Agenda of Governance Committee

N-logotype-black-wide Governance Committee

9 March 2017

Page No.

1. Apologies

Nil

2. Confirmation of Order of Business

3. Interests

3.1 Updates to the Interests Register

3.2 Identify any conflicts of interest in the agenda

4. Public Forum

4.1 Steve Cross - Nelson Residents Association

Steve Cross, on behalf of the Nelson Residents Association, will speak about asset disposal and procurement practices.

5. Confirmation of Minutes

5.1 1 December 2016 11 - 23

Document number M2243

Recommendation

That the Committee

Confirms the minutes of the meeting of the Governance Committee, held on 1 December 2016, as a true and correct record.

6. Status Report - Governance Committee - 9 March 2017 24 - 26

Document number R7256

Recommendation

That the Committee

Receives the Status Report Governance Committee 9 March 2017 (R7256) and its attachment (A1160658)

7. Chairperson's Report 27 - 29

Document number R7246

Recommendation

That the Committee

Receives the report Chairperson's Report (R7246); and

Appoints Councillor ……………. to the Councillor Liaison role for the Nelson Tasman Business Trust for the 2016 – 2019 triennium.

Governance

8. Council Controlled Organisations: Local Government Act 2002 Obligations and Exemption 30 - 34

Document number R6609

Recommendation

That the Committee

Receives the report Council Controlled Organisations: Local Government Act 2002 Obligations and Exemptions (R6609).

Recommendation to Council

That the Council

Approves a continued exemption to the City of Nelson Civic Trust for the purposes of Section 6(4)(i) of the Local Government Act 2002, in accordance with Sections 7(3) and 7(6) of the Act and after considering the matters in Section 7(5) of the Act.

9. Council's Key Organisational Risks 2017 First Quarterly Report 35 - 52

Document number R7030

Recommendation

That the Committee

Receives the report Council's Key Organisational Risks 2017 First Quarterly Report (R7030) and its attachment (A1695388); and

Notes that a workshop will be held for all Councillors on 11 April 2017 encompassing both core risk management concepts, and an overview of councillors’ health and safety obligations.

10. Health and Safety: Quarterly Report 53 - 63

Document number R7020

Recommendation

That the Committee

Receives the report Health and Safety: Quarterly Report (R7020) and its attachment (A1710588).

Recommendation to Council

That the Council

Notes the report Health and Safety Quarterly Report (R7020) and its attachment (A1710588); and

Confirms the assessment of critical health and safety risks contained in the attachment (A1710588).

11. Internal Audit Report to 31 December 2016 64 - 73

Document number R7185

Recommendation

That the Committee

Receives the report Internal Audit Report to 31 December 2016 (R7185) and its attachment (A1711559).

12. Remission Of Rates To Compensate For Business Disruption 74 - 77

Document number R7193

Recommendation

That the Committee

Receives the report Remission Of Rates To Compensate For Business Disruption (R7193).

Recommendation to Council

That the Council

Confirms not to develop a rates remission policy for businesses affected by civil works undertaken by Council.

13. Insurance renewal 2017/18 - Infrastructure Assets 78 - 82

Document number R7244

Recommendation

That the Committee

Receives the report Insurance renewal 2017/18 - Infrastructure Assets (R7244); and

Notes 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 and also to understand the appropriate level of insurance cover.

Recommendation to Council

That the Council

Approves delegating authority to the Mayor, Chair of Governance and Chief Executive to decide whether Nelson City Council should exit from the Local Authority Protection Program for Council’s infrastructure insurance and the appropriate level of insurance cover, by the end of May 2017 and take any action required to give effect to the decision.

14. Tendering processes 83 - 130

Document number R7135

Recommendation

That the Committee

Receives the report Tendering processes (R7135) and its attachments (A1713610 and R6796); and

Notes Crowe Horwath’s comments (A1713610) and how officers intend to address the issues raised.

Finance

15. Letter to the Council from Audit New Zealand on the audit for the year ended 30 June 2016 131 - 140

Document number R6978

Recommendation

That the Committee

Receives the report Letter to the Council from Audit New Zealand on the audit for the year ended 30 June 2016 (R6978) and its attachment (A1702571).

16. Corporate Report to 31 January 2017 141 - 153

Document number R6996

Recommendation

That the Committee

Receives the report Corporate Report to 31 January 2017 (R6996) and its attachments (A1715857 and A1717092).

17. Capital Expenditure Programme 2016-17 - Requests for Change 154 - 156

Document number R7065

Recommendation

That the Committee

Receives the report Capital Expenditure Programme 2016-17 - Requests for Change (R7065).

Recommendation to Council

That the Council

Approves, with respect to project 1199 Civic House Renewal Programme (Lift Renewal), that $225,816 be transferred from 2016/17 to 2017/18, to align with the scheduled installation programme.

Public Excluded Business

18. Exclusion of the Public

Recommendation

That the Committee

Excludes the public 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	Governance Committee Meeting - Public Excluded Minutes - 1 December 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)(i) To enable the local authority to carry on, without prejudice or disadvantage, negotiations (including commercial and industrial negotiations). · Section 7(2)(a) To protect the privacy of natural persons, including that of a deceased person.
2	Theatre Royal Loan	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)(i) To enable the local authority to carry on, without prejudice or disadvantage, negotiations (including commercial and industrial negotiations)
3	Internal Audit - Summary of New and Outstanding Control Issues - Quarter to 31 December 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)(j) To prevent the disclosure or use of official information for improper gain or improper advantage
4	Status Report - Governance Committee - 9 March 2017	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)(i) To enable the local authority to carry on, without prejudice or disadvantage, negotiations (including commercial and industrial negotiations)
5	Director appointment for Nelson Airport Limited	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

Item

General subject of each matter to be considered

Reason for passing this resolution in relation to each matter

Particular interests protected (where applicable)

Governance Committee Meeting - Public Excluded Minutes - 1 December 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)(i)

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

· Section 7(2)(a)

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

Theatre Royal Loan

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)(i)

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

Internal Audit - Summary of New and Outstanding Control Issues - Quarter to 31 December 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)(j)

To prevent the disclosure or use of official information for improper gain or improper advantage

Status Report - Governance Committee - 9 March 2017

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)(i)

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

Director appointment for Nelson Airport Limited

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

19. Re-admittance of the public

Recommendation

That the Committee

Re-admits the public to the meetings.

Note:

· This meeting is expected to continue beyond lunchtime. (delete as appropriate)

· Lunch will be provided at 12.30pm. (delete as appropriate)

· Youth Councillors Liam Bloomfield and Luke Wilkes will be in attendance at this meeting. (delete as appropriate)

Minutes of a meeting of the Governance Committee

Held in the Council Chamber, Civic House, 110 Trafalgar Street, Nelson

On Thursday 1 December 2016, commencing at 1.00pm

Present: Councillor I Barker (Chairperson), Her Worship the Mayor R Reese, Councillors M Courtney, B Dahlberg (Deputy Chairperson), P Matheson, G Noonan, M Rutledge, and T Skinner, Mr J Murray and Mr J Peters

In Attendance: Councillors B McGurk and S Walker, Chief Executive (C Hadley), Group Manager Community Services (C Ward), Group Manager Corporate Services (N Harrison), Group Manager Infrastructure (A Louverdis), Group Manager Strategy and Environment (C Barton), Senior Strategic Adviser (N McDonald), Manager Communications (P Shattock), Manager Administration (P Langley), Team Leader Administration Advisers (R Byrne), and Administration Adviser (S Burgess)

1. Apologies

There were no apologies.

2. Confirmation of Order of Business

The Chairperson advised that Item 10 (Health and Safety: Quarterly Report) and item 11 (Internal Audit Report to 30 September 2016) would be considered after item 7 (Sister City Report) to accommodate staff availability.

