AGENDA
Ordinary meeting of the
Audit, Risk and Finance Subcommittee
Thursday 23 June 2016
Commencing at 1.00pm
Council Chamber
Civic House
110 Trafalgar Street, Nelson
Membership: Mr John Peters (Chairperson), Her Worship the Mayor Rachel Reese, Councillors Ian Barker and 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
23 June 2016
1.1 An apology has been received from Her Worship the Mayor Rachel Reese
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 M1874
Recommendation
THAT the minutes of the meeting of the Audit, Risk and Finance Subcommittee, held on 10 May 2016, be confirmed as a true and correct record.
7. Internal Audit Plan - 2016/17 13 - 17
Document number R4216
Recommendation
THAT the report Internal Audit Plan - 2016/17 (R4216) and its attachment (A1562649) be received;
AND THAT the Subcommittee note the changes in timeframes to the Internal Audit Procedure.
Recommendation to Governance Committee and Council
THAT the Internal Audit Plan 2016/17 (A1562649) be approved;
AND THAT it be noted there will be unbudgeted expenditure required, which will be reported for approval to the Audit, Risk and Finance Subcommittee through the Corporate Report once estimates have been confirmed.
8. Accounting Policies 18 - 34
Document number R5504
Recommendation
THAT the report Accounting Policies (R5504) and its attachment (A1554702) be received;
AND THAT the Subcommittee notes the attached accounting policies will be included in the Annual Report 2015/16.
Document number R5507
Recommendation
THAT the report Procurement Policy (R5507) and its attachment (A1540508 and A345448) be received.
Recommendation to Governance Committee and Council
THAT the revised Procurement Policy (A1540508) be adopted.
10. Employee Conflicts of Interest Policy 53 - 58
Document number R5918
Recommendation
THAT the report Employee Conflicts of Interest Policy (R5918) and its attachment (A1288320) be received.
11. Theatre Royal Loan 59 - 95
Document number R6040
Recommendation
THAT the report Theatre Royal Loan (R6040) and its attachments (A1135204, A912504, and A1145163) be received.
12. Interim audit letter for year ending 30 June 2016 96 - 103
Document number R6064
Recommendation
THAT the report Interim audit letter for year ending 30 June 2016 (R6064) and its attachment (A1565622) be received;
AND THAT the suggested responses to the recommendations are noted.
13. Capital Projects Carry Forwards 2015/16 104 - 110
Document number R5992
Recommendation
THAT the report Capital Projects Carry Forwards 2015/16 (R5992) and its attachments (A1562956 and A1557401) be received.
Recommendation to Governance Committee and Council
THAT Council approves continuing work on 2015/16 capital projects within the 2015/16 approved budgets, noting a final report on carry forwards will come to the Governance Committee’s meeting on 25 August 2015.
14. Operating Expenditure Carry Forwards 2015/16 111 - 116
Document number R6071
Recommendation
THAT the report Operating Expenditure Carry Forwards 2015/16 (R6071) and its attachment (A1557519) be received.
Recommendation to Governance Committee and Council
THAT Council approves continuing work on 2015/16 operating projects within the 2015/16 approved budgets, noting a final report on carry forwards will come to the Governance Committee’s meeting on 25 August 2016.
15. Corporate Report to 30 April 2016 117 - 130
Document number R5998
Recommendation
THAT the report Corporate Report to 30 April 2016 (R5998) and its attachments (A1557787 and A1563107) be received;
AND THAT the Audit, Risk and Finance Subcommittee refer to the Governance Committee its delegation for the review of the draft Annual Report and the 2015/16 Carry Forwards Report.
Minutes of a meeting of the Audit, Risk and Finance Subcommittee
Held in the Council Chamber, Floor 2A, Civic House, 110 Trafalgar Street, Nelson
On Tuesday 10 May 2016, commencing at 11.09am
Present: Mr J Murray (Chairperson), Her Worship the Mayor R Reese, Councillors I Barker and B McGurk
In Attendance: Councillors P Matheson and G Noonan, Chief Executive (C Hadley), Group Manager Corporate Services (N Harrison), Group Manager Infrastructure (A Louverdis), and Administration Adviser (E-J Ruthven)
Apology: Mr John Peters
It was noted that a resolution was required to appoint a chairperson for the meeting.
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Resolved AUD/2016/030 THAT Mr John Murray chair the Audit, Risk and Finance Subcommittee meeting of 10 May 2016. Barker/Her Worship the Mayor Carried |
1. Apologies
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Resolved AUD/2016/031 THAT an apology be received and accepted from Mr John Peters. Murray/Her Worship the Mayor 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.
4. Public Forum
There was no public forum.
5. Confirmation of Minutes
5.1 31 March 2016
Document number M1801, agenda pages 6 - 12 refer.
