Agenda of Audit, Risk and Finance Subcommittee

Audit, Risk and Finance Subcommittee

14 September 2021

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 25 May 2021 6 - 14

Document number M17659

Recommendation

That the Audit, Risk and Finance Subcommittee

1. Confirms the minutes of the meeting of the Audit, Risk and Finance Subcommittee, held on 25 May 2021, as a true and correct record.

6. Chairperson's Report 15 - 17

Document number R26218

Recommendation

That the Audit, Risk and Finance Subcommittee

1. Receives the report Chairperson's Report (R26218).

7. Annual Report 2020/21 18 - 241

Document number R25905

Recommendation

That the Audit, Risk and Finance Subcommittee

1. Receives the report Annual Report 2020/21 (R25905) and its attachment (A2739259); and

2. Notes the draft Annual Report 2020/21 has been prepared and will be audited before being presented to Council for adoption following audit, prior to the 31 December 2021 statutory deadline.

8. Audit Reports on the Consultation Document and Long Term Plan 2021-31 242 - 265

Document number R26112

Recommendation

That the Audit, Risk and Finance Subcommittee

1. Receives the report Audit Reports on the Consultation Document and Long Term Plan 2021-31 (R26112) and its attachments (A2720857 and A2718269); and

2. Notes Council’s response to two recommendations from Audit New Zealand on asset planning (‘Management Comment’), highlighted in section 3.10, pages 10 and 11 of Attachment 1 (A2720857).

9. Bad Debts Writeoff - Year Ending 30 June 2021 266 - 269

Document number R25901

Recommendation

That the Audit, Risk and Finance Subcommittee

1. Receives the report Bad Debts Writeoff - Year Ending 30 June 2021 (R25901).

Recommendation to Council

That the Council

1. Approves the balance of $41,990.31 owed by the Brook Valley Community Group Inc be written off as at 30 June 2021.

10. Carry Forwards 2020/21 270 - 277

Document number R26143

Recommendation

That the Audit, Risk and Finance Subcommittee

1. Receives the report Carry Forwards 2020/21 (R26143) and its attachment (A2724698).

Recommendation to Council

That the Council

1. Approves the carry forward of $2.6 million unspent capital budget for use in 2021/22: and

2. Notes that this is in addition to the carry forward of $4.8 million approved during the Long Term Plan 2021-31, taking the total carry forward to $7.4 million of which $827,000 is for the 2022/23 year, $349,000 is for the 2023/24 year and the balance of $6.2 million is for the 2021/22 year; and

3. Notes that the total savings and reallocations in 2020/21 capital expenditure of $1.7 million including staff time which is in addition to the $2.3 million savings and reallocations already recognised in the May 2021 deliberations; and

4. Notes that the total 2021/22 capital budget (including staff costs and excluding consolidations and vested assets) will be adjusted by these resolutions from a total of $67.1 million to a total of $69.7 million; and

5. Approves the carry forward of $567,000 unspent operating budget for use in 2021/22.

Confidential Business

11. 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, Risk and Finance Subcommittee Meeting - Confidential Minutes - 25 May 2021	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
2	IT Funding Request	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

Item

General subject of each matter to be considered

Reason for passing this resolution in relation to each matter

Particular interests protected (where applicable)

Audit, Risk and Finance Subcommittee Meeting - Confidential Minutes - 25 May 2021

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

IT Funding Request

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

Audit, Risk and Finance Subcommittee Minutes - 25 May 2021

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

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

On Tuesday 25 May 2021, commencing at 9.03a.m.

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

In Attendance: Chief Executive (P Dougherty), Group Manager Infrastructure (A Louverdis), Group Manager Environmental Management (C Barton), Group Manager Corporate Services (N Harrison), Group Manager Strategy and Communications (N McDonald), Governance Adviser (E Stephenson) and Governance Support (P Boutle)

Apology: Councillor Lawrey

1. Apologies

Resolved ARF/2021/015

That the Audit, Risk and Finance Subcommittee

1. Receives and accepts an apology from Councillor Lawrey.

Edgar/Sanson 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 23 February 2021

Document number M15441, agenda pages 9 - 16 refer.

Resolved ARF/2021/016

That the Audit, Risk and Finance Subcommittee

1. Confirms the minutes of the meeting of the Audit, Risk and Finance Subcommittee , held on 23 February 2021, as a true and correct record.

Murray/Sanson Carried

6. Chairperson's Report

Document number R25884, agenda pages 17 - 18 refer.

The Chairperson spoke to his report, noting the future challenges and uncertainty relating to the central government review of local government. He acknowledged the decision to appoint an iwi representative to the Subcommittee, which he welcomed.

It was also noted that the repeal of the Resource Management Act and the associated legislation that would change as a result, would impact the organisation and the need for best practice change management implementation was highlighted.

Resolved ARF/2021/017

That the Audit, Risk and Finance Subcommittee

1. Receives the report Chairperson's Report.

Peters/Sanson Carried

7. Audit NZ: Audit Plan for year ending 30 June 2021

Document number R24802, agenda pages 19 - 51 refer.

