Audit and Risk Management Committee

Agenda

 

 

Notice of Meeting:

An ordinary meeting of the Audit and Risk Management Committee will be held on:

 

Date:                                     Wednesday 23 August 2017

Time:                                    8.30am

Venue:                                 Committee Room 1, Level 2, Civic Offices,
53 Hereford Street, Christchurch

 

 

Membership

Chair

Deputy Chair

Members

Ms Sue Sheldon

Councillor Raf Manji

Councillor Vicki Buck

Councillor Phil Clearwater

Councillor Pauline Cotter

Mayor Lianne Dalziel

Councillor David East

Deputy Mayor Andrew Turner

Mr Mark Russell

Mr Michael Rondel

 

 

18 August 2017

 

 

 

Principal Advisor

Carol Bellette

General Manager Finance and Commercial

 

Margaret Henderson

Committee Advisor

941 8185

margaret.henderson@ccc.govt.nz

www.ccc.govt.nz

Note:  The reports contained within this agenda are for consideration and should not be construed as Council policy unless and until adopted.  If you require further information relating to any reports, please contact the person named on the report.
To view copies of Agendas and Minutes, visit:
https://www.ccc.govt.nz/the-council/meetings-agendas-and-minutes/

 


Audit and Risk Management Committee

23 August 2017

 

Audit and Risk Management Committee - Terms of Reference

 

 

 

 

Chair

Sue Sheldon (Independent)

Deputy Chair

Councillor Manji as the Chair of the Finance and Performance Committee

Membership

Mayor Dalziel and Deputy Mayor Turner

The Chair of the following committees:

§   Innovation and Sustainable Development Committee

§   Social and Community Development Committee

§   Infrastructure, Transport and Environment Committee

§   Regulatory Performance Committee

2 External Members

Quorum

Half of the members if the number of members (including vacancies) is even, or a majority of members if the number of members (including vacancies) is odd.

Meeting Cycle

To be separately considered

Reports To

Council

 

 

Purpose

To assist the Council to discharge its responsibility to exercise due care, diligence and skill in relation to the oversight of:

§    the robustness of the internal control framework;

§    the integrity and appropriateness of external reporting, and accountability arrangements within the organisation for these functions;

§    the robustness of risk management systems, process and practices;

§    internal and external audit;

§    accounting policy and practice;

§    compliance with applicable laws, regulations, standards and best practice guidelines for public entities; and

§    the establishment and maintenance of controls to safeguard the Council’s financial and non-financial assets.

The foundations on which this Committee operates, and as reflected in this Terms of Reference, includes: independence; clarity of purpose; competence; open and effective relationships and no surprises approach.

 

Procedure

In order to give effect to its advice the Committee should make recommendations to the Council and to Management.

The Committee should meet the internal and the external auditors without Management present as a standing agenda item at each meeting where external reporting is approved, and at other meetings if requested by any of the parties.

The external auditors, the internal audit manager and the co-sourced internal audit firm should meet outside of formal meetings as appropriate with the Committee Chair.

The Committee Chair will meet with relevant members of Management before each Committee meeting and at other times as required.

 

Responsibilities

Internal Control Framework

§    Consider the adequacy and effectiveness of internal controls and the internal control framework including overseeing privacy and cyber security.

§    Enquire as to the steps management has taken to embed a culture that is committed to probity and ethical behaviour.

§    Review the processes or systems in place to capture and effectively investigate fraud or material litigation should it be required.

§    Seek confirmation annually and as necessary from internal and external auditors, attending Councillors, and management, regarding the completeness, quality and appropriateness of financial and operational information that is provided to the Council.

Risk Management

§    Review and consider Management’s risk management framework in line with Council’s risk appetite, which includes policies and procedures to effectively identify, treat and monitor significant risks, and regular reporting to the Council.

§    Assist the Council to determine its appetite for risk.

§    Review the principal risks that are determined by Council and Management, and consider whether appropriate action is being taken by management to treat Council’s significant risks. Assess the effectiveness of, and monitor compliance with, the risk management framework.

§    Consider emerging significant risks and report these to Council where appropriate.

