Agenda of Audit & Risk Committee meeting - Wednesday, February 19, 2025

Chairperson	Independent (to be appointed)
Deputy chairperson	Cr Steve Morris
Members	Deputy Mayor Jen Scoular Mayor Mahé Drysdale (ex officio)
Non-voting members	(if any)
Quorum	Half of the members present, where the number of members (including vacancies) is even; and a majority of the members present, where the number of members (including vacancies) is odd.
Meeting frequency	Five weekly

Role

The role of the Audit and Risk Committee is:

· To assist and advise the Council in discharging its responsibility and ownership of health and safety, risk management, internal control, and financial management practices, frameworks and processes to ensure that these are robust and appropriate to safeguard the Council’s staff and its financial and non-financial assets.

Scope

· Oversee Council’s relationship with the external auditor.

· Review with the external auditor, before the audit commences, the areas of audit focus and the audit plan.

· Review with the external auditor, representations required by elected representatives and senior management for the purposes of the audit.

· Receive and review the external auditor’s report on the audit and management’s responses to any issues raised.

· Make any recommendations necessary to the Office of the Auditor-General regarding the appointment or re-appointment of an external auditor.

· Review and approve an annual internal audit plan, including the integration of that plan with Council’s risk profile, and monitor the implementation of that plan.

· Review the reports of the internal audit function, in particular considering findings, conclusions, and recommendations and management’s response to such. Make any recommendations to Council on such as the Committee considers appropriate.

· Review, approve and monitor the implementation of Council’s Risk Management Policy, including regular review of the corporate risk register.

· Review reporting of new or emerging risks as needed.

· Review the effectiveness of risk management and internal control systems including all material financial, operational, compliance, and other managerial controls.

· Review the effectiveness of health and safety policies and processes to ensure a healthy and safe workplace for representatives, staff, contractors, visitors and the public.

· Assist elected representatives and the Chief Executive to discharge their statutory roles as 'officers' in terms of the Health and Safety at Work Act 2015.

· Monitor compliance with laws and regulations as appropriate.

· Review and provide advice on policies relevant to the Committee’s role including, but not limited to, policies addressing fraud, protected disclosures, and conflicts of interest.

· Review and monitor policy and processes to manage responsibilities under the Local Government Official Information and Meetings Act 1987 and the Privacy Act 2020 and any actions from any Office of the Ombudsman's report.

· Review and monitor current and potential litigation and other legal risks.

Power to Act

· To make all decisions necessary to fulfil the role, scope and responsibilities of the Committee subject to the limitations imposed.

· To establish sub-committees, working parties and forums as required.

Power to Recommend

· To Council and/or any standing committee as it deems appropriate.

Audit & Risk Committee meeting Agenda

19 February 2025

8 Business

8.1 Audit NZ Final Audit Results

File Number: A16452935

Author: Sheree Covell, Treasury & Financial Compliance Manager

Authoriser: Paul Davidson, Chief Financial Officer

Purpose of the Report

1. The purpose of this report is to present Audit New Zealand’s (Audit NZ) report to the Council on the audit of Tauranga City Council (TCC) for the year ended 30 June 2024. The Audit NZ report sets out findings from the annual audit and draws attention to areas where the Council is doing well and where improvements can be made.

Recommendations

That the Audit & Risk Committee:

(a) Receives the report "Audit NZ Final Audit Results".

Executive Summary

2. Audit NZ has completed its audit of Tauranga City Council for the year ended 30 June 2024.

3. The attached audit report outlines matters identified during the audit, makes recommendations and includes staff comments on these recommendations. An update on matters identified during previous audits is also included.

4. There are no significant risks to be brought to this Committee’s attention, however a summary of all new matters has been included in the background section of this report.

Background

5. Audit New Zealand has completed its audit of TCC for the year ended 30 June 2024. An unmodified opinion was given for the adoption of the 2023 Annual Report on 29 October 2024.

6. The audit report outlines matters identified during the audit, makes recommendations and includes Council comments on these recommendations. An update on matters identified during the previous audit is also provided.