Group Manager Corporate Services, Nikki Harrison, clarified the Annual Report process.

Audit NZ Appointed Auditor, John Mackey, attended via Zoom. He explained the Audit opinion process and scope.

Resolved ARF/2021/018

That the Audit, Risk and Finance Subcommittee

1. Receives the report Audit NZ: Audit Plan for year ending 30 June 2021 (R24802) and its attachments (A2638227 and A2648347).

2. Notes the Subcommittee can provide feedback on the Proposed Audit Fee letter to Audit New Zealand if required, noting the Mayor will sign the letter once the Subcommittee’s feedback has been incorporated.

Murray/Sanson Carried

8. Health Safety and Wellbeing Report, January - March 2021

Document number R23731, agenda pages 52 - 68 refer.

Health and Safety Adviser, Malcolm Hughes, provided an update on matters included in the Health Safety and Wellbeing report and answered questions.

Chief Executive, Pat Dougherty, noted that the Audit, Risk and Finance Subcommittee was the main mechanism for health and safety issues, however, if an issue required governance attention, it would go to the relevant Committee or Subcommittee.

Resolved ARF/2021/019

That the Audit, Risk and Finance Subcommittee

1. Receives the report Health Safety and Wellbeing Report, January - March 2021 (R23731) and its attachment (A2621469).

Murray/Her Worship the Mayor Carried

9. Key Organisational Risks Report - 1 January 2021 to 31 March 2021

Document number R23745, agenda pages 69 - 106 refer.

Manager Business Improvement, Arlene Akhlaq, and Audit and Risk Analysist, Chris Logan, spoke to the report.

Discussion took place on regarding the need for wide thinking about setting residual risk targets.

Resolved ARF/2021/020

That the Audit, Risk and Finance Subcommittee

1. Receives the report Key Organisational Risks Report - 1 January 2021 to 31 March 2021 (R23745) and its attachment (A2587873).

Her Worship the Mayor/Edgar Carried

The meeting was adjourned from 10.48a.m. until 11.01a.m.

10. Internal Audit - Quarterly Progress Report to 31 March 2021

Document number R23746, agenda pages 107 - 119 refer.

Manager Business Improvement, Arlene Akhlaq and Risk Analysist, Chris Logan, answered questions regarding the internal audit progress.

Ms Akhlaq confirmed the risk management maturity self-assessment had been completed during 2020 and the Subcommittee requested a report following the next risk management maturity assessment.

Resolved ARF/2021/021

That the Audit, Risk and Finance Subcommittee

1. Receives the report Internal Audit - Quarterly Progress Report to 31 March 2021 (R23746) and its attachments (A2601420, A2599893); and

2. Requests staff to report back on the postponement of the planned audit ‘effectiveness of crisis management response and business disruption planning and management’ and the reviews performed by other councils.

Edgar/Sanson Carried

11. Draft Annual Internal Audit Plan for year to 30 June 2022

Document number R24781, agenda pages 120 - 126 refer.

Manager Business Improvement, Arlene Akhlaq, and Audit and Risk Analysist, Chris Logan, answered questions regarding choice of audit topics, contract review and renewal dates and the central contracts register.

Resolved ARF/2021/022
	*That the Audit, Risk and Finance Subcommittee* 1. Receives the report Draft Annual Internal Audit Plan for year to 30 June 2022 (R24781) and its attachment (A2601457).
Edgar/Her Worship the Mayor Carried
Recommendation to Council ARF/2021/023
	*That the Council* 1. Approves the Draft Annual Internal Audit Plan for the year to 30 June 2022 (A2601457).
Edgar/Her Worship the Mayor Carried

12. Draft Treasury Management Policy including Liability Management and Investment Policies

Document number R24767, agenda pages 127 - 166 refer.

Group Manager, Nikki Harrison, explained the policy changes and rationale. She answered questions regarding the Nelmac services, policy review, landfill monitoring and reporting, constraints of the Treasury Policy in relation to bidding in the Emissions Trading Scheme Auction, natural hazards including climate change risks and forestry. It was noted that the Carbon Risk Management Strategy, which was specific to the Nelson Tasman Regional Landfill Busines Unit (NTRLBU), would be reported to the next NTRLBU meeting.

The meeting was adjourned from 12.14p.m. until 12.19p.m.

Following discussion, it was agreed to amend section 15 of the Policy to note that the Group Manager Corporate Services is authorised to act on the NTRLBU’s behalf as bidder in the auction in line with this policy and reporting will be to the NTRLBU.

Further discussion took place regarding the closed forestry account and distribution of forestry profits. It was noted that a clear mandate from Council was required for officers to undertake analysis on this issue, which was not a matter for this Subcommittee.

Resolved ARF/2021/024
	*That the Audit, Risk and Finance Subcommittee* 1. Receives the report Draft Treasury Management Policy including Liability Management and Investment Policies (R24767) and its attachment (A2611223).
Sanson/Edgar Carried
Recommendation to Council ARF/2021/025
	*That the Council* 1. Adopts the updated Treasury Management Policy (A2611223) as amended at the 25 May 2021 Audit, Risk and Finance Subcommittee meeting.
Murray/Edgar Carried

13. Service Delivery Reviews (s17A reviews)

Document number R15914, agenda pages 167 - 175 refer.

