Agenda of Audit, Risk and Finance Subcommittee

Audit, Risk and Finance Subcommittee

13 September 2022

Page No.

Karakia and Mihi Timatanga

1. Apologies

An apology has been received from Councillor J Edgar

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 24 May 2022 10 - 19

Document number M19478

Recommendation

That the Audit, Risk and Finance Subcommittee

1. Confirms the minutes of the meeting of the Audit, Risk and Finance Subcommittee, held on 24 May 2022, as a true and correct record.

5.2 9 August 2022 20 - 22

Document number M19700

Recommendation

That the Audit, Risk and Finance Subcommittee

1. Confirms the minutes of the meeting of the Audit, Risk and Finance Subcommittee, held on 9 August 2022, as a true and correct record.

5.3 23 August 2022

Recommendation

That the Audit, Risk and Finance Subcommittee

1. Confirms the minutes of the meeting of the Audit, Risk and Finance Subcommittee, held on 23 August 2022, as a true and correct record.

6. Chairperson's Report 23 - 24

Document number R27221

Recommendation

That the Audit, Risk and Finance Subcommittee

1. Receives the report Chairperson's Report (R27221).

7. Draft Annual Report 2021/22 25 - 218

Document number R26571

Recommendation

That the Audit, Risk and Finance Subcommittee

1. Receives the report Draft Annual Report 2021/22 (R26571) and its attachment (1854398335-33); and

2. Notes the draft Annual Report 2021/22 has been prepared and will be audited before being presented to Council for adoption following audit, prior to the 31 December 2022 statutory deadline.

8. Annual Procurement Monitoring Report 2021-22 219 - 224

Document number R26541

Recommendation

That the Audit, Risk and Finance Subcommittee

1. Receives the report Annual Procurement Monitoring Report 2021-22 (R26541).

9. Audit NZ: Audit Plan for year ending 30 June 2022 225 - 249

Document number R27176

Recommendation

That the Audit, Risk and Finance Subcommittee

1. Receives the report Audit NZ: Audit Plan for year ending 30 June 2022 (R27176) and its attachment (A2896447).

10. Carry Forwards 2021/22 250 - 259

Document number R27167

Recommendation

That the Audit, Risk and Finance Subcommittee

1. Receives the report Carry Forwards 2021/22 (R27167) and its attachments (332184083-4467 and 332184083-4466).

Recommendation to Council

That the Council

1. Approves the carry forward of $8.5 million unspent capital budget for use in the 2022/23 financial year; and

2. Notes that this is in addition to the carry forward of $21 million approved during the Annual Plan 2022/23, taking the total carry forward to $29.5 million of which $23.7 million is for the 2022/23 year, $3.4 million is for the 2023/24 year and $2.4 million is for the 2025/26 year; and

3. Notes the total savings and reallocations in 2021/22 capital expenditure of $782,000; and

4. Notes that the total 2022/23 capital budget (including staff costs and excluding consolidations and vested assets and scope adjustment) will be adjusted by these resolutions from a total of $80.6 million to a total of $89.1 million; and

5. Approves the carry forward of $2.95 million unspent operating budget for use in 2022/23, $2.7 million of which is loan funded capital grant expenditure.

11. Quarterly Finance Report to 30 June 2022 260 - 286

Document number R27060

Recommendation

That the Audit, Risk and Finance Subcommittee

1. Receives the report Quarterly Finance Report to 30 June 2022 (R27060) and its attachments (1857728953-240, 839498445-3215 and 839498445-7438).

12. Central Library Development - Risk Register 287 - 293

Document number R27093

Recommendation

That the Audit, Risk and Finance Subcommittee

1. Receives the report Central Library Development - Risk Register (R27093) and its attachment (606908324-33384).

13. Privacy Act 2020 - Reporting 294 - 295

Document number R27175

Recommendation

That the Audit, Risk and Finance Subcommittee

1. Receives the report Privacy Act 2020 - Reporting (R27175)

2. Notes that future updates will be provided to the subcommittee six monthly.

14. Health, Safety and Wellbeing Quarterly Report - 30 June 2022 296 - 312

Document number R27172

Recommendation

That the Audit, Risk and Finance Subcommittee

Receives the report Health, Safety and Wellbeing Quarterly Report - 30 June 2022 (R27172) and its attachment (855153265-555).

15. Quarterly Internal Audit Report 313 - 317

Document number R27173

Recommendation

That the Audit, Risk and Finance Subcommittee

1. Receives the report Quarterly Internal Audit Report (R27173) and its attachment (1194974384-3166).

16. Quarterly Risk Report - 30 June 2022 318 - 346

Document number R27174

Recommendation

That the Audit, Risk and Finance Subcommittee

1. Receives the report Quarterly Risk Report - 30 June 2022 (R27174) and its attachment (1759736513-9).

17. Bad Debts Write Off - Year Ending 30 June 2022 347 - 349

Document number R27177

Recommendation

That the Audit, Risk and Finance Subcommittee

1. Receives the report Bad Debts Write Off - Year Ending 30 June 2022 (R27177).

18. Six-monthly update - Section 17A review programme 350 - 354

Document number R27171

Recommendation

That the Audit, Risk and Finance Subcommittee

1. Receives the report Six-monthly update - Section 17A review programme (R27171).

Confidential Business

19. 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 - 24 May 2022	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:
2	Quarterly Update on Debts - 30 June 2022	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
3	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

Karakia Whakamutanga

Audit, Risk and Finance Subcommittee Minutes - 24 May 2022

Minutes of a meeting of the

Audit, Risk and Finance Subcommittee

Te Kōmiti Āpiti, Kaute / Tūraru / Pūtea

Held via Zoom on Tuesday 24 May 2022, commencing at 9.00a.m.

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

In Attendance: Councillors G Noonan and Y Bowater, Chief Executive (P Dougherty), Group Manager Infrastructure (A Louverdis), Group Manager Corporate Services (N Harrison), Group Manager Strategy and Communications (N McDonald), T eam Leader Governance (R Byrne) and Senior Governance Adviser (M Macfarlane)

Apologies : Councillor M Lawrey

Karakia and Mihi Timatanga

1. Apologies

Resolved ARF/2022/016

That the Audit, Risk and Finance Subcommittee

1. Receives and accepts the apologies from Councillor M Lawrey for attendance.

Murray/Her Worship the Mayor Carried

2. Confirmation of Order of Business

The Chairperson indicated Item 12: Quarterly Risk Report - 31 March 2022 would follow Item 8: The Health and Safety at Work Act 2015 and Elected Members

Auditor, John Mackey, was scheduled for Item 13: Quarterly Finance Report - 31 March 2022 on audit related matters.

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 22 February 2022

Document number M19252, agenda pages 8 - 14 refer.

Resolved ARF/2022/017

That the Audit, Risk and Finance Subcommittee

1. Confirms the minutes of the meeting of the Audit, Risk and Finance Subcommittee, held on 22 February 2022, as a true and correct record.

Murray/Edgar Carried

6. Chairperson's Report

Document number R26893, agenda pages 15 - 16 refer.

The Chairperson took the report as read and noted that the committee needed to be flexible to address matters in a timely fashion.

Resolved ARF/2022/018

That the Audit, Risk and Finance Subcommittee

1. Receives the report Chairperson's Report (R26893).

Peters/Sanson Carried

7. Privacy Act 2020 - reporting

Document number R26518, agenda pages 17 - 21 refer.

Manager Governance and Support Services, Devorah Nicuarta-Smith, took the report as read and answered questions about legislative timelines and restrictions, safeguards being put in place since earlier breach and the handling of private information.

Resolved ARF/2022/019

That the Audit, Risk and Finance Subcommittee

1. Receives the report Privacy Act 2020 - reporting (R26518)

Edgar/Sanson Carried

8. The Health and Safety at Work Act 2015 and Elected Members

Document number R26539, agenda pages 22 - 28 refer.

Heath Safety & Wellness Adviser, Malcolm Hughes, presented the report and answered questions on the Council providing safe spaces within Council facilities for elected members to meet with constituents, if any advice on duty of care had been sought to date and if so if it is legally privileged.

The meeting was adjourned at 09.37a.m. and reconvened at 09.42a.m.

Exclusion of the Public
Resolved ARF/2022/020
	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)
8		Audit, Risk and Finance Subcommittee Meeting - The Health and Safety at Work Act 2015 and Elected Members	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)(c)(ii) To protect information which is subject to an obligation of confidence or which any person has been or could be compelled to provide under the authority of any enactment, where the making available of the information would be likely otherwise to damage the public interest
Peters/Her Worship the Mayor Carried

The meeting went into confidential session at 09.42a.m. and resumed in public session at 09.53a.m.

Resolved ARF/2022/022

That the Audit, Risk and Finance Subcommittee

1. Receives the report The Health and Safety at Work Act 2015 and Elected Members (R26539) and its attachment (A2873272).

Murray/Edgar Carried

The Chair advised the meeting would consider Agenda Item 12 at this point.

9. Quarterly Risk Report - 31 March 2022 (Agenda item 12)

Document number R26793, agenda pages 69 - 98 refer.

Chief Executive, Pat Dougherty, Heath Safety and Wellness Adviser, Malcolm Hughes, and Audit and Risk Analyst, Chris Logan, spoke to this report and tabled an additional document (A2891157).

Mr Dougherty, Mr Hughes and Mr Logan answered questions on existing civic house assessments, previous incidents and near misses at civic house, previous refurbishment plans, further investigations being undertaken, business continuity plans, risk mitigations, how reporting in the risk register is undertaken, how risks are assessed, how high risk matters are recorded, how high risk matters are reported to members and who should be registered in the conflicts of interest.

