Agenda of Audit, Risk and Finance Subcommittee

N-logotype-black-wide Audit, Risk and Finance Subcommittee

18 June 2015

Page No.

1. Apologies

Nil

2. Confirmation of Order of Business

3. Interests

3.1 Updates to the Interests Register

3.2 Identify any conflicts of interest in the agenda

4. Public Forum

5. Confirmation of Minutes

5.1 5 May 2015 6 - 13

Document number M1202

Recommendation

THAT the minutes of the meeting of the Audit, Risk and Finance Subcommittee, held on 5 May 2015, be confirmed as a true and correct record.

6. Status Report - Audit, Risk and Finance Subcommittee - 18 June 2016 14 - 15

Document number R4386

Recommendation

THAT the Status Report Audit, Risk and Finance Subcommittee 18 June 2015 (R4386) and its attachment (A1324298) be received.

7. Chairperson's Report 16 - 16

Document number R4390

Recommendation

THAT the Chairperson's Report (R4390) be received and the updates noted.

Finance

8. Draft Debt Management Policy 17 - 23

Document number R4178

Recommendation

THAT the report Draft Debt Management Policy (R4178) and its attachment (A1353429) be received.

Recommendation to Governance Committee and Council

THAT the Draft Debt Management Policy (A1353429) be approved.

9. Corporate Report to 30 April 2015 24 - 43

Document number R4244

Recommendation

THAT the report Corporate Report to 30 April 2015 (R4244) and its attachment (A1366139) be received and the variations noted.

10. Risk Register and Framework Plan 44 - 53

Document number R4246

Recommendation

THAT the report Risk Register and Framework Plan (R4246) and its attachments (A1241121 and A1359808) be received.

Public Excluded Business

11. Exclusion of the Public

Recommendation

THAT the public be excluded from the following parts of the proceedings of this meeting.

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:

Item	General subject of each matter to be considered	Reason for passing this resolution in relation to each matter	Particular interests protected (where applicable)
1	Audit, Risk and Finance Subcommittee Meeting - Public Excluded - 5 May 2015	Section 48(1)(a) The public conduct of this matter would be likely to result in disclosure of information for which good reason exists under section 7.	The withholding of the information is necessary: · Section 7(2)(a) To protect the privacy of natural persons, including that of a deceased person. · Section 7(2)(i) To enable the local authority to carry on, without prejudice or disadvantage, negotiations (including commercial and industrial negotiations).

Item

General subject of each matter to be considered

Reason for passing this resolution in relation to each matter

Particular interests protected (where applicable)

Audit, Risk and Finance Subcommittee Meeting - Public Excluded - 5 May 2015

Section 48(1)(a)

The public conduct of this matter would be likely to result in disclosure of information for which good reason exists under section 7.

The withholding of the information is necessary:

· Section 7(2)(a)

To protect the privacy of natural persons, including that of a deceased person.

· Section 7(2)(i)

To enable the local authority to carry on, without prejudice or disadvantage, negotiations (including commercial and industrial negotiations).

12. Re-admittance of the public

Recommendation

THAT the public be re-admitted to the meeting.

Minutes of a meeting of the Audit, Risk and Finance Subcommittee

Held in Ruma Mārama, Level 2A, Civic House, 110 Trafalgar Street, Nelson

On Tuesday, 5 May 2015, commencing at 1.09pm

Present: Mr J Peters (Chairperson), Her Worship the Mayor R Reese, Councillors B McGurk and I Barker, and Mr John Murray

In Attendance: Councillor G Noonan, Group Manager Infrastructure (A Louverdis), Group Manager Community Services (C Ward), Group Manager Corporate Services (N Harrison), Manager Communications (P Shattock), Manager Capital Projects (S Davies), Manager Administration (P Langley), and Administration Adviser (G Brown)

Apology: Councillor I Barker for early departure

1. Apology

Resolved AUD/2015/001

THAT an apology be received and accepted from Councillor Barker for early departure.

Peters / McGurk Carried

2. Confirmation of Order of Business

There was no change to the order of business.

3. Interests

There were no updates to the Interests Register, and no interests with items on the agenda were declared.

It was noted that there was no information in the Members Interests Register for Glenice Paine and this needed to be followed up.

4. Public Forum

There was no public forum.

5. Confirmation of Minutes

5.1 10 March 2015

Document number M998, agenda pages 7 - 14 refer.

Resolved AUD/2015/002

THAT the minutes of the meeting of the Audit, Risk and Finance Subcommittee, held on 10 March 2015, be confirmed as a true and correct record.

