Terms of Reference
Responsibilities
The purpose of the Committee is to:
(a) control and review
expenditure across the Auckland Council Group to improve value for money
(b) monitor the overall
financial management and performance of the council parent organisation and
Auckland Council Group
(c) make financial
decisions required outside of the annual budgeting processes
Key responsibilities include:
·
Advising and
supporting the mayor on the development of the Long Term Plan (LTP) and Annual
Plan (AP) for consideration by the Governing Body including:
o
Local Board
agreements
o
Financial policy
related to the LTP and AP
o
Setting of rates
o
Preparation of the
consultation documentation and supporting information, and the consultation
process, for the LTP and AP
·
Monitoring the
operational and capital expenditure of the council parent organisation and
Auckland Council Group, and inquiring into any material discrepancies from
planned expenditure
·
Monitoring the
financial and non-financial performance targets, key performance indicators, and other
measures of the council
parent organisation and each Council Controlled Organisation (CCO) to
inform the Committee’s judgement about the performance of each
organisation
·
Advising the mayor
on the content of the annual Letters of Expectations (LoE) to CCOs
·
Exercising
relevant powers under Schedule 8 of the Local Government Act 2002, which relate
to the Statements of Intent of CCOs
·
Exercising Auckland
Council’s powers as a shareholder or given under a trust deed, including
but not limited to modification of constitutions and/or trust deeds, granting
shareholder approval of major transactions where required, exempting CCOs, and
approving policies relating to CCO and CO governance
·
Approving the
financial policy of the Council parent organisation
·
Overseeing and
making decisions relating to an ongoing programme of service delivery reviews,
as required under section17A of the Local Government Act 2002
·
Establishing and
managing a structured approach to the approval of non-budgeted expenditure
(including grants, loans or guarantees) that reinforces value for money and an
expectation of tight expenditure control
·
Write-offs
·
Acquisition and
disposal of property, in accordance with the long term plan
·
Recommending the
Annual Report to the Governing Body
Powers
(a) All powers necessary to
perform the committee’s responsibilities, including:
a. approval of a
submission to an external body
b. establishment of
working parties or steering groups.
(b) The committee has the powers
to perform the responsibilities of another committee, where it is necessary to
make a decision prior to the next meeting of that other committee.
(c) The committee does not
have:
a. the power to
establish subcommittees
b. powers that the
Governing Body cannot delegate or has retained to itself (section 2).
Exclusion of the public – who
needs to leave the meeting
Members of the public
All members of the public must leave the
meeting when the public are excluded unless a resolution is passed permitting a
person to remain because their knowledge will assist the meeting.
Those who are not members of the public
General principles
·
Access to confidential information is managed on a “need to
know” basis where access to the information is required in order for a
person to perform their role.
·
Those who are not members of the meeting (see list below) must
leave unless it is necessary for them to remain and hear the debate in order to
perform their role.
·
Those who need to be present for one confidential item can remain
only for that item and must leave the room for any other confidential items.
·
In any case of doubt, the ruling of the chairperson is final.
Members of the meeting
·
The members of the meeting remain (all Governing Body members if
the meeting is a Governing Body meeting; all members of the committee if the
meeting is a committee meeting).
·
However, standing orders require that a councillor who has a
pecuniary conflict of interest leave the room.
·
All councillors have the right to attend any meeting of a
committee and councillors who are not members of a committee may remain,
subject to any limitations in standing orders.
Independent Māori Statutory Board
·
Members of the Independent Māori
Statutory Board who are appointed members of the committee remain.
·
Independent Māori Statutory Board
members and staff remain if this is necessary in order for them to perform
their role.
Staff
·
All staff supporting the meeting (administrative, senior
management) remain.
·
Other staff who need to because of their role may remain.
Local Board members
·
Local Board members who need to hear the matter being discussed
in order to perform their role may remain. This will usually be if the
matter affects, or is relevant to, a particular Local Board area.
Council Controlled Organisations
·
Representatives of a Council Controlled Organisation can remain
only if required to for discussion of a matter relevant to the Council
Controlled Organisation.
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Finance and
Performance Committee
20 March 2019
|
|
Auckland
Council Group and Auckland Council quarterly performance reports to 31 December
2018
File No.: CP2019/02762
Te take mō te
pūrongo
Purpose of the report
1. To
provide an update on the financial and non-financial performance for the
Auckland Council Group against the 10-year Budget for the six months to 31
December 2018.
Whakarāpopototanga matua
Executive summary
2. The
10-year Budget 2018-2028 was adopted in June 2018. The budget included a
$26 billion investment programme to address growth pressure on transport,
water, environment and community infrastructure. It also included additional
operating budgets to address areas such as the natural environment.