The meeting was adjourned at 10.42a.m. and reconvened at 10.58a.m.

Resolved ARF/2022/023
	*That the Audit, Risk and Finance Subcommittee* 1. Receives the report Quarterly Risk Report - 31 March 2022 (R26793) and its attachment (A2587873).
Edgar/Peters Carried
Attachments 1 Risk Assessment - Earthquake prone building elements Civic House - June 2022 (A2891157)

10. Quarterly Health, Safety and Wellbeing Report - 31 March 2022 (Agenda item 9)

Document number R26769, agenda pages 29 - 46 refer.

Heath Safety & Wellness Adviser, Malcolm Hughes, presented the report and answered questions on reporting of notifiable incidents, incidents reported at Heritage Park, staff survey results and investigations into the tiles in the Elma Turner Library tiles.

Resolved ARF/2022/024

That the Audit, Risk and Finance Subcommittee

1. Receives the report Quarterly Health, Safety and Wellbeing Report - 31 March 2022
(R26769) and its attachment (A2872306).

Her Worship the Mayor/Kelly Carried

11. Draft Annual Internal Audit Plan to 30 June 2023 (Agenda item 10)

Document number R26801, agenda pages 47 - 55 refer.

Audit and Risk Analyst, Chris Logan, took report as read and answered questions about the way critical matters are being reported, potential of Senior Leadership Team and contractors being included in conflict of interest assessment and the migration to a new record management system.

Resolved ARF/2022/025

That the Audit, Risk and Finance Subcommittee

1. Receives the report Draft Annual Internal Audit Plan to 30 June 2023 (R26801) and its attachment (A2867251).

Sanson/Murray Carried

Resolved ARF/2022/025
Recommendation to Council
	*That the Council* 1. Approves the Draft Annual Internal Audit Plan for the year to 30 June 2023 (A2867251).
Sanson/Murray Carried

12. Adjournment of Meeting

Resolved ARF/2022/026

That the Audit, Risk and Finance Subcommittee

1. Adjourns the meeting at 12.54p.m. until 17 June at 9.00a.m. via Zoom.

Edgar/Sanson Carried

Karakia Whakamutanga

Minutes of part of a meeting of the

Audit, Risk and Finance Subcommittee

Te Kōmiti Āpiti, Kaute / Tūraru / Pūtea

Reconvened via Zoom on Friday 17 June 2022, commencing at 9.00 a.m.

Present: Mr J Peters (Chairperson), Councillors R Sanson and M Lawrey

In Attendance: Group Manager Corporate Services (N Harrison), Group Manager Strategy and Communications (N McDonald), Senior Governance Adviser (M Macfarlane) and Assistant Governance Adviser (A Bryce-Neumann)

Leave of absence: Her Worship the Mayor R Reese

Apologies : Councillor J Edgar, Mr J Murray and Iwi Representative S Kelly

Karakia and Mihi Timatanga

13. Apologies

Resolved ARF/2022/027

That the Audit, Risk and Finance Subcommittee

1. Receives and accepts the apologies from Councillor J Edgar, Mr J Murray and Iwi Representative S Kelly

Peters/Lawrey Carried

14. Quarterly Internal Audit Report - 31 March 2022 (Agenda item 11)

Document number R26792, agenda pages 56 - 68 refer.

Audit and Risk Analyst, Chris Logan, took the report as read.

Group Manager Strategy & Communications, Nicky McDonald, answered questions about Local Government Act Section 17a reviews, timing around reviews being brought to committee, which committee is appropriate to receive the updates and reports updating reviews. Mr Logan answered questions on regulatory services activities, the lack of suitable benchmarks available and how activities are tracking.

In response to questions, the Chairperson updated the committee on Greenmeadows Pūtangitangi review progress, the terms of reference, frequency of meetings held, delays encountered and expectation of completion of work.

Resolved ARF/2022/028

That the Audit, Risk and Finance Subcommittee

1. Receives the report Quarterly Internal Audit Report - 31 March 2022 (R26792) and its attachments (A2915304 and A2866388).

Sanson/Lawrey Carried

15. Quarterly Finance Report - 31 March 2022 (Agenda item 13)

Document number R26662, agenda pages 99 - 127 refer.

Manager Finance, Prabath Jayawardana, , took the report at read.

Group Manager Corporate Services, Nikki Harrison, , answered questions on forestry expenditure exceeding forestry income, the prudence of council’s current approach and if a Local Government Act Section 17a review is required.

Mr Jayawardana answered questions on base expenditure, savings, likely tracking, projects with predicted underspend.

Resolved ARF/2022/029

That the Audit, Risk and Finance Subcommittee

1. Receives the report Quarterly Finance Report - 31 March 2022 (R26662) and its attachments (A2881543, A2867009, and A2880764).

Lawrey/Sanson Carried

16. Exclusion of the Public

Resolved ARF/2022/030

That the Audit, Risk and Finance Subcommittee

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

Peters/Lawrey Carried

Agenda 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 - 22 February 2022	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 · Section 7(2)(c)(ii) To protect information which is subject to an obligation of confidence or which any person has been or could be compelled to provide under the authority of any enactment, where the making available of the information would be likely otherwise to damage the public interest
2	Quarterly Update on Debts - 31 March 2022	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
3	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

The meeting went into confidential session at 09:36a.m. and resumed in public session at 09.55a.m.

Karakia Whakamutanga

17. Restatements

It was resolved while the public was excluded:

1	Quarterly Update on Debts - 31 March 2022
	2. Agrees that the Report (R26806) and its attachment (A2878713) remain confidential at this time.

2	Quarterly Report on Legal Proceedings
	2. Agrees that the report Quarterly Report on Legal Proceedings (R26719) and its attachment (A2882014) remain confidential.

There being no further business the meeting ended at 09.55a.m.

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

Resolved

Audit, Risk and Finance Subcommittee Minutes - 9 August 2022

Minutes of a meeting of the

Audit, Risk and Finance Subcommittee

Te Kōmiti Āpiti, Kaute / Tūraru / Pūtea

Held via Zoom on Tuesday 9 August 2022, commencing at 9.02a.m.

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

In Attendance: Councillor G Noonan, Chief Executive (P Dougherty), Group Manager Infrastructure (A Louverdis), Group Manager Corporate Services (N Harrison), Senior Governance Adviser (M Macfarlane) and Assistant Governance Advisor (A Bryce-Neumann)

Apologies : Councillor J Edgar for attendance and Councillor M Lawrey for lateness

Karakia and Mihi Timatanga

1. Apologies

Resolved ARF/2022/035

That the Audit, Risk and Finance Subcommittee

1. Receives and accepts the apologies from Councillor J Edgar for attendance and Councillor M Lawrey for lateness.

Murray/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. Chairperson's Report

There was no Chairperson’s report.

6. Review into events leading to issue of Civic House Earthquake Prone Building notices

Document number R27007, agenda pages 4 - 56 refer.

The Chairperson noted this internal report was requested formally by the Chief Executive.

Manager Business Improvement, Arlene Akhlaq, introduced the report noting there were some errors requiring correction and that improvements had been identified, particularly around notification to elected members.

Ms Akhlaq, Chief Executive, Pat Dougherty, and Group Manager Corporate Services, Nikki Harrison, answered questions on

· What steps would be put in place to ensure there wasn’t a repeat of what happened

· If the risk management process would be updated

· If the operational recommendations to the Chief Executive would be shared with the committee, and if so, if they would be available before the end of the triennium

· What key challenges were identified

· What the perceived role of governance was under the Health and Safety Act and what information should be provided to elected members

Attendance: Councillor M Lawrey joined the meeting at 9.36a.m.

· If elected members should have greater awareness of discussions at the Senior Leadership level

· How updates were recorded on status reports

· Why an officer response wasn’t triggered and a series of steps and notifications initiated when the Earthquake Prone Building notice was issued

· Clarification on the regulatory role compared to the health and safety role.

The Chairperson noted that the report didn’t cover all the terms of reference at this stage and an additional report was requested.

Resolved ARF/2022/036

That the Audit, Risk and Finance Subcommittee

1. Receives the report Review into events leading to issue of Civic House Earthquake Prone Building notices (R27007 and its attachment (1759736513-10).

2. Requests a further report identifying and addressing the terms of reference that relate to the recommendations and appropriate separation of regulatory and ownership roles.

Her Worship the Mayor/Murray Carried

Karakia Whakamutanga

There being no further business the meeting ended at 10.22a.m.

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

Resolved

Item 7: Draft Annual Report 2021/22

Audit, Risk and Finance Subcommittee

13 September 2022

REPORT R26571

Draft Annual Report 2021/22

1. Purpose of Report

1.1 To provide a copy of the draft Annual Report 2021/22 prior to auditing.

2. Summary

2.1 The draft Annual Report for the 2021/22 financial year has been prepared and is provided as Attachment 1. The audit of the Annual Report is scheduled to commence in mid-September, and there are likely to be some changes to the draft Report as a result of the audit process.

3. Recommendation

That the Audit, Risk and Finance Subcommittee

1. Receives the report Draft Annual Report 2021/22 (R26571) and its attachment (1854398335-33); and

2. Notes the draft Annual Report 2021/22 has been prepared and will be audited before being presented to Council for adoption following audit, prior to the 31 December 2022 statutory deadline.

4. Background

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

4.2 The purpose of this Annual Report is to compare Council’s actual performance in 2021/22 against the targets set out in year one of the Long Term Plan 2021-31. It also provides accountability to the Nelson community for the decisions made throughout the year.

