HuttCity_TeAwaKairangi_BLACK_AGENDA_COVER

 

 

Komiti Iti Ahumoni I Tūraru
Audit and Risk Subcommittee

 

 

2 September 2021

 

 

 

Order Paper for the meeting to be held via ZOOM

on:

 

 

 

 

Thursday 9 September 2021 commencing at 2.00pm

 

 

 

Membership

 

 

 Ms Suzanne Tindal (Independent Chair)

Mayor C Barry (Deputy Chair)

Cr J Briggs

Cr S Edwards

Cr A Mitchell

Cr S Rasheed

Cr N Shaw

 

 

 

For the dates and times of Council Meetings please visit www.huttcity.govt.nz

 

Have your say

You can speak under public comment to items on the agenda to the Mayor and Councillors at this meeting. Please let us know by noon the working day before the meeting. You can do this by emailing DemocraticServicesTeam@huttcity.govt.nz or calling the Democratic Services Team on 04 570 6666 | 0800 HUTT CITY

 


AUDIT & RISK SUBCOMMITTEE
Membership:	                     Independent Chair and 7 Members
	Audit and Risk Subcommittee members should be appointed so that the subcommittee has a diversity of governance skills, experiences and personal qualities. Between them, the members should bring a mix of the following attributes:
1.	Broad governance experience;
2.	Familiarity with risk management disciplines;
3.	Understanding of internal control and assurance frameworks;
4.	 An understanding of financial and non-financial performance reporting;
5.	A good understanding of the roles of internal and external audit; and
6.	A sound understanding of the local government sector.
Use of the matrix below has assisted other councils to consider the best fit for membership of an Audit and Risk Committee.
Quorum:	Half of the members
Meeting Cycle:	Meets on an eight weekly basis or as required
Reports to:	Council

HuttCity_TeAwaKairangi_SCREEN_MEDRES

 

 

OVERVIEW:

This Subcommittee has a monitoring and advisory role in reviewing the effectiveness of the manner in which Council discharges its responsibilities in respect to governance, risk management and internal control.

The Committee is primarily aligned with the Office of the Chief Executive.

Its areas of focus are:

§   Oversight of risk management and assurance across the Council Group with respect to risk that is significant

§   Internal and external audit and assurance

§   Health, safety and wellbeing

§   Business continuity and resilience

§   Integrity and investigations

§   Monitoring of compliance with laws and regulations

§   Significant projects, programmes of work and procurement, focussing on the appropriate management of risk

§   The LTP, Annual Report and other external financial reports required by statute.

 

PURPOSE:

To carry out a monitoring and advisory role and provide objective advice and recommendations around the effectiveness of the manner in which Council discharges its responsibilities in respect to governance frameworks, risk management, internal control systems and the Council Group’s financial management practices.

DELEGATIONS FOR THE SUBCOMMITTEES AREAS OF FOCUS:

§   The Subcommittee has no decision-making powers other than those in these Terms of Reference.

§   The Subcommittee may request expert advice through the Chief Executive where necessary.

§   The Subcommittee may make recommendations to the Council and/or Chief Executive.

Risk Management:

§   Review, approve and monitor the implementation of the risk management framework and strategy, including significant risks to the Council Group.

§   Review the effectiveness of risk management and internal control systems including all material financial, operational, compliance and other material controls. This includes legislative compliance (including health and safety), significant projects and programmes of work, and significant procurement.

§   Review risk management reports identifying new and/or emerging risks.

Assurance:

§   Review and approve, and monitor the implementation of, the assurance strategy and detailed internal audit coverage and annual work plans.

§   Review the coordination between the risk and assurance functions, including the integration of the Council’s risk profile with the internal audit programme. This includes assurance over all material financial, operational, compliance and other material controls. This includes legislative compliance (including health and safety), significant projects and programmes of work, and significant procurement.

§   Review the reports of the assurance functions dealing with findings, conclusions and recommendations (including assurance over risks pertaining to Council Controlled Organisations and Council Controlled Trading Organisations that are significant to the Council Group).

§   Review and monitor management’s responsiveness to the findings and recommendations, inquiring into the reasons that any recommendation is not acted upon.

Fraud and Integrity:

§   Review, approve and monitor the implementation of the assurance strategy, including the fraud and integrity aspects.

§   Review the arrangements in place by which staff may, in confidence, raise concerns about possible improprieties in matters of financial reporting, financial control or any other matters, and ensure that there is proportionate and independent investigation of such matters and appropriate follow-up action.

§   Review the procedures in relation to the prevention, detection, reporting and investigation of bribery and fraud.

§   Review and monitor policy and process to manage conflicts of interest amongst elected and appointed members, management, staff, consultants and contractors.

§   Review internal and external reports related to possible improprieties, ethics, bribery and fraud related incidents.

Statutory Reporting:

§   Review and monitor the integrity of the Long Term Plan and Annual Report including statutory financial statements and any other formal announcements relating to the Council’s financial performance, focussing particularly on the areas listed below.

§   Compliance with, and the appropriate application of, relevant accounting policies, practises and accounting standards.

§   Compliance with applicable legal requirements relevant to statutory reporting.

§   The consistency of application of accounting pollicies, across reporting periods, and the Council Group.

§   Changes to accounting policies and practices that may affect the way that accounts are presented.

§   Any decisions involving significant judgement, estimation or uncertainty.

§   The extent to which financial statements are affected by any unusual transactions and the way they are disclosed.

§   The disclosures of contingent liabilities and contingent assets.