3. This
report provides an update on the performance against the 10-year Budget for the
first six months from 1 July 2018 to 31 December 2018. It covers progress at a
group level, and across the Auckland Council and the Council-Controlled
Organisations (CCOs).
4. For
the six months, $832 million in capital investment was delivered across the
Auckland Council Group (Group). An increase of $73 million when compared to the
same period last year.
5. The
Group had strong operating performance, with net direct costs $38 million
favourable against budget. Revenue was $17 million above budget primarily due
to higher water and consenting volumes. Expenditure was $21 million favourable
against budget primarily due to lower employee benefits in Auckland Council.
6. As
at 31 December 2018, full-time equivalent staff (FTE) was up 393 from 30 June
2018. This was driven from increased staffing in regulatory services required
to meet consenting demands and seasonal workers in community services such as
life-guards.
7. Group
net debt was $8.3 billion and is on track to be under the year-end budget of
$9.0 billion. Over the six months net debt increased by $63 million compared to
an increase in total assets of $938 million.
8. The
credit rating remains stable at AA/Aa2 from Standards and Poor’s and
Moody’s.
9. Attachment
A provides more detail on the performance, with a section outlining the
performance at a Group level including cross-organisational initiatives such as
the 36th America’s Cup, the City Centre Programme and
Māori Outcomes. It also includes a section on each CCO and the Auckland
Council. CCO board members and the respective senior management will attend the
meeting to present their results.
10. Attachment
B is a copy of the statutory accounts for the six months to 31 December 2018
which were released to the New Zealand Stock Exchange (NZX) on 28 March 2019.
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Ngā tūtohunga
Recommendation/s
That the Finance and
Performance Committee:
a) receive
the Auckland Council Group Quarterly Performance Report for the period ending
31 December 2018 which includes the Auckland Council and substantive
Council-Controlled Organisations.
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Horopaki
Context
11. The
10-year Budget 2018-2028 was adopted in June 2018. It included a record capital
investment of $26 billion across key infrastructure to support the growth
pressures facing Auckland.
12. It also
included new revenue sources such as the Regional Fuel Tax and new targeted
rates to support the funding of the investment programme.
13. The
results from 1 July 2018 through to 31 December 2018 are the first six months
against the 10-year Budget.
14. On 28
February, the statutory results for that period were released to the NZX with
commentary against prior periods.
15. At the 20
March 2019 Finance and Performance Committee, performance information at a
group level and for each council organisation is presented by senior management
and board members.
Change to the reporting format
16. In line
with current reporting obligations it is the responsibility of the Auckland
Council management and the board of each CCO to keep the committee informed of
key risks and issues, and the status of their operating and financial
performance.
17. The quarterly
reports provide an update on strategic issues, achievements, risks and key
projects approved through the 10-year budget.
18. A pilot
with a new approach to quarterly reporting was presented and well-received at
this committee on the 14 November 2018. The aim was to improve the quality and
consistency of performance reporting for all organisations within the group.
The new report provides a structured and concise design for elected members. It
also provides greater alignment and enables clearer accountability with
reporting on key 10-year Budget initiatives.
19. Since the
November meeting staff have engaged across Auckland Council and the respective
CCOs to relay the committee’s views and included their feedback in this
new template for the quarter two results.
20. This new
reporting approach found as attachment A, covers the following seven key
sections:
· Auckland
Council Group
· Panuku
Development Auckland (Panuku)
· Auckland
Tourism, Events and Economic Development Limited (ATEED)
· Regional
Facilities Auckland Limited (RFA)
· Watercare
Services Limited (Watercare)
· Auckland
Transport (AT)
· Auckland
Council.
21. Attachment
B is the Auckland Council Group Statutory Financial Report Summary.
Tātaritanga me ngā
tohutohu
Analysis and advice
Capital investment
22. There has
been solid progress on capital investment with spend of $832 million compared
to prior period spend of $759 million. This was up 9.6 per cent or $73 million.
23. Against
the $965 million six-month budget, 86 per cent of the spend was delivered.
24. For the
six months, the following are the key highlights:
· Work
was underway to deliver the infrastructure to host the 36th
America’s Cup.
· Construction
work commenced in late December for Quay Street enhancements.
· A
key milestone has been achieved with the first-floor structures completed on
the new 4 level, 40-unit Haumaru housing development.
· Strong
progress on delivery on Auckland Transport’s active mode programme with
Seabrook Avenue (links to New Lynn), Ian McKinnon Drive and Northcote cycleways
all opened in the last quarter.
25. Some
areas are tracking behind budget:
· Watercare
has only delivered 75 per cent of their budget mainly due to project
reprioritisations.
· RFA
has had delays in the Aotea Refurbishment.
26. Capital
grants were $82 million behind budget. This was due to timing from New Zealand
Transport Agency capital subsidies ($57 million) and government contributions
for the 36th America’s Cup ($25 million) now expected in
2019/2020.