5. Discussion

5.1 The attached draft Annual Report 2021/22 is intended to provide the Subcommittee with information staff have to date. This is not the final Annual Report for the year, as it is likely to require modification through the auditing process, which is yet to occur.

5.2 The Local Government Act usually requires councils 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 be submitted by 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 2021/22 and 2021/22 annual reports, to 31 December of 2021 and 2022 respectively. This decision was made due to audit staff shortages and workloads.

5.3 Audit New Zealand has confirmed that it is not possible to complete the audit process for this Annual Report prior to the end of the current Council triennium. Therefore, the incoming Council will be tasked with adopting the final audited Annual Report 2021/22 prior to 31 December 2022.

Financials

5.4 At the time of writing this report, Council is currently waiting to receive finalised draft financial statements from some of its CCOs and CCTOs. Therefore, the group financial statements have not been prepared yet.

5.5 Although Council’s CCOs and CCTOs were expected to deliver finalised draft financial statements by 20 August 2022, this has been delayed mainly due to staffing issues.

5.6 Funding impact statements for activities are in the process of being prepared and will be tabled at the meeting.

Financial Commentary

5.7 The surplus before revaluation is $22 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:

5.8 Fees and charges are $6.9 million lower than budget, this is mainly due to harvesting income ($4.1 million) is included as income when budgeting whereas only the movement in forestry fair value is considered as income for external reporting purposes. Another $1.6 million is due to a classification difference with other revenue which will be fixed in the final Annual Report.

5.9 Subsidies and grants are $2 million lower than budget mainly due to Waka Kotahi capital grant income being lower than budgeted.

5.10 Development/financial contributions are $2.7m greater than budget due to increased economic activity in the community than budgeted.

5.11 Other revenue is $6.0 million greater than budget due to following reasons:

· Vested asset income was $2.5 million more than budgeted.

· Dividend income was $0.5 million more than budgeted.

· $1.6 million classification difference with Fees and charges (as above).

· Unbudgeted Private Plan changes income of $0.5 million.

5.12 Other gains/losses are greater than budget by $14.4 million mainly due to a higher than budgeted gain on derivatives ($15.3 million) due to the upward movement in interest rates.

5.13 Total operating expenditure was $6.3 million less than budget due to many savings across the board. Major variances are:

· $0.8 million savings in the Nelson plan costs due to a change in the program of work.

· $2.7 million saving in Economic Development for Strategic land allocation funding for the Science and Technology Precinct not being spent and carried forward to 2022/23.

· $1.4 million grant funded from the Housing reserve not being budgeted for.

5.14 The draft Land and Infrastructure Revaluations was $97.0 million over budget:

· Infrastructure assets are revalued every year to smooth out the large fluctuations and accounted for $97.0 million of the overall revaluation. This is against a budget of $38.1 million.

· Land is revalued every five years or when its fair value diverges materially from its carrying value. The movement for 2021/22 is not deemed to be material and land was not revalued in this financial year. Land was last revalued in 2020/21.

5.15 At 30 June 2022 Council’s borrowings, net of deposits, cash and LGFA borrower notes were $111.6 million compared to a budget of $124.1 million. This variance is mainly due to the Capital Expenditure not reaching the full programme and ending less than forecasted by $11 million against Annual Plan budget of $67.1 million.

Rating Surplus (Deficit)

5.16 The Rates surplus was $1.5 million and was utilised to reduce the overdrawn balance in the Emergency Response Fund.

Non-financial Performance

5.17 Council measures its non-financial success against performance measures set through the Long Term Plan. The Long Term Plan 2021-31 established 67 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.

5.18 The preliminary result for 2021/22 is 83.5% achievement (56 out of 67 performance measures were achieved). 13.5% (nine measures) were not achieved, and 3% (two measures) were not measured. Commentary on the performance measures is provided in the activity sections of Attachment 1.

5.19 The result for the previous year, 2020/21, was 66.25% achieved of the 80 measures set in the Long Term Plan 2018-28. Performance measures were revised in the Long Term Plan 2021-31 to reflect the updated activity management plans, and therefore the 2021/22 year’s performance is not directly comparable to previous 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 that the final Annual Report 2021/22, with any changes resulting from the audit process, will be presented directly to Council for adoption before 31 December 2022.

Author: Nicky McDonald, Group Manager Strategy and Communications

Attachments

Attachment 1: 1854398335-33 - Draft Annual Report 2021/22 - 7Sep2022 ⇩

Important considerations for decision making

1. Fit with Purpose of Local Government

The Annual Report 2021/22 is a requirement of the Local Government Act 2002 and fits the purpose of local government by providing information about Council’s performance during 2021/22.

2. Consistency with Community Outcomes and Council Policy

The Annual Report 2021/22 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 2022. 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. As it is a factual representation of Council’s performance in the year just ended there is no engagement planned. The final audited Annual Report will be provided to Council for adoption after the audit opinion is given, before 31 December 2022. 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 2021/22.

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 2021/22.

Areas of Responsibility:

· Council’s Annual Report

· Council’s financial and service performance

Item 7: Draft Annual Report 2021/22: Attachment 1

PDF Creator

Item 8: Annual Procurement Monitoring Report 2021-22

Audit, Risk and Finance Subcommittee

13 September 2022

REPORT R26541

Annual Procurement Monitoring Report 2021-22

1. Purpose of Report

1.1 To update Elected Members on procurement activity for the period 01 July 2021 to 30 June 22, and to report on delivery of Procurement Policy objectives.

2. Recommendation

That the Audit, Risk and Finance Subcommittee

1. Receives the report Annual Procurement Monitoring Report 2021-22 (R26541).

3. Background

3.1 Council’s Procurement Policy was approved by Council resolution on 17 December 2020. The Policy introduced objectives relating to broader outcomes in procurement, cost effective and efficient procurement processes, and working well with suppliers. The policy has been in effect since 1 February 2021.

3.2 Following the introduction of the current policy, the Audit, Risk and Finance Subcommittee requested that an annual procurement report be initiated, to provide a summary of procurement activity conducted under the policy, and a commentary on achievement of policy objectives and delivery of broader outcomes.

4. The Year in Review

4.1 During the year, 446 creditor accounts were set up, representing new and reinstated suppliers working with Council.

4.2 Council entered into 334 contracts, this figure includes new contracts and contracts entering a new renewal term.

4.3 There were 6959 purchase orders issued, representing a value of $192,622,712. The purchasing trends for the year are shown below:

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4.4 There were 11 approved exemptions to the Procurement Policy across the 2021-22 year. Nine were requests for direct purchase instead of closed competitive procurement; two were requests for direct purchase instead of open competitive procurement. The approved requests for exemptions were from three Groups:

Group	Number of approved exemptions
Community Services	3
Corporate Services	2
Infrastructure	6

5. Delivery on Policy Objectives

5.1 The policy sets out nine objectives. These are shown below with commentary on mechanisms for how policy objectives are achieved.

Ensure Council gets the best public value and benefit over the lifetime of the goods and services

5.2 This is achieved through open and closed competitive purchasing processes, which require structured and documented decision making to select one or more suppliers for the goods and/or services being sought. Standardised processes for evaluating supplier proposals are used, which involve:

· setting weighted evaluation criteria in advance of advertising the contracting opportunity;

· an evaluation panel – size varies but is generally a panel of three officers;

· an evaluation facilitator, where the procurement is of sufficient size and complexity.

5.3 Once the contractual agreement begins, there is regular monitoring of deliverables and contractor performance to ensure the expected contract value and benefit is being achieved.

Make sure everyone involved in purchasing and contracting acts responsibly, lawfully, and with integrity

5.4 Officers involved in evaluating procurement are required to declare actual and perceived conflicts of interest for suppliers who are bidding for contracting opportunities. Suppliers are also required to declare any conflicts of interest that may influence the evaluation process.

5.5 During a competitive procurement process, supplier queries and Council responses are made available to all suppliers interested in the contracting opportunity. Some exceptions apply where confidentiality or privacy needs to be maintained.

5.6 Use of evaluation panels (as per paragraph 5.2) which include an officer who does not have a stakeholder interest in the goods or services being procured.

5.7 Award of contract must be authorised by at least a “one-up” manager, with further escalation as required to ensure award of contract is approved by the officer with the appropriate delegated financial authority. This is aligned with standard fraud risk controls across Counci.

Ensure procurement decisions seek broader outcomes aligned with Council’s responsibility to promote the social, economic, environmental, and cultural well-being of our communities, in the present and for the future, as specified in the Local Government Act 2002

5.8 Officers are required to consider how broader outcomes can be achieved through the procurement of goods and services. This consideration is included in templates used during the procurement planning stage and is supported with guidance which provides examples of how broader outcomes can be incorporated into procurements. Some judgement is needed by officers to balance these requirements for procurements that are considered to be of low risk, complexity, and contract value.

Ensure purchasing decisions are guided by the underlying principle of minimising greenhouse gas emissions, to comply with emissions reduction targets prescribed by Council, or in the absence of a Council target, as prescribed by the Climate Change Response Act 2002

5.9 Mechanisms for achieving this objective are included in the processes and guidance for broader outcomes (paragraph 5.8).

Get the right Suppliers who can deliver what we need, at a fair price and on time

5.10 Mechanisms for achieving this objective are the competitive procurement processes for supplier selection.

Create competition and encourage capable Suppliers to work with Council

5.11 Competitive procurement processes are followed as per the thresholds stipulated in the procurement policy.

5.12 There is potential for further mechanisms to be implemented for the “direct purchase” category, which would enable capable suppliers to be registered to supply goods and services to Council. The direct purchase category extends to purchases of up to $50,000, with appropriate management approval.

