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Notice of the Ordinary meeting of

Audit, Risk and Finance Committee

Te Kōmiti Kaute / Tūraru / Pūtea

 

Date:                      Wednesday 14 February 2024

Time:                      9.00a.m.

Location:                 Council Chamber
Floor 2A, Civic House
110 Trafalgar Street, Nelson

Agenda

Rārangi take

Chairperson                    Ms Catherine Taylor

Members                        His Worship the Mayor Nick Smith

        Cr Rohan O'Neill-Stevens

        Cr Mel Courtney

        Cr Rachel Sanson

        Mr Lindsay McKenzie

Quorum    3                                                                                   Nigel Philpott

Chief Executive

Nelson City Council Disclaimer

Please note that the contents of these Council and Committee agendas have yet to be considered by Council and officer recommendations may be altered or changed by the Council in the process of making the formal Council decision. For enquiries call (03) 5460436.


Excerpt from Nelson City Council Delegations Register (NDOCS-1982984479-5437)

Audit, Risk and Finance Committee

This is a Committee of Council

Areas of Responsibility

·                     Any matters raised by Audit New Zealand or the Office of the Auditor-General

·                     Audit processes and management of financial risk

·                     Chairperson’s input into financial aspects of draft Statements of Expectation and draft Statements of Intent for Nelson City Council Controlled Organisations, Council Controlled Trading Organisations and Council Organisations

·                     Council’s Annual Report

·                     Council’s financial performance

·                     Council’s Treasury policies

·                     Health and Safety

·                     Internal audit

·                     Monitoring organisational risks, including debtors and legal proceedings

·                     Procurement Policy

Powers to Decide

·                     Appointment of a deputy Chair

Powers to Recommend to Council

·                     Adoption of Council’s Annual Report

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

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

 

For the Terms of Reference for the Audit, Risk and Finance Committee please refer to document NDOCS-1974015928-887.

 


Audit, Risk and Finance Committee

14 February 2024

 

 

Page No.

 

Karakia and Mihi Timatanga

 

1.       Apologies

An apology has been received from Councillor R O'Neill-Stevens

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 November 2023                                                                       7 - 13

Document number M20377

Recommendation

That the Audit, Risk and Finance Committee

1.    Confirms the minutes of the meeting of the Audit, Risk and Finance Committee, held on 24 November 2023, as a true and correct record.

6.       Letter From Audit NZ on Annual Report for year ending 30 June 2023                                                                         14 - 53

Document number R27973

Recommendation

That the Audit, Risk and Finance Committee

1.    Receives the report Letter From Audit NZ on Annual Report for year ending 30 June 2023 (R27973) and its attachment (2126778665-323); and

2.    Notes Audit NZ’s comments and how officers intend to address the issues raised.

7.       Draft Treasury Management Policy including Liability Management and Investment Policies                        54 - 98

Document number R28288

Recommendation

That the Audit, Risk and Finance Committee

1.    Receives the report Draft Treasury Management Policy including Liability Management and Investment Policies (R28288) and its attachments (438494377-3859 and 438494377-3833).

 

Recommendation to Council

That the Council

1.    Adopts the Treasury Management Policy (438494377-3833).

8.       Quarterly Finance Report to 31 December 2023        99 - 121

Document number R28218

Recommendation

That the Audit, Risk and Finance Committee

1.    Receives the report Quarterly Finance Report to 31 December 2023 (R28218) and its attachments (1857728953-1257, 839498445-18200 and 839498445-18199).

 


 

9.       Quarterly Risk Report - 31 Dec 2023                      122 - 147

Document number R28271

Recommendation

That the Audit, Risk and Finance Committee

1.    Receives the report Quarterly Risk Report - 31 Dec 2023 (R28271) and its attachment (1759736513).

10.     Quarterly Internal Audit Report - 31 Dec 2023       148 - 151

Document number R28272

Recommendation

That the Audit, Risk and Finance Committee

1.    Receives the report Quarterly Internal Audit Report - 31 Dec 2023 (R28272) and its attachment (1194974384)

 

Confidential Business

11.     Exclusion of the Public

Recommendation

That the Audit, Risk and Finance Committee

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 Committee Meeting - Confidential Minutes - 24 November 2023

Section 48(1)(a)

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

The withholding of the information is necessary:

·    Section 7(2)(a)

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

·    Section 7(2)(g)

     To maintain legal professional privilege

2

Health, Safety and Wellbeing Report to 31 December 2023

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)(d)

     To avoid prejudice to measures protecting the health and safety of members of the public

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

4

Quarterly Update on Debts - 31 December 2023

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

 

 

Karakia Whakamutanga

 

 

 


Audit, Risk and Finance Committee Minutes - 24 November 2023

 

 

 

Minutes of a meeting of the

Audit, Risk and Finance Committee

Te Kōmiti Kaute / Tūraru / Pūtea

Held in the Council Chamber, Floor 2A, Civic House, 110 Trafalgar Street, Nelson on Friday 24 November 2023, commencing at 9.00a.m.

