Agenda of Assurance, Risk and Finance Committee Meeting

Assurance, Risk and Finance Committee Meeting Agenda

17 June 2020

ASSURANCE, RISK AND FINANCE COMMITTEE - MEMBERS REGISTER OF INTERESTS

Name	Responsibility (i.e. Chairperson etc)	Declaration of Interests	Nature of Potential Interest	Member's Proposed Management Plan
Hon John Carter QSO	Board Member of the Local Government Protection Programme	Board Member of the Local Government Protection Program
Hon John Carter QSO	Carter Family Trust
John Vujcich (Chair)	Board Member	Pioneer Village	Matters relating to funding and assets	Declare interest and abstain
	Director	Waitukupata Forest Ltd	Potential for council activity to directly affect its assets	Declare interest and abstain
	Director	Rural Service Solutions Ltd	Matters where council regulatory function impact of company services	Declare interest and abstain
	Director	Kaikohe (Rau Marama) Community Trust	Potential funder	Declare interest and abstain
	Partner	MJ & EMJ Vujcich	Matters where council regulatory function impacts on partnership owned assets	Declare interest and abstain
	Member	Kaikohe Rotary Club	Potential funder, or impact on Rotary projects	Declare interest and abstain
	Member	New Zealand Institute of Directors	Potential provider of training to Council	Declare a Conflict of Interest
	Member	Institute of IT Professionals	Unlikely, but possible provider of services to Council	Declare a Conflict of Interest
	Member	Kaikohe Business Association	Possible funding provider	Declare a Conflict of Interest
Bruce Robertson (Deputy)	No Form Received
Deputy Mayor Ann Court	Waipapa Business Association	Member		Case by case
	Warren Pattinson Limited	Shareholder	Building company. FNDC is a regulator and enforcer	Case by case
	Kerikeri Irrigation	Supplies my water		No
	Top Energy	Supplies my power		No other interest greater than the publics
	District Licensing	N/A	N/A	N/A
	Top Energy Consumer Trust	Trustee	Crossover in regulatory functions, consenting economic development and contracts such as street lighting.	Declare interest and abstain from voting.
	Ann Court Trust	Private	Private	N/A
	Waipapa Rotary	Honorary member	Potential community funding submitter	Declare interest and abstain from voting.
	Properties on Onekura Road, Waipapa	Owner Shareholder	Any proposed FNDC Capital works or policy change which may have a direct impact (positive/adverse)	Declare interest and abstain from voting.
	Property on Daroux Dr, Waipapa	Financial interest	Any proposed FNDC Capital works or policy change which may have a direct impact (positive/adverse)	Declare interest and abstain from voting.
	Flowers and gifts	Ratepayer 'Thankyou'	Bias/ Pre-determination?	Declare to Governance
	Coffee and food	Ratepayers sometimes 'shout' food and beverage	Bias or pre-determination	Case by case
	Staff	N/A	Suggestion of not being impartial or pre-determined!	Be professional, due diligence, weigh the evidence. Be thorough, thoughtful, considered impartial and balanced. Be fair.
	Warren Pattinson	My husband is a builder and may do work for Council staff		Case by case
Ann Court - Partner	Warren Pattinson Limited	Director	Building Company. FNDC is a regulator	Remain at arm’s length
	Air NZ	Shareholder	None	None
	Warren Pattinson Limited	Builder	FNDC is the consent authority, regulator and enforcer.	Apply arm’s length rules
	Property on Onekura Road, Waipapa	Owner	Any proposed FNDC capital work in the vicinity or rural plan change. Maybe a link to policy development.	Would not submit. Rest on a case by case basis.
Mate Radich	No form received
Kelly Stratford	KS Bookkeeping and Administration	Business Owner, provides book keeping, administration and development of environmental management plans	None perceived	Step aside from decisions that arise, that may have conflicts
	Waikare Marae Trustees	Trustee	Maybe perceived conflicts	Case by case basis
	Bay of Islands College	Parent Elected Trustee	None perceived	If there was a conflict, I will step aside from decision making
	Karetu School	Parent Elected Trustee	None perceived	If there was a conflict, I will step aside from decision making
	Maori title land – Moerewa and Waikare	Beneficiary and husband is a shareholder	None perceived	If there was a conflict, I will step aside from decision making
	Sister is employed by Far North District Council			Will not discuss work/governance mattes that are confidential
	Gifts - food and beverages	Residents and ratepayers may ‘shout’ food and beverage	Perceived bias or predetermination	Case by case basis
Kelly Stratford - Partner	Chef and Barista	Opua Store	None perceived
Kelly Stratford - Partner	Maori title land – Moerewa	Shareholder	None perceived	If there was a conflict of interest, I would step aside from decision making
Moko Tepania	Teacher	Te Kura Kaupapa Māori o Kaikohe.	Potential Council funding that will benefit my place of employment.	Declare a perceived conflict
	Chairperson	Te Reo o Te Tai Tokerau Trust.	Potential Council funding for events that this trust runs.	Declare a perceived conflict
	Tribal Member	Te Rūnanga o Te Rarawa	As a descendent of Te Rarawa I could have a perceived conflict of interest in Te Rarawa Council relations.	Declare a perceived conflict
	Tribal Member	Te Rūnanga o Whaingaroa	As a descendent of Te Rūnanga o Whaingaroa I could have a perceived conflict of interest in Te Rūnanga o Whaingaroa Council relations.	Declare a perceived conflict
	Tribal Member	Kahukuraariki Trust Board	As a descendent of Kahukuraariki Trust Board I could have a perceived conflict of interest in Kahukuraariki Trust Board Council relations.	Declare a perceived conflict
	Tribal Member	Te Rūnanga ā-Iwi o Ngāpuhi	As a descendent of Te Rūnanga ā-Iwi o Ngāpuhi I could have a perceived conflict of interest in Te Rūnanga ā-Iwi o Ngāpuhi Council relations.	Declare a perceived conflict

Assurance, Risk and Finance Committee Meeting Agenda

17 June 2020

4 Confirmation of Previous Minutes

4.1 Confirmation of Previous Minutes

File Number: A2895497

Author: Casey Gannon, Meetings Administrator

Authoriser: Aisha Huriwai, Team Leader Democracy Services

Purpose of the Report

The minutes are attached to allow the Committee to confirm that the minutes are a true and correct record of previous meetings.