Make it easy for all Suppliers to do business with Council

5.13 The format of requests for quote/proposal/tender have been simplified, and prepared response form templates have been introduced. The response form templates clearly set out the weightings being applied for each part of the contracting opportunity that the supplier is applying for. Both “requests for” and response form templates are customised versions of the central government procurement templates.

5.14 As indicated at paragraph 5.12, there is potential to introduce processes and opportunities to attract new or different suppliers to areas that do not quality for competitive purchasing processes.

Ensure relevant stakeholders are appropriately involved in procurement and contract management outcomes

5.15 Procurement processes include stakeholder identification and consultation at various stages. Further work is needed in this area to expand guidance and supporting information for officers.

Make sure the procurement effort is in proportion to the size, complexity, and risks associated with the goods and service

5.16 A procurement planning checklist is used by officers to plan the effort involved in procurement. The procurement templates are easily scaled to the specific requirements of the procurement. Use of standardised templates and contracts reduces effort needed.

6. Broader Outcomes

6.1 The policy sets out Council’s initial priority focus areas for broader outcomes as: increasing opportunities for local businesses to work with Council; increasing skills and training in our region, particularly in construction; improving conditions for local workers; and reducing emissions, waste, and environmental pollution.

6.2 Analysis shows over 68% of the year’s purchasing was with businesses in the Nelson Tasman region. Purchases from Auckland businesses represented 13%, with Wellington the next most common location with almost 6%. Nelson Tasman business represented 48% of new supplier accounts set up with Council across the year.

6.3 Fulfilling the procurement policy preference for local suppliers is effected through competitive procurements by allowing a weighting for buy local, with a higher or lower score reflecting the extent to which a supplier is established in the region.

6.4 Analysis of Council’s publicly advertised open competitive procurements showed 50% of these specifically incorporated all four broader outcome focus areas. The majority of closed competitive procurements incorporated one or more broader outcome areas.

6.5 Robust processes and systems for monitoring the inclusion of broader outcomes in procurements, and the achievement of broader outcomes during contract delivery, are not in place. The requirement to consider broader outcomes in procurement, and examples of how this can be achieved, is included in Council’s standard procurement training for new employees.

7. Procurement Monitoring

7.1 The policy refers to the procurement steering committee, whose role is to have oversight of procurement activities and matters related to the procurement policy. The procurement steering committee comprises the Group Manager Corporate Services, Group Manager Infrastructure, Manager Science and Environment, Manager Finance, and the Manager Parks and Facilities. The procurement steering committee meets on a quarterly basis, and considers information relating to purchasing trends, procurements completed and in progress, upcoming expiring contracts, and approved exemptions to the procurement policy. The committee provides direction on in-progress and upcoming procurement improvement initiatives.

7.2 Expiring contracts are automatically notified to contract managers through Council’s contract management software. Each quarter, Group Managers and their reporting Business Unit Managers are provided with a list of expiring contracts that they are responsible for (contracts expiring within the following 6 months). This provides an opportunity at the local Group level for management oversight of expiring contracts and potential upcoming procurement workload.

8. Conclusion

8.1 This concludes the first annual procurement monitoring report. Overall, there has been good progress on implementing the objectives and outcomes of the procurement policy.

8.2 Other achievement across the year include: simplifying and standardising procurement templates; incorporating consideration of broader outcomes into procurement training; and developing and publishing guidance on how to incorporate broader outcomes into procurements. A foundation level of procurement and contract training for officers has been maintained throughout the year, with learnings throughout the year incorporated into the training.

8.3 The work programme for parts of 2021-22, and for the current year 2022-23 has been on hold due to staff vacancies, however it is expected that work will begin on prioritised areas from January 2023.

Author: Arlene Akhlaq, Business Improvement Analyst

Attachments

Nil

Item 10: Carry Forwards 2021/22

Audit, Risk and Finance Subcommittee

13 September 2022

REPORT R27167

Carry Forwards 2021/22

1. Purpose of Report

1.1 To approve the carry forward of unspent 2021/22 budget to the new financial year (2022/23).

2. Summary

2.1 Invoice processing is complete for the 2021/22 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 2021/22 (R27167) and its attachments (332184083-4467 and 332184083-4466).

Recommendation to Council

That the Council

1. Approves the carry forward of $8.5 million unspent capital budget for use in the 2022/23 financial year; and

3. Notes the total savings and reallocations in 2021/22 capital expenditure of $782,000; and

5. Approves the carry forward of $2.95 million unspent operating budget for use in 2022/23, $2.7 million of which is loan funded capital grant expenditure.

4. Background

4.1 The capital programme for 2021/22, as agreed in the Long Term Plan 2021-31 totalled $67.1 million, including staff costs and scope adjustment and excluding Nelson Regional Sewerage Business Unit (NRSBU), Nelson Tasman Regional Landfill and vested assets. Excluding scope adjustment from this figure, the capital budget for 2021/22 totalled $74.3 million. All figures quoted in this report are calculated on this basis.

4.2 Scope adjustment was applied in the Long Term Plan 2021-31 (as noted on page 222 of the LTP 2021-31) to the overall capital programme which adjusted the overall budget down by approximately 10% per year. This adjustment acknowledges that Council is unlikely to use the full capital budget in any given year and so helps to avoid over funding of activities. To show an accurate reconciliation of budget to actuals, we remove the approximate 10% scope adjustment from the figures in this report as mentioned in the paragraph 4.1.

4.3 The addition of 2020/21 carry forwards, and other resolutions of Council over the 2021/22 year adjusted the total capital budget to $85.9 million.

4.4 The 2021/22 capital budgets were forecast quarterly throughout 2021/22 with a view to what could realistically be achieved in the remainder of the financial year. The capital budget was reforecast to $65.2 million in June 2022. The 2021/22 budget movements incorporated in year zero of the 2022/23 Annual plan were approved on adoption of the annual plan on 14 June 2022. In particular, $21 million was carried forward from 2021/22 to 2022/23 and future years during the annual plan process.

4.5 Total capital expenditure for the 2021/22 year was $57.5 million, $19.4 million less than the Annual plan 2021/22 including carry forwards of $76.9 million.

4.6 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, consent delays and negotiations with external parties;

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

4.7 A large percentage of the infrastructure carry forward relates 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.

4.8 As reported to the Infrastructure Committee recently, Council is 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.

4.9 Once the 2021/22 year was closed for invoice processing, officers collated data relating to the projects undertaken during the year, identifying variances against the reforecast.

4.10 Project managers were asked to identify which variances represented savings, and where they wished to carry forward budget into 2022/23, or subsequent years, they were asked to support their request.

4.11 The capital expenditure programme will be reprioritised during Quarter 1 & 2 of 2022/23 once damage from the August flooding has been assessed to gain a better understanding of projects that will not go ahead as planned in 2022/23.

5. Discussion

Capital savings and reallocations

5.1 Officers identified savings and reallocations of $782,000 in capital expenditure in 2021/22. In total, this saving will have a positive impact on interest, depreciation and debt levels.

Capital carry forwards

5.2 Officers have requested that $8.5 million be carried forward. $8.56 million to be added to 2022/23 capital budgets while $57,000 is being carried back from future years to cover some small overspends.

5.3 A breakdown of budget movements in total 2021/22 capital budgets is provided as Table 1.

5.4 Table 2 itemises capital projects with carry forwards requested greater than $50,000. These are new carry forwards which have been requested in addition to those approved during the Annual Plan 2022/23 process.

Operating carry forwards

5.5 In addition to the Capital carry forward requests, there are some Operating Expense budgets, totalling $2.95 million, that have been requested by officers to carry forward to 2022/23:

- DOC: Wakapuaka Jobs for Nature Funding $16,000 (offset by income)

- Our Nelson $27,000 (will be utilised for Communications Survey)

- Policy Consultants Parks and Reserves AMP $21,000

- LIM improvement project $20,000

- Strategic Land Funding grant for Science and Technology Precinct $2.7 million (loan funded)

- Summer Festival $20,000 (for Opera in the park 2022/23)

- Enforcing Bylaws advice/Services $35,000

- Greenmeadows Centre - Project Review $12,000

- Esplanade & Foreshore reserves resource consents $10,000

- Storm Water strategy budgets $91,000

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 2021/22 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 progress 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 2021/22 indicates:

- There are savings and reallocations from the capital budget of $782,000 compared to the approved budget for 2021/22.

- Capital budget of $8.5 million not spent should be carried forward to the 2022/23 year.

- Operating expenses totalling $2.95 million have been requested by staff to carry forward to 2022/23.

8. Next Steps

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

Author: Alistair Roper, Management Accountant

Attachments

Attachment 1: 332184083-4467 Table 1 - Carry Forwards 2021-22 ⇩

Attachment 2: 332184083-4466 Table 2 - Carry Forwards 2021-22 ⇩

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 2021/22 Carry Forwards.

Areas of Responsibility:

· Council’s financial performance

Powers to Recommend (if applicable):

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

Item 11: Quarterly Finance Report to 30 June 2022

Audit, Risk and Finance Subcommittee

13 September 2022

REPORT R27060

Quarterly Finance Report to 30 June 2022

1. Purpose of Report

1.1 To inform the Subcommittee of the financial results for Council for the four quarters of 2021/22, and to highlight any material variations.

2. Recommendation

That the Audit, Risk and Finance Subcommittee

1. Receives the report Quarterly Finance Report to 30 June 2022 (R27060) and its attachments (1857728953-240, 839498445-3215 and 839498445-7438).