McGurk / Murray Carried

6. Status Report - Audit, Risk and Finance Subcommittee - 5 May 2015

In response to a question, Group Manager Corporate Services, Nikki Harrison advised the Risk Register would be brought to the next Audit, Risk and Finance Subcommittee meeting and the Debt Management Policy had not yet been adopted.

Document number R4175, agenda pages 15 - 16 refer.

Resolved AUD/2015/003

THAT the Status Report Audit, Risk and Finance Subcommittee 5 May 2015 (R4175) and its attachment (A1324298) be received.

McGurk / Murray Carried

Governance

7. Interests Register

Document number R4170, agenda pages 17 - 25 refer.

It was noted that Councillor Barker was no longer a member of the Nelson Residents Association, therefore this needed to be removed from the Members Interests Register.

8. Events Resource Consent Charging Regime for RM125012

Document number R4177, agenda pages 27 - 30 refer.

Manager Community Partnerships, Shanine Hermsen, presented.

In response to a question, Ms Hermsen advised that Anzac Day at Anzac Park did not fall into consent RM125012, however Opera in the Park was covered in this consent. She added that she believed the consent did not expire but this needed to be confirmed.

In response to a question, Group Manager Community Services, Chris Ward, advised that if there was a charge to attend an event then it was treated as a commercial activity. He clarified this was not the case for ‘koha’ events.

There were concerns raised in relation to costs for the use of specific venues which could be written into a resource consent. Mr Ward advised that fees and charges were currently being reviewed across Council and he could provide this information to the Subcommittee when complete.

There was general agreement that the charge for the resource consent should be increased to $500 and that it should be clarified this was only for commercial ticketed events.

Resolved AUD/2015/004

THAT the report Events Resource Consent Charging Regime for RM125012 (R4177) be received.

McGurk / Peters Carried

Recommendation to Governance Committee and Council AUD/2015/005

THAT Council consider the options for the charging regime for the use of Council’s Resource Consent RM125012, as detailed in report R4177, and increase the charge to $500 and apply it only to commercial ticketed events.

Peters / McGurk Carried

Attendance: Councillor Barker left the meeting at 1.39pm.

9. Business Case Approach for 2015/16 Projects

Document number R4183, agenda pages 31 - 39 refer.

Senior Project Adviser, Arlene Akhlaq, presented.

In response to a question, Ms Akhlaq advised the definition of a business case was that it identified the problems, illustrated how these could be resolved, and the stated expected benefits. She added that a business case helped manage the project and would aid decision making.

In response to a further question, Ms Akhlaq said the bullet points under section 4.3 of the report were from Prince 2 methodology, which was internationally accredited.

In response to a question, Ms Akhlaq advised there was a presentation by Derek Walker from Third Bearing during the Long Term Plan workshops and she confirmed the report had been received by Council at the end of October 2014.

There were concerns raised that some members had not read the Alan Bickers or Third Bearing reports.

In response to a question, Ms Akhlaq advised the purpose of the officer report was to address the Council resolution from June 2014, which was to ‘give consideration to the projects that will follow a business case approach.’ She added that at this point in time, detailed business cases could not be conducted for all projects.

In response to a question, Group Manager Infrastructure, Alec Louverdis, informed the Subcommittee the projects highlighted in yellow were a first cut by the Senior Leadership Team and still needed to be approved by Council as part of the Long Term Plan process. He clarified that some multiyear capital projects had started this financial year and for that reason were not shaded yellow.

There was concern around how projects were identified and that a process should be set before moving forward. In response to a question, Ms Akhlaq said the rationale for the chosen projects was that management believed these needed specific attention due to public/political interest or were of a substantial cost. She added that all projects do receive a level of attention.

Group Manager Community Services, Chris Ward, said the usual mechanism for projects would be through Asset Management Plans but due to time restrictions this was the best mechanism to draw the Subcommittee’s attention to these projects.

There was a discussion that rationale for project selection would be beneficial especially for future projects. It was agreed that further information would be required and that it would be worthwhile having a discussion with committee chairs as to projects they thought required businesses cases before the next Governance Committee meeting.

It was suggested that a column be added to attachment 1 showing the justification for the project selection, and that the projects should be listed under the committee the project would be delegated to.

Resolved AUD/2015/006

THAT the report Business Case Approach for 2015/16 Projects (R4183) and its attachment (A1331113) be received;

AND THAT discussions are held with the Committee Chairs and Deputies to clarify and justify the projects listed in (A1331113).

Her Worship the Mayor / McGurk Carried

Recommendation to Governance Committee and Council AUD/2015/007

THAT a revised report and list of projects to follow a business case approach be confirmed at the next Governance Committee meeting.

Her Worship the Mayor/ McGurk Carried

Finance

10. Letter to the Council on the Audit for the Year Ending 30 June 2014 - Further Information

Document number R4168, agenda pages 40 - 42 refer.

