Minutes of Audit and Risk Committee

Audit and Risk Committee - 12 June 2020 - Open Minutes

Agenda Items

1. Wastewater Outfall Report

Type of Report:	Legal and Operational
Legal Reference:	Resource Management Act 1991
Document ID:	933764
Reporting Officer/s & Unit:	Catherine Bayly, Manager Asset Strategy Cameron Burton, Manager Environmental Solutions

1.1 Purpose of Report

To provide the Audit and Risk Committee with an update on the Wastewater Outfall, noting a similar report has gone to Council to:

· inform Council of an update to the status of the Awatoto Submarine Wastewater Outfall which conveys treated wastewater to the Pacific Ocean, and to;

· enable decisions to be made to bring forward funding for an expedited repair, renewal or replacement of the outfall structure.

At the Meeting

The Manager Environmental Solutions spoke to the report and provided a brief overview, noting the following:

· At the last inspection of the wastewater outfall, two areas of leakage were identified. The most difficult of which is 700m offshore.

· Council has been monitoring the leakages for a period of time and staff had ascertained that they pose very low risk to the environment.

· Council had previously been encouraged by Hawke’s Bay Regional Council (HBRC) to have work completed to fix the leak and HBRC have recently issued an Abatement Notice ordering Council to remedy the leak by 30 October 2020, and to have an emergency response plan in place by 30 July 2020.

· There is a high level of risk involved in attempting a repair of the leaks. Council is unable to replace the device like for like. A number of options have been considered in the Beca report, with the lowest risk being for specialist divers to remove each of the fibreglass joint parts slowly and one at a time, and use a caulking material to repair the leaking gaskets. The risk is that once they start undoing the bolts, that this may cause a breakage or warping of those parts. If that occurred this could cause a catastrophic failure of the device and potentially discharge all of the city’s wastewater at that point, 700 metres from the shore.

· There is a smaller leak slightly inshore which will be easier to fix.

· Both Council and the Māori Committee have been advised in relation to the current status of the outfall.

· Council will be holding risk workshops with specialist divers. Officers will then engage with HBRC to ensure they are aware of the risks and complications given the short timeframe afforded to remedy the leaks.

· $2M has been brought forward from reserves to address this work given the timeframe required to complete this work.

· A secondary risk is that staff are now focussed on the two particular leak points in the pipeline rather than the overarching, future-focussed works relating to improved treatment systems, contingency storage and improvements of the wastewater network as a whole.

In response to questions from the committee, the following points were clarified:

· The Abatement Notice being issued since the report was taken to Council does not change anything in this report. It was noted that HBRC have requested other works outside of the Abatement Notice.

· If Council is unable to remedy the leak by 30 October 2020 then a variation to the consent must be obtained by this date. If neither of these are achieved by that date, Council could be prosecuted.

· There are a number of factors outside of Council’s control including work being restricted to three hour windows only and subject to weather and oceanic conditions. Council is applying for a variation to the consent, however timing is dependent on HBRC’s ability to process this in time.

· There is no guarantee that the repair will be successful.

· Council officers will be as inclusive and transparent as possible with HBRC around the risks and process being followed.

Committee's recommendation

Councillor Taylor / DW Pearson

The Audit and Risk Committee:

a. Note the current status of the submarine wastewater outfall:

i. There remains some seepage of wastewater from sealing gaskets which form part of a bespoke fibreglass joint section of the subsurface outfall pipe structure;

ii. Despite efforts, staff have not been able to identify a way to quickly fix this seepage without putting the fibreglass joint at risk of rupturing;

iii. That frequent testing of the coastal waters surrounding the area of seepage continues to show de minimus environmental effect of those waters, caused by this seepage;

iv. That Hawkes Bay Regional Council (HBRC) have recently indicated (on 25 March 2020) that Council must take the following actions:
1) Undertake short-term repairs to mitigate the leak from the joint leak by 30 October 2020
2) Provide long-term options for repairing the joint in the outfall pipe by the same date (30 October 2020)

v. That HBRC have informally notified Council of their intention to pursue enforcement action against Napier City Council to cease the discharge at the joint if the timeframes above are not met.