Internal Audit

§    Review and approve the annual internal audit plan, such plan to be based on the Council’s risk framework. Monitor performance against the plan at each regular quarterly meeting.

§    Monitor all internal audit reports and the adequacy of management’s response to internal audit recommendations.

§    Review six monthly fraud reporting and confirm fraud issues are disclosed to the external auditor.

§    Provide a functional reporting line for internal audit and ensure objectivity of internal audit.

§    Oversee and monitor the performance and independence of internal auditors, both internal and co-sourced. Review the range of services provided by the co-sourced partner and make recommendations to Council regarding the conduct of the internal audit function.

§    Monitor compliance with the delegations policy.

 

External Reporting and Accountability

§    Consider the appropriateness of the Council’s existing accounting policies and practices and approve any changes as appropriate.

§    Contribute to improve the quality, credibility and objectivity of the accounting processes, including financial reporting.

§    Consider and review the draft annual financial statements and any other financial reports that are to be publicly released, make recommendations to Management.

§    Consider the underlying quality of the external financial reporting, changes in accounting policy and practice, any significant accounting estimates and judgements, accounting implications of new and significant transactions, management practices and any significant disagreements between Management and the external auditors, the propriety of any related party transactions and compliance with applicable New Zealand and international accounting standards and legislative requirements.

§    Consider whether the external reporting is consistent with Committee members’ information and knowledge and whether it is adequate for stakeholder needs.

§    Recommend to Council the adoption of the Financial Statements and Reports and the Statement of Service Performance and the signing of the Letter of Representation to the Auditors by the Mayor and the Chief Executive.

§    Enquire of external auditors for any information that affects the quality and clarity of the Council’s financial statements, and assess whether appropriate action has been taken by management.

§    Request visibility of  appropriate management signoff on the financial reporting and on the adequacy of the systems of internal control; including certification from the Chief Executive, the Chief Financial Officer and the General Manager Corporate Services that risk management and internal control systems are operating effectively;

§    Consider and review the Long Term and Annual Plans before adoption by the Council.  Apply similar levels of enquiry, consideration, review and management sign off as are required above for external financial reporting.

§    Review and consider the Summary Financial Statements for consistency with the Annual Report.

External Audit

§    Annually review the independence and confirm the terms of the audit engagement with the external auditor appointed by the Office of the Auditor General. Including the adequacy of the nature and scope of the audit, and the timetable and fees.

§    Review all external audit reporting, discuss with the auditors and review action to be taken by management on significant issues and recommendations and report to Council as appropriate.

§    The external audit reporting should describe: Council’s internal control procedures relating to external financial reporting, findings from the most recent external audit and any steps taken to deal with such findings, all relationships between the Council and the external auditor, Critical accounting policies used by Council, alternative treatments of financial information within Generally Accepted Accounting Practice that have been discussed with Management, the ramifications of these treatments and the treatment preferred by the external auditor.

§    Ensure that the lead audit engagement and concurring audit directors are rotated in accordance with best practice and NZ Auditing Standards.

Compliance with Legislation, Standards and Best Practice Guidelines

§    Review the effectiveness of the system for monitoring the Council’s compliance with laws (including governance legislation, regulations and associated government policies), with Council’s own standards, and Best Practice Guidelines.

Appointment of Independent Members

§    Identify skills required for Independent Members of the Audit and Risk Management Committee.  Appointment panels will include the Mayor or Deputy Mayor, Chair of Finance & Performance Committee and Chair of Audit & Risk Management Committee. Council approval is required for all Independent Member appointments.

§    The term of the Independent members should be for three years.  (It is recommended that the term for independent members begins on 1 April following the Triennial elections and ends 31 March three years later.  Note the term being from April to March provides continuity for the committee over the initial months of a new Council.)

§    Independent members are eligible for re-appointment to a maximum of two terms. By exception the Council may approve a third term to ensure continuity of knowledge.

 

Long Term Plan Activities

Consider and review the Long Term and Annual Plans before adoption by the Council.  Apply similar levels of enquiry, consideration, review and management sign off as are required above for external financial reporting.