§   The clarity of disclosures generally.

§   The basis for the adoption of the going concern assumption.

§   Significant adjustments resulting from the audit.

External Audit:

§   Discuss with the external auditor, before the audit commences, the nature, scope and fees of the external audit, areas of audit focus, and error and materiality levels.

§   Review, with the external auditors, representations required by elected members and senior management, including representations as to the fraud and integrity control environment.

§   Review the external auditor’s management letter and management responses, and inquire into reasons for any recommendations not acted upon.

§   Where required, the Chair may ask a senior representative of the Office of the Auditor General to attend meetings of the Subcommittee to discuss the office’s plans, findings and other matters of mutual interest.

Interaction with Council Controlled Organisations and Council Controlled Trading Organisations:

§   Other committees dealing with CCO and CCTO matters may refer matters to the Audit & Risk Subcommittee for review and advice.

§   This Subcommittee will inquire to ensure adequate processes at a governance level exist to identify and manage risks within a CCO. Where an identified risk may impact on Council or the Council Group, the Subcommittee will also ensure that all affected entities are aware of and are appropriately managing the risk.

Matrix of Experience, Skills and Personal Qualities

Experience, Skills and Personal Qualities

Member A

Member B

Member C

Member D

Independent Chairperson

The recommended combination of experience is:

·          financial reporting

 

 

 

 

 

·          broad governance experience

 

 

 

 

 

·          familiarity with risk management disciplines

 

 

 

 

 

·          understanding of internal control and assurance frameworks

 

 

 

 

 

·          good understanding of the roles of internal and external audit

 

 

 

 

 

·          local government expertise

 

 

 

 

 

For an “advisory-oriented” audit committee, particular emphasis should be placed on:

·          Strategy

 

 

 

 

 

·          Performance management

 

 

 

 

 

·          Risk management disciplines

 

 

 

 

 

In determining the composition of the audit committee, the combined experience, skills, and personal qualities of audit committee members is critical. Members should bring:

·          the ability to act independently and objectively

 

 

 

 

 

·          the ability to ask relevant and pertinent questions, and evaluate the answers

 

 

 

 

 

·          the ability to work constructively with management to achieve improvements

 

 

 

 

 

·          an appreciation of the public entity’s culture and values, and a determination to uphold these

 

 

 

 

 

·          a proactive approach to advising the governing body and chief executive of matters that require further attention

 

 

 

 

 

·          business acumen

 

 

 

 

 

·          appropriate diligence, time, effort, and commitment

 

 

 

 

 

·          the ability to explain technical matters in their field to other members of the audit committee

 

 

 

 

 

 

    


                                                                       7                                                                       

HUTT CITY COUNCIL

 

Komiti Iti Ahumoni I Tūraru | Audit and Risk Subcommittee

 

Meeting to be held via ZOOM on

 Thursday 9 September 2021 commencing at 2.00pm.

 

ORDER PAPER

 

Public Business

 

1.       APOLOGIES  

2.       PUBLIC COMMENT

Generally up to 30 minutes is set aside for public comment (three minutes per speaker on items appearing on the agenda). Speakers may be asked questions on the matters they raise.       

3.       CONFLICT OF INTEREST DECLARATIONS

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.       Risk Management Update (21/1234)

Report No. ARSC2021/4/189 by the Risk and Assurance Manager                      9

5.       Holidays Act 2003 Compliance Update (21/1276)

Report No. ARSC2021/4/190 by the Financial Transaction Services Manager   31

6.       External Audit Update (21/1315)

Report No. ARSC2021/4/191 by the Manager Financial Strategy & Planning    35

7.       Strategic Change Framework Briefing (21/1336)

Report No. ARSC2021/4/115 by the Strategic Programmes Manager                 62

8.       Kerbside Rubbish and Recycling Services Implementation Update (21/1343)

Report No. ARSC2021/4/192 by the Strategic Advisor                                        72


 

 

9.       Information Item

Audit and Risk Work Programme (21/1277)

         Report No. ARSC2021/4/116 by the Committee Advisor                                   75      

10.     QUESTIONS

With reference to section 32 of Standing Orders, before putting a question a member shall endeavour to obtain the information. Questions shall be concise and in writing and handed to the Chair prior to the commencement of the meeting.   

 

 

 

Toi Lealofi
DEMOCRACY ADVISOR

 

   


                                                                                 13                                           09 September 2021

Audit and Risk Subcommittee

04 August 2021

 

 

 

File: (21/1234)

 

 

 

 

Report no: ARSC2021/4/189

 

Risk Management Update

 

Purpose of Report

1.    This report is an update to the Audit and Risk Subcommittee on actions and activities to maintain and improve risk management at Hutt City Council (Council).

2.    Council’s risk register as at 31 July 2021 is also reported to the Subcommittee.

Recommendations

That the Subcommittee:

(1)   notes and receives the information in this report;

(2)   notes the Risk Register attached as Appendix 1 to the report; and

(3)   notes the results from the periodic fraud risk review and unusual transaction analysis will be provided to this Subcommittee on 11 November 2021.

Background

3.    The Risk and Assurance Manager provides quarterly updates on the activities to maintain and improve council’s risk management framework. The previous Risk Management Update was presented to the Audit and Risk Subcommittee on 23 April 2021.

Risk management update

4.    On 2 June 2021, Council adopted the risk appetite statement that was recommended by the Audit and Risk Subcommittee. This will take time to embed across council. This is part of our risk maturity journey. The next risk register is expected to show how councils’ top risks are profiled against the risk appetite set.