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 twelve-month performance (1 July 2021 to 30 June 2022) compared with the year-to-date (YTD) approved capital and operating budgets.

3.3 The quarterly report includes Nelson City Council performance only and does not include its subsidiaries, associates, and joint ventures.

3.4 Unless otherwise indicated, all information is against approved operating budgets, which is year one of the Long Term Plan 2021-31 (2021/22), plus any carry forwards, plus or minus any other additions or changes as approved by the Council.

3.5 Commentary is provided below for significant variances of +/- $100,000.

4. Financial Performance

4.1 For the twelve months ending 30 June 2022, the Council’s draft deficit is $19.2m favourable to budget.

4.2 Profit and Loss

4.3 Income

4.4 Rates income is greater than budget by $144,000. Wastewater Rates are over budget by $108,000 due to additional wastewater connections being added after wastewater charges had been set, resulting in more units than budgeted paying charges for the year.

4.5 Other income is greater than budget by $15m with significant variances as follows:

4.5.1 Investment Management income is greater than budget by $12.4m. A non-cash gain on Council’s interest rate swaps of $11.3m has been recognised due to the increase in interest rates since 30 June 2021. Last year end we recognized a derivative liability of $7.7m and now it has become a derivative asset of $3.6m at 30 June 2022 resulting in this non-cash gain of $11.3m. This has no rating impact.

An unbudgeted special dividend of $280,000 was received from Port Nelson and has been used to repay debt in accordance with Council policy. This dividend was paid in September 2021 for the 2020/2021 financial year in addition to the $2 million dividend already recognised in that financial year. A further dividend of $2.15 million has been received from Port Nelson which is $150,000 over budget. The dividend from the Airport is $550,000 which is $100,000 over budget.

Interest on Short Term Investment is over budget by $289,000 due to more funds being invested than planned because of pre-funding debt to take advantage of favourable borrowing conditions at the time.

An adjustment for reduced income from rent relief provided by Council to tenants due to COVID-19 was made with the full budget of $550,000 in this cost centre. Actual rent relief provided totals $217,000 and has been granted across various cost centres but mainly in Trafalgar Centre, Esplanade & Foreshore Reserves, Greenmeadows Centre and Rental properties. Overall rent relief is $333,000 under budget.

4.5.2 Forestry income is greater than budget by $1.55m. This is due to changes to the planned timing of harvesting that affected the harvest revenue as follows: Brook/York Valley Forest income is $591,000 over budget. Marsden Forest is $1.3m over a nil budget, Maitai forest income is $446,000 under budget.

4.5.3 Saxton Field income is less than budget by $104,000. TDC’s Champion Drive contribution is $116,000 under budget as the project was completed earlier than budgeted. Cost recoverable from TDC is also lower than budgeted.

4.5.4 Nelson Library income is greater than budget by $152,000. Grants from the DIA are $177,000 over budget with a funding extension to cover 3 secondee roles.

4.5.5 Community Housing income is greater than budget by $323,000. This is due to a gain of $323,000 from Housing Capped Fund Valuation adjustment because of unwinding the discount factor.

4.5.6 Parking Regulation income is greater than budget by $326,000. Infringement Fees are over budget by $285,000 and Court fines recovered are $56,000 over budget with the new system capturing more incidents of non-compliance.

4.5.7 Parking and CBD Enhancement income is less than budget by $161,000. Rental Income is under budget by $111,000 due to ongoing COVID impacts as well as credits being provided to tenants who are on income-based rental agreements for the last financial year due to impacts from COVID restrictions.

4.5.8 Millers Acre Centre income is less than budget by $155,000. Rental income from tenants is less than budget due to vacancies and a budgeting error.

4.5.9 Public Transport income is greater than budget by $106,000. This is primarily due to increased subsidy income from NZTA for additional expenditure.

4.5.10 Monitoring the Environment income is less than budget by $333,000. $330,000 of income budgeted to be received from the MPI Hill Country Erosion fund is yet to be invoiced. This will be invoiced upon completion of deliverables and reporting. The amount to be invoiced will be $316,000.

4.5.11 Developing Resource Management Plan income is greater than budget by $482,000. All this income was generated from the Maitahi Bayview plan change recovery charges.

4.5.12 Environmental Advocacy/Advice income is greater than budget by $147,000. Maitai ERP Grant is $128,000 ahead of budget due to paid in advance of expenditure.

4.5.13 Dog Control income is greater than budget by $319,000. Dog registration income is higher than planned by $326,000 and $297,000 of this is income received in advance for 2022/23 and will be accrued to next financial year. The balance is driven by an increase in dog numbers and fees.

4.5.14 Building Services income is greater than budget by $683,000. Quality Assurance levies, Job Sales and Insurance Levies are over budget by $214,000, $378,000, and $64,000 respectively with stronger market demand than anticipated.

4.5.15 Resource Consents income is less than budget by $164,000. Consent Fees are $142,000 under budget as there is a lag in invoicing. At the time of writing this report, this income has not been recognized in the current financial year however staff are working to accrue this revenue.

4.5.16 Waste Minimisation income is less than budget by $107,000. Local Disposal Levies recoverable from Landfill is under budget due to expenditure items it funds being under budget. The details of the expenditure items are mentioned below.

4.5.17 Transfer Station income is greater than budget by $210,000. Local Disposal Levies recoverable from Landfill is over budget due to expenditure items it funds being over budget. The details of the expenditure items are mentioned below.

4.5.18 Recycling income is greater than budget by $198,000. Local Disposal Levies recoverable from Landfill is over budget due to expenditure items it funds being over budget. The details of the expenditure items are mentioned below.

4.5.19 Wastewater income is less than budget by $1.14m. Commercial Trade Waste income is under budget by $384,000 due to a lower-than-expected volume being received. NRSBU Investment return has not been calculated at the time of getting data for this report, this shows as a nil return against a budget of $761,000.

4.5.20 Water Supply income is greater than budget by $154,000. Water by meter Commercial is $71,000 over budget and Water by Meter Residential is $70,000 over budget. This is due to higher than anticipated water usage caused by a relatively dry summer.

4.6 Expenses

4.6.1 Staff Operating expenditure is greater than budget by $310,000. This is mainly due to actual staff cost allocation between capital and operating being different from the budgeted allocation. This over budget variance is fully offset by the under budget Capital staff cost variance of $381,000.

4.7 Base Expenditure is greater than budget by $340,000.

4.7.1 Civic House expenditure is less than budget by $139,000. This is mainly due to electricity being under budget by $46,000 due to capacity restrictions for Civic House. BWOF – Lift compliance and Central heating and fresh air systems compliance were $24,500 and $21,000 under budget respectively.

4.7.2 Forestry expenditure is greater than budget by $1,440,000. Brook/York valley ($675,000) and Marsden Valley ($866,000) harvest costs are over budget due to work being brought forward while Maitai harvest cost is $109,000 under budget.

4.7.3 Administration expenditure is less than budget by $145,000. This is due to lower than expected depreciation of IT assets.

4.7.4 Marina expenditure is less than budget by $119,000. $104,000 of this is repairs and maintenance under budget which was partially due to capital improvement expenditure replacing the need for some maintenance.

4.7.5 Subsidised roading expenditure is less than budget by $453,000. Pre-seal repairs ($83,000), Crack Sealing ($95,000), Cycle path maintenance ($30,000) and Sealed pavement maintenance ($60,000) are under budget with ongoing difficulties in delivery due to Covid. Street light power is $41,000 under budget with reduced power supply costs.

4.7.6 Monitoring The Environment expenditure is less than budget by $201,000. Environment Iwi Indicators is $33,000 under budget as Council is awaiting feedback from iwi partners. There were savings in Environment Stream Monitoring of $21,000, Air Quality Monitoring of $40,000, and air quality gas studies of $13,000. Hydrology monitoring is $26,000 under budget with funds tagged for coastal projects being limited by staff turnover and some COVID savings. The Section 36 expenditure is nil against a budget of $30,000 as income has not yet been received. State of Environment Reporting was also underspent by $48,000 due to some delay with web-based and software-based projects.

4.7.7 Developing the Resource Management Plan expenditure is less than budget by $801,000. Significant changes were approved by Council in November 2021 to change the programme of works for the Nelson Plan. This has delayed major work that was to occur this year which has resulted in underspends across expenditure items with Nelson Plan ($1.4 million). This is partially offset by the unbudgeted consultant cost of $438,000 incurred on Maitahi Bayview plan change which was fully recovered.

4.7.8 Resource Consents expenditure is greater than budget by $393,000. External Consultants are over budget by $396,000 which is driven by staff vacancies requiring consultants to perform work to deal with the increased volume of consents being sought.

4.7.9 Landfill expenditure is greater than budget by $215,000. This is due to variation in disposal levies required from Waste Minimisation, Transfer Station and recycling. The differences are funded from reserves.

4.7.10 Recycling expenditure is greater than budget by $209,000. The Kerbside collection contract is $209,000 over budget which will be offset by levies and has no effect on rates.

4.8 Unprogrammed Expenditure is greater than budget by $1,963,000.

4.8.1 Forestry expenditure is less than budget by $274,000. Tantragee Hazardous Tree Removal is under budget by $274,000.

4.8.2 Landscapes Reserves expenditure is greater than budget by $216,000. Heavy Rain events are $183,000 over budget due to slips from rain events at Grampians, Botanical Hill, and Sir Stanley Whitehead. Savings across the activity of $150,000 have been found to fund this, with the Emergency Response Fund funding the remainder.