7. Audit New Zealand provides recommendations for improvement and prioritises these as urgent, necessary, or beneficial. The report also reviews earlier recommendations and notes whether these have been addressed by TCC.

8. There were three new recommendations made by audit, two of which are deemed necessary and one beneficial. These are detailed below.

New Recommendation #1: Obtain independent external accounting advice as early as possible when considering unique contractual arrangements.

9. TCC has entered into several contracts in the past several years which have required complex and considered application of accounting standards. This includes the creation of a CCO that owns the land for the development of Te Manawa o Te Papa, the sale of the Marine Precinct and the sale and lease back of the civic admin building. While the TCC in-house financial accounting team have the expertise and experience to account for these transactions, Audit NZ has required independent accounting advice to ensure the treatment is correct and fairly presented. This does come at a cost above the audit fee so TCC staff will only seek independent advice on future complex transactions that are significant in value.

New Recommendation #2: Annual provision of the detailed contract information for recent infrastructure projects.

10. The complexity and quantum of asset values and subsequent revaluations has increased significantly in recent years. This year Audit NZ requested additional information to be provided by our valuers and asset management teams to assist in the audit of the revaluations. This will be an ongoing requirement which TCC have agreed to.

New Recommendation #3: Consider if CCOs can be assisted to meet their statutory deadlines.

11. TCC’s newest CCOs have not yet had an auditor appointed by the Auditor General and Bay Venues Limited statutory reporting requirements changed as a result their higher expenditure resulting in a change in the applicable accounting standards tier. The TCC finance team work closely the CCOs and we note that the Annual Reports are being prepared in a timely manner but market for auditors still remains constrained and beyond the control of TCC.

Prior Year Recommendations

12. There are seven recommendations from prior years all of which continue to be monitored and worked on. The detail and TCC staff comments are on pages 25-28 of the audit report. Staff continue to work on solutions for these recommendations but consider them of a low risk to the organisation.

Statutory Context

13. The audit report is part of the processes of Financial Accounting and reporting set out under the Local Government Act 2002.

Options Analysis

14. There are no options presented in this report.

Financial Considerations

15. The costs associated with the additional revaluation information request will be absorbed into exiting budgets, however the request to obtain independent accounting advice cannot be quantified until the nature of any future transactions is known. The cost of independent accounting advice for the 2024 financial year was $30k.

Legal Implications / Risks

16. There are no specific legal implications or risks directly as a result of this report. Consultation / Engagement

Significance

17. The Local Government Act 2002 requires an assessment of the significance of matters, issues, proposals and decisions in this report against Council’s Significance and Engagement Policy. Council acknowledges that in some instances a matter, issue, proposal or decision may have a high degree of importance to individuals, groups, or agencies affected by the report.

18. In making this assessment, consideration has been given to the likely impact, and likely consequences for:

(a) The current and future social, economic, environmental, or cultural well-being of the district or region.

(b) Any persons who are likely to be particularly affected by, or interested in, the matter.

19. In accordance with the considerations above, criteria and thresholds in the policy, it is considered that the matter is of low significance.

ENGAGEMENT

20. Taking into consideration the above assessment, that the matter is of low significance, officers are of the opinion that no further engagement is required prior to Council making a decision.

Next Steps

21. Council will continue to work through recommendations for improvement in our processes and reporting.

Attachments

1. Audit NZ - TCC Report to Governors 2024 - Final - A17330700 ⇩

Audit & Risk Committee meeting Agenda

19 February 2025

8.2 Audit & Risk Committee Proposed Forward Work Plan

File Number: A17424884

Author: Chris Smith, Risk & Business Continuity Advisor

Authoriser: Alastair McNeil, General Manager: Corporate Services

Purpose of the Report

1. The purpose of this report is to introduce risk and risk management practices undertaken by Tauranga City Council (TCC), and an outline a proposed forward-looking work plan for consideration.