In response to a question, Group Manager Corporate Services, Nikki Harrison, advised there had not been any impact to levels of service from the reduction in staff.

Resolved AUD/2015/008

THAT the report Letter to the Council on the Audit for the Year Ending 30 June 2014 - Further Information (R4168) be received.

Murray / McGurk Carried

11. Corporate Report for the Period Ending 31 March 2015

Document number R4194, agenda pages 44 - 65 refer.

Group Manager Corporate Services, Nikki Harrison, and Senior Accountant, Tracey Hughes, presented.

In response to a question, Ms Harrison advised there were a number of adjustments to projections for year end, however it was favourable in terms of savings. She added that the savings were not all ratings related.

Group Manager Infrastructure, Alec Louverdis, advised the $5,000 stated in section 5.6.4 in the report relating to the Dun Trail slip was only for a temporary solution to open up the track to users, and that a long term solution needed to be considered following the submission of a geotechnical report from the Waimarama Sanctuary Trust.

In response to a question, Group Manager Community Services, Chris Ward, said unbudgeted expenditure would be considered by Council if there was no initial budget.

In response to a question, Mr Louverdis advised the flood protection works had not been completed yet due to the gravel build up from storm events in December 2011, April 2013 and June 2014, but a plan was now in place for this to progress. He added there were issues with landowners in certain areas.

In response to questions, Mr Louverdis said the Saxton Creek Upgrade from Champion Road to Main Road Stoke had been defined in the 2014/15 Annual Plan but not resolved as yet.

In relation to Whakatu Drive/Beatson Road cycleway and sewer project, Mr Louverdis confirmed there would be minimal impact to any southern link.

In response to question, Manager Capital Projects, Shane Davies, advised that the Stanley/Beachville stormwater project was currently under negotiations with the landowner relating to the easement and if this was unresolved an alternative option was available.

In response to a question, Mr Louverdis noted the Rocks Road cycling and walking project was now being project managed by the New Zealand Transport Agency, however this was still a partnership with Nelson City Council and the Steering Group meetings would continue.

Mr Davies advised the final costs for the Maitai Walkway (Akersten Street to Trafalgar Street) were on budget. In response to a question, Mr Davies said the Saltwater Creek/Haven Road culvert completion date needed to be updated via the Councillors newsletter.

Resolved AUD/2015/009

THAT the report Corporate Report for the Period Ending 31 March 2015 (R4194) and attachments (A1342336, A1311288, A133636, A1340305 and A793514) be received and the variations noted.

Murray / McGurk Carried

Recommendation to Governance Committee and Council AUD/2015/010

THAT Council note that ongoing costs of approximately $11,250 pa will need to be included in the Long Term Plan 2015-25 for live streaming of Council meetings.

McGurk /Her Worship the Mayor Carried

12. Exclusion of the Public

Resolved AUD/2015/011

THAT the public be excluded from the following parts of the proceedings of this meeting.

McGurk / Murray Carried

Item	General subject of each matter to be considered	Reason for passing this resolution in relation to each matter	Particular interests protected (where applicable)
1	Kahurangi Employment Trust - Completion of Liquidation	Section 48(1)(a) The public conduct of this matter would be likely to result in disclosure of information for which good reason exists under section 7	The withholding of the information is necessary: · Section 7(2)(a) To protect the privacy of natural persons, including that of a deceased person · Section 7(2)(i) To enable the local authority to carry on, without prejudice or disadvantage, negotiations (including commercial and industrial negotiations)

Item

General subject of each matter to be considered

Reason for passing this resolution in relation to each matter

Particular interests protected (where applicable)

Kahurangi Employment Trust - Completion of Liquidation

Section 48(1)(a)

The public conduct of this matter would be likely to result in disclosure of information for which good reason exists under section 7

The withholding of the information is necessary:

· Section 7(2)(a)

To protect the privacy of natural persons, including that of a deceased person

· Section 7(2)(i)

To enable the local authority to carry on, without prejudice or disadvantage, negotiations (including commercial and industrial negotiations)

The meeting went into public excluded session at 3.40pm and resumed in public session at 3.54pm.

13. Re-admittance of the Public

Resolved AUD/2015/012

THAT the public be re-admitted to the meeting.

McGurk / Murray Carried

There being no further business the meeting ended at 3.54pm.

Confirmed as a correct record of proceedings:

Chairperson Date

Audit, Risk and Finance Subcommittee

18 June 2015

REPORT R4178

Draft Debt Management Policy

1. Purpose of Report

1.1 To update the Committee on the Council’s Draft Debt Management Policy as requested at the Audit, Risk and Finance Subcommittee meeting on 10 March 2015.