4.8.3 Subsidised Roading expenditure is greater than budget by $273,000. Winter Storm Damage is over budget by $154,000 due to an unexpected weather event. February 2022 Storm Damage is over budget by $64,000. These costs are subsidised by Waka Kotahi. COVID Response is over budget by $42,000 which is a one-off cost claimed by a contractor as part of a wider contract due to COVID related costs.

4.8.4 City Development expenditure is greater than budget by $1,400,000. This variance is solely due to the unbudgeted housing reserve grant payments of $1,400,000. Another $450,000 is scheduled to be paid in 2022/23 financial year.

4.9 Programmed Expenditure is less than budget by $4.1m.

4.9.1 Marina expenditure is less than budget by $114,000. Maintenance dredging consent plan is less than budget by $100,000 as it has been deferred until the Masterplan is approved.

4.9.2 Economic Development expenditure is less than budget by $3,099,000. Strategic land allocation funding (Science and Technology Precinct) is nil against a budget of $2.7 million which will be carried forward to 2022/23 financial year. The international sporting event did not occur (saving of $120,000) and the events contestable fund was underutilised by $186,000 both due to impacts of COVID.

4.9.3 Subsidised Roading expenditure is greater than budget by $361,000. Condition Inspections and Data Collection are over budget by $326,000 which is offset by underspends in base expenditure in the subsidised programme.

4.9.4 Wastewater expenditure is less than budget by $105,000. A variety of expenditure items are under budget across the activity.

4.9.5 Stormwater expenditure is less than budget by $283,000. Preliminary Capex - Investigation, option and testing is $131,000 under budget. This budget is an allowance for annual reclassification of capex spend to opex based on accounting standards. Stormwater detention pond maintenance is $33,000 under budget, Tahuna SW strategy is $33,000 under budget, Stormwater renewal strategy is $36,000 under budget.

4.9.6 Flood Protection expenditure is less than budget by $115,000. Preliminary Capex - Investigation, option and testing is $101,000 under budget, this budget is an allowance for annual reclassification of capex spend to opex based on accounting standards.

4.10 Finance expenditure is less than budget by $3,249,000. This is mainly due to the Swap revaluation expense being nil over a budget of $4 million. This year a gain on swap revaluation was recognized instead of an expense as explained in 4.5.1.

4.11 Depreciation expenditure is greater than budget by $644,000. Depreciation is on track or under budget in a lot of the cost centres but Infrastructure had a greater than expected revaluation at 30 June 2021 which drove up the depreciation in the Infrastructure activities.

5. Capital Expenditure

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

As at 30 June 2022, Capital Expenditure is $3.95 million under the Operating Budget of $60.1 million of which $1.66 million relates to Infrastructure, $129,000 relates to Environment, $514,000 relates to Strategic Development & Property (Marina), and $1.62 million relates to Community and Recreation.

Out of the $3.95 million variance above, $2.7 million relates to Renewals and $1.5 million relates to Growth projects. Level of Service was $600,000 over budget due to capitalization of prior year forestry roading expenses during the year.

The largest year-to-date capital variances contributing to the $3.95 million variance are as follows and all of them have been requested to carry forward to 2022/23 financial year:

· Modellers Pond Solution is behind budget by $474,000.

· Land purchase general reserve is behind budget by $804,000.

· Footpaths renewal is behind budget by $234,000.

· EDRMS Replacement is behind budget by $215,000.

6. Insurance Renewal

6.1 Nelson City Council is part of the Top of the South Collective with Tasman District Council and Marlborough District Council which was formed 1 July 2011. The insurance broker is Marsh Limited. Nelson City Council has various insurance policies including:

· Material Damage – commercial and residential

· Business Interruption

· Motor Vehicle

· Public and Professional Indemnity

· Crime, Statutory, Environmental and Employers Liability

· Harbour Masters and Wreck Removal Liability

· Hall Hirers Liability

· Personal Accident

6.2 The insurance was successfully placed for 1 July 2022 for this programme. The infrastructure asset insurance renewal is on 1 November 2022.

6.3 Premiums have increased overall by $101,000 (7%) mainly driven by increased material damage premiums (12% or $139,000) and professional indemnity / public liability (25% or $38,000) premiums.

6.4 Forestry insurance is currently placed out with this group agreement and the insurance broker is PF Olsen Limited. Due to a 19% reduction in forestry values the premium has a year-on-year reduction of $7,000 (21%).

6.5 An allowance of $168,000 was included in the 2022/23 Annual Plan to address the risk of increasing insurance premiums.

6.6 Whilst successfully placing the policies late in the process one of the Material Damage Insurers introduced a Loss Limit on the Top of the South Insurance Collective cover. The insurer holds 15% of the policy cover, thereby the limit only applies for 15% of any claim over their imposed limit of $1bn. The current policy has a total sum insured of $1.396bn and therefore staff assess this as a low risk.

7. Events Fund

7.1 The Nelson Regional Development Agency (NRDA) administers funds distributed through the Council’s Events Fund. It advised that, as at 31 March 2022, 13 events had been cancelled or postponed due to the traffic light shift to RED. The NRDA has estimated a loss in spend of more than $20 million to the city for the financial year to date ($10 million of this since 24 January 2022).

7.2

Nelson City Council supported events as at 31 March 2022:
Total events cancelled	9
Total events postponed	4
Total amount paid out	$60,750
Total amount committed but not yet paid	$22,000

7.3 The Adam Chamber Music Festival was able to recover 50% of its costs, which meant $18,750 returned to the Events Fund, and Marchfest was approved for central government event insurance of which a certain amount will be able to be returned to the Events Fund.

7.4 Most event agreement payment schedules now stipulate the first payment is to be made close to the date of the event, and this has minimised the financial risk to the Events Fund since COVID-19.

8. Project Health

8.1 A table summarising the health of projects across Council for which project sheets have been generated is included as Attachment 2. It gives a red, amber, or green rating for quality, time, and budget factors.

8.2 The full project sheets are included as attachments to the Infrastructure, Community and Recreation, and Strategic Development and Property Committees’ quarter four reports.

9. Performance Measures

9.1 Council reports on 67 non-financial performance measures across its activity areas, as set out in the Long Term Plan 2021-31. These are evaluated as ‘achieved, not achieved, or not measured’ at the end of the year.

9.2 At the time of writing this report, 56 measures were achieved, 9 were not achieved, and two were not measured at the end of 2021/22. (The percentages are 83.5%, 13.5%, and 3% respectively). If any results are challenged during the audit these numbers may change slightly.

Chart, pie chart

Description automatically generated

9.3 The result for the previous year, 2020/21, was 66.25% achieved of the 80 measures set in the Long Term Plan 2018-28. New measures were set as part of developing activity management plans and the Long Term Plan 2021-31, therefore the percentage achievement rates for 2020/21 and 2021/22 are not directly comparable. However, the effort made through the Long Term Plan to include measures that more accurately reflect Council’s non-financial performance has led to this improvement in achievement.

9.4 Attachment 3 details Council’s 2021/22 performance measure results across all its activities. They will also be discussed in the Infrastructure, Environment and Climate, and Community and Recreation Committees’ respective quarter four reports.

Author: Prabath Jayawardana, Manager Finance

Attachments

Attachment 1: 1857728953-240 - Finance Dashboard and Graphs - Quarter Four 2021/22 ⇩

Attachment 2: 839498445-3215 - All of Council Project Health Summary - Quarter Four 2021/22 ⇩

Attachment 3: 839498445-7438 - All activities' end of year performance measure results 2021/22 ⇩

Item 14: Health, Safety and Wellbeing Quarterly Report - 30 June 2022

Audit, Risk and Finance Subcommittee

13 September 2022

REPORT R27172

Health, Safety and Wellbeing Quarterly Report - 30 June 2022

This report has been moved from the Audit, Risk and Finance Subcommittee from 23 August 2022 as the meeting was cancelled.

1. Purpose of Report

1.1 To provide the Subcommittee with a report on health, safety and wellbeing data collected over the period April to June 2022.

1.1 To update the Subcommittee on key health and safety risks, including controls and treatments.

2. Summary

2.1 Heavy ceiling tile remediation and COVID-19 controls have been a significant health and safety focus areas for this reporting period.

2.2 Council’s key health and safety risks remain unchanged since the previous report.

3. Recommendation

That the Audit, Risk and Finance Subcommittee

1. Receives the report Health, Safety and Wellbeing Quarterly Report - 30 June 2022 (R27172) and its attachment (855153265-555).

4. Background

4.1 Elected members, as ‘Officers’ under the Health and Safety at Work Act 2015 (HSWA), are required to undertake due diligence on health and safety matters. Council’s Health and Safety Governance Charter states that Council will receive quarterly reports regarding the implementation of health and safety. Council has delegated the responsibility for health and safety to the Audit, Risk and Finance Subcommittee.

4.2 Health, safety and wellbeing performance data reports provide an overview based on key lead and lag indicators. Where a concerning trend is identified more detail is provided in order to better understand issues and implement appropriate controls.

5. Discussion

5.1 Incidents of note:

5.1.1 No staff injury or illness incidents of minor severity or greater were reported this period.

5.1.2 Contractor injury or illness incidents included a lost time injury due to a loose section of pavement falling into an excavation and a subcontractor being struck in the face by a scaffolding component. Contractors have completed incident investigations for these incidents.

5.1.3 A public injury occurred when a car crashed at a Council site under temporary traffic management. Improvements were made to the traffic management plan.

5.1.4 A significant near miss for this period was a tree falling onto a caravan at Brook Valley Holiday Park (BVHP) during high winds, the process for assessing trees and removing dangerous trees or limbs from campsites is being reviewed.

5.1.5 Four security incidents reported related to difficult customers at BVHP and five related to break ins or vandalism at Founders Heritage Park (Founders). Security improvements at Founders and Council campgrounds are ongoing.