 

Present:              Ms C Taylor (Chairperson), His Worship the Mayor N Smith, Councillor R O'Neill-Stevens, M Courtney and R Sanson

In Attendance:    Chief Executive (N Philpott), Deputy Chief Executive/Group Manager Infrastructure (A Louverdis), Group Manager Corporate Services (N Harrison), Group Manager Strategy and Communications (N McDonald) Senior Governance Adviser (H Wagener) and Assistant Governance Adviser (A Bryce)

Apology:             An apology has been received from Mr L McKenzie

 

 

Karakia and Mihi Timatanga

1.       Apologies

Resolved ARF/2023/049

 

That the Audit, Risk and Finance Committee

1.    Receives and accepts an apology from Mr L McKenzie.

Courtney/Sanson                                                                          Carried

2.       Confirmation of Order of Business

There were no changes to the order of business.

3.       Interests

There were no updates to the Interests Register, and no interests with items on the agenda were declared.

4.       Public Forum

There was no public forum.

5.       Confirmation of Minutes

5.1      15 September 2023

Document number M20285, agenda pages 7 - 16 refer.

Resolved ARF/2023/050

 

That the Audit, Risk and Finance Committee

1.    Confirms the minutes of the meeting of the Audit, Risk and Finance Committee, held on 15 September 2023, as a true and correct record.

His Worship the Mayor/Courtney                                                   Carried

6.       Audit NZ - Audit Engagement Letter for the Long Term Plan 2024-2034

Document number R28035, agenda pages 17 - 18 refer.

The Appointed Auditor from Audit New Zealand, John Mackay took the report as read, tabled an attachment (1852948764-472) and answered questions on exclusion of the Water Services Reform Programme from the Long Term Plan 2024-2034 and agreement of the audit fees.

The meeting agreed to amendment of the officer’s recommendation to provide for audit fees to be agreed as a requirement for the signing of the letter from Audit New Zealand.

Resolved ARF/2023/051

 

That the Audit, Risk and Finance Committee

1.    Receives the report Audit NZ - Audit Engagement Letter for the Long Term Plan 2024-2034 (R28035) and its attachment (to be tabled); and

2.    Notes the Audit, Risk and Finance Committee can provide feedback on the Audit Engagement Letter to Audit NZ if required and that the Mayor will sign the letter once the Committee’s feedback (if any) has been incorporated and audit fees have been agreed.

Sanson/Courtney                                                                          Carried

 

Attachments

1    1852948764-472 - Audit NZ Engagement Letter

7.       Quarterly Internal Audit Report - 30 Sept 2023

Document number R28053, agenda pages 19 - 20 refer.

Group Manager Corporate Services, Nikki Harrison, and Audit and Risk Analyst, Chris Logan took the report as read and answered questions on the New Zealand’s Building Consent Authority two-yearly audit and the review of Council’s updated Water Safety Plan.

Resolved ARF/2023/052

 

That the Audit, Risk and Finance Committee

1.    Receives the report Quarterly Internal Audit Report - 30 Sept 2023 (R28053).

Sanson/His Worship the Mayor                                                      Carried

8.       Quarterly Risk Report - 30 Sept 2023

Document number R28049, agenda pages 21 - 46 refer.

Group Manager Corporate Services, Nikki Harrison, and Audit and Risk Analyst, Chris Logan took the report as read and answered questions on loss of service performance from ineffective contracts and contract management and optimisation of insurance.

Resolved ARF/2023/053

 

That the Audit, Risk and Finance Committee

1.    Receives the report Quarterly Risk Report - 30 Sept 2023 (R28049) and its attachment (1759736513).

Courtney/Sanson                                                                          Carried

9.       Privacy Act 2020 - Reporting

Document number R28111, agenda pages 47 - 48 refer.

