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Description automatically generatedNotice of the Ordinary meeting of

Audit, Risk and Finance Committee

Te Kōmiti Kaute / Tūraru / Pūtea

Agenda | Rārangi take

A rock in the water

Description automatically generated

 

Date:                      Wednesday 20 November 2024

Time:                      9.00a.m.

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

 

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

 

governance.advisers@ncc.govt.nz

www.nelson.govt.nz

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

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

20 November 2024

 

Page No.

 

Karakia and Mihi Timatanga

1.       Apologies

2.       Confirmation of Order of Business

3.       Interests

4.       Public Forum

5.       Confirmation of Minutes

 

6.       Audit New Zealand report on the Long Term Plan 2024-2034 10 - 22

 

7.       Quarterly Risk Report - 30 Sept 2024                               23 - 46

 

8.       Quarterly Internal Audit Report - 30 Sept 2024                  47 - 49

 

9.       Quarterly Finance Report to 30 September 2024                50 - 71

 

10.     Public Transport Services Contract - Working Group Review 72 - 88

11.     Exclusion of the Public

 

Karakia Whakamutanga

 

 


 

Procedural Items

1.       Apologies

Nil

2.       Confirmation of Order of Business

3.       Interests

3.1      Updates to the Interests Register

3.2      Identify any conflicts of interest in the agenda

4.       Public Forum

5.       Confirmation of Minutes

5.1      18 September 2024                                                                        5 - 9

Document number M20754

Recommendation

That the Audit, Risk and Finance Committee

1.    Confirms the minutes of the meeting of the Audit, Risk and Finance Committee, held on 18 September 2024, as a true and correct record.

 


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 18 September 2024, commencing at 9.05a.m.

 

Present:              Ms C Taylor (Chairperson), His Worship the Mayor N Smith, Councillors M Courtney, R Sanson and Mr L McKenzie

In Attendance:    Acting Chief Executive (A Louverdis), Group Manager Environmental Management (M Bishop), Group Manager Corporate Services (N Harrison), Group Manager Strategy and Communications (N McDonald), Team Leader Governance (R Byrne) and Governance Adviser (A Andrews)

Apologies :          Deputy Mayor R O'Neill-Stevens 

 

Karakia and Mihi Timatanga

1.       Apologies

Resolved ARF/2024/046

 

That the Audit, Risk and Finance Committee

1.    Receives and accepts the apologies from Deputy Mayor O’Neill Stevens for attendance and Mr McKenzie for lateness.

Courtney/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.       Confirmation of Minutes

4.1      14 August 2024

Document number M20712, agenda pages 7 - 13 refer.

Resolved ARF/2024/047

 

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.

Sanson/His Worship the Mayor                                                      Carried

5.       Draft Annual Report 2023/24

Document number R28614, agenda pages 14 - 194 refer.

Group Manager Strategy & Communications, Nicky McDonald, Group Manager Corporate Services, Nikki Harrison, Manager Strategy, Jessica Ettridge and Manager Finance, Prabath Jayawardana took the report as read. They answered questions on performance measures, feedback from Audit NZ, development contributions, dividend timing, external funding accrual, Waka Kotahi funding and key issues. 

Resolved ARF/2024/048

 

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.

Sanson/Courtney                                                                          Carried

 

6.       Carry Forwards - 2023/24 for Approval

Document number R28796, agenda pages 195 - 207 refer.

Group Manager Infrastructure, Alec Louverdis and Team Leader Accountants, Alistair Roper took the report as read. They answered questions on scale of the funds being carried forward in comparison to the previous financial year, comparison between storm recovery work and carried forward budgets, overestimating budgets and carrying forward underspent budgets, Better Off funding, Water Done Well funding and progress of the project and Three Waters staffing. 

Resolved ARF/2024/049

 

That the Audit, Risk and Finance Committee

1.    Receives the report Carry Forwards - 2023/24 for Approval (R28796) and its Attachments.

His Worship the Mayor/Courtney                                                   Carried

 

Recommendation to Council ARF/2024/050

 

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.