Recommendation

That the Assurance, Risk and Finance Committee confirms the minutes of the Assurance, Risk and Finance Committee meeting held 22 May 2020 as a true and correct record.

1) Background

Local Government Act 2002 Schedule 7 Section 28 states that a local authority must keep minutes of its proceedings. The minutes of these proceedings duly entered and authenticated as prescribed by a local authority are prima facie evidence of those meetings.

2) Discussion and Options

The minutes of the meetings are attached.

Far North District Council Standing Orders Section 27.3 states that no discussion shall arise on the substance of the minutes in any succeeding meeting, except as to their correctness.

Reason for the recommendation

The reason for the recommendation is to confirm the minutes are a true and correct record of the previous meetings.

3) Financial Implications and Budgetary Provision

There are no financial implications or the need for budgetary provision as a result of this report.

Attachments

1. 2020-05-22 Assurance, Risk and Finance Committee Minutes - A2887451 ⇩

Compliance schedule:

Full consideration has been given to the provisions of the Local Government Act 2002 S77 in relation to decision making, in particular:

1. A Local authority must, in the course of the decision-making process,

a) Seek to identify all reasonably practicable options for the achievement of the objective of a decision; and

b) Assess the options in terms of their advantages and disadvantages; and

c) If any of the options identified under paragraph (a) involves a significant decision in relation to land or a body of water, take into account the relationship of Māori and their culture and traditions with their ancestral land, water sites, waahi tapu, valued flora and fauna and other taonga.

2. This section is subject to Section 79 - Compliance with procedures in relation to decisions.

Compliance requirement	Staff assessment
State the level of significance (high or low) of the issue or proposal as determined by the Council’s Significance and Engagement Policy	This is a matter of low significance.
State the relevant Council policies (external or internal), legislation, and/or community outcomes (as stated in the LTP) that relate to this decision.	This report complies with the Local Government Act 2002 Schedule 7 Section 28.
State whether this issue or proposal has a District wide relevance and, if not, the ways in which the appropriate Community Board’s views have been sought.	It is the responsibility of each meeting to confirm their minutes therefore the views of another meeting are not relevant.
State the possible implications for Māori and how Māori have been provided with an opportunity to contribute to decision making if this decision is significant and relates to land and/or any body of water.	There are no implications for Māori in confirming minutes from a previous meeting. Any implications on Māori arising from matters included in meeting minutes should be considered as part of the relevant report.
Identify persons likely to be affected by or have an interest in the matter, and how you have given consideration to their views or preferences (for example, youth, the aged and those with disabilities).	This report is asking for minutes to be confirmed as true and correct record, any interests that affect other people should be considered as part of the individual reports.
State the financial implications and where budgetary provisions have been made to support this decision.	There are no financial implications or the need for budgetary provision arising from this report.
Chief Financial Officer review.	The Chief Financial Officer has not reviewed this report.

Assurance, Risk and Finance Committee Meeting Agenda

17 June 2020

MINUTES OF Far North District Council
Assurance, Risk and Finance Committee Meeting
held electronically, via TEAMs
ON Friday, 22 May 2020 AT 9.32 am

PRESENT: Cr John Vujcich, Member Bruce Robertson, Deputy Mayor Ann Court, Cr Kelly Stratford, Cr Moko Tepania (from 11:02 am), Mike Edmonds (Kaikohe-Hokianga Community Board Chairperson)

IN ATTENDANCE: Cr Rachel Smith

STAFF PRESENT: Shaun Clarke (Chief Executive Officer), Will Taylor (General Manager Corporate Services), Darrell Sargent (General Manager Strategic Planning and Policy), Andy Finch (General Manager Infrastructure and Asset Management), Dr. Dean Myburgh (General Manager District Services).

1 Karakia Timatunga – opening prayer

Councillor Vujcich commenced the meeting with a karakia.

2 Apologies and Declarations of Interest

Apologies were noted from His Worship the Mayor and Councillor Tepania for lateness.

3 Deputation

There were no deputations received for this meeting.

4 Confirmation of Previous Minutes

4.1 Confirmation of Previous Minutes

Agenda item 4.1 document number A2860745, pages 10 - 14 refers.

Committee Resolution 2020/1

Moved: Cr John Vujcich

Seconded: Member Bruce Robertson

That the Assurance, Risk and Finance Committee confirms the minutes of the Assurance, Risk and Finance Committee meeting held 12 February 2020 as a true and correct record.

Carried

5 Information Reports

5.1 Internal Audit and Assurance Report - March 2020

Agenda item 5.1 document number A2856441, pages 15 - 16 refers.

Committee Resolution 2020/2

Moved: Cr Kelly Stratford

Seconded: Member Bruce Robertson

That the Assurance, Risk and Finance Committee receive the Internal Audit and Assurance Report - March 2020.

Carried

5.2 Internal Audit and Assurance Report - April 2020

Agenda item 5.2 document number A2871278, pages 17 - 18 refers.

