AGENDA
Ordinary meeting of the
Audit, Risk and Finance Subcommittee
Thursday 31 March 2016
Commencing at the conclusion of Works and Infrastructure Committee
Ruma Mārama, Floor 2A
Civic House
110 Trafalgar Street, Nelson
Membership: Mr John Peters (Chairperson), Her Worship the Mayor Rachel Reese, Councillor Ian Barker, Councillor Brian McGurk and Mr John Murray
Guidelines for councillors attending the meeting, who are not members of the Committee, as set out in Standing Orders:
· All councillors, whether or not they are members of the Committee, may attend Committee meetings (SO 2.12.2)
· At the discretion of the Chair, councillors who are not Committee members may speak, or ask questions about a matter.
· Only Committee members may vote on any matter before the Committee (SO 3.14.1)
It is good practice for both Committee members and non-Committee members to declare any interests in items on the agenda. They should withdraw from the room for discussion and voting on any of these items.
Audit, Risk and Finance
Subcommittee
31 March 2016
Nil
2. Confirmation of Order of Business
3.1 Updates to the Interests Register
3.2 Identify any conflicts of interest in the agenda
Document number M1712
Recommendation
THAT the minutes of the meeting of the Audit, Risk and Finance Subcommittee, held on 18 February 2016, be confirmed as a true and correct record.
6. Status Report - Audit, Risk and Finance Subcommittee - 31 March 2016 17 - 18
Document number R5657
Recommendation
THAT the Status Report Audit, Risk and Finance Subcommittee 31 March 2016 (R5657) and its attachment (A1324298) be received.
8. Corporate Report to 31 January 2016 19 - 33
Document number R5334
Recommendation
THAT the report Corporate Report to 31 January 2016 (R5334) and its attachments (A1513082, A1311288, and A1514038) be received and the variations noted.
Recommendation to Governance Committee and Council
THAT the unspent 2015/16 Community Investment Fund operational budget of $21,300 be carried forward to the 2016/17 financial year, bringing the total budget for 2016/17 for the Community Investment Fund to $327,000.
9. Audit Arrangement letter 2015/16 34 - 55
Document number R5508
Recommendation
THAT the report Audit Arrangement letter 2015/16 (R5508) and its attachment (A1511332) be received;
AND THAT the Subcommittee provide feedback on the Audit Arrangement letter to Audit NZ if required, noting the Mayor will sign the letter once the Subcommittee’s feedback has been incorporated.
10. Extension of loan facility to the Melrose Society 56 - 74
Document number R5575
Recommendation
THAT the report Extension of loan facility to the Melrose Society (R5575) and its attachments (A1509577 and A1416892) be received.
Recommendation to Governance Committee and Council
THAT the $15,000 funding allocated towards asbestos remediation in Melrose House in 2016/17 be used to grant fund the Melrose Society for the purpose of toilet refurbishment;
AND THAT an interest free loan of up to $45,000 be made to the Melrose Society for the purpose of toilet refurbishment and chiller installation, subject to:
- the Society receiving a grant of $40,000 from the Rata Foundation for the same purpose;
- the Society contributing $10,000 to the refurbishment
- the designs being approved by the Group Manager Infrastructure;
AND THAT the interest free loan is to be repaid in nine annual instalments of $5,000 commencing 20 January 2017;
AND THAT the Melrose Society be informed that no further grants will be made by Council to the Melrose Society for the toilet refurbishment and chiller installation project.
11. Letter to Council on the audit for the year ended 30 June 2015 - further information 75 - 84
Document number R5640
Recommendation
THAT the report Letter to Council on the audit for the year ended 30 June 2015 - further information (R5640) and its attachment (A1493673) be received.
12. Insurance renewal 2016/17 - infrastructure assets 85 - 88
Document number R5649
Recommendation
THAT the report Insurance renewal 2016/17 - infrastructure assets (R5649) be received;
AND THAT the Audit, Risk and Finance subcommittee note that information is being collated to inform a decision on whether to remain with the Local Authority Protection Program (LAPP) for Council’s infrastructure insurance.
Recommendation to Governance Committee and Council
THAT the Chief Executive be delegated authority to decide by the end of May 2016 whether Nelson City Council should exit from the Local Authority Protection Program for Council’s infrastructure insurance and the appropriate insurance cover, and take any action required to give effect to the decision.