His Worship the Mayor/Courtney                                                   Carried

 

7.       Exclusion of the Public

Resolved ARF/2024/051

 

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:

His Worship the Mayor/Sanson                                                        Carried

 

Item

General subject of each matter to be considered

Reason for passing this resolution in relation to each matter

Particular interests protected (where applicable)

1

Audit, Risk and Finance 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

The meeting went into confidential session at 10.06a.m. and resumed in public session at 10.07a.m.

 

The only business transacted in confidential session was to confirm the minutes. In accordance with the Local Government Official Information and Meetings Act, no reason for withholding this information from the public exists, therefore this business has been recorded in the open minutes.

 

Resolved ARF/2024/052

 

That the Audit, Risk and Finance Committee

1.    Confirms the minutes of part of the meeting of the Audit, Risk and Finance Committee, held with the public excluded on 14 August 2024, as a true and correct record.

His Worship the Mayor/Courtney                                                   Carried

Karakia Whakamutanga

 

There being no further business the meeting ended at 10.07a.m.

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

Resolution

 

 

 

 

 


 

Item 6: Audit New Zealand report on the Long Term Plan 2024-2034

 

Audit, Risk and Finance Committee

20 November 2024

 

Report Title:             Audit New Zealand report on the Long Term Plan 2024-2034

Report Author:         Louis Dalzell - Senior Policy Adviser

Report Authoriser:   Nikki Harrison - Group Manager Corporate Services

Report Number:       R28605

 

 

1.       Purpose of Report

1.1      To provide the Committee with Audit New Zealand’s report on the audit of the Long Term Plan 2024-2034.

2.       Recommendation

 

That the Audit, Risk and Finance Committee

1.    Receives the report Audit New Zealand report on the Long Term Plan 2024-2034 (R28605) and its attachment; and

2.    Notes the areas of audit emphasis and Council’s response .

 

3.       Background

3.1      Audit New Zealand conducted an audit of the Long Term Plan 2024-2034, issuing an unmodified opinion before Council adopted the Plan on 27 June 2024. A report outlining the audit findings (Attachment 1) is now presented to the Committee for information. This report supplements the audit report on the Long Term Plan 2024-2034 Consultation Document presented on 5 June 2024.

3.2      During the audit a few items were given deeper consideration because of the impact they could have on delivery of the Long Term Plan (pages 7-8 of Attachment 1):

3.2.1   NZ Transport Agency Waka Kotahi funding assumption (Audit accepted Council’s approach on the basis of materiality).

3.2.2   Delivery of capital programme assumption (Audit concluded that the capital programme remains achievable).

3.2.3   Impact of the growth assumption (Audit reviewed for compliance with the National Policy Statement on Urban Development).

3.3      There was also further discussion about one Level of Service performance measure:

3.3.1   Audit recommended Council’s Transport Activity Management Plan performance measure on the numbers of people who walk or bike to work and school should be measured more frequently than the five-yearly census. Council’s management comment explained why this was not practical or affordable, and outlined the other data collected that allows Council insight into how the measure is tracking on a more regular basis.

3.4      The report concluded that Council had a good process and sound controls in place for developing the Plan, and that the underlying information was reasonable. It also noted that it was a significant achievement to adopt the Plan within statutory deadlines in the challenging and changing environment faced by Council and the local government sector.

 

Attachments

Attachment 1:   Report to the Council on the audit of Nelson City Council’s long-term plan for the period 1 July 2024 to 30 June 2034  

 


Item 6: Audit New Zealand report on the Long Term Plan 2024-2034: Attachment 1













 

Item 7: Quarterly Risk Report - 30 Sept 2024

 

Audit, Risk and Finance Committee

20 November 2024

 

Report Title:             Quarterly Risk Report - 30 Sept 2024

Report Author:         Chris Logan - Audit and Risk Analyst

Report Authoriser:   Nikki Harrison - Group Manager Corporate Services

Report Number:       R28839

 

 

1.       Purpose of Report

1.1      To provide information to the Audit, Risk and Finance Committee on the organisational and group risks through to the end of the first quarter of 2024/25.