Manager Strategy, Mark Tregurtha, and Policy Adviser, Gareth Power Gordon, noted an amendment to paragraph 4.15 of the agenda report, in that there were 41 activities at the $100,000 and 26 at the $500,000 thresholds and answered questions regarding the rationale for the thresholds.

Discussion took place on the financial thresholds and it was noted that there were other significant factors, rather than a singular financial metric, which was not required under legislation.

It was agreed that the matter be deferred pending discussion with the relevant Chairs and that a further report be brought back for consideration.

14. Quarterly Finance Report for the nine months ending 31 March 2021

Document number R24820, agenda pages 176 - 200 refer.

Resolved ARF/2021/026

That the Audit, Risk and Finance Subcommittee

1. Receives the report Quarterly Finance Report for the nine months ending 31 March 2021 (R24820) and its attachments (A2630218, A2630198, A2620993, A2628832 and A2628831).

Edgar/Murray Carried

15. Exclusion of the Public

Resolved ARF/2021/027

That the Audit, Risk and Finance Subcommittee

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

Edgar/Sanson Carried

Item	General subject of each matter to be considered	Reason for passing this resolution in relation to each matter	Particular interests protected (where applicable)
1	Audit, Risk and Finance Subcommittee Meeting - Public Excluded Minutes - 23 February 2021	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
2	Quarterly report 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
3	Quarterly Update On Debts - 31 March 2021	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 1.04p.m. and resumed in public session at 1.48p.m.

Restatements

It was resolved while the public was excluded:

CONFIDENTIAL: Quarterly report on legal proceedings

That the Audit, Risk and Finance Subcommittee

2. Agrees that the report (R23759) and its attachment (A2626174) remain confidential at this time.

CONFIDENTIAL: Quarterly Update On Debts - 31 March 2021

That the Audit, Risk and Finance Subcommittee

2. Notes that the application form for Outdoor Dining Concession rent relief includes that businesses with either an outstanding debt or who have not signed up to a payment plan will not be eligible for the rent relief; and

3. Agrees that the Report (R24796) and its attachment (A2216183) remain confidential at this time.

There being no further business the meeting ended at 1.48p.m.

Confirmed as a correct record of proceedings by resolution on (date)

Resolved

Item 6: Chairperson's Report

Audit, Risk and Finance Subcommittee

14 September 2021

REPORT R26218

Chairperson's Report

1. Purpose of Report

1.1 To update the Subcommittee on matters within its area of responsibility.

2. Recommendation

That the Audit, Risk and Finance Subcommittee

1. Receives the Chairperson's Report (R26218).

3. Discussion

3.1 Two key meetings of the Audit Risk and Finance sub-committee have been affected by the recent lockdown levels. The meeting scheduled for 24^th August was cancelled, as was the Risk Management Workshop arranged for 7^th September.

3.2 The papers for the August meeting, which include the financial year end results for the July 2020 to June 2021 financial year, were completed prior to the cancellation and distributed to members for information, and members were asked to raise any queries online. Questions that were raised, and the responses from officers are included here for information of all members. All questions relate to the Quarterly Financial Report.

Question: Para 2.4…… we sought advice about “salary advances and loans”…….are we doing this for our employees as an organisation?

3.3 We have offered staff an interest free loan (repaid fortnightly) for the purchase of personal bikes, to support Council’s active transport initiatives. We have also offered staff an interest free loan (repaid fortnightly) for the purchase of IT gear and office furniture through NCC for the setup of their home offices to support the Working from Home Policy. Advice was sought from PWC to ensure the schemes were set up correctly (i.e. to determine which method was the most appropriate - a salary advance or interest free loan) - and to ensure both GST and FBT were accounted for correctly.

Question: Para 4.1…..was the internal Audit plan approved by the Finance and Governance committee. I thought we did that in ARF?

3.4 The audit plan was approved by the Audit and Risk subcommittee 21 May 2020 but under the previous committee structure that was a recommendation through to the Governance and Finance committee on 27 August 2020.

Question: Para 4.3……who and how is a decision made to postpone an internal audit? Shouldn’t this be ARF (or at least in conjunction with the Chair)? I am not concerned about the postponement itself, but just wondered about the process behind this decision?

3.5 The wording in the report should have been better... instead of “indefinitely postponed” it should have been “the audit was not delivered in FY21 as per the FY21 plan”.

Question: What is the role of the new Internal Auditor and how is it structured? I see that he is also a Risk Analyst as well as the internal auditor with a business improvement lens. Have we lost the internal audit focus?

3.6 The role is essentially a 50/50 time split between internal audit and risk, which is the same amount of focus that the previous incumbent had for the internal audit role. The key change is that risk and internal audit matters are more closely interlinked than under the more generalised business improvement focus that former role.

