C8.5 Te Anau Wastewater Upgrade – Recommendation to Award Membrane Filtration Plant Contract (19/46)

C8.6 Te Anau Wastewater Upgrade – Recommendation to Award Contract for Kepler Dripline Installation

The general subject of each matter to be considered while the public is excluded, the reason for passing this resolution in relation to each matter, and the specific grounds under section 48(1) of the Local Government Official Information and Meetings Act 1987 for the passing of this resolution are as follows:

 

General subject of each matter to be considered

Reason for passing this resolution in relation to each matter

Ground(s) under section 48(1) for the passing of this resolution

 

Annual Report - Management Report from Audit NZ for the year ended 30 June 2019

s7(2)(i) - The withholding of the information is necessary to enable the local authority to carry on, without prejudice or disadvantage, negotiations (including commercial and industrial negotiations).

That the public conduct of the whole or the relevant part of the proceedings of the meeting would be likely to result in the disclosure of information for which good reason for withholding exists.

 

Quarterly risk management report - March 2020

s7(2)(e) - The withholding of the information is necessary to avoid prejudice to measures that prevent or mitigate material loss to members of the public.

s7(2)(i) - The withholding of the information is necessary to enable the local authority to carry on, without prejudice or disadvantage, negotiations (including commercial and industrial negotiations).

That the public conduct of the whole or the relevant part of the proceedings of the meeting would be likely to result in the disclosure of information for which good reason for withholding exists.

 

Operational Risk Report

s6(b) - The making available of the information would be likely to endanger the safety of a person.

s7(2)(i) - The withholding of the information is necessary to enable the local authority to carry on, without prejudice or disadvantage, negotiations (including commercial and industrial negotiations).

That the public conduct of the whole or the relevant part of the proceedings of the meeting would be likely to result in the disclosure of information for which good reason for withholding exists.

 

 

Te Anau Wastewater Upgrade Update and Request for Unbudgeted Expenditure

s7(2)(h) - The withholding of the information is necessary to enable the local authority to carry out, without prejudice or disadvantage, commercial activities.

That the public conduct of the whole or the relevant part of the proceedings of the meeting would be likely to result in the disclosure of information for which good reason for withholding exists.

 

 

Te Anau Wastewater Upgrade – Recommendation to Award Membrane Filtration Plant Contract (19/46)

s7(2)(h) - The withholding of the information is necessary to enable the local authority to carry out, without prejudice or disadvantage, commercial activities.

s7(2)(i) - The withholding of the information is necessary to enable the local authority to carry on, without prejudice or disadvantage, negotiations (including commercial and industrial negotiations).

That the public conduct of the whole or the relevant part of the proceedings of the meeting would be likely to result in the disclosure of information for which good reason for withholding exists.

 

 

Te Anau Wastewater Upgrade – Recommendation to Award Contract for Kepler Dripline Installation

s7(2)(h) - The withholding of the information is necessary to enable the local authority to carry out, without prejudice or disadvantage, commercial activities.

s7(2)(i) - The withholding of the information is necessary to enable the local authority to carry on, without prejudice or disadvantage, negotiations (including commercial and industrial negotiations).

That the public conduct of the whole or the relevant part of the proceedings of the meeting would be likely to result in the disclosure of information for which good reason for withholding exists.

 

 

That the Chief Executive, Group Manager, Environmental Services, Group Manager, Services and Assets, Group Manager, Community and Futures, Chief Financial Officer, People and Capability Manager, Group Manager, Customer Delivery, Communications Manager and Committee Advisor be permitted to remain at this meeting, after the public has been excluded, because of their knowledge of the items C8.1 Annual Report - Management Report from Audit NZ for the year ended 30 June 2019, C8.2 Quarterly risk management report - March 2020, C8.3 Operational Risk Report, C8.4 Te Anau Wastewater Upgrade Update and Request for Unbudgeted Expenditure, C8.5 Te Anau Wastewater Upgrade – Recommendation to Award Membrane Filtration Plant Contract (19/46) and C8.6 Te Anau Wastewater Upgrade – Recommendation to Award Contract for Kepler Dripline Installation. This knowledge, which will be of assistance in relation to the matters to be discussed, is relevant to those matters because of their knowledge on the issues discussed and meeting procedure.

 

That Planning and Reporting Analyst – Shannon Oliver, Strategy and Policy Manager – Michelle Stevenson and Associate Audit Director with Audit NZ – Dereck Ollsson be permitted to remain at this meeting, after the public has been excluded, because of their knowledge of the item C8.1 Annual Report - Management Report from Audit NZ for the year ended 30 June 2019. This knowledge, which will be of assistance in relation to the matters to be discussed, is relevant to those matters because of their knowledge on the issues discussed.

 

 

That Policy Analyst – Jane Edwards and Strategy and Policy Manager – Michelle Stevenson be permitted to remain at this meeting, after the public has been excluded, because of their knowledge of the item C8.2 Quarterly risk management report - March 2020. This knowledge, which will be of assistance in relation to the matters to be discussed, is relevant to those matters because of their knowledge on the issues discussed.

 

That the Strategic Manager Water and Waste – Ian Evans and Senior Project Accountant – Susan McNamara be permitted to remain at this meeting, after the public has been excluded, because of their knowledge of the items C8.4 Te Anau Wastewater Upgrade Update and Request for Unbudgeted Expenditure, C8.5 Te Anau Wastewater Upgrade – Recommendation to Award Membrane Filtration Plant Contract (19/46) and C8.6 Te Anau Wastewater Upgrade – Recommendation to Award Contract for Kepler Dripline Installation. This knowledge, which will be of assistance in relation to the matters to be discussed, is relevant to those matters because of their knowledge on the issues discussed.

 

The public were excluded at 11.11am.

 

Resolutions in relation to the confidential items are recorded in the confidential section of these minutes and are not publicly available unless released here.

 

 

The meeting concluded at 3.50pm.                      CONFIRMED AS A TRUE AND CORRECT RECORD AT A MEETING OF THE Finance and Assurance Committee HELD ON THURSDAY 30 APRIL 2020.

 

 

 

DATE:............................................................................................

 

 

 

CHAIRPERSON:........................................................................

 


Finance and Assurance Committee

22 June 2020

 

Finance & Assurance Committee Work plan for the year ended 30 June 2020

Record No:             R/20/6/15106

Author:                      Anne Robson, Chief Financial Officer

Approved by:         Steve Ruru, Chief Executive

 

  Decision                                       Recommendation                                  Information

 

 

 

Purpose

1        To update the Committee on the status of the work programme discussed and agreed at the 26 March 2019 meeting for the financial year ending 30 June 2020.

2        As noted at the meeting the adoption of the work plan does not preclude the Committee or staff from including additional reports as and when required. 

3        As the year proceeds the work plan will be updated to incorporate the actual dates reports are being presented where that differs to the work plan adopted.  For the committees information the “X” in red shows the date the report was presented, where this differs from what was approved in the work plan or if it is a new report that will be presented on an annual basis.  If there is a black “X” on the same line as a red “X”, the black “X” indicates the date agreed by the committee.  The “X” in green reflects changes identified to the ongoing work plan since it was adopted.

4        This meeting includes all the reports indicated in this plan for this meeting date. 

5        In addition to the reports noted in the timetable, this agenda also includes an

-        operational risk report

-        health and safety plan

-        annual report audit proposal 2020, 2021 and 2022

-        annual report audit engagement 2020, 2021 and 2022

-        fraud risk assessment actions

-        NZTA audit report.

 

Recommendation

That the Finance and Assurance Committee:

a)            Receives the report titled “Finance & Assurance Committee Work plan for the year ended 30 June 2020” dated 16 June 2020.

 

b)           Notes the changes made to the Finance and Audit Committee Work plan for the year ended 30 June 2020 since the last meeting.

 

Attachments

a             Finance & Assurance Committee 2019-20 meeting content (June 2020 meeting)    

 


Confidential Finance and Assurance Committee

22 June 2020

 

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Finance and Assurance Committee

22 June 2020

 

Engagement Letter - Limited Independent Assurance Report of the debenture trust deed

Record No:             R/20/5/11656

Author:                      Sheree Marrah, Financial Accountant

Approved by:         Anne Robson, Chief Financial Officer

 

  Decision                                       Recommendation                                  Information

 

 

 

Purpose

1        To provide an overview of and seek authorisation of Audit New Zealand’s (Audit NZ) engagement letter for the limited independent assurance report of Council’s debenture trust deed.

Executive Summary

2        Audit NZ requires Council to confirm the terms of its engagement for the limited independent assurance report of Council’s debenture trust deed, by way of an engagement letter.

3        This letter is required to be signed by the Mayor and returned to Audit NZ to confirm Council’s acceptance of the engagement terms.

4        A copy of Audit NZ’s engagement letter and associated documents are included as Attachment A.

Recommendation

That the Finance and Assurance Committee:

a)            Receives the report titled “Engagement Letter - Limited Independent Assurance Report of the debenture trust deed” dated 16 June 2020.

 

b)           Determines that this matter or decision be recognised as not significant in terms of Section 76 of the Local Government Act 2002.

 

c)            Determines that it has complied with the decision-making provisions of the Local Government Act 2002 to the extent necessary in relation to this decision; and in accordance with Section 79 of the act determines that it does not require further information, further assessment of options or further analysis of costs and benefits or advantages and disadvantages prior to making a decision on this matter.

 

d)           Authorises the Mayor to sign the Audit New Zealand engagement letter for the limited independent assurance report of the debenture trust deed on Council’s behalf.  

 

Background

5        Historically the assurance report of the debenture trust deed was included as part of the Council’s engagement letter for the annual report audit.  However since 2018, Audit NZ now require a separate engagement letter to be signed for the completion of this work.  The cost of undertaking this work is in addition to the annual report audit fee.

6        The debenture trust was established in 2009 with assistance from Simpson Grierson in order to give Council a broader range of options for sourcing long term external funding.  This is an established market security for lenders and similar trust deeds exist for various other Councils.

7        Perpetual Trust Limited (now trading as Covenant Trustee Services Limited (Covenant)) were appointed to act as Trustee under the debenture Trust deed for the benefit of stockholders. They also act as a supervisor for Council debt matters.

8        Under Section 12.2.6 of the debenture trust deed between Council and Covenant, Council are required to provide an independent auditors report on an annual basis.

9        The letter of engagement outlines the scope, terms, responsibilities and logistics of the engagement for the year ended 30 June 2020.

10      The engagement letter contains the following sections:

·              scope of the engagement – outlines the extent of the work to be undertaken by Audit NZ for this engagement.

·              scope of the Council’s responsibilities - outlines Council’s responsibilities in relation to the information to support the independent review of the trust deed.

·              scope of the Trustee’s responsibilities - outlines Covenant Trustee Services Limited’s responsibilities as the Trustee in relation to the trust deed.

·              scope of the Auditor’s responsibilities under the trust deed - outlines Audit NZ’s responsibilities as the auditor in relation to the trust deed.

·              timetable - the work will be completed concurrently with Council’s statutory
annual report audit, with sign off occurring soon after the adoption of Council’s annual report.

·              restriction on use and distribution of the report - restricts the use of the Audit NZ report for the sole purpose of meeting the requirements of clause 12.2.6 of the trust deed.

·              fees - the fee for the trust deed limited independent assurance engagement is estimated to be $4,000 (GST exclusive).

·              supporting documentation required – the information required to be provided by Council for this engagement is included in Appendix 3 of the letter.

·              agreement - Audit NZ require the Mayor and a representative from
Covenant Trustee Services Limited (as Trustee) to sign this letter to confirm their acceptance of the terms in the engagement letter. You will note, from Attachment A, that Igor Viner has already signed this letter on behalf of Covenant Trustee Services Limited.

11      A copy of the engagement letter is attached for your information.

12      Included as Appendix 1 of Audit NZ’s engagement letter is a draft unqualified limited independent assurance report which will be issued to Council at the conclusion of the engagement (subject to successfully completion of the necessary fieldwork).