2.       Recommendation

 

That the Audit, Risk and Finance Committee

1.    Receives the report Quarterly Risk Report - 30 Sept 2024 (R28839) and its attachment.

 

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      R1 - Central-government-led-reforms (Owner: Chief Executive). Risks relating to deferral of and uncertainty around reforms remain. The risk rating remains at High.

4.3      R2 - Lifeline services failure (Owner: Group Manager Infrastructure). Flood-recovery work is ongoing. The risk rating remains at High.

4.4      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.

4.5      R4 - Loss of service performance from ineffective contracts and contract management (Owner: Chief Executive). The contract management improvement program continues to be monitored quarterly by the internal Procurement Steering Committee. The risk rating remains at Medium.

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

4.7      R6 - Council work compromised by loss of and difficulties in replacing skilled staff (Owner: Manager People and Capability). Turnover is continuing to reduce throughout 2024 and no longstanding critical vacancies. Training, inducting and establishing relationships within the organisation is now a key focus to ensure that new talent is retained and can thrive. The organisational risk rating remains at Medium as having the right resourcing in place is critical to our service delivery.

4.8      R7 - Legal Risk (Owner: Group Manager Strategy and Communications). Other 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.

4.9      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:  Construction downturn in subdivision work has resulting in more tenders on some Council works that has realised competitive pricing in some cases.

5.4      Community Services Group:

5.4.1   Risks associated with two of three Council-owned campgrounds (one 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 have been investigated, a remediation option has been approved by Council, funding has been secured from Ministry for Environment, and work to remove the contaminated material is well underway.

5.5      Environmental Management Group: Some planning positions remain vacant. Workload stress continues for both planning teams due to complexity of work and 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: No new emerging risks to report at this time.

6.       Insurance renewal update

6.1      Below-ground-essential-infrastructure insurance was renewed from 1 November 2024 for $1.36M (prior year $1.66M). The bulk of this ‘savings’ is expected to be used to increase the (sub)limit to 20% of insured values (last year 9%), which equates to a maximum pay-out of $160M. To put this into context:

6.1.1   NCC left the LAPP scheme in 2017, as cover of approximately 7% of insured values was deemed inadequate.

6.1.2   When NCC joined the current (South Island Collective) scheme in 2017, cover was 23% of insured values.

6.1.3   Since 2017, asset values have increased by a factor of 2.7 yet the (sub)limit has only increased by a factor of 1.1.

6.1.4   Aon & Tonkin +Taylor 2015 scenario analysis indicated a 1 in 500 year earthquake return damage ratio of between 14% and 26%.

6.1.5   The Christchurch earthquake series, saw percent of network damaged ranging from 3% (drinking water reticulation), to 30% (waste water reticulation including pipelining)[1].

 

Attachments

Attachment 1:   1Q25 key organisational risks for ARF  


Item 7: Quarterly Risk Report - 30 Sept 2024: Attachment 1























 

Item 8: Quarterly Internal Audit Report - 30 Sept 2024

 

Audit, Risk and Finance Committee

20 November 2024

 

Report Title:             Quarterly Internal Audit Report - 30 Sept 2024

Report Author:         Chris Logan - Audit and Risk Analyst

Report Authoriser:   Nikki Harrison - Group Manager Corporate Services

Report Number:       R28840

 

 

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 first quarter of 2024/25.

2.       Recommendation

 

That the Audit, Risk and Finance Committee

1.    Receives the report Quarterly Internal Audit Report - 30 Sept 2024 (R28840) and its attachment.

 

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 2024-25 Internal Audit Plan (the Plan) was approved by the Council on 6 June 2024.

4.       Overview of Progress on the 2024/25 Internal Audit Plan

4.1      An audit of Infrastructure physical works procurement was completed during the quarter, resulting in two Low recommendations.