Public Excluded Business
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 Minutes - 18 February 2016 |
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)(b)(ii) To 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. · Section 7(2)(h) To enable the local authority to carry out, without prejudice or disadvantage, commercial activities. |
14. 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, Floor 2A, Civic House, 110 Trafalgar Street, Nelson
On Thursday 18 February 2016, commencing at 12.09pm
Present: Mr J Peters (Chairperson), Her Worship the Mayor R Reese, Councillors I Barker, B McGurk and Mr J Murray
In Attendance: Councillors P Matheson and G Noonan, Chief Executive (C Hadley), Group Manager Infrastructure (A Louverdis), Group Manager Community Services (C Ward), Group Manager Corporate Services (N Harrison), Senior Accountant (T Hughes), Manager Operations (P Anderson), Manager Capital Projects (S Davies), Manager Organisational Assurance and Emergency Management (R Ball), Risk and Procurement Analyst (S Vaughan), Internal Audit Analyst (L Anderson), and Administration Adviser (S Burgess)
1. Apologies
There were no apologies.
2. Confirmation of Order of Business
The Chairperson advised a public forum presentation from Steve Cross had been confirmed after the agenda was distributed.
3. Interests
There were no updates to the Interests Register, and no interests with items on the agenda were declared.
4. Public Forum
4.1 Hugh Briggs, Melrose House Society
Hugh Briggs, Chairperson of the Melrose House Society, tabled handouts (A1499934 and A1508640) and presented the Society’s request for funding towards the upgrade of the Melrose House bathrooms.
He asked the Subcowmmittee to hold off deciding on the request for funding while costs were finalised, as they would likely be higher than originally anticipated.
|
Attachments 1 A1499934 - Hugh Briggs, Melrose House Society Handout 1 2 A1508640 - Hugh Briggs, Melrose House Society Handout 2 |
4.2 Steve Cross
Steve Cross expressed concern about the redaction of clause 3.5 in the letter to the Council on the audit for the year ending 30 June 2015. He asked for transparency from Council, and pointed out that ratepayers relied on audit reports to satisfy concerns they may have. Mr Cross suggested that Council too readily moved matters to public excluded in general.
Attendance: The meeting adjourned for lunch from 12.28pm to 12.48pm.
5. Confirmation of Minutes
5.1 12 November 2015
Document number M1593, agenda pages 8 - 14 refer.
|
Resolved AUD/2016/001 THAT the minutes of the meeting of the Audit, Risk and Finance Subcommittee, held on 12 November 2015, be confirmed as a true and correct record. McGurk/Murray Carried |
6. Status Report - Audit, Risk and Finance Subcommittee - 18 February 2016
Document number R5457, agenda pages 15 - 16 refer.
|
Resolved AUD/2016/002 THAT the Status Report Audit, Risk and Finance Subcommittee 18 February 2016 (R5457) and its attachment (A1324298) be received. Barker/McGurk Carried |
7. Chairperson's Report
The Chairperson advised that draft Terms of Reference for the Subcommittee would be presented to the 10 March Governance Committee meeting. He noted this would include the recommendation to move future health and safety quarterly updates direct to the Governance Committee.
The Chairperson commended the Chief Executive and officers on the increased health and safety focus, as well as the progress on risk management and internal audit.
It was noted that several elected members attended the Local Government New Zealand Health and Safety Roadshow, and the health and safety duties of elected members was highlighted.
|
Resolved AUD/2016/003 THAT the Chairperson’s Report be received and updates noted. Peters/Barker Carried |
8. Corporate Report to 31 December 2015
Document number R5375, agenda pages 17 - 37 refer.
Group Manager Corporate Services, Nikki Harrison, presented the report and noted the presentation of financial information in future reports would be improved.
In response to a question about the recommendation regarding the Stoke Foothills and Atawhai Hills traffic studies, Group Manager Infrastructure, Alec Louverdis, advised officers were taking a cautious approach as there could be parameters in the Nelson Southern Link Investigation which would need to be incorporated into the Stoke Foothills project.
The Subcommittee discussed the Tasman Street upgrade. Manager Capital Projects, Shane Davies, emphasised that internal processes had changed in the past twelve months to ensure improved project management.
In response to a question, Ms Harrison advised the $361,343 saving in Staff Expenses would likely be a permanent saving.
In response to discussion on the landfill account, Chief Executive, Clare Hadley, suggested it may be more appropriate to review this at the time of the nine month corporate report.
In response to questions, Mr Louverdis undertook to provide the Subcommittee with the amount of funding in the current financial year for the Southern Arterial corridor management plan. He advised that several large projects would be commencing on 1 March which would positively impact capital expenditure. Mr Louverdis said the St Vincent to CBD cycle path connection timeline and budget had been approved by the Works and Infrastructure Committee as part of the Out and About Policy but the scope had yet to be developed.
The Subcommittee discussed cultural impact assessments. The Chairperson noted the delays in this area and asked that officers do what they could to progress negotiations with iwi.
