Audit and Risk Management Committee

Agenda

 

 

Notice of Meeting:

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

 

Date:                                     Friday 1 February 2019

Time:                                    3:30pm

Venue:                                 Council Chambers, Level 2, Civic Offices,
53 Hereford Street, Christchurch

 

 

Membership

Chairperson

Deputy Chairperson

Members

Ms Kim Wallace

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

 

 

28 January 2019

 

 

 

Principal Advisor

Carol Bellette

General Manager Finance and Commercial

 

Mark Saunders

Committee and Hearings Advisor

941 6436

mark.saunders@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

01 February 2019

 


Audit and Risk Management Committee - Terms of Reference

 

Chair

Kim Wallace (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

1.1               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.

 

1.2               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

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

2.2               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.

2.3               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.

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

 

Responsibilities

3.1        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.

 

3.2        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.

 

3.3        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.

 

3.4        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.

 

3.5        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.

 

3.6        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.

 

3.7        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

4.1             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

01 February 2019

 

Part A        Matters Requiring a Council Decision

Part B         Reports for Information

Part C         Decisions Under Delegation

 

 

TABLE OF CONTENTS

 

C       1.       Apologies.......................................................................................................................... 8

B       2.       Declarations of Interest................................................................................................... 8

C       3.       Confirmation of Previous Minutes................................................................................. 8

B       4.       Public Forum.................................................................................................................... 8

B       5.       Deputations by Appointment........................................................................................ 8

B       6.       Presentation of Petitions................................................................................................ 8

B       7.       Committee-Only Time with Auditors for Public Excluded Items................................. 8

Staff Reports

C       8.       Audit NZ Report to Council on the 2017/18 Audit of the Christchurch City Council 13

C       9.       Resolution to Exclude the Public................................................................................. 42  

 

 


Audit and Risk Management Committee

01 February 2019

 

 

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 Monday, 12 November 2018  be confirmed (refer page 9).

4.   Public Forum

A period of up to 30 minutes may be available for people to speak for up to five minutes on any issue that is not the subject of a separate hearings process.

5.   Deputations by Appointment

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

6.   Petitions

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

7.   Committee-Only Time with Auditors for Public Excluded Items

The Committee is reminded that under its Terms of Reference, it should meet with the internal and the external auditors without Management present at each meeting where external reporting is approved, and at other meetings if requested by any of the parties.

 

Any Committee-only time with the auditors within the proceedings of the meeting will be held as part of the consideration of a public excluded item. The public will be excluded from this time for the reason set out in the below resolution to exclude the public relating to the relevant item.


Audit and Risk Management Committee

01 February 2019

 

 

 

Audit and Risk Management Committee

Open Minutes

 

 

Date:                                     Monday 12 November 2018

Time:                                    9:35am

Venue:                                 Council Chambers, Level 2, Civic Offices,
53 Hereford Street, Christchurch

 

 

Present

Chairperson

Deputy Chairperson

Members

Ms Kim Wallace

Councillor Raf Manji

Councillor Vicki Buck

Councillor Phil Clearwater

Councillor Pauline Cotter

Mayor Lianne Dalziel

Councillor David East

Mr Mark Russell

Mr Michael Rondel

 

 

12 November 2018

 

 

 

Principal Advisor

Carol Bellette

General Manager Finance and Commercial

 

Mark Saunders

Committee and Hearings Advisor

941 6436

mark.saunders@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/2018/00029

Committee Decision

That the apology for lateness from Mayor Dalziel be accepted.

Deputy Chair Manji/Ms Wallace                                                                                                                           Carried

 

2.   Declarations of Interest

Part B

There were no declarations of interest recorded.

 

3.   Confirmation of Previous Minutes

Part C

Committee Resolved ARCM/2018/00030

Committee Decision

That the minutes of the Audit and Risk Management Committee meeting held on Friday, 28 September 2018 be confirmed.

Ms Wallace/Mr Russell                                                                                                                                             Carried

 

4.   Public Forum

Part B

There were no public forum presentations.

5.   Deputations by Appointment

Part B

There were no deputations by appointment.

6.   Presentation of Petitions

Part B

There was no presentation of petitions.

7.   Committee-Only Time with Auditors for Public Excluded Items

Part B

It was noted that under its Terms of Reference, the Committee should meet with the internal and the external auditors without Management present at each meeting where external reporting is approved, and at other meetings if requested by any of the parties. This Committee-only time with the auditors to be part of the consideration of a relevant item on the public excluded agenda and requested during the consideration of the item.

 

 

8.   Asset Management Maturity Assessment 2018 Report - Executive Summary

 

Committee Comment

Kathy Dever-Tod of Dever-Tod Advisory Services joined the table for this item.

 

 

 

Committee Resolved ARCM/2018/00031 (Original Staff Recommendations Accepted without Change)

Part C

That the Audit and Risk Management Committee:

1.         Note the Executive Summary of the 2018 Asset Management Maturity Assessment Report.

2.         Note those report recommendations to be monitored by the Audit and Risk Management Committee and those recommendations to be monitored by the Asset Management Governance Board.

3.         Endorse the Asset Management Unit’s continued work on implementing the Asset Management Maturity Assessment report’s recommendations.