vi. That a further leak has been discovered within 100m of the fibreglass joint. Divers have been to the site with the aim to repair and have found that this is an old repair that has been damaged by an anchor, or other, and will need an additional repair.

vii. Tight timeframes to effect a repair increases the risk associated with delivering a short-term fix, rather than facilitating long-term solutions which will provide better outcomes.

b. Officers are seeking approval by Council to:

i. Seek a variation to the current resource consent to authorise the discharge of wastewater via seepage at a position other than that currently authorised (at the fibreglass joint location);

ii. Seek early provision of funding assigned for later financial years in the Long Term Plan (LTP) to enable the strategic and planned replacement of the wastewater outfall, including better treatment options to facilitate a more highly treated wastewater in the future.

c. Note that funding to be released from Wastewater Reserves to attempt a fix of the two seepages and to start on investigation works for replacement of the outfall ($2m has been put forward in the 20/21 Annual Plan).

d. Note attempt the lowest risk repair option of the fibreglass joint to address Regional Council’s repair timelines.

e. Note the Beca Ltd Report entitled “Napier City Council – Wastewater Outfall – Issues and Options” dated 15 May 2020.

f. Note the Audit and Risk Committee may request further information in relation to this issue that they may require in order to fully understand the risk to Council and the community if not already provided in the report. This committee has the ability to provide any feedback on the risk assessment based on the preferred options presented as part of this paper and/or may any recommendation to Council.

Carried

2. Summary of Napier Water Safety Plan's Risks

Type of Report:	Operational
Legal Reference:	N/A
Document ID:	933756
Reporting Officer/s & Unit:	Catherine Bayly, Manager Asset Strategy

2.1 Purpose of Report

Purpose of this report is to bring ‘high’ and ‘very high’ risks as identified in NCC’s current version of Water Safety Plan (v4.3, updated August 2019) to Audit and Risk Committee attention and for Committee to acknowledge those risks.

At the Meeting

The Director Infrastructure Services provided a brief overview of the report noting that the intention of the report is to regularly bring the risks identified through the water safety plan to the committee’s attention.

In response to questions from the committee, the following points were clarified:

· A new consent will be required before Council can move to two operational bore fields.

· Every change made to the water safety plan is put to the drinking water assessor for their approval. Council officers work in collaboration with the drinking water assessor.

· The current report addresses inherent risks, recognising what controls might already be in place and any further corrective measures required. Council officers were requested to provide further detail around timeframes for reducing risk levels.

· A number of actions are due for completion by the end of June and officers confirmed they are on track to meet those timeframes.

ACTION: Council officers are to include details around timeframes to address the risks highlighted in this report, moving forward.

Committee's recommendation

Councillor Simpson / DW Pearson

The Audit and Risk Committee:

a. Endorse the report.

b. Note the risks identified.

Carried

3. Health and Safety Report

Type of Report:	Operational
Legal Reference:	N/A
Document ID:	933568
Reporting Officer/s & Unit:	Sue Matkin, Manager People & Capability

3.1 Purpose of Report

The purpose of the report is to provide the Audit and Risk Committee with an overview of the health and safety performance as at 30 April 2020.

At the Meeting

The Manager People and Capability spoke to the report and provided a brief update in relation to health and safety initiatives undertaken during lockdown in order to support staff during this period. It was noted that no further lost time injuries have been recorded since April.

Committee's recommendation

Councillors Simpson / Taylor

The Audit and Risk Committee:

a. Receive the Health and Safety report as at 30 April 2020

Carried

4. Draft Annual Plan 2020/21

Type of Report:	Legal
Legal Reference:	Local Government Act 2002
Document ID:	933816
Reporting Officer/s & Unit:	Caroline Thomson, Chief Financial Officer Adele Henderson, Director Corporate Services Jane McLoughlin, Corporate Planner

4.1 Purpose of Report

That the Committee review and provide feedback to Council on the Annual Plan 2020/21 underlying financial information prior to the final adoption of the reports.