Committee Resolution 2020/3

Moved: Deputy Mayor Ann Court

Seconded: Cr Kelly Stratford

That the Assurance, Risk and Finance Committee receive the report Internal Audit and Assurance Report - April 2020.

Carried

5.3 Risk Management

Agenda item 5.3 document number A2857046, pages 19 - 28 refers.

Committee Resolution 2020/4

Moved: Deputy Mayor Ann Court

Seconded: Cr John Vujcich

That the Assurance, Risk and Finance Committee receive the Risk Management Report.

Carried

5.4 BCA Accreditation Update

Agenda item 5.4 document number A2855393, page 29 refers.

Committee Resolution 2020/5

Moved: Cr Kelly Stratford

Seconded: Cr John Vujcich

That the Assurance, Risk and Finance Committee receive the BCA Accreditation Update.

Carried

5.5 May Risk Management

Agenda item 5.5 document number A2875398, pages 30 - 47 refers.

Committee Resolution 2020/6

Moved: Cr Kelly Stratford

Seconded: Deputy Mayor Ann Court

That the Assurance, Risk and Finance Committee receive the report May Risk Management.

Carried

5.6 Council Financial Report for the Period Ending 30 April 2020

Agenda item 5.6 document number A2881067, pages 48 - 71 refers.

Committee Resolution 2020/7

Moved: Member Bruce Robertson

Seconded: Deputy Mayor Ann Court

That the Assurance, Risk and Finance Committee receive the report Council Financial Report for the Period Ending 30 April 2020.

Carried

5.7 Revenue Recovery Report - March 2020

Agenda item 5.7 document number A2876424, pages 72 - 74 refers.

Committee Resolution 2020/8

Moved: Deputy Mayor Ann Court

Seconded: Cr Kelly Stratford

That the Assurance, Risk and Finance Committee receive the report “Revenue Recovery Report - March 2020.

Carried

5.8 Financial Impact Assessment - Covid-19

Supplementary Agenda item 1.1 document number A2887172, pages 4 - 6 refers.

At 11:38 am, Deputy Mayor Ann Court left the meeting and returned at 11:43am.

Recommendation

Moved: Member Bruce Robertson

Seconded: Cr Kelly Stratford

That the Assurance, Risk and Finance Committee receive the report Financial Impact Assessment - COVID-19.

Carried

5.9 Level of Service KPI Quarter 3 Performance Report

Agenda item 5.8 document number A2876091, pages 78 - 104 refers.

Committee Resolution 2020/9

Moved: Cr Kelly Stratford

Seconded: Member Bruce Robertson

That the Assurance, Risk and Finance Committee receive the report Level of Service KPI Quarter 3 Performance Report.

Carried

6 Public Excluded

6.1 RESOLUTION TO EXCLUDE THE PUBLIC

Recommendation

That the public be excluded from the following parts of the proceedings of this meeting.

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

General subject of each matter to be considered	Reason for passing this resolution in relation to each matter	Ground(s) under section 48 for the passing of this resolution
6.1 - Confirmation of Previous Minutes	s7(2)(h) - the withholding of the information is necessary to enable Council to carry out, without prejudice or disadvantage, commercial activities	s48(1)(a)(i) - the public conduct of the relevant part of the proceedings of the meeting would be likely to result in the disclosure of information for which good reason for withholding would exist under section 6 or section 7
6.2 - 2020 Far North District Council Assurance Work Programme	s7(2)(f)(i) - free and frank expression of opinions by or between or to members or officers or employees of any local authority	s48(1)(a)(i) - the public conduct of the relevant part of the proceedings of the meeting would be likely to result in the disclosure of information for which good reason for withholding would exist under section 6 or section 7
6.3 - FNDC Current Legal Action Potential Liability Claims	s7(2)(g) - the withholding of the information is necessary to maintain legal professional privilege	s48(1)(a)(i) - the public conduct of the relevant part of the proceedings of the meeting would be likely to result in the disclosure of information for which good reason for withholding would exist under section 6 or section 7

The Assurance, Risk and Finance Committee resolved to exclude the public at 11:49 am.

At the conclusion of the public excluded discussion, the meeting confirmed the report and decision regarding the 2020 Far North District Council Assurance Work Programme can be publicly accessible.

7 karakia whakamutunga – closing prayer

8 Meeting Close

The meeting closed at 12:20pm.

The minutes of this meeting were confirmed at the Assurance, Risk and Finance Committee Meeting held on 17 June 2020.

...................................................

CHAIRPERSON

Assurance, Risk and Finance Committee Meeting Agenda

17 June 2020

5 Reports

5.1 NZ Audit Fraud Questionnaire

File Number: A2889264

Author: Tanya Reid, Manager - Transformation, Risk and Audit (Acting)

Authoriser: William J Taylor MBE, General Manager - Corporate Services

Purpose of the Report

To seek approval to provide response to NZ Audit fraud questionnaire.

Executive Summary

· As a part of their audit programme the FNDC external auditor, Audit NZ, have supplied a series of fraud questionnaires for completion.

· One of these fraud questionnaires is to be completed by our elected members.

· This questionnaire has been populated on your behalf and is presented for your review and approval.

Recommendation

That the Assurance, Risk and Finance Committee:

a) approve the proposed response.

1) Background

This report is required to ensure the Assurance, Risk and Finance Committee is aware of, and approves, the proposed response to NZ Audit.

As an organisation FNDC have a number of controls in place to mitigate fraud risk:

1. FNDC’s Audit and Assurance Specialist undertakes internal audits on processes that are commonly known to be susceptible to fraud.