The Chairperson advised of one late item for the public part of the meeting, and that the following resolution needed to be passed for the items to be considered:

2.1 Nelson Events Strategy Funding Application South Island Masters Games 2017 (M2242)

Resolved GOV/2016/132

That the Committee

Considers the item regarding Nelson Events Strategy Funding Application South Island Masters Games 2017 at this meeting as a major item not on the agenda, pursuant to Section 46A(7)(a) of the Local Government Official Information and Meetings Act 1987, to enable a timely decision to be made.

Dahlberg/Rutledge Carried

3. Interests

Deputy Mayor Matheson declared an interest in the late item Nelson Events Strategy Funding Application South Island Masters Games 2017.

4. Public Forum

There was no public forum.

5. Status Report - Governance Committee - 1 December 2016

Document number R6820, agenda pages 9 - 10 refer.

The Audit, Risk and Finance Subcommittee Status Report was tabled (A1324298)

It was requested that the report regarding options for the Theatre Royal Loan be prepared for the first meeting of the relevant committee in 2017.

Resolved GOV/2016/133

That the Committee

Receives the Status Report Governance Committee 1 December 2016 (R6820) and its attachment (A1160658), and the tabled Audit, Risk and Finance Subcommittee Status Report (A1324298).

Noonan/Courtney Carried

Attachments

1 A1324298 - Status Report - Audit, Risk and Finance Subcommittee

6. Chairperson's Report

The Chairperson tabled and presented his Chairperson’s Report (A1671957).

The Committee acknowledged the achievement of Council retaining an AA credit rating with Standard and Poor’s, and thanked senior officers for their efforts.

Resolved GOV/2016/134

That the Committee

Receives the Chairperson’s Report (A1671957).

Barker/Dahlberg Carried

Governance

7. Sister City Report

Gail Collingwood, Sister City Coordinator, tabled her report to the Committee (A1670966). She highlighted key activities and responded to questions regarding China Week 2016.

The Committee noted the strength of Council’s Sister City relationships.

Resolved GOV/2016/135

That the Committee

Receives the report from the Sister Cities Coordinator (A1670966)

Matheson/Dahlberg Carried

Attachments

1 A1670966 - Nelson City Council Sister Cities Coordinator Report

8. Health and Safety: Quarterly Report

Document number R6491, agenda pages 89 - 119 refer.

Manager Organisational Assurance and Emergency Management, Roger Ball, presented the report. He provided an update on health and safety activities in October and November 2016.

Mr Ball responded to questions regarding site visits, reporting on actions under the Health and Safety Management System Governance Charter, health and safety training for newly elected members, contractor reporting, and whether health and safety reporting needed to be enhanced to meet elected member obligations under legislation.

Mr Ball responded to further questions regarding the definition of ‘director’ in reference to annual self-assessments, the process of building assessments, and seasonality of incident reporting.

Resolved GOV/2016/136

That the Committee

Receives the report Health and Safety Quarterly Report (R6491) and its attachments (A1394804 and A1651702).

Dahlberg/Skinner Carried

It was requested that newly elected members be provided information by the end of 2016 regarding their health and safety obligations under legislation. It was also requested that a written engineering report regarding Civic House post the Kaikoura earthquake be provided to the Committee by the end of 2016.

Recommendation to Council GOV/2016/137

That the Council

Notes the report Health and Safety Quarterly Report (R6491) and its attachments (A1394804 and A1651702).

Dahlberg/Skinner Carried

9. Internal Audit Report to 30 September 2016

Document number R6660, agenda pages 120 - 130 refer.

Manager Organisational Assurance and Emergency Management, Roger Ball, presented the report.

Mr Ball responded to questions regarding external resource and prioritisation of internal audit reviews. He noted the challenge in ensuring reviews were carried out by people with expertise who held no conflict of interest.

Officers responded to questions regarding the fixed asset review process and the community grants process review.

Resolved GOV/2016/138

That the Committee

Receives the report Internal Audit Report to 30 September 2016 (R6660) and its attachment (A1642257); and

Notes internal audit findings and recommendations in the table summarising Internal Audit activity to 30 September 2016 (A1642257).

Murray/Courtney Carried

Councillor Dahlberg, seconded by Councillor Skinner, moved the recommendation to Council in the officer report.

It was suggested that internal audit requirements were deeper and broader than audits by Audit New Zealand, and that Council should take care to discharge its responsibilities in this area. Concern was expressed regarding whether the audits of the Liability Management Policy and the Investment Policy would be adequately considered by Audit New Zealand, and whether those reviews should remain on the internal audit work programme but be reprioritised.

Group Manager Corporate Services, Nikki Harrison, explained that there would be reasonable duplication of work between the internal and external audits of the Liability Management Policy and the Investment Policy.

Her Worship the Mayor, seconded by Mr Murray, proposed an amendment:

Recommendation to Council

That the Council

Approves that the Internal Audit Plan to 30 June 2017 (A1562649) be amended to defer internal audits for the Liability Management Policy and the Investment Policy to 2017/18, and prioritise Business Continuity Planning.

The amendment was put and carried, and became the substantive motion.

Recommendation to Council GOV/2016/139

That the Council

Approves that the Internal Audit Plan to 30 June 2017 (A1562649) be amended to defer internal audits for the Liability Management Policy and the Investment Policy to 2017/18, and prioritise Business Continuity Planning.

Dahlberg/Skinner Carried

10. Service Delivery Review Quarterly Update

Document number R6482, agenda pages 11 - 46 refer.

Policy Adviser, Gabrielle Thorpe, presented the report.

Officers responded to questions regarding the contracts for community facilities, and the potential that the statutory deadline of 8 August 2017 might not be met.

Senior Strategic Adviser, Nicky McDonald, clarified that earlier discussions with Council had indicated officers should work towards the deadline within existing resources but recognised that other tasks may take precedence.

Resolved GOV/2016/140

That the Committee

Receives the report Service Delivery Review Quarterly Update (R6482) and its attachments (A1653452, A1653316, A1657534, A1608744, A1653640, A1654605, A1657532, A1665363, and A1665280); and

Notes the update on progress to achieving the statutory deadline of August 2017.

Courtney/Noonan Carried

11. 2016 Residents Survey

Document number R6720, agenda pages 47 - 88 refer.

Strategy and Environment Analyst, Brylee Wayman, presented the report.

Officers responded to questions regarding sample sizes and reliability of statistics, survey responses to being ‘informed by Council and its services’, and the actions they were taking to engage the under 40 years age group. It was noted that focus groups could provide more detail regarding areas of importance. Officers advised that alternative means of engaging with the community would be undertaken for the 2017 Residents Survey.

Resolved GOV/2016/141

That the Committee

Receives the report 2016 Residents Survey (R6720) and its attachment (A1580658); and

Notes the release of the 2016 Residents Survey results.

Her Worship the Mayor/Noonan Carried

12. Council's Key Organisational Risks: Progress Report

Document number R6681, agenda pages 131 - 148 refer.

Risk and Procurement Analyst, Steve Vaughan, presented the report.

Mr Vaughan responded to questions regarding the officer conflicts of interest policy, the Report It Now service, templates for contracts, management of contractors, and Council’s Procurement Policy.

Attendance: Councillor Rutledge left the meeting from 3.13pm to 3.15pm.

Committee members asked further questions regarding the risk management policy, customer aggression, the privacy officer appointment, and the risk rating for ‘Breach of Privacy of Personal Information Affects Council’s Reputation’.

Resolved GOV/2016/142

That the Committee

Receives the report Council's Key Organisational Risks: Progress Report (R6681) and its attachment (A1639927).

Rutledge/Murray Carried

Attendance: Her Worship the Mayor left the meeting at 3.24pm.

Finance

13. Corporate Report to 30 September 2016

Document number R6813, agenda pages 149 - 163 refer.

Senior Accountant, Tracey Hughes, presented the report. She noted that the commissioning of the Corder Park Sewer Pump Station Upgrade was not quite complete (pg 161), and the Capital Revenue arrow (page 153) should have been marked green.

Attendance: Her Worship the Mayor returned to the meeting at 3.25pm.

Officers responded to questions regarding debtors, recent recommendations to Council from the Works and Infrastructure Committee, the marina dredging resource consent, Days Track, the Saxton Velodrome, and how jointly funded projects were reported to, and from, Tasman District Council.