Manager Governance and Support Services, Devorah Nicuarta-Smith took the report as read and advised that the compliance register was not attached to the report. She answered questions on measures to ensure protection of privacy of submitters during the Long Term Plan 2024-34 consultation.

Resolved ARF/2023/054

 

That the Audit, Risk and Finance Committee

1.    Receives the report Privacy Act 2020 - Reporting  (R28111).

Sanson/His Worship the Mayor                                                      Carried

10.     Quarterly Finance Report to 30 September 2023

Document number R28129, agenda pages 49 - 71 refer.

Group Manager Infrastructure, Alec Louverdis, Group Manager Corporate Services, Nikki Harrison and Manager - Finance, Prabath Jayawardana took the report as read and answered questions on the reduction in Transport Choices Revenue, timing of capital expenditure, measures for collection of outstanding rates and current employee leave liabilities.

Resolved ARF/2023/055

 

That the Audit, Risk and Finance Committee

1.    Receives the report Quarterly Finance Report to 30 September 2023 (R28129) and its attachments (1857728953-1257, 839498445-17924 and 839498445-17948).

O'Neill-Stevens/Courtney                                                              Carried

 

11.     Exclusion of the Public

Resolved ARF/2023/056

 

That the Audit, Risk and Finance Committee

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:

 

Courtney/O'Neill-Stevens                                                              Carried

 

Item

General subject of each matter to be considered

Reason for passing this resolution in relation to each matter

Particular interests protected (where applicable)

1

Audit, Risk and Finance Committee Meeting - Confidential Minutes - 15 September 2023

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)(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

·    Section 7(2)(g)

     To maintain legal professional privilege

2

Health, Safety and Wellbeing Report to 30 September 2023

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

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

4

Quarterly Update on Debts - 30 September 2023

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

5

Organisational Risk - Deep Dives

Section 48(1)(a)

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

The withholding of the information is necessary:

·    Section 7(2)(j)

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

The meeting went into confidential session at 10.10a.m. and resumed in public session at 12.04p.m.

 

Karakia Whakamutanga

 

12.     Restatements

 

It was resolved while the public was excluded:

 

1

Health, Safety and Wellbeing Report to 30 September 2023

 

2.     Agrees that Report (R28094) and Attachment (855153265-4266) remain confidential at this time.

 

2

Quarterly Report on Legal Proceedings

 

2.     Agrees that Report Quarterly Report on Legal Proceedings (R27940) and Attachment (142319133-487) remain confidential at this time.

 

3

Quarterly Update on Debts - 30 September 2023

 

2.     Agrees that the Report and its attachment (1857728953-1250) remain confidential at this time.

 

4

Organisational Risk - Deep Dives

 

1.     Receives the report Organisational Risk - Deep Dives (R28145) and its Attachments (731786637 and 416503567); and

2.     Agrees that Report (R28145), and the decision only be made publicly available; and

3.     Agrees that Attachments (731786637 and 416503567) remain confidential at this time.

 

 

There being no further business the meeting ended at 12.05p.m.

 

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

 

Resolved

 

 

 

 


 

Item 6: Letter From Audit NZ on Annual Report for year ending 30 June 2023

 

Audit, Risk and Finance Committee

14 February 2024

 

Report Title:             Letter From Audit NZ on Annual Report for year ending 30 June 2023

Report Author:         Prabath Jayawardana - Manager Finance

Report Authoriser:   Nikki Harrison - Group Manager Corporate Services

Report Number:       R27973

 

1.       Purpose of Report

1.1      To provide the letter to the Council on the audit for the year ending 30 June 2023 from Audit NZ.

2.       Recommendation

That the Audit, Risk and Finance Committee

1.    Receives the report Letter From Audit NZ on Annual Report for year ending 30 June 2023  (R27973) and its attachment (2126778665-323); and

2.    Notes Audit NZ’s comments and how officers intend to address the issues raised.

3.       Background

3.1      Audit New Zealand (Audit NZ) issued an unmodified audit opinion on 31 October 2023 for the financial year ending 30 June 2023. This means that it was satisfied that the financial statements fairly reflected Council's activities for the year and its financial position at the end of the financial year.

3.2      Audit NZ included an Emphasis of Matter paragraph to draw attention to the disclosure, in the financial statements, of the inherent uncertainties in the Government’s proposed Three Waters Reform programme and it’s offer to fund up to $6 million to support the purchase of up to 14 “red stickered” properties where the landslide risk is too high for those property owners to return to their homes.