Cancelled Risk Management Workshop

3.7 The cancelled Risk Management Workshop was intended for all members, not just Sub-Committee members. The intention was to provide an update on Council’s Risk Management history, progress and intended approach to risk, and was intended as a refresher for more experienced members and an awareness and education opportunity about risk for first term members.

3.8 It was also an opportunity to seek members’ input into the internal audit programme and to review the current top risks monitored by the Sub-committee. These activities will be pursued directly with the Audit and Risk Analyst prior to the next meeting in order to meet reporting deadlines.

4. Conclusion

4.1 My thanks to officers for being in a position to present the draft Annual Report Audit in timely fashion to this meeting, despite the pressures experienced. I remain concerned, however, at the continuing uncertainty relating to Audit New Zealand’s ability to meet the annual audit commitment, and we await further information on this. In the meantime, I am encouraged that staff will do everything possible to ensure that any delays are not attributable to NCC.

Author: John Peters, Chairperson - Audit Risk and Finance Subcommittee

Attachments

Nil

Item 7: Annual Report 2020/21

Audit, Risk and Finance Subcommittee

14 September 2021

REPORT R25905

Annual Report 2020/21

1. Purpose of Report

1.1 To provide a copy of the draft Annual Report 2020/21.

2. Summary

2.1 The draft Annual Report for the 2020/21 financial year has been prepared and is provided as Attachment 1, for information. Audit is now scheduled to commence in late September, and there are likely to be some changes as a result of the audit process.

3. Recommendation

That the Audit, Risk and Finance Subcommittee

1. Receives the report Annual Report 2020/21 (R25905) and its attachment (A2739259); and

2. Notes the draft Annual Report 2020/21 has been prepared and will be audited before being presented to Council for adoption following audit, prior to the 31 December 2021 statutory deadline.

4. Background

4.1 The purpose of the Annual Report is to compare Council’s actual performance against the targets as set out in year three of the Long Term Plan 2018-28. It also provides accountability to the Nelson community for the decisions made throughout the year.

4.2 An Annual Report must be completed to comply with section 98 of the Local Government Act 2002.

5. Discussion

5.1 The attached draft Annual Report 2020/21 is intended to provide the Subcommittee with information officers have to date. This is not the final Annual Report for the year as it is yet to be audited. It is likely to require modification through the auditing process.

5.2 The Local Government Act usually requires Council to adopt the final Annual Report within four months of the end of the financial year (31 October). In 2020, central government amended the legislation to give a two month extension for 2019/20 reports to the end of December (due to the impacts of COVID-19). Similarly, in July 2021 a Bill was enacted to extend the adoption deadline for 2020/21 and 2021/22 annual reports, to 31 December of 2021 and 2022 respectively. This decision was made in response to a national shortage of auditors due to ongoing border closures.

Financials

5.3 At the time of writing this report, Council is currently waiting to receive finalised draft financial statements from some of its CCOs and CCTOs. Draft financial statements have been prepared based on what has been received and therefore the draft financials will be different from the version that will be made available to Audit New Zealand to perform the year end audit.

5.4 Although Council’s CCOs and CCTOs were expected to deliver finalised draft financial statements by 20 August 2021, this has been delayed due to constraints that arose as a result of the recent lockdown. At this stage, we do not know when the CCO and CCTO audits will be finalised due to travel restrictions impacting Audit NZ.

Financial Commentary

5.5 The surplus before revaluation is $2.1 million greater than budgeted. The reasons for this variance will be explained in the draft Annual Report Note 40. This is yet to be completed however the variances are mainly due to following reasons.

5.6 Fees and charges are $2.5 million greater than budget, this is mainly due to the Building Consent activity income being $927,000 over budget. The driver behind higher income is increased levels of activity in the building sector during the recovery from COVID-19 compared with budgeted estimates which were conservative.

5.7 Subsidies and grants are $2.7 million greater than budget mainly due to unbudgeted grants received from Central Government largely to offset the economic effects in the community caused by COVID-19 which are offset by additional expenditure. Some examples of this include:

· Waka Kotahi provided $565,000 for the Public Transport COVID-19 response;

· Ministry for the Environment and Department of Conservation provided $671,000 for the Ecological Restoration Programme;

· Waka Kotahi provided $852,000 for Kawai Street Innovative Streets.

5.8 Other revenue is $2.5 million under budget mainly due to vested assets being $3.5 million under budget.

5.9 Other gains/losses are greater than budget by $6.1 million due to below reasons:

· Gain on Derivatives are $5.7 million greater than budget due to movement in interest rates;

· Gain on sale of Community Housing of $2.6 million;

· Loss on Disposal on Infrastructure assets of $1.8 million with some assets removed from the network earlier than anticipated in conjunction with our work programme.

5.10 Depreciation is greater than budget by $3.1 million mainly due to depreciation on Three Waters assets being $2.3 million greater than budget due to an increase in replacement values at 30 June 2020 with water supply assets increasing by an average of 13%, wastewater assets increasing by an average of 25%, and stormwater assets increasing by an average of 29% when compared with values at 1 July 2019.

5.11 Other expenses are $3.0 million greater than budget mainly due to the unbudgeted expenditure incurred due to the additional grant income received, including:

· $828,000 for Kawai Street Innovative Streets project.