It was asked that in future the Major Projects Summary reports showed further detail regarding amendments to milestone dates and whether they had been confirmed by the relevant Committee or Council, as well as showing the final overall project completion date.

Resolved GOV/2016/143

That the Committee

Receives the report Corporate Report to 30 September 2016 (R6813) and its attachments (A1655647 and A1651321).

Murray/Peters Carried

Attendance: Deputy Mayor Matheson declared an interest and left the meeting at 3.55pm.

14. Nelson Events Strategy Funding Application South Island Masters Games 2017

Document number R6858, late items agenda pages 2 - 27 refer.

Senior Strategic Adviser, Nicky McDonald, introduced Nelson Regional Development Agency Chief Executive, Mark Rawson, who presented the report in his role as Chair of the Event Management Committee.

Attendance: Councillor Skinner left the meeting at 3.58pm.

Mr Rawson highlighted that the South Island Masters Games was a stepping stone to the World Masters Games. In response to a question, it was clarified that the right to hold the event was granted for two events at a time, before being re-bid.

The Committee asked questions about whether Tasman District Council or other organisations would be providing funding towards the event. Mr Rawson explained that this was not part of the criteria that the event was assessed against.

Attendance: The meeting adjourned from 4.03pm to 4.05pm.

Mr Rawson responded to questions regarding how Council would be recognised as a sponsor of the event. It was suggested that the contract should list the ways in which Council would be acknowledged as a sponsor.

It was suggested that a lower level of funding for the event could be approved.

The Committee further discussed funding from other organisations and the types of return that Council should expect for its sponsorship.

Resolved GOV/2016/144

That the Committee

Receives the report Nelson Events Strategy Funding Application South Island Masters Games 2017 (R6858) and its attachments (A1671467, a1671474 and A1671477).

Her Worship the Mayor/Barker Carried

It was suggested that the matter be referred to Council, and that Council needed to clearly determine its expectations when the matter was considered.

Resolved GOV/2016/145

That the Committee

Refers the item Nelson Events Strategy Funding Application South Island Masters Games 2017 (R6858) to Council for consideration at its meeting on 15 December 2016.

Noonan/Courtney Carried

15. Exclusion of the Public

It was noted that that Rob Gunn, Lee Babe, and Robyn Curran of Nelmac Limited would be in attendance for Item 3 of the Public Excluded agenda to present and answer questions and, accordingly, the following resolution was required to be passed:

Resolved GOV/2016/146

That the Committee

Confirms, in accordance with section 48(5) of the Local Government Official Information and Meetings Act 1987, that Rob Gunn, Lee Babe, and Robyn Curran remain after the public has been excluded, for Item 3 of the Public Excluded agenda (Nelmac Presentation on Strategic Direction), as they have knowledge that will assist the Council;

Notes, in accordance with section 48(6) of the Local Government Official Information and Meetings Act 1987, the knowledge that Rob Gunn, Lee Babe, and Robyn Curran posess relates to Nelmac Limited.

Noonan/Dahlberg Carried

Resolved GOV/2016/147

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

Noonan/Courtney 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	Nelmac Presentation on Strategic Direction	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)(i) To enable the local authority to carry on, without prejudice or disadvantage, negotiations (including commercial and industrial negotiations)
2	Nelmac Ltd - matters for Statement of Expectation 2017/18	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)(i) To enable the local authority to carry on, without prejudice or disadvantage, negotiations (including commercial and industrial negotiations)
3	Bishop Suter Trust - Statement of Expectation 2017/18	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)(i) To enable the local authority to carry on, without prejudice or disadvantage, negotiations (including commercial and industrial negotiations)
4	Nelson Regional Development Agency - Statement of Expectation 2017/18	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)(i) To enable the local authority to carry on, without prejudice or disadvantage, negotiations (including commercial and industrial negotiations)
5	Process For Awarding Contracts for Council Festivals and Events	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
6	Commercial Lease - Reliance Building	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)(i) To enable the local authority to carry on, without prejudice or disadvantage, negotiations (including commercial and industrial negotiations)

Item

General subject of each matter to be considered

Reason for passing this resolution in relation to each matter

Particular interests protected (where applicable)

Nelmac Presentation on Strategic Direction

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)

· Section 7(2)(i)

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

Nelmac Ltd - matters for Statement of Expectation 2017/18

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)(i)

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

Bishop Suter Trust - Statement of Expectation 2017/18

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)(i)

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

Nelson Regional Development Agency - Statement of Expectation 2017/18

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)(i)

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

Process For Awarding Contracts for Council Festivals and Events

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

Commercial Lease - Reliance Building

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)(i)

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

The meeting went into public excluded session at 4.35pm and resumed in public session at 6.47pm.

16. Re-admittance of the Public

Resolved GOV/2016/148

That the Committee

Re-admits the public to the meeting.

Murray/Rutledge Carried

There being no further business the meeting ended at 6.47pm.

Confirmed as a correct record of proceedings:

Chairperson Date

Governance Committee

9 March 2017

REPORT R6609

Council Controlled Organisations: Local Government Act 2002 Obligations and Exemption

1. Purpose of Report

1.1 To outline the obligations the Local Government Act 2002 imposes on Council Controlled Organisations (CCOs) and to recommend an exemption for the City of Nelson Civic Trust.

2. Recommendation

That the Committee

Receives the report Council Controlled Organisations: Local Government Act 2002 Obligations and Exemptions (R6609).

Recommendation to Council

That the Council

3. Background

3.1 CCO’s are organisations in which one or more local authorities control 50% or more of the voting rights or rights to appoint directors. There are several organisations that currently come under this category:

· The Tasman Bays Heritage Trust (TBHT);

· The City of Nelson Civic Trust;

· The Bishop Suter Trust (BST);

· The Nelson Regional Development Agency (NRDA)

· Nelmac; and

· Nelson Airport Limited (NAL).

3.2 Unless specifically exempted by Council resolution a CCO is required to:

· Prepare a statement of intent in accordance with Schedule 8 of the Act;

· Prepare a half yearly report and an annual report;

· Comply with Parts I to VI of LGOIMA.

3.3 While these are quite appropriate in relation to what could be termed Council businesses, they could place an unreasonable burden on the smaller, less commercially oriented organisations in which the Council has an interest.

3.4 Sections 6(4)(i) and Section 7(3) of the Local Government Act (2002, the ‘Act’) provide that the Council may grant small organisations an exemption from the requirements of a CCO after considering:

· The nature and scope of the activities provided by the organisation; and

· The costs and benefits, if an exemption is granted, to the Council, the Council Controlled Organisation, and the community.

3.5 Section 7(6) of the Act requires that a Local Authority must review an exemption within three years after it is granted and thereafter at intervals of not more than three years.

3.6 In March 2014 the Council granted an exemption to the City of Nelson Civic Trust and Council needs to decide if it wishes to again grant an exemption to the Civic Trust, and/or grant a new exemption to any of its other CCOs.

4. Discussion

4.1 In considering the list of organisations in section 3.1, only the City of Nelson Civic Trust can reasonably be considered a small organisation.

4.2 Nelmac and NAL are significant trading companies, with multi-million dollar turnovers.

4.3 TBHT employs up to 20 staff, has a large operating budget and manages a collection with a value in excess of $100 million and the Bishop Suter Trust employs a number of staff, has a large operating budget and manages a collection with a value in excess of $7 million. Neither can be considered small organisations.

4.4 The NRDA was established as a CCO from 1 July 2016. The Council has delegated its economic development activities to the NRDA and is providing it with over $1.2M of funding each year. Given this and the importance of the NRDA’s role to the region, it is not considered to be a small organisation, and it is appropriate for the Council to receive regular reports and review the Statement of Intent.

4.5 The City of Nelson Civic Trust is a charitable organisation that exists to provide amenities for the enhancement of the City and the benefit of the community as a whole. The Council appoints all the trustees and provides administrative support. An independent accountant provides the financial services.