At the Meeting

The Chief Financial Officer provided a brief overview of the report and tabled the updated consultation document (attached). The committee were thanked for their feedback prior to the Council meeting held on 11 June 2020. It was noted that Council adopted the consultation document and underlying information, including the proposed changes to the rates remission and rates postponement policies, and the Statement of Proposal to join the LGFA. The policies will be consulted separately but at the same time as the Draft Annual Plan.

As previously advised to the committee, the budget does not meet the balanced budget provision under section 100 of the Local Government Act 2002. As required under section 80 of the Local Government Act 2002, Council has carefully considered the unbalanced budget issue with the most financially prudent option being to reserve fund the shortfall due to the one-off nature. Council will not meet the deadline of 30 June to adopt the Annual Plan and both Audit New Zealand and the Department of Internal Affairs have been notified of this.

The Interim Chief Executive advised that following reforecasting completed between now and finalising the Annual Plan, further changes are expected due to the impacts of COVID-19.

Officer’s Recommendation

The Audit and Risk Committee:

a. Receive the underlying information as the basis for the Annual Plan 20/21:

i. Financial information

ii. 10 year revised capital plan

iii. Rates remission policy

iv. Rates postponement policy

v. Statement of Proposal to join LGFA

b. Provide feedback to Council by 9 June (via the Director of Corporate Services) to be tabled for consideration by Council at its meeting on 11 June 2020.

c. Resolve that the use reserves to fund the one-off shortfall of $6.74m anticipated in 20/21 is financially prudent and does not impact unfairly on ratepayers in the future.

d. Note that the Annual Plan 20/21 does not meet the section 100 (i) balanced budget provision of the Local Government Act, and that Council will be working towards a balanced budget for the LTP.

e. Note that Council has notified DIA and Audit NZ that it will not meet the statutory deadline of 30 June 2020 for adoption of the Annual Plan 20/21.

AMENDED MOTION

Committee's recommendation

DW Pearson / Councillor Taylor

The Audit and Risk Committee note that they have reviewed and are comfortable with the approach taken by Council in the adoption of the Draft Annual Plan and commend and note that Council has made the following resolutions:

a. Receive the underlying information as the basis for the Annual Plan 20/21:

i. Financial information

ii. 10 year revised capital plan

iii. Rates remission policy

iv. Rates postponement policy

v. Statement of Proposal to join LGFA

b. Provide feedback to Council by 9 June (via the Director of Corporate Services) to be tabled for consideration by Council at its meeting on 11 June 2020.

c. Resolve that the use reserves to fund the one-off shortfall of $6.74m anticipated in 20/21 is financially prudent and does not impact unfairly on ratepayers in the future.

d. Note that the Annual Plan 20/21 does not meet the section 100 (i) balanced budget provision of the Local Government Act, and that Council will be working towards a balanced budget for the LTP.

e. Note that Council has notified DIA and Audit NZ that it will not meet the statutory deadline of 30 June 2020 for adoption of the Annual Plan 20/21.

Carried

5. Sensitive Expenditure - Mayor and Chief Executive

Type of Report:	Procedural
Legal Reference:	N/A
Document ID:	933218
Reporting Officer/s & Unit:	Caroline Thomson, Chief Financial Officer

5.1 Purpose of Report

To provide the information required for the Committee to review Sensitive Expenditure of the Mayor and Chief Executive for compliance with Council’s Sensitive Expenditure Policy.

At the Meeting

The Chief Financial Officer briefly spoke to the report, noting that the Mayor’s sensitive expenditure for the second quarter was also attached to the report as this had been inadvertently omitted from the previous meeting’s agenda. There was no further discussion on this item.