4.2      Of the remaining audits:

4.2.1   Two are in progress

4.2.2   One is yet to commence, and

4.2.3   One is yet to be defined        

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

5.1      The Building team passed their International Accreditation New Zealand (IANZ) June 2024 audit. The next routine audit will be in two years’ time.

5.2      Council had a security audit through SAM for Compliance and ALGIM in August.  The auditor assessed our cybersecurity risk mitigation effectiveness. The results show an improvement in a number of areas when compared against the framework conformance levels observed in October 2023. A comparison of the Nelson City Council assessment results against the ALGIM Cybersecurity Programme national benchmark for August 2024 shows that the Council continues to have conformance levels generally above the current benchmark. The only area where Nelson City Council is behind the national benchmark is with the area of anomaly detection and the primary means of improvement in this area is to implement a Security Information and Event Management system, and officers continue to investigate finding an affordable option for this.

 

Attachments

Attachment 1:   Annual Audit Plan Progress - 30 Sep 2024  

 


Item 8: Quarterly Internal Audit Report - 30 Sept 2024: Attachment 1



 

Item 9: Quarterly Finance Report to 30 September 2024

 

Audit, Risk and Finance Committee

20 November 2024

 

Report Title:             Quarterly Finance Report to 30 September 2024

Report Author:         Prabath Jayawardana - Manager Finance

Report Authoriser:   Nikki Harrison - Group Manager Corporate Services

Report Number:       R28871

 

 

1.       Purpose of Report

1.1      To inform the Committee of the financial results for Council for the three months ended 30 September 2024, and to highlight any material variations.

2.       Recommendation

 

That the Audit, Risk and Finance Committee

1.    Receives the report Quarterly Finance Report to 30 September 2024 (R28871).

 

3.       Background

3.1      The whole of Council financial reporting provided to this Committee focuses on the three-month performance (1 July 2024 to 30 September 2024) compared with 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 2024/25, 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 three months ending 30 September 2024, the Council’s draft deficit is $3.8m against a budgeted deficit of $4.6m ($0.8m favourable to budget), mainly due to reasons explained from 4.3 below.

4.2      Profit and Loss

Full Year Forecast vs. Operating Budget Net surplus/(deficit)

4.3      The Full Year Forecast is less than the Operating Budget by $3.8 million. There are increases and decreases in different areas but the significant changes are:

4.3.1   Subsidies and Grants - Opex: Tahunanui Sawdust Risk Mitigation Grant. The forecast has been increased by $0.7m to reflect the agreed Government Funding from the newly opened Contaminated Sites and Vulnerable Landfills Fund. The grant amounts to 75% of the total expected cleanup cost of $4.59m.

4.3.2   Subsidies and Grants – Capex: Forecast has been decreased by $4.5m in Subsidised Roading to reflect the reduced funding from NZTA Waka Kotahi however the operating budget has not been adjusted as this requires Council approval. This is partially offset by unbudgeted $1.6m of Maitai Flood Management Grants (RIF) with $0.7m in Stormwater and $0.9m in Flood Protection.

4.3.3   Finance Revenue: includes an increase to forecast of $1.3m due to additional pre-funding of future debt maturities (which partially offsets the higher than forecast Finance Costs below).

4.3.4   The forecast for Finance Costs has increased by ($2.0m) due in part to prefunding of debt (see Finance Revenue), and in part to higher than budgeted debt levels. Opening debt levels had some permanent differences and some timing differences due to a delay in some funding for weather event related costs.

4.3.5   Other Expenses includes an overall increase to forecast of ($0.6m) however there are many increases and decreases spread over many different areas with no one variance over $0.15m.

Operating Budget vs. Annual Plan Budget Net surplus/(deficit)

4.4      The Full Year Operating Budget is less than the Annual Plan Budget by $3.6 million. There are increases and decreases in different areas but the significant changes are:

4.4.1   Subsidies and Grants – Opex: Includes an increase in operating budget of $0.6m for Operating Grants carried forward from 2023/24 to align with timing of costs of which $0.5m was 3 Waters Better off funding (timing difference).