 


Audit and Risk Management Committee

23 August 2017

 

Part A        Matters Requiring a Council Decision

Part B         Reports for Information

Part C         Decisions Under Delegation

 

 

TABLE OF CONTENTS

 

C       1.       Apologies.......................................................................................................................... 7

B       2.       Declarations of Interest................................................................................................... 7

C       3.       Confirmation of Previous Minutes................................................................................. 7

B       4.       Deputations by Appointment........................................................................................ 7

B       5.       Presentation of Petitions................................................................................................ 7

STAFF REPORTS

A       6.       Audit New Zealand - Audit Proposal Letter................................................................ 13

C       7.       Resolution to Exclude the Public................................................................................. 22  

 

 


Audit and Risk Management Committee

23 August 2017

 

 

1.   Apologies

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

2.   Declarations of Interest

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

3.   Confirmation of Previous Minutes

That the minutes of the Audit and Risk Management Committee meeting held on Friday, 12 May 2017 be confirmed (refer page 8).

4.   Deputations by Appointment

There were no deputations by appointment at the time the agenda was prepared. 

5.   Presentation of Petitions

There were no petitions received at the time the agenda was prepared.  


Audit and Risk Management Committee

23 August 2017

 

 

 

Audit and Risk Management Committee

Open Minutes

 

 

Date:                                     Friday 12 May 2017

Time:                                    1pm

Venue:                                 Committee Room 1, Level 2, Civic Offices,
53 Hereford Street, Christchurch

 

 

Present

Chair

Deputy Chair

Members

Ms Sue Sheldon

Councillor Raf Manji

Mayor Lianne Dalziel

Deputy Mayor Andrew Turner

Councillor Vicki Buck

Councillor Phil Clearwater

Councillor Pauline Cotter

Councillor David East

Mr Mark Russell

Mr Michael Rondel

 

 

8 May 2017

 

 

 

Principal Advisor

Carol Bellette

General Manager Finance and Commercial

 

Margaret Henderson

Committee Advisor

941 8185

margaret.henderson@ccc.govt.nz

www.ccc.govt.nz

To view copies of Agendas and Minutes, visit:
www.ccc.govt.nz/Council/meetingminutes/agendas/index

 


Part A        Matters Requiring a Council Decision

Part B         Reports for Information

Part C         Decisions Under Delegation

 

 

 

The agenda was dealt with in the following order.

1.   Apologies

Part C

 

Committee Resolved ARCM/2017/00020

It was resolved on the motion of Councillor Cotter, seconded by Deputy Mayor Turner that the apologies for lateness  from Mayor Dalziel and Councillor Buck, be accepted.

Councillor Cotter/Deputy Mayor                                                                                                                          Carried

 

2.   Declarations of Interest

Part B

There were no declarations of interest recorded.

 

3.   Confirmation of Previous Minutes

Part C

Committee Resolved ARCM/2017/00021

Committee Decision

That the minutes of the Audit and Risk Management Committee meeting held on Monday, 20 February 2017, be confirmed.

Deputy Chair Manji/Deputy Mayor                                                                                                                     Carried

 

4.   Deputations by Appointment

Part B

There were no deputations by appointment.

5.   Presentation of Petitions

Part B

There was no presentation of petitions.

 

Councillor East joined the meeting at 1.07pm.

Councillor Buck joined the meeting at 1.08pm.

 

6.   Audit New Zealand - Audit Engagement and Arrangement Letters 2017

 

Staff Recommendations

That the Audit and Risk Management Committee consider the audit engagement and arrangement letters provided by Audit New Zealand.

That after consideration of the audit engagement and arrangement letters the Audit and Risk Management Committee recommend to Council that it:

1.         Approve the content of the draft audit engagement letter received from Audit New Zealand.

2.         Approve the content of the draft audit arrangements letter received from Audit New Zealand with the exception of the audit fee as that is yet to be advised.

3.         Recommend that the Mayor sign the final audit engagement letter once received from Audit New Zealand.

4.         Note that as the Council is yet to be advised of the final audit fee, the signing the final audit arrangements letter is deferred until the audit fee is received and considered.

 

Committee Decided ARCM/2017/00022 

Part A

That the Council:

1.         Approve the content of the draft audit engagement letter received from Audit New Zealand.

2.         Approve the content of the draft audit arrangements letter received from Audit New Zealand with amended wording with respect to the audit fee that is yet to be advised.