3.3      After the audit is completed, Audit NZ issues a management letter to Council outlining the findings of the audit.

3.4      In the letter to Council, received on 14 November 2023 (Section 3, Attachment 1), Audit NZ comment on a number of matters considered in the Audit Plan to be the main audit risks and issues:

·    Property, plant and equipment revaluations, impairment and fair value assessments

·    Three Water Reform

·    Compliance with drinking water standards

·    Accounting for Nelson City Council group entities

·    New Accounting Standard – First-Time adoption of PBE IPSAS 41, Financial Instruments

·    First time adoption of PBE FRS 48, Service Performance Reporting

·    Establishment of IHL

·    Capital asset additions and work in progress

·    Risk of management override of internal controls

3.5      Matters identified during the audit include:

·    Revaluation of infrastructure assets

·    Drinking water quality performance measures (protozoa and bacteria)

4.       Conclusion

4.1      That the Committee notes the matters raised in the management letter for the year ending 30 June 2023 and the manner in which officers propose to address them.

 

 

Attachments

Attachment 1:   2126778665-323 - Letter from Audit NZ on Annual Report for year ending 30 June 2023  

 


Item 6: Letter From Audit NZ on Annual Report for year ending 30 June 2023: Attachment 1








































 

Item 7: Draft Treasury Management Policy including Liability Management and Investment Policies

 

Audit, Risk and Finance Committee

14 February 2024

 

Report Title:             Draft Treasury Management Policy including Liability Management and Investment Policies

Report Author:         Nikki Harrison - Group Manager Corporate Services

Report Number:       R28288

 

 

1.       Purpose of Report

1.1      To adopt the new Treasury Management Policy including the amended Liability Management and Investment Policies.

2.       Recommendation

That the Audit, Risk and Finance Committee

1.    Receives the report Draft Treasury Management Policy including Liability Management and Investment Policies (R28288) and its attachments (438494377-3859 and 438494377-3833).

Recommendation to Council

That the Council

1.    Adopts the Treasury Management Policy (438494377-3833).

3.       Background

3.1      Under the Local Government Act 2002 (LGA) section 102(2)(b) and (c) Council must adopt a Liability Management Policy and an Investment Policy.  The current Treasury Management Policy including Liability Management and Investment Policies was adopted in June 2021 and is due for review in June 2024 to align with the Long Term Plan 2024-34.

3.2      In order to manage Council’s proposed work programme in the LTP 2024-34, the debt to revenue ratio is proposed to be changed from 175% to 200%.  This change to the Financial Strategy needs to be also changed in the Treasury Management Policy.

4.       Discussion

4.1      The Council’s treasury advisors, Price Waterhouse Cooper (PWC), have reviewed and updated the Council’s draft Treasury Management Policy to continue to align with sound treasury management sector practice. Their cover memo is included as Attachment 1 and key recommendations are included below.

Liability Management Policy

4.2      The following recommendations were made based on the review and updates from the Financial Strategy:

4.2.1   Section 12 has been added outlining changes to Council’s group lending activity through the establishment of Infrastructure Holdings Limited (IHL) and potentially further Council Controlled Organisation/Council Controlled Trading Organisations within the Council group.  Inclusion of this policy section will allow the Council, by separate decision, to consider providing lending support to, for example the proposed Marina CCO, and the section includes a framework to apply when considering these decisions.

4.2.2   In order to reflect changes made to the Financial Strategy as part of the draft 2024-34 LTP, the net external debt as a percentage of total revenue has been changed to 200% (previously 175%) in Section 9.

Investment Policy

4.3      The changes to the Investment Policy are:

4.3.1   The policy has been updated to recognise the establishment of Infrastructure Holdings Limited and included comments on its role and purpose as a centralised treasury function. The Port Nelson Limited and Nelson Airport Limited investments have been consolidated under the Infrastructure Holdings Limited investment.

4.3.2   The forestry section has been updated to reflect the proposal in the Long Term Plan 2024-34 to transition away from commercial forestry over time.

