Audit and Risk Management Committee - Terms of Reference Ngā Ārahina Mahinga

Chair	Mr Michael Wilkes (Independent)
Deputy Chair	Councillor McLellan
Membership	Councillor Fields Councillor MacDonald Councillor Scandrett External Members: Mrs Hilary Walton Mr Bruce Robertson
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	Quarterly and as required
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

Audit and Risk Management Committee Forward Work Programme 2024

2024	Feb 8	Apr 5	Jun 20	Aug 9	Oct 17	Dec 6
Update Reports	· LTP Process Update	· Risk and Assurance · Procurement · Cyber Security · Health and Safety	· Risk and Assurance · Cyber Security · Procurement report	· Risk and Assurance · Major Litigation	· Risk and Assurance · Cyber Security	· Risk and Assurance · Procurement · Major Litigation
Other Reports			· Te Kaha Update · Sensitive Expenditure	· Parakiore Update
Annual Report	· Audit NZ Management Report	· External Reporting and Audit Programme for 2023/24 Update	· Audit NZ Management Letter for current year interim audit · Audit Plan - Audit NZ		· Financial Statements and Annual Report · Update on critical judgments, estimates & assumptions
Annual Plan	· Draft LTP		· LTP Update · Final LTP

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Audit and Risk Management Committee

Open Minutes

Date: Friday 5 April 2024

Time: 9.33 am

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

Present

Chairperson

Deputy Chairperson

Members

Mr Michael Wilkes

Councillor Jake McLellan

Councillor Tyrone Fields

Councillor Sam MacDonald

Mr Bruce Robertson

Mrs Hilary Walton

Principal Advisor

Jane Parfitt

General Manager Infrastructure Planning & Regulatory

Tel: 941 8999

Luke Smeele

Democratic Services Advisor

941 6374

luke.smeele@ccc.govt.nz

www.ccc.govt.nz

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 Ngā Whakapāha

Part C

Committee Resolved ARCM/2024/00005

That the apology received from Tim Scandrett for absence be accepted.

Councillor McLellan/Mr Robertson Carried

2. Declarations of Interest Ngā Whakapuaki Aronga

Hilary Walton declared an interest in Item 14 – Infrastructure as a service (IaaS) Outcome.

3. Confirmation of Previous Minutes Te Whakaāe o te hui o mua

Part C

Committee Resolved ARCM/2024/00006

That the minutes of the Audit and Risk Management Committee meeting held on Thursday, 8 February 2024 be confirmed.

Councillor MacDonald/Mrs Walton Carried

4. Public Forum Te Huinga Whānui

Part B

There were no public forum presentations.

5. Deputations by Appointment Ngā Huinga Whakaritenga

Part B

There were no deputations by appointment.

6. Presentation of Petitions Ngā Pākikitanga

Part B

There was no presentation of petitions.

7. Procurement and Contracts Unit FY24 Q2 Report

Committee Resolved ARCM/2024/00007

Officer Recommendation Accepted without Change

Part C

That the Audit and Risk Management Committee:

1. Receive the information in the Quarterly Procurement Report for the months of October, November, and December 2023 (FY2024 Q2 Report).

Councillor McLellan/Councillor MacDonald Carried

8. Alignment with Health, Safety & Wellbeing Committee

Committee Resolved ARCM/2024/00008

Officer Recommendation Accepted without Change

Part C

That the Audit and Risk Management Committee:

1. Requests staff to consider the Terms of Reference of the ARMC and those of the Health, Safety and Wellbeing Committee with a view to identifying any overlaps, misalignments and/or process efficiencies.

2. Requests that a meeting is set up between the Chairs of both committees, including relevant staff, to discuss and agree any changes required to ensure that there is alignment and efficient processes between the two committees.

Mr Robertson/Mrs Walton Carried

9. LTP 2024/2034 update

Committee Resolved ARCM/2024/00009

Officer Recommendation Accepted without Change

Part C

That the Audit and Risk Management Committee:

1. Receive the information in the LTP 2024/2034 update Report.

Mrs Walton/Councillor McLellan Carried

Councillor McDonald left the meeting at 9.56am and returned at 10.05am during consideration of Item 9.

