Agenda of Audit, Risk and Finance Subcommittee

Audit, Risk and Finance Subcommittee

2 December 2020

Page No.

1. Apologies

Nil

2. Confirmation of Order of Business

3. Interests

3.1 Updates to the Interests Register

3.2 Identify any conflicts of interest in the agenda

4. Public Forum

5. Confirmation of Minutes

5.1 10 November 2020 6 - 12

Document number M15258

Recommendation

That the Audit, Risk and Finance Subcommittee

1. Confirms the minutes of the meeting of the Audit and Risk Subcommittee, held on 10 November 2020, as a true and correct record.

6. Chairperson's Report 13 - 13

Document number R22501

Recommendation

That the Audit, Risk and Finance Subcommittee

1. Receives the Chairperson's Report (R22501).

7. Policy Review: Procurement Policy 14 - 30

Document number R14814

Recommendation

That the Audit, Risk and Finance Subcommittee

1. Receives the report Policy Review: Procurement Policy (R14814) and its attachments (A2348654 and A2525519).

Recommendation to Council

That the Council

1. Approves the Nelson City Council Procurement Policy (A2348654).

8. Quarterly Finance Report 1 July - 30 September 2020 31 - 47

Document number R21347

Recommendation

That the Audit, Risk and Finance Subcommittee

1. Receives the report Quarterly Finance Report 1 July - 30 September 2020 (R21347) and its attachments (A2505175, A2505385 and A2517557).

CONFIDENTIAL Business

9. Exclusion of the Public

Recommendation

That the Audit, Risk and Finance Subcommittee

1. Excludes the public from the following parts of the proceedings of this meeting.

2. The general subject of each matter to be considered while the public is excluded, the reason for passing this resolution in relation to each matter and the specific grounds under section 48(1) of the Local Government Official Information and Meetings Act 1987 for the passing of this resolution are as follows:

Item	General subject of each matter to be considered	Reason for passing this resolution in relation to each matter	Particular interests protected (where applicable)
1	Audit and Risk Subcommittee Meeting – Confidential Minutes - 10 November 2020	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)(g) To maintain legal professional privilege · Section 7(2)(a) To protect the privacy of natural persons, including that of a deceased person · Section 7(2)(g) To maintain legal professional privilege

Item

General subject of each matter to be considered

Reason for passing this resolution in relation to each matter

Particular interests protected (where applicable)

Audit and Risk Subcommittee Meeting – Confidential Minutes - 10 November 2020

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)(g)

To maintain legal professional privilege

· Section 7(2)(a)

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

· Section 7(2)(g)

To maintain legal professional privilege

Audit and Risk Subcommittee Minutes - 10 November 2020

Minutes of a meeting of the Audit and Risk Subcommittee

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

On Tuesday 10 November 2020, commencing at 1.34p.m.

Present: Mr J Peters (Chairperson), Her Worship the Mayor R Reese, Mr J Murray and Councillor J Edgar

In Attendance: Councillors Y Bowater, T Brand and T Skinner, Group Manager Corporate Services (N Harrison), Governance Advisers (J Brandt and K McLean) and Governance Support (P Boutle)

Apology: Her Worship the Mayor R Reese for early departure (Council business), Councillor R Sanson for attendance

1. Apologies

Resolved AR/2020/051

That the Audit and Risk Subcommittee

1. Receives and accepts the apology from Her Worship the Mayor R Reese for early departure (on Council business), and from Councillor R Sanson for attendance.

Murray/Edgar 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 17 September 2020

Document number M14135, agenda pages 7 - 11 refer.

Resolved AR/2020/052

That the Audit and Risk Subcommittee

1. Confirms the amended minutes of the meeting of the Audit and Risk Subcommittee, held on 17 September 2020, as a true and correct record.

Peters/Murray Carried

6 Chairperson's Report

Chairperson John Peters gave a verbal report. On behalf of the Subcommittee, Mr Peters expressed thanks to the Internal Audit Analyst, Lynn Anderson, for her contributions, and wished her well for the future.
Resolved ARF/2020/053
	*That the Audit and Risk Subcommittee* 1. Receives the verbal Chairperson’s Report.
Her Worship the Mayor/Murray Carried

7. Key Organisational Risks Report - 01 July to 30 September 2020

Document number R19222, agenda pages 12 - 43 refer.