· $715,000 for Ecological Restoration Programme.

· $212,000 for Public Transport COVID-19 response.

5.12 Land and Infrastructure Revaluations were $51.5 million over budget;

· Infrastructure assets are revalued every year to smooth out the large fluctuations and accounted for $23.9 million of the overall revaluation. This was against a budget of $20.2 million.

· Land is revalued every five years or when its fair value diverges materially from it’s carrying value. There were material movements in the 2020/21 year and the revaluation at 30 June 2021 resulted in a total increase in land value of $47.8 million. As this was not budgeted to be a land revaluation year, this movement was against a nil budget.

5.13 At 30 June 2021 Council’s borrowings, net of deposits, cash and LGFA borrower notes were $85.9 million compared to a budget of $114.6 million. This variance from the budget is mainly due to following reasons;

· Borrowings were lower due to Capital Expenditure not reaching the full programme and ending less than forecasted by $10.0 million.

· Proceeds received from selling community housing were $17.0 million against a budget of $8.0 million, with $5.0 million of this required to be held in a reserve for potential use by Kāinga Ora.

Rating Deficit

5.14 The rates deficit is $2.55 million against an Annual Plan budget of $2.57 million.

5.15 The quarterly report presented to Audit Risk and Finance Subcommittee held on 24^th August 2021 reported the rating deficit as $1.8 million whereas it is now $2.55 million. This difference is mainly due to the year-end adjustments to fixed assets but also multiple late creditor and debtor accruals.

Non-financial Performance

5.16 Council measures its non-financial success against performance measures that are set through the Long Term Plan. The Long Term Plan 2018-28 established 80 performance measures across Council’s 11 activity areas. The measures are recorded as ‘achieved’, ‘not achieved’, or ‘not measured’ (where insufficient data is available to determine a result) at the end of the year.

5.17 Council’s non-financial performance was 66.25% achieved in 2020/21, which is equal to its performance in 2019/20. Commentary on all measures is provided in the activity sections of Attachment 1.

5.18 As was the case in the previous year, Council’s ability to achieve many of its performance measures was impacted by COVID-19. In 2020/21 Nelson was fortunate to stay at Alert Level 1 for the majority of the year, with some relatively short periods at Level 2. However, the uncertainty and socioeconomic impacts of the post-COVID environment, particularly the lack of international visitors and cancellation/scaling down of events, is reflected in the achievement of targets. This is particularly notable in the social activity, which has many events-based measures, but across other areas too, such as bus patronage.

5.19 As annual reporting was undertaken over the period of the Long Term Plan 2018-28, staff found that several of the measures set in 2018 no longer align with changing data collection methods and legislated performance requirements (e.g. required inspection of licenced premises). This results in measures like these being listed as ‘not achieved’ against the targets set in 2018, which does not accurately reflect Council’s actual achievements in these areas. Similarly, numerous measures selected in 2018 relate to the performance of other organisations (such as the Theatre Royal and Suter Art Gallery), which Council has little control over. It also has limited influence on overarching measures such as Nelson’s GDP. To address this, Council’s performance measures were revised in the Long Term Plan 2021-31, to give a more accurate, relevant picture of Council’s non-financial performance over the next three years.

6. Options

6.1 This report is provided for information. The Audit, Risk and Finance Subcommittee has the option to either receive or not to receive this report and attachment. It is recommended that the Subcommittee receives this report and notes the final Annual Report 2020/21, with any changes resulting from the audit process, will be presented directly to Council before 31 December 2021.

Authors:

Nicky McDonald, Group Manager Strategy and Communications

Nikki Harrison, Group Manager Corporate Services

Attachments

Attachment 1: A2739259 - Draft Annual Report 2020/21 ⇩

Important considerations for decision making

1. Fit with Purpose of Local Government

The Annual Report 2020/21 is a requirement of the Local Government Act 2002 and fits the purpose of local government by providing information about Council’s performance during 2020/21, thereby promoting accountability.

2. Consistency with Community Outcomes and Council Policy

The Annual Report 2020/21 contributes to all the community outcomes by measuring performance across the full range of Council activities.

3. Risk

The content of the Annual Report is prescribed by statute so there is a very low risk that it will not achieve the required outcome.

The Local Government Act 2002 normally requires Council to adopt the final Annual Report within four months of the end of the financial year (31 October). Under the Annual Reporting and Audit Time Frames Extensions Legislation Bill 2021, the new date for councils to meet reporting timeframes is 31 December 2021. There is low risk that the Annual Report will not be adopted by this date.

4. Financial impact

Preparation and publication of the Annual Report can be achieved within existing budgets.

5. Degree of significance and level of engagement

The decision to receive this report is of low significance. The final audited Annual Report will be provided to Council for adoption after the audit opinion is given, before 31 December 2021. There will be a summary Annual Report available following adoption of the final audited Annual Report, and this will also be made available to the public, as well as an Our Nelson feature.

6. Climate Impact

The draft Annual Report (Attachment 1) contains a summary of Council’s climate change actions in 2020/21.