11. Resolution to Exclude the Public Te whakataunga kaupare hunga tūmatanui

Committee Resolved ARCM/2024/00011

Part C

That Chantelle Gernetzky of Audit New Zealand, remain after the public have been excluded for Items 12-16 of the public excluded agenda as she has knowledge that is relevant to those items and will assist the Council. That Andrew Simpson of KPMG, remain after the public have been excluded for Item 13 of the public excluded agenda as he has knowledge that is relevant to that item and will assist the Council.

AND

That at 10.09am the resolution to exclude the public set out on pages 33-35 of the agenda be adopted.

Councillor McLellan/Councillor MacDonald Carried

The public were re-admitted to the meeting at 11.24 am.

10. Committee Forward Work Programme 2024

Committee Resolved ARCM/2024/00010

Officer Recommendation Accepted without Change

Part C

That the Audit and Risk Management Committee:

1. Receive the information in the Committee Forward Work Programme 2024 Report.

Mr Robertson/Councillor MacDonald Carried

The Committee requested that CCHL be invited to present an update on their strategic risks at the ARMC meeting on the 20 June 2024.

The Committee requested that CCHL be invited to present the results from their 2023/24 Audit at the ARMC workshop on the 19 September 2024.

The Committee requested that an insurance update report be presented to the Committee on a 6 monthly basis.

The Committee requested that the meeting start time be updated to allow 30 minutes before each meeting for discussions with the Chief Executive and independent auditors without staff present.

Meeting concluded at 12.17 pm.

CONFIRMED THIS 20^thDAY OF JUNE 2024

Michael Wilkes

Chairperson

7. Sensitive Expenditure: Elected Member Professional Development, Allowances and Expenses
Reference Te Tohutoro:	24/943737
Responsible Officer(s) Te Pou Matua:	David Corlett, Democratic Services Advisor, Hearings and Council Support Team
Accountable ELT Member Pouwhakarae:	Helen White, General Counsel / Head of Legal & Democratic Services

1. Purpose and Origin of the Report Te Pūtake Pūrongo

1.1 Section 9 of the Council’s Elected Member Allowances and Expenses Policy 2019 covers the entitlement of elected members to allowances and contributions towards conferences, courses, training, professional development, and travel. Staff have reviewed section 9 and have prepared a draft decision report (Attachment A) for Council with recommended amendments. The residual components concerning allowances and expenses are contained in a revised draft policy with no substantive change (Attachment B) which will also be considered by the Council.

1.2 The purpose of this report is to consult the Committee and seek its advice on matters relating to sensitive expenditure^{^[1]} in the draft decision reports. In particular, there two specific questions that staff request advice on:

· The identification of an appropriate person to approve expenditure by the Mayor.

· Whether it would be appropriate for elected members to receive an allocation on a triennial basis for professional development, as opposed to the current annual allocation.

2. Officer Recommendations Ngā Tūtohu

That the Audit and Risk Management Committee:

1. Receive the information in this report on Sensitive Expenditure: Elected Member Professional Development, Allowances and Expenses.

2. Either

a. Confirm that the Chair of the Council’s Audit and Risk Committee is an appropriate person to approve the Mayor’s sensitive expenditure on professional development, allowances and expenses.

b. Identify an appropriate person(s) to approve the Mayor’s sensitive expenditure on professional development, allowances and expenses.

3. Provide advice to the Council on any sensitive expenditure elements of the draft Policies on professional development, allowances and expenses.

4. Notes that the decisions in this report are assessed as low significance based on the Christchurch City Council’s Significance and Engagement Policy.

3. Executive Summary Te Whakarāpopoto Matua

3.1 Staff have reviewed the policy on elected member professional development and have drafted a decision report that sets out recommendations that are broadly reflective of the comments elected members made at a workshop in May 2024. The draft policy on professional development and the accompanying report to Council is Attachment A. A refreshed version of residual policy on elected member allowances and the accompanying report to Council is Attachment B.