Manager Business Improvement, Arlene Akhlaq, presented the report and gave an update about measures taken to increase Council’s cyber security following the recent NZX website cyber-attack. Ms Akhlaq answered questions about the risk management maturity benchmarking self-assessment and the new contract management system, the new risk software, and potential emergent risks related to legislative changes around Freshwater management.

In response to a question, Group Manager Corporate Services, Nikki Harrison, confirmed that financial oversight reporting for the Nelson Plan would be provided as part of the quarterly finance report going forward.

Resolved AR/2020/054

That the Audit and Risk Subcommittee

1. Receives the report Key Organisational Risks Report - 01 July to 30 September 2020 (R19222) and its attachment (A2486951).

Edgar/Her Worship the Mayor Carried

8. Audit NZ - Audit Engagement Letter for the Long Term Plan 2021-31

Document number R21345, agenda pages 44 - 62 refer.

Audit NZ Appointed Auditor, John Mackey, joined the meeting via Zoom. While discussing levels of service, Mr Mackey noted delays in completing the Annual Report 2019/20 audit due to internal COVID-19 resourcing issues and matters that had recently arisen in relation to Council Controlled Organisations (CCOs).

Mr Mackey outlined the steps Audit NZ would take to complete the audit and acknowledged that timeframes to meet the 31 December 2020 statutory deadline were tight.

Mr Mackey answered questions about Audit NZ’s ability to deliver on the Long Term Plan engagement letter by 30 June 2021. In relation to the payment schedule (item 7 of the draft engagement letter), Mr Mackey gave the undertaking that invoicing would be for completed work only.

Resolved AR/2020/055

That the Audit and Risk Subcommittee

1. Receives the report Audit NZ - Audit Engagement Letter for the Long Term Plan 2021-31 (R21345) and its attachment (A2479185); and

2. Notes the Audit and Risk Subcommittee can provide feedback on the Audit Engagement Letter to Audit NZ if required and that the Mayor will sign the letter once the Subcommittee’s feedback (if any) has been incorporated.

Edgar/Murray Carried

9. Health, Safety and Wellbeing Report, July to September 2020

Document number R21365, agenda pages 63 - 78 refer.

Health and Safety Adviser, Malcolm Hughes presented the report. He answered questions about safe work observations and staff wellbeing.

Resolved AR/2020/056

That the Audit and Risk Subcommittee

1. Receives the report Health, Safety and Wellbeing Report, July to September 2020 (R21365) and its attachment (A2488389).

Edgar/Her Worship the Mayor Carried

Attendance: Her Worship the Mayor R Reese left the meeting at 2.47p.m.

10. Internal Audit - Quarterly Progress Report to 30 September 2020

Document number R21363, agenda pages 79 - 82 refer.

Internal Audit Analyst, Lynn Anderson presented the report. She noted the number of staff who did training for fraud prevention, bribery and corruption had increased since the writing of the report, and that testing of internal controls relating to fraud risks had been completed.

Resolved AR/2020/057

That the Audit and Risk Subcommittee

1. Receives the report Internal Audit - Quarterly Progress Report to 30 September 2020 (R21363) and its attachment (A2483911).

Edgar/Murray Carried

11. New and Outstanding Significant Risk Exposures and Control Issues Identified from Internal Audits - 30 September 2020

Document number R21364, agenda pages 83 - 87 refer.

Internal Audit Analyst, Lynn Anderson presented the report. She answered questions about procurement and contract management, and the information management maturity audit.

Resolved AR/2020/058

That the Audit and Risk Subcommittee

1. Receives the report New and Outstanding Significant Risk Exposures and Control Issues Identified from Internal Audits - 30 September 2020 (R21364) and its attachment (A2482497).

Murray/Edgar Carried

12. Internal Audit Self-Assessment - 31 March 2020

Document number R18156, agenda pages 88 - 98 refer.

Internal Audit Analyst, Lynn Anderson presented the report. She highlighted key focus areas and answered questions about areas for improvement.