Issues

13      No issues have been identified, the terms of the engagement are consistent with prior years.

Factors to Consider

Legal and Statutory Requirements

14      Under Section 12.2.6 of the of the debenture trust deed between Southland District Council and Covenant Trustee Services Limited, Council are required to provide an auditor’s report on the compliance with the debenture trust deed for the year ended 30 June 2020.

 

Community Views

15      This matter has no impact on community views.

 

Costs and Funding

16      The cost of the Limited Independent Assurance Report of the debenture trust deed is estimated to be $4,000 (GST excl). Council has allowed for this cost within the annual audit fees budget.

 

Policy Implications

17      There are no policy implications.

 

Analysis of Options

Options Considered

18      There are two options to be considered in this report as outlined below.

Option 1 – Accept the terms of Audit NZ’s engagement letter for the Limited Independent Assurance Report in respect of the debenture trust deed.

Advantages

Disadvantages

·      timely receipt of the Limited Independent Assurance Report for Council’s debenture trust deed.

·      meet our obligation to provide an independent auditor’s report under Section 12.2.6 of the debenture trust deed.

·      no disadvantages.

 


 

Option 2 – Do not accept the terms of Audit NZ’s engagement letter for the Limited Independent Assurance Report in respect of the debenture trust deed.

Advantages

Disadvantages

·        If the committee want to make significant changes these can be discussed with Audit NZ prior to signing.

·      Audit NZ will be unable to provide the Limited Independent Assurance Report for Council’s debenture trust deed.

·      Council will fail to meet its obligation to provide an independent auditor’s report under Section 12.2.6 of the debenture trust deed.

 

Assessment of Significance

19      This matter is not considered significant in terms of Council’s significance and engagement policy.

Recommended Option

20      Option 1 - Accept the terms of Audit NZ’s engagement letter for the Limited Independent Assurance report in respect of the debenture trust deed.

Next Steps

21      Mayor Tong will sign the engagement letter on behalf of Council and the signed letter will be returned to Audit NZ.  Audit NZ will undertake their fieldwork for this engagement in late September/early October 2020.

 

Attachments

a             Debenture Trust Deed Engagement Letter from Audit NZ for the year ended 30 June 2020    

 


Finance and Assurance Committee

22 June 2020

 

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Finance and Assurance Committee

22 June 2020

 

Audit Engagement Letters

Record No:             R/20/5/11659

Author:                      Sheree Marrah, Financial Accountant

Approved by:         Anne Robson, Chief Financial Officer

 

  Decision                                       Recommendation                                  Information

 

 

 

Purpose

1        To receive the proposal and audit engagement letters from Audit NZ, to conduct the audit of Council on behalf of the Auditor-General for the 2020, 2021 and 2022 financial years.

2        For Council to consider accepting the fee proposed in regards to the 2020 year and the terms of the audit including Councils responsibilities for the years ended 30 June 2020, 2021 and 2022.

Executive summary

3        Council has received the proposal from Audit NZ to complete the audit of Council on behalf of the Auditor-General for the 2020, 2021 and 2022 financial years.  As part of doing so, Audit NZ is looking for Council to accept the audit fee for the year ended 30 June 2020 and the proposal to work together for the setting of the fees for the 2021 and 2022 financial years.

4        Council has also received the audit engagement letter for the years ending 30 June 2020 to 30 June 2022, which sets out the terms of the audit engagement and the respective responsibilities of Audit NZ and Council during this process.  Audit NZ is looking for Council to acknowledge the terms of engagement.

5        If the committee is in agreement with what is proposed, the report includes a recommendation for the mayor to be given authority to sign the documents on behalf of Council.

6        A summary of the letters (attachment A & B) is undertaken in the report.

 

 

Recommendation

That the Finance and Assurance Committee:

a)            Receives the report titled “Audit Engagement Letters” dated 16 June 2020,

 

b)           Determines that this matter or decision be recognised as not significant in terms of Section 76 of the Local Government Act 2002,

 

c)            Determines that it has complied with the decision-making provisions of the Local Government Act 2002 to the extent necessary in relation to this decision; and in accordance with Section 79 of the act determines that it does not require further information, further assessment of options or further analysis of costs and benefits or advantages and disadvantages prior to making a decision on this matter,

 

d)           Receives the proposal from Audit NZ to conduct the audit of Council on behalf of the Auditor-General for the 2020, 2021 and 2022 financial years

e)            Receives the Audit engagement letter from Audit NZ for the 2020, 2021 and 2022 financial years

f)            Accepts the proposed 1.5% audit fee increase of $1,775 for the audit of the annual report for the year ended 30 June 2020, resulting in an overall audit fee of $120,124 excl GST plus actual disbursements for the year ended 30 June 2020.

g)           Accepts the terms of the engagement for the audit of the annual report for the 2020, 2021 and 2022 financial years.

h)           Agrees to enter into discussions with Audit NZ in relation to the audit of Councils annual report for the years ended 30 June 2021 and 2022

i)             Authorises the Mayor to sign the following letters received from Audit NZ,

-     proposal to conduct the audit of Southland District Council on behalf of the Auditor General for the 2020, 2021 and 2022 financial years,

-     audit engagement letter.

 

 

Background

7        The purpose of this report is to provide an overall summary of the two letters recently received from Audit NZ.  The two letters being the audit proposal letter and the audit engagement letter.  These letters cover the coming three financial years and are in response to the Office of the Auditor General (OAG) seeking to appoint the auditor for Council for that period. 

8        These letters are in addition to the audit plan letter received from Audit NZ in relation to the 2019/20 annual report that was presented to the committees 30 April 2020 meeting.

Audit Proposal Letter

9        The purpose of the proposal letter is to provide information on:

·                      the statutory basis for the audit and how the audit fees are set,

·                      the entities covered by the proposal,

·                      the key members of the audit team,

·                      the hours Audit NZ plan to spend on the audit and the reasons for any change in hours,

·                      the proposed fee for the audit of the financial year ending 30 June 2020, and the reasons for any change,

·                      assumptions relating to the proposed audit fees, including what is expected of Council,

·                      what the OAG audit standard and quality support fee provides,

·                      the certification required by the Auditor General, and

·                      Audit NZ’s commitment to conduct the audit in accordance with the Auditor-General’s Auditing Standards.

10      Normally the proposal letter outlines the audit fee for each of the three years. Generally the fee is set by the Auditor General having regard to section 42 of the Public Audit Act which requires that the fees are “reasonable” for both the auditors and Council.

11      This letter only proposes the setting of the fee for the year ended 30 June 2020. For that year the fee is being held at 1.5% over the agreed fee for the 30 June 2019 audit. In proposing this fee, the Auditor-General noted the very real cost pressures that Council and his office is facing as a result of Covid-19.

12      In fixing the fee for 2020 however, the Auditor General has clearly indicated that for many years across the sector there has been a significant and growing under recovery of audit fees for a range of reasons and that that needs to be resolved, as parliament expects the cost to be met by public entities. 

13      As a result of the cost pressures and worried that audit quality may be compromised over time, Councils are being encouraged to work with their auditor to mutually agree and recommend fees to the OAG for the 2021 and 2022 financial years.  The timing of this work, is being proposed by Mr Ollsson to be later this year, beginning of next, due to workloads.

14      To start this process, Mr Ollsson has outlined in section five and six of the proposal the budgeted and actual hours for 2019 along with budgeted 2020 hours and the proposed audit fee. As part of section six, Mr Ollsson has indicted that the fee for 2020 if based in an efficient audit at full recovery would be in the range of $145,743 to $160,753, about $35,000 or a 30% increase on the 2019 fee.  Mr Ollsson indicates that the likely increase is significant and would be phased in over time.

15      As a note, if a fee cannot be agreed, the Auditor General will, with assistance from the OAG, directly set the fee.

 


 

Estimated audit hours and cost

16     Audit NZ estimate the following hours and fees will be required to carry out the audits (compared to budgeted and actual data from the previous financial year):

 

2019 budget

2019 actual charged

2019 incurred

2020

Total audit hours

716

-

1,150

824

Total audit fees (excl GST and disbursements)

$118,349

$124,524

$186,706

$120,124

Disbursements (excl GST charged by AuditNZ)

$8,500

$8,710

$9,871

$8,500

Accommodation disbursements for Audit NZ staff paid by Council (excl GST)

-

$8,863

-

-

17     For the committees information, Council has for a number of years paid the accommodation costs of Audit NZ staff due to the rate it has negotiated locally.

18     As noted above even though Audit NZ are indicating an increase in hours for the year ended 30 June 2020 the fee is being held at a 1.5% increase before actual disbursements.

19     In assessing the increase in hours of 108 (824 less 716), as noted in section 5.31 of their proposal, Audit NZ are reportedly recognising changes in the time needed to conduct the audit in line with the Office of the Auditor General guidelines over a number of prior years that have not been reflected in the fee calculation to date. 

20     The increase relates to:

·          changes to financial reporting standards which result in additional audit work principally IPSAS 34-38, group entity accounting, (7 hours)

·          unavoidable travel time, Mr Ollsson advised that this has not been previously invoiced.  Seemingly when the Audit NZ office was moved from Invercargill to Dunedin a number of years ago, an agreement was made to not charge for travelling time.  Mr Ollsson has advised that the 57 hours budgeted still does not reflect the actual hours taken to travel. 

·          compulsory engagement quality control review (10 hours), as a result of now exceeding 750 hours an additional review within Audit NZ is needed,

·          changes within the entity, or in its environment – such as changes in the entity’s activity, systems, risk profile, or complexity, which have resulted in a change to the size or complexity of the audit (34 hours).  In here Audit NZ have noted that sensitive expenditure, asset valuations, rating process review, estimations and judgements, non-financial reporting and changes in the Council’s group structure contribute to additional hours.

21     It is important to note that if over the three years, there are any changes made to the structure of council, mandatory accounting or auditing standards or the audit arrangements that would change the scope of, timing of or disbursements related to this audit then these would be discussed with Council as part of seeking additional recoveries for them. 

 

Audit Engagement Letter:

22     The audit engagement letter for the 2020, 2021 and 2022 years outlines:

•          the terms of the audit engagement and the nature, and limitations of the annual audit,

•          the respective responsibilities of the District Council and Audit NZ as the Appointed Auditor for the financial statements and performance information.

23      The proposed engagement letter is not significantly different to that signed by the Mayor three years ago. 

 

Issues

24      The purpose of an audit is to provide an objective independent examination of the financial statements, which increases their value and credibility, thus increasing user confidence in the financial statements.  As such, it is in Council’s interest for the Office of the Auditor General and Audit NZ to define the audit programme of work.

25      Notwithstanding the above paragraph, the audit is still being undertaken for the benefit of Council and as such the committee needs to take full advantage of the opportunity to draw any specific matter to the audit directors attention that it would like to see have additional assurance or comment on as part of the overall audit.

 

Factors to consider

Legal and statutory requirements

26      Section 98(1) of the Local Government Act 2002 requires the Council to prepare and adopt an Annual Report each financial year.  Section 99(1) requires the Annual Report to include an Auditor’s Report.

27      In accordance with Section 14(1) of the Public Audit Act 2001, the Council’s Annual Report must be audited by the Office of the Auditor-General.  Audit New Zealand is the authorised audit service provider on behalf of the Auditor-General.

 

Community views

28      No consultation is required as the Annual Report reflects the actual results of activities undertaken during the year compared to the LTP/Annual Plan budgets, which typically have been consulted on.

 

Costs and funding

29     The cost associated with the audit of 2019/2020 Annual Report is $120,124 (GST exclusive) plus disbursements.  Audit Fees of $151,613 have been budgeted in the 2019/2020 Annual Plan.

 

Policy implications

30      There are no policy implications. 

Analysis

Options Considered

31      There are two options to be considered in this report as outlined below.

Analysis of Options

Option 1 – accept and sign (subject to any amendments discussed and agreed at the meeting with the audit director) the audit proposal and audit engagement letters as attached.

Advantages

Disadvantages

·        allows the Annual Report process to continue as proposed.

·        confirms Council’s auditors for the next three years and the key details around the engagement.

·        none, unless Council requires clarification and this is not sought before signing.

