Report to Council 24/04/04
Audit Committee Report
Appendix - Treasury Policy
April 3 2004 at 10:30 AM - Meeting at the InternetNZ rooms.
Present:
- Bill Parkin
- David Harris
- Nick Wallingford
- Chris Streatfield (chair)
Agenda discussed
- End of Year Audit Procedures and Timetable
- Treasury Policy (Revised)
- Referral to the Committee
- Project Management wrap-up
- Other business
Meeting opened at 10:45
Agenda item 1.
Two parts to this discussion
(a) Audit procedures and the Committee's responsibilities
(b) Timetable to allow the Committee to meet with the Auditor
(a) This was a general discussion around the Committee's responsibilities and interaction with the audit process and the Auditor. The Committee concluded that there would not be a need to discuss matters with the auditor prior to the EoY audit taking place but a discussion following the audit was felt to be important.
(b) We then discussed the EoY timetable and the difficulties raised by the difference between the timetable desired by INZ and the rather extended period that NZRS want to take to finalize their EoY accounting matters. It was noted that the timing shown in the NZRS timetable has been modified to ensure that INZ can meet its requirements. We noted that this area has not been particularly well handled due a series of circumstances and expressed the wish that this will not be a pattern for the future. The Committee having studied the matter decided that we will meet with the auditor on or around 14 May depending on the auditor's availability at that time. The Chair was asked to arrange this meeting and the next Audit Committee meeting will take place on that date.
Agenda item 2.
The Society's Treasury policy was brought back to the Committee. The draft paper was originally put together by David Harris on behalf of the Committee and presented to the Executive Committee. The Exec requested some modifications to the policy and these were incorporated. The paper was then returned to Exec that expressed the wish that the Audit Committee agree to the modifications before Exec could receive the paper. In the event a small modification has been requested by Audit, which is now incorporated into the policy and the paper will now be presented to Exec at their 10 April meeting.
David and Bill are examining some potential investment areas for the Society with a view to putting forward a proposal to have an amendment to Section 10 of the Bylaws. This should be presented to the next Council Meeting on 23 April.
Agenda item 3.
An issue around a computer failure was brought to the Committee's attention by Simon Riley via email. The Committee briefly examined the issue and determined that it is not within the remit of this Committee and have asked that the matter be referred to Exec for them to examine.
Agenda item 4.
The Chair apprised the Committee of the latest developments put in place to handle projects both internally and externally, following on from the issues raised with the Committee around the Interop Project. The Committee expressed satisfaction that sound policies were being put in place.
Agenda item 5.
The Chair informed the Committee of a recent discussion that took place with Nicola Draper, the Quickbooks and accounts trainer at her recent visit for staff training. In the role as Treasurer the Chair requested that Nicola return to the INZ offices to give some explanation, and possibly training, on the ASB's Internet banking procedure and software, an area that she deals with to a considerable extent with other clients. The Chair noted to the Committee that if this could be arranged to occur on the day of our next meeting that they might wish to take the opportunity to have a chat with Nicola on this topic. The Committee agreed that it would be very useful to have the discussion so an effort will be made to see if Nicola can be available on that day. Meeting Closed at 2:50 PM.
The Treasury policy, passed to Audit by the Executive Committee, has been completed, with thanks to David Harris, and viewed by Executive Committee. It is attached below as Appendix 1.
Chris Streatfield
Chair, Audit Committee.
RECOMMENDATIONS:
- That the report be accepted.
- That the Treasury policy be adopted.
Appendix 1
InternetNZ - The Internet Society of New Zealand, Inc.
Treasury Management Policy
1. Introduction
Late in 2003, InternetNZ?s reorganization of the Domain Name system in New Zealand resulted in the sale of DomaiNZ, the former monopoly Domain Name Registrar for the .NZ name space and a wholly-owned subsidiary of InternetNZ. The proceeds from the sale have put InternetNZ in a situation where it has significant capital reserves, and the Society needs a suitable Treasury Policy to structure the way those reserves are managed and invested.