Resolved AR/2020/059

That the Audit and Risk Subcommittee

1. Receives the report Internal Audit Self-Assessment - 31 March 2020 (R18156) and its attachment (A2366767).

Edgar/Murray Carried

13. Exclusion of the Public

Resolved AR/2020/060

That the Audit and Risk Subcommittee

1. Excludes the public from the following parts of the proceedings of this meeting.

Murray/Edgar 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	Quarterly Update on Legal Proceedings	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)(g) To maintain legal professional privilege
2	Quarterly Update On Debts - 30 September 2020	Section 48(1)(a) The public conduct of this matter would be likely to result in disclosure of information for which good reason exists under section 7	The withholding of the information is necessary: · Section 7(2)(a) To protect the privacy of natural persons, including that of a deceased person · Section 7(2)(g) To maintain legal professional privilege

Item

General subject of each matter to be considered

Reason for passing this resolution in relation to each matter

Particular interests protected (where applicable)

Quarterly Update on Legal Proceedings

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)(g)

To maintain legal professional privilege

Quarterly Update On Debts - 30 September 2020

Section 48(1)(a)

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

The withholding of the information is necessary:

· Section 7(2)(a)

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

· Section 7(2)(g)

To maintain legal professional privilege

The meeting went into confidential session at 3.14p.m. and resumed in public session at 3.28p.m.

Restatements

It was resolved while the public was excluded:

CONFIDENTIAL: Quarterly Update on Legal Proceedings

That the Audit and Risk Subcommittee

2. Agrees that the Report (R21371) and its attachment (A2490624) remain confidential at this time.

CONFIDENTIAL: Quarterly Update On Debts - 30 September 2020

That the Audit and Risk Subcommittee

2. Agrees that the Report (R21377) and its attachment (A2216183) remain confidential at this time.

There being no further business the meeting ended at 3.28p.m.

Confirmed as a correct record of proceedings:

Chairperson Date

Item 7: Policy Review: Procurement Policy

Audit, Risk and Finance Subcommittee

2 December 2020

REPORT R14814

Policy Review: Procurement Policy

1. Purpose of Report

1.1 To adopt Council’s Procurement Policy, effective from 1 February 2021.

2. Summary

2.1 The existing Procurement Policy was approved by Council resolution in 2016, with a review date of October 2019. The Policy has been reviewed, and a revised Procurement Policy is proposed which updates Council’s position both as a purchaser and a change leader, and which better aligns Council with the Government Procurement Rules.

3. Recommendation

That the Audit, Risk and Finance Subcommittee

1. Receives the report Policy Review: Procurement Policy (R14814) and its attachments (A2348654 and A2525519).

Recommendation to Council

That the Council

1. Approves the Nelson City Council Procurement Policy (A2348654).

4. Background

4.1 In 2019, an internal Procurement Steering Committee was established. Part of its remit was to evaluate the effectiveness of the Procurement Policy, and to make recommendations on changes to the Policy objectives and content, for subsequent approval by Council. In its evaluation, the Procurement Steering Committee considered the key strategic influences (summarised in this report at paragraph 5), statistics on Council procurement activity, feedback from Council officers who had completed procurements, and feedback from external suppliers who had participated in Council procurements.

4.2 During the deliberations on submissions to the draft Annual Plan 2020-21, Council resolved:

Requests that when reviewing the Council Procurement Policy, officers incorporate broader outcomes as outlined in the Government Procurement Rules, including a focus on buying local.

4.3 The revised Policy was reviewed to ensure alignment with the above resolution.

5. Discussion

5.1 Since the existing Procurement Policy was adopted in 2016, Council’s desired approach to procurement has been increasingly shaped by strategic level influences:

5.1.1 Council’s declaration of a Climate Emergency in May 2019, which signalled Council’s recognition that urgent, meaningful action was needed to respond to the challenge of climate change;

5.1.2 Changes to the Climate Change Response Act 2002 in November 2019, which introduced a target for New Zealand of net zero emissions by 2050;

5.1.3 Changes to the Local Government Act 2002 in May 2019 which reinstated the four well-beings, amending the purpose of local government to include promoting the “social, economic, environmental, and cultural well-being of communities in the present and for the future”. The Act requires local authorities to deliver services in a way that is efficient, effective, and “appropriate to present and anticipated future circumstances”;

5.1.4 Changes to the Government Procurement Rules in October 2019 to primarily reflect the expectation that procurement is leveraged to achieve broader outcomes for New Zealand.