2. The current FNDC Assurance Work Programme includes providing assurance in areas such as:

· Duplicate payments

· Supplier Masterfile changes

· Delegated financial authorisations

· Conflicts of interest

· Vehicle fleet management

· Network logon accounts

· Accounts payable and accounts receivable

· Payroll

· Contract/project assurance, i.e. payments, variations and documentation.

If any fraud, or opportunities for fraud, are identified through these audits, appropriate recommendations are made for improvements.

3. Third party external audits are also completed. These include:

· IANZ Building Consent Authority Accreditation Assessment

· MPI Council Food Act Recognised Agency

· Three Waters Interim Alliance Agreement Review

· LGOIMA Compliance and Practice Chief Ombudsman Report

4. Implementation of the risk management framework through the organisation.

5. Review of risk progress against the Organisational Top 12 Risk Dashboard by the Assurance, Risk and Finance Committee put another lens over the controls we have, and the strength of these controls.

6. A suite of internal policies provides defined business practices and behavioural expectations:

· Asset Disposal Policy

· Dealing with Complaints Policy

· Dress Code Policy

· Drugs and Alcohol Policy

· Email Usage Policy

· Employee Code of Conduct Policy (includes Conflicts of Interest)

· Equal Employment Opportunities Policy

· Flexible Ways of Working Policy

· Fraud, Corruption and Whistle Blower Policy

· Gifts and Inducements Policy

· Intranet, Network Usage and Password Security Policy

· IT Equipment Policy

· Learning and Development Policy

· Leave Provisions Policy

· Mobile Phone and Desk Phone Usage Policy

· Overtime - Toil Policy

· Payment of Professional Fees Policy

· Performance Management Policy

· Privacy Policy

· Procurement Policy

· Recruitment Policy

· Remuneration and Reward Policy

· Sensitive Expenditure Policy

· Software Usage and PC Standards Policy

· Workplace Harassment, Discrimination and Bullying Prevention Policy

7. Two Protected Disclosure Officers available to staff, as well as an external whistleblowing hotline provided by EAP Services.

8. Other procedures and processes that are in place to reduce the risk of fraud include:

· Dependent on their role potential new staff members are both credit and Ministry of Justice checked within the recruitment process. Some positions are also Police vetted

· Induction training for all new starters that educates them on our policies

· Defined processes, controls and regular reporting such as non-PO payment report, duplicate payments, petty cash, staff expenses, training and travel approvals, and delegated financial authorisations

· Separation of duties which prevents a single person from approving financial transactions

· Conflicts of Interest processes and management plans.

· Fraud insurance is in place

· Completing lessons learned when a fraud event is experienced

· We are implementing a new asset management system.

9. In response to the current COVID-19 pandemic situation we have stood up an eight strong cross functional Fraud Task Force. The purpose of this Fraud Task Force is to utilise our systems and processes to mitigate fraud risks as identified by the organisation.

2) Discussion and Options

· This fraud questionnaire was received from Audit NZ for elected members to complete.

· The fraud questionnaire response has been reviewed and approved by SLT.

· The questionnaire summarises fraud management and events over the last 12 months to end April 2020.

The Assurance, Risk and Finance Committee can:

1. Approve the proposed response

2. Amend the response

3. Decline to make a response

Staff recommend that the proposed response be approved. Staff are happy to take proposed amendments from the committee to have a final response agreed at the meeting.

The benefit in responding is to in comply with the Audit NZ annual 2020 audit requirements.

Reason for the recommendation

The questionnaire is a fair and accurate reflection of current fraud process, procedures and governance.

3) Financial Implications and Budgetary Provision

There are no financial implications.

Attachments

1. 2020 05 Draft Fraud Risk Assessment Questionnaire to TCWG - A2889255 ⇩

Compliance schedule:

Full consideration has been given to the provisions of the Local Government Act 2002 S77 in relation to decision making, in particular:

1. A Local authority must, in the course of the decision-making process,

a) Seek to identify all reasonably practicable options for the achievement of the objective of a decision; and

b) Assess the options in terms of their advantages and disadvantages; and

2. This section is subject to Section 79 - Compliance with procedures in relation to decisions.

Compliance requirement	Staff assessment
State the level of significance (high or low) of the issue or proposal as determined by the Council’s Significance and Engagement Policy	Not applicable.
State the relevant Council policies (external or internal), legislation, and/or community outcomes (as stated in the LTP) that relate to this decision.	Not applicable.
State whether this issue or proposal has a District wide relevance and, if not, the ways in which the appropriate Community Board’s views have been sought.	Not applicable.
State the possible implications for Māori and how Māori have been provided with an opportunity to contribute to decision making if this decision is significant and relates to land and/or any body of water.	Not applicable.
Identify persons likely to be affected by or have an interest in the matter, and how you have given consideration to their views or preferences (for example – youth, the aged and those with disabilities.	Not applicable.
State the financial implications and where budgetary provisions have been made to support this decision.	Not applicable.
Chief Financial Officer review.	The Chief Financial Officer has reviewed this report.