Recommendations

That the Audit & Risk Committee:

(a) Receives the report "Audit & Risk Committee Proposed Forward Work Plan".

(b) Approves the draft forward work plan.

Executive Summary

2. The forward work plan is designed to align activities with organisational goals, address emerging risks, and ensure compliance with best practices in public sector governance:

a) A key recommendation is to conduct regular, in-depth reviews of critical risks through workshops with subject matter experts. These deep dives provide valuable insights to ensure risks are appropriately managed in a dynamic evolving environment.

b) A clear definition of the Council’s risk appetite is essential to balance innovation and risk management, promote accountability and transparency. Establishing this framework supports effective decision-making and enhances public safety.

c) The Office of the Auditor General emphasises the importance of appointing an independent chair for the committee to reinforce governance, objectivity, and accountability. Until an independent chair is appointed, the committee may consider delaying discussions on defining the Council’s risk appetite to ensure alignment with best practices and expert guidance.

Background

3. The forward work plan, guided by an independent chair, is focused on aligning activities with organisational goals, addressing emerging risks, and ensuring compliance with best practices in public sector governance. It is recommended deep dives on Council’s critical risks are conducted on a regular basis through workshops with subject matter experts. The overarching purpose of deep dives is to give the committee insight into whether a risk is being managed appropriately. To note, as councils operate in a complex environment the forward work plan needs to be flexible, agile, and responsive to changing environments:

a) Risk appetite, as set by resolution of Council (refer Risk Policy, 5.2.1), should be set during strategic planning processes, reviewed regularly, and updated when there are significant changes to legislation, community priorities, or the Council’s operational environment, at a minimum each triennium. It involves defining the level and type of risk the Council is willing to accept to achieve strategic objectives while ensuring the safety of public assets and services. By establishing a clear risk appetite, the committee provides a framework for decision-making, enabling the Council to balance innovation and risk management effectively. This promotes accountability, transparency, and alignment with best governance practices, ensuring risks are managed appropriately while pursuing council priorities.

b) The Office of the Auditor-General (OAG) recommends appointing an independent Chair for the Audit and Risk Committee to strengthen governance, impartiality, and oversight. An independent chair brings objectivity, enhances accountability, and ensures the committee affectively addresses critical areas such as financial reporting, risk management, and internal controls. In line with best practice, the chairperson holds a critical role through sharing their subject matter expertise with the committee to enable members to effectively discharge their responsibilities. The committee may choose to wait until an independent chair is appointed to facilitate the discussion on setting a risk appetite.

Statutory Context

4. Effective risk management contributes to improved management systems, and informed-decision-making.

STRATEGIC ALIGNMENT

5. This contributes to the promotion or achievement of the following strategic community outcome(s):

	Contributes
We are an inclusive city	ü
We value, protect and enhance the environment	ü
We are a well-planned city	ü
We can move around our city easily	ü
We are a city that supports business and education	ü

6. Identified TCC risks have impacts on, at differing levels, each of the community outcomes, and therefore on TCC organisational activity. Regular review and assessment of our risk management processes helps better understand and manage key organisational and city risks.

Options Analysis

7. There are no specific options for this meeting to consider in respect of this report, although direction may be given in respect of the forward work plan.

Financial Considerations

8. Not applicable

Legal Implications / Risks

9. Not applicable

Consultation / Engagement

10. Risk analysis is an integral part of developing the Long-Term Plan and Annual Plan which are consulted upon with community to align with their needs and expectations. As the Audit and Risk Committee work plan focuses on internal process to ensure effective governance and risk management, community consultation is not required in this instance.

Significance

11. The Local Government Act 2002 requires an assessment of the significance of matters, issues, proposals, and decisions in this report against Council’s Significance and Engagement Policy. Council acknowledges that in some instances a matter, issue, proposal or decision may have a high degree of importance to individuals, groups, or agencies affected by the report.

12. In making this assessment, consideration has been given to the likely impact, and likely consequences for:

(a) The current and future social, economic, environmental, or cultural well-being of the district or region.