5.2 Operationally, the key issues which impact procurement effectiveness are supplier constrained markets, and efficiency of procurement processes. These issues are largely being addressed at the procedural level, however some policy level alignment is needed for these operational changes to be fully effective.

5.3 In preparing the proposed revised Policy, consideration has been given to procurement as a mechanism to effect change. Operationally, officers will use a consistent framework to gauge the extent to which an individual procurement is focussed on effecting change, beyond the benefits to be gained from the goods and services being purchased.

5.4 An overview of the procurement process that officers are required to follow, updated to align with the proposed revised Policy, is included at attachment two.

Seeking broader outcomes through Council procurement

5.5 Central government has prioritised the broader outcomes of: increasing access for New Zealand businesses; increasing the size and skills of the construction sector; lifting health and safety and employment standards; and transitioning to a net zero emissions economy. For each of these priority outcomes, Government agencies must meet a set of minimum requirements for procurement of designated goods and services contracts.

5.6 The revised Policy mandates that in undertaking procurement, officers must consider the opportunities for broader outcomes relevant and appropriate to the scale of goods or services being purchased.

5.7 The revised Policy makes clear statements on Council’s preference for: contractual arrangements with local suppliers; suppliers who pay the living wage to all their employees; suppliers who can deliver services with the lowest possible greenhouse gas emissions, and who are actively seeking to reduce the greenhouse gas emissions of their own business operation.

5.8 With regards to the living wage, many of Council’s suppliers are paying a living wage to all their employees. If Council wishes to pursue this as a mandatory requirement for all suppliers in undertaking work for Council, the cost across affected contracts is estimated at a minimum $200,000 additional operational expenditure per year, plus annual increases. This estimate is for contracted programmed work such as maintenance, and regularly performed scheduled services.

Comparison with existing Procurement Policy

5.9 The proposed revised Policy incorporates the following key changes from the existing Policy:

5.9.1 Consideration of the broader outcomes to be achieved through Council procurement;

5.9.2 Statements on Council’s preferences for the Living Wage, and lowering greenhouse gas emissions; strengthened definition and statement about Council’s preferences for local suppliers;

5.9.3 An increased focus on procuring goods and services through previously established contracts where feasible and appropriate;

5.9.4 The threshold triggers for direct, closed competitive, and open competitive purchasing have been adjusted to be more appropriate for purchasing in a supplier constrained market, and will additionally result in more efficient use of officer resources for purchasing activities;

5.9.5 A policy of awarding contracts for the maximum natural term. This is considered good practice, and an enabler to develop better relationships with suppliers;

5.9.6 A mandatory requirement for contracts to include performance measures, and for officers to monitor and manage those contractual performance measures.

6. Options

Option 1: Approve the proposed revised Procurement Policy
Advantages	· Supports Council’s investment in and leadership of the Nelson region · Clear policy enabling officers to seek broader outcomes through procurement activity · Will enable procurement activity to be more effective in achieving Council’s requirements · Will enable development of more efficient procurement processes
Risks and Disadvantages	· Suppliers outside of the Nelson region may feel disadvantaged. However it should be noted that the “buy local” policy statement is largely unchanged from the current Policy · The cost of some new contractual arrangements may be more than is currently anticipated, and may require some adjustments to budgets in order to deliver the procurement outcomes sought by Council
Option 2: Renew the existing Procurement Policy
Advantages	· Operational procurement practices can continue to evolve, to a point, under the umbrella of the existing Policy · Avoid the short term internal disruption of adapting procurement practices to support a new policy · Includes some alignment with “Nelson 2060” sustainability goals · Supports “buy local”
Risks and Disadvantages	· Does not demonstrate change leadership · Procurement practices will continue to have built-in inefficiencies necessary to support the Policy · Lack of clear policy statement to fully enable officers to seek broader outcomes through procurement · Smaller suppliers discouraged from participating in Council procurements due to the time and cost involved

7. Conclusion

7.1 The revised Policy seeks to achieve better procurement outcomes for Council, whilst recognising the need for efficient use of Council resources and prudent management of risks.