5.    A range of initiatives have been delivered to embed the risk appetite, risk management framework and improve risk management at council. This includes a series of workshops held at the group level to begin this journey.

6.    The risk workshops were developed in conjunction with Cecilia Tse, industry leader in legal, risk management and assurance. Cecilia has many years of experience supporting organisations in their risk maturity journey and has been supporting council since February 2021.

7.    Communication to all staff of the risk appetite statement was included in the Chief Executive’s all staff Pānui email on 23 June 2021. This included a link to the intranet Ourspace page for risk management, which provides a self-service guide for risk management basics including links to the risk management framework, the risk appetite statement, roles and responsibilities for risk management, criteria for assessing risk, the risk management quick reference guide and the risk register template.

Council’s Risk Register

8.    Attached as Appendix 1 to the report is the Risk Register as at July 2021, as approved by the Corporate Leadership Team (CLT). This date is prior to the latest COVID-19 Response (for the Delta variant) from 17 August 2021.

9.    The risk register was last considered by the Audit and Risk Subcommittee on 23 April 2021.

10.   Council officers are continuing to make improvements to the risk register, by ensuring that the strategic/top risks are appropriately identified, evaluated and assessed, and that appropriate risk mitigations are in place to reduce the risk likelihood or impact. This is an ongoing process and over time, the process and register will continue to be improved.

11.   As signalled to the Audit and Risk Subcommittee on 23 April 2021, the risk register has been refined and rationalised to focus on the key uncertainties and effects that have a significant impact on council objectives.

12.   Strategic risk registers usually have up to 10 top risks, so that management can properly focus on these. In this case council has 13, which is a reflection of its journey. Council will continue to refine its strategic or top risks over time to ensure it is working with the key risk.

13.   The group risk workshops served a broader purpose to draw in from leaders their views of key risk, in addition to implementing the new risk framework and risk appetite adopted by Council in June 2021.

14.   Risk insights from the workshops were consolidated and have informed the now refreshed top risks, as set out in Appendix 1.

15.   The risk register has been through a process which includes input and review by the risk owners, the Risk Steering Group[1], an external risk consultant and the Corporate Leadership Team (CLT).

Changes from the last quarter

16.   Two new risks have been added. This first relates to the uncertainties arising from the Governments’ local government reform programme (see Risk 3 in the risk register, as set out in Appendix 1). The reform programme is evolving and is a significant risk (presenting both potential opportunities and impacts) to council, its future form and functions.

17.   Reputational risk has been added as a separate risk. Some organisations include this as an impact to business risks. This is the approach council has taken previously. This reporting round a risk on reputation, trust and confidence has been captured in the risk register to enable focus on areas outlined in the risk (see Risk 13 in the risk register, as set out in Appendix 1). Each of the top risks also considers the impacts on reputation.

18.   There have been three risk rating changes from the previous risk register presented to this Subcommittee on 23 April 2021. The remaining have had no change to the rating.

19.   The risk profile for Risk 1 Workforce Capacity, Capability and Engagement has increased (worsened). In the context of the challenging labour market, the likelihood and impacts are increasing, as the border remains closed, activity in the domestic economy increases and transitioning to new organisational structure. There are retention and recruitment challenges across New Zealand, due to a competitive labour market, tightening market conditions, wage pressures and growing concerns around labour shortages and skilled workers specifically. The level of employment is higher than pre-pandemic levels. There is high demand on highly skilled regulatory staff (given all the central government activity) and engineering staff (impact on transport, asset specialists and projects etc.). Management has recently introduced initiatives such as enhanced leave and wellbeing benefits to maintain councils’ position as an employer who provides more than the minimum and a continued focus on wellbeing.

20.   The risk profile for Risk 3 Planning for Climate Change has decreased (improved). Council, in the Long Term Plan 2021-2031, has committed significant resources to implement plans to reduce carbon and increase climate resilience. This includes all the work to decarbonise council assets, improve efficiency and electrifying of councils vehicle fleet and establish environmental policies. Much work has been undertaken with the community to develop strategies to achieve carbon zero targets and to inform the city-wide carbon reduction plan/framework. Climate change remains a top priority for council and our community.

21.   The risk profile for Risk 11 Relationships with Mana Whenua has decreased (improved). This is a priority focus for both governance and management. Council has made progress and continues to be committed to ensuring we have the right relationships, processes and developing protocols to enable partnership with Mana Whenua, effective participation and a shared decision-making focus. Council will take a tikanga approach to setting priorities for policies and processes that relate to council’s statutory obligations to Mana Whenua/Māori.

22.   Health and Safety (Risk 2) and financial management (Risk 8) have had components of their ratings adjusted, as officers continue to embed and recalibrate to the risk criteria approved by this Subcommittee in April 2021. However, the overall ratings are unchanged.

23.   Of the top 13 risks identified, 23% (or three) have a residual risk rating of High, relating to workforce, health and safety and assets. This reflects council’s risk maturity journey. Having considered the newly adopted risk matrix and appetite, we are working with our teams through workshops to build a better understanding and awareness of risk management and improving risk culture in the council. Our focus is to ensure that appropriate resources are allocated to these areas to reduce both the likelihood and impact of the risks with the intention to bring it in line with the risk appetite that council has set. While progress is being made, it takes time particularly considering staff capacity available at this time to drive the risk activities.