3.2 The proposed policies have also been assessed against the Office of the Auditor-General’s (OAG’s) guide on sensitive expenditure: https://oag.parliament.nz/good-practice/sensitive-expenditure

3.3 Advice is sought from the Committee on the sensitive expenditure elements of both policies. The specific matters for input from the Committee are:

· The identification of an appropriate person to approve expenditure by the Mayor.

· Concerning alignment with the OAG’s guide on sensitive expenditure, the appropriateness of elected members having an allocation for training/professional development on a triennial basis, as opposed to the current annual allocation.

3.4 The Committee is invited to make any other comments it considers appropriate for the Council to consider.

4. Background/Context Te Horopaki

4.1 The Christchurch City Council’s Elected Member Allowances and Expenses Policy 2019 covers the entitlement of elected members to allowances and contributions towards expenses related to travel, mileage, communication, childcare, and travel, conference and training attendance and professional development.

4.2 Section 9 specifically relates to professional development and related costs. Section 9 is not covered by Local Government Members' Determination.

4.3 As part of the discussion on the Council’s Long-Term Plan Councillors asked staff to come back with options for the allocation of the budget for elected member professional development within existing budget limits.

4.4 The provision of budget for professional development and related costs is to provide elected members with learning experiences to increase their governance capacity. This is currently self-directed, and the Mayor and Councillors identify training opportunities that they individually consider meets their development needs.

4.5 On 16 May 2024 staff held an information session/workshop with the Mayor and Councillors to explore options. Elected member guidance was sought on whether they were content with the current policy, and if not, what aspects they would be interested in changing.

4.6 Expenditure on professional development can be seen as sensitive expenditure and staff have considered the guidance^{^[2]} provided by the Office of the Auditor General in reviewing section 9. This is important as inappropriate use of sensitive expenditure risks harming the organisation’s reputation, and the public sector more generally.

4.7 The overriding concern for the person approving the expenditure is to be satisfied of a justifiable business purpose and that all of the following principles are met:

4.7.1 Impartiality

4.7.2 Integrity

4.7.3 Moderate and conservative

4.7.4 Transparent

4.8 The purpose of this report is to consult the Committee and seek its guidance on two specific matters relating to sensitive expenditure:

· The identification of an appropriate person to approve expenditure by the Mayor

· Whether it would be appropriate for elected members to receive an allowance on a triennial basis, as opposed to the current annual allocation.

5. Approval of Mayoral expenditure

Options Considered Ngā Kōwhiringa Whaiwhakaaro

5.1 In terms of the approval of Mayoral expenditure the following reasonably practicable options were considered and are assessed in this report:

· Approval of Mayoral expenditure by the Deputy Mayor.

· Approval of Mayoral expenditure by the Chair of the Audit and Risk Committee.

5.2 The following options were considered but ruled out:

· Approval of Mayoral expenditure by the Chief Executive. This option was ruled out because the Chief Executive is employed by the Mayor.

Options Descriptions Ngā Kōwhiringa

5.3 Preferred Option: Approval by the Chair of the Audit and Risk Committee.

5.3.1 Option Description: Staff would undertake an initial assessment of any application by the Mayor against the Council’s professional development or allowances and expenses policy, with the final decision being made by the Chair of the Audit and Risk Committee. There would need to be an arrangement in place for approvals when the Chair is unavailable. The suggested arrangement would be for any two members of the Committee, one of whom must be an independent member.

5.3.2 Option Advantages

· The Chair is independent of the Mayor and would not be seen to benefit from approving/rejecting the Mayor’s requests for professional development, expenses or allowances within the parameters set out in the policies.

· This aligns with the advice from the Office of the Auditor General that “It is worth considering having senior personnel expenses reviewed by an audit and risk committee and/or making the expenses publicly available”.

· This is the recommendation of Audit New Zealand.

5.3.3 Option Disadvantages

· Requires additional work by the Chair in assessing any applications from the Mayor.

5.4 Alternative Option: Approval of Mayoral expenditure by the Deputy Mayor.

5.4.1 Option Description: Staff would undertake an initial assessment of any application by the Mayor against the Council’s professional development or allowances and expenses policy, with the final decision being made by the Deputy Mayor.