4.6 The Civic Trust is reliant on the return from investments for its income, typically in the order of $80,000 per annum. It has limited resources to direct towards the administrative and financial reporting type of work envisaged by the Act. Meeting the CCO requirements would put more work on the trustees and reduce the level of funding available for project works.

4.7 The Civic Trust has current assets of around $200,000 and investments of $780,000.

4.8 Whilst it holds a significant level of funds, given the administrative costs of compliance; the subsequent reduction in grants available to the community if it had to meet those compliance costs; and the straightforward nature of the Trust’s activities, officers recommend that the Civic Trust continues to be recognised as a small organisation and should be exempted from the requirements of CCOs.

5. Options

5.1 Council can either grant an exemption to the City of Nelson Civic Trust or not. If it grants an exemption it is signalling that it considers the Trust to be a small organisation which does not need to meet the reporting and monitoring requirements of a CCO.

5.2 If Council does not grant an exemption then the Trust will have to comply with the relevant schedules in the Act. This will increase transparency in relation to the Trust’s activities but come at a financial cost to the Trust.

6. Conclusion

6.1 There are no recommendations to make any new exemptions, rather only to approve the continuation of the Civic Trust’s exemption for another three years.

6.2 The Civic Trust controls a significant amount of funds, but it does not trade and merely distributes the proceeds of its investments. As such the administrative overhead associated with withdrawal of the exemption would simply reduce the amount distributed within the community.

Chris Ward

Group Manager Community Services

Attachments

Nil

Important considerations for decision making

1. Fit with Purpose of Local Government

This is a statutory compliance matter.

2. Consistency with Community Outcomes and Council Policy

The recommendation is not inconsistent with any Council policy or strategic document.

3. Risk

This matter is of very low risk as the recommendation is addressing a statutory compliance issue.

4. Financial impact

If Council decides that the Civic Trust is not exempt the financial costs of compliance will have to be borne by the Trust.

5. Degree of significance and level of engagement

This matter is of low significance because it does not have impact on any individuals in the community.

6. Inclusion of Māori in the decision making process

Maori have not been specifically consulted on this matter.

7. Delegations

The Governance Committee has the responsibility for considering matters in relation to Nelson City Council Controlled Organisations and Nelson City Council Controlled Trading Organisations. The Governance Committee has the power to make a recommendation to Council on this matter.

Governance Committee

9 March 2017

REPORT R7030

Council's Key Organisational Risks 2017 First Quarterly Report

1. Purpose of Report

1.1 To update the Committee on progress with identifying and managing key risks to the organisation’s objectives.

Recommendation

That the Committee

Receives the report Council's Key Organisational Risks 2017 First Quarterly Report (R7030) and its attachment (A1695388); and

Notes that a workshop will be held for all Councillors on 11 April 2017 encompassing both core risk management concepts, and an overview of councillors’ health and safety obligations.

4. Background

1.2 At its meeting on 1 December 2016 Governance Committee received and considered the previous quarterly report on key organisational risks to Council’s objectives. This reporting forms part of the development of Council’s overall risk management capability. As noted in the previous report, this capability is being developed using the organisation’s existing business model – that is by basing risk management processes within each business unit. This includes; business unit objectives which are, as far as possible, specific, measurable and achievable within a defined timeframe, and use organisationally consistent techniques and criteria.

1.3 Further training in these techniques for senior staff will be run during this first quarter, building on workshops developed in 2016. In addition a workshop is being organised for Councillors encompassing both core risk management principles (with an emphasis on governance needs) and the specific risk area of Councillor’s health and safety obligations. This workshop is scheduled for Tuesday 11 April.

2. Progress in implementing risk treatments

2.1 Since the last report, controls to manage risks in the following key risk areas have been improved or further developed. This is occurring as part of actioning risk treatments developed in Council’s ongoing programme of addressing risk areas. (For clarity; risk treatments are actions to manage risks decided on but not yet put in place (or partially put in place) whereas controls are already in place.) Several previous treatment items are now fully in place and so appear in the attached document as controls.

2.2 There are also a number of areas where the treatments (planned controls) are becoming shorter lists. This is because the corresponding risks are reaching a point where the gain to be had from further action may not outweigh the work required to undertake such action. For example; in the case of reputational damage from negative media exposure, the risk is shown as medium, with a minor impact and ‘likely’ level of likelihood. Further action may reduce this likelihood, but at substantial diversion of effort from other areas.

Key risk area	Progress on risk treatments since last report
1 Maintaining lifeline services …	· Review and update of organisation wide business continuity planning in progress · Contribution to regional lifeline utility report · Strategic route investigations begun to meet requirements of Earthquake Prone Building amendments
2 Customer aggression causing threats to health and safety…	· Lone worker policy implemented (controls in place) · Security review recommendations agreed to and either being implemented in priority order, or folded into wider staff accommodation project · Expanded reporting (more detail on public safety event reporting)
3 Reputational damage from negative media exposure…	· All new contracts require contractors to direct media inquiries to Council communications group (control in place)
5 Ineffective contract management…	· Extensive suite of contract templates in place and being used for all new contracts (except NZS3910 – large civil works - which is still to complete) · Improved procedures for specifying contract requirements being rolled out
7 Incomplete and difficult to access records…	· GIS data input accuracy checking protocols in place · Rationalisation of off-site records to commence this year

Options

2.3 It is recommended that this report be received as it will further improve the Committee’s understanding of the risks faced by Council and the actions being taken to manage them.

2.4 There can be value from a discussion of the factors contributing to risks and the Committee may consider such a discussion useful.

Steve Vaughan

Risk & Procurement Analyst

Attachments

Attachment 1: A1695388 - Key organisational risks - quarter 1 calendar 2017 ⇩

Important considerations for decision making

1. Fit with Purpose of Local Government

This report describes risk management activity. Risk management is a tool to enable more efficient and effective provision on services as set out in section 10(1)(b) of the LG Act.

2. Consistency with Community Outcomes and Council Policy

This report describes risk management activity. Risk management at its most fundamental is about achieving an organisation’s objectives (in this case as set out in Nelson City Council’s planning documents) with increased clarity, efficiency and effectiveness.

3. Risk

The report does not recommend a particular goal or objective to which risks may be considered. It serves to provide information about Council’s work in addressing those risks judged to be key to the organisation achieving its objectives.

4. Financial impact

This is a report on work already underway as part of Council’s regular management activity. Therefore there are no additional funding implications at this stage.

5. Degree of significance and level of engagement

This is not a significant decision under the Council’s Significance and Engagement Policy. Therefore no external consultation has been undertaken in the preparation of this report although information from the Council’s developing risk management systems has been used in preparing it.

6. Inclusion of Māori in the decision making process

There has been no consultation with Maori in the preparation of this report which deals with internal Council processes.

7. Delegations

At the date of writing of this report the Governance Committee has oversight of the Council’s management of risk.

Governance Committee

9 March 2017

REPORT R7020

Health and Safety: Quarterly Report

1. Purpose of Report

1.1 To provide the Committee with a quarterly report of health and safety data collected over the period October-December 2016.

Recommendation

That the Committee

Receives the report Health and Safety: Quarterly Report (R7020) and its attachment (A1710588).

Recommendation to Council

That the Council

Notes the report Health and Safety Quarterly Report (R7020) and its attachment (A1710588); and

Confirms the assessment of critical health and safety risks contained in the attachment (A1710588).

2. Background

2.1 Council is continuing to implement a programme to ensure its health and safety management system meets the higher expectations contained within the Health and Safety at Work (HSW) Act 2015.

2.2 Councillors, as ‘Officers’ under the HSW Act 2015, are expected to undertake due diligence on health and safety matters. Council’s Health and Safety Governance Charter states that quarterly performance data reports will be presented to Council.

3. Discussion

Performance data

3.1 This report provides the Committee with a summary of quarterly data on the health and safety performance of Council (Attachment 1). It includes information on both leading (preventative) and lagging health and safety management system indicators. It also identifies progress in addressing our top six critical health and safety risks. To help meet the ‘positive due diligence’ expectations of the HSW Act 2015, Councillors are asked to confirm the assessment of our top health and safety risks provided in the attachment.