 

Option 2 – Request clarification or inclusion of any issue that Council wants included in the audit letters before accepting them

Advantages

Disadvantages

·        Council is able to seek the clarification it requires or discuss the inclusion of any issue it would like incorporated into the audit

·        could delay the audit process if Council and Audit NZ  cannot agree to appropriate arrangements.

 

Assessment of Significance

32      The decision being made in this report is whether Council should agree to the audit engagement and arrangement proposals presented by Audit NZ. Given the administrative nature of this matter it is not considered significant in terms of Council’s Significance Policy.

Recommended Option

33      Option 1, accept and sign (subject to any amendments discussed and agreed at the meeting with the audit director) the audit proposal and audit engagement letters as attached.

Next Steps

34      If accepted, council staff will arrange for the Mayor to sign these letters and return them to Audit NZ.

35      Council staff will compile the 2019/2020 Annual Report to enable the final audit to be undertaken and adoption to occur on the 21 October 2020.

 

Attachments

a             Audit Proposal Letter for the 2020 2021 and 2022 financial years

b             Audit Engagement letter    

 


Finance and Assurance Committee

22 June 2020

 

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Finance and Assurance Committee

22 June 2020

 

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Finance and Assurance Committee

22 June 2020

 

Interim Management Report from Audit New Zealand for the year ended 30 June 2020

Record No:             R/20/5/11689

Author:                      Sheree Marrah, Financial Accountant

Approved by:         Anne Robson, Chief Financial Officer

 

  Decision                                        Recommendation                                  Information

 

 

 

Summary of Report

1        As part of the audit process, Audit New Zealand (Audit NZ) provides Council with a report on the interim audit of Council’s Annual Report. 

2        The primary purpose of the interim audit is for Audit NZ to update their understanding of Councils control environment, identify any control improvements required and confirm the extent to which they can rely on the controls in place for the Council.  Their findings indicated that Council continues to operate an effective control environment.

3        Overall the report notes that based on the work performed, there are no new recommendations.  As the interim audit procedures were undertaken remotely during level 4 Covid 19 lockdown, there was some testing that was unable to be completed (refer to page 19 of Attachment A). Audit NZ has advised this work will be completed as part of the final audit fieldwork.

4       Council staff will continue to work to implement/resolve the recommendations from previous audits. Attachment A of the report, updates the status of these recommendations.  Of the 25 recommendations, five have been implemented or closed, eight will be followed up in the final audit and 12 are still open, with some just requiring confirmation by the auditors of their completion when they are onsite for the final audit.

 

Recommendation

That the Finance and Assurance Committee:

a)            Receives the report titled “Interim Management Report from Audit New Zealand for the year ended 30 June 2020” dated 16 June 2020.

 

Attachments

a             Interim Audit Report from Audit New Zealand for the year ended 30 June 2020    

 


Finance and Assurance Committee

22 June 2020

 

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Finance and Assurance Committee

22 June 2020

 

Draft Annual Plan 2020/2021

Record No:             R/20/5/11773

Author:                      Jason Domigan, Corporate Performance Lead

Approved by:         Rex Capil, Group Manager Community and Futures

 

  Decision                                       Recommendation                                 Information

 

 

 

Purpose

1        The purpose of the report is for the Finance and Assurance committee to review the final draft of the Annual Plan 2020/2021 and recommend to Council its adoption.

Executive Summary

2        Every three years, council adopts a ten year plan which is referred to as the ‘Long Term Plan (LTP)’.

3        In the intervening years, an Annual Plan is developed to address any variances from the LTP, to confirm service levels and budgets for the year, and to set rates. Year three of the Council’s LTP 2018-2028 serves as the base for the Annual Plan 2020/2021. 

4        All councils are required by legislation to prepare and adopt an Annual Plan for each financial year before the start of the new financial year. The Annual Plan is not audited.

5        The 2020/2021 Annual Plan did not have any significant or material variances between year three of the LTP 2018-2028. As a result, it was agreed by Council not to go out to the public for formal consultation with the community.

6        Council did produce an annual plan information document and used social media and the council website to update the community on the Annual Plan process.

7        The global Covid-19 pandemic has potentially led to increased pressure on rate affordability.  Additional measures were used to reduce the impact of increased rates on communities, including utilisation of forestry and roading reserves.

8        The rate increase for 2020/2021 financial year is proposed to be 2.31%, compared to the 3.27% proposed in the LTP 2018-2028.

9        It is intended that the committee recommends to Council the adoption of the Annual Plan 2020/2021, including the Funding Impact Statement (Rates section) for the 2020/2021 financial year.

10      A copy of the draft Annual Plan 2020/2021 is included separately.

 

Recommendation

That the Finance and Assurance Committee:

a)        Receives the report titled “Draft Annual Plan 2020/2021” dated 16 June 2020.

 

b)        Determines that this matter or decision be recognised as significant in terms of Section 76 of the Local Government Act 2002.

 

c)         Determines that it has complied with the decision-making provisions of the Local Government Act 2002 to the extent necessary in relation to this decision; and in accordance with Section 79 of the Act determines that it does not require further information, further assessment of options or further analysis of costs and benefits or advantages and disadvantages prior to making a decision on this matter.

 

d)        Confirms in accordance with Section 100 of the Local Government Act 2002 that the Annual Plan 2020/2021 has been prepared based on reasonable judgement and assumptions and that it considers the projected financial results, including the projected operating deficit for 2020/2021, to be financially prudent given its financial position.

 

e)        Confirms the reduction of the Te Anau Airport Manapouri rate from $128.00 (incl GST) to $67.69 (incl GST).  Noting this reduction is being done by extending the airport loan by one year and deferring the 2020/2021 airport loan repayment and by funding the interest charge by adding it to the airport loan balance to be repaid over the life of the loan. 

 

f)       Acknowledges that resolution e above, is inconsistent with Council’s Revenue and Financing policy as it is funding an operational cost from a loan. Accordingly Council recognise that this as an inconsistent decision made in accordance with section 80 of the Local Government Act 2002.

 

g)        Notes that resolution e above is in response to the potential financial impact of Covid-19 on affordability of rates, particularly in the Fiordland rating area.  A review of the Revenue and Financing policy will be undertaken as part of Council’s 2021-2031 Long Term Plan, but at this stage there are no plans to alter the policy to generally allow the funding of operational costs from loans.

 

h)        Recommends to Council the adoption of the Annual Plan 2020/2021, including the Funding Impact Statement (Rates section) for the 2020/2021 financial year.

 

i)          Recommends to Council that a copy of the finalised fees and charges booklet be made available on Council’s website and be distributed to relevant stakeholders, Hall Committees and Community Boards for their information.

 

Background

11      Once every three years, Southland District Council is required to adopt a Long Term Plan (LTP), and in the intervening years an Annual Plan. These plans set out the service levels and budgets for the coming year, as well as being used to set rates.

12      Year three of the Council’s LTP 2018-2028 serves as the base for the Annual Plan 2020/2021.

13      The Annual Plan 2020/2021 proposed rates increase is broadly consistent with what was projected for the 2020/2021 year in the LTP 2018-2028.

14      The majority of changes relate to capital works projects for roading, sewerage and water renewals and changes in operational costs. These capital works projects were already included in the LTP 2018-2028 and budget included within the work programme.

15      All councils are required by legislation to prepare and adopt an Annual Plan for each financial year before the start of the new financial year. The Annual Plan is not audited.

16      The purpose of an Annual Plan is to:

•     detail the proposed annual budgets and funding impact statement;

•     identify any variation from the financial statements and funding impact statement included in the Long Term Plan (LTP) in respect of the year;

•     provide integrated decision-making and co-ordination of the resources of the local authority;

•     contribute to the accountability of the local authority to the community.

 

17      As part of developing the Annual Plan, community boards and water supply subcommittees were provided with the opportunity at their direction-setting meetings to highlight any planned changes for the 2020/2021 financial year from what was budgeted for year three of the Long Term Plan 2020/2021. Hall committees and Council staff were also asked to advise of any changes to fees and charges for the 2020/2021 year.

18      On 17 December 2019, Council informally discussed a number of key matters associated with the 2020/2021 Annual Plan, including:

•     proposed fees and charges

•     grants and donations

•     planned capital projects for 20/21

•     roading rate model

•     key financial matters, including loans, reserves, forestry dividend and SIESA

•     impact on the overall and specific rates for 2020/2021

 

19      At its meeting on 30 January 2020, Council formally considered the need for consultation on the 2020/2021 Annual Plan.  Council confirmed there was no community consultation required for the Annual Plan 2020/2021 as there were no significant variances to the LTP 2018-2028. This was in accordance with the Significance and Engagement Policy that was adopted in June 2018 through the LTP process.

20      On 11 March 2020, the World Health Organisation (WHO) declared Covid-19 as a global pandemic.  The government devised a series of alert levels with associated restrictions ranging from 1 to 4 with 4 being the most severe. In New Zealand, the nation went into lockdown at alert level 4 for the period of 25 March to 27 April with only essential services running and the majority of New Zealanders staying at home to help reduce the spread of Covid-19. The country then moved to alert level 3 for 16 days before moving to alert level 2.

21      The Covid-19 pandemic may have severe social disruption and financial impacts including potential economic recession and increased unemployment. 

22      Given the impact of Covid-19 on the wider community it was important for Council to consider rates affordability and try to minimise the level of proposed rates increase.

23      Further discussions were held between January and March to review operational budgets and to also consider the wider implications of the Covid-19 pandemic. 

24      At the 22 April council meeting, revised guidance was given for the direction of the Annual Plan 2020/2021 and the budgets including the following summary of the key resolutions below:

•     progress the work on the Annual Plan on the basis of a 2.65% proposed rate increase noting that while it differs from year three of the LTP, it does not constitute a significant or material change

•     endorse the revised project plan

•     endorse the reduction of the Te Anau Airport Manapouri rate from $128.00 (incl GST) to $67.69 (incl GST).

•     recognise that the proposed reduction in the Te Anau Airport Manapouri rate above is inconsistent with Council’s Revenue and Financing policy. 

•     notes that the above reduction in the Te Anau Airport Manapouri rate is proposed in response to the potential financial impact of Covid-19 on affordability of rates, and a review of the Revenue and Financing policy will be carried out as part of its 2021-2031 Long Term Plan.

25      Subsequent to the 22 April council meeting, the Fiordland Community Board agreed at its meeting on 19 May 2020 to recommend the reduction in the airport rate from $128.00 (incl GST) to $67.69 (incl GST). 

26      Further informal discussions on the draft Annual Plan were held on 20 May which presented the full draft annual plan to Councillors for their review.  This version of the accounts included the impact of the reduction in the Te Anau Airport Manapouri rate, which resulted in a proposed overall rate increase of 2.31% (from 2.65% as previously advised).  Councillors were also given a preview of the design theme of the final document.

 

Consultation and feedback

27      There was no community consultation for the Annual Plan 2020/2021 as there were no significant variances to the LTP 2018-2028. This was in accordance with the Significance and Engagement Policy that was adopted in June 2018 through the LTP process.

28      However, an Annual Plan information document was produced to update the public on the proposed direction and proposed rates increase. The document was put on the Council website and facebook.

29      The Annual Plan information document post on facebook reached 2,827 people, had 119 engagements and received feedback from one member of the public who submitted three comments in total, expressing adverse opinion.

Changes from year three of the LTP 2018-2028

30      The majority of the changes between what was forecasted in the 2020/2021 year in the LTP 2018-2028 from what has been included in the draft Annual Plan 2020/2021 relate to capital works projects. Key changes include:

•      the deferral/addition from 2019/2020 of $4.1 million of water capital projects (Lumsden/Balfour, Manapouri, Riverton, Te Anau) to be implemented in 2020/2021.

•      the deferral/addition from 2019/2020 of $12.5 million of wastewater capital projects (Ohai, Riversdale, Riverton, Stewart Island, Te Anau) noting that Te Anau represents $11.3 million of this increase (of which $2 million is funded from a government grant) to be implemented in 2020/2021.