2. Delegations

2.1 The Audit, Risk and Finance Subcommittee has oversight of the management of financial risk.

3. Recommendation

THAT the report Draft Debt Management Policy (R4178) and its attachment (A1353429) be received.

Recommendation to Governance Committee and Council

THAT the Draft Debt Management Policy (A1353429) be approved.

4. Background

4.1 The Procurement Policy and Debt Management Process was considered at the Audit, Risk and Finance Subcommittee on 10 March 2015. The Subcommittee requested that the Draft Debt Management Policy be reported to the Subcommittee at a future meeting.

5. Discussion

5.1 The Debt Management Policy covers the guidelines for:

5.1.1 Extending credit – new standard credit application forms have been put in place for new customers applying for credit. Finance will work through a process of getting an application in place for existing debtors as it is important that debtors accept our terms and conditions of credit.

5.1.2 Payment terms and invoicing – a key change from previous practice is that a list of aged debtors will be provided to managers each month to ensure that they are taking appropriate and consistent action in relation to the debt.

5.1.3 Debt collection – outlines the current procedure. However, all debts over $10,000 and/or of a sensitive nature and greater than 90 days overdue will be reported to the Audit, Risk and Finance Committee in the future. It is not standard practice to charge interest on outstanding debts but it is recommended the Group Manager Corporate Services has discretion to charge interest.

5.1.4 Disputed amounts – an Invoice Dispute Procedure is included in the credit application form as part of the Terms and Conditions.

5.1.5 Payment arrangement by instalments – outlines the procedure to be followed when payment arrangements are put in place.

5.1.6 Bad debts – this section documents the current process for writing off bad debts.

6. Options

6.1 Accept the recommendation – approve the Draft Debt Management Policy.

6.2 Reject the recommendation – not approve the Draft Debt Management Policy.

7. Alignment with relevant Council policy

7.1 This decision is not inconsistent with any other previous Council decision.

8. Assessment of Significance against the Council’s Significance and Engagement Policy

8.1 This is not a significant decision under the Council’s Significance and Engagement Policy.

9. Consultation

9.1 No consultation has been undertaken in preparing this policy.

10. Inclusion of Māori in the decision making process

10.1 No consultation with Maori has been undertaken in preparing this policy.

Nikki Harrison

Group Manager Corporate Services

Attachments

Attachment 1: A1353429 - Draft Debt Management Policy

1. Policy Objectives and Scope

The Policy Objectives and Scope are as follows:

1.1. To ensure Council manages its Accounts Receivable in such a way that reduces risk to the organisation and protects the income earned for services provided.

1.2. Provides a consistent approach to the management and follow-up of debt.

1.3. Provides the rules and general guidance around extending credit to third parties.

1.4. Provides the rules around the write-off of debt.

1.5. This policy excludes rates (including water rates), parking, and dogs which are covered by statutory processes.

2. Principles of Policy

The guiding principles for this policy are as follows:

2.1. Responsibilities. All business units are responsible to provide complete and accurate information for any chargeable work or services to external parties for billing purposes.

2.2. Risk Management. Principles of risk management will underpin decisions made in relation to credit and debt management. The business unit providing the goods and/or service is accountable to ensuring that the debtor is a good credit risk, ensuring Council’s exposure to potential debt write-off is eliminated.

2.3. Fairness and Equity. Council will ensure that all debts are managed fairly and equitably. Parties that incur debts do so on the understanding that Council’s standard terms of payment are met.

3. Policy Guidelines

The sections following are intended as a guide to ensure outstanding debts are managed and reported to Council.

3.1. Extending Credit:

· It is the responsibility of managers to ensure that debts raised by invoice are properly chargeable and comply with applicable regulations, laws and Council policies.

· Standard credit application forms, appropriate to the level of credit to be extended, or the risk, will be completed when a customer applies for credit.

· Managers and their delegates should request a credit check from the finance team before they agree to extending credit. A credit check is to be based on:

o The value of the work being undertaken is above $10K, or

o A lesser amount if the business unit feels it is appropriate, or

o Where there is a potential risk to the organisation, or

o Where there is the potential for an ongoing relationship between Council and the debtor and a credit history has not previously been established.

· In cases where the credit check indicates a high level of risk, then the Accounting Services Manager should determine that payment terms are to be “Cash in Advance”.

3.2. [jb1] Payment Terms and Invoicing:

· Council’s payment terms are displayed on the invoice. Standard terms being the 20th of the month following the date of the invoice.

· Other credit terms may apply in relation to the approved fees and charges schedule and any ongoing changes, e.g. cash in advance for building consents.

· Where a debtor does not pay within the credit term, the debtor is to be considered in default of the agreement to pay, and collection procedures are to be initiated as appropriate.