3.2 In brief, there were no major incidents over the quarter. There was one incident notified to Worksafe New Zealand by a Council Contractor. (This was a near miss that in fact probably did not need to be notified.)

Other matters

3.3 As requested at the last Governance Committee meeting (1 December 2016), a selection of documentation has been circulated by email to Councillors providing an introduction to Council’s health and safety obligations. To support the induction of new Councillors, and as a refresher for returning Councillors, a workshop is proposed for the morning of 11 April to provide Councillors with an overview of (a) Council’s risk management framework and (b) Council’s health and safety management system, including Councillors’ specific obligations under the HSW Act. (A resolution relating to the workshop is contained in the separate report “Council's Key Organisational Risks 2017 First Quarterly Report” (R7030).)

3.4 It is also noted that Council’s health and safety systems were reviewed by the Accident Compensation Corporation (ACC) staff in December 2016. This was part of the process to renew Council’s membership in ACC’s Workplace Safety Management Practices (WSMP) incentive scheme. Council was re-accredited as a Tertiary member of ACC’s WSMP incentive scheme, reducing our ACC Work Levy by 20% (a net saving of around $7,000 over the next two years).

4. Options

Option 1: Receive the report and its attachment
Advantages	· Council demonstrates positive due diligence in relation to health and safety matters in the Council workplace. This assists in meeting Councillor’s obligations as ‘Officers’ under the HSW Act 2015.
Risks and Disadvantages	· Receiving the report alone is not sufficient. Positive diligence (understanding, asking questions etc) is required.
Option 2: Decline to receive the report and its attachment
Advantages	· An advantage could not be identified.
Risks and Disadvantages	· Council will not be able to use this report to help demonstrate due diligence on health and safety matters.

Roger Ball

Manager Organisational Assurance and Emergency Management

Attachments

Attachment 1: A1710588 - Health and Safety Quarterly Data October-December 2016 ⇩

Important considerations for decision making

1. Fit with Purpose of Local Government

This report forms part of Council’s work to perform its regulatory functions. Council has an obligation under the Workplace Health and Safety Act 2015 because it is classed as a Person Conducting a Business or Undertaking (PCBU), and both Councillors and Council’s senior management have obligations as “Officers” under that Act.

2. Consistency with Community Outcomes and Council Policy

The recommendations align with the Community Outcome: Our communities are healthy, safe, inclusive and resilient.

3. Risk

This report aims to help Councillors meet their due diligence obligations as “Officers” under the Health and Safety at Work Act 2015. It is likely this objective will be achieved when combined with other actions outlined in Appendix 2 of Council’s Health and Safety Management System Governance Charter (A1394804). The likelihood of adverse consequences is assessed as low based on the current record of Council’s health and safety systems and our on-going monitoring of them. However the consequences for Council could still be significant if there were to be a serious harm incident to a Council worker, contractor or other person. These consequences could include harm to people, prosecution of the Council and/or its officers, financial penalties, and/or reputational damage.

4. Financial impact

There are no immediate budget implications arising from this report.

5. Degree of significance and level of engagement

This matter is of low significance because it is a quarterly progress report regarding the Council’s health and safety data, and no engagement is required.

6. Inclusion of Māori in the decision making process

Maori have not been consulted in the preparation of this report.

7. Delegations

The Governance Committee is delegated oversight of Health and Safety.

Governance Committee

9 March 2017

REPORT R7193

Remission Of Rates To Compensate For Business Disruption

1. Purpose of Report

1.1 To consider whether to develop a rates remission policy for businesses affected by civil works undertaken by Council.

2. Summary

2.1 Council has received a request to consider remitting rates for businesses affected by its civil works.

3. Recommendation

That the Committee

Receives the report Remission Of Rates To Compensate For Business Disruption (R7193).

Recommendation to the Council

That the Council

Confirms not to develop a rates remission policy for businesses affected by civil works undertaken by Council.

4. Background

4.1 John Gourdie of Gourdie Automotive Ltd, attended the public forum of the Works and Infrastructure Committee meeting on 17 November 2016 to request a rates remission due to the substantial loss to his business as a result of works conducted along Waimea Road in 2016.

4.2 The works on Waimea Road were undertaken in order to upgrade flood protection pipes, renew wastewater pipes and water supply pipes in the area from the Boys College to the Girls College playing field in lower Waimea Road. The project ran through a large portion of 2016 with various parts of the road being worked on during different times. There was extensive pre-consultation as well as consultation during the physical works.

4.3 The Works and Infrastructure Committee resolved as follows:

Requests the Chief Executive to provide a report to the appropriate committee on the matter of a rates remission policy for businesses affected by large-scale civil works.

This report has considered large-scale works but also all other public works as there may be disruption due to maintenance and other smaller projects.

5. Discussion

5.1 Council frequently undertakes projects that cause disruption to businesses and residents, but these projects also bring benefits to the community. The city accommodates a level of disruption to allow necessary works to be undertaken.

5.2 Businesses do not have any right under law to any particular level of passing trade. Businesses are expected to manage the risk of loss due to temporary civil works along with all the other various risks of running a business. Trade may fluctuate for a variety of reasons, and accurately assessing the losses directly attributable to the civil works would be extremely difficult.

5.3 In researching this issue, officers found no precedent in local government for the provision of rates remissions to businesses affected by civil works.

5.4 At central government level, the New Zealand Transport Agency (NZTA) does not provide monetary relief to businesses inconvenienced by road works. Any right to compensation arising from a major NZTA construction project is dealt with under the Public Works Act 1981. It is only relevant in relation to land in circumstances where land is taken or land suffers damage or substantial loss of value.

5.5 While Council tries to minimise the impact of works, it is not appropriate to extend that by attempting, through a reduction in rates, to compensate those affected.

6. Options

6.1 The Governance Committee may choose to proceed no further with the matter or decide to develop a rates remission policy for businesses affected by large-scale civil works.

Option 1: decide to proceed no further with the matter (status quo)
Advantages	· Requires no further resourcing · Maintains a consistent approach across local government
Risks and Disadvantages	· Businesses affected by disruptions will be disappointed Council has not considered the matter further
Option 2: develop a draft policy for public consultation
Advantages	· Allows Council to hear community views
Risks and Disadvantages	· Requires additional resourcing to develop the draft policy · Indicates a willingness to establish a precedent that would create a significant financial burden for ratepayers

7. Conclusion

7.1 Officers recommend the status quo as the most appropriate option.

Nikki Harrison

Group Manager Corporate Services

Attachments

Nil

Important considerations for decision making

1. Fit with Purpose of Local Government

A decision not to amend the rates remission policy is the most cost effective outcome for ratepayers as it avoids creating an unwarranted financial burden.

2. Consistency with Community Outcomes and Council Policy

The recommendation in this report is consistent with Council’s Community Outcome “Our Council provides leadership and fosters partnerships, a regional perspective, and community engagement”.

3. Risk

A decision not to develop a rates remission policy for businesses affected by civil works is likely to disappoint affected businesses.

4. Financial impact

There is no financial impact from deciding not to pursue a policy. The ongoing financial impact of remitting rates for disruption would be significant.

5. Degree of significance and level of engagement

A decision not to adopt a policy is of low significance as it is in keeping with standard practice in local and central government and, so far, has only been an issue raised by one business.

6. Inclusion of Māori in the decision making process

Māori have not been specifically consulted on this report.

7. Delegations

The Governance Committee has the area of responsibility of rating systems and policies. The Governance Committee has the power to make a recommendation to Council on this matter.

Governance Committee

9 March 2017

REPORT R7244

Insurance renewal 2017/18 - Infrastructure Assets

1. Purpose of Report

1.1 To update the committee on the 2017/18 insurance renewal for infrastructure assets and to seek delegated authority to decide whether Council should exit from the Local Authority Protection Program (LAPP).

