"AGENDA AUDIT AND RISK SUB-COMMITTEE"
I PUBLIC COPY Te Kaunihera 0 MANUKAU City Council AGENDA for the meeting of the AUDIT AND RISK SUB-COMMITTEE to be held on THURSDAY, 17 SEPTEMBER 2009 at 5.00pm in the Puhinui Room MANUKAU CIVIC CENTRE Wiri Station Road Manukau City STANDING SUB-COMMITTEE CHAIRMAN: Cr Maggie Burrill DEPUTY CHAIRMAN: Cr Bob Wichman SUB-COMMITTEE: His Worship the Mayor, Len Brown Cr Efu Koka Cr Daniel Newman Cr Jami-Lee Ross Cr Michael Williams Team Leader Committee Services - Puretu Nia: T: 262-5129 M: 0274201112 E-mail: Puretu.Nia@manukau.govt.nz EMERGENCY EVACUATION WHEN REQUESTED TO EVACUATE THIS BUILDING Leave the building immediately by the nearest exit, which is: Exit into the Main Foyer Exit at Carpark End The alternative exit is: I Entry Foyer by Lift I Please assemble at: I Council Car Parks I STAY AT THE ASSEMBLY POINT UNTIL THE "ALL CLEAR" IS GIVEN WALK DO NOT RUN DO NOT USE LIFTS The Fire Warden for this meeting is the: Please follow her instructions AUDIT AND RISK SUB-COMMITTEE MEETING THURSDAY, 17 SEPTEMBER 2009 TABLE OF CONTENTS Item Page No. No. 1. APOLOGIES IN ACCORDANCE WITH STANDING ORDER NUMBER 2.10 1 2. CONFIRMATION OF MINUTES 1 3. PRECEDENCE OF BUSINESS IN ACCORDANCE WITH STANDING ORDER NUMBER 2.6.1 2 4. CHAIRPERSON'S ANNOUNCEMENTS 2 5. URGENT BUSINESS AUTHORISED TO BE TAKEN UNDER STANDING ORDER NUMBER 2.5 2 6. EXTRAORDINARY BUSINESS AUTHORISED TO BE TAKEN UNDER STANDING ORDER NUMBER 2.5.1 3 7. QUESTIONS IN ACCORDANCE WITH STANDING ORDER NUMBER 4.1 3 8. INTERIM MANAGEMENT REPORT FOR THE YEAR ENDED 30 JUNE 2009 (see Appendix "A'J 4 9. ANNUAL REPORT FOR THE YEAR ENDED 30 JUNE 2009 (see Appendix "B'J 6 10. CONSIDERATION OF URGENT BUSINESS AS AUTHORISED UNDER ITEM 5 8 11. STANDING ORDERS - EXCLUSION OF THE PUBLIC FROM THE MEETING 9 12. UPDATE REPORT FROM CHIEF ADVISOR RISK AND ASSURANCE - AS AT SEPTEMBER 2009 (see Appendix "C'J 10 13. RESOLUTION REQUIRED TO DETERMINE WHICH, IF ANY, RESOLUTION(S) PASSED DURING THE EXCLUSION OF THE PUBLIC CAN BE RESTATED AFTER RE-ADMISSION OF THE PUBLIC TO THE MEETING 11 14. STANDING ORDERS - RE-ADMISSION OF THE PUBLIC TO THE MEETING 11 15. RESOLUTION(S) OF THE COMMITTEE ARISING FROM DELIBERATIONS DURING THAT PART OF THE MEETING FROM WHICH THE PUBLIC WAS EXCLUDED WHICH PURSUANT TO RESOLUTION(S) PASSED UNDER ITEM 13 CAN NOW BE MADE PUBLIC TO BE RESTATED 12 AUDIT AND RISK SUB-COMMITTEE MEETING -17 SEPTEMBER 2009 1 1. APOLOGIES IN ACCORDANCE WITH STANDING ORDER NUMBER 2.10 Councillors are reminded to contact the Committee Advisor prior to the meeting to tender their apologies for absence and lateness. 2. CONFIRMATION OF MINUTES RECOMMENDATION That the minutes of the Audit and Risk Sub-Committee meeting dated 18 June 2009 (Minute Numbers AR/JUN/715/09 to AR/JUN/724/09 inclusive) be signed as a correct record of the proceedings at that meeting. 2 AUDIT AND RISK SUB-COMMITTEE MEETING -17 SEPTEMBER 2009 3. PRECEDENCE OF BUSINESS IN ACCORDANCE WITH STANDING ORDER NUMBER 2.6.1 Councillors are reminded of Standing Order 2.6.1 which states: "Notwithstanding anything to the contrary contained in these Standing Orders, and after the confirmation of the minutes of the previous meeting, the presiding member as a matter of urgency, or the Council or committee, as the case may be, on a motion duly passed without debate, may accord precedence to any business set down on the agenda for consideration. " RECOMMENDATION That the order of items in this agenda be confirmed. 4. CHAIRPERSON'S ANNOUNCEMENTS The Chairperson will make any necessary announcements. 5. URGENT BUSINESS AUTHORISED TO BE TAKEN UNDER STANDING ORDER NUMBER 2.5 If members or officers identify any items the Chairperson should use the following recommendation: RECOMMENDATION That pursuant to the Local Government Official Information and Meetings Act 1987 the following matter/s be approved by the Audit and Risk Sub-Committee as urgent business to be considered later in this agenda (under item 10) for the following reasons: 1. Subject: 2. Reasons: (a) why any such item/s is/are not on the Agenda; (b) why discussion cannot be delayed until the next meeting of the Audit and Risk Sub-Committee. AUDIT AND RISK SUB-COMMITTEE MEETING - 17 SEPTEMBER 2009 3 6. EXTRAORDINARY BUSINESS AUTHORISED TO BE TAKEN UNDER STANDING ORDER NUMBER 2.5.1 Pursuant to the Local Government Official Information and Meetings Act 1987 the following matter/s be approved by the Sub-Committee. 