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 draft Annual Report 2020/21.

Areas of Responsibility:

· Council’s Annual Report

· Council’s financial and service performance

Item 8: Audit Reports on the Consultation Document and Long Term Plan 2021-31

Audit, Risk and Finance Subcommittee

14 September 2021

REPORT R26112

Audit Reports on the Consultation Document and Long Term Plan 2021-31

1. Purpose of Report

1.1 To provide Audit New Zealand’s Audit Reports on the Long Term Plan Consultation Document 2021-31 and final Long Term Plan 2021-31.

2. Recommendation

That the Audit, Risk and Finance Subcommittee

1. Receives the report Audit Reports on the Consultation Document and Long Term Plan 2021-31 (R26112) and its attachments (A2720857 and A2718269); and

2. Notes Council’s response to two recommendations from Audit New Zealand on asset planning (‘Management Comment’), highlighted in section 3.10, pages 10 and 11 of Attachment 1 (A2720857).

3. Background

3.1 The Long Term Plan 2021-31 Consultation Document was adopted by Council in March 2021. Following consultation, hearings and deliberations, the Long Term Plan 2021-31 was adopted by Council in June 2021.

3.2 Both the Consultation Document and the Long Term Plan 2021-31 were audited by Audit New Zealand prior to Council adopting them. Unmodified opinions were issued by Audit New Zealand for both documents.

3.3 Following the audit, Audit New Zealand provided Council with reports which outlined findings from the audit. These reports are attached for information.

Consultation Document

3.4 In relation to the Consultation Document, the Audit Report (Attachment 1) outlines the process that was followed in order to reach an unmodified audit opinion. Key points and recommendations are listed below:

3.4.1 The process to develop the Consultation Document and underlying information was generally well managed. Some delays were experienced with the activity management plans and Infrastructure Strategy, including clarification of the implications for the status of the Nelson Future Access (NFA) project.

· The audit identified a risk that levels of service may decrease for transport if the NFA project does not go ahead. Based on Audit’s recommendation, Council included a disclosure of this uncertainty.

· It was recommended for the future that Council evaluate whether additional resources should be deployed in planning and management of its transport infrastructure, and have future infrastructure strategies and AMPs peer reviewed. Council’s response to these recommendations is included in the attached report, highlighted in section 3.10 on pages 10-11.

3.4.2 It was confirmed that Council’s Financial Strategy is financially prudent, and that the capital programme proposed is achievable.

3.4.3 No issues were found with the forecasting assumptions, though it was recommended that key assumptions be reassessed when finalising forecasts for the final Long Term Plan.

3.4.4 Council’s climate change assumptions were assessed as reasonable and supportable, with a stated high level of uncertainty. Audit concluded that Council has been taking appropriate steps to identify and mitigate climate change, and that this was clearly set out in the Consultation Document and Infrastructure Strategy.

3.5 One emphasis of matter drew attention to Council’s disclosure around the Government’s intention to make Three Waters Reform decisions during 2021. It acknowledged the uncertainty around the impacts of future reforms and decisions on Council’s provision of three waters services, and that significant changes would affect the information on which the Consultation Document was based.

3.6 These comments are outlined in more detail in Attachment 1 and will be considered by staff in preparation of the 2024-34 Long Term Plan.

Long Term Plan 2021-31

3.7 In relation to the full Long Term Plan, the Audit Report (Attachment 2) notes that the opinion issued was unmodified. At the Long Term Plan stage, further consideration was given to the following items (page four of Attachment 2):

3.7.1 Waka Kotahi funding assumption

3.7.2 Delivery of capital programme assumption

3.7.3 Impact of the growth assumption

3.8 An emphasis of matter paragraph on the Government’s proposed Three Waters Reforms was included in the Audit Report, as was the case for all territorial local authorities. This drew attention to the assumption made by Council that three waters infrastructure will continue to be delivered by Council for the life of the Long Term Plan 2021-31.

4. Conclusion

4.1 The Audit Reports from Audit New Zealand on the Long Term Plan 2021-31 and Consultation Document are attached for information.

Author: Nikki Harrison, Group Manager Corporate Services

Attachments

Attachment 1: A2720857 - Audit Report - Long Term Plan Consultation Document 2021-31 ⇩

Attachment 2: A2718269 - Audit Report - Long Term Plan 2021-31 ⇩

Item 9: Bad Debts Writeoff - Year Ending 30 June 2021

Audit, Risk and Finance Subcommittee

14 September 2021

REPORT R25901

Bad Debts Writeoff - Year Ending 30 June 2021

1. Purpose of Report

1.1 To inform the Audit and Risk Subcommittee of the level of bad debts written off, and to seek approval to write off one debt over $10,000 for the year ending 30 June 2021.

2. Recommendation

That the Audit, Risk and Finance Subcommittee

1. Receives the report Bad Debts Writeoff - Year Ending 30 June 2021 (R25901).

Recommendation to Council

That the Council

1. Approves the balance of $41,990.31 owed by the Brook Valley Community Group Inc be written off as at 30 June 2021.

3. Discussion

3.1 There is one bad debt over $10,000 to be written off for the year ending
30 June 2021. The Brook Valley Community Group Inc (BVCG) was liquidated in 2020 with the final liquidators report received in August 2020. Council as an unsecured creditor was owed $41,990.31 (no GST).