24.   As outlined in paragraph 11 above, the risk register has been refined and rationalised. That doesn’t mean the other risks are not important. Changes to underlying risks, events and conditions will be considered in future risk register reviews.

25.   Risks that are not captured on the top risk register continue to be monitored via operational risk registers by the respective business unit leads and escalation occurs as required in alignment with the risk assessment criteria set.

26.   As a result of the review and the group risk workshop sessions, the following risks, which were included in the last risk register reported to this Subcommittee in April 2021, have been removed from the Top Risk Register July 2021. These risks continue to be assessed, managed/treated and monitored by the relevant group/business unit:

a)    Fraud

Fraud controls exist at an operational level and are embedded in council operations and business as usual. As such, this is not considered a strategic, top risk.

Recent activity in relation to fraud risk includes PwC’s fraud focussed unusual transaction analysis and the fraud risk review. So far, there is no indication from these reviews underway that fraud is present. Final results will be reported to this Subcommittee on 11 November 2021.

b)    Stakeholder engagement and planning

This is still an important focus and elements are captured in the risks around legal compliance, assets (e.g. consultation around strategic asset plans), projects (stakeholder engagement plans) and climate change.

Adequate and genuine stakeholder engagement is particularly relevant during LTP consultation phase. The recent focus on engagement was evident in the Long Term Plan 2021-2031 process, which had 900 pieces of feedback received during the consultation period - significantly higher than the previous LTP 2018-2028.

A centralised engagement function has been established to support and assist areas to seek and enable the views of people from our diverse, multi-cultural communities to be empowered, heard and planned for.

The organisational planning aspects from the previously reported Stakeholder engagement and planning risk has been incorporated into the portfolio, programme, project management and planning risk, which remains a top risk (see risk number 7 in the risk register, as set out in Appendix 1).

c)    Transformation and strategic change

A strategic change framework has been established. This previously reported separate risk is being managed within the portfolio, programme and project management framework, with its respective oversight, management, monitoring and reporting (including oversight from this Subcommittee, the first on 8 July 2021 and an update to this Subcommittee at this meeting). See risk number 7 in the risk register, as set out in Appendix 1.

27.   CLT regularly monitors and has oversight of issues (i.e. uncertainties that have eventuated) to ensure treatment plans are in place and action is within an acceptable level. This process is available to raise any emerging issues in relation to the above risks.

Fraud Risk Management

28.   A fraud risk review (a two-yearly review, per the Fraud Policy) and fraud focussed data analytics (unusual transaction analysis) is underway. The outcome from this work will be considered by the Audit and Risk Subcommittee on 11 November 2021.

COVID-19 Response

29.   A community case of COVID-19 was confirmed in Auckland on 17 August 2021. On 18 August the case was confirmed as the Delta variant and a number of additional cases were subsequently confirmed.

30.   In response to the Auckland outbreak and increase in Alert Level across the country, the Hutt City Emergency Management Operation Centre activated on 19 August 2021.

31.   Council transitioned to operating under Alert 4 guidelines and work protocols. From 11:59pm on Tuesday 31 August 2021 everywhere south of the Auckland boundary moved to Alert Level 3.

32.   Updates regarding Councils response are being provided to elected members, staff and the public on an ongoing basis as the situation evolves. A further verbal update on the COVID-19 response will be provided at the Subcommittee meeting.

Climate Change Impact and Considerations

33.   The matters addressed in this report have been considered in accordance with the process set out in Council’s Climate Change Considerations Guide.

Consultation

34.   Not applicable.

Legal and Financial Considerations

35.   Not applicable.

 

Appendices

No.

Title

Page

1

Risk Register (Top Risk) July 2021

 

    

 

Author: Enid Davids

Risk and Assurance Manager

 

 

Reviewed By: Jenny Livschitz

Group Chief Financial Officer

 

 

Approved By: Jo Miller

Chief Executive

 

 


Attachment 1

Risk Register (Top Risk) July 2021

 


 


 


 


 


 


 



                                                                                 33                                           09 September 2021

Audit and Risk Subcommittee

12 August 2021

 

 

 

File: (21/1276)

 

 

 

 

Report no: ARSC2021/4/190

 

Holidays Act 2003 Compliance Update

 

Purpose of Report

1.    The purpose of this report is to provide an update to the Audit and Risk Subcommittee on Hutt City Council’s compliance with the Holidays Act 2003(the Act). 

 

Recommendations

That the Subcommittee notes and receives the report.

 

Background

2.    The Audit and Risk Subcommittee received a first formal report on Hutt City Council Holidays Act 2003 pay compliance at the meeting held on 23 April 2021.

3.    As reported to the Subcommittee at that time, compliance with the Holidays Act 2003 is a current issue for many organisations in New Zealand. The Ministry of Business Innovation and Employment (MBIE), through their Labour Inspectorate, are actively auditing and mandating compliance through a number of instruments including Enforceable Undertakings and Information Notices. An Enforceable Undertaking is a voluntary commitment by an employer to address certain defined breaches within a certain timeframe.  If that does not happen, the Employment Relations Authority (ERA) can issue a compliance order and if that is not followed, then an order for penalties. 

4.    Council run the payroll through the CHRIS21 system.  There are approximately 600 employees being paid through this system.

5.    Given that compliance with the Act is a current issue for many organisations across New Zealand, Council officers decided to complete initial discovery work to assess Council’s compliance with the requirements of the Act.  The following areas are widely acknowledged as potential triggers for compliance failures:

a.       Diverse working arrangements (shift work, on-call employees),

b.      Additional remuneration arrangements,

c.       Employees working irregular hours; and employees receiving allowances.