Mrs Hadley undertook to meet with Mr Murray to discuss reporting on debtors.
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Resolved AUD/2016/004 THAT the report Corporate Report to 31 December 2015 (R5375) and its attachments (A1489864, A1482829, A793514, A1498466 and A1486343) be received and the variations noted. Murray/Barker Carried |
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Recommendation to Governance Committee and Council AUD/2016/005 THAT Council resolves to fund the additional expenditure for Tasman Street from the following activities; Roading subsidised budgets ($119,000), Roading unsubsidised budgets ($117,000) and Stormwater budgets ($92,000), a total of $328,000, from operational and capital expenditure budgets as appropriate, noting that any individual project underspends which cover this overspend will be reported by 30 June 2016; Barker/McGurk Carried |
|
Recommendation to Governance Committee and Council AUD/2016/006 AND THAT funding of $100,000 for the Stoke Foothills Traffic Study be deferred from 2015/16 to 2016/17; AND THAT funding of $100,000 for the Atawhai Hills Traffic Study be brought forward from 2016/17 to 2015/16. Barker/McGurk Carried |
9. Letter to the Council on the audit for the year ending 30 June 2015
Document number R5350, agenda pages 38 - 48 refer.
Group Manager Corporate Services, Nikki Harrison, presented the report.
The Subcommittee congratulated officers on an unmodified audit report.
There was discussion on the terminology used for the Suter redevelopment. It was highlighted that Council did not own the building but was involved in all decision making processes. It was also noted that should any over expenditure occur, this would be reported to the Subcommittee.
In response to a question, Senior Accountant, Tracey Hughes, advised the Housing New Zealand suspensory loan was no longer being treated as a contingent liability but was now appearing on the balance sheet.
In response to a question, the Chief Executive, Clare Hadley, advised that Council would comply with Department of Internal Affairs wording for performance measure rules in future.
Mrs Hadley noted the Subcommittee’s feedback regarding the residents survey and its comparability with other council surveys.
|
Resolved AUD/2016/007 THAT the report Letter to the Council on the audit for the year ending 30 June 2015 (R5350) and its attachment (A1499499) be received. Murray/Her Worship the Mayor Carried |
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Recommendation to Governance Committee and Council AUD/2016/008 THAT Council notes Audit NZ’s comments (A1499499) and how officers intend to address the issues raised. Murray/Her Worship the Mayor Carried |
10. Health and Safety quarterly update to 31 December 2015
Document number R4967, agenda pages 49 - 60 refer.
Group Manager Corporate Services, Nikki Harrison, presented the report.
The Chief Executive, Clare Hadley, spoke about the significant InControl training being undertaken. She highlighted that the information presented to the Health and Safety Forum was the same as that presented to the Subcommittee. It was noted that health and safety was about the culture of the organisation.
Mrs Hadley introduced Roger Ball in his new role as Manager Organisational Assurance and Emergency Management.
It was noted that a second health and safety workshop would be held before 31 March for elected members who missed the December 2015 workshop.
|
Resolved AUD/2016/009 THAT the report Health and Safety quarterly update to 31 December 2015 (R4967) and its attachments (A1483985 and A1485205) be received. Barker/McGurk Carried |
11. Council's Key Organisational Risk Progress Report
Document number R5395, agenda pages 61 - 79 refer.
Manager Organisational Assurance and Emergency Management, Roger Ball, presented the report and summarised the ‘bottom up’ approach taken.
It was suggested that area five, ineffective contracts and management of contracts, go beyond health and safety aspects and assess areas of ineffectiveness as well.
There was discussion on the Residual Risk Heat Map, noting that the colour codes reflected ownership of areas, and placement reflected what Council controlled.
It was suggested that compliance with legislation was a key risk; although it was pointed out there was a separate process for statutory compliance. It was also suggested that the area of fraud and corruption could also highlight increased work of internal audit on fraud detection.
In response to a question, the Chief Executive, Clare Hadley, provided detail on Council’s limited use of security guards.
It was pointed out that loss of key staff was a risk that could be given more emphasis. Several Subcommittee members felt that some risks were under-emphasised.
|
Resolved AUD/2016/010 THAT the Council's Key Organisational Risk Progress Report (R5395) and its attachment (A1461881) be received. McGurk/Barker Carried |
12. Internal Audit Report to 31 December 2015
Document number R5452, agenda pages 80 - 86 refer.
Internal Audit Analyst, Lynn Anderson, presented the report.
In response to a question, Ms Anderson advised the firearm at the York Valley Weighbridge had been assessed and found not to be required, so had been removed. She added that a recent visit to the Weighbridge had shown many of the recommended changes had been put in place.