3.2 The debt owed by the BVCG was for court awarded costs incurred throughout an unsuccessful legal challenge taken against Council.

3.3 The BVCG has been removed from the Register of Incorporated Societies and was dissolved on the 26 May 2021.

3.4 As the BVCG was an incorporated society, members cannot be held personally liable for its debts, except in exceptional circumstances. The only exceptions are where members have done acts for pecuniary gain or have incurred a debt through unlawful action, neither of which applies in this situation.

3.5 The debt has been reported to the Audit, Risk and Finance Subcommittee in the Quarterly Update on Debts since 30 September 2020, as requiring write off.

3.6 Under officer delegation, the Group Manager Corporate Services has written off 23 debts under $10,000 per debtor at 30 June 2021 (excluding GST).

	Write-off 2021		Write-off 2020
	$	No.	$	No.
Dog Impounding	$ 2,322	9	$ 3,885	14
Marina Fees	$ 440	7	$ 2,112	1
General Debtors	$ 688	3	$ 1,266	2
Regulatory	$ 1,099	4	$ 638	3
Total	$4,551	23	$7,901	20

3.7 A comparison of debts to be written off between 20/21 and 19/20 is as follows:

	Write-off 2021 $	Write-off 2020 $
Over $10,000	41,990	20,462
Under $10,000	4,551	7,901
Cost for year	$46,541	$28,363

3.8 The decision to write off debt over $10,000 is an administrative one. Although the debts are written off from an accounting point of view, a record is kept and if an opportunity to recover the debt arises, action will be taken. Most of this balance sits with Credit Recoveries Limited, Council’s debt recovery agency, which continues recovery activities. Every possible effort has been made to locate and obtain payment from these debtors.

4. Options

4.1 The recommendation is to receive the report and write off one bad debt over $10,000 for accounting purposes.

Author: Victoria Harper, Accounting Services Manager

Attachments

Nil

Important considerations for decision making

1. Fit with Purpose of Local Government

This report deals with process matters in relation to cost effective service delivery which benefits the economic wellbeing of the community.

2. Consistency with Community Outcomes and Council Policy

This report supports the community outcome that Council provides leadership, which includes the responsibility for protecting finances and assets.

3. Risk

There is limited risk from writing off these bad debts as most will continue to be followed up by the credit recovery agency.

4. Financial impact

Writing off the debts has a one-off impact on revenue of $41,990.31.

5. Degree of significance and level of engagement

This matter is of low significance because the amounts being written off are immaterial.

6. Climate Impact

There is no climate impact in writing off these debts.

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 [subject]

Areas of Responsibility:

· Audit processes and management of financial risk

Powers to Decide:

· None

Powers to Recommend to Council

· To write off outstanding accounts receivable or remit fees and charges of amounts over the Chief Executive’s delegated authority

Item 10: Carry Forwards 2020/21

Audit, Risk and Finance Subcommittee

14 September 2021

REPORT R26143

Carry Forwards 2020/21

1. Purpose of Report

1.1 To approve the carry forward of unspent budget to the new financial year.

2. Summary

2.1 Invoice processing is complete for the 2020/21 financial year and officers have reviewed project expenditure to identify savings and consider whether unspent budget is still required.

3. Recommendation

That the Audit, Risk and Finance Subcommittee

1. Receives the report Carry Forwards 2020/21 (R26143) and its attachment (A2724698).

Recommendation to Council

That the Council

1. Approves the carry forward of $2.6 million unspent capital budget for use in 2021/22: and

5. Approves the carry forward of $567,000 unspent operating budget for use in 2021/22.

4. Background

4.1 The capital programme for 2020/21, as agreed in the Annual plan 2020/21 totalled $57.1 million, including staff costs and excluding Nelson Regional Sewerage Business Unit (NRSBU), Nelson Tasman Regional landfill and vested assets. All figures quoted in this report are calculated on this basis.

4.2 The addition of 2019/20 carry forwards, and other resolutions of Council over the 2020/21 year adjusted the total capital budget to $59.6 million.

4.3 The 2020/21 capital budgets were forecast quarterly throughout 2020/21 with a view to what could realistically be achieved in the remainder of the financial year. The capital budget was reforecast to $52.5 million in May 2021. The 2020/21 budget movements incorporated in year one of the 2021-2031 Long Term Plan (LTP) were approved on adoption of the LTP on 24 June 2021. In particular, $4.8 million was carried forward from 2020/21 to 2021/22 and future years during the LTP process.

4.4 Total capital expenditure for the 2020/21 year was $48.3 million, $10 million less than the Annual plan 2020/21 including carry forwards of $58.3 million. Of this, $4.8 Million has already been carried forward in the LTP process and $2.3 million was already re-forecast as savings or reallocations, $1.7 million has been identified as further savings or reallocations.