4.4.2   Subsidies and Grants – Capex (Corporate): Includes a ($4.1m) reduction in operating budget, as the Crown capital funding for slip properties was carried back to 2023/24 during the Annual Report audit (timing).

4.4.3   Subsidies and Grants – Capex (Transport):  Includes a total reduction in operating budget of $1.3m in public transport for the Millers Acre bus interchange. NZTA Waka Kotahi funding for the next three years, through the National Land Transport Programme, was confirmed after the LTP was signed off. Budgets have been reduced to match the reduced income from NZTA Waka Kotahi as the Council decided to proceed the project without NZTA Waka Kotahi funding at 10 October 2024 Council meeting (R28780).

4.4.4   Personnel Costs and other expenses include a budget re-allocation of $2.1m from other expenses to Personnel costs with Regulatory Services functions coming in house (reclassification).

4.5      Revenue

4.6      Rates income is in-line with budget.

4.7      Subsidies and Grants - OPEX income is greater than budget by $555,000. Attachment 1 includes a detailed analysis of this variance.

4.8      Subsidies and Grants - CAPEX income is greater than budget by $877,000. Attachment 1 includes a detailed analysis of this variance.

4.9      Fees and Charges income is in-line with budget.

4.10    Other Revenue is less than budget by $111,000.

4.11    Development Contributions is greater than budget by $378,000.

4.12    Finance Revenue is greater than budget by $468,000. This is due to additional pre-funding of future debt maturities (see partial offset in Finance costs below).

4.13    Other gains/(losses) is in-line with budget.

4.14    Expenses

4.15    Personnel costs are greater than budget by $171,000. There have been savings in personnel costs of $556,000 across different activities however the YTD vacancy provision in the budget was high at 9% ($727,000).

4.16    Finance costs are greater than budget by $914,000. This increase in interest costs is due to additional pre-funding of debt (which has a partial offset of $468,000 from Finance Revenue). The remaining is due to higher than budgeted debt levels as addressed in 4.3.4 above, partially offset by lower interest rates than budgeted for.

4.17    Depreciation and amortisation costs are greater than budget by $121,000. Depreciation has been based on the 2023/24 asset valuations, which saw large increases.  This resulted in a higher depreciation expense than planned.

4.18    Weather Event costs are in-line with budget.

4.19    Other expenses are in-line with budget. There are variances within, however none are greater/less than budget by $0.5m.

5.       Capital Expenditure

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

5.2      As at 30 September 2024, capital expenditure was $16.9m which is $1.9m under the YTD Operating Budget of $18.8m. Transport was the main contributor being less than budget by ($0.5m) which generates less CAPEX Subsidies and Grants as discussed above.

5.3      The operating budget includes the carry forwards from 2023/24 which were approved at the October 2024 Council Meeting.

5.4      A high-level breakdown by activity:

 

6.       Cash Flow Management

6.1      Net External Borrowings

6.2      As at 30 September 2024, there were net external borrowings of $238.0m. This has increased from 30 June 2024 by $15.2m. The full-year Annual Plan budget is $252.3m.

6.3      This $15.2m increase in net external borrowings from 30 June 2024 is due to: a) to fund the August 2022 weather event ($0.09m expenditure), b) to fund capital expenditure during the year ($6.2m net of funded depreciation) c) the balance is due to timing of cash inflows and outflows being different than planned.

6.4      Attachment 2 includes the statement of financial position (Balance sheet), Debtors graph and compliance with the Treasury policy as at 30 September 2024.

6.5      The net debt figure in the treasury compliance report (Attachment 2) is different from above 6.2 mainly due to LGFA borrowing notes not being included in the PWC tool.

7.       Rates

7.1      City wide Revaluation Release to Ratepayers

7.1.1   Council is required to revalue property values for rating purposes every three years and the revaluation is due this year as at 1 September 2024.

7.1.2   Under the Rating Valuation legislation, the Valuer General’s Office is responsible for scheduling and approving revaluations. Council’s Valuation Service Provider (Quotable Value) are currently working on the new 2024 property values, and these are due to be submitted to Office of the Valuer General for auditing in March 2025.