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Resolved AUD/2016/011 THAT the Internal Audit Report to 31 December 2015 (R5452) and its attachments (A1485806 and A1498101) be received. Murray/McGurk Carried |
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Recommendation to Governance Committee and Council AUD/2016/012 THAT Council note the internal audit findings, recommendations and status of action plans up to 31 December 2015 (R5452). Murray/McGurk Carried |
13. Extension of loan facility to the Melrose Society
Document number R4814, agenda pages 87 - 104 refer.
Group Manager Community Services, Chris Ward, said that in line with the public forum presentation from Mr Briggs, additional information was required before the matter could be considered.
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Resolved AUD/2016/013 THAT pursuant to Standing Order 3.12.1 the item Extension of loan facility to the Melrose Society be left to lie on the table, to be considered at the Audit, Risk and Finance Subcommittee meeting on 31 March 2016, commencing at the conclusion of the Works and Infrastructure Committee, in Ruma Marama, Civic House, 110 Trafalgar Street, Nelson. Peters/McGurk Carried |
14. Exclusion of the Public
The Chairperson noted Mr Cross’s concerns about moving into public excluded for the item Letter to the Council on the audit for the year ending 30 June 2015 - Utilities Contract, and supported officer advice that it was appropriate to do so.
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Resolved AUD/2016/014 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: Peters/McGurk 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 |
Audit, Risk and Finance Subcommittee Meeting Minutes - Public Excluded - 12 November 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. |
|
2 |
Letter to the Council on the audit for the year ending 30 June 2015 - Utilities Contract
|
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)(h) To enable the local authority to carry out, without prejudice or disadvantage, commercial activities
|
The meeting went into public excluded session at 3.01pm and resumed in public session at 3.14pm.
15. Re-admittance of the Public
|
Resolved AUD/2016/015 THAT the public be re-admitted to the meeting. Murray/Barker Carried |
It was noted that the public excluded item Letter to the Council on the audit for the year ending 30 June 2015 – Utilities Contract, would be more appropriately reflected with an additional public excluded reason.
|
Resolved AUD/2016/016 THAT Section 7(2)(b)(ii) ‘To 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’ be added to the public excluded reason for the report titled Letter to the Council on the audit for the year ending 30 June 2015 – Utilities Contract, to more appropriately reflect the nature of that matter. Barker/Her Worship the Mayor Carried |
|
Resolved AUD/2016/017 THAT it be noted that Council’s auditor, Bede Kearney, was aware of the proposal to consider the utilities contract information in public excluded and had confirmed it was Council’s decision as to what information it made publicly available in line with its obligations under the Local Government Official Information and Meetings Act 1987. Barker/Her Worship the Mayor Carried |
There being no further business the meeting ended at 3.17pm.
Confirmed as a correct record of proceedings:
Chairperson
Date
|
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Audit, Risk and Finance Subcommittee 31 March 2016 |
REPORT R5657
Status Report - Audit, Risk and Finance Subcommittee - 31 March 2016
1. Purpose of Report
1.1 To provide an update on the status of actions requested and pending.
2. Recommendation
|
THAT the Status Report Audit, Risk and Finance Subcommittee 31 March 2016 (R5657) and its attachment (A1324298) be received. |
Shailey Burgess
Administration Adviser
Attachments
Attachment 1: A1324298 - Status Report - Audit, Risk and Finance Subcommittee
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Audit, Risk and Finance Subcommittee 31 March 2016 |
REPORT R5334
Corporate Report to 31 January 2016
1. Purpose of Report
1.1 To inform the members of the Audit, Risk and Finance Subcommittee of the financial results of activities for the 7 months ending 31 January 2016 compared to the approved operating budget, and to highlight and explain any permanent and material variations.
2. Delegations
2.1 The Audit, Risk and Finance Subcommittee has oversight of the management of financial risks.
3. Recommendation
|
THAT the report Corporate Report to 31 January 2016 (R5334) and its attachments (A1513082, A1311288, and A1514038) be received and the variations noted. |
Recommendation to Governance Committee and Council
4. Background
4.1 The financial reporting focuses on the 7 month performance compared with the year to date approved operating budget.
4.2 The financial information provided to this sub-committee has been redesigned, informed by sector best practice and in consultation with this sub-committee’s external committee members. The intention is to provide information that is more visual, more focussed and less detailed, and high-level commentary that is better aligned with variance information as provided in the annual report. Feedback from the sub-committee is welcomed.
4.3 Unless otherwise indicated, all measures are against approved operating budget, which is LTP budget plus any carry forwards, plus or minus any other additions or changes as approved by Council throughout the year.