Assurance, Risk and Finance Committee Meeting Agenda

17 June 2020

Fraud risk assessment – Direct enquiry areas for Council members

Fraud enquiries: Those charged with governance

Specific enquiries	Response
Role in relation to fraud
What role do those charged with governance] have in monitoring management’s exercise of its fraud prevention responsibilities?	The Assurance, Risk and Finance Committee has this governance role. In this role the committee: · ensures the appropriate financial accounting and disclosure requirements are in place · approves independent external financial audit appointment · receives direct reporting by the external financial auditor to the committee with external auditor lead staff excluded discussion with elected members other third party audits (BCA, Food) are by regulatory agencies with outcomes reported to the Regulatory Compliance Committee. These audit recommendations are entered into the central audit log for monitoring and reporting by the Assurance and Audit Specialist to the Assurance, Risk and Finance Committee · reviews and approves internal audit and assurance work programme · receives direct reports from the internal Assurance and Audit Specialist including progress to close out third party and internal audit findings and recommendations · participates in the risk management governance including identification risks on the top organisational risk dashboard · receives direct top organisational risk progress reports
How does management communicate identified fraud risks? How do they provide assurance that anti-fraud controls are in place and operating?	Management communicates identified fraud risk to the Assurance, Risk and Finance Committee. Assurance that anti-fraud controls are in place is provided, to this committee, through the internal audit and assurance function and the external third party audits.
If a fraud risk assessment has been completed, what input did those charged with governance have? Do you consider that the fraud risk assessment was a robust process?	Fraud was assessed as a risk by the Assurance, Risk and Finance Committee in 2018. With the controls, already in place, fraud was not prioritised as a top organisational risk.
How are those charged with governance informed of actual, suspected or alleged frauds?	Sponsored by the General Manager Corporate Services the Transformation & Assurance team report investigated and proven fraud events to the Assurance, Risk and Finance Committee.
Actual, suspected, or alleged frauds
Have any frauds been identified or are there any suspected or alleged frauds?	Yes. In the last 12 months one fraud lessons learned report was presented, on the 12 Feb 2020, to the Assurance, Risk and Finance Committee agenda.
For any identified frauds, were these investigated by management and have the results of the investigation been reported to those charged with governance? How did the fraud occur? How was it identified? What happened to fraudster, how much was involved and were any monies or assets recovered?	In December 2019 FNDC was affected by a fraudulent request for a bank account number to be changed. This request originated from one of our contractors, Conhur Ltd (sludge dewatering specialist company). Their IT and email systems had been maliciously hacked by an unknown party. A payment for a legitimate invoice was made to Conhur Ltd for $100,600.30 using Conhur Ltd’s new (fraudulent) bank account details. This event was reported to the Police who subsequently opened their own investigation.

Assurance, Risk and Finance Committee Meeting Agenda

17 June 2020

6 Information Reports

6.1 Internal Audit and Assurance Report

File Number: A2885033

Author: Lisa Huria, Audit and Assurance Specialist

Authoriser: William J Taylor MBE, General Manager - Corporate Services

Purpose of the Report

To provide the Assurance, Risk and Finance Committee with an update on internal and external audits, and any associated recommendations.

Executive Summary

This report provides an update on internal and external audit recommendations that have recently been completed, are almost complete, are underway, or are on hold. Since the last report on 22 May, five recommendations have been completed.

Recommendation

That the Assurance, Risk and Finance Committee receive the report Internal Audit and Assurance Report.

Background

Five audit recommendations from the LGOIMA Compliance and Practice at FNDC Report have recently been completed by the Legal Services team.

There are plans in place to complete all other outstanding recommendations.

Audit recommendations as at 22 May 2020:

