Audit & Risk Committee Meeting

(Posted on: August 10)

This week the committee met to discuss the fourth quarter report, insurance loss modelling on our infrastructure and a key risk assessment that will be used for internal audit purposes.

Fourth Quarter Report to 30 June 2018

The purpose of this was to provide a summary to 30 June 2018 of the Council’s performance against the 2017/18 Annual Plan.

Our quarterly governance reports provide interim updates towards end of year results to be published in the Annual Report 2017/18. The Annual Report accounts for how Council performed against the 2017/18 Annual Plan and the non-financial measures included in the third year of the 2015-25 Long Term Plan. The reports summarise Council’s financial performance, progress on capital projects, levels of service performance and reasons for significant differences from what was planned.

The Committee resolved that they received the Fourth Quarter Report and the Capital Expenditure

Insurance Loss Modelling

The purpose of this report was to seek Audit and Risk Committee approval to undertake loss modelling on the Manawatū District Council, three waters (sewer, water and stormwater) infrastructure.

Manawatū District Council (MDC) three water infrastructure, has an insured replacement value of $297,000,000. MDC insures these assets by way of a group “Infrastructure” insurance cover. The group cover is through MWLASS and involves Tararua, Ruapehu, Wanganui, Rangitikei and Horowhenua District Councils. This cover is for Natural Disasters such as earthquake and flooding.

The method for determining the impacts on the infrastructure under different disaster scenarios is called Probable Maximum Loss Analysis (PMLA).

To undertake a PMLA makes good business sense. It would allow Council to analyse accurately the maximum probable loss of the three waters infrastructure under a number of natural disaster scenarios. This in turn would allow Council to make an informed decision on the appropriate amount of insurance cover required.

That the Audit and Risk Committee resolved that:

  1. That the Council accepts the AON Earthquake Hazard – Probable Maximum Loss Estimate Analysis, proposal dated 17 July 2018.
  2. That the Council approves $50,000 (GST excl.) of unbudgeted finance to be funded from reserves, to cover the cost of the Earthquake Hazard – Probable Maximum Loss Estimate Analysis.

Key Risks – Assessment of Treatments and Controls

The purpose of this report was to present to the Audit and Risk Committee an assessment of the current controls and treatments being used for the key risks that could impact on Manawatū District Council (MDC) achieving its objectives.

MDC has begun a process of maturing its risk management practice. It has developed a Risk Register for Health and Safety specific risks. It complies with WorkSafe New Zealand Health and Safety risk register practices. This aids compliance with the Health and Safety Act (2015) and contributes to better Health and Safety practices for MDC staff and Manawatū District citizens.

To overcome earlier risk identification limitations, another round of risk identification included reviewing:

  • Draft Long Term Plan 2018-2028 and its Asset Management Plans;
  • Health & Safety Risk Register;
  • Key Project Status Report Risks; and
  • Conducting interviews with key staff.

The last update of the Corporate Risk Register Database occurred in the first half of 2018 with the development of the Long Term Plan 2018-2028 and its associated Asset Management Plans. These documents have utilised the MDC Risk Framework and the quality of risk data has been improved. The process of Key Project Status Reports is identifying risks for the delivery of key projects. These risks have been added to the Corporate Risk Register Database.

All identified risks have been categorised according to risk appetite impact. This process has increased the number of risks identified from 218 risks to 346 risks and more categories of risk have been included in the identification process. The key risks identified in 2017 remain and two new key risks were identified and added to the Corporate Risk Register.

The committee resolved that the report “Key Risks – Assessment of Treatments and Controls” is to be used as an input in the update of the Internal Audit Work Programme.

Click here to read the full Audit and Risk Agenda.