4.4 Budgets for operating income and expenditure are phased evenly through the year, whereas capital expenditure budgets are phased to occur mainly in the second half of the year.
5. Discussion
Financial Summary
5.1 For the 7 months ending 31 January 2016, the activity surplus/deficits are $2.9 million favourable to budget.
5.2 Financial information provided in attachments 1 – 7 to this report are:
· A financial measures dashboard with information on rates revenue, operating revenue and expenditure, and capital revenue and expenditure (Attachment 1).
· A grouping of more detailed graphs and commentary for operating income and expenditure (Attachment 2). Graphs on the left are by activity and those on the right are by category. The commentary is by category (as in the annual report) and highlights significant permanent differences and items of interest. Variances due to timing will not be itemised unless they become permanent.
· A treasury measures dashboard with a compliance table (green = compliant), a forecast of the debt/revenue ratio for the year, and a graph showing debt levels and cost of funds over a rolling 12 month period (Attachment 3).
· High level balance sheet (no change to that provided previously) (Attachment 4).
· A debtor analysis graph over 12 months, clearly showing outstanding debt levels and patterns for major debt types along with a summary of general debtors > 3 months and over $10,000 and other debtors at risk (Attachment 5).
· Two capital expenditure graphs – actual expenditure against operating budget for the financial year (no change), and year to date expenditure against operating budget by activity (Attachment 6).
· Major projects status report – no change (Attachment 7).
Community Investment Fund carry forward
5.3 It has been requested by the Community Investment Funding Panel (CIFP) that the unspent funds of the 2015/16 Community Investment Fund be transferred to the 2016/17 financial year. The total amount of unspent funding is $21,300. This amount includes $6,300 unallocated at the funding allocation meeting and a $15,000 agreement that was declined by St Barnabas Church.
5.4 The CIFP has chosen not to allocate the remaining funds in 2015/16 as it wishes to remain consistent with how it manages the funds. The Panel does not want the community to lose out on this amount of funding so if this request was declined, would attempt to allocate the funding this financial year. However, this would lead to a rushed process and not allow for a strategic approach in funding allocation. The Panel wishes to make allocations based on the merits of the individual projects rather than a desire to spend all of the available budget.
5.5 In the current Annual Plan budget for 2016/17, $305,700 is allocated to the fund. Of this amount $93,690 is assigned to existing agreements, $162,010 would be made available to be allocated to new agreements and $50,000 to new grants. If the funds transfer was approved, the unspent $21,300 would go towards new agreements, bringing the total allocation for new agreements to $183,310 with a total fund of $327,000 for the 2016/17 financial year.
Approved 2015/16 project budget changes
5.6 Numerous projects have had budget change approvals as per the Projects Management Processes and Governance Framework. Approximately $4.3 million has been transferred from the 2015/16 programme into the 2016/17 programme. A breakdown of projects which have had a budget change approved is detailed in Attachment 8. These budget changes may not yet have been incorporated into the budget figures used in Attachment 6.
Alignment with relevant Council policy
5.7 The financial reporting is prepared comparing current year performance against the year to date approved budget for 2015/16.
6. Assessment of Significance against the Council’s Significance and Engagement Policy
6.1 There are no significant decisions.
7. Consultation
7.1 No consultation is required.
8. Inclusion of Māori in the decision making process
8.1 No consultation is required.
Tracey Hughes
Senior Accountant
Attachments
Attachment 1: Financial Measures (A1513082)
Attachment 2: Operating Income and Expenditure (A1513082)
Attachment 3: Treasury Measures (A1513082)
Attachment 4: Balance Sheet (A1513082)
Attachment 5: Debtor Analysis (A1513082)
Attachment 6: Capital Expenditure (A1513082)
Attachment 7: Major Projects Status Report (A1311288)
Attachment 8: Approved Project Budget Changes (A1514038)
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Audit, Risk and Finance Subcommittee 31 March 2016 |
REPORT R5508
Audit Arrangement letter 2015/16
1. Purpose of Report
1.1 To provide the subcommittee with the Audit Arrangement Letter for the year ending 30 June 2016, and ask for any feedback before the letter is signed by the Mayor.
2. Delegations
2.1 The subcommittee is responsible for the oversight of the audit process and the audit of Council’s Annual Report and annual accounts.
3. Recommendation
4. Discussion
4.1 The Audit Arrangement letter 2015/16 (Attachment 1) sets out the proposed arrangements for the 2015/16 audit of the Council, including Nelson Tasman Combined Civil Defence Organisation.
4.2 There is a separate audit arrangement letter for the debenture trust deed but this is not yet available from Audit NZ and will be brought to a future subcommittee meeting.