7.1.3   Before the release of the new property values to our ratepayers, Quotable Value will provide Council an overview of the changes in values from our previous revaluation that was dated 1 September 2021 to the current 2024 property values.

7.2      Rates Aging

7.3      Total rates outstanding as at 30 September 2024 were $1.5m which includes $1.2m for Instalment one for the current rating year. Below are the rates outstanding at the end of each rating quarter.

Total Rates Outstanding

           YTD Rates at 31 October 2024

7.4      Rates outstanding as of 1 July 2024 were $797,000 and this amount has been reduced to $264,000 as of 31 October 2024.

7.5      As at 31 October, rates outstanding for Instalment one (2024/25) are $534,000 and this represents 1.88% of the total rates that were levied ($28,556,000) in July 2024.

8.       Project Health

8.1      Attachment 3 summarises the health of projects across Council. The table gives a red, amber or green rating for quality, time and budget factors.

8.2      A number of large projects have progressed well this quarter with many going to tender and strong interest from contractors due to a quiet market.

8.3      Paru Paru Road Pump Station Early Contractor Involvement (ECI), St Vincent Street Culvert Replacement ECI and the Bridge to Better ECI have been tendered but not yet awarded.

8.4      Atawhai Rising Main Design Professional Services has also been tendered and negotiations are underway with a preferred tenderer.

8.5      Bridge to Better projects, Halifax St – Collingwood St Watermain Upgrade and Bridge Street East Watermain Upgrade have also been tendered but not yet awarded.

9.       Performance Measures

9.1      Council reports on 40 non-financial performance measures across its activity areas, as set out in the Long Term Plan 2024-34. These are generally evaluated as ‘on track, not measured yet and not on track’ during the first three quarters of the year, however, in this instance, one performance measure has already been achieved.

9.2      For quarter one 2024/25, 26 are on track, 12 are not measured yet, 1 is not on track and 1 is achieved. The percentages are measured as 65%, 30%, 2.5% and 2.5% respectively.

9.3      Attachment 4 details Council’s performance measures so far across all its activities.

 

 

 

Attachments

Attachment 1:   1857728953-2238 Appendix for Council Reports for Sep-24 Subsidies and Grants

Attachment 2:   1857728953-2242 Appendix for Council Reports for Sep-24 Financial Info

Attachment 3:   1530519604-15548 - Project Health Summary

Attachment 4:   839498445-20010 - Performance Measure Table Q1 2024 - 2025  

 


Item 9: Quarterly Finance Report to 30 September 2024: Attachment 1



Item 9: Quarterly Finance Report to 30 September 2024: Attachment 2







Item 9: Quarterly Finance Report to 30 September 2024: Attachment 3



Item 9: Quarterly Finance Report to 30 September 2024: Attachment 4









 

Item 10: Public Transport Services Contract - Working Group Review

 

Audit, Risk and Finance Committee

20 November 2024

 

Report Title:             Public Transport Services Contract - Working Group Review

Report Author:         Nicky McDonald - Group Manager Strategy and Communications

Report Authoriser:   Nicky McDonald - Group Manager Strategy and Communications

Report Number:       R28881

 

 

1.       Purpose of Report

1.1      To consider the report of the Working Group looking into the public transport services project.

2.       Summary

2.1      The June 2024 meeting of the Audit, Risk and Finance Committee, concerned by the $2million project overspend, initiated a review of the governance, management and oversight of the public transport services contract. The Terms of Reference for the Working Group are in Attachment 1. The report that has been prepared by the Working Group tasked with looking into the matter is in Attachment 2.