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Resolved AUD/2016/032 THAT the minutes of the meeting of the Audit, Risk and Finance Subcommittee, held on 31 March 2016, be confirmed as a true and correct record. McGurk/Her Worship the Mayor Carried |
6. Status Report - Audit, Risk and Finance Committee - 10 May 2016
Document number R5861, agenda pages 13 - 14 refer.
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Resolved AUD/2016/033 THAT the Status Report Audit, Risk and Finance Subcommittee 10 May 2016 (R5861) and its attachment (A1324298) be received. Barker/McGurk Carried |
7. Chairperson's Report
There was no Chairperson’s Report.
8. Council's Key Organisational Risks - Progress Report 2
Document number R5490, agenda pages 15 - 31 refer.
Group Manager Corporate Services, Nikki Harrison, and Manager Organisational Assurance and Emergency Management, Roger Ball, presented the report.
In response to questions, Mr Ball explained how the magnitude of risks was calculated, and the next steps officers would be taking in this area.
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Resolved AUD/2016/034 THAT the report Council's Key Organisational Risks - Progress Report 2 (R5490) and its attachment (A1519755) be received. Barker/McGurk Carried |
9. Balance Sheet reconciliation review
Document number R5505, agenda pages 32 - 38 refer.
Group Manager Corporate Services, Nikki Harrison, and Senior Accountant, Tracey Hughes, presented the report. Ms Hughes explained that the risk column in the reconciliation table related to accounting classifications.
There was a discussion regarding the status of the loan to the Theatre Royal. In response to questions, Ms Harrison noted this was an interest free loan, for which no repayments had been received to date, and Ms Hughes explained that the risk column in the table did not evaluate individual loans, but recognised all community loans as a risk.
Attendance: the meeting adjourned from 11.36am to 11.40am.
It was noted that a report would be brought to the next subcommittee meeting regarding the status of the Theatre Royal loan.
In response to further questions, Ms Hughes explained the references on the table relating to the loan to Rainbow Ski Field, reserve funds, a non-current suspensory loan, and holiday pay accrual.
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Resolved AUD/2016/035 THAT the report Balance Sheet reconciliation review (R5505) and its attachment (A1540192) be received. McGurk/Barker Carried |
10. Audit, Risk and Finance subcommittee work plan
Document number R5654, agenda pages 39 - 41 refer.
Group Manager Corporate Services, Nikki Harrison, presented the report. She said that the task list represented a three year work plan, but that items were only scheduled for meetings until the end of the triennium.
In response to questions, Ms Harrison gave updates relating to the tax governance framework, tax review, sensitive expenditure policy, procurement policy and conflicts of interest policy. She confirmed there was a current conflicts of interest policy for officers, and said this would be brought to the next subcommittee meeting.
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Resolved AUD/2016/036 THAT the report Audit, Risk and Finance subcommittee work plan (R5654) and its attachment (A1389278) be received; Her Worship the Mayor/Barker Carried |
11. Internal Audit Report to 31 March 2016
Document number R5793, agenda pages 42 - 48 refer.
Internal Audit Analyst, Lynn Anderson presented the report. She said good progress had been made on a number of internal audits, but that completing them was taking longer than anticipated. She added that there had been few significant findings.
In response to questions, Ms Anderson explained that issues noted as part of the cash handling internal audit were unlikely to be linked to banking controls. She added that the initial audits had a stronger focus on best practice, rather than being compliance checking.
The subcommittee discussed the timeframe for internal audits, and a suggestion was made that the Senior Leadership Team consider resourcing constraints in the next Internal Audit Annual Plan.
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Resolved AUD/2016/037 THAT the Internal Audit Report to 31 March 2016 (R5793) and its attachments (A1533053 and A1532989) be received. Barker/McGurk Carried |
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Recommendation to Governance Committee and Council AUD/2016/038 THAT Council note the internal audit findings, recommendations and status of action plans up to 31 March 2016 (R5793). Barker/McGurk Carried |
12. Corporate Report to 31 March 2016
Document number R5872, agenda pages 49 - 61 refer.
Senior Accountant, Tracey Hughes, presented the report.
In response to questions regarding operational expenditure, Ms Hughes said that the underspend would likely be outside the 5% variance, as there were several large items that were unlikely to attract full budgeted spend by the end of financial year.
In response to questions regarding capital expenditure, Mr Louverdis explained that many projects currently had work on-site, with invoices expected prior to the end of financial year. He added that the KPI relating to completion of the capital programme should be met.
In response to further questions, Mr Louverdis gave updates relating to forestry, use of water for fire-fighting purposes, installation of membranes at the water treatment plant, and the Corder Park pump station, and Mrs Hadley explained the reasons for the delay in backpay for officers on individual employment agreements.