•      Council’s 2020/2021 contribution to the Pyramid Bridge replacement ($0.3 million)

•      $1 million emergency roading works as a result of the February 2020 floods

•      $1.5 million of bridge renewals

•      refurbishment/fit out of the Don Street office ($0.9 million).

 

31      Additionally, there are a number of changes to operational costs from what was forecast in the LTP 2018-2028 for 2020/2021.  Key operational changes include:

•      increased water maintenance costs ($0.3 million)

•      increased rubbish and recycling costs, including Emission Trading Scheme ($0.3 million)

•      $1.8 million Milford Opportunities project costs (fully funded by government grants)

•      additional contractors required to assist with building regulation activities ($0.5 million), partially offset by increased revenue 

•      lease of two Don Street offices and associated costs ($0.4 million)

•      increased costs to meet new regulatory standards ($1.9 million)

•      loss of revenue from Venture Southland ($0.3 million)

•      reduction in internal loan repayments ($0.3 million)

•      increase in external loan repayments ($0.1 million).

 

32      Where appropriate, loan funding is used to fund capital expenditure with the following reserve transfers being utilised to reduce the impact on the 2020/2021 rates increase:

•     transfer from the forestry reserve to reduce rates ($0.4 million)

•     utilisation of the roading reserve to reduce the roading rate ($1.7 million).

Issues

33      The Annual Plan is based on a number of assumptions. In addition, there are a number of issues described below that may require separate reports to be brought back to Council. These reports will explore the issues more fully and potentially include additional unbudgeted expenditure for 2020/2021 or beyond, if approved.

Te Anau Airport Manapouri rate

34      As part of the response to Covid-19, the government’s shut down of the borders to New Zealand for overseas visitors has seen the tourism market and those associated with provision of goods and services to the tourism market particularly affected.

35      The loss of tourism revenue in the Fiordland Basin as a result of this event and also the recent flooding had an significant impact on the area.  In response consideration was given to the possibility of reducing the Te Anau Airport Manapouri rate for 2020/2021, with the potential of also extending this reduction as part of discussions around Councils 2021-2031 Long Term Plan.

36      This matter was discussed at the Council meeting on 22 April and the Fiordland Community Board meeting on 19 May.  It was resolved by the Fiordland Community Board to reduce the Te-Anau Airport Manapouri rate from $128.00 incl GST per rating unit to $67.69 incl GST for the 2020/2021 year, by deferring 1 year of the loan repayments.  This is inconsistent with Council’s current Revenue and Financing Policy, however a resolution in accordance with section 80 of the Local Government Act 2002 has been included in this report.  Further details of this matter can be found in the reports to the noted meetings.

Rates Affordability

37      The Covid-19 pandemic and subsequent lockdown has led to a high level of uncertainty and risk particularly in regard to its potential economic, social and cultural impacts.  This is on top of environmental legislation changes such as land and water plans, RMA reforms, increased building control costs and new three waters regulation.  The issue of affordability of rates within communities means that it is important to try and minimise any proposed rates increase given the current circumstances, while ensuring that Council continues to provide an appropriate level of service to its communities and manage the increased risks that it faces as an organisation such as reductions in other revenue streams and increased costs in providing support during the response and subsequent recovery phases.

38      The Annual Plan 2020/2021 includes budgets based on best available information at early March 2020.  Included in this is planned 2019/2020 capital projects that have been forecast to be completed or undertaken in 2020/2021.  This information was compiled prior to the declaration of the alert level 4 nationwide lockdown.  The lockdown will impact on the final operational and/or capital work budgets. 

39      Time constraints will not enable Council to evaluate and quantify these changes for this Annual Plan and may result in a higher level of capital works being carried forward to 2020/2021 outside the 2020/2021 Annual Plan.  Overall, however this is not expected to have a significant effect on rates that would have been required as part of the 2020/2021 Annual Plan as generally capital projects are funded from long term loans, the repayment of which occurs in the year following drawdown.

Cashflow forecasts and funding

40      Council is forecast to be in overdraft of $3.5 million by 30 June 2020 increasing to $3.9 million by 30 June 2021.  Interest on the overdraft has been allowed for in the budgets at 3.65% consistent with the LTP 2018-2028 assumptions, however this may vary depending on the cashflows of Council throughout the year and the actual interest rates incurred. 

41      Council is also forecast to be drawing down external debt in 2020/2021 of approximately $20 million.  Interest on the term debt has been allowed for in the budgets at 3.65% and drawn down in full on 1 January 2021 consistent with the LTP 2018-2028 assumptions. This may also vary depending on the actual cashflows of Council throughout the year and the actual interest rate incurred, particularly on external debt.

42      Council has a district operations reserve which is made up of any unused operational funds offset by operational deficits and costs associated with specific projects.  This reserve is forecast to be approximately $1 million overdrawn at 30 June 2020 and planned to increase further into deficit in 2020/2021.  At this stage repayment has not been incorporated. It will, however, need to be considered as part of Council’s Long Term Plan when the actual results of operations and planned projects for 2019/2020 will be known.

Utilising reserves to offset rate increases

43      The proposed rate increase for 2020/2021 has been reduced by using $1.7 million of roading reserves as well as an additional $0.4 million of the forestry reserve. This is a one-off approach to assist in addressing the potential impact of rates increases on our ratepayers given the effect that the pandemic will have on the economy. This approach may result in a higher rates increase in 2021/2022 and beyond.  

Building control

44      The building control activity exists to manage the risks from development, construction, weather tight home issues and earthquakes. Council has to balance the need for additional resources to ensure that it can meet the required service levels against the flow-on impact that this will have on the level of user fees charged for services. A number of assumptions have been made around the building control activity in developing the Annual Plan 2020/2021.

45      Increase in fees - the building control department is funded 80% from fees and charges and 20% from rates. Fees and charges are the main funding source for this activity reflecting the direct benefit to those who use the service. Fees and charges are proposed to be increased in 2020/2021 by 7.5% in order to cover the proposed increased costs for this activity.  This increase is most significant in relation to consents for new dwellings.  A 7.5% increase equates to $245 for a new dwelling less than 300 square metres, or $295 for a new dwelling larger than 300 square metres.  Council’s fees in this area are generally lower than neighbouring councils. There is a risk that if the fees and charges are not increased, the increased costs budgeted for will need to be covered from rates and/or reserves.

46      Additional costs - Council was audited by International Accreditation New Zealand (IANZ) in February 2019 and was advised that IANZ was not satisfied that Council’s Code Compliance Certificate processing times and that processes were to the level that they needed to be. Council has taken a number of steps to improve its performance in this area and ensure we meet the required standards. It is important that Council be able to maintain the appropriate standards moving forward to ensure that it can retain accreditation as a Building Consent Authority (BCA).  As a result staff have made an allowance for additional resourcing in the Annual Plan 2020/2021. There has been an increase in costs of $0.9 million between the year three of the LTP and the Annual Plan 2020/2021 which includes staffing and contractor costs. 

47      New fees and charges – the Ministry of Business, Innovation and Employment undertook an audit of Council’s Territorial Authority (TA) functions in 2019 and made some recommendations around the work required to be undertaken and the associated fees that could be charged.  Staff are proposing to include the following five new fees and charges (including GST) associated with these TA functions in the Annual Plan 2020/2021:

Swimming pool inspection

$165.00

Annual renewal of Building Warrant of Fitness

$111.00

Inspection of Building Warrant of Fitness

$350.00

Amendment fee

$400.00

Discretionary exemption fee

$342.00

48      It is anticipated that these fees will generate approximately $150,000-$200,000 of revenue per annum which can cover the cost of the additional resource required to undertake this work.  A separate report will be brought to Council in due course, which will explore this matter further.

Factors to Consider

Legal and Statutory Requirements

49      The Annual Plan is a statutory requirement under the Local Government Act 2002 (section 95).

50      All councils are required by legislation to prepare and adopt an Annual Plan before the commencement of the financial year to which it relates (1 July 2020 in this instance).

Community Views

51      The Community Boards were involved in the direction setting for the Annual Plan 2020/2021 and provided input into any new projects that were urgently required for their areas and the fees and charges for the local assets. This feedback was presented to Council for consideration and included in the Annual Plan 2020/2021 where appropriate.

52      As mentioned above, the annual plan information document was made available on facebook for comments.  Council received three comments from one member of the public.

53      There was also opportunity to provide feedback to Council through public forum at any Council or Committee of Council meeting by live streaming during Covid-19 lockdown, or in person at a Council meeting once the lockdown was lifted.  There were no requests to speak at public forum in relation to the Annual Plan 2020/2021.

54      The issue of affordability of rates within communities should always be considered.  This particular Annual Plan also has the Covid-19 economic impacts which means that it could be even more difficult for our communities to meet their rates. 

Costs and Funding

55      There are various costs incurred in compiling the Annual Plan including staff costs and budgets. These are included in Council’s annual budgets and funded accordingly.

56      The specific financial implications of the changes made to the final Annual Plan are outlined in the financial considerations section below.

Policy Implications

57      The changes set out in the Annual Plan are consistent with Council’s current Financial Strategy, Infrastructure Strategy and policies, except a variation to the Revenue and Financing Policy. 

58      The resolution on 22nd April in relation to the Te Anau Airport Manapouri rate is inconsistent with the current Revenue and Financing policy.

59      Council’s Revenue and Financing Policy outlines in section 2.3 that operating expenditure should be met from funding sources such as rates, reserves, user fees and charges.  Capital expenditure can also be met from loans. Although Council’s policy indicates these preferred funding sources, where Council makes a significantly inconsistent decision it can as a result of section 80 of the Local Government Act 2002, clearly identify as part of the decision the inconsistency, the reasons why and the intention or not to amend the policy to accommodate the decision.

60      Accordingly, a resolution to this effect is included with this report that specifically identifies the inconsistent decision.

61      No policies have been amended as part of the Annual Plan 2020/2021 development process.

 

Financial considerations

62      The financial implications of the proposed Annual Plan 2020/2021 are noted below:  

63      Rating Impact/Rates Increase

•     the rate increase for 2020/2021 will be 2.31%, compared to 3.27% proposed in the LTP 2018-2028.

•     the proposed rate increase for 2020/2021 has been reduced by using $1.7 million of roading reserves as well as an additional $0.4 million of the forestry reserve. This is a one-off approach to assist in addressing the potential impact of rates increases on our ratepayers given the effect that the pandemic will have on the economy. This approach may result in a higher rates increase in 2021/2022 and beyond.  

•     the Funding Impact Statement (Rates Section) has been updated to show the current District and local area rates.  Rates will be set as either a rate in the dollar on land value or capital value or a Uniform Targeted Rate (UTR).

64      30% Maximum Uniform Targeted Rate (UTR)

•     Uniform Targeted Rate - The maximum amount Council can collect under the UTR is 30% of total rates.  The UTR for the 2020/2021 financial year will be 26.62%, compared to 27.09% for 2019/2020.

65      Impact on Financial Reports

•      the consolidated impacts of the changes are shown in the draft forecast statement of comprehensive income and statement of financial position included in Attachment A of this report. Please note these may be subject to change as staff undertake the final review and finalisation of the Annual Plan document.

•      in comparing the draft Annual Plan 2020/2021 forecast deficit to year three of the LTP 2018-2028, the deficit has increased $1.7 million, from $3.1 million to $4.8 million. 

o increased revenue ($6.5 million) is forecast from NZTA $1.8 million and grants and subsidies ($4.7 million).  The grants expected to be received are for the Te Anau Wastewater project $2 million, Milford Opportunities Project $1.8 million, SIESA $0.5 million and Stewart Island Jetties $0.4 million. 

o this revenue is offset by increased costs, being employee associated costs ($2.3 million) and other Council expenditure ($5.8 million).  Increased employee related costs are as a result of the need to continue to meet ongoing service and legislative requirements and as a result of some functions and associated positions being transferred from Venture Southland.  Other Council expenditure includes costs relating to the Milford Opportunities Project, SIESA wind energy project and building regulation area ($2.8 million), flood damage reinstatement works ($1 million), office lease ($0.3 million), and Council’s contribution to Pyramid Bridge ($0.3 million). 