6.    Ernst & Young (EY) have been engaged across a wide range of both public and private organisations to complete payroll remediation work; this includes Auckland Council, Christchurch City Council, Watercare Services Ltd, NZ Post, KiwiRail, Kainga Ora and the Ministry of Justice.

7.    In November 2020, EY was engaged to undertake a review of Hutt City Council’s compliance with the Act. The scope of work involved taking a sample group of 20 employees across the Council group, including casual and terminated staff, along with a mixture of current full time, part time and temporary staff over a payment period of 104 weeks.

8.    This initial discovery work by EY had been delayed earlier in the year due to COVID-19 pandemic impacts.

9.    EY’s findings were reported to officers in March 2021 and to the Audit and Risk Subcommittee on 23 April 2021. The summary of findings identified areas of risk, and inconsistencies or potential errors in payroll existed when compared to references to the requirements of the Act. Annual leave, BAPSF (Bereavement, alternative, public holiday, sick and family violence) leave, terminations, casual employees and reporting have been identified in the report as the areas of risk. These findings were consistent with similar findings at many other organisations in New Zealand. 

Progress update

10.   Following on from these findings by EY a project has been initiated and a Project Steering Group has been established, comprising the Group Chief Financial Officer, Chief People Officer and the Chief Digital Officer. The Project Steering Group reports through to the Chief Executive and Corporate Leadership Team. 

11.   There are two core work streams for the project:

·    remediation calculations; and

·    payroll system and/or process corrections.

12.   This is a complex project which will require external specialist support and advice to ensure compliance is achieved. Current processes and policies will need to be reviewed and updated in line with remediation work outcomes. Key milestones of the project include developing a business case, procurement processes, remediation works and payroll system corrections.

13.   Prior to the end of the financial year 30 June 2021, the Project Steering Group (PSG) prioritised work to calculate an initial estimate of the financial liability of all remediation payments owing to staff. EY was engaged to complete the estimation of the financial liability which was based on the identified areas of potential non-compliance with the Act. The sample recalculations were performed based on a sample of 550 employees.

14.   The EY report on the estimated financial liability was finalised in June 2021 and estimated a liability of $1.4M. Following review by the PSG and Chief Executive, a further 40% contingency has been added to the estimate due to the uncertainties and risks. This has resulted in a revised estimate of the financial liability of $2M. A further cost of $0.5M for the estimated project costs has been added to this amount to fund project resourcing and technical specialists. This has resulted in a total Holiday Act compliance provision of $2.5M which has been recorded in the financial statements for the year ended 30 June 2021. The details of the EY report and basis for the calculations of the provision have been provided to Audit NZ as part of the 2020/21 audit that remains in progress.

15.   As part of the Go Digital Programme a HR and Payroll system review project is underway. This project has synergies with the Holiday Act compliance project. The PSG is progressing the development of the business case which achieves the outcomes sought from the Go Digital programme whilst also ensuring any future system is compliant with the Holidays Act. The PSG is expecting that by the end of November 2021 there will be a decision about the HR and Payroll system review process and that this decision will have been reviewed and confirmed by the Chief Executive and Corporate Leadership Team.

16.   Investigation work is also underway with our current payroll vendor CHRIS21 to understand changes that would be required if we decided to use this system to manage the payroll compliance corrections. The outcome of this work will inform future decisions by the PSG. Detailed planning will be progressed over the next quarter. Officers estimate that the remediation calculations will take six to nine months to complete once a plan has been agreed. The Chief Executive and Corporate Leadership Team will review and confirm the plan.

17.   A further report and update to the Audit and Risk Subcommittee will be presented on the 11 November 2021. 

Climate Change Impact and Considerations

18.   The matters addressed in this report have been considered in accordance with the process set out in Council’s Climate Change Considerations Guide.

Consultation

19.   Not applicable.

Legal Considerations

20.   EY have advised that there are a number of risk areas in our compliance with the Holidays Act 2003.

Financial Considerations

21.   There are a range of financial matters raised in this report.

Appendices

There are no appendices for this report.    

 

 

 

Author: Helen Stringer

Financial Transaction Services Manager

 

 

 

Author: Lyndon Allott

Chief Digital Officer

 

 

 

Author: Kelly Alkema

Chief People Officer

 

 

 

Reviewed By: Jenny Livschitz

Group Chief Financial Officer

 

 

 

Approved By: Jo Miller

Chief Executive

 


                                                                                 36                                           09 September 2021

Audit and Risk Subcommittee

16 August 2021

 

 

 

File: (21/1315)

 

 

 

 

Report no: ARSC2021/4/191

 

External Audit Update

 

Purpose of Report

1.    To provide an update on the preparation of the Hutt City Council Group Annual Report for the period 1 July 2020 to 30 June 2021. Including the:

a.    updated audit plan timelines;

b.    interim management report.

2.    To provide the final Long Term Plan 2021-2031 management report from Audit New Zealand.

Recommendations

That the Subcommittee:

(1)   notes the updated timelines for the audit for the year ended 30 June 2021;

(2)   notes Audit New Zealand’s interim management report for the year ended 30 June 2021, attached as appendix 1 to the report; and

(3)   notes Audit New Zealand’s final management report on the Long Term Plan 2021-2031 as attached in appendix 2 to the report.

 

Group Annual Report 2020/21

3.    The primary purpose of the external audit is to complete checks that enable Audit New Zealand (ANZ) to issue an audit opinion on Council Groups’ performance results for the year end.