Committee's recommendation

Councillors Simpson / Taylor

The Audit and Risk Committee:

a. Receive the report of Sensitive Expenditure for the Mayor and Chief Executive and review for compliance with the Sensitive Expenditure Policy.

Carried

6. External Accountability - Investment and Debt Report

Type of Report:	Information
Legal Reference:	N/A
Document ID:	933511
Reporting Officer/s & Unit:	Caroline Thomson, Chief Financial Officer

6.1 Purpose of Report

To consider the snapshot report on Napier City Council’s Investment and Debt as at 30 April 2020.

At the Meeting

The Chief Financial Officer provided a brief overview of the report. There was no further discussion on this item.

Committee's recommendation

DW Pearson / Mayor Wise

The Audit and Risk Committee:

a. Receive the snapshot report on Napier City Council’s Investment and Debt as at 30 April 2020.

Carried

7. Risk Management Report June 2020

Type of Report:	Information
Legal Reference:	N/A
Document ID:	934363
Reporting Officer/s & Unit:	Adele Henderson, Director Corporate Services

7.1 Purpose of Report

To provide the Audit and Risk Committee with an update on progress with risk management work and to report on the highest paid risks.

At the Meeting

The Chief Financial Officer spoke to the report and announced that the Risk and Assurance Lead position had now been appointed, with the start date being 22 June 2020. One of the first priorities for this role will be to review the risk management framework which will be brought back to this committee.

There was no further discussion on this item.

Committee's recommendation

DW Pearson / Mayor Wise

The Audit and Risk Committee:

a. Note the Risk Management Work being undertaken by Napier City Council staff and management.

b. Note the current High risks.

c. Receive the Risk Report dated 29^th May 2020

Carried

Audit and Risk Committee - 12 June 2020 - Open Minutes

PUBLIC EXCLUDED ITEMS

Councillors Taylor / Simpson

That the public be excluded from the following parts of the proceedings of this meeting, namely:

1. Insurance Update

2. Cybersecurity Strategy

3. Revera Lead Agency IaaS Close Out Report

4. Legal Update

Carried

The general subject of each matter to be considered while the public was excluded, the reasons 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 were 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(1) to the passing of this resolution.
1. Insurance Update	7(2)(i) Enable the local authority to carry on, without prejudice or disadvantage, negotiations (including commercial and industrial negotiations)	48(1)A That the public conduct of the whole or 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: (i) Where the local authority is named or specified in Schedule 1 of this Act, under Section 6 or 7 (except 7(2)(f)(i)) of the Local Government Official Information and Meetings Act 1987.
2. Cybersecurity Strategy	7(2)(h) Enable the local authority to carry out, without prejudice or disadvantage, commercial activities	48(1)A That the public conduct of the whole or 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: (i) Where the local authority is named or specified in Schedule 1 of this Act, under Section 6 or 7 (except 7(2)(f)(i)) of the Local Government Official Information and Meetings Act 1987.
3. Revera Lead Agency IaaS Close Out Report	7(2)(h) Enable the local authority to carry out, without prejudice or disadvantage, commercial activities	48(1)A That the public conduct of the whole or 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: (i) Where the local authority is named or specified in Schedule 1 of this Act, under Section 6 or 7 (except 7(2)(f)(i)) of the Local Government Official Information and Meetings Act 1987.
4. Legal Update	7(2)(b)(ii) Protect information where the making available of the information would be likely unreasonably to prejudice the commercial position of the person who supplied or who is the subject of the information 7(2)(g) Maintain legal professional privilege 7(2)(i) Enable the local authority to carry on, without prejudice or disadvantage, negotiations (including commercial and industrial negotiations)	48(1)A That the public conduct of the whole or 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: (i) Where the local authority is named or specified in Schedule 1 of this Act, under Section 6 or 7 (except 7(2)(f)(i)) of the Local Government Official Information and Meetings Act 1987.