ID	Audit Name	Title	Priority	Status	Description
23	Internal Audit - Information Security	External user access and authentication	Must do	Almost complete	The number of external users with non-expiring passwords should be reviewed to: 1) Determine if they need access 2) Confirm with Pathway that user access cannot be restricted to just the RFS's they are assigned to 3) Ensure an IT Asset Acceptance Letter is signed by external users. Progress: 1) Network logon account internal audit has been completed. Findings to be actioned by the IT team. 2) User access to Pathway cannot be restricted to just the RFS’s they are assigned to. External contractors are provided with limited access of ‘enquiry’ unless otherwise requested. User Groups have been set up for external users. External contractors are de-activated when contract has terminated, and the maintenance structures are removed. 3) An IT Asset Acceptance Letter is signed by all external users.
28	Internal Audit - Information Security	Project Security Risks	Should do	Underway	Information security controls need to be factored into FNDC's project management framework to ensure associated risks are managed.
58	KPMG - Procurement	Spend Monitoring	Should do	Underway	Implement quarterly procurement spend analysis.
59	KPMG - Procurement	Spend Monitoring	Should do	Underway	As part of the spend analysis process, integrate category spend management on a periodic basis.
64	KPMG - Procurement	Record-keeping	Should do	Underway	Centralised system for storing documentation. Progress: A Contracts Register has been set up in SharePoint.
65	KPMG - Procurement	Record-keeping	Should do	Underway	Establish naming conventions for consistent naming. Progress: This will be combined with number 64 above.
74	2017 Audit NZ Interim Annual Management Report	Legislative Compliance System	Should do	On hold	Audit NZ recommend a mechanism for monitoring compliance with legislative requirements is put in place as part of the Council’s overall risk management strategies. Progress: Stakeholder interviews have been completed. A range of possible solutions have been investigated. The next step is to procure a legislative compliance system and this will be considered in future budgets.
99	Contract Management Review	Set contract management guidelines	Must do	Underway	Focus is being placed on setting organisation wide contract management guidelines, encompassing the three main contractual areas: physical works, fixed term operational and maintenance, and goods and services. This encompasses the four contract stages: contract planning and development, contract execution, contract management and contract review/close-out. Progress: Work on developing a Contract Management Policy and Framework is progressing well.
105	2018 Audit NZ Final Annual Management Report	Resource Management Deposits (Bonds)	Must do	Almost complete	When testing the liability balance related to resource management deposits, Audit NZ found some deposits in the listing were received 18 years ago. They recommended resource management deposits be reviewed and an assessment made as to whether they still meet the definition of a liability. If not, they should be released to revenue. Progress: The Compliance Team have undertaken analysis and site inspections to determine which bonds can be refunded. This work is nearing completion.
111	Three Waters Interim Alliance Agreement Review	Education of Alliance contracts and principles	Should do	Underway	Greater education provided for staff regarding expectations of an Alliance contract and understanding of the Alliance principles. Progress: Toolbox sessions are held regularly with Far North Waters. FNDC Asset Managers are going to be taken through the contract so they can get a clear understanding of how it works.
115	Three Waters Interim Alliance Agreement Review	Agree on Key Performance Indicators (KPI)	Should do	Underway	Agree on the KPI’s through the Alliance Management Team, including finance and contract performance, proactiveness and innovation, and co-developed Health and Safety KPI’s. Progress: KPI’s will be agreed in early 2020.
123	2019 Audit NZ Final Annual Management Report	Deferral of capital expenditure	Must do	Underway	Audit NZ recommend that the Council give consideration to the impact of deferred capital expenditure on asset condition and any potential impact this may also have on Council’s asset valuations and impairment assessments for future reporting cycles. Progress: Council has commenced Programme Darwin which is aimed at addressing issues with asset management. Delivery of the capital programme being one of these issues. Council is reviewing the capital programme to ensure that it is achievable from inception and is limited to what can reasonably be delivered.
132	LGOIMA Compliance and Practice Report	Develop a LGOIMA training programme tailored to the needs of all staff, including induction training and more detailed training on the application of LGOIMA withholding grounds	Must do	Complete	A LGOIMA Policy has been developed which acts as a training tool. This will be embedded into induction training. Any additional training required will be based on the LGOIMA Policy and will be delivered by the Legal Services team.
136	LGOIMA Compliance and Practice Report	Develop a written policy on official information	Must do	Complete	A LGOIMA Policy has been developed. About to go through SLT approval.
137	LGOIMA Compliance and Practice Report	Develop guidance resources for staff on how to apply LGOIMA to information requests	Must do	Complete	A LGOIMA Policy has been developed which acts as a training tool. This will be embedded into induction training. Any additional training required will be based on the LGOIMA Policy and will be delivered by the Legal Services team. The policy itself is an excellent guidance tool for staff.
138	LGOIMA Compliance and Practice Report	Amend operational guidance on staff intranet to comply with LGOIMA	Must do	Almost complete	The LGOIMA Policy will be placed on the intranet. Legal Services will work with the Communications and IT teams to action this once SLT approval is gained.
139	LGOIMA Compliance and Practice Report	Develop a Proactive Release policy	Must do	Almost complete	The Proactive Release Policy is nearing completion. As a result of the adoption of this policy, Legal Services will commence work on establishing the processes for proactive release of information, as well as how we manage publicly excluded items according to the policy guidelines.
141	LGOIMA Compliance and Practice Report	Ensure that all public and media information requests are handled in accordance with LGOIMA	Must do	Complete	This is embedded in the LGOIMA Policy.
142	LGOIMA Compliance and Practice Report	Ensure that requests from elected members are handled in accordance with LGOIMA	Must do	Complete	This is embedded in the LGOIMA Policy.
151	LGOIMA Compliance and Practice Report	Consider ways to include contact centre, media, elected member and property file requests in LGOIMA statistics	Must do	Underway	We are changing the way we report on LGOIMA to the Chief Executive - this work is currently in development.
152	LGOIMA Compliance and Practice Report	Consider including more information about LGOIMA requests in the report to the Chief Executive	Must do	Underway	We are changing the way we report on LGOIMA to the Chief Executive - this work is currently in development.

Complete: 5

Almost complete: 4

Underway: 11

On hold: 1

Total: 21

Financial Implications and Budgetary Provision

This report is for information only.

Attachments

Nil

Assurance, Risk and Finance Committee Meeting Agenda

17 June 2020

6.2 Risk Register Update

File Number: A2889879

Author: Tanya Reid, Manager - Transformation, Risk and Audit (Acting)

Authoriser: William J Taylor MBE, General Manager - Corporate Services

Purpose of the Report

To provide scheduled risk progress reports for the organisation’s top risks and group risk. No decision required.

Executive Summary

Risk progress updates are provided for two of the top organisational risks.

Recommendation

That the Assurance, Risk and Finance Committee receive the report June 2020 Risk Register Update.

Background

The Transformation and Assurance team has facilitated the development of treatment plans for the organisation’s top risks. We are now in the phase where regular reporting of the organisation’s top risks, and treatment plans, is in place.

A programme of deep dive workshops is planned for these risks. The first of two deep dive workshops for ARF005 Affordability risk has been completed, with the second workshop to be scheduled.

The Transformation and Assurance team continues to work with the organisation to refresh / establish Group risk registers, with treatment plans, and regular reviews.

Discussion and Next Steps

Two risk progress reports, with treatment plans, are attached. Below is a summary of change to risk status. More detail is available in the risk progress reports.

Both ARF010 Data Governance and ARF005 Delivery of Service (affordability) risks, have been assessed as increasing level of risk.

The rationale for the increased level of risk is due to the impact of the drought and COVID-19 pandemic and national emergency. The negative impact is a result of:

1. Financial stress being experienced now and into the short-medium term future due to the impact of loss of income on businesses; and individuals and households.

2. Certnz have highlighted increased threat from criminals taking advantage of the COVID-19 pandemic to create opportunistic online scams and attacks.

An elected member workshop is to be scheduled to cover the FNDC Risk Management Framework and to refresh the top organisational risk dashboard.

The Transformation and Assurance team continues to work through the organisation to establish and maintain Group Risk Registers.

Financial Implications and Budgetary Provision

At this stage no additional budgetary provision has been identified for the treatment plans.