(b) Any persons who are likely to be particularly affected by, or interested in, the matter.

In accordance with the considerations above, criteria and thresholds in the policy, it is considered that the matter is of high significance, however the decision proposed in this report is of low significance.

ENGAGEMENT

13. Taking into consideration the above assessment, that the matter is of low significance, officers are of the opinion that no further engagement is required prior to Council making a decision.

Next Steps

14. Regular workshops will be planned involving subject matter experts to review and analyse the Council’s critical risks (deep dives):

(a) The setting of workshop to develop a clear and comprehensive risk appetite framework will be prioritised in line with direction.

15. The forward workplan will remain adaptable to emerging risks and changing environments.

Attachments

1. Audit & Risk Committee - Proposed Work Plan to June 2026 - A17430246 ⇩

Audit & Risk Committee meeting Agenda

19 February 2025

8.3 Insurance Update

File Number: A17098545

Author: Frazer Smith, Manager: Strategic Finance & Growth

Kat Mills, Financial Accountant

Authoriser: Paul Davidson, Chief Financial Officer

Purpose of the Report

1. This report presents the current insurance holdings for Tauranga City Council for the period from 1 November 2024 to 1 November 2025.

Recommendations

That the Audit & Risk Committee:

(a) Receives the report "Insurance Update".

Executive Summary

2. Tauranga City Council’s annual insurance renewal programme has been completed for the 2024/2025 period.

3. There have been significant increases in premiums over the last few years. These increases have been driven both by a tight inflation market and significant increases in the values of insurable assets. While material damage markets have started to ease (not for Professional Indemnity), asset price increases are still driving inflation increases.

4. Council have had a significant modelling exercise completed (not finalised) that confirms that our underground cover is sufficient at $380M. A similar exercise is likely to commence for rest of BOPLASS Councils.

Background

5. Insurance is a key plank in Council’s risk mitigation strategy. Insurance enables some of Council’s residual risks to be passed to another entity.

6. Insurance is a global market with a very small number of large organisations. Premiums are largely set on an international basis.

7. Tauranga City Council’s insurance is arranged through a broker, currently Aon, who is appointed through a tender process for BOPLASS Councils’.

8. Insurance is renewed from the first of November each year.

9. Council holds cover around:

(a) organisational activities;

(b) asset protection;

(d) business continuity/interruption.

10. Council also provides insurance services to our CCO’s, Bay Venues Ltd and Tauranga Art Gallery, with costs recovered via invoicing.

11. Insurance information is available in the annual report:

(a) Insurance expense – Other Operating Expenses Note (pg. 273 in 2024
Annual Report), and

(b) Asset values – Property, Plant & Equipment Note (pg. 306 in 2024 Annual Report).

12. Three Waters Assets contributes approximately 40% of the total insurance premium.

13. The below graphs present year on year change in the total insurance values and the percentage increases:

(a) Premiums,

(b) Replacement cost of Assets (NB replacement costs for 2024/25 have not yet been updated as asset valuations are in progress),

(c) Carrying Amount of Assets, (NB Carrying amounts for 2024/25 have not yet been updated as asset valuations are in progress),

(d) Insured Amount of Assets. (NB for underground assets this has stayed the same ($380M) even though the value and number of assets has increased).

14. Recent Issues in Insurance

(a) Market

(i) Material Damage - Recently the global insurance market has faced increasing pressures (multiple global events in short period of time), which meant that insurance was more difficult to obtain, and what was available was more expensive. The most recent renewal saw a lessening in these pressures on the market, and therefore a decline in premiums rates but Council’s increase in asset holdings outweighed the small gain in premiums.

(ii) General Liability & Indemnity (Including building consents) – these types of insurance are more difficult to obtain and maintain, and therefore the pricing pressures on these types continue to increase.

(b) New Limits to Claims

(i) Building Claims under Primary Policy Layer of Professional Indemnity have been limited to a total of $45m in any policy period, across the 37 Councils in New Zealand (excludes Auckland and Wellington). Tauranga City Council has participated in a secondary layer which will cover claims in excess of $15m, up to a joint limit to $145m.