· The Managers are provided a list of all aged debtor accounts, each month showing the status in respect of invoices as raised by staff within their group.

· All invoices must be raised against individuals or legal entities, i.e. limited liability companies or incorporated societies, which provides a specific source of contact for debt recovery.

· Where possible, arrangements will be put in place to ensure that Council’s interests are protected eg for seasonal ground use fees, spreading payment over session rather than invoicing all at the end.

3.3. Debt Collection:

· Where debtors are in default of the credit terms, the Finance Team is to initiate appropriate collection procedures after having notified the appropriate manager or their delegate of the debtor status and confirmed that no reason exists that would inhibit collection procedures.

· Appropriate collection procedures may include suspending any further entitlement to credit, and/or to the extent permitted by law, refrain from supplying further goods or services to the customer, until such time as the outstanding debt is repaid in full.

· All debts over $10K and/or of high profile which are likely to be reported to the Audit Risk and Finance Committee are to be brought to the attention of the Group Manager of the group that raised the debt.

· With the approval of the Group Manager Corporate Services, interest may be charged on outstanding debts at Council’s weighted average interest rate for the period it is outstanding.

3.4. Payment Arrangement by Instalments:

· All amounts owing to Nelson City Council should be paid in full immediately when they become due and payable. However, there may be situations where it is not possible for an amount to be paid in full immediately, e.g. where full immediate repayment would lead to unreasonable financial hardship on the customer.

· Only the Accounting Services Manager may agree to recovery of debts by instalment. The Group Manager Corporate Services may accept a reasonable request for the payment of an outstanding amount by instalments, provided that reasonable progress is made promptly within a specified date.

· Any instalment repayment agreement is to be documented in writing and agreed by both the debtor and Accounting Services Manager.

· An explicit term of any such arrangement is that the failure by the debtor to pay any instalment on or before the due date will render the full amount of the debt then outstanding, immediately due and payable.

3.5. Dispute Settlement:

· Where payment of an outstanding debt is disputed by a debtor, the Debtors Officer will refer to the following Invoice Dispute Procedure as detailed in the Terms and Conditions.

· Consultation should be made with the relevant operational staff to attempt to mediate a solution. Any amounts not in dispute must be paid in full and on time.

3.6. Invoice Dispute Procedure:

· If the customer disagrees with a tax invoice provided by Nelson City Council:

o The customer must notify Nelson City Council in writing no later than 10 business days following receipt of the invoice, setting out in reasonable detail the nature of the invoice dispute and the reasons for non-payment

o Nelson City Council will acknowledge receipt of such invoice dispute notice and both parties’ responsible managers will endeavour to promptly settle the invoice dispute by agreement

o If, on resolution of the invoice dispute, an amount is due to Nelson City Council, the customer will pay that amount to Nelson City Council within five business days of resolution of the dispute, or if a building or resource consent, as per the terms of the consent.

· Where only a portion of an amount claimed in a tax invoice is the subject of an invoice dispute (disputed portion), this clause will only apply to the disputed portion and the balance of the amount payable in respect of that tax invoice must be paid by the customer to Nelson City Council no later than the due date of the invoice.

3.7. Bad Debts:

· Debts unable to be collected are to be known as bad debts and must be submitted annually to the Audit Risk and Finance Committee for write-off if over $2,500.

· These debts are to be registered with Council’s external debt collection agency or liquidator/receiver for continued collection.

· The authority levels pertaining to the write-off of bad debts have been approved by Council, as follows:

o General Manager Corporate Services approves any debt write-off up to a maximum of $2,500 for any one item.

o Debt write-off amounts in excess of $2,500 per item require Council approval and will be submitted to the Audit Risk and Finance Committee.

o All debts written off are to be recorded for future possible action and information, and systems are to be updated to best ensure that staff are aware before raising further debts.

4. Monitoring and Implementation

4.1. Reporting:

· All debts over $10,000 and greater than 90 days overdue will be reported to the Audit Risk and Finance Committee.

· Other significant debts under $10,000 where there is a potential risk of non payment, or debts of a sensitive nature, will be reported to the Audit Risk and Finance Committee.

4.2. The policy will be reviewed every three years or at the request of Council or in response to changed legislative and statutory requirements or in response to any issues that may arise.

5. Responsibility

5.1. The Debtors Officer is responsible for Debtor Management, with the assistance of the Accounting Services Manager for escalation where required. Outstanding debts will be reviewed on a regular basis by the Debtor Officer and the Accounting Services Manager and decisions will be made as to the most appropriate debt recovery action. This can include:

· Issue of regular reminders

· Personal contact with the debtor

· Referral of matter to the manager responsible for initiating the debt (where appropriate)

· Escalation of matter to the Group Manager Corporate Services and/or referral to debt recovery agents.