4.4      Finance staff have conducted a review of the changes in depth and are satisfied with the recommendations.

 

 

5.       Options

 

Option 1: Adopt the Treasury Management Policy

Advantages

·   Changes are recommended by Council’s treasury advisor and are considered current best practice

·   Can continue to proactively manage treasury risk

·   Updated for the holding company borrowing directly from the LGFA

·   Allows for CCO/CCTO borrowing via the Council

Risks and Disadvantages

·   None

Option 2: Do not adopt the Treasury Management Policy

Advantages

·    No change from existing policy

Risks and Disadvantages

·    Policy will not conform to current best practice

·    Will not allow for CCO/CCTO borrowing via the Council

 

6.       Next Steps

6.1      On approval at Council the adopted Treasury Management Policy will come into effect and will be updated on the Council website.

6.2      Active daily monitoring of compliance against the policies is the responsibility of the Group Manager Corporate Services and the Finance Manager.

 

Attachments

Attachment 1:   438494377-3859 - Nelson City Council Policy Review Memo January 2024

Attachment 2:   438494377-3833 Treasury Management Policy - Apr2021 (PwC edits)  

 

Important considerations for decision making

Fit with Purpose of Local Government

Risk management through having an Investment Policy and Liability Management Policy ensures Council is effectively promoting the social, economic, environmental, and cultural well-being of communities in the present and for the future.

Consistency with Community Outcomes and Council Policy

The Liability Management and Investment Policies are required by section 102 of the Local Government Act.  Nothing in the proposed Treasury Management Policy (including the Investment Policy and Liability Management Policy) is inconsistent with any other previous Council decision or Council Policy. Updating the policy supports the community outcome “Our Council provides leadership and fosters partnerships, a regional perspective and community engagement”.

Risk

There is limited risk from the proposed changes.

Financial impact

There is no direct financial impact from adopting the Treasury Management Policy.

Degree of significance and level of engagement

This matter is of low significance because it includes minor amendments to existing policies, therefore no consultation has taken place.

Climate Impact

None.

Inclusion of Māori in the decision making process

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

Legal context

·    Council has power to make this decision under the Local Government Act section 102 (5). The Council does not need to consult on the Treasury Management Policy.

Delegations

The Audit Risk and Finance committee has the following delegations to consider Investment and Liability Management Policies:

Areas of Responsibility:

·    Council’s Treasury policies

Powers to Decide:

·    none

Powers to Recommend:

·    Any matters within the areas of responsibility

 

 


Item 7: Draft Treasury Management Policy including Liability Management and Investment Policies: Attachment 1








Item 7: Draft Treasury Management Policy including Liability Management and Investment Policies: Attachment 2




































 

Item 8: Quarterly Finance Report to 31 December 2023

 

Audit, Risk and Finance Committee

14 February 2024

 

Report Title:             Quarterly Finance Report to 31 December 2023

Report Author:         Prabath Jayawardana - Manager Finance

Report Authoriser:   Nikki Harrison - Group Manager Corporate Services

Report Number:       R28218

 

1.       Purpose of Report

1.1      To inform the Committee of the financial results for Council for six months ended 31 December 2023, and to highlight any material variations.

2.       Recommendation

That the Audit, Risk and Finance Committee

1.    Receives the report Quarterly Finance Report to 31 December 2023 (R28218) and its attachments (1857728953-1257, 839498445-18200 and 839498445-18199).

3.       Background

3.1      The whole of Council financial reporting provided to this Committee focuses on the six-month performance (1 July 2023 to 31 December 2023) compared with the the year-to-date (YTD) approved capital and operating expenditure budgets. The quarterly report includes Nelson City Council performance only and does not include its subsidiaries, associates, and joint ventures.

3.2      Unless otherwise indicated, all information is against approved Operating budgets, which is Annual Plan 2023/24, plus any carry forwards, plus or minus any other additions or changes as approved by the Council.

3.3      Commentary is provided below for significant variances of +/- $500,000.

4.       Financial Performance

4.1      For the six months ending 31 December 2023, the Council’s draft deficit is $11.8m against a budgeted deficit of $5.6m ($6.2m unfavourable to budget), mainly due to reasons explained below.

4.2      Profit and Loss

Operating Budget vs. Annual Plan Budget

4.3      The Full Year Operating Budget is less than the Annual Plan Budget by $3,300,000. This is mainly due to a $3.6m reduction in Transport Choices Grants, with an offsetting $1.0m reduction in Transport Choices expenses (net $2.6m). 

