Notice of the Ordinary meeting of
Audit, Risk and Finance Committee
Te Kōmiti Kaute / Tūraru / Pūtea
Date: Wednesday 18 September 2024 Time: 9.00a.m. Location: Council
Chamber |
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.
This is a Committee of Council
· 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
· Appointment of a deputy Chair
· 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
18 September 2024
Karakia and Mihi Timatanga
1. Apologies
Nil
2. Confirmation of Order of Business
3.1 Updates to the Interests Register
3.2 Identify any conflicts of interest in the agenda
Document number M20712
Recommendation
That the Audit, Risk and Finance Committee 1. Confirms the minutes of the meeting of the Audit, Risk and Finance Committee, held on 14 August 2024, as a true and correct record. |
5. Draft Annual Report 2023/24 14 - 194
Document number R28614
Recommendation
That the Audit, Risk and Finance Committee 1. Receives the report Draft Annual Report 2023/24 (R28614) and its Attachments; and 2. Notes that the draft Annual Report will be audited before being presented to Council for adoption on 31 October 2024, the statutory deadline. |
6. Carry Forwards - 2023/24 for Approval 195 - 207
Document number R28796
Recommendation
That the Audit, Risk and Finance Committee 1. Receives the report Carry Forwards - 2023/24 for Approval (R28796) and its Attachments. |
Recommendation to Council
That the Council 1. Approves the net capital carry forward of $12 million –$12.3 million net to 2024/25 and $250,000 back from 2025/26; and 2. Notes that the net capital carry forward is in addition to the net capital carry forward of $24.2 million approved during the Long Term Plan 2024/34 process, taking the total carry forward to $36.3 million of which $34.1 million is for the 2024/25 year and $1.4 million is for the 2025/26 year; and $500,000 is for the 2026/27 year and $300,000 is for the 2029/30 year; and 3. Notes the savings and reallocations in 2023/24 capital expenditure of $3.4 million including staff time which is in addition to the $0.7 million savings and reallocations already recognised in the May 2024 Long Term Plan 2024/34 deliberations; and 4. Notes that the total 2024/25 capital budget (including staff costs and Aug 2022 severe weather event related budgets and excluding consolidations, vested assets and scope adjustment) will be adjusted by these resolutions from a total of $107.1 million to a total of $119.3 million; and 5. Approves net capital grants carried forward of $628,000 to align with the timing of capital expenditure budgets; and 6. Approves capital grant budget of $4.1 million of Crown funding for slip effected property purchases to be carried back to 2023/24 to align with the accrual of that income that has been made for our Annual Report 2023/24; and 7. Approves the carry forward of $612,000 unspent operating expenditure budget to 2024/25, accompanied by $567,000 of operating grant funding budget. |
Confidential Business
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 - 14 August 2024 |
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 · 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 |
Karakia Whakamutanga
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 Wednesday 14 August 2024, commencing at 9.02a.m.
Present: Ms C Taylor (Chairperson), His Worship the Mayor N Smith, Councillors R O'Neill-Stevens, M Courtney, R Sanson and Mr L McKenzie
In Attendance: Chief Executive (N Philpott), Deputy Chief Executive/Group Manager Infrastructure (A Louverdis), Group Manager Community Services (A White), Group Manager Corporate Services (N Harrison), Group Manager Strategy and Communications (N McDonald), Senior Governance Adviser (A Andrews) and Governance Adviser (A Bryce)
Apologies : Nil
Karakia and Mihi Timatanga
1. Apologies
There were no apologies.
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 5 June 2024
Document number M20599, agenda pages 7 - 15 refer.
Resolved ARF/2024/034 |
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That the Audit, Risk and Finance Committee 1. Confirms the minutes of the meeting of the Audit, Risk and Finance Committee, held on 5 June 2024, as a true and correct record. |
His Worship the Mayor/McKenzie Carried |
6. Quarterly Internal Audit Report - 30 June 2024
Document number R28694, agenda pages 16 - 19 refer.