Audit, Risk and Finance Subcommittee

18 June 2015

REPORT R4244

Corporate Report to 30 April 2015

1. Purpose of Report

1.1 To inform the members of the Audit Risk and Finance Committee on the financial results of activities for the 10 months ending 30 April 2015 compared to the final projection, completed as part of the Long-Term Plan 2015-2025 (LTP), and to highlight and explain any material variations.

2. Delegations

2.1 The Audit Risk and Finance Committee has oversight of the management of financial risk and makes recommendations to the Governance Committee and to Council.

3. Recommendation

THAT the report Corporate Report to 30 April 2015 (R4244) and its attachment (A1366139) be received and the variations noted.

4. Background

4.1 The report focuses on the 10 month performance compared with the year to date projection. Budgets/projections for operating income and expenditure are phased evenly through the year, whereas capital expenditure budgets/projections are phased to occur mainly in the second half of the year.

4.2 Projections (forecasts) were updated in April as part of the work informing the final LTP.

4.3 Some definitions of terms used within this report:

· Operating income – all income other than rates including metered water, grants, fees, rentals, and recoveries;

· Rates – includes the general rate, wastewater, stormwater and flood protection rates, and targeted rates for Solar Saver;

· Staff costs – salaries plus overheads such as training, super, professional fees and office accommodation expenses;

· Depreciation – includes all depreciation, and any losses on asset disposal/retirement;

· Interest – includes debt interest, bank fees, interest rate swap margins, treasury and rating agency fees.

5. Discussion

5.1 The report focuses on performance to date compared with the year to date projections. More detailed financials by sub-activity are in Attachment 1.

5.2 For the 10 months ending 30 April 2015, the activity surplus/deficits are $2.0 million favourable to projection.

5.3 Revenue and expenditure variances are discussed by activity.

5.4 Staff expenses are $178,000 in total better than projected. Variances in activities illustrate where staff time has actually been spent against where it was expected to be spent at the time of setting the 2014/15 Annual Plan. Savings identified through the projections exercise are reflected in total in the Corporate Activity.

Corporate

5.5 The Corporate activity is $237,000 worse than projection due to a range of factors including:

5.5.1 Revenue – $445,000 less than projection. Income in the Disaster Recovery Fund is $288,000 under projection due to timing of further insurance claims (in progress). Internal interest is $299,000 under projection reflecting the timing of capital expenditure. This is offset by the income on Rental Properties reflecting one month in advance.

5.5.2 Expenses – staff $213,000 higher than projection . Organisation-wide savings in staff expenditure identified through the latest projection exercise have reduced budget available in this activity.

5.5.3 Expenses – other $344,000 better than projection as the contingency has not yet been called on ($125,000) and Civic House expenditure is under projection ($125,000). Property condition assessments has little expenditure recorded against it (timing) and the budget for post earthquake inspections (reactive budget), year to date $38,000, currently has only $1,000 recorded against it. There is currently an underspend of $39,000 in building and other maintenance for Civic House. Expenditure on the Strategic Property Review is currently being incurred, but is $38,000 under projection as at the end of April. Third party communications costs (including production costs for Live Nelson) are under projection by $36,000.

Parks and Active Recreation

5.6 The Parks and Active Recreation activity is $362,000 better than projection due to:

5.6.1 Revenue - $87,000 less than projection due to timing of some revenue streams such as the golf course and Saxton Stadium.

5.6.2 Expenses – staff - $189,000 better than projection. The distribution of staff time over the organisation differs from anticipated and there are savings across this activity but particularly in Community Programmes, Esplanade and Foreshore Reserves, Sports Parks and Recreation Liaison. Savings identified through the projections exercise are represented in total in the Corporate activity.

5.6.3 Expenses – other - $171,000 better than projection. Regional Community Facilities is $87,000 more than projection as the second grant to the Brook Waimarama Sanctuary Fence has been paid in full ($524,000 - timing). Year to date expenditure is under projection in many areas including maintenance, electricity and insurance costs and consultancy costs.

Social

5.7 The Social activity is $147,000 better than projection due to:

5.7.1 Expenses – other - $95,000 better than projection. Base expenditure is $122,000 underspent year to date across a large range of activities, for items such as water, insurance, maintenance, cleaning and electricity. Expenditure against property maintenance contracts are currently $47,000 under projection.

Economic

5.8 The Economic activity is $127,000 better than projection due to:

5.8.1 Revenue - $135,000 better than projection. The Cricket World Cup (CWC) cost recovery is now largely complete (producing a timing variance) and more than anticipated. Extra expenditures not originally in the budget have been recovered. See paragraph 6.2.