4.4      Revenue

4.5      Rates income is in-line with budget.

4.6      Subsidies and Grants is less than budget by $2,457,000. This is mainly due to $1.5m reduction in Transport subsidies and grants (relating to multiple projects including Active Linear Corridor, Transport Choices, Railway Lighting and the weather event), a reduction of $0.6m in Waste Management Funding (see below reduction in kerbside kitchen waste expenses), as well as a reduction in 3 Waters Better Off Funding due to funding delays (see below reduction in expenses). Offsetting this is $0.6m in Environmental Grants from MFE and MPI received earlier than budgeted for.

4.7      Fees and Charges income is greater than budget by $479,000. This is mainly due to water by meter charges to residential and commercial being higher than anticipated.

4.8      Other revenue is in line with budget and there are no significant variances greater than $0.5m. 

4.9      Development Contributions is less than budget by $493,000. This is due to less development activity than budgeted for.

4.10    Finance Revenue is greater than budget by $717,000. This is due to more funds being invested than planned because of pre-funding of debt. Currently there is $25m of investments for pre-funding of debt.

4.11    Other gains/(losses) is less than budget by $702,000. This relates to the forestry activity, with net income being less than budget due to delays in harvesting at Marsden and Roding Forest. 

4.12    Expenses

4.13    Personnel costs are greater than budget by $1,240,000. This is mainly due to the expected savings from the vacancy provision ($1.5m provision) not being achieved. Instead, any cost savings from vacancies have been spent on temp staff, higher duty allowances, and other staff-related costs.

4.14    Depreciation and amortisation costs are greater than budget by $1,017,000. Depreciation has been based on the 2022/23 asset valuations, in which we saw large increases.  This resulted in a higher depreciation expense than planned.

4.15    Finance costs are greater than budget by $1,437,000. This increase in interest costs is due to a) additional pre-funding of debt (which is offset by the $0.7m over variance in finance revenue), and b) $0.7m increase in interest costs due to both higher interest rates and borrowings than planned for the 6-months ended 31 December 2023.

4.16    Weather Event costs are greater than budget by $356,000 with there being no significant variances greater than $0.5m. 

4.17    Other expenses are less than budget by $258,000. Significant variances are as follows:

4.17.1 Insurance is greater than budget by $1.0m. This is because of increases in premiums due to a) increases in asset values, and b) higher premium rates. 

4.17.2 Public Transport Costs are greater than budget by $30,000. While the bus service contract is greater than budget by $1.1m, this is offset by minor improvements budget of $1.1m not being spent to date.

4.17.3 Kerbside Kitchen Waste expenses are less than budget by $713,000. This government-funded initiative has been delayed.

4.17.4 Three Waters Better Off Funding is less than budget by $592,000. This is due to delays in funding (refer to subsidies and grants above).

4.17.5 Reticulation Maintenance is greater than budget by $545,000. This is due to reactive spending on wastewater, stormwater and water supply reticulation.

4.17.6 Riskpool Claim is greater than budget by $230,000. This is due to a historic exposure to calls dating pre-2010/11 when Nelson City Council was part of a New Zealand Mutual Liability Riskpool Scheme for Insurance. This is funded by the building insurance reserve.

4.17.7 All other variances in other expenses are below $0.5m.

4.18    Profit and Loss by Activity

4.19    The profit and loss has been broken down by activity per the above table. Non-controllable income and expenses have been taken out, so that results per activity are not skewed. Most of the variance year to date is in the non-controllable income and expenses.


 

5.       Capital Expenditure

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

5.2      As at 31 December 2023, capital expenditure was $34.6m which is $13.3m under the YTD Operating Budget of $47.8m. The main contributors to the variance were Transport ($1.6m), Parks & Recreation ($4.5m), Social ($1.7m), Water Supply ($2.3m), and Flood Protection ($2.0m). 


 

6.       Cash Flow Management

6.1      Net Debt

6.2      As at 31 December 2023, there was a net debt of $205.7m. This has increased from 30 June 2023 by $36.9m. The full-year Annual Plan budget is $207.9m.

6.3      This $36.9m increase in net debt from 30 June 2023 is due to: a) to fund the August 2022 weather event ($2.7m expenditure), b) to fund capital expenditure during the year ($15.4m net of funded depreciation), c) to fund $1.5m advance to Nelson Tasman Regional Landfill Business Unit (NTRLBU), d) to fund $9.4m advance in working capital and term loan to Nelson Regional Sewerage Business Unit, and e) drawdown of Housing NZ funds of $2.5m. The balance is due to timing of cash inflows and outflows being different than planned.