A question was raised about debtors.
Attendance: The meeting adjourned from 12.29pm to 12.31pm, during which time Councillor Barker left the meeting.
It was noted that the four general debtors listed were being managed, and had appropriate repayment plans in place.
Attendance: Councillor Barker returned to the meeting at 12.32pm.
There was a discussion regarding the transfer of budget in relation to the proposed Progressive Enterprises Limited private Plan Change, and Mrs Hadley explained the process and requirement for expert economic and traffic evidence.
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Resolved AUD/2016/039 THAT the report Corporate Report to 31 March 2016 (R5872) and its attachments (A1544370 and A1544028) be received. Her Worship the Mayor/McGurk Carried |
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Recommendation to Governance Committee and Council AUD/2016/040 THAT the transfer of legal budget from the Corporate activity to the Planning activity in 2015/16 in order to obtain economic and traffic evidence for the submission to Tasman District Council on the proposed Progressive Enterprises Ltd Private Plan Change be noted. Her Worship the Mayor/McGurk Carried |
There being no further business the meeting ended at 12.40pm.
Confirmed as a correct record of proceedings:
Chairperson
Date
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Audit, Risk and Finance Subcommittee 23 June 2016 |
REPORT R4216
Internal Audit Plan - 2016/17
1. Purpose of Report
1.1 To approve the Internal Audit Plan through to 30 June 2017.
1.2 To note change to the Internal Audit Procedure.
2. Delegations
2.1 The Audit, Risk and Finance Subcommittee have responsibility for risk management and internal control.
3. Recommendation
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THAT the report Internal Audit Plan - 2016/17 (R4216) and its attachment (A1562649) be received; AND THAT the Subcommittee note the changes in timeframes to the Internal Audit Procedure. |
Recommendation to Governance Committee and Council
4. Background
4.1 Under the approved Internal Audit Charter a risk-based internal audit plan is to be reviewed by the Subcommittee at least annually prior to the beginning of each financial year.
4.2 The Charter requires that in compiling the internal audit plan the impact of resource limitations is to be considered. At the Audit, Risk and Finance Subcommittee meeting of 10 May 2016, the Subcommittee suggested that the Senior Leadership Team consider the resourcing constraints that had impacted on the completion of planned audits for the 2015/16 year when approving the plan through to 30 June 2017. This is addressed below under Implications.
5. Discussion
Compilation of Internal Audit Plan
5.1 Using risk-based methodology, and in addition to audits that were not completed in the approved plan to 30 June 2016, the internal audit plan to 30 June 2017 includes audit topics according to priority. This includes any new topics which have been identified during ongoing risk assessments across the organisation.
5.2 As discussed at the Audit, Risk and Finance Subcommittee meeting on 10 May 2016, one reason for planned audits not being completed in the previous plan included the tight requisite response timeframes for Managers in the Internal Audit Procedure. To make the annual audit plan more achievable, standardised audit plan forms will be developed for Managers and an extension has been made to one of the corrective action timeframes:
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Risk Rating |
Response Time for Corrective Action (Original) |
Response Time for Corrective Action (New) |
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High |
7 days |
10 working days |
Implications
5.3 The Internal Audit Plan for the year to 30 June 2017 is considered more realistic than the previous plan through to 30 June 2016. It allows for 31 audits to be completed during the financial year. These will be spread - with internal audit performing sixteen, external contractors performing seven, and other expert officers within Council performing the remaining eight audits. Audits not performed by internal audit will be assessed and reported according to the Internal Audit Procedure and these reports will include any further recommendations considered appropriate by internal audit.
5.4 When compiling the plan, and where possible, there has been an attempt not to burden one Business Unit with successive audits.
6. Options
6.1 Accept the recommendation that the Internal Audit Plan 2016/17 be approved.
6.2 Reject the recommendation.
7. Alignment with relevant Council policy
7.1 The decision is not inconsistent with any other previous Council decision.
7.2 There is unbudgeted and unknown cost associated with the use of external contractors to perform some of the audits in this Plan. It is considered that specialised knowledge and competence which is unavailable within Council, is necessary to provide the degree of confidence needed for these audits. Once this audit plan is approved, scoping can occur and estimated costs can be reported back for approval to a future Subcommittee meeting.
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 report.
10. Inclusion of Māori in the decision making process
10.1 No consultation with Maori has been undertaken in preparing this report.
Lynn Anderson
Internal Audit Analyst
Attachments
Attachment 1: A1562649 - Internal Audit Plan 2016-17
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Audit, Risk and Finance Subcommittee 23 June 2016 |
REPORT R5504
Accounting Policies
1. Purpose of Report
1.1 To present the current significant accounting policies for review.
2. Delegations
2.1 The Audit, Risk and Finance Subcommittee has the power to recommend to the Governance Committee on matters related to the annual accounts, audit, internal control and statutory compliance. The significant accounting policies of Council impact all of these areas.