4.3 This letter is required to be signed by the Mayor to confirm that the details of the audit match Council’s understanding of the arrangements.
5. Options
5.1 That the subcommittee provide feedback on the Audit Arrangement letter if required, noting it will be signed by the Mayor once the Subcommittee’s feedback is incorporated.
6. Alignment with relevant Council policy
6.1 This recommendation is not inconsistent with any previous Council decision.
7. Assessment of Significance against the Council’s Significance and Engagement Policy
7.1 This is not a significant decision in terms of the Council’s significance and engagement policy.
8. Consultation
8.1 No consultation has taken place in preparation of this report.
9. Inclusion of Māori in the decision making process
9.1 No consultation with Maori has taken place in preparation of this report.
Nikki Harrison
Group Manager Corporate Services
Attachments
Attachment 1: A1511332 - Audit Arrangement letter 2015/16
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Audit, Risk and Finance Subcommittee 31 March 2016 |
REPORT R5575
Extension of loan facility to the Melrose Society
1. Purpose of Report
1.1 To consider providing grant and loan funding to the Colonel Noel Percy Adams Trust (Melrose) Society for refurbishment of toilets in Melrose House.
2. Delegations
2.1 The Audit, Risk and Finance Subcommittee’s area of responsibility includes: to monitor Council’s financial and service performance and to make recommendations to the Governance Committee and Council on those matters.
3. Recommendation
|
THAT the report Extension of loan facility to the Melrose Society (R5575) and its attachments (A1509577 and A1416892) be received. |
Recommendation to Governance Committee and Council
4. Background
4.1 Melrose House is owned by Council and is currently leased to the Melrose Society until 2018, with a further extension to 2021 currently proposed to the Society. The Society subleases part of the building as an apartment and café, and uses the income generated to maintain the interior of the house. Council is responsible for maintenance of the exterior.
4.2 The Society approached Council in 2011 seeking permission to refurbish the toilets in Melrose House. The current facilities are not in character with the house and are not adequate for the numbers of people using the house.
4.3 Having received approval from Council for the alterations, the Society has submitted a number of funding applications to raise the money required for the refurbishment. The Society has been allocated $40,000 by the Rata Foundation, conditional on matching funding being secured. The Society’s other funding applications have been unsuccessful.
4.4 In February 2016 Melrose Society amended their original loan request of up to $35,000 and has now indicated that they will be seeking additional financial support to cover increased costs for the toilet renovation and to incorporate the installation of a chiller unit. The total estimated cost for this work is $109,000.
4.5 Rata Foundation will contribute $40,000 to the project on a matched funding basis. The Society has indicated that it would be prepared to put $10,000 of its own money into the project. The Society gets income of around $26,641 each year from the subleases and is also reimbursed expenses (power etc) by the tenant.
4.6 The Society has therefore requested a maximum loan of $60,000 from Council (Attachment 1).
4.7 In its 2010-11 Annual Plan Council decided to extend a loan to the Society of $25,000 towards the heating system in the house. The final repayment of that loan ($5000) was made in January 2016.
4.8 A copy of the Society’s most recent accounts (for year ending 31 December 2014) is attached for information (Attachment 2).
5. Discussion
5.1 The Society is in good health, with a healthy balance sheet and a diverse governance group. It has successfully paid off a loan of $20,000 from Council (for heating upgrade) and has secured $40,000 of grant funding towards the refurbishment costs of the toilets.
5.2 In order to recognise that as owner of the building Council does have responsibilities to maintain adequate toilet facilities it is recommended that a grant of $15,000 be made to the Society. The grant could be provided from existing funds allocated in 2016/17 for asbestos removal in the house. A recent assessment has shown that no asbestos is present in the House ceilings and these funds are not required for that purpose.
5.3 The standard of toilet facilities proposed by the Society is significantly higher than Council would normally require. This reflects the standard expected by event organisers and other users for which the Society receives revenue so it is appropriate that the Society contributes to the remaining costs.
5.4 The Society needs to draw down the Rata Foundation grant by August 2016. If it waited until the Annual Plan, it would not have time to make alternative arrangements if Council chooses not to provide funding. Instead it has asked Council to make a decision now in order to give some clarity over what the next steps for the Society should be.
5.5 The Society has indicated that if Council approves a loan that it would make a submission through the Annual Plan 2016/17 for the loan to be converted into a grant. It is recommended that Council signal to the Society that the $15,000 grant is the maximum grant that it will allocate for these projects, and that further requests to Council for grant funding for these projects will be declined.
5.6 Council, as building owner, needs to be satisfied that the final designs for any upgrades to the House are approved by the Group Manager Infrastructure.