1. The item/s may be discussed at this meeting if: (a) The item/s is/are a minor matter/s relating to the general business of the local authority; and (b) The Chairperson explains at the beginning of the meeting, at a time when it is open to the public, that the item will be discussed at the meeting; but 2. No resolution, decision, or recommendation may be made in respect of the item/s except to refer it/them to a subsequent meeting of the local authority for further discussion. RECOMMENDATION That pursuant to Local Government Official Information and Meetings Act 1987 the following matter/s be reported to a subsequent meeting of the Committee. 7. QUESTIONS IN ACCORDANCE WITH STANDING ORDER NUMBER 4.1 Questions sheets are tabled for your convenience. Councillors are reminded of Standing Order No. 4.1.2, which states: "Before putting a question, a member shall, in the first instance, endeavour to obtain the relevant information from the appropriate Council employee or the Chairperson of the committee concerned. In the event of the information sought not being forthcoming, or the member not being satisfied with the answer, the member then has the right to raise the matter by way of a question at an ordinary meeting of Council, provided that the Mayor may refer a question to an appropriate committee. JJ RECOMMENDATION That the question/s be received and referred to the appropriate Committee or Sub-Committee for a response. 4 AUDIT AND RISK SUB-COMMITTEE MEETING - 17 SEPTEMBER 2009 8. INTERIM MANAGEMENT REPORT FOR THE YEAR ENDED 30 JUNE 2009 (see Appendix (~'J Portfolio Area All Significance of Decision Internal Procedure Reporting Unit Finance Reporting Officer Ross Chirnside, Group Manager Financial Control Ward Citywide SUMMARY Audit New Zealand has completed the interim audit and issued their Interim management report for the year ended 30 June 2009 (see Appendix "A"). The Interim management report has been reviewed and management comments added in consultation with the relevant Council officers. The report covers the following areas: (l) Audit progress to date. (li) Assessment of the management control environment. (iii) Significant issues arising out of the interim audit. Audit Progress to date The following significant areas were covered during the interim audit: (i) Management control environment. (ii) Review of the information systems control environment. (iii) Review of compliance with significant legislation. (iv) Review of systems of internal controls. (v) Sensitive expenditure testing. Audit New Zealand will update and complete testing in respect of the above matters during their final audit in September 2009. Management Control Environmental Audit New Zealand found that there is a sound management control environment and effective financial management processes in place. As part of their audit they considered the overall attitude, awareness and actions of the Council and management in establishing and maintaining effective management procedures and internal controls. The following factors were taken into account: (i) The Council's budgeting, monitoring and forecasting procedures are sufficiently robust for Audit New Zealand to place reliance on them. (ii) Key controls are in place with regard to the expenditure, payroll, receipting and general ledger reconciliation systems. Legislative Compliance No breaches of significant legislation were identified during the audit. AUDIT AND RISK SUB-COMMITTEE MEETING -17 SEPTEMBER 2009 5 8. Continued Significant Issues Audit New Zealand brought the following issues to our attention