3. Recommendation
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THAT the report Accounting Policies (R5504) and its attachment (A1554702) be received; AND THAT the Subcommittee notes the attached accounting policies will be included in the Annual Report 2015/16. |
4. Background
4.1 Council’s significant accounting policies are presented to the public twice a year, as they are included in the financials section of all Long Term Plans or Annual Plans, and Annual Reports.
4.2 The review of these policies is included in the work plan for this subcommittee in the current financial year. These policies will now be presented for consideration every three years or when there is a significant change.
4.3 This is an opportunity for the subcommittee to consider the policies in isolation, be informed of any current or prospective changes to the policies and identify possible changes for consideration.
5. Discussion
5.1 Significant accounting policies describe the treatment of income and expenditure, assets and liabilities and equity. They are not (and are not intended to be) processes or procedures.
5.2 Nelson City Council’s significant accounting policies are reviewed by the Senior Accountant twice a year, in advance of being included in Annual or Long Term Plan and the Annual Report. This review is required to ensure that the policies reflect the latest requirements, arrangements, controls and practice.
5.3 The policies underwent a significant revision in advance of the 2014/15 Annual Report audit to reflect compliance under the new Public Benefit Entity International Public Sector Accounting Standards (PBE IPSAS).
5.4 The policies closely align to both PBE IPSAS and New Zealand generally accepted accounting practice (NZ GAAP).
5.5 The policies are part of the framework used by Audit NZ in their audits of Long Term Plans and Annual Reports. Audit have not raised any issues with the accounting policies in the past, and so long as they are compliant with NZ GAAP and PBE IPSAS they are unlikely to do so.
5.6 Attachment 1 itemises the significant accounting policies as contained in the 2014/15 Annual Report. There have been no substantive changes to these policies since and these are intended to be included in the 2015/16 Annual Report.
5.7 Over the next year, officers will be investigating whether to recommend that Council buildings are revalued. This would align our policies with our significant Council Controlled Trading Organisations. However there will be ongoing costs associated with doing this (valuations), including potentially a rating impact so some work needs to be done.
6. Options
6.1 Accept the recommendations – receive the Accounting Policies report and endorse the policies for inclusion in the 2015/16 Annual Report.
6.2 Reject the recommendation – not receive the Accounting Policies report or endorse the policies for inclusion in the 2015/16 Annual Report.
7. Alignment with relevant Council policy
7.1 Significant accounting policies are presented to Council’s stakeholders twice a year as part of annual and long term planning and reporting. A review by the subcommittee is therefore appropriate.
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 preparation of this report.
10. Inclusion of Māori in the decision making process
10.1 There has been no consultation with Maori in the preparation of this report.
Tracey Hughes
Senior Accountant
Attachments
Attachment 1: Significant accounting policies (A1554702)
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Audit, Risk and Finance Subcommittee 23 June 2016 |
REPORT R5507
Procurement Policy
1. Purpose of Report
1.1 To approve an updated procurement policy for the Council as the foundation for further development of the Council’s procurement systems and procedures.
2. Delegations
2.1 The Audit Risk and Finance Subcommittee has oversight of the Council’s management of risk and internal procedures including procurement and procurement related risk.
3. Recommendation
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THAT the report Procurement Policy (R5507) and its attachment (A1540508 and A345448) be received. |
Recommendation to Governance Committee and Council
4. Background
4.1 The ongoing improvement of the Council’s procurement systems and procedures, for which the attached revised policy forms the foundation, is intended to clarify processes, provide for recent innovations (e.g. use of whole of government purchasing arrangements), increase flexibility and efficiency, and reduce contracting risks. The policy is to be brought into effect on 1 October to allow time to put in place the required procedures and templates (e.g. standardised Council contract templates) to implement it.
4.2 The previous Procurement Policy is included for information as Attachment 2.
5. Discussion
5.1 The proposed updated procurement policy addresses the following matters.
Clarity and efficiency in selecting providers
5.2 The attached revised policy provides for graduated steps of effort in selecting the best provider for a given job. At the smaller job/lower cost item end, requirements have been streamlined so that these items can be contracted with minimum effort. The policy also provides for the use of preferred supplier arrangements which would be specifically negotiated for a fixed term and provide items such as service guarantees, discounts etc. Using preferred suppliers and supplier panels will also help the Council to build up knowledge of suppliers who provide superior levels of service.
5.3 At a larger scale, provision is made for supplier panels which are prequalified for specific types of work at agreed rates and then can be called upon rapidly. Panels of this type will have a fixed duration and require resetting if required for a further time.