Group Manager Corporate Services, Nikki Harrison and Audit and Risk Analyst, Chris Logan, took the report as read and answered questions on implementation of the four medium recommendations, commercial lease management, financial year storm recovery subsidies, LOCO software benefits and risks associated with noncompliance of financial delegations.
The Chief Executive, Nigel Philpott, answered questions on the non-compliance issue, confirming that an annual review of delegation compliance will be undertaken.
Resolved ARF/2024/035 |
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That the Audit, Risk and Finance Committee 1. Receives the report Quarterly Internal Audit Report - 30 June 2024 (R28694) and its Attachment (1194974384-3691). |
His Worship the Mayor/Courtney Carried |
7. Quarterly Risk Report - 30 June 2024
Document number R28695, agenda pages 20 - 44 refer.
Audit and Risk Analyst, Chris Logan, took the report as read.
Group Manager Corporate Services, Nikki Harrison answered questions on voluntary staff exit surveys, insurance risks and change in Harbourmaster responsibility.
Deputy Chief Executive/Group Manager Infrastructure, Alec Louverdis, answered questions on lifeline services and risk rating, flood recovery work, risk reduction and current risk levels.
Chief Executive, Nigel Philpott, answered questions on Long Term Plan projects, Nelson City Council vacancies and induction for new staff.
Resolved ARF/2024/036 |
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That the Audit, Risk and Finance Committee 1. Receives the report Quarterly Risk Report - 30 June 2024 (R28695) and Attachment (1759736513-18). |
His Worship the Mayor/Sanson Carried |
8. Quarterly Finance Report to 30 June 2024
Document number R28611, agenda pages 45 - 66 refer.
Group Manager Corporate Services, Nikki Harrison and Manager Finance, Prabath Jayawardana, took the report as read, noting this was the draft financial report and the draft annual report would come back to the committee for approval in September, to be adopted by Nelson City Council prior to 31 October 2024. They answered questions on forestry performance measures and governance oversight, Infrastructure Holdings Limited (IHL) dividends, subsidies and grants oversight, risk management and current project budgets.
Resolved ARF/2024/037 |
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That the Audit, Risk and Finance Committee 1. Receives the report Quarterly Finance Report to 30 June 2024 (R28611) and its Attachments (1857728953-1938, 1530519604-14363 and 839498445-18731). |
Courtney/Sanson Carried |
9. Annual Tax Update
Document number R28612, agenda pages 67 - 79 refer.
Group Manager Corporate Services, Nikki Harrison and Manager Finance, Prabath Jayawardana, took the report as read and answered questions on GST.
Resolved ARF/2024/038 |
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That the Audit, Risk and Finance Committee 1. Receives the report Annual Tax Update (R28612) and its Attachment (2130083480-731). |
His Worship the Mayor/O'Neill-Stevens Carried |
10. Bad Debts write off - Year ending 30 June 2024
Document number R28716, agenda pages 80 - 81 refer.
Manager Finance, Prabath Jayawardana, took the report as read.
Resolved ARF/2024/039 |
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That the Audit, Risk and Finance Committee 1. Receives the report Bad Debts write off - Year ending 30 June 2024 (R28716). |
O'Neill-Stevens/McKenzie Carried |
11. Exclusion of the Public
Resolved ARF/2024/040 |
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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/His Worship the Mayor 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 - 5 June 2024 |
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 · Section 7(2)(g) To maintain legal professional privilege · Section 7(2)(b)(ii) To protect information where the making available of the information would be likely unreasonably to prejudice the commercial position of the person who supplied or who is the subject of the information |
2 |
Quarterly Health, Safety and Wellbeing Report to 30 June 2024 |
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)(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 |
4 |
Quarterly Update on Debts - 30 June 2024 |
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 |
The meeting went into confidential session at 10.25a.m. and resumed in public session at 10.56a.m.