where there is opportunity for improvement. The items raised following key internal control systems were: (i) Review of property, plant and equipment (PPE) reconciliations on a timely basis, evidenced by signing and dating. (ii) Lack of supporting documentation that is, appropriate GST invoices on some entertainment and senior management expenditure. The issues raised from Information systems review were: (i) Password settings did not conform to good security practice as well as council's "Password and Authentication Policy". (ii) Use of generic accounts within PeopleSoft reducing traceability to a specific person. (iii) Failure to promptly remove remote access privileges specially of third parties. (iv) Windows audit policy settings do not conform to windows recommended settings. (v) Regular on-site inspection of the data centre. (vi) Ensuring that all user acceptance testing forms were filed. RECOMMENDATION That the Interim management report be received. 6 AUDIT AND RISK SUB-COMMITTEE MEETING - 17 SEPTEMBER 2009 9. ANNUAL REPORT FOR THE YEAR ENDED 30 JUNE 2009 (see Appendix "B") Portfolio Area All Significance of Decision Internal Procedure Reporting Unit Finance Reporting Officer Ross Chirnside, Group Manager Financial Control Ward Citywide SUMMARY At the Accountability and Performance Committee meeting on 28 July 2009, the annual financial results were presented to the Committee. Subsequent to that meeting, the following adjustments have been made to these financial results: ($'000) Operating Surplus (as reported) 25,761 Adjustments Prior period depreciation reversed 2,996 Joint Venture entries to align with final accounts (194) Rates penaltv end of year adlustrnent done in Hansen (190) 2,612 Revised Operating Surplus 28,373 Less non cash accounting adjustments Fair value of interest rate swaps (including 2008 reversal) (7,452) Fair value of loans (7,458) Fair value of investment property (2,540) (17,450) Surplus before tax 10,923 Tax Provision (308) Surplus after tax 10,615 Prior period depreciation charge incorrectly accounted for this financial year has been reversed. The joint venture final accounts alignment and the rates penalty adjustment brings the operating surplus to $28 million. The revaluation of the debt and financial instruments (swaps) and investment property are technical accounting adjustments required to ensure that our accounts reflect the current or fair value of these items. These are non cash transactions and are accounting requirements following the adoption of International Financial Reporting Standards. Audit New Zealand commenced the final audit of the draft annual report on 7 September 2009. An update on any issues will be provided at the meeting and Francis Caetano from Audit New Zealand will be in attendance at the meeting to answer any questions. Any major changes will be reported to the Council meeting on 24 September 2009 where Council will adopt its annual report. Council officers are continuing to review the annual report and where appropriate improve the content of the report prior to the statement of compliance and responsibility and Management letter of representation being signed by His Worship the Mayor and Chief Executive Officer following approval at the Council meeting of 24 September 2009. AUDIT AND RISK SUB-COMMITTEE MEETING -17 SEPTEMBER 2009 7 9. Continued A copy of the draft annual report and the draft Management representation letter has been circulated separately to committee members. All Councillors may access this document which is available on n:/corpdev/demoserv/comsec/committee/Audit&Risk2009. The draft Management representation letter needs to be finalised specifically paragraphs 49 and 50 based on any Audit New Zealand findings. Attached as Appendix "B" is the proposed letter of representation to be signed by His Worship the Mayor, the Chief Executive Officer and the Director Finance. It should be noted that all other members of the Executive Leadership Team are required to sign an abbreviated copy of this statement. RECOMMENDATION 1. That the Annual Report for the year ended 30 June 2009 be approved. 