5.4 Requirements for open tender and proposal request remain for larger items of work.
Flexibility within principles
5.5 It is recognised that the many purchase decisions Council is required to make do not always fit neatly into any structure. Accordingly the role of the Procurement Steering Committee has been extended so it can make exceptions when required for specific purchase situations while retaining adherence to the principles of this policy. This authority is also provided for those to whom the Steering Committee would report – i.e. the Senior Leadership Team and/or Chief Executive.
Transparency of review
5.6 All organisations which contract for services face the possibility of being captured by a single supplier whose existing arrangements may be rolled over without proper consideration of alternatives. The attached revised policy considerably beefs up existing review procedures, where the scale of the contract warrants this. This is intended to lessen the likelihood of this type of roll over occurring to the Council’s disadvantage.
Use of Council originated contracts
5.7 Work done earlier this year has shown that, because Council has not had the capacity to offer its own suite of standard contracts, it has used many different contracts for services all of which have different exclusions, arrangements for liability etc. Such a situation is clearly undesirable for the organisation. We are now making arrangements to bring into use a standardised set of council originated contracts. The policy therefore requires the use of these except in limited cases, such as where roading subsidies require use of the subsidiser’s contract.
Whole of government purchase arrangements
5.8 The Council has already made considerable gains from opting in to whole of government purchasing arrangements in areas as diverse as banking services and motor vehicle purchases. The proposed policy provides a formal basis for the use of these, consistent with current delegations.
6. Options
6.1 Approve the attached updated procurement policy for Council, noting the advantages to Council described above.
6.2 Do not approve the updated procurement policy. Alignment with relevant Council policy
6.3 This policy updates an existing policy and is required for the efficient operation of Council.
6.4 The updating of the Council’s procurement policy will trigger a set of already planned updates to Council’s procedures and systems. This will require staff time to develop and put in place.
6.5 Principle (i) of the proposed policy requires consistency with the sustainability goals of Nelson 2060.
7. Assessment of Significance against the Council’s Significance and Engagement Policy
7.1 This is not a significant decision under the Council’s Significance and Engagement Policy.
8. Consultation
8.1 No consultation has been undertaken in the development of this updated Procurement Policy, although the updates were prepared making use of existing experience and after considering the policies of other similar local authorities.
9. Inclusion of Māori in the decision making process
9.1 There has been no consultation with Maori in the preparation of this policy.
Steve Vaughan
Risk & Procurement Analyst
Attachments
Attachment 1: A1540508 - Procurement Policy 2016
Attachment 2: A345448 - Procurement Policy 2015
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Audit, Risk and Finance Subcommittee 23 June 2016 |
REPORT R5918
Employee Conflicts of Interest Policy
1. Purpose of Report
1.1 To receive the Employee Conflicts of Interest Policy.
2. Delegations
2.1 The Audit, Risk and Finance Subcommittee has responsibility for risk management and internal control.
3. Recommendation
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THAT the report Employee Conflicts of Interest Policy (R5918) and its attachment (A1288320) be received. |
4. Background
4.1 It is best practice to have an Employee Conflicts of Interest Policy. This ensures that employee conflicts of interest are promptly disclosed and managed carefully in order to maintain the integrity and reputation of Nelson City Council (Council) and its employees, and to avoid reputational damage. The reputational risk that Council has potential exposure to is the reason this policy is being brought to the Sub-Committee.
5. Discussion
5.1 Historically, conflicts of interests for employees have been managed within certain areas of Council. Conflicts of interest registers are held for a number of business units including Senior Leadership Team, Building and Resource Consents and conflicts are noted through the recruitment process.
5.2 Building on this good work, a formal Employee Conflicts of Interest Policy has now been developed with a centralised system designed to hold this data. The Health and Safety System – InControl – has been adapted to record and report the conflicts. The Policy is included as Attachment 1.
6. Options
6.1 Accept the recommendation - receive Employee Conflicts of Interest Policy.
6.2 Reject the recommendation - not receive the Employee Conflicts of Interest 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: A1288320 - Employee Conflicts of Interest Policy
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Audit, Risk and Finance Subcommittee 23 June 2016 |
REPORT R6040
Theatre Royal Loan
1. Purpose of Report
1.1 To update the Subcommittee on the Theatre Royal loan as requested at the last Subcommittee meeting.
2. Delegations
2.1 The Audit, Risk and Finance Subcommittee is responsible for oversight and management of financial risk.
3. Recommendation
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THAT the report Theatre Royal Loan (R6040) and its attachments (A1135204, A912504, and A1145163) be received. |
4. Background
4.1 During the finalisation of the 2009/19 Community Plan it was agreed that a loan of $1.2 million to the Theatre Royal Trust be provided to assist with the refurbishment of the Theatre Royal but no terms and conditions for the loan were discussed.