Costs
|
Toilet renovations |
$97,000 |
|
Chiller installation |
$13,000 |
|
Total |
$110,000 |
Funding
|
Rata Foundation |
$40,000 |
|
Melrose Society |
$10,000 |
|
Council Grant |
$15,000 |
|
Council Loan |
$45,000 |
|
Total |
$110,000 |
6. Options
6.1 Council could choose to extend a loan to the Society, which has requested $60,000. Officers recommend that $45,000 be allocated based on the previous precedent in relation to providing a loan for the heating for Melrose and as the Society is able to afford to contribute $10,000 from its own reserves to the project.
6.2 Council could offer to provide a grant to the Society of up to $60,000. Officers recommend that a maximum grant of $15,000 be allocated to recognise its responsibilities as house owner. The contribution expected from Melrose Society recognises its ability to generate income from the facilities and the house.
6.3 Council could choose to decline the loan request. This may result in the loss of the Rata Foundation grant, which requires match funding to be in place. This would also mean that the toilet upgrade would not happen for some considerable time. This option is not recommended.
7. Alignment with relevant Council policy
7.1 There is no specific funding in the Long Term Plan for this work. The recommended approach is consistent with the Whakatu Nelson Heritage Strategy.
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 making these recommendations, other than with the Melrose Society.
10. Inclusion of Māori in the decision making process
10.1 Maori have not been consulted on in making these recommendations.
11. Conclusion
11.1 The Melrose Society has requested loan funding for development of facilities. Officers recommend that Council partners with the Rata Foundation and the Society, and contributes both grant funding and loan funding to the project.
Chris Ward
Group Manager Community Services
Attachments
Attachment 1: A1509577 - Melrose House Trust - Request for loan funding
Attachment 2: A1416892 - Melrose House - Financial Accounts
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Audit, Risk and Finance Subcommittee 31 March 2016 |
REPORT R5640
Letter to Council on the audit for the year ended 30 June 2015 - further information
1. Purpose of Report
1.1 To provide the full letter to the Council on the audit for the year ending 30 June 2015 from Audit NZ, including the previously redacted section 3.5.
2. Delegations
2.1 The Subcommittee is responsible for the oversight of the audit process and the audit of Council’s Annual Report and annual accounts.
3. Recommendation
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THAT the report Letter to Council on the audit for the year ended 30 June 2015 - further information (R5640) and its attachment (A1493673) be received. |
4. Discussion
4.1 The Letter to Council on the audit for the year ended 30 June 2015 presented to the Audit, Risk and Finance Subcommittee meeting on 18 February 2016 had section 3.5 redacted. This section was discussed in Public Excluded. This item is now being entered on the public record.
5. Options
5.1 That the Subcommittee receive the report.
6. Alignment with relevant Council policy
6.1 This recommendation is not inconsistent with any previous Council decision.
7. Assessment of Significance against the Council’s Significance and Engagement Policy
7.1 This is not a significant decision.
8. Consultation
8.1 No consultation has occurred in preparation of this report.
9. Inclusion of Māori in the decision making process
9.1 No consultation with Maori has occurred in preparation of this report.
Nikki Harrison
Group Manager Corporate Services
Attachments
Attachment 1: A1493673 - Audit New Zealand letter to the Council on the audit of Nelson City Council for the year ended 30 June 2015
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Audit, Risk and Finance Subcommittee 31 March 2016 |
REPORT R5649
Insurance renewal 2016/17 - infrastructure assets
1. Purpose of Report
1.1 To update the subcommittee on the 2016/17 insurance renewal for infrastructure assets.
2. Delegations
2.1 The Audit, Risk and Finance subcommittee has responsibility to consider items relating to risk management.
3. Recommendation
Recommendation to Governance Committee and Council
4. Background
4.1 Council has been a member in the Local Authority Protection Programme (LAPP) scheme since it started in 1993. It is a mutual scheme whose membership now consists of 32 local authorities, prior to the Christchurch earthquakes this was around 60. It provides insurance cover for damage to infrastructural assets from natural hazard events. It only covers the 40% of damage costs not covered by the National Disaster Recovery Plan which currently provides 60% cover from Central Government. Council has $719 million of infrastructure assets covered by the Local Authority Protection Programme ($696m 2015/16).
4.2 Council gave notice last year that it was considering withdrawing from the LAPP scheme (as it did in the prior year). Members must give one year’s notice but are able to retract the notice by mid May for the following financial year. Council officers believe it is financially prudent to give notice to withdraw annually so that Council can look at other insurance options. Council gave notice on 18 May 2015 that it intended to stay with LAPP for the 2015/16 renewal and again gave notice to withdraw from 1 July 2016.