(i) Tauranga City Council has undertaken a review with Aon and Tonkin & Taylor, of the probable loss for these assets, the final report is still pending, but we have been given assurance that our current limit is sufficient. The review and report is based upon the most recent seismic survey pronouncements.

(ii) BOP LASS as a whole is to undertake a similar review to ensure the total loss limit of $500m is appropriate.

(iii) Taupo District Council has recently joined the BOP LASS Underground Infrastructure Assets Policy (previously they were self-insuring) but Taupo District Council held other BOP LASS Group policies.

(d) Riskpool, is a now defunct mutual liability entity created by Councils in the 1990s, which is no longer in operation. Council has been notified of a likely call in March 2025 (Tauranga City Council portion estimated to be less than $100k).

Statutory Context

15. Effective risk management contributes to improved management systems, and informed-decision-making.

STRATEGIC ALIGNMENT

16. This contributes to the promotion or achievement of the following strategic community outcome(s):

	Contributes
We are an inclusive city	ü
We value, protect and enhance the environment	ü
We are a well-planned city	ü
We can move around our city easily	ü
We are a city that supports business and education	ü

17. Insurance provides Tauranga City Council with the capability to continue to operate and recover quickly in the event of natural disaster, which impacts on community outcomes, and Council’s overall organisational activity.

Options Analysis

18. There are no options presented in this report.

Financial Considerations

19. There are no specific financial implications directly associated with this report.

Legal Implications / Risks

20. There are no specific legal implications or risk directly as a result of this report.

Consultation / Engagement

21. Community consultation is not deemed necessary for this report.

Significance

22. The Local Government Act 2002 requires an assessment of the significance of matters, issues, proposals and decisions in this report against Council’s Significance and Engagement Policy. Council acknowledges that in some instances a matter, issue, proposal or decision may have a high degree of importance to individuals, groups, or agencies affected by the report.

23. In making this assessment, consideration has been given to the likely impact, and likely consequences for:

(a) the current and future social, economic, environmental, or cultural well-being of the district or region

(b) any persons who are likely to be particularly affected by, or interested in, the matter.

24. In accordance with the considerations above, criteria and thresholds in the policy, it is considered that the matter is of medium significance; however, the decision proposed in this report is of low significance.

ENGAGEMENT

25. Taking into consideration the above assessment, that the matter is of low significance, officers are of the opinion that no further engagement is required prior to Council making a decision.

Next Steps

26. Council will continue to work with BOPLASS for insurance.

Attachments

1. Insurance Desk File - January 2025 - A17432026 ⇩

Audit & Risk Committee meeting Agenda

19 February 2025

10 Public excluded session

Resolution to exclude the public

Recommendations

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
10.1 - Digital/Cyber Risk Presentation	s7(2)(a) - The withholding of the information is necessary to protect the privacy of natural persons, including that of deceased natural persons s7(2)(b)(i) - The withholding of the information is necessary to protect information where the making available of the information would disclose a trade secret	s48(1)(a) - 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
10.2 - Internal Audit & Assurance - Quarterly Update	s7(2)(j) - The withholding of the information is necessary to prevent the disclosure or use of official information for improper gain or improper advantage	s48(1)(a) - 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
10.3 - Risk Register - Quarterly Update	s7(2)(j) - The withholding of the information is necessary to prevent the disclosure or use of official information for improper gain or improper advantage	s48(1)(a) - 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


AGENDA Audit & Risk Committee meeting Wednesday, 19 February 2025
I hereby give notice that a Audit & Risk Committee meeting will be held on:
Date:	Wednesday, 19 February 2025
Time:	9.30am
Location:	Tauranga City Council Chambers Ground Floor Meeting Room 306 Cameron Road Tauranga
Please note that this meeting will be livestreamed and the recording will be publicly available on Tauranga City Council's website: www.tauranga.govt.nz.
Marty Grenfell Chief Executive