4.2 At the Council meeting dated 1 October 2009 the following resolution was passed.
Approve an interest free loan of up to $1.2 million; and
That the repayment be set at $15,000 per quarter commencing on 30 June 2010 for the quarter ending on that day.
That the Trust provide audited accounts to the Council's Chief Financial Officer within three months of the Trust's balance date.
4.3 During the Annual Plan 2010/11 the Theatre Royal Trust requested a further $300,000 to complete the building refurbishment with repayments deferred to July 2011 and this was approved following consultation.
4.4 The loan documentation are included as Attachment 1 ($1.2m) and 2 ($300,000).
5. Discussion
5.1 The Council proposed in its Long Term Plan 2012/22 to take over ownership of the Theatre Royal (and the Nelson School of Music) and allow the entity to focus on operating the facility. It was also proposed in the Plan that Council clear the Theatre Royal debts of $2.1 million - $1.5 million owed to Council and the remaining $600,000 to a bank.
5.2 In the 2013/14 Annual Plan, Council affirmed existing funding levels for the Theatre Royal and Nelson School of Music until a new entity was formed to bring both institutions together into a new entity for the performing arts. Additional transition funding of $125,000 was set aside for the new entity to help establish its operations, and this was to reduce to $75,000 in 2014/15.
5.3 At a Council meeting 27 February 2014 (see Attachment 3) Council reallocated some of the transition funding of $100,000 to be an operating grant for 2013/14. This amount was to be sufficient to allow the Trust to operate independently and sustainably, and a clear expectation was set that the business should be managed without use of overdraft. Then, through the Annual Plan 2014/15 Council adjusted the ongoing operating grant funding to $220,000pa.
5.4 It was clear in the report to Council (Section 7.8 and 9.4) that the operating grant of $220,000 would not allow the Theatre Royal Trust to make any capital repayments to either Council or the bank.
6. Options
6.1 Accept the recommendation - receive the report.
6.2 Reject the recommendation - not receive the report.
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 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 The Audit, Risk and Finance Sub-committee requested a report on the Theatre Royal Loan.
Nikki Harrison
Group Manager Corporate Services
Attachments
Attachment 1: A1135204 - Term Loan Agreement - Nelson Historic Theatre Trust ($1.2M)
Attachment 2: A912504 - Term Loan Agreement - The Nelson Historic Theatre Trust ($300K)
Attachment 3: A1145163 - Council report 27Feb2014 - Theatre Royal - funding and other issues
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Audit, Risk and Finance Subcommittee 23 June 2016 |
REPORT R6064
Interim audit letter for year ending 30 June 2016
1. Purpose of Report
1.1 To provide the Subcommittee with the letter to the Council on the interim audit for the year ending 30 June 2016 from Audit NZ.
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 Interim audit letter for year ending 30 June 2016 (R6064) and its attachment (A1565622) be received; AND THAT the suggested responses to the recommendations are noted. |
4. Discussion
4.1 Audit NZ carried out the interim audit for the year ending 30 June 2016 in mid-April 2016 which focused on the Council's internal controls and the overall control environment. They issued two letters - a letter to the Council which covers governance issues (Attachment 1) and a letter to the Chief Executive which covers management issues.
4.2 Overall Audit NZ found that the Council's internal controls were operating effectively. However they have identified areas where the Council could consider enhancing its internal controls which are outlined in the letter to the Chief Executive.
Contract Management
4.3 Audit NZ notes that there is no integrated system for recording and monitoring contracts and recommends that a system be implemented.
4.4 Officers suggested response to this issue - agree that a centralised system should be developed. The new Risk and Procurement Analyst role has been tasked with considering the appropriate tool to fulfil the need.
Project Management
4.5 Audit NZ notes the significant changes made in the Capital Projects team in the way it approaches projects. Audit recommends that a project management policy be implemented to ensure all projects are managed consistently and appropriately in line with good practice.
4.6 Officers suggested response to this issue – the focus has been on the Capital Projects team processes and systems and work is starting on rolling out Project management training across the organisation. The focus needs to be on ‘right sizing’ the Project management tools for the size, risk and complexity of the projects. Consideration will be given to principles for project management across the organisation.
Supplementary letter
4.7 Audit NZ notes the matters raised in the supplementary letter to management. The Chief Executive accepts these comments and will address these matters prior to the 2015/16 Annual Report.
5. Options
5.1 That the Subcommittee note the matters raised in the letter to the Council on the interim audit of Nelson City Council for the year ending 30 June 2016 and the manner in which officers propose to address them.