Karakia Whakamutanga
12. Restatements
It was resolved while the public was excluded:
1 |
CONFIDENTIAL: Quarterly Health, Safety and Wellbeing Report to 30 June 2024 |
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2. Agrees that Report R28658 and Attachment (855153265- 4991) remain confidential at this time. |
2 |
CONFIDENTIAL: Quarterly Report on Legal Proceedings |
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2. Agrees the Report R28608 and its Attachment (142319133- 606) will remain confidential. |
3 |
CONFIDENTIAL: Quarterly Update on Debts - 30 June 2024 |
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2. Agrees that the Report R28613 and its Attachment (1857728953-1933) remain confidential at this time. |
There being no further business the meeting ended at 10.56a.m.
Confirmed as a correct record of proceedings by resolution on (date)
Resolved |
|
Item 6: Draft Annual Report 2023/24
Audit, Risk and Finance Committee 18 September 2024 |
Report Title: Draft Annual Report 2023/24
Report Author: Nikki Harrison - Group Manager Corporate Services and Nicky McDonald – Group Manager Strategy & Communications
Report Number: R28614
1. Purpose of Report
1.1 To provide a copy of the draft Annual Report 2023/24 prior to auditing by Audit New Zealand.
2. Summary
2.1 The draft Annual Report for the 2023/24 financial year has been prepared and is provided as Attachment 1 and 2. Attachment 1 details non-financial performance measure information, and Attachment 2 details financial information. The audit of the Annual Report commenced early-September, and there are likely to be some changes to the Annual Report as a result of the audit process. After the audit the documents will be combined and presented to Council on 31 October 2024 for approval.
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 2023/24 against the targets set out in the Annual Plan 2023/24. It also provides accountability to the Nelson community for the decisions made throughout the year.
5. Discussion
5.1 The attached draft Annual Report 2023/24 is intended to provide the Committee 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 currently in progress.
5.2 The Local Government Act requires councils to adopt the final Annual Report within four months of the end of the financial year (31 October).
5.3 At the time of writing this report, Council is currently waiting to receive finalised financial statements and performance measures from some of its CCOs and CCTOs. Therefore, the group financial statements and performance measure tables have not been prepared yet.
5.4 Some of the financial statements such as Cash Flow Statement, Funding Impact statements and disclosure notes are also in the process of being finalized together with the peer review of infrastructure revaluation. These will be ready before Audit NZ starts their audit on 16th September 2024.
5.5 The deficit before revaluation is $8 million against a budgeted surplus of $6.2 million. At a high level the main drivers of the variance are additional depreciation of $1.9m, net interest cost of $2.2m, insurance costs of $1.5m, other losses of $5.7m and Tahuna beach remediation accrual of $2.6m.
5.6 The detailed reasons for this variance will be explained in the final Annual Report Note 40. This is yet to be completed however the variances are mainly due to following reasons;
5.7 Subsidies and grants are $1.8m lower than budget mainly due to the following:
5.7.1 Waka Kotahi income is $3.6m less than budget.
5.7.2 IAF Active Linear Corridor $1.5 million budgeted but not received.
5.7.3 Contribution from Waste Minimization Fund - $1.3m budgeted but not received.
5.7.4 Crown slip effected properties grant is $4.1m which is unbudgeted.
5.8 Finance income is $2.0m greater than budget. This is due to interest on short-term investments (i.e. pre-funding of debt).
5.9 Development/financial contributions are $1m lower than budget due to less development activity than budgeted for.
5.10 Other revenue is $1.7m greater than budget due to following reasons:
5.10.1 Vested asset income was $4m more than budgeted.
5.10.2 Dividend/subvention income was $3.1m less than budgeted as the Infrastructure Holdings Limited (IHL) dividend has not been accrued due to the new IHL dividend policy, resulting in a shortfall of $3.1m compared to budget. The Port Nelson and Nelson Airport dividends previously declared prior to yearend and paid the next financial year: now declared and paid in the same financial year. This is a timing issue as the result will be two years of dividend income in 2024/25.
5.11 Other losses is higher than budget by $5.7m mainly due to $4.3m of abandoned assets as a result of the August 2022 flood event (mainly $2.1 million of wastewater assets and $1.1 million of water supply assets).