Recommendation

That the Committee

Receives the report Insurance renewal 2017/18 - Infrastructure Assets (R7244); and

Recommendation to Council

3. Background

3.1 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).

3.2 Council gave notice last year that it was considering withdrawing from the LAPP scheme (as it did in the prior year) and investigated alternate options for insurance cover. Council was in discussion with Aon New Zealand (insurance brokers) about joining a collective of local authorities to obtain insurance cover for our infrastructure assets. As part of this process, Aon New Zealand undertook risk modelling on Council’s flood and earthquake risks using Tonkin and Taylor analysis and data on our infrastructure assets (including location and value).

3.3 The decision was made to remain with LAPP for another year, primarily because the claim for the December 2011 rainfall event had not been settled and the risk modelling work was not far enough developed to make a final decision on the appropriate level of insurance cover.

4. Discussion

4.1 Council, along with TDC and MDC, has been in discussion with Aon New Zealand 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).

4.2 Aon is sourcing some quotes for 2017/18 insurance cover for Council’s infrastructure assets. Initial comparisons with LAPP are, for a similar deductible (amount Council would have to pay itself before claiming any funds) of $1.8million the annual premium quoted was $215,000, 15% lower than 2016/17 LAPP premium. This would be subject to a limit for any one event of $125million total (including the central government 60% component) and one automatic reinstatement of insurance cover for earthquake per year for nil premium.

4.3 LAPP is unable to provide an estimate of contributions for 2017/18 (will be available later in April). The premium in 2016/17 was $251,000 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.

4.4 The Top of South collective are also sourcing a quote from JLT, the insurance broker for the material damage policies.

Risk modelling

4.5 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).

4.6 This risk modelling was undertaken during 2016 and has been further refined following the Kaikoura earthquake and similar modelling for Marlborough and Tasman District Council.

4.7 Based on a 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.

Other matters

4.8 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.

4.9 Contrary to initial commentary, the LGRA is likely not to affect the LAPP scheme but provide support to local authorities, particularly smaller ones, in understanding risk management processes.

4.10 It is uncertain when Treasury will put out a consultation document on the current 40/60% cost sharing arrangement. However it is likely to include consideration of Central Government contributing a lower percentage for smaller more frequent events, introduction of risk management regulations etc. This will potentially mean Council will need to obtain additional insurance cover in the future, over and above the current 40% share.

5. Options

5.1 This report recommends that the Mayor, Chair of Governance and Chief Executive are given delegated authority to decide whether Council should exit from the LAPP. If this option was not supported, a decision could not be made in time to meet the mid May deadline for exiting LAPP and Council would need to commit to a further year’s membership.

Option 1: Delegate authority to Mayor, Chair of Governance and CE
Advantages	· Allows fully informed decision making to occur in a timely manner
Risks and Disadvantages	· Not a decision of full Council
Option 2: Not delegate authority
Advantages	· Any decision would be by full Council
Risks and Disadvantages	· Unlikely that decision timeframes will line up with committee and Council meetings potentially leading to a sub-optimal outcome and further delays in achieving appropriate insurance cover.

6. Conclusion

6.1 It is recommended that the Mayor, Chair of Governance and Chief Executive are given delegated authority to decide whether Council should exit from the LAPP by the end of May 2017 and also to decide the appropriate level of cover and agree a provider.

Nikki Harrison

Group Manager Corporate Services

Attachments

Nil

Important considerations for decision making

1. Fit with Purpose of Local Government

Risk management through using insurance is a tool to enable more efficient and effective provision on services as set out in section 10(1)(b) of the Local Government Act.

2. Consistency with Community Outcomes and Council Policy

This recommendation is not inconsistent with any previous Council decisions.

3. Risk

The decision to delegate reduces the risk of renewal timings being out of step with committee and Council meetings.

4. Financial impact

There is no financial impact from the recommendation.

5. Degree of significance and level of engagement

This matter is of low significance because it is a decision to delegate authority to a small group. Therefore no engagement will occur.

6. Inclusion of Māori in the decision making process

No consultation with Maori has been undertaken in preparing this report.

7. Delegations

The Governance Committee has the responsibility for considering organisational risk management. The Governance Committee has the power to make a recommendation to Council on this matter.

Governance Committee

9 March 2017

REPORT R7135

Tendering processes

1. Purpose of Report

1.1 To provide the Committee with the outcome of the external audit report undertaken by Crowe Horwath, in response to concerns raised by the Office of the Auditor-General.

2 Recommendation

That the Committee

Receives the report Tendering processes (R7135) and its attachments (A1713610 and R6796); and

Notes Crowe Horwath’s comments (A1713610) and how officers intend to address the issues raised.

2. Background

2.1 The Committee received advice of concerns raised by the Office of the Auditor-General (OAG) at its 1 December 2016 meeting (refer R6796).

2.2 The Chief Executive advised an external review had been commissioned, and Crowe Horwath were due to report shortly. A draft report was received from Crowe Horwath within the agreed timeframe; however there were some items that required clarification. The report was received just prior to the Christmas close-down.

2.3 At the Governance Committee meeting on 1 December 2016, the Committee resolved as follows

GOV/2016/155

That the Committee

Leaves the matter regarding Process for Awarding Contracts for Council Festivals and Events to lie on the table.

3. Discussion

3.1 The final report from Crowe Horwath is attached. Management responses to the matters raised are included.

3.2 When reviewing the report, it is useful to note that the Crowe Horwath advice is based on a “risk rating” which is different to internationally accepted risk management standards as set out in AS/NZS ISO31000, and which Council uses.

3.3 Formally, risk is the effect of uncertainty on objectives, and so always has dimensions of likelihood and consequence for clearly stated objectives. The Crowe Howarth “risk rating” is based only on consequence for objectives which are at best stated by implication – i.e. there is no dimension of likelihood in their risk rating. This makes it impossible to directly compare the Crowe Howarth rating with Council’s risk ranking scales. Accordingly the timeframes allocated to required actions differ, with actions to be completed between 31 March and 31 July 2017.

3.4 The report identifies a number of areas where management has failed to follow good practice. It does not identify the considerable effort put into developing good contracts and seeking OAG approvals in the period to 30 June 2015. This increases the sense of disappointment at the correct processes not then being adhered to.

3.5 Council processes have undergone considerable change since then, with the creation of an organisational assurance unit, and substantial effort put into training on contracting and procurement practices.

3.6 The report highlights the opportunity for further improvements, and these will be pursued. Provision has been sought in the Annual Plan for funding for learning management software. This would improve management, delivery and reporting on training in a range of areas(conflicts of interest, Vulnerable Childrens Act, procurement, etc)

3.7 Where matters of performance have been identified, discussions have taken place with affected staff.

3.8 The recommendations have been entered into InControl (internal programme) for measurement on progress. This will be covered by the Internal Audit Analyst who reports to management and Council.

Options

3.9 The Committee can receive the report; decline to receive the report; and/or ask for further information.

Option 1: Receive the report, noting the actions to be progressed by management
Advantages	· The matter has been the subject of an external audit. Management has responded to the issues. Progression of management actions will provide further rigour to Council’s processes.
Risks and Disadvantages	· None can be identified.
Option 2: Decline to receive the report
Advantages	· If the Committee is not comfortable with the report, it should decline to receive it.
Risks and Disadvantages	· The matter would not be progressed.
Option 3: Ask for further information
Advantages	· If the Committee feels it has unanswered questions, it should seek further information in order to be confident in its decision-making.
Risks and Disadvantages	· The item has been the subject of an external audit; management responses have been included. All information should be available at this time.

4. Conclusion

4.1 The Office of the Auditor-General expressed concern around Council’s procurement, contract and tendering policies with particular reference to festivals funded by Council.

4.2 An audit of the activity was undertaken. The audit report is attached, along with recommendations and management responses to those.