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 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: A1565622 - Audit NZ - Letter to the Council on the interim audit of NCC for the year ending 30 June 2016
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Audit, Risk and Finance Subcommittee 23 June 2016 |
REPORT R5992
Capital Projects Carry Forwards 2015/16
1. Purpose of Report
1.1 To approve continuing work on 2015/16 capital projects in the interim until the carry forwards are formally approved.
2. Delegations
2.1 The Audit, Risk and Finance Subcommittee has oversight of the management of financial risk and makes recommendations to the Governance Committee and to Council.
3. Recommendation
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THAT the report Capital Projects Carry Forwards 2015/16 (R5992) and its attachments (A1562956 and A1557401) be received. |
Recommendation to Governance Committee and Council
4. Discussion
4.1 Capital expenditure to 30 April 2016 was $34.2 million, $14.4 million (30%) below operating budget (approved budget including Council resolutions). The operating budget for capital for the full year is $66.4 million. Large capital payments are anticipated for May and June.
4.2 An assessment has been done to provide an indication of year end carry forwards. As at 1 June 2016, approximately $15.8 million has been identified as potential carry forwards.
5. Projects managed by the Capital Projects team
5.1 The Capital Projects Team has identified 47 projects totalling approximately $11.3 million of budget that will need to be carried forward into 2016/17. Please see attachment 1.
5.2 13 projects totalling approximately $7.5 million were initially expected to be completed in the current financial year. The bulk of this budget is related to the Trafalgar Centre/Rutherford Park projects.
5.3 34 projects totalling approximately $3.7 million are multi-year projects where the timing of expenditure has changed. Hampton St East/Little Go Stream and the Stoke Community Centre projects account for more than half of this total.
6. Other capital projects carry forwards requested
6.1 A further 50 projects totalling approximately $3.0 million of budget have been identified as requiring/requesting carry over. Please see attachment 2.
6.2 32 projects with a carry forward total of approximately $2.0 million are currently underway. These projects include $737,000 for roading projects for which a subsidy will be claimed.
6.3 18 projects with a carry forward total of approximately $961,000 were not underway as at 30 April. Delays have occurred for a variety of reasons and project managers have requested that the budget is carried over to allow the projects to be undertaken in 2016/17.
7. Conclusion
7.1 Most of the projects indicating carry forward are either currently underway or scheduled to be underway before 30 June 2016, and as the budget is approved for spending in 2015/16, it is proposed that work continue on these projects in the meantime.
7.2 A report on requested carry forwards will be on the agenda for the 25 August meeting of the Governance committee (as the information will not be finalised in time for the 4 August meeting of this subcommittee).
8. Options
8.1 Approve the recommendation – the spending is within 2015/16 approved budgets.
8.2 Not approve the recommendation. Work would need to cease on these projects until such time as the formal report approving carry forwards has made its way through the Council processes.
9. Alignment with relevant Council policy
9.1 Budgets were approved in the Annual Plan 2015/16 and subsequent Council resolutions but are currently not forecast to be fully spent by 30 June 2016.
10. Assessment of Significance against the Council’s Significance and Engagement Policy
10.1 This is not a significant decision.
11. Consultation
11.1 No consultation has been undertaken.
12. Inclusion of Māori in the decision making process
12.1 No consultation has been undertaken.
Tracey Hughes
Senior Accountant
Attachments
Attachment 1: Capital Projects team carry forwards (A1562956)
Attachment 2: Other capital carry fowards (A1557401)
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Audit, Risk and Finance Subcommittee 23 June 2016 |
REPORT R6071
Operating Expenditure Carry Forwards 2015/16
1. Purpose of Report
1.1 To approve ongoing work using 2015/16 operating budgets until carry forwards are formally approved on 25 August 2016.
2. Delegations
2.1 The Audit, Risk and Finance Subcommittee has oversight of the management of financial risk and makes recommendations to the Governance Committee and to Council.
3. Recommendation
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THAT the report Operating Expenditure Carry Forwards 2015/16 (R6071) and its attachment (A1557519) be received. |
Recommendation to Governance Committee and Council
4. Background
4.1 In prior years, as part of the LTP/Annual Plan preparation, officers were asked to formally make projections or forecasts of their current year spending. In some cases, unused budget from the current year was transferred to the forthcoming year in order to complete programmed pieces of work. The rating carry forward from the current year would (with a few specific exceptions) fund that work.
4.2 In the current year, officers were not asked to complete formal projections for reasons of efficiency. When that decision was made it was acknowledged that the organisation may have to consider carry forwards of operating expenditure in order to complete pieces of work without rating for it twice.
4.3 The practical result, at this stage of the year, is that there is currently budget in the current year that will not be used, and there is no budget in 2016/17 to complete various 2015/16 work that has been delayed.