3.         Recommend that the Mayor sign the final audit engagement letter and the amended Audit Arrangements letter once received from Audit New Zealand.

4.         Note that the final audit fee proposal will be received subsequently.

Deputy Chair Manji/Councillor Cotter                                                                                                                Carried

 

 

Through the Chair, the Committee expressed its thanks to Julian Tan of Audit New Zealand for all the work he has done for the Christchurch City Council including leading the audit over the last five years.

 

 

Mayor Dalziel joined the meeting at 1.21pm.

 

 

7     Resolution to Exclude the Public

 

Committee Resolved ARCM/2017/00023

Part C

That at 1.24pm the resolution to exclude the public set out on pages 40 to 42 of the agenda, be adopted.

AND

That Steve Wakefield, David Seath and Aloysius Tey of Deloitte and Kathy Dever-Todd, Consultant from Dever-Todd Advisory Services, remain after the public have been excluded for Item 11 of the public excluded agenda as they have knowledge that is relevant to that item and will assist the Committee.

Mr Rondel/Councillor Clearwater                                                                                                                           Carried

 

The public were re-admitted to the meeting at 3.36pm.

 

   

Meeting concluded at 3.36pm.

 

CONFIRMED THIS 23RD DAY OF AUGUST 2017

 

Sue Sheldon

Chair

   


Audit and Risk Management Committee

23 August 2017

 

 

6.        Audit New Zealand - Audit Proposal Letter

Reference:

17/827179

Contact:

Patricia Christie

Patricia.christie@ccc.govt.nz

941 8113

 

 

1.   Purpose and Origin of Report

Purpose of Report

1.1       The purpose of this report is for the Audit and Risk Management Committee to confirm the audit proposal with Audit New Zealand for the three years beginning 30 June 2017.

Origin of Report

1.2       This report is staff generated in response to the receipt of the draft audit proposal letter (Attachment A) from Audit New Zealand.

2.   Significance

2.1       The decision(s) in this report is of low significance in relation to the Christchurch City Council’s Significance and Engagement Policy.

2.1.1   The level of significance was determined by the impact of the issues raised in this report.

2.1.2   The community engagement and consultation outlined in this report reflect the assessment.

 

3.   Staff Recommendations

That the Audit and Risk Management Committee recommend to Council that it:

1.         Approve the content of the draft audit proposal letter received from Audit New Zealand.

2.         Approve the Mayor signing the final audit proposal letter once received from Audit New Zealand.

 

 

4.   Key Points

4.1       The audit proposal letter is the third letter which underpins the annual audit engagement by Audit New Zealand. The other two letters; the engagement letter and audit arrangements letters were considered by the Committee at its last meeting. The audit proposal letter was not available at that time to allow all three to be considered together.

4.2       The purpose of the audit proposal letter is to outline the audit fee for the Council for the next three audits and the number of hours that Audit New Zealand are budgeting to spend on the audit.

4.3       The audit is expected to require 1,892 hours of staff time in 2017 reducing to 1,772 in 2018 and 2019. The 2017 hours are a 165 hour increase on those budgeted for the 2016 audit. The reasons for the increase are:

·   Additional time to audit the financial prudence disclosures and other Local Government Act disclosures as no provision was made for these in the previous proposal – 25 hours.

·   Review of the new revenue system implemented – 20 hours for 2017 only.

·   Additional time to audit the increased number of asset valuations – 120 hours reducing by 100 hours in 2018 with Council returning to a ‘normal’ valuation routine.

1.2       These hours translate to the following audit fees:

 

2016
(Actual costs)
$

2016
(As agreed)
$

2017
$

2018
$

2019
$

Audit Fee (excluding disbursements and GST)

376,636

320,200

351,548

332,330

336,705

 

1.3       The fees above also include an estimate of staff salary movements and the Office of the Auditor General overhead charge.

1.4       The fee proposal provided has been reviewed by the Office of the Auditor General. Management have also compared the Council’s audit fee against other councils of similar size and the proposed level of fee is not inconsistent.

 

 

Attachments

No.