5.12 Personnel costs are $2.5m higher than the Annual plan budget. This is different from what has been reported to Audit Risk and Finance Committee on 14th August 2024 (R28611) by $2.2 million. This is mainly due to reclassifications of budgets for management reporting (Annual Plan Vs Operating budgets).
5.12.1 $1.4m difference between Annual Plan and Operating budgets mainly due to a reclassification of activity funded staff expense of $1.2 million (net nil impact on expenditure) and $0.15 million of additional salary budgets approved for Transport and Solid waste.
5.12.2 $0.6m of joint operations salaries included in the Annual report of which the budgets were classified as other expenditure in the Annual plan due to an error on consolidation.
5.12.3 $0.3m of difference between actual savings in personnel cost against the expected savings (Vacancy provision).
5.12.4 $0.2m increase in leave liability at year end.
5.13 Depreciation and amortisation expense was $1.9 million greater than budgeted. In the 2022/23 financials, the asset valuations saw significant increases. This resulted in a much higher depreciation expense than budgeted for, particularly in Roads, Wastewater, Stormwater, and Water Supply.
5.14 Finance costs are greater than budget by $4.2m. This increase is due to additional pre-funding of debt (offset against interest income of $2m in 5.7 above) and higher interest rates and higher borrowings than planned during the year.
5.15 Other expenses were $1.6m greater than budget. This was mainly driven by the below increases/decreases:
5.15.1 $2.6m unbudgeted Tahuna sawdust mitigation accrual.
5.15.2 $1.5m higher than planned insurance cost due to increase in premium rates and asset values.
5.15.3 $0.6m higher than planned Resource Consent job purchases due to higher usage of consultants due to staff vacancies (this is partially offset by savings in personnel costs and higher fees and charges).
5.15.4 $3.75m lower than planned Housing Reserve Grant. This was carried forward to next financial year as a part of Long Term Plan Deliberation report (R28349) that went to Council on 23 May 2024.
5.15.5 $0.3m higher than planned weather event costs.
5.16 The draft Land and Infrastructure Revaluations is $106m compared with a budget of $38m ($68 million over budget):
5.16.1 Infrastructure assets are revalued fully every second year and this year is a full revaluation year however assets are revalued in between years to smooth out the large fluctuations. Infrastructure revaluation increase accounted for $90 million of the $106 million total revaluation against a budget of $38 million. This is the very first draft and is subject to change as the peer review process has not been finalised yet by Council Valuer (Marsh).
5.16.2 Land was revalued in 2023/24 and increased by $15.6 million against a Nil budget. This has no impact on rates.
5.17 At 30 June 2024 Council’s borrowings, net of deposits, cash and LGFA borrower notes were $223.5 million compared to a budget of $207.9 million and has increased $54.6m from 30 June 2023. This $54.6m increase in net debt from 30 June 2023 is due to:
5.17.1 Funding capital expenditure during the year ($36.4m net of funded depreciation)
5.17.2 Fund $4.0m advance to Nelson Tasman Regional Landfill Business Unit (NTRLBU) and $8.8m advance to Nelson Regional Sewerage Business Unit; and
5.17.3 Drawdown of Housing NZ funds of $2.5m. The balance is due to timing of cash inflows and outflows being different than planned.
Rating Surplus (Deficit)
5.18 The rates deficit was $5.5 million which was funded by debt. A large part of this is the $3.1m IHL dividend which will be received in 2024/25 (a timing difference for the Annual Report but cash likely still received at a similar time).
Non-financial Performance
5.19 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 due for measurement’.
5.20 The preliminary result for 2023/24 is 82.08% achievement (55 out of 67 performance measures were achieved). 16.42% (11 measures) were not achieved, and 1.49% (one measure) was not due for measurement within the 2023/24 year. Commentary on the performance measures is provided in the activity sections of Attachment 1.
5.21 The result for the previous year, 2022/23, was 77.6% achieved, 52 measures of the 67 measures set in the Long Term Plan 2021- 2031.
6. Conclusion
6.1 This report is provided for information. It is recommended that the Committee receives this report and notes that the final Annual Report 2023/24, with any changes resulting from the audit process, will be presented directly to Council for adoption on 31 October 2024.