5. Discussion
5.1 Based on April 2016 year to date results, officers have been asked to identify operating projects that will not be complete by 30 June 2016. A current year forecast and projected carry forward have been assessed for these projects, please see attachment 1. Including the School of Music and Saxton Field grants for capital works, nearly $2.5 million has been requested to be carried forward. Approval of finalised carry forwards is on the agenda for the 25 August Governance Committee.
5.2 In order that staff can keep moving towards delivery of the 2015/16 work programme, in the meantime officers request approval for 2015/16 budgets to continue to be used on 2015/16 projects as itemised in attachment 1.
Options
5.3 Option 1 – approve the recommendation – the spending is within 2015/16 approved budgets.
5.4 Option 2 – not approve the recommendation. Work would need to cease on these projects until such a time as the final report approving carry forwards has made its way through Council meeting processes.
6. Alignment with relevant Council policy
6.1 Budgets were approved in the Long Term Plan 2015-2025 year one (2015/16) but are currently not forecast to be fully spent by 30 June 2016.
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 been undertaken.
9. Inclusion of Māori in the decision making process
9.1 No consultation has been undertaken.
10. Conclusion
10.1 Attachment 1 itemises requested budget carry forwards for operating expenditure. As the budgets are approved for spending in 2015/16, it is proposed that work continue on these projects.
10.2 A report on requested carry forwards will be on the agenda for the 25 August meeting of the Governance Committee (as the information will not be finalised in time for the 4 August meeting of the Audit, Risk and Finance Subcommittee).
Tracey Hughes
Senior Accountant
Attachments
Attachment 1: Operating expenditure carry forward request (A1557519)
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Audit, Risk and Finance Subcommittee 23 June 2016 |
REPORT R5998
Corporate Report to 30 April 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 10 months ending 30 April 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
4. Background
4.1 The financial reporting focuses on the 10 month performance compared with the year to date approved operating budget.
4.2 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.
4.3 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
5.1 For the 10 months ending 30 April 2016, the activity surplus/deficits are $4.1 million favourable to budget.
5.2 Financial information provided in attachment 1 to this report are:
· A financial measures dashboard with information on rates revenue, operating revenue and expenditure, and capital revenue and expenditure. A new icon has been added to each applicable measure, indicating whether the variance is increasing or decreasing (arrows) and whether that trend is favourable or unfavourable (green or red).
· A grouping of more detailed graphs and commentary for operating income and expenditure. The first set of charts and 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. The second set of charts are by activity.
· 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 over a rolling 12 month period.
· High level balance sheet (no change to that provided previously).
· 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.
· 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.
5.3 Operating income and expenditure variances have increased since the March report to this committee. The current indication is that $3.0 million of the variance will be carried forward to 2016/17 to fund work that has been delayed. $1.5 million of that variance is loan-funded (grants for capital works). See the report on this agenda on operating expenditure carry forwards R6071.
5.4 The capital revenue variance is decreasing as invoicing for expenditure in excess of Council’s contribution to the Suter redevelopment is catching up to the budget.
5.5 Capital expenditure is $14.4 million under budget, please see report R5992 on this agenda indicating potential carry forwards of $14.3 million.
6. Transfers of delegation
6.1 The last meeting of this Sub-committee in this triennium of Council is 4 August 2016. There are two matters delegated to this Sub-committee which will not be ready for review by 4 August due to extended year end close off, and cannot wait until the first meeting of the new Sub-committee. Officers therefore request that the delegations for review of the draft Annual Report and the Carry Forwards report be transferred to the Governance Committee for consideration at its 25 August 2016 meeting.
7. 1903 site shade sail
7.1 As discussed at the Annual Plan deliberations meeting on 11 and 12 May, a further section of shade sail will be ordered to ensure there is cover for the audience as well as performers at events on the 1903 site. The cost estimate is $3,600 and will be a charge against the CBD Enhancement fund. Funding covers the cost of fabric as well as fixtures to anchor it to. The shade sail will only remain in place during events and erection and removal will be the responsibility of event organisers.
8. Charter Parade
8.1 Council incurred costs of $2,891 for the NZ Army Charter Parade of 2 April 2016. Costs were for the provision of seating, PA, lectern etc along with a Mayoral afternoon tea provided for guests. This expenditure is covered from the Civic Expenses budget.
9. Alignment with relevant Council policy
9.1 The financial reporting is prepared comparing current year performance against the year to date approved budget for 2015/16.
10. Assessment of Significance against the Council’s Significance and Engagement Policy
10.1 There are no significant decisions.
11. Consultation
11.1 No consultation is required.
12. Inclusion of Māori in the decision making process
12.1 No consultation is required.
Tracey Hughes
Senior Accountant
Attachments
Attachment 1: Corporate Report Attachments (A1557787)
Attachment 2: Major projects summary (A1563107)