4.         Note as part of the annual Asset Management Improvement Programme review, projects will be considered in light of the Asset Management Maturity Assessment recommendations.  This will commence in the new year and an updated Improvement Programme will be presented to the Executive Leadership Team (ELT) prior to the commencement of the next financial year.

Deputy Chair Manji/Councillor East                                                                                                                     Carried

 

Committee Decided ARCM/2018/00032 (Original Staff Recommendations Accepted without Change)

Part A

That the Audit and Risk Management Committee recommends the Council:

1.         Receive the information in this report.

Deputy Chair Manji/Councillor East                                                                                                                     Carried

 

 

 

 

9.   Debenture Trust Audit Report and Letter of Representation

 

Committee Resolved ARCM/2018/00033 (Original Staff Recommendations Accepted without Change)

Part C

That the Audit and Risk Management Committee:

1.         Receive the information in the Audit New Zealand Report on the Debenture Trust.

2.         Note that Audit New Zealand have issued an unqualified opinion.

Deputy Chair Manji/Mr Rondel                                                                                                                             Carried

 

 

 

10  Resolution to Exclude the Public

 

Committee Resolved ARCM/2018/00034

Part C

That David Seath of Deloitte remain after the public have been excluded for Items 12 and 13 of the public excluded agenda as he has knowledge that is relevant to that item and will assist the Council.

AND

That at 10:02am the resolution to exclude the public set out on pages 51 to 52 of the agenda be adopted.

Mr Russell/Ms Wallace                                                                                                                                                Carried

 

The public were re-admitted to the meeting at 12:13pm.

 

   

Meeting concluded at 12:14pm.

 

CONFIRMED THIS 1st DAY OF FEBRUARY 2019

 

Kim Wallace

Chairperson

 


Audit and Risk Management Committee

01 February 2019

 

 

8.        Audit NZ Report to Council on the 2017/18 Audit of the Christchurch City Council

Reference:

19/41606

Presenter(s):

Len van Hout; Manager External Reporting and Governance

 

 

1.   Purpose of Report

1.1       The purpose of this report is for the Audit and Risk Management Committee to receive the Audit New Zealand Management Report relating to the audit of the financial statements and annual report for the year ended 30 June 2018.

2.   Staff Recommendations

That the Audit and Risk Management Committee:

1.         Receive the information and consider the recommendations made by Audit New Zealand in the Audit New Zealand Management Report relating to the audit of the financial statements and annual report for the year ended 30 June 2018 and management’s responses to these.

2.         Recommend to Council that it receives the Audit New Zealand Management Report relating to the audit of the financial statements and annual report for the year ended 30 June 2018.

 

3.   Key Points

3.1       The Management Report is attached as Attachment A.

3.2       The Management Report sets out Audit New Zealand’s findings from their audit of the Council for the year ended 30 June 2018. The report draws attention to areas where the Council is doing well or where Audit New Zealand has made recommendations for improvement.

3.3       The key points in the management report are:

3.3.1   Internal Control Processes

Audit NZ noted that the identification of a significant although not material misstatement by Council highlighted that there are appropriate internal control processes in place.

3.3.2   Recommendation for Improvements

No new recommendations were made following the 2017/18 audit.

3.4       Review notes from the audit of group entities include:

3.4.1   Christchurch City Holdings Limited – Release of Capital, Dividends and Bond Issues.

3.4.2   Vbase Limited – Move to PBE accounting standards and Town Hall repair costs and post balance date equity injections from Council.

3.5       Future matter to be reviewed in the 2018/19 audit cycle include:

3.5.1   Accounting for the Otautahi Community Housing Trust Asset Transfer.

3.5.2   Council’s procurement and contract management processes from a best practice perspective.

3.5.3   The accounting treatment of the Crown’s contribution towards key development projects.

3.5.4   Progress in addressing Deloitte’s outstanding recommendations from their audit of Holidays Act 2003 compliance.

3.5.5   Review of the treatment of any variations to the 2018/28 Long Term Plan.

 

 

Attachments

No.

Title

Page

a

Audit New Zealand Management Report for the year ended 30 June 2018

15

 

 

Signatories

Author

Len Van Hout - Manager External Reporting & Governance

Approved By

Diane Brandish - Head of Financial Management

Carol Bellette - General Manager Finance and Commercial (CFO)

  


Audit and Risk Management Committee

01 February 2019

 

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Audit and Risk Management Committee

01 February 2019

 

 

9.    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

01 February 2019

 

 

 

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

10

Public Excluded Audit and Risk Management Committee Minutes - 12 November 2018

 

 

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

 

11

Draft Annual Plan 2019/20 to be presented to the Council Annual Plan meeting on 12 Feb 2019

s7(2)(b)(ii), s7(2)(g)

Prejudice Commercial Position, Maintain Legal Professional Privilege

The information to be used as the basis for preparation of the Council's Annual Plan remains subject to change.  Premature release of this information, before it is adopted by the Council, could prejudice those people and entities that may be affected by any changes made.
 The Committee may seek at the meeting legal advice on matters relating to the preparation and adoption of the Annual Plan.

Upon the Chief Executive being satisfied, in her discretion, that there are no longer grounds for withholding the information.