4.    An audit plan for the year ended 30 June 2021 was agreed and issued on 3 June 2021. Subsequently legislation was passed through parliament extending reporting deadlines by two months.  This is as a result of auditor shortages in conjunction with extended high workloads due to the impacts of COVID-19 and Council long term plan audits.

5.    The audit team now expects to commence their final audit for the council on 25 October 2021.  Consequently the annual report is now planned to be adopted by Council on 14 December 2021.   

6.    The Council’s CCO audits will commence on 18 October 2021 and expect to be signed-out by 30 November 2021.

Update on the interim audit

7.    As part of the audit process each year, ANZ issue both an interim management report and a final management report.

8.    The ANZ interim management report for the year ended 30 June 2020 has been issued and is attached to this report as appendix 1. The interim audit was focused on reviewing the Council’s control environment and testing the council’s systems and controls.

9.    No new audit recommendations have been raised following the interim audit visit.

10.   For the year ended 30 June 2020, Council received a modified opinion on certain performance information relating to the Department of Internal Affairs mandatory performance measures for Council’s water activities. This was due to issues identified with the underlying systems and information of Wellington Water who carry out these activities on Council’s behalf.

11.   An improvement plan has been agreed with Wellington Water Limited to address these matters, with implementation underway in 2020/21. However, it is expected the audit issues will not be fully resolved before 30 June 2021. As a result ANZ have signaled that the Hutt City Council audit opinion is expected to be impacted in a similar manner.

12.   Officers are working proactively with Wellington Water Limited and Audit NZ to plan ahead and manage the risks related to the performance reporting issues. It is important to note that this impacts all Wellington Water shareholder Councils.

Audit of the Long Term Plan 2021-2031

13.   The audit of the Long Term Plan 2021-2031 was successfully completed in June 2021.

14.   An unmodified audit report was issued by Audit NZ. There were three emphasis of matter paragraphs in the audit report drawing attention to the disclosure in the Long Term Plan on the following:

1.    Uncertainty over three waters reforms (all councils across New Zealand received this audit point )

2.    Uncertainty over the delivery of the capital programme (many councils across New Zealand received this audit point)

3.    Uncertainty over the three waters forecasts (all Wellington Water shareholder councils were impacted by this audit point).

15.   These emphasis of matter paragraphs are in line with those that were included in the audit report for the draft Long Term Plan Consultation Document.

16.   Following the audit of the Consultation Document Audit New Zealand issued a management report on 15 April 2021. One recommendation remains from this report in the final report. The final LTP report is available in appendix 2.

17.   The remaining recommendation is that the Wellington Water asset management plans are finalised including incorporation of asset condition assessments into assets management planning. Council will work with Wellington Water on incorporating asset condition information into asset management planning as condition assessments are completed.

Climate Change Impact and Considerations

18.   There are no climate change impacts or considerations arising from this report.

Consultation

19.   There are no consultation considerations arising from this report.

Legal Considerations

20.   There are no legal considerations arising from this report

Financial Considerations

21.   The financial considerations are detailed in this report in the relevant areas.

Appendices

No.

Title

Page

1

Appendix 1 - HCC Report to Council - Interim 2021

38

2

Appendix 2 - HCC Final LTP 2021-2031 Report to Council

49

     

 

 

Author: Daniel Koenders

Manager Financial Strategy & Planning

 

 

 

Author: Darrin Newth

Financial Accounting Manager

 

 

 

Approved By: Jenny Livschitz

Group Chief Financial Officer


Attachment 1

Appendix 1 - HCC Report to Council - Interim 2021

 


 


 


 


 


 


 


 


 


 


 


Attachment 2

Appendix 2 - HCC Final LTP 2021-2031 Report to Council

 


 


 


 


 


 


 


 


 


 


 


 


 


                                                                                 66                                           09 September 2021

Audit and Risk Subcommittee

23 August 2021

 

 

 

File: (21/1336)

 

 

 

 

Report no: ARSC2021/4/115

 

Strategic Change Framework Briefing

 

 

 

1.    This briefing responds to a request from the Audit and Risk Subcommittee to outline activities that council is undertaking and the process we are following as we implement the organisational strategic change framework.

 

Recommendations

That the Subcommittee:

(1)   notes and receives the report;

(2)   considers future reporting on the strategic change framework goes to the Policy, Finance and Strategy Committee as part of reporting on organisation performance; and

(3)   notes that any risks associated with the implementation of the strategic change framework will be reported through to the Subcommittee as part of our regular risk management reporting.

Background

2.  Council has agreed externally facing priorities and plans agreed as part of the 10-year plan (Long Term Plan 2021-2031). To ensure delivery to these, Key Performance Indicators (objectives) are set for the Chief Executive and reported through to the Policy, Finance and Strategy Committee at the end of each quarter.

3.  The strategic change framework provides the appropriate setting (i.e. tools and processes) to enable our organisation to work as one and deliver on these priorities, plans and objectives by having the right people in the right roles with the right skills. In summary the strategic change framework sets out a way to achieve large scale organisation change as evidenced by the projects/workstreams identified in Section 4 below.


 

4.  The strategic change framework outlines a number of key projects or workstreams that seek to improve our overall organisational capability and effectiveness working as ‘one Council’. These are:

a)         A review of Council’s organisational structure;

b)         The Go Digital (Te Pātaka) programme with a budget of an additional $10.8m over 4 years (approved by Council in June 2020) to achieve the following outcomes: People’s experience with council improves; we move to being a modern, agile and adaptive council; and better use of information;

c)         Property Optimisation Project – now called the Activity-Based Working Project;

d)        Business Planning and Performance Project; and

e)         The Organisational Capability Strategy.