5.1.6 The Marina reported a number of incidents related to criminal behaviour on vessels in the marina, this is partly attributed to improved reporting of incidents. More effective liaison with police is occurring and CCTV improvements are planned.

5.2 COVID-19 Response

5.2.1 After a peak of 35 staff testing positive for COVID-19 in March the data shows the long tail of the Omicron outbreak. Data for July has been included to show the significance of the second wave with 49 staff reporting positive tests for July.

5.2.2 A recent workplace outbreak (July) and the high prevalence of seasonal illness has significantly impacted some teams.

5.2.3 Surveillance monitoring using Rapid Antigen Tests (RATs) at Council has been reviewed with a plan developed for each setting of the COVID Protection Framework (traffic lights). This will see less routine monitoring at orange but more targeted use of RATs in areas of higher risk.

5.2.4 Changes to the reporting of COVID-19 test results has resulted in a far more streamlined process and better allows for a timely response to information about possible workplace exposure to COVID-19.

5.3 Lead Indicators

5.3.1 Data relating to overspeed events as reported by the ERoad in vehicle monitoring is not included in this report while an issue with the completeness of the data is resolved.

5.3.2 Contractor health and safety oversight activities have increased from last quarter but are still impacted by COVID-19 controls.

5.3.3 Increasing the number of workstation assessments completed has proved a significant challenge due to the close contact nature of these assessments. A new approach with improved self-help resources and more targeted in person assessments is planned.

5.4 Due Diligence Activities

5.4.1 Four safe work observations or safety tours were reported for this period. Two SLT members and one elected member attended a visit to Saxton Field. The focus was on the safety of traffic control devices (bollards) on pathways. Three other site visits were completed by an SLT member.

5.4.2 The Omicron COVID -19 outbreak continues to impact the scheduling of these visits.

6. Key Health, Safety and Wellbeing Risks

6.1 Key health safety risks are assessed to be unchanged since the last report.

6.2 Changes to treatments and controls since the previous report are shown in red text.

6.3 Controlling the risk of heavy suspended ceiling tiles falling or whole ceiling systems failing during an earthquake in Civic House and Elma Turner Library is an ongoing focus area and significant progress has been made in regard to the highest risk spaces.

Author: Malcolm Hughes, Health Safety and Wellness Adviser

Attachments

Attachment 1: 855153265-555 Health, Safety and Wellbeing Report - April-June 2022 ⇩

Item 16: Quarterly Risk Report - 30 June 2022

Audit, Risk and Finance Subcommittee

13 September 2022

REPORT R27174

Quarterly Risk Report - 30 June 2022

This report has been moved from the Audit, Risk and Finance Subcommittee from 23 August 2022 as the meeting was cancelled.

1. Purpose of Report

1.1 To provide information to the Audit, Risk and Finance Subcommittee on the organisational risks through to end of quarter four 2021-22.

Recommendation

That the Audit, Risk and Finance Subcommittee

1. Receives the report Quarterly Risk Report - 30 June 2022 (R27174) and its attachment (1759736513-9).

2. Background

2.1 This report includes information on risk management practice, a summary of Council risks and a deeper dive into key risk areas, sliced by risk theme (organisational risks) and reporting group

3. Risk Management Practice

3.1 The 2021-22 risk management work plan was partially completed:

3.1.1 risk training for two business units was completed (target four);

3.1.2 partly automated risk reporting is provided quarterly to Group Managers and the Chair of the Audit, Risk and Finance Subcommittee;

3.1.3 reporting enterprise level risk metrics to test against an organisation wide risk appetite has not been completed as enterprise level risk metrics, such as value at risk or probability of adequacy, are problematic to generate using the risk register for the following reasons:

· Losses from different consequence domains cannot be easily converted to an equivalent single measure (normally financial). For instance, whilst losses from the ‘Financial’ consequence domain can be measured relative to balance sheet items, there is no defined ‘Relationship with Iwi’ asset even though a ‘Relationship with Iwi’ loss would likely impact to the profit and loss accounts, through to increased cost of working, over multiple years.

· The relationship/correlation between risks is not easily quantified whilst noting that some qualitative allowance has been made for risks tagged with the same organisation risk.

· Given the above, the same enterprise level risk reporting as per Section 5 will continue.

3.1.4 The risk management maturity self-assessment was completed and reported in quarter one of 2021-22; and

3.1.5 A review of the descriptions for the consequence domain Legal Compliance has been postponed to quarter one of 2022-23 (previously third quarter of 2021-22) following an initial scan which showed that the current description is similar to other councils so changes are likely to be minor.

4. Putting Organisational Risks in Context

4.1 This section summarises risks relating to Council and joint operations. Risks relating to subsidiaries and joint ventures are limited to ownership risks. Risks relating to contracted-out activities is limited to residual/non-contracted-out risks. Specific asset, activity, legal matter or project risks, are rolled up into more general asset, activity, legal or project risks however any significant items are summarised in the last section.

4.2 There were 439 risk entries in the centralised register at 31 March 2021 compared to 431 in the prior quarter, with eight risks deleted and sixteen risks added.

4.3 Thirteen of the risk entries have status overdue as treatments have not been signed off compared to nine in the prior quarter. Ten to twenty overdue risk entries is considered reasonable given the treatment renewal process is new and the sign-off delays associated with newly identified risks.

4.4 The following chart is the heatmap for all the risk entries, noting that inherent risks are notionally before controls (including risk transfers), whilst residual risks are notionally after controls.

4.5 Risk entries are categorised in two ways:

4.5.1 risks with no apparent common theme or cause^{^[1]} and hence are unlikely to pose a threat at an organisational level (310 risk entries), and

4.5.2 risks with identified common themes or causes which create risk concentrations that pose a threat at an organisational level^{^[2]} (129 risk entries).

4.6 The latter is the focus of this report of which further detail is provided the next section.

5. Key Risk Areas By Theme (Organisational Risks)

5.1 There have been no organisational risk movements to report during quarter four of 2021-22.

5.2 A summary of key risk themes is provided below. The attachment to this report describes each risk theme in more detail, its existing controls and planned risk treatments. For ease of comparison to the prior quarter, new text in the attachment has been coloured red.

5.3 R1 - Central-government-led-reforms (Owner: Chief Executive). A strategic review has defined the project stages for managing organisational changes within the three-waters transition program. The risk rating was increased to Very High last quarter and remains rated as Very High but may return to High next quarter.

5.4 R2 - Lifeline services failure (Owner: Group Manager Infrastructure). There was a boil water notice issued in the quarter however the likely cause of the E.coli results was water quality sampling/testing issues and not contamination within the drinking water supply network. No new emerging risks to report at this time. The risk rating remains at Medium.

5.5 R3 - Illness, injury or stress from higher hazard work situations (Owner: Group Manager Corporate Services). Staff vacancies across various operating groups continue, impacting workloads and staff stress. The risk rating remains at High.

5.6 R4 - Loss of service performance from ineffective contracts and contract management (Owner: Chief Executive). Work on planned treatments paused due to staff vacancies. The risk rating remains at Medium.

5.7 R5 - Compromise of Council service delivery from information technology failures (Owner: Group Manager Corporate Services). Council has been working closely with security vendors over the quarter preparing for finance and document management cloud migration and various other incremental security improvements. The risk rating remains at Low.

5.8 R6 - Council work compromised by loss of and difficulties in replacing skilled staff (Manager People and Capability). At end of May there were 47 vacancies, some of which have been open for some time despite repeated recruitment efforts, engaging recruitment consultants and re-evaluating the job description. The organisational risk rating remains at Medium.

5.9 R7 – Legal Risk (Group Manager Strategy and Communications). No new emerging organisational risks to report at this time noting that any new legal proceedings or emerging areas of increased litigation risk are separately reported in the quarterly report on legal proceedings. The organisational risk rating remains at Medium.

5.10 R8 - Reputation damage and loss of public trust in the organisation (Group Manager Strategy and Communications). No new emerging risks to report at this time. The risk rating remains at Medium.

5.11 R9 - Disruption to Council service delivery due to significant increase in COVID-19 cases (Owner: Chief Executive). Insignificant impact on council services to date. The organisational risk rating remains at Medium.

6. Key Risk Areas By Reporting Group

6.1 Office of the Chief Executive: New risk related to the Public Service Association initiating bargaining for multi-employer collective agreement for top-of-the-south councils – rated Medium. Elevated organisational uncertainty given current Chief Executive finishes their role in December 2022 and a replacement is yet to be found and the Group Manager Environmental Management finishes their role in September 2022 and a replacement is yet to be found.

6.2 Infrastructure Group: COVID-19 related risks are being realised including on-site project delays from Omicron self-isolation requirements and previously noted related supply chain risks for materials. The Utilities and Roading business units, NTRLBU and NRSBU labour and contractor capacity remains constrained resulting in elevated operational risk. For the Utilities team, the situation is expected to deteriorate especially with the work expected on the three-waters reform; resourcing risks related to three-waters reform are being explored by the Three Waters Transition project team.

6.3 Community Services Group: Risks associated with Council owned campgrounds (two operated and one leased) remain elevated whilst non-compliance remediation actions are being implemented. Specifically, the risk around displacing vulnerable people is being closely managed at present through significant support being provided to residents. Other risks associated with the work programme are being reported and monitored through Strategic Development and Property Subcommittee. There was one high risk notification to the Chair of the Audit, Risk and Finance subcommittee over the quarter.