5.4.2 Option advantages: Reasonably simple to administer.

5.4.3 Option disadvantages: Contrary to Office of the Auditor General guidance on the good practice of approval by a more senior person.

6. Annual or multi-year allocation for professional development

Options Considered Ngā Kōwhiringa Whaiwhakaaro

6.1 The following reasonably practicable options were considered and are assessed in this report. Noting that if Council agrees there will be an extra contestable allocation of up to $2,000 per annum for those elected members with additional responsibilities (Chairs, Deputy Chairs, Portfolio Leads).

· Option 1: The status Quo (Option1): an annual allocation of $4,000 to each elected member at the start of the financial year.

· Option 2: A three-year allocation ($12,000) at the beginning of each triennium.

6.2 Preferred Option: Option 1: The status quo (an annual allocation of $4,000)

6.2.1 Option Description: There would be an annual allocation of $4,000 to elected members for professional development at the beginning of each financial year (1 July). As at present any allocation not spent in a financial year would not be able to be carried over to the next financial year.

6.2.2 Option Advantages:

· Easy to administer financially. Potentially less risk around sensitive expenditure.

6.2.3 Option Disadvantages:

· Elected members may not be able to attend a course that relates closely to the elected members Council responsibilities if it exceeds $4,000.

6.3 Alternative Option: Option2: A three-year allocation.

6.3.1 Option Description: Under this option there would be a three-year allocation of $12,000 to each elected member at the beginning of the triennium.

6.3.2 Option Advantages:

· A greater range of courses would become available due to the larger one-off allocation.

6.3.3 Option Disadvantages:

· Difficult to administer because of the misalignment of the financial and election cycle.

· More likely to trigger sensitive expenditure considerations as the types of training courses that cost more than $4000 (such as Institute of Directors or RMA Commissioner training) may suggest a significant personal benefit to the elected member. Extravagant or immoderate expenditure may lead to adverse comment in the auditing process.

Analysis Criteria Ngā Paearu Wetekina

6.4 Assessment against the criteria set out in the guidance provided by the Office of the Auditor General.

7. Financial Implications Ngā Hīraunga Rauemi

Capex/Opex Ngā Utu Whakahaere

7.1 There are no financial implications resulting from this report as all options are budget neutral, save for any additional time incurred by the Chair of the Committee in attending to this task.

8. Considerations Ngā Whai Whakaaro

Risks and Mitigations Ngā Mōrearea me ngā Whakamātautau

8.1 The decision report for both policies will be going to Council and there are no risks arising from the receipt of advice from the Committee. There could be risk in the absence of advice.

Legal Considerations Ngā Hīraunga ā-Ture

8.2 The Public Audit Act 2001 provides the Auditor-General authority to examine and report on any act or omission that shows, or appears to show, waste or a lack of probity or financial prudence by a Council or one of its members or staff. The Auditor-General is able to draw attention to sensitive expenditure as part of the annual audit process.

Strategy and Policy Considerations Te Whai Kaupapa here

8.3 The required decisions:

8.3.1 Align with the Christchurch City Council’s Strategic Framework.

8.3.2 Is assessed as low significance based on the Christchurch City Council’s Significance and Engagement Policy. The level of significance was determined by considering the criteria of the Significance and Engagement Policy.

8.3.3 Is consistent with Council’s Plans and Policies.

8.4 This report supports the Council's Long Term Plan (2021 - 2031):

8.5 Governance

8.5.1 Activity: Office of the Mayor and Chief Executive, and Treaty Partner Relations

· Level of Service: 4.1.25.1 Provide direct advice and administrative support to the Mayor, Deputy Mayor and Councillors - Provide information, support and advice within 48 hours, or as priorities are agreed.

Community Impacts and Views Ngā Mariu ā-Hāpori

8.6 This report only relates to the professional development of the Mayor and Councillors and does not relate to Community Board professional development.

Impact on Mana Whenua Ngā Whai Take Mana Whenua

8.7 This report does not involve a significant decision in relation to ancestral land, a body of water or other elements of intrinsic value, therefore this report does not specifically impact Mana Whenua, their culture, and traditions.