Clare Hadley

Chief Executive

Attachments

Attachment 1: R6796 Report to Governance Committee 1Dec2016 - Process for Awarding Contracts for Council Festivals and Events ⇩

Attachment 2: A1713610 - Redacted report - Final report with management comments - Review of procurement, contract and tendering policies and management of member interests - Crowe Horwath December 2016 ⇩

Important considerations for decision making

1. Fit with Purpose of Local Government

Ensuring robust processes for issuing contracts allows cost-effective procurement of services.

2. Consistency with Community Outcomes and Council Policy

Reviewing contract processes supports the community outcome that our Council provides leadership.

3. Risk

Adopting the recommendations in the report will ensure the matters are progressed by management as proposed.

4. Financial impact

The costs of the review were met within existing budgets.

5. Degree of significance and level of engagement

This matter is of low significance because it relates to internal processes. No consultation is required.

6. Inclusion of Māori in the decision making process

Maori have not been consulted on this matter.

7. Delegations

The Governance Committee has the responsibility for monitoring of Council’s financial and service performance.

14 December 2016

Rachel Reese

Mayor

Nelson City Council

PO Box 645

Nelson 7040

cc John Peters, Chair of the Audit, Risk and Finance Subcommittee

Clare Hadley, Chief Executive

Nikki Harrison, Group Manager Corporate Services

Dear Rachel

Letter to the Council on the audit of Nelson City Council for the year ended 30 June 2016

1 Introduction

We have completed our audit of Nelson City Council (the City Council). This letter outlines the work undertaken and the key findings from our audit. It builds on our findings included in our interim letter to the Council dated 9 June 2016. We have provided a separate letter to management, which sets out our more detailed findings on the audit process, internal controls and accounting issues.

Work undertaken

Our final audit was primarily focused on the City Council’s Annual Report. We issued an unmodified audit opinion (see section 2 of this letter). We also reviewed the key business risks and issues facing the City Council (see section 3 of this letter) and the sector-wide issues facing all local authorities (see section 4 of this letter).

We outline the content of our supplementary letter to management in section 5 of this letter. Our mandatory disclosures are in Appendix 1.

2 We issued an unmodified audit opinion

We issued an unmodified audit opinion on 27 October 2016. We were satisfied that the financial statements and statement of performance presented fairly, in all material respects, the City Council’s activity for the year and its financial position at the end of the year.

The financial statements and the statement of performance are free from material misstatements, including omissions.

3 Business risks/issues

In our interim letter, we reported our findings on some of the key risks identified in our audit management letter. The sections below outline the remainder of our findings.

3.1 Property, plant and equipment matters

3.1.1 Airport land

In 2015/16 NAL changed its accounting policy from cost to a revaluation regime. This significantly increased the company’s asset values. A major impact was on airport land, which the company previously recognised at cost of $0. This was revalued to $25 million.

We accepted the underlying principle that the land appropriately sits on NAL’s balance sheet.

NAL’s revaluation of its PP&E added significantly to the value of the City Council’s equity interest in NAL. The increase in value from the revaluation was recognised through other comprehensive income in the group financial statements.

In its parent financial statements the City Council transferred the “lost” value of the land to its investment in NAL.

3.1.2 Infrastructure asset valuations

The City Council completed a valuation that was prepared in-house and peer reviewed by Opus International Limited (Opus). We obtained confirmation from Opus that the valuation was prepared in accordance with appropriate valuation and accounting standards, and was suitable for inclusion in the financial statements. The work we completed confirmed that these assertions were reasonable.

In 2014, the City Council recognised an unusually high valuation movement. This appeared to be because the City Council’s contract rates were significantly impacted by work to repair Christchurch following the Canterbury earthquakes. These increases do not have as large an impact on a national index like the CPGI. The unit rates used to support the valuation were adjusted by the CPGI in 2013.

For the financial years of 2014/15 and 2015/16 management used an in-house indexation process using rates and advice provided by Opus to revalue its assets. This was a weighted average of the Product Price Index, Capital Goods Price Index and Labour Index.

We were satisfied the approach taken by the City Council was reasonable.

3.1.3 Suter development

During 2015/16 City Council has undertaken renovation work on the Bishop Suter Trust (the Suter) building. The project has a budget of $6 million. After completion, the work was gifted to the Suter. The City Council recognised a capital addition and the associated disposal in the audited financial statements. The City Council took this approach as the stated intention in the 2012-22 Long-Term Plan was to transfer the asset to the Suter as a capital injection.

We have previously noted that the memorandum of understanding between the City Council and the Suter, and the heads of agreement for the project, provide no guidance on how the asset was to be transferred. The accounting treatment adopted by the City Council was in line with the approach stated in the LTP as a capital injection.

We reviewed the transaction and associated accounting entries and concluded the treatment was reasonable and appropriate.

3.2 Statement of performance

As part of the audit we discussed with management how, in our opinion, the statement of performance can be enhanced and become more meaningful to the reader.

We emphasise the importance of telling a balanced story behind the results (whether favourable or unfavourable). This allows the reader to understand the results better. Often, reporting the result of “achieved/not achieved” has the effect of restricting any further narrative beyond this.

In any financial year there will be current issues that will be of interest to the reader. For example, in the 2015/16 year (due to national issues) this was water quality. The statement of performance provided an opportunity to explain the City Council’s processes and any specific issues relating to how it ensures water quality.

3.3 Building assessments

In our interim letter to the Council, we outlined the current status of the City Council’s progress in its seismic assessments of its building stock.

We note that the most significant building which was considered earthquake prone was the Trafalgar Centre. The Council had resolved to spend $13 million to restore and enhance the building. A significant proportion of the budget has been spent within 2015/16 and the building was partially re-opened in 2015/16 with a full re-opening scheduled for 2016/17. We confirmed the accounting for the expenditure incurred to date was appropriate.

As part of our final audit we reviewed management’s assessment as to whether the carrying value of earthquake prone buildings fairly reflected their depreciated replacement cost.

In relation to the buildings issued with section 124 notices, the City Council is currently evaluating whether to upgrade or demolish these buildings. We also note that some of the buildings are continuing to be used, albeit only for storage.

We will continue to monitor the situation in 2017.

3.4 Council sub-committees

To improve accountability and performance, the Council has established two subcommittees chaired by external representatives. The Audit, Risk and Finance (ARF) subcommittee and the Commercial subcommittee. Both report to the Governance committee.

The Council has provided delegations to ARF in the formal terms of reference which we have reviewed as part of the audit process.

During the 2015/16 financial year we met with the ARF committee and liaised with the chair when appropriate. We will continue to develop this relationship in 2017.

3.5 Future development of landfill operations

The City Council has agreed with Tasman District Council (the District Council) to enter a shared service arrangement which would change the ownership and operation of their respective landfills. The landfills will be owned and operated under a joint venture model, with a joint committee being responsible for the ownership and operation of the landfills. This model is similar to governance and funding structures of Nelson Regional Sewerage Business Unit. The District Council will make a one-off payment of $4.2 million to the City Council to recognise the difference in value between the two landfills.

Under the agreement the joint operation is not due to start until 1 July 2017, with the District Council’s payment to the City Council also due on that date. Therefore, this arrangement did not significantly affect the current year’s annual report as there were no transactions which needed to be accounted for in the 2015/16 financial statements.

We understand the start date could be delayed as the councils are seeking a decision from the Commerce Commission as to whether the proposed arrangement will create a monopoly in regard to waste disposal operators within the Nelson/Tasman region.

Please keep us informed of any information or decision received from the Commerce Commission.

4 Sector-wide areas of audit focus

We completed reviews on our areas of interest across all local authorities.

4.1 Statement of performance

Performance measure rules

The Department of Internal Affairs (DIA) released the Non-Financial Performance Measures Rules 2013 (the Rules). The Rules mandate the inclusion of 19 performance measures across each local authority’s infrastructural activities.

The City Council was required to include these measures in its 2015-25 Long-Term Plan. During out audit of the Long-Term Plan, we identified that, although all of the mandated measures were included, the wording of several measures was different than that specified by DIA.

The City Council has incorporated the correct wording when developing its 2016/17 annual plan and its reporting of its 2015/16 performance is consistent with the DIA requirements.