6.4      Attachment 1 (1857728953-1257) includes the statement of financial position (Balance sheet), Debtors graph and compliance with the Treasury policy as at 31 December 2023.

6.5      The net debt figure in the treasury compliance report (Attachment 1) is different from above 6.2 mainly due to LGFA borrowing notes not being included in the PWC tool.

7.       Rates Aging

7.1      Over the last twelve months officers have seen outstanding rates balances increasing slightly which highlights the cost of living and interest rate increases impacting on the community. Officers are working hard to get ratepayers on to payment plans.

7.2      Total rates outstanding as at 31 December 2023 were $924,991. Below are the rates outstanding at the end of each rating quarter.

 

 

 

 

Total Rates Outstanding

8.     Project Health

8.1      A table summarising the health of projects across Council has been generated and is included as attachment 2 (839498445-18200). It gives a red, amber or green rating for quality, time and budget factors.

8.2      The majority of the orange and red are as a result of delays due to weather events in August 2022 and May 2023, the impact of COVID 19 and supply chain delays in material and equipment from overseas.

8.3      Projects on hold indicate projects that require further workshops or discussion.

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 ‘on track/not on track/not measured yet’.

9.2      Of the 67 measures, 53 are currently on track, 10 are not measured yet, 4 are not measured yet.  A spreadsheet with commentary on these measures is included as attachment 3 (839498445-18199).

 

 

Attachments

Attachment 1:   1857728953-1257 - Dec-23 Appendix for Finance Report for Council

Attachment 2:   839498445-18200 - Performance Measures Quarter Two 2023 2024

Attachment 3:   839498445-18199 - Project Health Summary - Quarter Two 2023 2024  

 


Item 8: Quarterly Finance Report to 31 December 2023: Attachment 1







Item 8: Quarterly Finance Report to 31 December 2023: Attachment 2











Item 8: Quarterly Finance Report to 31 December 2023: Attachment 3




 

Item 9: Quarterly Risk Report - 31 Dec 2023

 

Audit, Risk and Finance Committee

14 February 2024

 

Report Title:             Quarterly Risk Report - 31 Dec 2023

Report Author:         Chris Logan - Audit and Risk Analyst

Report Authoriser:   Nikki Harrison - Group Manager Corporate Services

Report Number:       R28271

 

 

1.       Purpose of Report

1.1      To provide information to the Audit, Risk and Finance Committee on the organisational risks through to the end of the second quarter of 2023/24.

2.       Recommendation

That the Audit, Risk and Finance Committee

1.    Receives the report Quarterly Risk Report - 31 Dec 2023 (R28271) and its attachment (1759736513).

3.       Background

3.1      This report describes key risk areas, divided by risk theme organisational risks) and reporting Group.

4.       Key Risk Areas by Theme (Organisational Risks)

4.1      Risks relating to Council and joint operations are monitored via Council’s risk register. Approximately 30% of risk entries by count have been identified as having a common theme or cause which create risk concentrations that pose a threat at an organisational level. These organisational risks are described below.

4.2      Organisational risk “Central-government-led-reform” has been rerated to High from Very High. There were no changes in risk rating for the other organisational risks.

4.3      R1 - Central-government-led-reforms (Owner: Chief Executive). Deferral of and uncertainty around reforms has resulted in rerating this risk to High from Very High.

4.4      R2 - Lifeline services failure (Owner: Group Manager Infrastructure). Flood-recovery work is ongoing. No other new emerging risks to report at this time.

4.5      R3 - Illness, injury or stress from higher hazard work situations (Owner: Group Manager Corporate Services). Addressing workplace stress remains an organisational focus area. The risk rating remains at High.

4.6      R4 - Loss of service performance from ineffective contracts and contract management (Owner: Chief Executive). Contract management improvement program tentatively agreed with quarterly monitoring of program provided by the internal Procurement Steering Committee. The risk rating remains at Medium.

4.7      R5 - Compromise of Council service delivery from information technology failures (Owner: Group Manager Corporate Services). No new emerging risks to report. The risk rating remains at Low.

4.8      R6 - Council work compromised by loss of and difficulties in replacing skilled staff (Owner: Manager People and Capability). Turnover remains high with some ‘hard-to-fill’ roles remaining open despite repeated recruitment efforts, engaging recruitment consultants and re-evaluating the job description.  The organisational risk rating remains at Medium.