8.8 The decision does not involve a matter of interest to Mana Whenua and will not impact on our agreed partnership priorities with Ngā Papatipu Rūnanga.

Climate Change Impact Considerations Ngā Whai Whakaaro mā te Āhuarangi

8.9 The proposals in this report are unlikely to contribute significantly to adaptation to the impacts of climate change or emissions reductions.

9. Next Steps Ngā Mahinga ā-muri

9.1 Following advice from the Audit and Risk Committee the decision reports on elected member professional development policy and allowances and expenses policy will be finalised and placed on a Council agenda for consideration.

Attachments Ngā Tāpirihanga

No.	Title	Reference	Page
a ⇩	Draft Council report on Elected Member Professional Development	24/1019814	21
b ⇩	Draft Council report on Elected Member Allowances and Expenses	24/1019728	30

In addition to the attached documents, the following background information is available:

Controlling sensitive expenditure: Guide for public organisations

Part 3: Preparing suitable policies and procedures — Office of the Auditor-General New Zealand (oag.parliament.nz)

Signatories Ngā Kaiwaitohu

Author	David Corlett - Democratic Services Advisor
Approved By	Helen White - General Counsel / Head of Legal & Democratic Services

8. Procurement and Contracts Unit FY24 Q3
Reference Te Tohutoro:	24/757149
Responsible Officer(s) Te Pou Matua:	Luke Stevens, Acting Head of Procurement and Contracts
Accountable ELT Member Pouwhakarae:	Bede Carran, General Manager Finance, Risk & Performance / Chief Financial Officer

1. Purpose and Origin of the Report Te Pūtake Pūrongo

1.1 With regard to procurement the Council as a Local Authority has obligations pursuant to the Local Government Act 2002 (LGA) to:

· conduct its business in an open, transparent, and democratically accountable manner" (LGA: s14(1)(a)(i));

· give effect to its identified priorities and desired outcomes in an efficient and effective manner" (LGA: s14(1)(a)(ii));

· undertake any commercial transactions in accordance with sound business practices" (LGA: s14(1)(f)); and

· ensure prudent stewardship and the efficient and effective use of its resources (LGA: s14(1)(g)).

1.1.2 Controller and Auditor-General’s Procurement Guidance for Public Entities (June 2008) (part 2, paragraph 2.3) (OAG Guidelines):

· Value for money: Public entities should use resources effectively, economically, and without waste, with due regard for the total costs and benefits of an arrangement, and its contribution to the outcomes the entity is trying to achieve.

· Fairness: Public entities have a general public law obligation to act fairly and reasonably. Public entities must be, and must be seen to be, impartial in their decision-making.

1.1.3 The Principles of the Government Procurement Rules – 4th Edition 2019 apply to all government agencies and provide government’s overarching values. The LGA applies as a direct obligation, on Council. OAG Guidelines apply as best practice i.e. we must have a sound basis for not following them.

1.1.4 Our procurement framework and rules, formally adopted by Council incorporate the LGA obligations along with best practice public sector procurement. Following our rules and framework ensures that we fulfil our LGA obligations and best practice is followed.

1.2 The Principles are outlined as follows (these are incorporated into our rules):

1.2.1 Plan and manage for great results

1.2.2 Be fair to all suppliers

1.2.3 Get the right supplier

1.2.4 Get the best deal for everyone

1.2.5 Play by the rules

1.3 Council's 2018 Procurement Policy also contains the following additional and relevant strategic procurement principles:

1.3.1 Open and effective competition

1.3.2 Ethical behaviour and fair dealing

1.4 The Procurement and Contracts Unit has levels of service relating to managing risk associated with our obligations regarding procurement practice. This Quarterly Audit and Risk Management Committee Report describes how these levels of service are being met to give the Audit and Risk Committee an understanding of the Council’s exposure to procurement related risk. The report also provides an understanding of the scale of activity.

2. Officer Recommendations Ngā Tūtohu

That the Audit and Risk Management Committee:

1. Receives the information in the Procurement and Contracts Unit FY24 Q3 Report.

3. Long Term Plan Activity Reports

3.1 For a summary of the Procurement and Contract Unit Long Term Plan Activity reporting, refer to Attachment A.

3.2 The Procurement and Contracts Unit has led and completed 21 sourcing projects and 61 contract management activities in FY24 Q3. 56 sourcing projects and 193 contract management activities in FY24.