8. Next Steps

8.1 On adoption by Council, this Policy will become effective from 01 February 2021 for all Council procurement. Additionally, the streamlined contract award process for the Capital Works Programme will remain in place until 30 June 2022. This streamlined contract award process is an approved exception to the existing Procurement Policy.

8.2 In preparation for the Policy’s effective date of 01 February 2021, the following will be completed: amend operational procurement processes to reflect the updated Policy; introduce guidance to assist officers with implementing the Policy requirements; update and deliver procurement training to familiarise officers with the revised Policy requirements.

Author: Arlene Akhlaq, Manager Business Improvement

Attachments

Attachment 1: A2348654 - Draft Procurement Policy ⇩

Attachment 2: A2525519 - Procurement Process Overview ⇩

Important considerations for decision making

1. Fit with Purpose of Local Government

The revised Policy mandates consideration of achieving broader outcomes through Council procurement, which supports Council’s promotion of the social, economic, environmental, and cultural well-being of the local community.

2. Consistency with Community Outcomes and Council Policy

The revised Policy contributes to the outcome “Our Council provides leadership and fosters partnership, a regional perspective, and community engagement”.

3. Risk

The objectives of the revised Policy are likely to be achieved, provided the required procedural changes are implemented and monitored.

4. Financial impact

The immediate costs of implementing the revised Policy are staff time. Any additional longer term costs for significant planned procurements will be proposed through the relevant Activity Management Plan.

5. Degree of significance and level of engagement

This matter is of low significance because the revised Policy supports previous Council decisions, therefore no community engagement has been undertaken.

6. Climate Impact

This decision is likely to result in a reduction in greenhouse gas emissions by requiring officers to consider how procurement activity could contribute to Council’s climate change goals, and targets for reducing or limiting greenhouse gas emissions.

7. Inclusion of Māori in the decision making process

No engagement with Māori has been undertaken in preparing this report.

8. Delegations

The Audit, Risk and Finance Subcommittee has the following delegations to consider the revised Procurement Policy:

Areas of Responsibility:

· Council’s procurement policy.

Delegations:

· Power to recommend to Council on matters within the Subcommittee’s areas of responsibility.

Item 8: Quarterly Finance Report 1 July - 30 September 2020

Audit, Risk and Finance Subcommittee

2 December 2020

REPORT R21347

Quarterly Finance Report 1 July - 30 September 2020

1. Purpose of Report

1.1 To inform the Subcommittee of the financial results for the first quarter of 2020/21 for Council and to highlight any material variations.

2. Recommendation

That the Audit, Risk and Finance Subcommittee

1. Receives the report Quarterly Finance Report 1 July - 30 September 2020 (R21347) and its attachments (A2505175, A2505385 and A2517557).

3. Background

3.1 Quarterly reports on performance are being provided to each Committee on the performance and delivery of projects and areas within their responsibility.

3.2 The whole of Council financial reporting provided to this subcommittee focuses on the three month performance (1 July to 30 September 2020) compared with the year-to-date (YTD) approved capital and operating budgets.

3.3 Unless otherwise indicated, all information is against approved operating budgets, which is 2020/21 Annual Plan, plus any carry forwards, plus or minus any other additions or changes as approved by the Committee or Council.

4. Financial Performance

4.1 For the three months ending 30 September 2020, the activity surplus/deficits are $1.5 million favourable to budget.

4.2 Operating budgets were initially phased evenly across the year and then staff are asked to check phasing for any changes required. Following the quarterly report writing process, budgets in all activities have been revisited and corrected where necessary. These changes will be reflected in the second quarter committee reports.

4.3 Profit and Loss

4.4 Income

4.4.1 Rates income is on budget.

4.4.2 Other Income is on budget with large variances including the following:

4.4.3 Forestry income is behind budget by $486,000 due to Maitai Forest Income $486,000 being behind budget YTD. This is because of delays in work on the Maitai and Roding bridges. Work is due to start on the Maitai Bridge in October and on the Roding Bridge in December.