Resident Survey

The City Council has a number of resident survey measures in the 2015-25 Long-Term Plan. The targets expressed in the Long-Term Plan suggest that the City Council plans to measure these every year. However, we noted in our 2014/15 audit that no resident survey was conducted.

The City Council conducted a resident survey in 2016 and included the results in its 2015/16 performance reporting.

4.2 Public sector concerns

In the course of our usual audit work, we remained alert for matters of effectiveness and efficiency, waste, and a lack of probity or financial prudence. In our testing:

· We did not identify any unrecorded conflicts of interest for either Council members or senior management.

· We did not identify any unusual ex gratia payments made to employees.

· We confirmed the City Council appropriately disclosed the severance payments made in the annual report.

· We confirmed the Council members’ remuneration complied with the Local Government Elected Members Determination and the City Council disclosed the remuneration of each member appropriately in the annual report.

· We reviewed selected credit card statements to ensure that these were appropriately reviewed and had appropriate supporting documentation attached. No issues were noted.

4.3 Rates

As in prior years, we reviewed the City Council’s processes for setting its rates in accordance with the Local Government (Rating) Act 2002 and the Local Government Act 2002. The Council set rates for 2016/17 in accordance with the information in the legislative requirements. No issues arose from our review.

Our review of compliance with legislation is completed for the purposes of expressing an audit opinion. It is not, and should not be seen, as a comprehensive legal review. This is beyond the scope of the audit, and our expertise as auditors. The Council has the ultimate responsibility for ensuring that it complies with applicable laws and regulations.

4.4 Financial reporting disclosures

We confirmed that the City Council included the information required by the Local Government (Financial Reporting and Prudence) Regulations 2014 in its annual report. The information contained in these disclosures was consistent with the information in the audited financial statements.

4.5 Possible LTP amendments

No LTP amendments were made in 2015/16.

4.6 Annual Report Adoption and Public Release Dates Return

The City Council met the requirements to adopt the annual report and summary annual report in accordance with the timeline set out in the Local Government Act 2002.

4.7 Local Authority exemptions for Council Controlled Organisations

The City Council did not exempt any entities in 2015/16.

5 Supplementary letter

We have provided management with a supplementary letter that outlines our other findings and recommendations about less significant and miscellaneous matters. The following table summarises our new recommendations:

Matter	Recommendation
Preparation and support for financial statements	Perform further work to streamline the audit process and ensure timeliness of information.
High annual leave accruals	Discuss and implement arrangements with employees to reduce high accrued leave balances.
Incorrect accounting standard applied by external valuer	Provide instructions to external parties which include specific instructions and requirements.
Monitoring of performance measures	Monitor the results for all City Council performance measures on a regular basis.
Reliance on third party to ensure payment is correct at different sites	Investigate opportunities to ensure that third parties provide a complete listing of transactions.

We also include a complete listing of the updated position of recommendations made previously within our supplementary report to management.

We wish to thank you and your staff for the assistance and cooperation extended during the course of the audit. If you have any questions, please contact me on 021 222 8464.

Yours sincerely

Bede Kearney
Director

Appendix 1: Mandatory disclosures

Area	Key messages
Our responsibilities in conducting the audit.	We carried out this audit on behalf of the Controller and Auditor‑General. We are responsible for expressing an independent opinion on the financial statements and statement of service provision, and reporting that opinion to you. This responsibility arises from section 15 of the Public Audit Act 2001. The audit of the financial statements and statement of service provision does not relieve management or the Council of their responsibilities. Our audit engagement letter contains a detailed explanation of the respective responsibilities of the auditor and the Council.
Auditing standards	We carry out our audit in accordance with generally accepted audit standards. The audit cannot and should not be relied upon to detect every instance of misstatement, fraud, irregularity or inefficiency that are immaterial to your financial statements and statement of service provision. The Council and management are responsible for implementing and maintaining your systems of controls for detecting these matters.
Auditor independence	We confirm that, for the audit of the City Council’s financial statements and statement of service provision for the year ended 30 June 2016, we have maintained our independence in accordance with the requirements of the Auditor‑General, which incorporate the independence requirements of the External Reporting Board. Other than this audit, the audit of the City Council’s 2015‑25 Long Term Plan and an independent assurance review of the City Council’s Debenture Trust Deed, we have no relationship with, or interests, in the City Council or any of its subsidiaries.
Other relationships	We are not aware of any situations where a spouse or close relative of a staff member involved in the audit occupies a position with the City Council that is significant to the audit. We are not aware of any situations where a staff member of Audit New Zealand has accepted a position of employment with the City Council during or since the end of the financial year.
Unresolved disagreements	We have no unresolved disagreements with management about matters that individually or in aggregate could be significant to the financial statements and statement of service provision. Management has not sought to influence our views on matters relevant to our audit opinion.

Governance Committee

9 March 2017

REPORT R6996

Corporate Report to 31 January 2017

1. Purpose of Report

1.1 To inform the members of the Governance committee of the financial results of activities for the 7 months ending 31 January 2017 compared to the approved operating budget, and to highlight and explain any permanent and material variations

2. Recommendation

That the Committee

Receives the report Corporate Report to 31 January 2017 (R6996) and its attachments (A1715857 and A1717092).

3. Background

3.1 The financial reporting focuses on the 7 month performance compared with the year to date approved operating budget.

3.2 Unless otherwise indicated, all measures are against approved operating budget, which is 2016/17 Annual Plan budget plus any carry forwards, plus or minus any other additions or changes as approved by Council throughout the year.

3.3 For the 2016/17 financial year, officers have assessed budgets and applied a range of phasing mechanisms to better reflect the timing of anticipated actual income and expenditure. This should enable clearer analysis of variances, and better highlight any real issues. Given that there are in excess of 3,500 budget lines, officers have concentrated effort on more material items so there will remain a (much smaller) element of timing differences.

4. Discussion

1.1 For the 7 months ending 31 January 2017, the activity surplus/deficits are $2.7 million favourable to budget.

1.2 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. The arrow icon in each applicable measure indicates whether the variance is increasing or decreasing 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 where available, and a graph showing debt levels over a rolling 13 month period.

· High level balance sheet. This does not include any consolidations.

· A debtor analysis graph over 13 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, and year to date expenditure against approved operating budget by activity.

· A major projects summary including milestones, status, issues and risks.

4.1 Capital expenditure is $7.5 million under budget.

5. November earthquake costs update

5.1 Expenditure incurred as a result of the November earthquakes centred around Cheviot/Kaikoura, totals $49,722. The bulk of this expenditure relates to inspections and assessments of Council assets. Repairs to Civic House expected to cost in the region of $23,600 remains to be invoiced/undertaken. These costs will be met from unprogrammed maintenance budgets. In addition to these costs, staff time of $33,000 has been recorded.

6. Options

6.1 Accept the recommendation. This report is to inform the committee members, and no further actions are required.

6.2 Do not accept the recommendation.

Tracey Hughes

Senior Accountant

Attachments

Attachment 1: Financial information (A1715857) ⇩

Attachment 2: Major projects summary (A1717092) ⇩

Important considerations for decision making

1. Fit with Purpose of Local Government

The Governance committee receives an update on financial matters at each meeting to inform them of items of financial interest and potentially items of financial risk.

2. Consistency with Community Outcomes and Council Policy

The financial reports are prepared comparing current year performance against the year to date approved budget for 2016/17.

3. Risk

The recommendation carries no risk as the report is for information only.

4. Financial impact

The recommendation has no financial impact.

5. Degree of significance and level of engagement

The recommendation is of low significance as there are no decisions to be made.

6. Inclusion of Māori in the decision making process

No consultation is required.

7. Delegations

The Governance committee has oversight of Council’s financial performance and the management of financial risks.

Option 1: Receive the report and note the issues raised by Audit NZ
Advantages	· Allows discussion on the issues raised and finalisation of the letter to council
Risks and Disadvantages	· none
Option 2: Not receive the report
Advantages	· none
Risks and Disadvantages	· the letter to council cannot be finalised.