Attachments

1. 2020 05 ARF005 Delivery of Service Risk (affordability) Progress Report - A2889806 ⇩

2. 2020 05 ARF010 Data Governance Risk Progress Report - A2889997 ⇩

Assurance, Risk and Finance Committee Meeting Agenda

17 June 2020

Description of risk and impact

· Economic delivery is the financial ability to deliver Council services, strategies and initiatives to the community at affordable levels.

· Affordability of services is acknowledged as one of FNs key challenges. With a small rating base, diverse socio-economic factors and large distributed infrastructure base and service requirement, this will get worse over time without intervention.

· Data from the Ministry of Social Development shows that 19% of the Far North District receives New Zealand Superannuation. In total, Infometrics calculations show that 31% of the Far North population in March 2020 was either on a main benefit or on New Zealand Superannuation. In 2018, the Far North District had a usual residential population of 65,250, living in 22,761 households or around 2.9 people per household. Business Economic Research Limited (BERL) analysis (Feb 2020) for the Far North provides a snapshot by household type:

· Table 1 Household counts by the eight usual household types, Far North District 2018

Household Type	Household count	As a percentage
· Single Superannuitant, no other income	· 2471	· 10.9%
· Married Superannuitant, no other income	· 2961	· 13.0%
· Single working person (no kids)	· 1504	· 6.6%
· Single adult, 2 children, on benefit	· 409	· 1.8%
· Single adult, 2 children, employed	· 102	· 0.4%
· Couple, 2 children, one employed	· 749	· 3.3%
· Couple, 2 children, both employed	· 1123	· 4.9%
· Remaining households	· 13442	· 59.1%
· Total occupied households	· 22761	·
· Two working adults, based in Auckland	· 763	· 3.4%

· Ageing infrastructure and the forecast impacts of climate change and natural hazards present further delivery challenges. We do not fully understand our assets – location, condition, capacity, long-range requirements. Unbudgeted costs emerge frequently as a result of under-estimation and poor understanding of requirements.

· The affordability of delivery relates predominantly to core infrastructure assets, although services such as enforcement cannot be excluded as an area of risk.

· Central government’s productivity commission enquiry acknowledges affordability as an issue for many councils, particularly for those without funding sources beyond rates and charges. This has been further impacted by the COVID-19 pandemic. Infometrics forecast a 7.2% decline economic activity in the Far North, for the year to March 2021, with the Far North likely see a 10.1% decline in local employment, costing around 2,500 jobs.

Current situation (from CEO’s memo to Elected Members 24 April 2020)

In this financial year (2019/20), the cost to Council for drought-related works is, at 24 April 2020, sitting at approximately $4.2m with costs associated with COVID-19 costs so far totaling approximately $88k.

· So far, we have been able to identify savings to offset $3.7m, many of which were taken from areas of the business that have “slowed” due to drought or stopped all together as a result of the shutdown. At this point it must be noted that maintaining this level of saving in the slowed areas may not be possible indefinitely; it is anticipated that as we move back down the Alert Levels expenditure will start to increase, although it is too soon to estimate how fast normal levels are likely to be reached.

· It is extremely difficult to estimate the quantum of impact on Council’s income streams in the remaining few months of the current financial year as we move back through the COVID-19 Alert Levels. At the time of writing, staff continue to work on resource consents and building consents that were lodged prior to shut down. Expected future lodgment rates are unknown, so the impact on future income from consenting cannot yet be determined. Likewise, the cashflow impact on rates income has not yet emerged. Invoices for the final instalment have just been issued and a clearer picture of the impact is expected to develop in the coming weeks.

Existing Treatments

· Elected members have attended one of two risk deep dive workshops to unpack this risk. At this workshop elected member identified ideas, opportunities, issues and risks. Based on natural relationships these were grouped into 11 categories. An analysis of the complex relationship among the 11 themes was completed and captured in a “relationship” diagram. The main purpose of this diagram is to help identify the relationships between the themes, the goal being to support the understanding of the links between ideas or cause-and-effect relationships.

Diagram 1:

· This diagram shows a count of the arrows in and out for each theme

· Themes with the highest arrow count are key ideas;

· Themes with primarily out-going arrows ((10) Governance, (7) Changing physical environment, and (5) Central Government) are basic causes; and

· Themes with primarily in-coming arrows ((2) Community wellbeing and (4) Provision of service infrastructure) are final effects critical to address for this risk.

· Council has commissioned a report by BERL to inform our understanding of the rates affordability for eight usual household types within the District to determine the percentage of household income spent on rates at different rating levels, for different household types.

· FNDC has a traditional financial model of budgeting for endorsed plans and strategies such as the Long Term Plan, infrastructure and district plans including Council resource and capability to deliver on these plans and core service base.

· These plans and services are funded by mainly rating revenue, complemented by a small return on some assets such as pensioner housing, and Council’s CCO, Far North Holdings Limited, who provides a shareholder dividend back to council.

· A revenue and rating review is underway looking at aspects such as Land value vs. Capital value to see if additional revenue can be derived from a more equitable rating system for the district.

· This review is also planned in the near term to look at sources of revenue and investigate new opportunities to grow and improve the funding base and potential.

· Planned enhancements such as; planning quality, business casing, project support, asset condition and management and contract management will all assist with managing costs, however it will take time for the cumulative benefits from these initiatives to flow down to accurate budgeting and forecasting processes.

· FNDC has joined regional alliances such as the Northern Transport Alliance to share costs and opportunities and the regional shared services model is one that will be utilized more frequently.

· Longer term strategy work such as the "Far North 2100” initiative is underway to assist with forecasting future services and costs.

· High level treatment plan:

1. CouncilMark:

18. Asset Management Improvement

29. Capital Project Life Report Improvement

16. Long Term Asset Funding Improvement

2. Knowing where new assets will be required and when, including:

• Location, timing and quantum of potential growth/decline

• Current capacity of assets and likely future demand

• The future/agreed strategy for the asset class

• Where change (unforeseen and/or uncontrollable) may force action.