3.       Recommendation

 

That the Audit, Risk and Finance Committee

1.    Receives the report Public Transport Services Contract - Working Group Review and its attachments; and

2.    Directs the Chief Executive to consider all the Public Transport Services Contract Working Group recommendations, but in particular the operational recommendations (as set out in 5.6.1 to 5.6.5 of report R28881), as part of the suite of changes to Council project management that will developed through the Shaping Our Future transformation project; and

3.    Refers the report of the Public Transport Services Contract Working Group to Council.

Recommendation to Council

That the Council

1.    Consider the recommendations from the Public Transport Services Contract Working Group relating to governance oversight of significant projects (as set out in 5.6.6 to 5.6.13 of report R28881) and have regard for them when undertaking joint activities with other councils/agencies and in any future review of governance arrangements; and

2.    Direct the Chief Executive to provide Tasman District Council with recommendations from the Public Transport Services Contract Working Group relating to governance oversight of significant projects (as set out in 5.6.6 to 5.6.13 of report R28881) for its consideration;

3.    Direct the Chief Executive to provide the Chair of the Joint Nelson Tasman Regional Transport Committee with a copy of the report of the Public Transport Services Contract Working Group for the information of the Committee.

 

4.       Background

4.1      At its 5 June 2024 meeting, the Audit, Risk and Finance Committee resolved as follows:

ARF/2024/026

1. Requests a review of the governance management and oversight of the eBus project with Terms of Reference to be determined by the Audit, Risk and Finance Chair Catherine Taylor, member Lindsay McKenzie and Councillor O'Neill-Stevens, with the intention of the review reporting back by December 2024.

4.2      A Working Group of the above Audit, Risk and Finance Committee members has prepared a report reviewing the public transport project. During development of the report the Group met with relevant Nelson City and Tasman District Council staff and with Councillor Stuart Bryant, Chair of the Joint Nelson Tasman Regional Transport Committee (RTC), and Christeen MacKenzie, a member of Tasman District Council’s Audit and Risk Committee. As part of these meetings the Working Group had a full and frank discussion with staff responsible for the project and heard how lessons had already been taken from their reflection on the project and would be applied in future.

4.3      The Working Group’s report of its findings is in Attachment 2.

5.       Discussion

5.1      The context for establishment of a Working Group was the concern expressed at the RTC in April 2024 about a $2million overspend on the public transport project and the project management that led to this being a funding fait accompli presented to the RTC. The Working Group considered the retendering and awarding of the contract for public transport, a contract that encompassed services in both council areas but that was negotiated and overseen by staff from Nelson City Council.  It focussed on lessons that could be learned from the process that are relevant to the Audit, Risk and Finance Committee’s mandate to monitor organisational risks.

Key Findings

5.2      The Working Group findings are detailed in full in Attachment 2 and summarised below along with all the resulting recommendations.

5.3      An early conclusion of the Working Group was that the lack of a business case contributed to problems in the project as did weaknesses in the project planning and risk identification. These issues were driven in large part by timing constraints which were not adjusted, despite the impact of the August 2022 severe weather event, and put the project team under extreme pressure.

5.4      Another finding of the review was that the unclear governance oversight meant there was not a straightforward reporting line for the project. The RTC did not have the mandate to provide the level of oversight needed for the project (eg no financial delegations), and did not meet frequently enough to realistically undertake that role.

5.5      Council elections during the development of the project saw changes in governance arrangements that added complexity to oversight of the project.

Recommendations

5.6      Following are the full set of recommendations from the Working Group developed as part of its investigation into the causes of problems in the public transport project.

5.6.1   Develop and use a purposeful business case template for significant project proposals and use a common template for joint council projects.

5.6.2   Develop and use a formal project planning template for significant complex project proposals and use a common template for joint council projects.

5.6.3   Develop and use a structured risk assessment and management approach for significant project proposals.

5.6.4   Involve an independent expert voice so that any pressures and biases that have the potential to influence officers can be managed.

5.6.5   Appoint a dedicated suitably experienced project manager to lead significant complex projects especially those that involve deliverables for the two councils jointly.

5.6.6   Assign governance oversight for significant projects to a relevant committee, subcommittee, taskforce or working party with an express obligation to do so in its terms of reference, with appropriate powers to act along with training for its members and support from an independent party to perform that oversight role.