5. Discussion
5.1 Council has been in discussion with Aon New Zealand (insurance brokers) about joining a collective of local authorities to obtain insurance cover for our infrastructure assets. This would be a separate arrangement to the Top of the South collective which Council is part of with Tasman and Marlborough District Council for material damage and other insurance policies (business interruption, motor vehicle, public and professional indemnity, crime, statutory and employers liability, harbour masters and wreck removal liability, hall hirers liability, personal accident and forestry).
5.2 The infrastructure asset collective would initially be with 8 local authorities from the Manawatu Wanganui Local Authority Shared Services (MWLASS) group. Over time, Aon’s intent would be to form a South Island collective depending on sufficient councils opting in to form a collective.
5.3 Aon has sourced some quotes for 2016/17 insurance cover for Council’s infrastructure assets. For a similar deductible (amount Council would have to pay itself before claiming any funds) to LAPP of $1.8m the annual premium quoted was $215,000. This would be subject to a limit for any one event of $125m total (including the central government 60% component) and one automatic reinstatement for earthquake per year for nil premium.
5.4 The limit is a shared limit - however the geographic separation would effectively mean that in the event of a large natural disaster occurring close to Nelson – the other councils would likely be unaffected so the limit would not be shared. It does mean that a significant loss to one or more of the other 8 councils within the MWLASS group could impact Council as a consequence, but in that sense the arrangement is not different from LAPP. However, with LAPP, Council are exposed to the risks from 31 other councils (including Tasman and Marlborough District Councils). Council would need to be aware of geographic separation if a South Island collective was formed in the future.
5.5 LAPP are unable to provide an estimate of contributions for 2016/17 (will be available later in April). The premium in 2015/16 was $279,200 with a $1.8m deductible. This policy is subject to the same limit as the Aon proposal ie a limit for any one event of $125m total including the central government 60% component with one reinstatement per year.
5.6 LAPP are also reviewing their offering to Councils going forward, after a survey was conducted amongst the sector. The fund was now reached critical mass again after being depleted during the Christchurch earthquakes. The Wellington councils are no longer in LAPP therefore this does lower the risk for other member councils.
Risk modelling
5.7 As part of the presentation of our infrastructure asset portfolio to insurance companies in London, Aon New Zealand has undertaken risk modelling on Council’s flood and earthquake risks using Tonkin and Taylor analysis and data on our infrastructure assets (including location and value).
5.8 Based on an initial risk assessment it would appear that Council is underinsured; that the $125m loss limit (set by LAPP and therefore quoted on for comparison) is not enough. Pricing indications of the potential shortfall, for an additional $75m above the current $125m loss limit (i.e. $200m for any one loss) is likely to be in the region of $100,000. Officers will investigate whether there is an option of staying with LAPP for the core limit and purchasing the additional ‘excess’ layer through Aon.
· Other matters
5.9 Local Government New Zealand (LGNZ) commissioned a report in 2013 to review the insurance market for the local authority sector post Christchurch earthquakes and leaky homes and the impact thereof on the three sector-owned entities Civic, LAPP and Riskpool. The report made recommendations which included establishing a Local Government Risk Agency (LGRA) and reassessing the role of Central Government in meeting the 60% not covered by local authorities.
5.10 Contrary to initial commentary, the LGRA is likely not to effect the LAPP scheme but provide support to local authorities, particularly smaller ones, in understanding risk management processes.
5.11 Treasury is likely to put out a consultation document in May 2016 on the current 40/60% cost sharing arrangement. This may include consideration of Central Government contributing a lower percentage for smaller more frequent events, introduction of risk management regulations etc.
5.12 LAPP are also reviewing their offering to Councils going forward, after a survey was conducted amongst the sector. The fund was now reached critical mass again after being depleted during the Christchurch earthquakes. The Wellington councils are no longer in LAPP therefore this does lower the risk for other member councils.
6. Options
6.1 This report recommends that the Chief Executive is given delegated authority to decide whether Council should exit from the LAPP. If this option wasn’t allowed, a decision couldn’t be made in time to meet the mid May deadline for exiting LAPP.
7. Alignment with relevant Council policy
7.1 This recommendation is not inconsistent with any previous Council decision.
8. Assessment of Significance against the Council’s Significance and Engagement Policy
8.1 This is not a significant decision.
9. Consultation
9.1 No consultation has been undertaken in preparing this report.
10. Inclusion of Māori in the decision making process
10.1 No consultation with Maori has been undertaken in preparing this report.
11. Conclusion
11.1 It is recommended that the Chief Executive is given delegated authority to decide whether Council should exit from the LAPP by the end of May 2016.
Nikki Harrison
Group Manager Corporate Services
Attachments