Title

Page

a

2017 Audit New Zealand Audit Proposal Letter

15

 

 

Confirmation of Statutory Compliance

Compliance with Statutory Decision-making Requirements (ss 76 - 81 Local Government Act 2002).

(a) This report contains:

(i)  sufficient information about all reasonably practicable options identified and assessed in terms of their advantages and disadvantages; and

(ii) adequate consideration of the views and preferences of affected and interested persons bearing in mind any proposed or previous community engagement.

(b) The information reflects the level of significance of the matters covered by the report, as determined in accordance with the Council's significance and engagement policy.

 

Signatories

Author

Patricia Christie - Manager External Reporting and Governance

Approved By

Diane Brandish - Head of Financial Management

Carol Bellette - General Manager Finance and Commercial (CFO)

  


Audit and Risk Management Committee

23 August 2017

 

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Audit and Risk Management Committee

23 August 2017

 

 

7.    Resolution to Exclude the Public

Section 48, Local Government Official Information and Meetings Act 1987.

 

I move that the public be excluded from the following parts of the proceedings of this meeting, namely items listed overleaf.

 

Reason for passing this resolution: good reason to withhold exists under section 7.

Specific grounds under section 48(1) for the passing of this resolution: Section 48(1)(a)

 

Note

 

Section 48(4) of the Local Government Official Information and Meetings Act 1987 provides as follows:

 

“(4)     Every resolution to exclude the public shall be put at a time when the meeting is open to the public, and the text of that resolution (or copies thereof):

 

             (a)       Shall be available to any member of the public who is present; and

             (b)       Shall form part of the minutes of the local authority.”

 

This resolution is made in reliance on Section 48(1)(a) of the Local Government Official Information and Meetings Act 1987 and the particular interest or interests protected by Section 6 or Section 7 of that Act which would be prejudiced by the holding of the whole or relevant part of the proceedings of the meeting in public are as follows:


Audit and Risk Management Committee

23 August 2017

 

 

 

ITEM NO.

GENERAL SUBJECT OF EACH MATTER TO BE CONSIDERED

SECTION

SUBCLAUSE AND REASON UNDER THE ACT

PLAIN ENGLISH REASON

WHEN REPORTS CAN BE RELEASED

8

Public Excluded Audit and Risk Management Committee Minutes - 12 May 2017

 

 

Refer to the previous public excluded reason in the agendas for these meetings.

 

9

Quarterly Procurement Report - Quarter 4 - 2016/17

s7(2)(b)(ii), s7(2)(h), s7(2)(i)

Prejudice Commercial Position, Commercial Activities, Conduct Negotiations

The following information may prejudice the Council's commercial position.

At the expiry of the Agreement.

10

Internal Audit Status Report

s7(2)(e), s7(2)(f)(ii), s7(2)(j)

Prevention of Material Loss, Protection from Improper Pressure or Harassment, Prevention of Improper Advantage

Prevent the use of Internal Audit findings being utilised for improper advantage.

Consideration of release when reported findings have been closed.

11

Risk Management Status Report

s7(2)(c)(ii), s7(2)(f)(ii)

Prevent Damage to the Public Interest, Protection from Improper Pressure or Harassment

Prevent the improper use and misinterpretation of information.

Consideration of release pending status of risks and management activity.

12

The Crossing Car Park - Review by the Office of the Auditor-General

s7(2)(c)(i), s7(2)(h)

Protection of Source of Information, Commercial Activities

To allow the Office of the Auditor-General to have advanced notice that the letter attached to the report will be released to the public.

10 days from the date the letter is sent to the Office of the Auditor-General

13

Audit New Zealand - Interim Management Report for the year ended 30 June 2017

s7(2)(h), s7(2)(j)

Commercial Activities, Prevention of Improper Advantage

This report discusses areas of the the Council's internal control framework and work that is still to occur.

Public knowledge of some items in this report could allow control deficiencies to be exploited for improper advantage.

The final management report is typically tabled in a public meeting

14

Annual Report 2017 - Key Accounting Decisions and Assumptions

s7(2)(b)(ii)

Prejudice Commercial Position

The annual report is still draft and subject to final audit sign off and change by management.

The annual report will become public after the Audit and Risk Committee meeting to approve the Annual Report for adoption by Council