5.8.2 Expenses – staff - $136,000 more than budgeted, almost entirely in the Cricket World Cup sub-activity. This is a budgeting issue as the number of staff hours required was within the 4,000 allowed as part of $900,000 expenditure cap in the contract. See paragraph 6.2.

5.8.3 Expenses – other - $128,000 better than projection. The Economic Development expenditure is under projection by $260,000. The events contestable fund is $156,000 under projection. If unspent at year end the balance will be held in reserve for future years. There is no spending to date in the business incubator (timing), facilities marketing and economic impact assessment. Expenses relating to the CWC are now complete, producing a timing effect of expenditure being $131,000 more than projection (see paragraph 6.2).

Transport

5.9 The Transport activity is $366,000 better than projection due to:

5.9.1 Expenses – other - $452,000 better than projection, mainly in unsubsidised roading. The most significant underspends in that activity are:

· Base maintenance ($89,000) including street and sump cleaning and footpath maintenance, expected to be spent over Autumn;

· $204,000 underspent relating to UFB remediation and corridor access. Corresponding income is also under projection.

· $57,000 underspent year to date in recovery works from the 2011 emergency event relating to Days Track. This work will be carried forward into 2015/16.

· No expenditure year to date for the southern arterial corridor management plan ($81,000 - this has been delayed until the findings of the Southern Arterial Investigation – Annesbrook Drive roundabout to QEII Drive roundabout (run by NZTA) are known).

5.9.2 Depreciation - $165,000 worse than projection. Depreciation expense in this activity needs to be adjusted for the changes to the capital programme as generated by the projections process. Once adjusted, expenditure is expected to be in line with the depreciation projection.

Environmental Management

5.10 This activity includes Civil Defence and Rural Fire activities, Consents and Compliance, Environmental Programmes, and Solid Waste activities. The Environmental Management activity is $511,000 better than projection due to:

5.10.1 Revenue - $333,000 less than projection. Landfill fees are $43,000 less than projection. Internal income in the solid waste group is $152,000 less than projection and is offset in expenses. Building services job sales are $55,000 less than projection. Food premises license fees are currently $79,000 under projection with most of the income for that subactivity being invoiced in the last quarter of the financial year (timing). $101,000 year to date income projected for the Clean Heat Warm Homes programme is part of an end of year adjustment (timing).

5.10.2 Expenses – staff - $104,000 better than projection. This is mainly in Building Services which has carried vacancies for much of the year, and which has not been charged staff time from the Resource Consents team to the extent anticipated.

5.10.3 Expenses – other - $735,000 better than projection Monitoring the Environment is $212,000 under projection as this sub activity contains a large number of programmes (timing – almost all of this variance is committed with outstanding purchase orders). Expenditure relating to the Nelson plan is currently $200,000 under projection, but there are outstanding purchase orders for almost all of that amount. Landfill expenditure is $236,000 under projection reflecting no expenditure yet for Emissions Trading Scheme (ETS) levies and lower internal charges than anticipated from other solid waste sub-activities. Other sub activities in Solid Waste show year to date savings of $73,000.

Wastewater

5.11 The Wastewater activity is $76,000 better than projection due to:

5.11.1 Revenue - $281,000 less than projected, related to the NRSBU investment return. The distribution from the Regional Sewerage Business Unit (NRSBU) is less than budgeted as input volumes from all five customers are less than anticipated.

5.11.2 Expenses – other - $256,000 less than projection mainly due to lower charges than expected from NRSBU, see 5.11.1.

5.11.3 Expenses – Interest - $130,000 less than projected due to timing of capital expenditure.

Stormwater

5.12 The Stormwater activity is $151,000 better than projection due to:

5.12.1 Expenses – staff - $143,000 better than projection. The distribution of staff time over the organisation differs from anticipated.

Water

5.13 The Water activity is $372,000 better than projection due to:

5.13.1 Revenue – $75,000 worse than projection. The residential reading round extends through May and income for the full year is expected to be close to projection.

5.13.2 Expenses – other - $435,000 better than projection relates to year to date underspend against maintenance budgets ($256,000), mainly in headworks maintenance where the activity is concentrated towards the end of the year, and in reactive budgets. Base service and operating expenditure show a current underspend of $173,000 in respect of electricity and insurance costs (savings) and the timing of the costs of the meter reading contract.

Flood Protection

5.14 The Flood Protection activity is $149,000 better than projection.

5.14.1 Expenses – other - $85,000 better than projection. This is relating to recovery works. There has been only minor expenditure year to date for these works (identified from the December 2011 Rainfall Event). The projects have now been re-categorised as mitigation (capital) works and will extend into the 2015/16 year.