Attachments
Attachment 1: Draft Annual-Report - 2023 2024 ⇩
Attachment 2: Financial Statements and relevant notes 30 June 2024 ⇩
Item 7: Carry Forwards - 2023/24 for Approval
Audit, Risk and Finance Committee 18 September 2024 |
Report Title: Carry Forwards - 2023/24 for Approval
Report Author: Alistair Roper - Team Leader Accountants
Report Authoriser: Nikki Harrison - Group Manager Corporate Services
Report Number: R28796
1. Purpose of Report
1.1 To approve the carry forward of available budgets from 2023/24 to the new financial year 2024/25.
2. Summary
2.1 Invoice processing is complete for the 2023/24 financial year and officers have reviewed project expenditure against budgets to identify savings and where budget carry-over is required for completion of approved projects.
That the Audit, Risk and Finance Committee 1. Receives the report Carry Forwards - 2023/24 for Approval (R28796) and its Attachments. |
Recommendation to Council
1. Approves the net capital carry forward of $12 million –$12.3 million net to 2024/25 and $250,000 back from 2025/26; and 2. Notes that the net capital carry forward is in addition to the net capital carry forward of $24.2 million approved during the Long Term Plan 2024/34 process, taking the total carry forward to $36.3 million of which $34.1 million is for the 2024/25 year and $1.4 million is for the 2025/26 year; and $500,000 is for the 2026/27 year and $300,000 is for the 2029/30 year; and 3. Notes the savings and reallocations in 2023/24 capital expenditure of $3.4 million including staff time which is in addition to the $0.7 million savings and reallocations already recognised in the May 2024 Long Term Plan 2024/34 deliberations; and 4. Notes that the total 2024/25 capital budget (including staff costs and Aug 2022 severe weather event related budgets and excluding consolidations, vested assets and scope adjustment) will be adjusted by these resolutions from a total of $107.1 million to a total of $119.3 million; and 5. Approves net capital grants carried forward of $628,000 to align with the timing of capital expenditure budgets; and 6. Approves capital grant budget of $4.1 million of Crown funding for slip effected property purchases to be carried back to 2023/24 to align with the accrual of that income that has been made for our Annual Report 2023/24; and 7. Approves the carry forward of $612,000 unspent operating expenditure budget to 2024/25, accompanied by $567,000 of operating grant funding budget. |
4. Background
4.1 The capital programme for 2023/24, as agreed in the Annual Plan 2023-24 totalled $80.9 million, including staff costs and scope adjustment and excluding Nelson Regional Sewerage Business Unit (NRSBU), Nelson Tasman Regional Landfill and vested assets. Grossing up for scope adjustment of approximately 15% from this figure, the capital budget for 2023/24 totalled $94.4 million. These figures also include all budgets and actuals related to the August 2022 extreme weather event recovery. 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. Council set the scope adjustment at approximately 15% for the annual plan 2023/24 recognising the impact of delivering the August 2022 recovery program on top of the capital programme. To show an accurate reconciliation of budget to actuals, the scope adjustment is removed from the figures in this report as mentioned in paragraph 4.1.
4.3 The addition of 2022/23 carry forwards, and other resolutions of Council over the 2023/24 year adjusted the total capital budget to $114.8 million.
4.4 The 2023/24 capital budgets were forecast quarterly throughout 2023/24 with a view to what could realistically be achieved in the remainder of the financial year. The capital budget was reforecast to $89.9 million in May 2024 for the Long Term Plan deliberations report. In particular, $24.2 million was carried forward from 2023/24 to 2024/25 and future years during the Long Term Plan process.
4.5 Total actual capital expenditure for the 2023/24 year was $74.5 million, $28 million less than the Annual Plan 2023/24 (including carry forwards) of $102.5 million.
4.6 Reasons for capital carry forwards are largely to do with projects that were either well underway, completed and not yet invoiced, or commenced on site before the end of the financial year and hence committed, and to maximise councils share on projects such as the IAF.