3.3 LTP/AP22: 13.1.21.1 Procurement and Contract Management is managed as a shared service delivery - Performance.
Return on Investment (ROI) = total Cost Reduction/Avoidance

3.3.1 9 financial benefits were captured from the procurement activities that have a financial impact in FY24 Q3. Procurement activities that have a financial impact include sourcing projects, renewals, price adjustments and variations with a financial impact.

3.3.2 Below is a summary of the captured financial benefits for FY24.

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3.3.3 Project actual savings are an average of all projects completed in FY24 to date and are calculated as per the below:

· A cost reduction is when the awarded amount is lower than the pre-tender estimate.

· A cost avoidance is when the awarded amount is larger than the estimated amount, but lower than the tendered amount.

3.4 LTP/AP22: 13.1.21.2 Procurement and Contract Management is managed as a shared service delivery
Non-financial return through procurement activity - 85% of sourcing activity and contract management activity to achieve Non-Financial outcomes annually.

Sustainable return through procurement activity - 85% of sourcing activity and contract management activity to achieve sustainable outcomes annually.

3.4.1 91 non-financial benefits reported through 89 procurement activities completed in FY24 Q3 for a percentage return of 111%. Multiple non-financial benefits such as Process Improvement initiatives, Risk Mitigation, KPI Improvement, amongst others may be captured in one procurement activity.

3.4.2 53 sustainable benefits reported through 57 procurement activities completed by the end of FY24 Q3 for a percentage return of 93% This includes only Social, Environmental and Economic benefits reported through a Procurement activity.

3.4.3 There has been an improvement in reporting on benefits since the last quarter.

3.4.4 See below a summary of the Non-Financial and Sustainable return through Procurement for FY24.

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3.5 LTP/AP22: 13.1.22.1 Procurement and Contract Management is managed as a shared service delivery.
95% of all procurement activity more than $100k (Excl. GST) put to market through RFP/T.

3.5.1 100% of all the procurement activity over $100k in FY24 followed the Council Procurement Framework and was put to market through a Request for Proposal (RFP) or a Request for Tender (RFT). There were 108 contracts awarded with an expected value of over $100k in FY24 Q3.

The table below shows a summary of new contracts created in FY24.

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3.6 LTP/AP22: 13.1.22.3 Procurement and Contract Management is managed as a shared service delivery - Conformance.
100% of Procurement & Contract recommended Departures have valid procurement plans/strategies and risk assessment.

3.6.1 There were 25 departures submitted and 17 departures approved in FY 2024 Q3. 100% of all Departures approved had a valid procurement plan and a risk assessment. There is 100% compliance on this activity.

3.6.2 The rationale for not going to market is justified based on the Office of the Auditor General Procurement Guidance for Public Entities.

4. Other Council Procurement Information

4.1 Compliance reporting

4.1.1 For an overview of compliance spend reporting, please see table below.

Period	Total Spend	Off contract	% off contract	PO after invoice	% PO after invoice
Q3 2024	$186.73M	$18.28M	9.79%	$6.47M	3.48%
Q2 2024	$251.73M	$30.38M	12.07%	$11.95M	4.75%
Difference	Decrease 2.28%			Decrease 1.27%
Q3 2023	$246.13M	$32.64M	13.26%	$32.28M	13.12%
Difference	Decrease 3.47%			Decrease 9.64%

4.2 Off-Contract Spend

4.2.1 There has been a decrease of 3.47% in off-Contract spend compared to Q3 FY23. The average off contract spend for FY24 Q3 represents 9.79% of total spend. The average has decreased by 2.28% since the last reporting period. We expect to see a continued reduction in off-contract spend, as the Procurement and Contract Unit together with Finance are currently carrying out multiple in-person trainings across all Council Units.

4.3 Purchase Orders raised after Invoice

4.3.1 The average on purchase orders raised after invoice has decreased by 1.27% compared to the last reporting period. An average of 3.48% of Purchase Orders created have been created after receiving the invoice in FY24 Q3.