•      the prospective statement of financial position in the draft Annual Plan 2020/2021 incorporates 30 June 2019 actual balances (as opening balances) as well as changes resulting from revised forecasts for 2019/2020.

o the main variance from year three of the LTP 2018-2028, is the increase in property, plant and equipment and external debt which is due to the increase in planned capital works including the Te Anau Wastewater project.

66      Compliance with Financial Strategy

•     the draft Annual Plan is in compliance with the key financial indicators outlined in the financial strategy, being specifically:

•     rates increases to be no more than Local Government Cost Index (LGCI) + 2.0%. For 2020/2021 in the Long Term Plan 2018-2028, the LGCI was budgeted at 2.2%, resulting in a limit of 4.2%. The revised LGCI forecast for June 2021 based on BERL forecasts at September 2019 remains at 2.2%.  The draft rates increase proposed is 2.31%

•     total debt not to exceed 100% of total annual revenue. Council anticipates it will require
$20 million of long term external debt in the 2020/2021 year (to be repaid over 30 years).  Additionally
, Council is forecast to be in overdraft at 30 June 2021 of $2.7 million.

Analysis

Options Considered

67      Option 1: recommend the draft Annual Plan 2020/2021 to Council for adoption, with any minor amendments as agreed at this meeting.

Option 2: do not recommend the Annual Plan 2020/2021 to Council for adoption.

Analysis of Options

68      Option 1 – Recommend the draft Annual Plan 2020/2021 to Council for adoption, with any minor amendments as agreed at this meeting.

Advantages

Disadvantages

·        the Annual Plan will comply with statutory requirements and timeframes

·        is consistent with the overall direction set through the LTP 2018-2028

·        adoption of the Annual Plan will enable rates to be set for the 2020/2021 financial year.

·        the committee has a delegated authority to recommend to Council the adoption of the Annual plan.  

·        no further changes can be made

 


 

69      Option 2 – Do not recommend the Annual Plan 2020/2021 to Council for adoption.

Advantages

Disadvantages

·        if a significant omission has been made in the development of the Annual Plan, it can be rectified.

·        the Annual Plan will not comply with the statutory requirements to adopt before 1 July 2020.

·        rates will not be able to set for the 2020/2021 financial year until the Annual Plan is adopted.

·        there would be a high level of uncertainty for ratepayers.

 

Assessment of Significance

70      The draft Annual Plan 2020/2021 does not contain significant variance from year three of the LTP 2018-2028. Therefore, it did not meet the significant threshold in the Significance and Engagement Policy and the formal consultation with the public was not undertaken.

Recommended Option

71      Option 1 – Recommend the draft Annual Plan 2020/2021 to Council for adoption, with amendments as agreed at this meeting.

Next Steps

72      Following Council adoption, the Annual Plan 2020/2021 will be made available on the Council’s website www.southlanddc.govt.nz. Hard copies will be available upon request.

 

Attachments

a             Annual Plan 2020 2021 (separately enclosed)     

 


Finance and Assurance Committee

22 June 2020

 

Annual Report 2019/2020 - Key dates

Record No:             R/20/5/11775

Author:                      Jason Domigan, Corporate Performance Lead

Approved by:         Rex Capil, Group Manager Community and Futures

 

  Decision                                       Recommendation                                  Information

 

 

 

Purpose

1        The purpose of the report is to provide the committee with the key dates for the Annual Report 2019/2020.

Executive Summary

2        The Annual Report is a key reporting document for Council to the community, and reports on Council’s performance against the 2019/2020 Annual Plan.

3        The purpose of this report is to provide the committee with the key dates from the Annual Report 2019/2020 timetable.

4        The timetable has been prepared to ensure adoption of the Annual Report on 21 October 2020. 

5        The Annual Report is required to be audited in accordance with section 99 of the Local Government Act 2002. Audit New Zealand (Audit NZ) have been engaged to undertake Council’s audit for the year ending 30 June 2020.

 

 

Recommendation

That the Finance and Assurance Committee:

a)            Receives the report titled “Annual Report 2019/2020 - Key dates” dated 16 June 2020.

 

b)           Notes the Annual Report 2019/2020 - key dates as per attachment A, being:

 

 

 

Background

6        Council is required to develop and adopt an Annual Report within four months of the end of a financial year.  The Annual Report is a means for Council to account and report to the community on its performance of the preceding financial year. It reports on outcomes, performance measures (both financial and non-financial) and provides information on the results achieved against planned results, as published in the Annual Plan 2019/2020. 

7        The purpose of an Annual Report is:

(a)     to compare the actual activities and the actual performance of the local authority in the year with the intended activities and the intended level of performance as set out in respect of the year in the Long Term Plan and the Annual Plan; and

(b)     to promote the local authority's accountability to the community for the decisions made throughout the year by the local authority.

8        An Annual Report and a summary document are produced, and both these documents will be made available on Council’s website. The summary document will be distributed to all Council offices and copies of both the summary and the full document made available on request.  The report availability will also be advertised in the Ensign and Southland Express.

9        The committee will be presented with the unaudited Annual Report in draft form at the 11 September 2020 meeting, for review and approval to release to Audit NZ.  

10      The Annual Report is audited by Audit NZ which provides the reader with a level of assurance of the completeness and accuracy of the information reported. Audit NZ staff are expected to be on site from 14 September to 2 October 2020. 

11      On 16 October 2020 the Finance and Audit Committee will receive the final draft of the Annual Report for recommendation for adoption by Council on 21 October 2019. Mr Dereck Ollsson Audit NZ Audit Director, will be present at the 16 October meeting.

12      Please note that the adoption date is later than usual as agreed with Audit NZ.  This allows for the summary document to be approved at the same time as the full document, so they both can be made available to the public soon after adoption.

Issues

Timeframes

13      In order to deliver on the proposed timetable, full co-operation from the wider organisation is needed.  It is therefore important that information is provided in a timely manner.  There is a risk of deadlines and timeframes being impacted if information is not provided in a timely manner.

14      The relevant key dates for staff will be communicated to reduce this risk, however management will also need to be proactive in prioritising tasks associated with the Annual Report.

Covid-19

15      This year’s timetable has been impacted by the effects of the Covid-19 pandemic. Audit NZ staff were unable to conduct the interim audit onsite in March so the process occurred remotely.

16      It is anticipated that Audit NZ staff will be onsite to conduct the final audit process in September/October.  All precautions and Ministry of Health guidelines will be followed and SDC staff will be advised in advance about their presence onsite.

 

Factors to Consider

Legal and Statutory Requirements

17      Section 98 of the Local Government Act 2002 states that:

(1)     A local authority must prepare and adopt in respect of each financial year an Annual Report containing in respect of that year the information required by Part 3 of Schedule 10.

(2)     The purposes of an Annual Report are—

(a)   to compare the actual activities and the actual performance of the local authority in the year with the intended activities and the intended level of performance as set out in respect of the year in the Long Term Plan and the Annual Plan; and

(b)   to promote the local authority's accountability to the community for the decisions made throughout the year by the local authority.

(3)     Each Annual Report must be completed and adopted, by resolution, within four months after the end of the financial year to which it relates.

(4)     A local authority must, within one month after the adoption of its Annual Report, make publicly available—

(a)   its Annual Report; and

(b)   a summary of the information contained in its Annual Report.

(5)     The summary must represent, fairly and consistently, the information regarding the major matters dealt with in the Annual Report.

(6)     A local authority must, within one month after the adoption of its Annual Report, send copies of that report and of the summary prepared under subsection (4)(b) publicly available.

18      Information that must be included can be found in Schedule 10 Part 3 of the act, and includes:

·                 groups of activities

·                 capital expenditure for groups of activities

·                 statement of service provision

·                 funding impact statement for groups of activities

·                 internal borrowing

·                 Council-controlled organisations

·                 financial statements

·                 funding impact statement

·                 rating base information

·                 reserve funds

·                 insurance of assets

·                 remuneration issues

·                 employee staffing levels and remuneration

·                 severance payments

·                 statement of compliance

·                 the activities that the local authority has undertaken in the year to establish and maintain processes to provide opportunities for Māori to contribute to the decision-making processes of the local authority.

19      The Annual Report 2019/2020 and summary document reports on Council’s performance against the Annual Plan (which is based on the second year of the Council’s Long Term Plan 2018-2028).

20      As each Annual Report must be completed and adopted, by resolution, within four months after the end of the financial year to which it relates, this makes 31 October 2020 the last day available to meet this timeframe. 

Community Views

21      As the Annual Report is a report on activities undertaken during the year, no consultation is required. 

Costs and Funding

22      In accordance with Section 14(1) of the Public Audit Act 2001, the Council’s Annual Report must be audited by the Office of the Auditor-General.  Audit New Zealand is the authorised audit service provider on behalf of the Auditor-General.

23      Audit NZ’s proposal letter sets out the cost to conduct the audit and estimated disbursements. These are discussed in a separate report in this agenda.

24      Sufficient budget has been allowed for the audit fee and associated printing costs in the operating budgets for 2019/2020.

Policy Implications

25     There are no policy implications identified.

Assessment of Significance

26      Whilst the Annual Report is an important accountability document for Council, the purpose of this report is to set out the key dates for the proposed timetable, and is identified by staff as being of low significance in relation to Council’s Significance and Engagement Policy.

Next Steps

27      Staff will action the proposed timetable, and circulate it to the relevant staff. 

28      The committee will review the draft unaudited report at the 11 September 2020 meeting and confirm release of the draft to Audit NZ. 

29      The committee will receive the final draft of the Annual Report on 16 October for recommendation for adoption by Council on 21 October 2020.

 

Attachments

a             2019/2020 Annual Report key dates    

 


Confidential Finance and Assurance Committee

22 June 2020

 

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Finance and Assurance Committee

22 June 2020

 

Accounting Policies for the year ended 30 June 2020

Record No:             R/20/5/11691

Author:                      Sheree Marrah, Financial Accountant

Approved by:         Anne Robson, Chief Financial Officer

 

  Decision                                       Recommendation                                 Information

 

 

 

Purpose

1        To consider and recommend to Council the adoption of the accounting policies to be used to compile the Council’s annual report for the year ended 30 June 2020. 

Executive Summary

2        The draft accounting policies (Attachment A) set the basis on which Council’s annual report for the year ended 30 June 2020 will be prepared and the associated financial information compiled.

3        The accounting standards proposed for the 30 June 2020 annual report are based on those used for the 2019 annual report.  The only change is in relation to jointly controlled operations and updating the standards available for early adoption, but which are not proposed to be early adopted.  These amendments are noted in green text in Attachment A.

 

Recommendation

That the Finance and Assurance Committee:

a)            Receives the report titled “Accounting Policies for the year ended 30 June 2020” dated 16 June 2020.

 

b)           Determines that this matter or decision be recognised as not significant in terms of Section 76 of the Local Government Act 2002.

 

c)            Determines that it has complied with the decision-making provisions of the Local Government Act 2002 to the extent necessary in relation to this decision; and in accordance with Section 79 of the Act determines that it does not require further information, further assessment of options or further analysis of costs and benefits or advantages and disadvantages prior to making a decision on this matter.

 

d)           Recommends to Council that the accounting policies as outlined in Attachment A, including any amendments from this meeting, be adopted for use in preparation of the Council’s Annual Report for the year ended 30 June 2020.

 

 

Background

4        Councils are required by legislation to adopt an annual report every year.  The annual report informs the reader about how Council did against what Council said it was going to do in the 2019/2020 Annual Plan.

5        In arriving at the accounting policies proposed, Council staff have used the 2018/2019 Annual Report policies as the base, considered these against the 2019/2020 Annual Plan accounting policies and reviewed for any changes needed, including any new or amended financial reporting standards.

Issues

6        The accounting standards proposed for the 30 June 2020 annual report are based on those used for the 2019 annual report.  The only change is in relation to jointly controlled operations and updating the standards available for early adoption.  These amendments are noted in green text in Attachment A.