5.6.7   Establish a formal reporting (to governance) regime for significant projects that ensures timely, accurate and transparent information is provided on, for example -

·      finances - budget, costs to date;

·      stage of completion/milestones;

·      estimated outturn cost;

·      health, safety and environment;

·      critical risks and their mitigation;

·      scope changes;

·      resourcing;

·      contractor performance;

·      contractual matters

5.6.8   Ensure that significant complex projects that are at critical stages are supported to be progressed during the pre and post-election periods and interregnum by, for example a project governance group being appointed to progress the work.

5.6.9   Ensure that committees, subcommittees, taskforces, and other reporting bodies that have responsibilities assigned to them are given the authority and support to     effectively carry out those responsibilities subject to appropriate reporting up    obligations.

5.6.10 Establish and agree a set of obligations on the lead council/administrator and reciprocal obligations on the other party in relation to joint projects and their delivery.

5.6.11 Review the level and any conditions on the exercising of officers’ delegations where the exercise of those delegations creates obligations (contractual, financial) on another council or entity.

5.6.12 Require prompt reporting by officers to governance, with a recommendation to         reset, when an approved budget is likely to be exceeded.

5.6.13 Evaluate and mitigate the risks associated with funding agreements and contract terms that are misaligned.

6.       Options

6.1      The Committee could make changes to the recommendations or decline to take action on the recommendations. However, the preferred option is to refer the report and recommendations to both councils for consideration and to direct the Chief Executive to consider implementation of the recommendations, via Council’s transformation project. As the recommendations have wider applicability than just one project they will be helpful to consider as standard approaches for more complex projects in future. They have the potential to help mitigate future risk to Council in the delivery of significant and complex projects.

 

7.       Conclusion

7.1      The Audit, Risk and Finance request for a review of the governance management and oversight of the public transport project has been fulfilled.

 

 

Attachments

Attachment 1:   Public Transport Working Group Terms of Reference

Attachment 2:   Public Transport Working Group Report  

 

Important considerations for decision making

Fit with Purpose of Local Government

Review of Council project management processes with a view to reducing risk contributes to community economic wellbeing.

Consistency with Community Outcomes and Council Policy

The decision in this report supports the following community outcomes:

Our infrastructure is efficient, resilient, cost effective and meets current and future needs

Our Council provides leadership and fosters partnerships, including with iwi, fosters a regional perspective, and encourages community engagement

Risk

The recommendations from the Working Group have the potential to reduce risk on future Council projects if included as part of standard practice.

Financial impact

There is no financial impact of the decision in this report. However, if Council implements the recommendations there will need to be allowance made within future project budgets to accommodate the extra requirements.

Degree of significance and level of engagement

This matter is of low significance because it deals with a review of a project that has now been implemented and there is no requirement for engagement.

Climate Impact

Improved project management offers an opportunity to better factor climate change risks and impacts into Council’s work programme. There is also an opportunity for climate change considerations to be included within any new templates implemented.

Inclusion of Māori in the decision making process

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

Delegations

The Audit, Risk and Finance Committee has the delegation for matters related to monitoring risk. 

 


Item 10: Public Transport Services Contract - Working Group Review: Attachment 1





Item 10: Public Transport Services Contract - Working Group Review: Attachment 2










Item 11: Exclusion of the Public

11.     Exclusion of the Public

Recommendation

That the Audit, Risk and Finance Committee

1.        Confirms, in accordance with sections 48(5) and 48(6) of the Local Government Official Information and Meetings Act 1987, that Executive Director at PricewaterhouseCoopers (PWC), Brett Johanson remain after the public has been excluded, for Item 3 of the Confidential agenda (PriceWaterhouseCoopers Treasury Presentation), as he has knowledge relating to xxxx that will assist the meeting.

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

Quarterly Health, Safety and Wellbeing Report to 30 September 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

2

Quarterly Debt Report - 30 September 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

3

PriceWaterhouseCoopers  Treasury Presentation

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)(h)

     To enable the local authority to carry out, without prejudice or disadvantage, commercial activities

4

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

 



[1] Figure 61 – The Value of SCIRT Report – in Full