4.5 Reasons for capital carry forwards being requested include project delivery delays due to:

· alterations to the phasing of multi-year projects resulting from wet weather and negotiations with external parties;

· delay in lead time in procuring materials and equipment as a result of Covid-19.

4.6 A large percentage of the infrastructure carry-over relate to projects that were well underway on site before the end of the financial year and hence committed but were delayed by wet weather and negotiations to accommodate businesses.

4.7 As reported to the Infrastructure Committee recently, Council are experiencing higher than expected additional costs on some of its projects that will in all likelihood continue for the foreseeable future. Costs are rising at a level that officers could not have anticipated. These additional costs are a direct result of the COVID-19 lockdown, specifically its effect on the supply chain and the delay in materials and equipment and increased installation costs.

4.8 Once the 2020/21 year was closed for invoice processing, officers collated data relating to the projects undertaken during the year, identifying variances against the reforecast.

4.9 Project managers were asked to identify which variances represented savings, and where they wished to carry forward budget into 2021/22, or subsequent years, they were asked to support their request.

4.10 The capital expenditure programme will be re-assessed during Quarter 1 2021/22 to gain a better understanding of projects that will not go ahead as planned in 2021/22.

5. Discussion

Capital savings and reallocations

5.1 Officers identified savings and reallocations of $1.7 million in capital expenditure in 2020/21. In total, this saving will have a positive impact on interest, depreciation and debt levels, in excess of that already identified in year 1 of the LTP 2021-2031.

Capital carry forwards

5.2 Officers have requested that $2.6 million be carried forward. All of this is requested to be added to 2021/22 capital budgets.

5.3 A breakdown of budget movements in total 2020/21 capital budgets is provided as Table 1.

5.4 Table 2 itemises capital projects with carry overs requested greater than $50,000. These are new carry forwards which have been requested in addition to those approved during the LTP 2021-2031.

Operating carry forwards

5.5 In addition to the Capital carry forward requests, there are four Operating Expense budgets, totalling $567,000, that have been requested by staff to carry forward to 2021/22:

· Provision of rental relief for the effects of COVID 19 $500,000 ($180,000 of a $1.1 million provision had been spent in 2020/21). It would be prudent to carry forward a portion of the unspent budget for 2021/22 given the recent Level 4 lockdown.

· Emergency Fund (for COVID Recovery in community) $56,000

· Mayoral Discretionary Fund $6,000

· NN Youth Council – Pride Crossing $5,000

6. Options

6.1 Council officers support Option 1, approve the recommendations. Not approving the recommendations would be problematic as the future scope of some of these projects has been agreed through Committee and Council resolutions including Annual and Long Term Plans prior to this meeting. Work has continued on these projects based on those decisions.

Option 1: Approve the recommendations
Advantages	· Work has continued on 2020/21 capital projects and costs have been incurred. · The carry forward spending is within previously approved budgets. · The majority of carry forward requests are for projects that are in process and carry forward of budget is required to realise expected council outcomes.
Risks and Disadvantages	· None
Option 2: Approve carry forward with exceptions
Advantages	· If Council wished, it could remove some items from the list of budgets to be carried forward. · Savings in future debt, depreciation, interest and maintenance costs would occur.
Risks and Disadvantages	· The projects concerned would then not have sufficient budget to be completed. · Council does not have complete information through this report to fully inform such a decision.

7. Conclusion

7.1 An analysis of capital expenditure against forecast for 2020/21 indicates:

· There are savings and reallocations from the capital budget of $1.7 million compared to the approved budget for 2020/21.

· Additional capital budget of $2.6 million not spent should be carried forward to the 2021/22 year.

· Operating Expenses totalling $567,000 have been requested by staff to carry forward to 2021/22.

8. Next Steps

8.1 Once approved, budgets will be updated to reflect the approved resolutions.

Author: Alistair Roper, Management Accountant

Attachments

Attachment 1: A2724698 - Carry Forward Report 2020/21 ⇩

Important considerations for decision making

1. Fit with Purpose of Local Government

Approval of the recommendation will allow progress/completion of approved projects. This will promote social, economic and environmental wellbeing in the present and future through employment, stimulus of the local economy and delivery of public infrastructure and community services.

2. Consistency with Community Outcomes and Council Policy

This decision supports all the community outcomes but most particularly that our infrastructure is efficient, cost effective and meets current and future needs.

3. Risk

Failure to approve the recommendation will introduce risk (financial, contractor and community relationships) which does not currently exist.

4. Financial impact

There is little financial impact from approving the recommendation as budgets are already approved and funded.

5. Degree of significance and level of engagement

This matter is of low significance as budgets are already approved and the recommendation confirms business as usual. Therefore no engagement is required.

6. Climate Impact

Adaptation

This decision will have no impact on the ability of the Council or District to proactively respond to the impacts of climate change now or in the future.

The decision is not sensitive to higher emission scenarios or more rapid climate changes.

Mitigation

This decision is likely to result in no impact in 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 2020/21 Carry Forwards.

Areas of Responsibility:

· Council’s financial performance

Powers to Recommend:

· All other matters within the areas of responsibility or any other matters referred to it by the Council