New Accounting Standards

7        Council must apply the following new accounting standards in preparing their 30 June 2020 financial statements.

·    PBE IPSAS 34 Separate Financial Statements,

·    PBE IPSAS 35 Consolidated Financial Statements,

·    PBE IPSAS 36 Investments in Associates and Joint Ventures,

·    PBE IPSAS 37 Joint Arrangements, and

·    PBE IPSAS 38 Disclosure of Interest in Other Entities.

8        These standards relate to how Council accounts for Southland Regional Heritage Committee (SRHC), Emergency Management Southland (EMS), WasteNet, Milford Community Trust (MCT), Southland Museum and Art Gallery Trust (SMAG), Great South/Southland Regional Development Authority (SRDA) and Whakamana Te Waituna Charitable Trust in the Annual Report 2019/2020.

9        Council staff presented papers to the Finance and Audit committee meeting in December 2018 and June 2019 regarding the approach Council intended to take for accounting for these entities in the Annual Report for the year ended 30 June 2019 and beyond.  A summary of Council’s approach to accounting for these entities is included as Attachment B.

10      The implementation of these standards results in a change in the accounting policy for jointly controlled operations from proportionate consolidation to equity method.  This will impact how we account for WasteNet for the year ended 30 June 2020.

Early adoption of accounting standards

11      As part of considering the applicable accounting policies staff also need to consider any new standards that will apply in the future and consider if it is appropriate to adopt early.

12      The below standards and amendments have been issued by the External Reporting Board (XRB) and are effective for reporting periods beginning on or after 1 January 2020.  For Council they will be effective for the financial year ending 30 June 2021 and beyond:

-     PBE IPSAS 9 Financial Instruments

-     PBE FRS 48 Service Performance Reporting

-     PBE IFRS 17 Insurance Contracts

-     PBE IPSAS 40 PBE Combinations

-     PBE IPSAS 41 Financial Instruments.

13      Council staff do not consider there is any benefit in adopting the standards early. 

14      The future application of these standards to Councils financial accounts is noted under the heading “Standards issued and not yet effective that have not been early adopted” within the accounting policies (refer policy (ab) page 15 of Attachment A).

Venture Southland

15      Council staff expect that the Venture Southland (VS) wind up will be complete by 30 June 2020 and therefore there will be no requirement to account for VS balances at 30 June 2020 in the Annual Report.

16      The appropriate dissolution entries will be included in the financial results for the year ended 30 June 2020.

SIESA property, plant and equipment

17      Audit NZ have recommended in their management letter to 30 June 2019 that Council consolidate the fixed assets disclosures for SIESA with Council assets given that SIESA is a business unit of Council.  Accordingly the property, plant and equipment accounting policy (refer page 7-9 of Attachment A) has been amended to show consolidated disclosures.

Factors to Consider

Legal and Statutory Requirements

18      Section 98 of the Local Government Act 2002 requires the Council to prepare and adopt an Annual Report within four months of the end of the financial year.

19      Section 111 of the Local Government Act states that any information to be prepared must be in accordance with generally accounting practice where the information is of a form or nature for which generally accepted accounting practice has developed standards. 

Community Views

Costs and Funding

20      There are no direct cost implications of Council adopting accounting policies.

Policy Implications

21      Council has by way of Section 6.1 of the Finance and Assurance Committee’s terms of reference delegated to the committee to consider and make recommendations to Council in regards to accounting treatments, changes in generally accepted accounting practice and new accounting and reporting requirements.

Analysis

Analysis of Options

Option 1 – Recommends to Council the use of the accounting policies attached, including any amendments agreed at this meeting, for use in preparation of the Council’s 2019/2020 Annual Report

Advantages

Disadvantages

·        The Annual Report can continue to be prepared in line with the timetable.

·      The Committee would not get any further information if it required it before Committee endorses the report for release to Audit NZ.

Option 2 – Do not recommend accounting policies as presented

Advantages

Disadvantages

·        Changes can be made to the accounting policies to incorporate the Committee’s views.

·      The preparation of the Annual Report process may be held up depending on the time needed to provide the necessary information.

 

Assessment of Significance

22      In terms of Council’s Significance and Engagement Policy, the accounting policies which form part of the Annual Report are not considered significant.

Recommended Option

23      Option one - Recommends to Council the use of the accounting policies attached, including any amendments agreed at this meeting, for use in preparation of the Council’s 2019/2020 Annual Report.

Next Steps

24      If the committee approves the policies, they will be presented to Council for adoption in due course.

25      The accounting policies (incorporating any changes agreed at this meeting) will be reviewed by Audit New Zealand as part of their audit of the Annual Report.

 

Attachments

a             Draft Accounting policies for the year ending 30 June 2020

b             Accounting for related entities - Overall summary June 2020    

 


Finance and Assurance Committee

22 June 2020

 

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Confidential Finance and Assurance Committee

22 June 2020

 

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Finance and Assurance Committee

22 June 2020

 

Quarterly risk management report - June 2020

Record No:             R/20/5/10858

Author:                      Jane Edwards, Policy Analyst

Approved by:         Rex Capil, Group Manager Community and Futures

 

  Decision                                        Recommendation                                 Information

 

 

 

Purpose

1        The purpose of this report is to:

a)   submit the June 2020 Quarterly Risk Management Report for consideration by the Finance and Assurance Committee (the committee)

b)   following review of priority weightings, this report also seeks recommendation to Council for the adoption of Council’s revised top strategic risks, to become effective 1 July 2020.

Executive Summary

2        Risk management is about identifying events that may occur in the future that will have an impact on Council’s objectives. Council’s approach to risk management involves four key steps:

a)       identifying the risk

b)      evaluating the severity of any identified risks

c)       applying possible solutions to those risks

d)      monitoring and analysing the effectiveness of any subsequent steps taken.

3        A risk management framework (RMF) was adopted by Council in February 2019. This framework supports risk thinking across Council so that risk can be understood, planned for and mitigated across all levels and activities.

4        As part of the RMF, Council’s priority strategic and corporate risks were also identified and endorsed in February 2019 and these form the basis of the Finance and Assurance Committee quarterly risk report including the risk register.

5        The executive leadership team (ELT) have reviewed the status of the primary strategic risks for the June 2020 quarter and they are presented as Attachment A with their assessment, any current and proposed mitigations, and their residual risk assessment.

6        Risks are ranked in accordance with their priority weighted scoring from highest to lowest. The current risk scorings were assessed at the workshops facilitated by Structured Conversations in October 2018.  As a living document, these scorings are required by the RMF to be reviewed formally on a six-monthly or as required basis.

7        The latest review of the risk register priority weightings took place on 10 February 2020 and the revised priority weightings are presented as Attachment B for the committee’s consideration.

8        This report seeks recommendation from the committee that Council adopts the revised top strategic risks at its meeting 23 June 2020 with a proposed operational date of 1 July 2020.

9        The matrices used to assess the risks are included for information as Attachment C.

 

Recommendation

That the Finance and Assurance Committee:

a)            Receives the report titled “Quarterly risk management report - June 2020” dated 16 June 2020.

 

b)           Determines that this matter or decision be recognised as not significant in terms of Section 76 of the Local Government Act 2002.

 

c)            Determines that it has complied with the decision-making provisions of the Local Government Act 2002 to the extent necessary in relation to this decision; and in accordance with Section 79 of the act determines that it does not require further information, further assessment of options or further analysis of costs and benefits or advantages and disadvantages prior to making a decision on this matter.

 

d)           Considers and gives feedback on the revised priority weightings

 

e)            Notes that the addition of an emergent risk and elevation of a previously lower ranked risk to the top ten strategic risks displaces the two lowest ranking risks on the current register

 

f)             Recommends that Council adopt the revised top strategic risks as follows to become effective 1 July 2020:

 

1.           Inaccurate data leads to bad decisions/asset failure

2.           Underinvestment in infrastructure

3.           Infrastructure not fit for purpose to withstand climate change

4.           Inadequate, incomplete or lack of strategy/policy impacts the wellbeing of the District

5.           Natural or biosecurity event impacts the wellbeing of the District

6.           Health and safety controls fail to protect staff and contractor safety

7.           Financial conservatism constrains progress towards strategic objectives

8.           Difficulty retaining or recruiting staff affects service levels

9.           Over-commitment leads to inability to deliver agreed work programme

10.         Growth and demand dependent model makes it hard to fund new infrastructure.

 

Quarterly Risk Report

Background

10      The top 10 priority risks endorsed by Council are jointly owned by the ELT and form the basis of the Finance and Assurance Committee risk register.

11      The ELT review the status of the 10 primary strategic and corporate risks, and any emerging operational risks, on a quarterly basis and this report is then presented to the committee for consideration. After feedback from the committee each quarter, the RMF requires those risks categorised as very high and high to be reported to the next Council meeting.

12      Risks are ranked in accordance with their priority weighted scoring from highest to lowest. The current risk scorings were assessed at the workshops facilitated by Structured Conversations in October 2018.  As a living document, these scorings are required by the RMF to be reviewed formally on a six monthly or as required basis.

13      The consequences, likelihoods and thresholds for each risk have been given after review of the ELT risk register and they are a reflection of the highest assessed aspect of each risk for this current quarter.

14      The status of each risk is a summary of the mitigations that are currently in place for each risk and indicate whether the mitigations are assessed of causing the threshold to rise, lower or remain in place.

Overview of Council’s Highest Strategic Risks

15      The risk register update for the June 2020 quarter is attached as Attachment A. 

16      Of particular note is the increased priority weighting of the risk of a natural or biohazard event impacting on the wellbeing of the District. This risk had already been identified in October 2018 and assessed as 14th on the risk register. With the risk presently realised, in the form of pandemic, the priority weighting was reviewed by ELT at a workshop in May 2020 and this risk will move into fifth position on the strategic register.

17      Staff will continue to assess the mitigation and response phase of this realised risk in both the immediate and short term and this will be reflected in updates to the committee in the next reporting cycle. Preliminary work undertaken on this risk is included in the June quarterly risk register as Attachment A.

18      The impacts of COVID-19 across all of Council’s strategic risks has been considered by the ELT and this is reflected in mitigations which have been put in place to address these impacts.

In the majority of cases, these adjustments have not impacted on the overall risk thresholds however the following risks thresholds have changed:

Risk 2 - Inaccurate data leads to bad decisions/asset failure.

This risk has increased from High to Very High pre-mitigation. Post-mitigation has increased from Medium to High

This increase is due to an additional aspect of the risk which reflects the consequence of data collection not being perceived as a core service of Council. The consequence of this risk being realised has been assessed as Major/Catastrophic pre-mitigation and as a result has increased the risk threshold.

Risk 8 - Difficulty retaining or recruiting staff affects service levels

This risk has reduced from High to Medium pre-mitigation.

This decrease is due to the increased availability of skilled staff at this present time and the resource sharing that is currently taking place with other councils.

19      While some risk thresholds have remained the same, aspects of a risk may have meant that their status on the risk register has changed. Risks with statuses that are assessed as ‘worsening’ are reflecting aspects of the COVID-19 situation that are currently being realised and are under watching brief. Risk thresholds may not change where there are mitigations in place or where the COVID-19 impacts do not have consequences higher than those already reflected elsewhere in the risk.

These risks are as follows:

Risk 5 – Over commitment and work programme

This risk is assessed as worsening due to the impact of COVID-19 on the delivery of team business plans. This aspect of risk 5 is assessed as High pre-mitigation dropping to Medium post-mitigation but does not affect the overall risk threshold.

Risk 9 – Growth dependent model makes it hard to fund new infrastructure.

This risk has had its likelihood adjusted from Likely to Highly Likely in the current COVID-19 environment. This does not impact on the overall risk threshold which remains at High however the status is reflective of the impact of the potential worsening of access to funding despite increasing need.

Emergent Risks

20      One emergent risk has been identified for the June 2020 quarter:

·    inadequate, incomplete or lack of strategy/policy impacts the wellbeing of the District.

21      This risk highlights the potential that a lack of consistent strategic direction-setting could result in poorly aligned and uninformed decisions that impact the community.