3. Accurate and process-driven options assessment, with realistic budgets and timelines (taking the guesswork out of corporate planning (LTP and Annual Plans).

4. Ensuring that work practices across Council are free of waste, keeping the rates requirement as low as possible.

5. Building a rating system that is as fair and equitable as possible.

Where are the gaps? / what more could we be doing?

Inherent Risk:	Trend	Residual Risk:	Accountable:	CEO	Date raised:	29/11/18	Report frequency:
	á		Responsible:	GM SPP	Date accepted:	30/05/19	Six monthly

Assurance, Risk and Finance Committee Meeting Agenda

17 June 2020

6.3 Far North Holdings Limited - March 2020 Third Quarter Financial Report

File Number: A2895646

Author: Janice Smith, Chief Financial Officer

Authoriser: William J Taylor MBE, General Manager - Corporate Services

Purpose of the Report

To report the financial position of Far North Holdings Limited as at 31 March 2020.

Executive Summary

At the Council meeting of 23 April 2020, Council requested that Far North Holdings Limited report on the financial position on a quarterly basis. This report is the third quarter report for the financial year 2019/20.

Recommendation

That the Assurance, Risk and Finance Committee receive the report Far North Holdings Limited - March 2020 Third Quarter Financial Report.

Background

At the Council meeting - 23 April 2020, Council resolved the following:

Resolution 2020/21

Moved: Mayor John Carter

Seconded: Cr Dave Collard

That Council:

a) accept the Half Year Report from Far North Holdings Limited:

b) request that future reports contain the following information;

i) annual and Year to Date budget,

ii) commentary on any significant variances, and

iii) detail of significant income and expenditure, for example fees & charges and salaries to aid the shareholder understanding of the financial position.

The March 2020 third quarter financial report is the first report received following that resolution.

Discussion and Next Steps

The report as attached, now includes additional information as requested by Council at the meeting of 23 April 2020.

The COVID-19 Level 4 shutdown occurred 25 March 2020; therefore, the financial position shows limited impact for the quarter. The final accounts at 30 June 2020 will show more detail of the impact associated with the closure of the airport as well as the shortening of the cruise ship season.

Overall, income is down for the third quarter by $381,458 and this is largely due to a reduction in goods sold.

Expenditure is ahead of budget in several places, the most significant being depreciation with $322,221. Other areas showing greater than $50k movement are Employee benefits (+$95,315), Inventory (+$68,720) and Finance Expenses (-$63,156).

Overall the surplus is below budget by $610,619 which equates to 24% of the budgeted surplus of $2,451,955.

Financial Implications and Budgetary Provision

The are no financial implications arising from this report, however, it should be noted that a continued decrease in the reported surplus will reduce the dividend payable to Council at the end of the financial year.

Attachments

1. FNHL March 2020 Quarterly Report.final - A2895675 ⇩

Assurance, Risk and Finance Committee Meeting Agenda

17 June 2020

6.4 Far North Holdings Limited - Statement of Intent for the period 2020 to 2023

File Number: A2895790

Author: Janice Smith, Chief Financial Officer

Authoriser: William J Taylor MBE, General Manager - Corporate Services

Purpose of the Report

The purpose of this report is to receive the Far North Holdings Limited - Statement of Intent for the period 2020 to 2023.

Executive Summary

The Schedule 8 (3) of the Local Government Act 2002 requires Far North Holdings Limited to deliver a final Statement of Intent to the Shareholder before the commencement of the financial year to which it relates.

Recommendation

That the Assurance, Risk and Finance Committee receive the report Far North Holdings Limited - Statement of Intent for the period 2020 to 2023.

Background

Far North Holdings Limited delivered a draft Statement of Intent to the Shareholder and this was reviewed at the Council meeting of 23 April 2020. At that meeting it was agreed that a further workshop was required to enable the Shareholder to provide feedback to the Board of Far North Holdings Limited on the Statement of Intent.

Discussion and Next Steps

A workshop was held 13 May 2020 where Board members of Far North Holdings Limited were in attendance. To enable new elected members to understand the purpose of Far North Holdings Limited a timeline that identified when and how Far North Holdings Limited came into existence and the changes that had occurred over time was discussed.

It was agreed that the Board of Far North Holdings Limited would review the draft Statement of Intent to ensure that it responded to the issues raised in the resolution from the 23 April Council meeting:

Resolution 2020/22

Moved: Cr John Vujcich
Seconded: Cr Mate Radich

That Council:

a) review the comments from staff as identified and approve that:

i. the accounting policies needs to advise that additional disclosures are required to meet the needs of the Shareholders reporting requirements;

ii. the reference to a Statement of Expectations be removed from the Statement of Intent as the Shareholder has not yet taken any decisions in relation to the new sections of the Local Government Act 2002;

iii. the Board membership section of the Statement of Intent identifies which members will be retiring when and that all appointments will be in line with Council policy.

b) advise Far North Holdings Limited of any amendments that are suggested by the shareholder, that are not covered in the report; and

c) that all amendments be notified, through the Chief Executive, to the Board of Far North Holdings Limited prior to 30 April 2020.

And that Far North Holdings Limited begin quarterly financial and risk reporting to the Assurance, Risk and Finance Committee.’

It was also noted that the impact that COVID–19 would need to be taken into consideration for the dividend projections for the outer years of the statement.

Financial Implications and Budgetary Provision

There are no specific financial implications arising from this report.

Attachments

1. FNHL Statement of Intent 2020 - 2023 FINAL - A2895770 ⇩