5.  The alignment of all of the above projects/workstreams within one strategic change framework will mean interdependencies are managed effectively and efficiently and there will be a seamless delivery of strategic organisational benefits. The outcome sought via the framework is to contribute to a transformation shift in how Council goes about delivering outcomes for the city and its people.

6.  It should be noted that the organisation’s priorities, plans and objectives are ingrained in the Chief Executive’s Key Performance Indicators.

Our approach

 

7.  The previous report to the Subcommittee used the term “Strategic Change Programme”. Now renamed as the Strategic Change Framework, officers believe this more appropriate reflects the whole of organisation approach to the projects (workstreams) that will contribute to the benefits that are sought to be realised.

8.  A Strategic Change Oversight Group (“Oversight Group”) has been established to provide oversight and governance for the Framework.  This is described in Section 17 below

9.  Now that the Framework and its implementation has been approved, there will be an ongoing need for strong coordination and governance to ensure the strategic interdependencies of the programme are maintained, but this will be resourced internally.


 

Framework Update

10.   Over the past two months a “One Council” set of transformational outcomes has been developed to describe a desired future council organisation. Three groups of seven outcomes were selected under, respectively:

a)      People

b)      Processes, and

c)       Tools, Technology and Work Environment

11.   Each project was mapped against the 21 outcomes to assess how each particular project would contribute to each outcome.

12.   This produced a matrix showing how the projects could individually and collectively deliver the characteristics of a transformed organisation. We now have a specific view of what a “fit for purpose” council looks like as it moves into 2022 and beyond that will guide the projects/workstreams to collectively deliver a “future state.”

13.  Specific organisational outcome measures are being developed.

14.  The approach is repeatable. It will be applied to selected future projects and initiatives to embed business effectiveness across the council.

15.  The following diagram shows the process we adopted:

16.   At its 17 August meeting, the CLT approved the Framework and the Terms of Reference.


 

17.   Governance

It was proposed that a Strategic Change Oversight Group be constituted to provide Framework governance.  Membership of the Group comprises:

 

−    Director, Strategy and Engagement (Chair)

−    EPMO Manager

−    Strategic Change Framework Lead – during Framework’s stand-up phase     

−    Chief People Officer

−    Chief Digital Officer

−    Kaitātari Tumuaki Māori

−    Programme Leader, Go Digital

−    Project Manager, Te Pātaka Project

−    Project Manager, Planning and Performance Project

−    Communications Advisor

In addition to each individual project having its own governance arrangements and risk management arrangements, this Group will:

−    oversee the strategic change context for the projects/workstreams and promote their strategic alignment

−    monitor the strategic change outcomes of each project

−    facilitate the critical strategic interdependences

−    ensure that project/workstream communications are aligned strategically

−    help ensure that the necessary communications and change management inputs are provided.

This is an oversight group and will not have the authority to make decisions affecting the individual projects/workstreams. 

The Director, Strategy and Engagement is the lead Director for the strategic change framework and consequently chairs the Oversight Group. As the lead Director he reports to CLT chaired by the Chief Executive. CLT owns the whole of the strategic change framework. Reporting will cover: strategic alignment and outcomes; key project/workstream interdependencies and sequencing; expenditure vs budget; risks and any other matters.

The CLT approved Terms of Reference is attached as Appendix 1. 

18.   Reporting

The Oversight Group will initially meet fortnightly and project/workstream managers will report on project progress toward the strategic outcomes set out in the Framework.

The Director Strategy and Engagement/Chair will report to CLT’s fortnightly formal meetings on progress and on any strategic issues that arise.

The EPMO will provide the CLT with a quarterly report and following this a summary will be included with the quarterly performance report to the Policy, Finance and Strategy Committee.

In addition, the EPMO will monitor the work in progress and will report as required to the Director Strategy & Engagement and to key stakeholders.

In future Go Digital update report will be provided to alternate meetings of the Major Projects Board.

Officers note that reporting on the strategic change framework, including Go Digital, will be included in the quarterly performance report to the Policy, Finance and Strategy Committee as part of reporting on organisation performance. The Subcommittee is invited to consider this, noting that any risks associated with the implementation of the strategic change framework will be reported through to the Subcommittee as part of our regular risk management reporting.

 

Financial considerations

 

19.   The Strategic Change Framework is being prioritised from within approved Long Term Plan Budgets.

Risks

20. The Strategic change framework aims to support our organisation change programmes and projects by providing a structure to oversee and coordinate the individual pieces to better enable them to deliver their outputs.

21.   The key uncertainty is that the strategic change framework does not assist the effective implementation of transformational change required to deliver on outputs and outcomes. The risk drivers of this are:

-     Individual projects falling behind schedule and so affecting key interdependencies within the Framework;

-     Heavy business workload and/or resource capacity affecting staff availability to contribute to the Framework at key stages; and

-     General change fatigue within the organisation creating a barrier to staff buy-in for further changes in processes and ways of working. However this is also a wider risk across all the Council’s business.

 

22.   The key controls in place are that the Oversight Group will monitor risk and provide governance for the work. Regular reporting to the CLT will cover risks and mitigating actions underway.