22      This potential emergent risk was considered by the ELT at a workshop 25 May 2020. Assessment of its priority weighting places it fourth on both the current and revised risk register. Details of the raw weightings assigned to it are included in Attachment B.

23      In light of this, it has been included on the revised top strategic risks to be considered by the committee and which will be presented to Council for adoption at its 23 June 2020 meeting.

Operational Risk Assurance

24      The next step is to review the operational risk register development process and ensure that it is appropriate and aligns with the risk management framework. This is scheduled to begin later this year. 

25      In the interim, Council’s chief executive will provide an operational risk report to the committee in a separate report.

26      Group managers will continue to work with their respective teams to identify and mitigate operational risks.

Revised priority weightings

27      The ELT met on 24 February 2020 to undertake a review of the priority scorings of Council’s top corporate and strategic risks.

28      As a living document, the risk management framework (the RMF) requires the ELT to review the priority scorings on a six-monthly basis to ensure the risks that make up the top corporate and strategic register are relevant and current.

29      It was proposed that instead of the six-monthly review period specified in the RMF, an annual review of priority scorings would be more appropriate and a 1 July operational date each year would bring the risk register into line with Council’s start of financial year.

30      The proposed change from a six-monthly to an annual review period and the operational date of 1 July 2020 were supported by the ELT.

31      The ELT reviewed, in ranked order, the ten priority risks on the current risk register. These risks had weighted scores previously assessed at a workshop in October 2018 and had elected member and staff input.

32      The review was undertaken in line with the process outlined in the RMF which states the five priority criteria that each risk must be assessed against in order to be assigned a weighted score. These are as follows:

·    the potential for at-fault death

·    the potential for financial disaster

·    the threat to Long Term Plan objectives

·    the level of influence over drivers or outcomes 

·    the immediate impact of treatment or control

33      The revised risk priority scorings are attached to this report as attachment C.

34      It had been anticipated that, with the length of time between the original assessment and review, coupled with a dissimilar group undertaking the review, that the resultant risk rankings might change substantially.

35      The changes made at the February workshop are as follows:

·    three risks remained in their original ranked position, four risks were ranked higher than previously, and three risks moved down the risk register.

·    ‘underinvestment in infrastructure’ was replaced by ‘inaccurate data leading to bad decisions/asset failure’ as Council’s highest priority risk.

·    ‘difficulty retaining or recruiting staff affects service levels’ had greatest increase in rank, moving up the register two places.

·    ‘over commitment and work programme’ and ‘key people leave with organisational knowledge’ had greatest decrease in ranking, each moving down the register two places.

36      In general, revised weightings were scored more conservatively than originally.

37      When originally scored, raw weights of ‘five’ (catastrophic/highly likely) were given to individual priority criteria of five risks. When reviewed, no raw scores of ‘five’ were given, meaning that the ELT did not consider any consequence, coupled with likelihood, in the current strategic risks to be catastrophic, nor highly likely.

38      Conversely, weights of ‘one’ (rare/insignificant) were previously given to individual priorities within six of the ten risks. Upon review, only three risks contained criteria that were assessed with scores of ‘one’.

39      ELT consideration was also given to those risks ranked as 11-17 in the previous assessment to see whether any one of these should be considered as ranking higher than those listed as risks 1-10.  No other risk was considered of high enough priority to replace the ten listed in the revised register.  ‘Natural or biosecurity event impacts economy/industry’ was highlighted as worth exploring further but at the February workshop it was not deemed urgent at that time.

40      The impacts of the COVID-19 pandemic occurred subsequent to the February workshop and necessitated the prompt consideration of Risk 14 in view of the risk being realised. This assessment was undertaken by the ELT at a workshop 25 May 2020. The assessment of the risk is shown in the following table, with the raw weightings included in Attachment B.

Risk: Natural or biosecurity event impacts the wellbeing of the District

Consequence

Likelihood

Potential for at-fault death

Catastrophic

Rare

Potential for financial disaster

Moderate

Unlikely

Threat to Long Term Plan objectives

Moderate

Possible

Council’s level of influence over drivers or outcomes 

Moderate

Possible

The immediate impact of treatment or control

Minor

Rare

 

41      The reviewed weighting of this risk and the proposed inclusion of the emergent strategic deficit risk has resulted in the risks currently ranked ninth and tenth being displaced from the revised top ten strategic risks.

42      The proposed inclusion of the two risks has also meant that risks 6 – 12 have been forced downwards in rank despite the changes in ranking stated in paragraph 36 of this report. These original changes in rank made in February are still important to note.

43      Staff request the committee consider whether it is comfortable that reporting continues on the top ten risks going forward or whether it would prefer reporting to extend to the top twelve.


 

Analysis of Options

Option 1 – that the committee endorses the revised top ten strategic risks for adoption by Council

Advantages

Disadvantages

·        this ensures clarity and focus is given to those risks deemed as most important to Council

·        this approach is consistent with the risk management reporting to date

·        this may mean that risks that have to date been deemed high priority do not continue to have the same level of scrutiny placed upon them

 

Option 2 – that the committee endorses extending reporting to the revised top twelve strategic risks for adoption by Council

Advantages

Disadvantages

·        this will ensure the continued high level of scrutiny on risks that have to date been considered amongst Council’s highest

·        extending the risk management reporting may have implications for the clear focus on what Council’s top strategic risks are

·        extending the risks contained on the strategic risk register may be impractical for risk management and reporting in the future

 

Recommendation

44      Staff recommend option 1 - that the committee endorses the revised top ten strategic risks for adoption by Council

Next Steps

45      Following the committee’s consideration of the June quarterly risk management update, those strategic risks that are assessed as high or very high will be reported to Council at its 23 June 2020 meeting.

46      Following consideration by the committee, staff will present the revised top strategic risks to Council at its 23 June 2020 meeting seeking adoption with an operational date of 1 July 2020.

 

Attachments

a             Risk register - Finance & Assurance committee - June 2020 quarter

b             Revised priority weightings - Finance & Assurance committee - June 2020

c             Risk Management Framework - risk matrices    

 


Finance and Assurance Committee

22 June 2020

 

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Finance and Assurance Committee

22 June 2020

 

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Confidential Finance and Assurance Committee

22 June 2020

 

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Finance and Assurance Committee

22 June 2020

 

New Zealand Transport Agency investment audit report for the period 2017/2018 to 2019/2020

Record No:             R/20/6/14112

Author:                      Hartley Hare, Strategic Manager Transport

Approved by:         Matt Russell, Group Manager Services and Assets

 

  Decision                                        Recommendation                                  Information

 

 

 

Summary of report

1        As part of the New Zealand Transport Authority (NZTA) requirement an investment audit is undertaken every three years. This is to ensure that the investment in Council’s land transport programme is being well managed and delivering value for money.

2        The audit covers five key areas:

·        Previous audit issues

·        Financial processes

·        Procurement procedures

·        Contract management

·        Professional services

3        Attached is the NZTA audit report for the procedural audit of Southland district Council (attachment A) issued on 11 May 2020.

4        There we no previous audit issues to be covered by the audit and three areas (financial process, procurement processes and contract management) were found to be effective. Professional services has been identified as some improvement needed. The assessment rating definitions can be found on page 4 of the NZTA report (attachment A).

5        NZTA have identified one recommendation for professional services. This is to ensure council is using an appropriate charge out rate for internal staff and charging sufficient hours. The review of charge out rates will be completed by 30 June 2021 for implementation from 1 July 2021.

 

Recommendation

That the Finance and Assurance Committee:

a)            Receives the report titled “New Zealand Transport Agency investment audit report for the period 2017/2018 to 2019/2020” dated 16 June 2020.

 

Attachments

a             NZTA investment audit 2020    

 


Finance and Assurance Committee

22 June 2020

 

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Finance and Assurance Committee

22 June 2020

 

Monthly Financial Report - April 2020

Record No:             R/20/6/12832

Author:                      Dee Patel, Project Accountant

Approved by:         Anne Robson, Chief Financial Officer

 

  Decision                                        Recommendation                                  Information

 

 

 

Summary

1.       The purpose of this report is to provide Council with an overview of the financial results to date by the nine activity groups of Council, as well as the financial position, and the statement of cash flows.

2.       This report summaries Council financial results for the ten months to 30 April 2020.

 

Recommendation

That the Finance and Assurance Committee:

a)            Receives the report titled “Monthly Financial Report - April 2020” dated 16 June 2020.

 

Attachments

a             Monthly Financial Report - April 2020    

 


Finance and Assurance Committee

22 June 2020

 

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Finance and Assurance Committee

22 June 2020

 

Health and Safety Update

Record No:             R/20/6/13331

Author:                      Janet Ellis, People and Capability Manager

Approved by:         Steve Ruru, Chief Executive

 

  Decision                                        Recommendation                                  Information

 

 

 

Purpose

1        To provide an update on health and safety related incidents and activity over the last quarter.

Content

Incidents/Near Misses – Southland District Council

2        As part of the Health and Safety Plan for 2019/2020 we are ensuring that we have consistency of reporting on both lead and lag indicators. 

3        Lagging indicators are typically “output” oriented, easy to measure but hard to improve or influence while leading indicators are typically input oriented, hard to measure and easy to influence.

4        Lead indicators include Near Misses, Audits and Inspections and progress against the Health and Safety Plan. Lag indicators include Medical Treatment Interventions (MTI), Incidents, Lost time due to injury, Worksafe notifications and Number of Incident Investigations completed.

5        A summary of these indicators for the year from 1 January 2020 to 31 May 2020 is below.  In January there were two MTIs.  These were a twisted knee that occurred on 24 December 2019 that was not reported until January 2020 and a cat bite that caused infection.  In February there was one MTI, this involved an employee getting lacerations to her fingers that required stitches.   

6        In addition please find below a summary of contractor monitoring comparison and the incident (event) reporting comparisons. It is pleasing to note an eighty two percent increase in in contractor monitoring and recording since 2017.

 

 

 

 

 

 

 

 

Summary of Indicators – 1 January 2020 to 31 May 2020

Date

Total Reported Events

EDI - Early Discomfort Event

NMI - Near Miss Event

MNI - Minor No Treatment Event

FAI - First Aid Event

MTI - Medical Treatment Injury Event

LTI - Lost Time Event

PDI - Property Damage Event

RSK - Risk Reports

Other (ie Medical Event/NWR)

Number of events investigated

Number of Corrective Actions set

Number of Corrective Actions achieved

LTI Free Days

Days Lost Time

ACC Claims

Safety/Site Observations received

Contractors Audited

Contractors requiring follow up

Jan-20

13

2

2

0

2

2

0

0

5

0

13

13

11

84

0

1

 

15

 

16

 

0

Feb-20

5

0

1

0

0

1

0

1

2

0

5

5

3

113

0

0

 

9

 

8

 

0

Mar-20

2

1

0

0

0

0

0

0

1

0

2

3

3

144

0

1

12

6

0

Apr-20

6

3

0

0

0

0

0

0

3

0

6

1

0

174

0

0

10

5

0

May-20

8

2

1

2

0

0

0

1

2

0

8

3

4

205

0

0

27

4

0

Jun-20

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Jul-20

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Aug-20

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sep-20

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Oct-20

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nov-20

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dec-20

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

34

8

4

2

2

3

0

2

13

0

34

25

21

 

0

2

 

73

 

39

 

0

 

Other Health and Safety Related initiatives

7        There are many ways to keep current on health and safety matters, subscribing to the Worksafe updates is an easy way to remain up to date.  The link is: https://worksafe.govt.nz/home/subscriptions

8        Health and safety training continues with staff completing the health and safety e-learning modules based on the health and safety procedures.  All new staff are required to complete all the modules. 

9        Safety observations and inspections have continued to increase with the new health and safety software providing a tailored app which is being piloted by the project delivery team.  As detailed above there has been a significant increase in contractor monitoring and reporting since 2017. With the increase of monitoring there has been an increased number of corrective actions required.

10      Health and safety governance training is being scheduled for late 2020.  All community boards have had a health and safety presentation/induction.