Group Balance Sheet
27. Net
borrowing (after cash on hand) for the Group increased from 30 June 2018 by
$63 million to $8,285 million.
28. Total
assets increased from $51,462 million at 30 June 2018 to $52,400 million as at
31 December, an increase of $938 million.
29. Net debt
is on track to be under the year-end budget of $9,041 million for this
financial year.
30. There is
currently $1.2 billion of debt headroom against the internal debt to revenue
ceiling of 265 per cent. This headroom is projected to be fully utilised over
the next couple of years as the Group continues to progress delivery of its $26
billion 10-year capital investment programme.
Operating performance
31. Performance
on net direct expenditure (direct operating costs less direct operating
revenue) has been strong. The Group was $38 million favourable against budget. This was due to:
· $17 million increase in revenue primarily from NZTA operating
grants, higher water and waste water volumes, resource consent income, rentals
and other sundry income
· $14 million under budget in employee benefits primarily in Auckland
Council and POAL
· $7 million under budget in other direct operating expenditure
primarily due to accounting re-classification of revenue and employee costs in
RFA.
32. Outside of core operating costs, notable
items include:
· A $63 million increase in weather-tightness provisions.
· Higher than expected vested asset income at $239 million for the six
months to date.
Savings
33. The
10-year Budget includes a $62 million savings target over the first three years
for Auckland Council. This equates to more than $560 million over the ten
years.
34. Auckland
Council is on track to deliver the 2018/2019 target of $23 million.
35. The
savings are being delivered through:
· procurement
– reducing contract spend with third parties through negotiating better
terms for the council.
· organisational
design – implementing structures that remove duplication and leverage
capability and capacity more efficiently.
· technology
– leveraging existing investments for better outcomes or implementing new
tools that create efficiencies such as automation.
· increasing
non-rates revenue – identifying new or growing existing revenue streams.
· prudent
financial management – a strong focus on costs through a culture of
questioning and challenging all expenditure, managing spend against budgets and
applying controls around activities such as travel and recruitment.
· Value
for Money – reviewing the cost effectiveness of our services.
Full-time Equivalent Employees
36. Group FTE was 10,651 at 31 December 2018. This is an increase of 393
FTE from 30 June 2018.
37. The increase was primarily within Auckland Council (334 FTE
increase) due to:
· Regulatory Services (110) – The increase was to support the
level of building consenting volumes.
· Community Services (41) – The increase was due to seasonal
workers across facilities such as pools.
· Infrastructure and Environmental Services (62) – Additional
FTE to deliver on increased spend in the targeted rate funded Natural
Environment and Water Quality programmes.
Other information
38. The NZX has finalised its updated market
structure and New Listing Rules, completing the first holistic review of the
rule set in 15 years. Council transitioned to the New Listing Rules on 1
February 2019.
39. Standard & Poor’s have recently announced a review of the
local government credit rating methodology. The timing and any potential
impacts are uncertain at this stage.
Ngā whakaaweawe me
ngā tirohanga a te rōpū Kaunihera
Council group impacts and views
40. The
report incorporates the performance reporting for Auckland Council and the
CCOs.
41. Each
report is approved by the respective management team and board.
Ngā whakaaweawe
ā-rohe me ngā tirohanga a te poari ā-rohe
Local impacts and local board views
42. Except
for the update on progress for One Local Initiatives, the report does not
report at a local level.
43. Each
local board receives reports specific to their area. Accordingly, the views of
local boards have not been sought.
Tauākī whakaaweawe
Māori
Māori impact statement
44. The
attachment includes reporting against Māori outcomes at an organisational
and group level.
Ngā ritenga
ā-pūtea
Financial implications
45. Detailed
financial commentary is included in the analysis section of the report and
within the attachments.
Ngā raru tūpono me
ngā whakamaurutanga
Risks and mitigations
46. Any risks
and mitigations are highlighted in the attachment for each organisation.
Ngā koringa ā-muri
Next steps
47. The next
10-year budget progress update covering the period 1 July 2018 to 31 March 2019
will be provided to the Finance and Performance Committee at the 19 June 2019
meeting.
Ngā tāpirihanga
Attachments
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No.
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Title
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Page
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a⇩ 
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Group Quarterly Performance Pack 31 December 2018
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15
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b⇩ 
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Auckland Council Group Interim Report 31 December 2018
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91
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Ngā kaihaina
Signatories
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Authors
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Ross Tucker - General Manager, Financial Strategy and
Planning
Robert Irvine - Head of Group Financial Planning
Kevin Ramsay - General Manager Corporate Finance and
Property
Francis Caetano - Group Financial Controller
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Authoriser
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Matthew Walker - Group Chief Financial Officer
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