4.4.4 Investment Management income is ahead of budget by $135,000 due to a provision for lease and rental relief across Council due to COVID-19. For Q1, there appears to be no major issues with lessees paying agreed rent and leases.

4.4.5 Esplanade & Foreshore Reserves income is greater than budget by $92,000. An unbudgeted PGF Grant for Borck Creek of $98,000 was received.

4.4.6 Walkways income is greater than budget by $45,000 due to an unbudgeted grant from MBIE in relation to the management of the NZ Cycle Trail.

4.4.7 Trafalgar Centre income is less than budget by $57,000 due to COVID-19 closure and cancelled events. Trafalgar Centre expenditure is in line with budget.

4.4.8 Tahuna Motor Camp income is less than budget by $136,000. The phasing of the budget is misaligned as Tahuna is charged a minimal rent for 10 months of the year and higher amounts during the peak summer months of February and March to reflect the seasonality of campground income. This phasing will be corrected.

4.4.9 Public Transport income is over budget by $192,000 due to higher than budgeted subsidised income from NZTA of $151,000 mainly due to receiving an annual lump sum of $159,000 in relation to SuperGold Card expenses during Q1 when the budget is phased evenly across the year.

4.4.10 Wastewater income is behind budget by $137,000 due to a phasing misalignment in relation to NRSBU investment return, it is on track to be on budget for the year. The phasing will be revisited and corrected.

4.4.11 Water Supply income is ahead of budget by $336,000 due to incorrect budget phasing for Commercial Water by Meter, but is in line with the same period in 2019/20. The phasing will be revisited and corrected.

4.4.12 Dog Control income is ahead of budget by $159,000 due to incorrect budget phasing. Registration fees are due in September so the majority of Dog Registration Fees should have been collected for the year.

4.4.13 Building Services income is ahead of budget by $128,000 mainly due to building consents being higher than anticipated ($97,000) as budget assumed reduced activity following COVID-19 lockdown as well as a fee increase for BCA QA Levies ($25,000). Council is in the process of recruiting QA Roles.

4.5 Expenses

4.5.1 Staff Operating Expenditure is over budget by $257,000 due to staff being hired sooner than budgeted ($113,000) and insurance ($144,000) being charged at the start of the year and not smoothed over the year in line with budget.

4.5.2 Base Expenditure is behind budget by $1.3 million due to:

· Maitai Forest expenditure being $375,000 behind budget and Roding Forest expenditure $88,000 behind budget. Work is due to start on the Maitai Bridge in October and on the Roding Bridge in December in anticipation of harvesting commencing in winter.

· The phasing of Nelson Plan expenditure is behind budget ($189,000) as it is currently in the engagement phase. Full year expenditure will meet the approved budget.

· Water Supply expenditure is behind budget by $87,000 due to a misalignment of phasing over the year for water treatment maintenance ($92,000). The phasing will be revisited and corrected.

· Subsidised Roading expenditure is $90,000 behind budget due to maintenance expenses in relation to Sealed Pavement Maintenance ($27,000), Bridge Maintenance ($25,000) and Travel Demand Management ($35,000) being behind budget in Q1 but expected to be on budget by the end of the year.

· Parking and CBD Enhancement expenditure is behind budget by $97,000. $51,000 is due to a budgeting error in relation to rates that will be adjusted. CBD development is currently under budget by $20,000 but is expected to be spent by the end of the year. Maintenance of Street Trees is behind budget ($12,000) but the remainder of the budget is expected to be spent in the winter months.

· Monitoring the Environment expenditure is behind budget by $65,000 mainly due to budget phasing of Estuary health investigation work ($15,000), Hydrology monitoring ($14,000), Sustainable Land Management ($10,000) and River Ecology Monitoring ($9,000). The phasing will be revisited and corrected.

· Wastewater expenditure is $150,000 behind budget mainly due to NCC’s share of Regional Sewerage ($108,000) and Nelson North treatment plant maintenance ($22,000) both being behind budget due to phasing misalignment. The phasing will be revisited and corrected.