4.9      R7 - Legal Risk (Owner: Group Manager Strategy and Communications). No 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.

4.10    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.       Key Risk Areas by Reporting Group

5.1      Council’s risk register does not contain specific asset, activity, legal matter, or project risks. Instead, these are rolled up into more general asset, activity, legal or project risks. Any significant specific risks which are new or emerging are summarised below by reporting group.

5.2      Office of the Chief Executive:  No new emerging risks to report at this time.

5.3      Infrastructure Group:  Supply chain and contractor constraint risks rated down to Low. Consultants are being used, where appropriate, to ensure work programmes continue to be delivered to cover staff vacancies.

5.4      Community Services Group:

5.4.1   Risks associated with Council-owned campgrounds (two operated and one leased) remain elevated whilst non-compliance remediation actions are being implemented. The risks previously monitored by elected members through the Strategic Development and Property Subcommittee have been monitored through the usual organisational processes since that subcommittee ceased at the end of the last triennium.

5.4.2   Risks associated with wood processing waste deposited at Tāhunanui Beach in the 1960s/1970s are under investigation, with mitigation options to be brought to Council for consideration later in the year.

5.5      Environmental Management Group: Some senior vacancies have or soon will be filled, mitigating risks relating to delivery and ability to recruit. Workload stress may shift from causes due to vacancies to causes due to uncertainty about national legislation reform.

5.6      Strategy and Communications Group:  No new emerging risks to report at this time.

5.7      Corporate Services Group:  Project to optimise insurance is underway. The project may result in increased financial risk.

 

 

Attachments

Attachment 1:   1759736513 - 2Q24 key organisational risks for ARF  

 


Item 9: Quarterly Risk Report - 31 Dec 2023: Attachment 1
























 

Item 10: Quarterly Internal Audit Report - 31 Dec 2023

 

Audit, Risk and Finance Committee

14 February 2024

 

Report Title:             Quarterly Internal Audit Report - 31 Dec 2023

Report Author:         Chris Logan - Audit and Risk Analyst

Report Authoriser:   Nikki Harrison - Group Manager Corporate Services

Report Number:       R28272

 

 

1.       Purpose of Report

1.1      To update the Audit, Risk and Finance Committee on the internal audit activity through to the end of the second quarter of 2023/24.

2.       Recommendation

That the Audit, Risk and Finance Committee

1.    Receives the report Quarterly Internal Audit Report - 31 Dec 2023 (R28272) and its attachment (1194974384).

3.       Background

3.1      Under Council’s Internal Audit Charter, the Audit, Risk and Finance Committee requires a periodic update on the progress of internal audit activities. The 2023-24 Internal Audit Plan (the Plan) was approved by the Council on 8 June 2023.

4.       Overview of Progress on the 2023/24 Internal Audit Plan

4.1      Two audits were completed during the quarter and one commenced:

4.1.1   The Annual Fraud, Conflict of Interest & Sensitive Expenditure internal audit resulted in no recommendations.

4.1.2   Officer Delegation Compliance internal audit resulted in four medium recommendations.

4.1.3   An internal audit of Commercial Lease Management was commenced.

4.2      Inclusion of both 4.1.2 and 4.1.3 into the audit plan was approved by the Chair of the Audit, Risk and Finance committee and had previously been flagged as potential audits in the audit plan. These audits replace the deferred audit of the Implementation of Vertical Construction external review and fills the placeholder for an ‘unplanned’ audit.

4.3      Further information on the status and outcome of the audits is provided in the attachment.

5.       Significant external audits that are not reported separately to the Audit, Risk and Finance Committee

5.1      An external audit of Council’s full year 2023 operational greenhouse gas emission footprint is due to commence in the second quarter of 2023-2Q24. An update on the outcome will be provided to this committee as part of end of year 2024 reporting.

6.       Status of Outstanding Significant Risk Exposures and Control Issues Identified from Internal Audits

6.1      Staff cannot currently perform advanced searches – Status unchanged - NDocs Improvements Business Case approved. The majority of benefits are expected by May 2024 (IANZ deadline) or the end of 2023-24 (advanced search).

6.2      Staff are finding it difficult to find NCC internal policies – Status unchanged - Work has commenced on implementing this recommendation.

 

 

Attachments

Attachment 1:   1194974384 - Annual Audit Plan Progress - 31 Dec 2023  

 


Item 10: Quarterly Internal Audit Report - 31 Dec 2023: Attachment 1