5. Discussion
Capital savings and reallocations
5.1 Officers identified savings and reallocations of $3.4 million in capital expenditure in 2023/24. In total, this saving will have a positive impact on interest, depreciation and debt levels due to less borrowings and the capital expenditure not occurring.
Capital carry forwards
5.2 Officers have requested that a net $12 million be carried forward. $10.8 million general CAPEX and $1.7 million CAPEX related to the Aug 2022 severe weather event to be added to 2024/25 capital budgets while $173,000 is being carried back from 2024/25 and $250,000 from 2025/26 to cover projects tracking ahead of schedule.
5.3 There are $910,000 of capital grant budgets being carried forward and $280,000 of capital grant budgets being carried back to align with the timing of capital expenditure budgets, resulting in a net carry forward of capital grants budgets of $628,000. In addition, budget of $4.1 million of Crown funding for slip effected property purchases is being carried back to 2023/24 to align with the accrual of that income that has been made for our Annual report 2023/24.
5.4 A breakdown of budget movements by Activity in total 2023/24 capital budgets is provided in Table 1 (Attachment 1).
5.5 Table 2 (Attachment 2) itemises general 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 Long Term Plan 2024/34 process.
5.6 Table 3 (Attachment 3) itemises Aug 22 severe weather event related capital projects carry forwards.
Operating carry forwards
5.7 In addition to the capital carry forward requests, there are net operating expense budgets, totalling $612,000, that have been requested by officers to carry forward to 2024/25 as detailed below. $567,000 of these are matched by the carry forward of operating grant budgets.
5.7.1 Three Water Better off Funding project budgets of $516,000 fully grant funded;
5.7.2 Maitai ERP Grant (DOC) expenditure of $15,000 fully grant funded;
5.7.3 DOC: Wakapuaka Jobs for Nature expenditure of $20,000 fully grant funded;
5.7.4 MFE: Essential Freshwater Fund expenditure of $16,000 fully grant funded;
5.7.5 Climate change adaptation and mitigation budgets of $95,000;
5.7.6 Community grant budgets of $36,000; and
5.7.7 With a carry back to 2023/24 of $50,000 for the Housing Reserve grants to align with actual spend from the reserve.
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 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 |
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Advantages |
· Work has continued on 2023/24 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 forwards 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. |
7. Conclusion
7.1 An analysis of actuals against forecast for 2023/24 indicates:
7.1.1 There are savings and reallocations from the capital budget of $3.4 million compared to the approved budget for 2023/24.
7.1.2 Net Capital budget of $12 million not spent should be carried forward to the 2024/25 year.
7.1.3 Net capital grants of $628,000 should be carried forward to align with the timing of capital expenditure budgets. In addition, budget of $4.1 million of crown funding for slip effected property purchases should be carried back to 2023/24 to align with the accrual of that income that has been made for our Annual report 2023/24.
7.1.4 Operating expenses totalling $612,000 have been requested by staff to carry forward to 2024/25. $567,000 of these are matched by the carry forward of operating grant budgets.
8. Next Steps
8.1 Once approved, budgets will be updated to reflect the approved resolutions.
Attachments
Attachment 1: Carry Forwards 23-24 Table 1 ⇩
Attachment 2: Carry Forwards 23-24 Table 2 ⇩
Attachment 3: Carry Forwards 23-24 Table 3 ⇩
Important considerations for decision making |
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. |
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. |
Risk Failure to approve the recommendation will introduce risk (financial, contractor and community relationships) which does not currently exist. |
Financial impact There is little financial impact from approving the recommendation as budgets are already approved and funded. |
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. |
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. |
Inclusion of Māori in the decision making process No engagement with Māori has been undertaken in preparing this report. |
Legal context Council has the power to make this decision under s 12 of the Local Government Act 2002, and Council’s decision must be made in accordance with Part 6 of that Act. |
Delegations The Audit, Risk and Finance Committee has the following delegations to consider the 2022/23 carry forwards. Areas of Responsibility: · Council’s financial performance Powers to Recommend: · All other matters within the areas of responsibility or any other matters referred to it by Council |