This document defines a set of principles that should be applied to any investment of the Society?s capital, and creates a framework of responsibility within the Society through which formal oversight can be maintained of the proper process and appropriateness of such investments.
2. Nature, form and scope of investments
InternetNZ is not primarily an investment organization, and is largely operated on a voluntary basis with a minimum of permanent staff. These facts suggest that an aggressively-maintained investment policy focused on capital growth or high rates of return is unlikely to be workable within the framework of the Society as it stands. In light of these factors, the first three initial paragraphs shall act as overall guidelines covering all investments.
While this policy does not attempt to mandate particular types of investment, purely on an exemplary basis it is noted that investments such as long-term Government-secured bonds and equity-secured mortgages would provide a good balance between maximum security and reasonable rates of return. In the current Constitution no policy on investments is mandated but the Council Bylaws state:
" 10.4 The Council may from time to time approve the investment of the Society's financial assets and may direct the Treasurer to withdraw funds invested.
10.5 Funds approved for investment shall be invested in one or more of the following ways:
(a) with a registered bank
(b) in New Zealand Government or Local Authority stock." . It may be beneficial to the Society to have a modification of these clauses to enable compliance with the general tone of this Policy document.
Spread of investments Accepted practice within the financial community is for a portfolio to be spread across a range of investments to minimize exposure to risks arising from unforeseeable events such as the collapse or bankruptcy of any entity. This leads to paragraph 4 which limits the level of investment in any one entity.
Conflict of Interest . The Constitution in Section 15 states:
" 15. PECUNIARY PROFIT
No Member or person associated with a Member of the Society shall derive any income, benefit, or advantage from the Society where that person can materially influence the payment of the income, benefit or advantage except where the income, benefit or advantage is derived from:
a. Professional services to the Society rendered in the course of business charged at no greater rate than current market rates; or
b. Interest on money lent at no greater rate than current market rates."
This could cause a Conflict of Interest to arise should the Society consider investing in an institution where a Member could gain "pecuniary" advantage it is thus encumbent on all Members to notify the Society should such a situation occur. Paragraph 5 is included for this purpose.
3. Administrative Roles
Paragraph 6: It will be the Society?s policy that the Executive Committee be tasked with the responsibility for exploring, establishing and managing investments in accordance with this policy.
Investment advisors From time to time, the Executive Committee may consider it appropriate to explore the possibility of placing funds with investment advisors or managers. This policy document does not specifically prohibit the use of such external agents, provided the policies set out herein are adhered to in all such cases.
4. Oversight and Review
Proper transparency is a crucial factor in ensuring security of investments. The Society must establish formal mechanisms allowing regular peer review of the investment process, and must make information on its investment holdings available to the Members in a timely and regular manner. Paragraphs 7 and 8 lay out these responsibilities.
Treasury Management Policy
- The Society shall adhere to the Constitution, Council Bylaws and to all relevant laws governing Incorporated Societies in its undertaking of any investment.
- The Society will favour investments that entail minimal risk and which require the minimum of active management or participation by the Society, its Officers, or those appointed to oversee the investment process.
- The Society has an obligation to establish investments that yield the best possible rate of return, subject and subordinate to the requirements of paragraphs (1) and (2).
- The Society will not invest more than 50% or $400,000, whichever is the lower value, of its total capital reserves in investments in a single entity without a specific vote of Council approving such investment.
- InternetNZ Members are required to disclose any interest they may have, or know of, concerning an investment held by the Society, to an appropriate body usually the Executive Committee.
- The Executive Committee of InternetNZ shall have the responsibility to explore, establish and manage investments in accordance with this overall policy.
- The Executive Committee shall report any change in the status of investments held by the Society as part of its regular reporting to Council.
- The Society will include an abbreviated non-specific summary of investments in the annual report.
© 2004 The Internet Society of New Zealand
Last updated Thursday, 17-Mar-2005 17:01:27 NZDT