· The remaining variance is made up of individual variances of less than $50,000.

4.5.3 Unprogrammed expenditure is on budget.

4.5.4 Programmed expenditure is behind budget by $1.1 million due to:

· Maitai area MTB Trail grade 2-3 and 3-4 development being $126,000 under budget. Work is being undertaken with the MTB club to determine the correct allocation between operating and capital expenditure.

· TDC Champion Drive connection to Velodrome being under budget by $181,000. This is due to a delay in the works starting which is now estimated to be November.

· Incorrect budget phasing in Nelson Nature expenditure which is $95,000 behind budget. The phasing will be revisited and corrected.

· Economic Development expenditure is under budget by $162,000 mainly due to Events Contestable Fund ($60,000) which is paid dependent on the timing of events but the budget is phased evenly, Light Nelson ($27,000), Facilities Marketing ($20,000) and international sporting event ($18,000) which are all on track for the year but phasing is misaligned. The phasing will be revisited and corrected.

· Neighbourhood Parks Replacement Planting ($54,000) incorrectly phased budget but the full budget is expected to be spent during the next planting season in May/June 2021.

· Sports Parks building and property maintenance expenditure is behind budget by $73,000 due to misaligned budget phasing. The phasing will be revisited and corrected.

· Heritage Incentives expenditure is less than budget by $90,000 due to Heritage Rates Remissions being behind budget by $89,000 due to timing as the rebate is not applied until the 2^nd quarter. It is expected that the full budget will be spent.

· Unsubsidised Roading replacement planting expenditure is behind budget by $45,000 as phasing is evenly spread but is planned for Autumn 2021.

· The remaining variance is made up of individual variances of less than $50,000.

4.5.5 Depreciation expenditure is over budget by $553,000 due to the budget being based on the value of assets at the start of 2019/20 but actual depreciation is based on the revaluations performed on 30 June 2020 which saw, for example, depreciated replacement value of water supply assets increase by an average of 13% and stormwater assets increase by an average of 29% when compared with values at 1 July 2019.

4.6 Capital Expenditure (including staff time, excluding vested assets)

5. Nelson Plan Financial Risk Oversight

5.1 Nelson Plan is tracking to plan, within the revised scope and budget for 2020/2021. It is currently in Engagement phase 1, with the Draft Nelson Plan out with the public for feedback. Phase 2 engagement is planned in March 2021 for the parts of the Plan that have not been released in Phase 1.

5.2 Nelson Plan actual expenditure for the first quarter of $212,000 is $189,000 behind budget ($401,000). The costs are expected to meet the budget by the end of the year as consultancy costs increase following public feedback, preparation of supporting reports (s.32 reports) and completing the Nelson Plan.

5.3 Financial Risks include:

5.3.1 Coastal Hazards - this area is complex. There is a risk for the Nelson Plan that community feedback will increase the request for options.

5.3.2 Fresh Water - The National Policy Statement changes have as much as possible been anticipated in the Nelson Plan but there are some additional process steps and work with iwi and catchment communities that are required. This may impact timeframes.

5.3.3 EPlan - The Nelson Plan is on a new IT software platform. Functionality may not fully achieve what is expected for users based on other council experiences. Additional back up measures are being prepared to mitigate these risks.

5.3.4 Legislation - Central Government has a significant programme of regulatory changes that may be implemented during the development phase of the Nelson Plan and pose a risk as the impact is not known. The Randerson Report to Government recommended a raft of changes to the Resource Management Act, and it is expected that some or all of these will be implemented relatively quickly by the Government. Until there is a clear signal from the government about the scope of changes, the preparation of the Draft Nelson Plan is continuing.

5.4 The Nelson Plan Project Sheet is attached to the report (Attachment 3).

Author: Clare Knox, Manager Finance

Attachments

Attachment 1: A2505175 - All of Council Project Health Summary Quarter 1 2020/21 ⇩

Attachment 2: A2505385 - Finance Dashboard and Graphs ⇩

Attachment 3: A2517557 - Nelson Plan Project Sheet ⇩