11      GPS (ERoad) installation has begun in vehicles and will happen in stages with groups of 10 at a time.

12      Panic alarm upgrades have begun with Invercargill and Winton completed to date.

13      The new health and safety system has been implemented and released to all areas of the business. 

14      Council has continued to manage its response to the Covid-19 pandemic. From an organisational operations perspective all staff have continued to work from home where practical for the period of the alert level 4 and 3 lockdown. With the move to alert level 2 the majority of staff are now working back in the office and field. The executive leadership team continues to keep a very close watch on the impact to Southland District Council.  The latest key information from the Ministry of Health (MOH) is distilled continually.

15      The new system was utilised during Covid-19 alert levels 4, 3 and 2 to support contractor and project management in regards to the risk of transmission and infection of Covid-19. All contractor Covid-19 risk management plans were processed through the permit to work module of the H&S system (the SHED) so as to easily identify and monitor the works being undertaken with this added risk factor during this time. 120 permits to work have been approved for project or contract continuation and restarts during alert levels 4, 3 and 2.

16      Our H&S system also continued to support employee self-check safety observations and pre-site visit checks during this time. The flexibility of the H&S application on smart phones and the online platform enabled transitions through the alert levels and SDC’s health safety wellbeing response to be supported by the system - A system that has now been put through its paces and is delivering as expected, with all employees able to use this tool via app, platform or portal as required. 

17      In late 2020, Southland District Council will use an external consultant to undertake a high level assessment and review of Council’s approach to the management of health and safety.  This will include a review of Council’s governance framework, strategic plan and performance measures and targets.  The review will also include a thin slice review of the health and safety management system targeting risk management, incident management, worker engagement, contractor management and injury management.  Any opportunities identified as part of this gap analysis will be incorporated into the 2020/21 implementation plan.

Critical Risks

18      At Southland District Council we currently use the bowtie method as a visual risk evaluation tool.  This tool allows us to describe a risk and define our risk response actions.

19      This visual tools allows us to key an overview of risk management practices rather than replace exciting processes or systems.

20      The bowtie critical risk update as of 31 May 2020 is attached.  The update shows the visual comparison between 2018 and 2020.  In addition it details the focus for 2020/21.

 

Recommendation

That the Finance and Assurance Committee:

a)            Receives the report titled “Health and Safety Update” dated 11 June 2020.

 

Attachments

a             Bowtie critical risk update as of 31 May 2020  



Finance and Assurance Committee

22 June 2020

 

Critical Risk Bowtie Update

31st May 2020

Motor Vehicle Accident Causing Injury

2018

2020

 

Priorities completed since May 2018:

GPS Monitoring approved and implementation underway

Fatigue Management Handbook completed and distributed also included in new HS employee induction handbook


 

Contractor Injury

2018

2020

 

Priorities completed sine MAy 2018:

Pre-approval process reviewed and updated – includes requesting evidence of managing key risks listed in H&S contractor application

Procurement requirement – Contractor Handbook has been updated

Monitoring recorded with onsite observations and audits – includes follow up of corrective actions from monitoring outcomes

Personal harm due to working alone

2018

2020

priorites completed since may 2018:

CCTV pilot is underway

Fatigue Management Handbook completed and distributed also included in new HS employee induction handbook

Panic Alarm upgrades underway – Invercargill and Winton complete to date

De-escalation training completed in September 2018 and December 2019 and then ‘managing unreasonable customer conduct’ training completed in February 2020

Serious Mental Harm

A fourth bowtie was developed this year with the critical risk bowtie working group. Below is the Gap analysis to date:

 

 

Where to next 2020/2021

Motor vehicle accident causing injury:

SDC to develop performance indicators to measure the driver's safety performance around use of vehicles. The KPI's can be reviewed on monthly, quarterly or six - monthly basis.

A Health Monitoring process in consultation with staff will be developed.

SDC shall develop competence assessments, training plans following assessment and vehicle specific familiarization e.g. indicators on what side and a safe driving handbook/guide

 

Contractor injury:

SDC shall ensure the Contractor has in place a process to check the competencies of reviewers, observers or project managers carrying out observations or issuing work/projects in relation to confined space.  An outside agency will be engaged if the level of knowledge required is outside of the scope of SDC staff.

SDC shall ensure it has in place a process to check all applicable contractors are aware and implementing if relevant any new notifications or publications on confined space or other significant risks

 


 

Personal harm due to working alone

SDC to verify communication processes are in place. It is important to ensure that all SDC employees and contractors working alone on any site understand the hazards and risks and what controls have been put in place. Periodic phone contacts from managers at set intervals should be set. SDC communication channels will cover:
1) Communication between SDC employee working alone with respective Manager.
2) Communication between our customer sites and SDC staff
3) Communication devices onsite where there is no cell phone coverage.

Continue CCTV and panic alarm upgrades and installs

Investigate and implement ‘man down’ tools and technology
SDC to verify that they have in place a process to check the competencies of supervisors such as team leaders/ managers.

 

 

Serious Mental harm (attempt to self-harm)

SDC to verify communication processes is in place. For example: Scheduled coaching sessions/meetings/one on ones/observations

Introduction of a sick leave bank with guidelines on how it will work

SDC shall review complaints procedure to ensure current and refresh employees on this procedure

SDC shall create a bullying and harassment policy

SDC shall provide contacts/access to information and support, including internal mentoring and ongoing employee training

SDC to record all health and wellbeing initiatives undertaken by Council and review for effectiveness. Create wellness program around procedure HS07. Support a healthy team and organisational climate. Join in with NZ health and wellbeing campaigns

SDC shall create an internal 'toolbox' for employees to refer to for help as an alternative to accessing EAP services

SDC shall have clear roles, training and career progression plans in place for job positions within the organisation

SDC shall provide Physiotherapist/occupational therapist services for workstation set up and early reporting of pain and discomfort. SDC shall support healthy workplace environment.

SDC shall develop a flexible working policy

SDC shall have a management plan for escalation

SDC shall develop a critical event plan and provide training and support on how to manage a critical incident

 

 

 

 

 

 


Finance and Assurance Committee

22 June 2020

 

Draft Health and Safety Plan for 2020/21

Record No:             R/20/6/13328

Author:                      Janet Ellis, People and Capability Manager

Approved by:         Steve Ruru, Chief Executive

 

  Decision                                        Recommendation                                 Information

 

 

 

Purpose

1        To seek approval for the draft Health and Safety Plan 2020/2021 to be presented to Council for formal approval.

Executive Summary

2        Southland District Council has an obligation to manage the health and safety of its staff, contractors and volunteers.  To be able to do this Council needs to continue on its journey with improving the focus on health and safety in the coming year.

3        A draft Health and Safety Plan for 2020/21 has been drafted which contains the proposed objectives for the year ahead. The plan is being presented to the Committee for their endorsement prior to seeking formal approval from Council.

 

 

Recommendation

That the Finance and Assurance Committee:

a)            Receives the report titled “Draft Health and Safety Plan for 2020/21” dated 16 June 2020.

 

b)           Determines that this matter or decision be recognised not significant in terms of Section 76 of the Local Government Act 2002.

 

c)            Determines that it has complied with the decision-making provisions of the Local Government Act 2002 to the extent necessary in relation to this decision; and in accordance with Section 79 of the Act determines that it does not require further information, further assessment of options or further analysis of costs and benefits or advantages and disadvantages prior to making a decision on this matter.

 

d)           Recommends to Council that it approves the Health and Safety Plan for 2020/2021.

 

 

Background

4        In 2019/20 ongoing progress was made on health, safety and wellness within Council including the implementation of a health and safety system, improved contractor approval process, ongoing development of health and safety training, continued work on critical risk control plans, implementation of the drug and alcohol policy and the start of the implementation of GPS in fleet vehicles.

5        An update on the Health and Safety Plan as of 31 May 2020 is attached (Attachment A) for Council’s information.  The critical control plan work is proposed to continue into 2020/21 along with the training on the procedures. 

6        In 2017 our progress was benchmarked and reviewed by Simpson Grierson.  In late June 2020 a new gap analysis will be undertaken.  It is envisaged that in the 2020/21 year the focus will be to implement any opportunities identified in the gap analysis as well as what is identified in the draft plan. 

7        A Health and Safety Plan for 2020/2021 has been drafted and is attached (Attachment B) for the Committee’s consideration.

8        The plan contains a review of previous performance and objectives and spells out proposed improvement measures and targets.  It identifies key elements to deliver improvement and allocates sponsors to ensure momentum is maintained.

Factors to Consider

Legal and Statutory Requirements

9        Council has a legislative obligation to manage the health and safety of workers.

10      The Health and Safety Plan continues the focus on a risk based approach to managing health and safety based within its undertakings.

Costs and Funding

11      There will be ongoing health and safety costs with the implementation of this plan.  Current known costs have been budgeted in the Long Term Plan.  Both the Finance and Audit Committee and Council in March 2018 endorsed the continued spending on health and safety to ensure our staff get home safe every day.

Policy Implications

12      The current Health and Safety Policy will need to be amended following finalisation of the Plan.

Analysis

Options Considered

13      The options considered are to approve the Health and Safety Plan as presented (Option 1), recommend the plan subject to some minor amendments (Option 2) or Do Nothing (Option 3).

Analysis of Options

Option 1 – Agree to the Draft Health and Safety Plan 2020/2021

Advantages

Disadvantages

·      improvement of health and safety culture

·      illustration that Council and ELT are committed to caring for the wellbeing and safety of our people

·      decline in the number of injuries

·      meet legislative requirements.

·      possible additional financial implications

 

 


 

Option 2 – Modifies the Draft Health and Safety Plan 2020/2021

Advantages

Disadvantages

•    save some initial costs in the short term

·      no clear guidelines

·      health, safety and wellbeing of our people in jeopardy

·      may not be consistent with legislative obligations.

 

Option 3 – Do Nothing

Advantages

Disadvantages

·      avoids short term cost implications

·      inconsistency in procedures

·      no clear guidelines

·      health, safety and wellbeing of our people in jeopardy

·      not consistent with legislative obligations

 

Assessment of Significance

14      The matter being considered is of an administrative matter and hence is not considered to be significant in terms of section 76 of the Local Government Act 2002.

Recommended Option

15      Approves the recommendation to Council to adopt the Health and Safety Plan for 2020/21.

Next Steps

16      Continue working on the execution of the plan.

 

Attachments

a             Update on the Health and Safety Plan as of 31 May 2020

b             Health and Safety Plan for 2020/2021    

 


Finance and Assurance Committee

22 June 2020

 

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Finance and Assurance Committee

22 June 2020

 

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Finance and Assurance Committee

22 June 2020

 

Exclusion of the Public: Local Government Official Information and Meetings Act 1987

 

Recommendation

 

That the public be excluded from the following part(s) of the proceedings of this meeting.

C8.1   Annual Insurance Renewal

C8.2   Deloitte Fraud Risk Assessment

C8.3   Operational Risk Report

The general subject of each matter to be considered while the public is excluded, the reason for passing this resolution in relation to each matter, and the specific grounds under section 48(1) of the Local Government Official Information and Meetings Act 1987 for the passing of this resolution are as follows:

General subject of each matter to be considered

Reason for passing this resolution in relation to each matter

Ground(s) under section 48(1) for the passing of this resolution

Annual Insurance Renewal

s7(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 of the information.

That the public conduct of the whole or the relevant part of the proceedings of the meeting would be likely to result in the disclosure of information for which good reason for withholding exists.

Deloitte Fraud Risk Assessment

s7(2)(f)(ii) - The withholding of the information is necessary to maintain the effective conduct of public affairs through the protection of such members, officers, employees and persons from improper pressure or harassment.

That the public conduct of the whole or the relevant part of the proceedings of the meeting would be likely to result in the disclosure of information for which good reason for withholding exists.

Operational Risk Report

s7(2)(g) - The withholding of the information is necessary to maintain legal professional privilege.

s7(2)(i) - The withholding of the information is necessary to enable the local authority to carry on, without prejudice or disadvantage, negotiations (including commercial and industrial negotiations).

That the public conduct of the whole or the relevant part of the proceedings of the meeting would be likely to result in the disclosure of information for which good reason for withholding exists.