6.4 Environmental Management Group: All business units in this group have at least one staff vacancy. Non-priority work is being deferred where it can be including in City Development. The risk of non-compliance with statutory timeframes (resource and building consents) is being realised. An instance of Land Information Memo (LIM) disclosure risk (rated Low) was identified during the quarter. New LIM risk treatments are being considered as part of the LIM improvement project.

6.5 Strategy and Communications Group: Retention and recruitment remains an area of underlying risk. There was one high risk notification to the Chair of the Audit, Risk and Finance subcommittee and Mayor over the quarter.

6.6 Corporate Services Group: Whilst a temporary resource has been secured, three of the five accountancy roles are vacant. The Finance and Accounting business unit is focussed on meeting statutory reporting, such as the annual reporting. Non-statutory work, such as senior leadership reporting and business partnering, is being deferred.

Author: Chris Logan, Audit and Risk Analyst

Attachments

Attachment 1: 1759736513-9 - 4Q22 key organisational risks for ARF ⇩

Item 17: Bad Debts Write Off - Year Ending 30 June 2022

Audit, Risk and Finance Subcommittee

13 September 2022

REPORT R27177

Bad Debts Write Off - Year Ending 30 June 2022

This report has been moved from the Audit, Risk and Finance Subcommittee from 23 August 2022 as the meeting was cancelled.

1. Purpose of Report

1.1 To inform the Audit and Risk Subcommittee of the level of bad debts written off for the year ending 30 June 2022.

2. Recommendation

That the Audit, Risk and Finance Subcommittee

1. Receives the report Bad Debts Write Off - Year Ending 30 June 2022 (R27177).

3. Discussion

3.1 There are no bad debts over $10,000 to be written off for the year ending 30 June 2022.

3.2 Under officer delegation, the Group Manager Corporate Services has written off 6 debts under $10,000 per debtor at 30 June 2022 (excluding GST).

Under $10,000
	Write-off 2022		Write-off 2021
	$	No.	$	No.
Dog Impounding	$983	3	$2,322	14
Marina Fees	$0	0	$440	1
General Debtors	$2,681	1	$688	2
Regulatory	$500	2	$1,099	3
Total	$4,164	6	$4,549	20

3.3 A comparison of debts to be written off between 21/22 and 20/21 is as follows:

Summary
	Write-off 2022	Write-off 2021
	$	$
Over $10,000	$0	$41,990
Under $10,000	$4,164	$4,549
Cost for year	$4,164	$46,539

3.4 The decision to write off debt 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.

Author: Prabath Jayawardana, Manager Finance

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 $4,164.

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 bad debt writeoffs.

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 18: Six-monthly update - Section 17A review programme

Audit, Risk and Finance Subcommittee

13 September 2022

REPORT R27171

Six-monthly update - Section 17A review programme

This report has been moved from the Audit, Risk and Finance Subcommittee meeting on 23 August 2022 as the meeting was cancelled.

1. Purpose of Report

1.1 To provide an update on the service delivery review and contract review work programmes, as requested by the subcommittee, for the period 1 March 2022 to 28 February 2024.

2. Recommendation

That the Audit, Risk and Finance Subcommittee

1. Receives the report Six-monthly update - Section 17A review programme (R27171).

3. Background

Recent decisions

3.1 A schedule of s17A activity reviews to be carried out in 2022 and 2023 was presented to the Audit, Risk and Finance subcommittee on 22 February 2022. As contract reviews are undertaken as needed they were not included in the schedule.

3.2 At the meeting of 22 February 2022, it was resolved that the subcommittee:

Requests a six-monthly report to the Audit, Risk and Finance subcommittee providing a rolling 2-year contract review work programme and section 17A review work programme as well as monitoring of progress on the completion of the reviews.

This report is in response to this resolution.

3.3 Recommendations were also made to Council, which were resolved on 10 March 2022. Utilities activities and the Nelson Regional Sewerage Business Unit were made exempt from review for 2022 and 2023 due to the Government’s Three Waters Reform programme. Council also approved retention of the current threshold that triggers a service delivery review ($100,000 per annum).

About s17A reviews

3.4 Service delivery reviews are a requirement of section 17A of the Local Government Act 2002. They determine whether the existing means of delivering a service remains the most efficient, effective and appropriate method. This includes consideration of the current method of governance, funding, and delivery of the service alongside the alternative options that are available. They are not about the quality of services themselves, which are reviewed as part of activity management plan development.

3.5 Council undertakes reviews of service areas, such as a business activity within Council (activity reviews), and reviews of services which are delivered via contract, such as a maintenance contract (contract reviews). Activity reviews may encompass the review of one or more service contracts.

3.6 Under the Act, Council is required to undertake s17A service delivery reviews when it is considering a significant change to a level of service, and no later than every six years. Contract reviews are undertaken within two years before the expiry of a contract.

3.7 Council staff are required to undertake ‘desktop reviews’, which are signed off by the Senior Leadership Team (SLT). The legislation does not prescribe a process for the signoff of these reviews. Desktop reviews can recommend more in-depth reviews, which go to the relevant committee if changes to service delivery are recommend.

Exemptions

3.8 Section 17A(3) provides two exemptions to the review requirements:

17A(3)(a) A local authority is not required to undertake the review in respect of a function to the extent that delivery arrangements are bound by legislation, contract or binding agreement so that they cannot be changed within the next two years;

17A(3)(b) A local authority is not required to undertake the review if it is satisfied that the potential benefits do not justify the cost of the review.

3.8.1 Section 17A(3)(b) is for circumstances where the service is small or where cost savings resulting from a review may be minor. In 2015, Council, using the Procurement Policy as a guide, set a threshold that activities with a value below $100,000 be exempt from review.

3.8.2 Under the legislation costs and benefits other than financial matters (such as staffing resources) can also be considered. Council’s review template provides for other considerations for exemption including time, policy and regulatory changes, cost and capacity implications and the views of service users. This is part of the required desktop review.

3.8.3 Although there is a financial threshold operating, reviews below this level can be brought to the relevant committee if it is considered that other factors warrant it.

4. Update on activity reviews

Due in 2022 (calendar year)

4.1 Thirteen activity reviews are due in 2022.

4.2 As at September 2022, eight have been completed and signed off by SLT:

· Cemeteries

· Crematorium

· Resource Management Policy and Planning

· General Building Maintenance

· Roading Maintenance

· Transfer Station

· Forestry

· Recycling

4.3 Five are underway and planned to be signed-off by SLT by the end of 2022:

· Civil Defence Emergency Management

· Community Facilities Management

· Science and Environment

· Strategic Policy, Bylaws and Asset Management Planning

· Swimming Pools

Due in 2023 (calendar year)

4.4 Three of the activity reviews which were due by the end of 2023 have been completed early as part of larger pieces of work:

· Public Transport – a review of this service was undertaken through the Regional Land Transport Plan process in 2021.

· Nelson Marina services were reviewed in 2021 and recommendations for a new governance model were made.

· Saxton Field services were reviewed under the master Open Spaces contract review in 2021.

· Regulatory Compliance services (delivered by contract) were reviewed in 2022. A report on the review will be brought to the Environment and Climate Committee, as requested by Committee resolution in April 2021, in September 2022.

4.5 The remaining activity reviews programmed for the 2023 calendar year are:

· Arts, Heritage and Heritage Houses

· Building Consents and Building Inspection Services

· City Development

· Community Partnerships and Investment

· Community Property portfolio

· Corporate Services

· Festivals and Events

· Founders Park

· Golf course – Waahi Taakaro

· Libraries

· Motor Camps

· Nelson Airport

· Nelson Arts Festival

· Nelson Regional Economic Development Agency – Economic Services

· Parks and Reserves

· Port Nelson

· Resource Consents

· Solid Waste

· Solid Waste Management – Landfill

· Tasman Bay Heritage Trust and Nelson Museum

· The Bishop Suter Trust – Suter Gallery

5. Update on contract reviews

5.1 Where reviews of contracts are required, and not incorporated into broader activity reviews, separate reviews are undertaken. The award or extension of contracts is reported to the Tenders Subcommittee (if over $2.5 million) and the respective committees/subcommittees through quarterly reports (if over $300,000).

5.2 Recently completed contract reviews

5.2.1 Contract has been awarded/extended:

· Cycle Skills Training

· Election Services

· Forestry

· Roading Network Maintenance and Renewals (excluding electrical services)

· Valuation and Database Management Services

5.2.2 Contract is yet to be awarded/extended:

· Open Space (Operations and Maintenance)

· Regulatory Services

· Roading Electrical Maintenance

· Roadside Vegetation Control

5.3 Contract reviews that are currently underway

· External Legal Services

5.4 Upcoming contract reviews

5.5 Based on the information provided by staff in Council’s contract management system LawVu, there are two more contracts for services with an annual value over $100,000 which are due to expire by the end of February 2024, and that are not anticipated to be covered within a programmed activity review:

· Traffic Counting

· Operational Services at Brook Waimarama Sanctuary

5.6 These contracts may not be subject to a full review, due to exemption criteria. This will be determined at the initial desktop review.

6. Next steps

6.1 Staff will progress the reviews which are underway and planned over the remainder of 2022.

6.2 Staff plan to provide the next update on the progress of Council’s s17A reviews to the relevant committee in early 2023.

Author: Laura Bruce, Policy Coordinator

Attachments

Nil

[1] Commonly referred to as either: activity risks or day-to-day operational risks

[2] Commonly referred to as either: corporate risks, strategic risks, or organisational risks

Excerpt from Nelson City Council Delegations Register (A11833061)

Audit, Risk and Finance Subcommittee

Areas of Responsibility

Powers to Decide

Powers to Recommend to Council