2. That His Worship the Mayor and Chief Executive Officer sign the Statement of Compliance and Responsibility for the annual report on behalf of the council. 3. That His Worship the Mayor, the Chief Executive Officer and the Director Finance sign the letter of representation for the year ended 30 June 2009. RECOMMENDATION To COUNCIL That the Annual Report for the year ended 30 June 2009 be adopted. 1.0 Annual Report - Timetable for Completion Approval annual report for year Audit and Risk 17 September 2009 ended 30 June 2009. Committee Sign statement of compliance HWM, CEO and Director 24 September 2009 and responsibility letter of Finance representation. Sign audit report. Audit New Zealand 24 September 2009 Adopt annual report. Council 24 September 2009 Send adopted annual report to Council Officers 25 September 2009 design company. Publish annual report and Council Officers 23 October 2009 summary on Council website. Send copies of annual report to Council Officers 23 October 2009 interested parties and those listed in Local Government Act. Produce summary annual Council Officers 26 October 2009 report in Manukau Matters. 8 AUDIT AND RISK SUB-COMMITTEE MEETING -17 SEPTEMBER 2009 10. CONSIDERATION OF URGENT BUSINESS AS AUTHORISED UNDER ITEM 5 Pursuant to Standing Order 1.10.7, issues dealt with under this item will be a "Recommendation to Council". AUDIT AND RISK SUB-COMMITTEE MEETING - 17 SEPTEMBER 2009 9 PUBLIC COPY EXCLUDES PAGES 10·11 11. STANDING ORDERS - EXCLUSION OF THE PUBLIC FROM THE MEETING RECOMMENDATION That the public be excluded from the following parts of the proceedings of this meeting namely: Item 12 UPDATE REPORT FROM CHIEF ADVISOR RISK AND ASSURANCE - AS AT SEPTEMBER 2009 Item 13 DETERMINATION OF RESTATEMENT Item 14 STANDING ORDERS - RE-ADMISSION OF THE PUBLIC The general subject 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(1) 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 UPDATE REPORT FROM CHIEF considered: ADVISOR RISK AND ASSURANCE - AS AT SEPTEMBER 2009 Reason for passing this resolution in The protection of the interests mentioned relation to each matter: below. Ground(s) under section 48(1) for the Item 13 - Section 7 of the Local passing of this resolution: Government Official Information and Meetings Act 1987. The particular interest or interests protected by Section 7 of the Local Government Official Information and Meetings Act 1987 which would be prejudiced by the holding of the whole (or relevant part) of the proceedings of the meeting in public are as follows: Item 13 • Section 7 (2) (c) (ii) To protect information which is subject to an obligation of confidence or which any person has been or could be compelled to provide under the authority of any enactment, where the making available of the information would be likely otherwise to damage the public interest. After this resolution is passed the Chairperson will announce: "THE PUBLIC IS NOW EXCLUDED FROM THE MEETING". Members of the public in attendance must then leave the meeting. 10 AUDIT AND RISK SUB-COMMITTEE MEETING - 17 SEPTEMBER 2009 CONFIDENTIAL - NOT FOR PUBLICATION 12. UPDATE REPORT FROM CHIEF ADVISOR RISK AND ASSURANCE - AS AT SEPTEMBER 2009 (see Appendix "C'? AUDIT AND RISK SUB-COMMITTEE MEETING -17 SEPTEMBER 2009 11 CONRDENnAL-NOTFORPUBL~AnON 13. RESOLUTION REQUIRED TO DETERMINE WHICH, IF ANY, RESOLUTION(S) PASSED DURING THE EXCLUSION OF THE PUBLIC CAN BE RESTATED AFTER RE-ADMISSION OF THE PUBLIC TO THE MEETING 14. STANDING ORDERS - RE-ADMISSION OF THE PUBLIC TO THE MEETING 12 AUDIT AND RISK SUB-COMMITTEE MEETING -17 SEPTEMBER 2009 15. RESOLUTION(S) OF THE COMMITTEE ARISING FROM DELIBERATIONS DURING THAT PART OF THE MEETING FROM WHICH THE PUBLIC WAS EXCLUDED WHICH PURSUANT TO RESOLUTION(S) PASSED UNDER ITEM 13 CAN NOW BE MADE PUBLIC TO BE RESTATED RECOMMENDATION That the resolutions only passed under Item 13 be hereby restated.