4.3.2 We expect to drive this number close to zero through training and the SAP Improvement Programme. Invoices without a Purchase Order number will not be able to be paid under the new Accounts Payable process which went live in December 2023, unless the purchase is related to an emergency procurement.

4.4 Best practice Procurement at Council

4.4.1 Risks

· Commercial information in SAP is impacted by the changes made as part of the SAP improvement programme, including but not limited to:

· key contact details are moved to a location that can not be used for SAP standard reporting until the SAP upgrade, due in July/August. NB. We have the following short term mitigation: use of alternate fields in SAP for key contact information.

· the removal of custom fields to improve SAP upgrade times means we have lost key data to manage our contracts.

· procurement and financial data has not been updated on our asset maintenance contracts as it is part of the asset improvement project, now delayed.

· These risks impact on our ability to provide accurate reporting for meaningful decisions and therefore poses and increased risk to Council.

4.4.2 Mitigation

· The Procurement & Contracts Unit is work with Digital to address this issue to work to ensure that commercial information in our systems is conducive to Procurement & Contracts meeting their levels of service and by extension mitigating the risk to Council.

4.4.3 Opportunites

· This quarter the Procurement & Contracts Unit have worked with the Finance Unit to initiate a collaborative Community of Excellence for Procurement and Finance.

· The community will be trained and supported by the Procurement and contracts and Finance Units on best commercial practice at Council.

Attachments Ngā Tāpirihanga

No.	Title	Reference	Page
a ⇩	Procurement and Contracts LTP Activity Report	24/823877	47

In addition to the attached documents, the following background information is available:

Document Name – Location / File Link

Not applicable

Signatories Ngā Kaiwaitohu

Authors

Elizabeth Espin - Team Leader Procurement Special Projects

Luke Stevens - Head of Procurement & Contracts

Chris Banks - Senior Procurement Reporting Analyst

Approved By

Luke Stevens - Head of Procurement & Contracts

Bede Carran - General Manager Finance, Risk & Performance / Chief Financial Officer

[1] Sensitive expenditure is any spending by an organisation that could be seen to be giving private beneﬁt to staﬀ additional to the business beneﬁt to the organisation. Office of the Auditor General (2020)

[2] Office of the Auditor General (2020) Controlling sensitive expenditure: Guide for public organisations Wellington, oag.parliament.nz

ITEM NO.	GENERAL SUBJECT OF EACH MATTER TO BE CONSIDERED	SECTION	SUBCLAUSE AND REASON UNDER THE ACT	PLAIN ENGLISH REASON	WHEN REPORTS CAN BE REVIEWED FOR POTENTIAL RELEASE
10.	Public Excluded Audit and Risk Management Committee Minutes - 5 April 2024			Refer to the previous public excluded reason in the agendas for these meetings.
11.	Consideration of the Council's Long-term Plan LTP 2024-34	s7(2)(h)	Commercial Activities	Contains commercially sensitive information.	25 June 2024 Finalisation and release of the Councils Long Term Plan 2024-34
12.	Te Kaha Canterbury Multi-Use Arena – Risk Management Update June 2024	s7(2)(h)	Commercial Activities	To avoid risk to Commercial Activities.	30 April 2026 The Completion of the Te Kaha Project.
13.	Audit Plan and Interim Audit Report	s7(2)(c)(i)	Protection of Source of Information	Information on CCC systems are disclosed in the Audit NZ report.	20 June 2025 ARMC to share FY24 Report to Governors
14.	Risk and Assurance Quarterly Update	s7(2)(e)	Prevention of Material Loss	Report discusses topics on finacial, HR and fraud controls.	5 June 2025 Not to be released without Head of Risk and Assurance approval.
15.	Cyber Security Report	s7(2)(c)(i)	Protection of Source of Information	Disclosure of our approach to cyber security will increase the risk of Council being a target, resulting in potential service disruptions and / or information breaches that will not be in the public interest	1 June 2025 This report may only be released if the Chief Executive Officer has determined that there are no longer any reasone under the Local Government Official Information and Meeting Act to withhold the information.