23. Apart from the above, risks associated with this work, and their mitigation reside with the component projects and are addressed by their own project management. A risk around programme and project management and planning is detailed at a strategic level in the council-wide risk management framework. This, along with Workforce capacity, capability and engagement at Risk 1, can be seen at Risk 7 in the Risk Register (Top Risk) Appendix 1 to the Risk Management Update provided to this Subcommittee at this meeting.

Consultation

 

24. CLT, relevant project managers, and other key Council managers have been consulted on the Strategic Change Framework and the governance arrangements to oversee the Framework’s implementation.

 

25.   There will be continued consultation with wider Council leaders. The component project managers are members of the Oversight Group.

Legal Considerations

26.   There remain no identified legal considerations at this stage.

 

Appendices

No.

Title

Page

1

Appendix 1: Terms of Reference

68

    

 

 

Author: Grant Herman

Strategic Programmes Manager

 

 

 

Approved By: Matt Boggs

Director, Strategy and Engagement

 

 

 


Attachment 1

Appendix 1: Terms of Reference

 


 


 


 


                                                                                 73                                           09 September 2021

Audit and Risk Subcommittee

23 August 2021

 

 

 

File: (21/1343)

 

 

 

 

Report no: ARSC2021/4/192

 

Kerbside Rubbish and Recycling Services Implementation Update

 

Recommendations

That the Subcommittee:

 

(1)   receives the report, noting it is the final report to this subcommittee for the project to implement the kerbside rubbish and recycling services; and

 

(2)   notes that reporting on these services will continue to the Climate Change and Sustainability Committee for at least the first year of operation.

 

Post Implementation Actions

1.       This report provides a final update, as at 30 August 2021 on the project to implement the new kerbside rubbish and recycling services, which commenced 1 July 2021, with particular emphasis on issue management.  

 

·         Bins were rolled out during May, June and early July 2021, following late delivery of the final shipment of bins from Australia.

 

·         Rubbish bags were provided to 3000 homes for a two week period for those properties awaiting final bin delivery. Bags were also made available free of charge from libraries and community hubs to anyone else who needed them.

 

·         Services commenced 1 July 2021 as planned.  Services included collection of bins as well as bags for the interim period, until all bins were delivered.

 

·         Teething problems were experienced as the contractor bedded in the new runs and residents became accustomed to the new services.

 

 

·         Missed collections were an issue but have been tracking down to an acceptable level over the past seven weeks ( 0.125% of total collections for the last week).

 

·         The bin exchange programme commenced early August 2021. Prior to COVID 19 level 4 restrictions, the exchange was running smoothly.  It involves 940 requests made by ratepayers prior to 1 July 2021. We have received another 1000 requests since 1 July 2021 which will be managed later this year.

 

·         Further requests for assisted service are being received and assessed, but cannot commence during COVID 19 level 4 restrictions as site assessments cannot be undertaken. For residents with existing assisted services, the service is being maintained through the COVID 19 level 4 restrictions.

 

·         Requests for Service (mostly missed collections) are being handled through the Confirm system, while changes to Saber for recording new bins and bin changes for the rates system are expected to be finalised in early September 2021.

 

·         The online tool developed for residents to access information on bin collections on phones and other devices is being enhanced to include green waste collections.

Issues

2.        The following table outlines the issues, which are reported regularly as part of a wider project update to the Corporate Leadership Team.  The main issue that the project has faced during the past two months with the service commencing has been adequate resourcing to respond to a high volume of requests.

Issue

High, Med, Low

Issue Mitigation

Bin roll out delayed for around 3000 homes due to shipping issues.

Med

Bags delivered in late June to affected homes and arrangements in place with WML for pick up. Bags also made available at libraries and community hubs.

A very high volume of requests received during July for a variety of issues, including no bins, bin exchanges, assisted services and missed collections.

High

Additional resources both from within and outside the organisation engaged to address this issue.

Daily meetings held to assess resourcing needs and priorities.

New processes developed and put in place for managing enquiries and the resulting data.

Climate Change Impact and Considerations

3.       Council’s decision to opt for a rates funded rubbish and recycling bin service took into account climate change considerations, such as the use of electric vehicles and reduction in the number of trucks operating the same routes.

 

Appendices

There are no appendices for this report.    

 

 

 

Author: Bruce Hodgins

Strategic Advisor

 

 

 

Approver:Helen Oram

Director Environment and Sustainability

 

  


                                                                                 74                                           09 September 2021

Audit and Risk Subcommittee

12 August 2021

 

 

 

File: (21/1277)

 

 

 

 

Report no: ARSC2021/4/116

 

Audit and Risk Work Programme

 

 

 

 

 

Recommendation

That the work programme be received and noted.

 

 

Appendices

No.

Title

Page

1

Appendix 1: Audit and Risk Work Programme

76

    

 

 

 

 

 

 

 

Author: Toi Lealofi

Democracy Advisor

 

 

 

 

 

 

Approved By: Kathryn Stannard

Head of Democratic Services

 

 


Attachment 1

Appendix 1: Audit and Risk Work Programme

 


 



[1] The Risk Steering Group has representation from across council: Information Systems Business Transformation Manager, Head of Facilities and Asset Management (Economy and Development directorate), Emergency Management Lead (Strategy and Engagement directorate), Strategic Advisor (Environment and Sustainability directorate), Head of Chief Exec’s Office, Financial Strategy and Planning, People and Capability Business Partner (and Acting Health Safety Wellbeing Manager) and Head of Parks and Recreation (Neighbourhoods and Communities directorate).