Capital Expenditure

5.15 Capital expenditure to 30 April 2015 was $22.0 million, $3.6 million (10%) below projection. Details are included in Attachments 2 to 5.

Balance Sheet

5.16 The Rates Debtors balance reflects the fourth quarter rates invoicing. This has generated a similar increase in Ratepayer’s Equity.

5.16.1 The increase in current portion of term liabilities reflects higher levels of expenditure late in the year on capital projects along with the funding of working capital requirements resulting from the timing of cash in/out flows.

5.16.2 Fixed assets net of depreciation have increased by $3.2 million reflecting that expenditure on capital projects tends towards the end of the financial year.

6. Projects Update

6.1 Please see Attachments 4 and 5 for progress reports on Council’s major projects.

Cricket World Cup

6.2 Please see Attachment 9 for a detailed breakdown of Cricket World Cup expenditure. Council capped its total contribution at $900,000. The rates requirement in the attachment is $787,127 – a saving against budget of $112,873.

7. Alignment with relevant Council policy

7.1 The finance report is prepared comparing current year performance against the final projection for the 2015 LTP.

8. Assessment of Significance against the Council’s Significance and Engagement Policy

8.1 There are no significant decisions.

9. Consultation

9.1 No consultation is required.

10. Inclusion of Māori in the decision making process

10.1 No consultation is required.

Tracey Hughes

Senior Accountant

Attachments

Attachment 1: NCC Summary Performance (A1362441)

Attachment 2: Capital Expenditure Graph (A1362441)

Attachment 3: Capital Expenditure by Activity (A1362441)

Attachment 4: Major projects status report - delivery at risk (A1366146)

Attachment 5: Major projects status report - on track (A1366144)

Attachment 6: Balance Sheet ( A1360175)

Attachment 7: Interest Rate Position Report

Attachment 8: Debtors Report (A793514)

Attachment 9: Cricket World Cup detailed expenditure (A1361868)

Audit, Risk and Finance Subcommittee

18 June 2015

REPORT R4246

Risk Register and Framework Plan

1. Purpose of Report

1.1 To update the Committee on the Council’s Risk Register and Framework Plan.

2. Delegations

2.1 The Audit, Risk and Finance Subcommittee has oversight of the management of financial risk.

3. Recommendation

THAT the report Risk Register and Framework Plan (R4246) and its attachments (A1241121 and A1359808) be received.

4. Background

4.1 The Council risk register was reported to the Governance Committee at the 4 December 2014 meeting. The responsibility for the risk register now falls under the delegation of the Audit, Risk and Finance Subcommittee.

4.2 At the 4 December 2014 Governance Committee meeting the following resolution was passed:

· THAT the report Council Risk register (A1276686) and its attachments (A1241121) be received;

· AND THAT the attached Risk Register be endorsed in principle, including the implementation of the highlighted controls;

· AND THAT a plan for the development of a full risk management framework incorporating this Risk Register be brought to this Committee by the end of this financial year.

· AND THAT the Committee agree the focus is to be on mitigation strategies, noting internal audit and other internal controls will be the priority.

5. Discussion

5.1 Most of the bold italic controls from the December 2014 risk register have been implemented with the remaining ones to be actioned still highlighted in bold italics.

5.2 One of the key mitigations was the improvement in the internal audit function. Council is currently recruiting for a Health and Safety Manager, a Risk Analyst and an Internal auditor and it is hoped that these roles will be filled over the next few months.

5.3 The risk register has been updated to ensure that all risks have responsibility assigned. The Risk register has also been reviewed to ensure that the risks highlighted in the Long Term Plan are adequately covered.

5.4 A new risk relating to external infrastructure failure (power, telecom etc) has been added during the period.

5.5 The high level plan for the development of a full risk management framework is also attached but timings will depend on the recruitment of staff to fill the roles highlighted in 5.2 above.

6. Options

6.1 The recommendation is to receive the report.

7. Alignment with relevant Council policy

7.1 Understanding the risks that Council faces and the mitigations that are in place or that should be considered, allows council to consider the impacts on Council’s strategic documents, particularly the Long Term Plan or Annual Plan.

8. Assessment of Significance against the Council’s Significance and Engagement Policy

8.1 This is not a significant decision under the Council’s Significance and Engagement Policy.

9. Consultation

9.1 There has been no consultation on the risk register and framework plan.

10. Inclusion of Māori in the decision making process

10.1 There has been no consultation with Maori in the preparation of the risk register and framework plan.

Nikki Harrison

Group Manager Corporate Services

Attachments

Attachment 1: A1241121 - Risk Register

Attachment 2: A1359808 - Risk management framework plan