Agenda of Appointments, Performance Review and Value for Money Committee

I hereby give notice that an ordinary meeting of the Appointments, Performance Review and Value for Money Committee will be held on:

Date:

Time:

Meeting Room:

Venue:

Thursday, 6 June 2019

9.30am

Room 1, Level 26
135 Albert St
Auckland

Komiti Tohu me te Arotake Tūranga Mahi, me te Rite o te Whiwhi ki Tā Tērā i Utu Ai /
Appointments, Performance Review and Value for Money Committee

OPEN AGENDA

MEMBERSHIP

Chairperson	Hon Phil Goff, CNZM, JP
Deputy Chairperson	Cr Hon Christine Fletcher, QSO
Members	Cr Josephine Bartley
	Cr Ross Clow
	Cr Chris Darby
	Cr Richard Hills
	Cr Penny Hulse
	Cr Desley Simpson, JP

Ex-officio	Deputy Mayor Cr Bill Cashmore
	IMSB Chair David Taipari

(Quorum 4 members)

Sandra Gordon

Senior Governance Advisor

29 May 2019

Contact Telephone: (09) 890 8150

Email: sandra.gordon@aucklandcouncil.govt.nz

Website: www.aucklandcouncil.govt.nz

Terms of Reference

Responsibilities

The Appointments and Performance Review Committee is established to:

1. Review the chief executive’s performance and to recommend to the Governing Body the terms and conditions of the CE’s employment including any performance agreement measures and annual remuneration.

2. Make appointments to Council-Controlled Organisations (CCOs), Council Organisations (COs) and exempt CCOs and COs.

3. Approve policies relating to the appointment of directors and trustees to CCOs and COs.

Powers

All powers necessary to perform the committee’s responsibilities.

Except:

(a) powers that the Governing Body cannot delegate or has retained to itself (section 2)

(b) where the committee’s responsibility is limited to making a recommendation only

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.

1 Apologies

At the close of the agenda no apologies had been received.

2 Declaration of Interest

Members are reminded of the need to be vigilant to stand aside from decision making when a conflict arises between their role as a member and any private or other external interest they might have.

3 Confirmation of Minutes

That the Appointments, Performance Review and Value for Money Committee:

a) confirm the ordinary minutes of its meeting, held on Wednesday, 1 May 2019, including the confidential section, as a true and correct record.

4 Petitions

At the close of the agenda no requests to present petitions had been received.

5 Public Input

Standing Order 7.7 provides for Public Input. Applications to speak must be made to the Governance Advisor, in writing, no later than one (1) clear working day prior to the meeting and must include the subject matter. The meeting Chairperson has the discretion to decline any application that does not meet the requirements of Standing Orders. A maximum of thirty (30) minutes is allocated to the period for public input with five (5) minutes speaking time for each speaker.

At the close of the agenda no requests for public input had been received.

6 Local Board Input

Standing Order 6.2 provides for Local Board Input. The Chairperson (or nominee of that Chairperson) is entitled to speak for up to five (5) minutes during this time. The Chairperson of the Local Board (or nominee of that Chairperson) shall wherever practical, give one (1) day’s notice of their wish to speak. The meeting Chairperson has the discretion to decline any application that does not meet the requirements of Standing Orders.

This right is in addition to the right under Standing Order 6.1 to speak to matters on the agenda.

At the close of the agenda no requests for local board input had been received.

7 Extraordinary Business

Section 46A(7) of the Local Government Official Information and Meetings Act 1987 (as amended) states:

“An item that is not on the agenda for a meeting may be dealt with at that meeting if-

(a) The local authority by resolution so decides; and

(b) The presiding member explains at the meeting, at a time when it is open to the public,-

(i) The reason why the item is not on the agenda; and

(ii) The reason why the discussion of the item cannot be delayed until a subsequent meeting.”

Section 46A(7A) of the Local Government Official Information and Meetings Act 1987 (as amended) states:

“Where an item is not on the agenda for a meeting,-

(a) That item may be discussed at that meeting if-

(i) That item is a minor matter relating to the general business of the local authority; and

(ii) the presiding member explains at the beginning of the meeting, at a time when it is open to the public, that the item will be discussed at the meeting; but

(b) no resolution, decision or recommendation may be made in respect of that item except to refer that item to a subsequent meeting of the local authority for further discussion.”

Appointments, Performance Review and Value for Money Committee

06 June 2019

Value for Money Finance Review

File No.: CP2019/03618

Te take mō te pūrongo

Purpose of the report

1. To provide an overview of the findings and recommendations contained in the value for money (s17A) review report of Group Financial Services (Finance).

2. To seek endorsement for the completed report (contained in Attachment A), to be recommended to the Governing Body for approval.

Whakarāpopototanga matua

Executive summary

3. Finance is the latest review to be completed by the Value for Money Programme.

4. In each review the first step is identifying the key strategic opportunities to improve value for money. The recommendations contained in this report are at a conceptual stage. They require management review and detailed investigation, including business case development and consultation on potential plans, options, process changes and associated decisions.

5. The review of Finance found:

· Finance has delivered on key investment challenges

· borrowing is within prudent levels

· capital delivery is key to Long-term Plan (LTP) objectives

· costs are reasonable compared to benchmarks but there are efficiency opportunities

· good examples of shared services are operating but more potential exists

· Finance has a number of roles and overall is effective

· new technologies are starting to be used to automate repeatable transactions, with further opportunities identified

· Group Finance is a mature function but needs to be ready for future challenges.

6. The review of Finance recommends that the chief executive of Auckland Council collaborate with the chief executives of the council-controlled organisations (CCOs) to:

· develop a shared services strategy and operating model for all back-office services

· design and implement a strategy for the management of Group financial information

· simplify the planning and reporting process.

7. All recommendations provide efficiency opportunities. Simplifying the planning and reporting process has been estimated to provide a saving of $18 million over the next ten years. Work has commenced on implementing this recommendation and some savings have already been made.

Ngā tūtohunga

Recommendation/s

That the Appointments, Performance Review and Value for Money Committee:

a) receive the Finance Value for Money Review 2019 report

b) agree to recommend to the Governing Body that the council’s chief executive collaborates with the chief executives of the council-controlled organisations to:

i) develop and implement a shared services strategy and operating model for all back-office services including:

A) key guiding principles

B) the appropriate operating model to deliver efficient and effective shared services

C) establishing the appropriate shared service governance structure and decision-making principles with appropriate sponsorship and representation from all Group organisations

D) establishing a mandate to use in future Council Controlled Organisations Statements of Intent and in council policies

E) assess the potential future efficiency and productivity benefits that increased use of robotics and AI and how the Group may collectively leverage these benefits

ii) design and implement a strategy for the management of Group financial information:

A) determining the key information that is required in the Group plan to report cycle, for each Long-term Plan as part of a three-year planning calendar

B) including principles for how the information is collected, accessed and used

C) establishing appropriate data governance and controls

D) develop a business case for implementing the strategy including the selection of appropriate technology solutions and roadmap for future improvements

E) determine the appropriate analytical tools for self-service capability for staff

iii) simplify planning and reporting process by:

A) introducing a new planning and reporting framework aligned to Long-term Plan, annual budgeting and planning cycles and corporate strategy

B) ensuring all business performance reporting is driven on an exception basis by eliminating duplicated reporting effort

C) moving corporate reporting requirements to quarterly and on an exception basis

D) creating an embedded, enterprise wide Commercial and Finance team servicing the business through a single channel

E) simplifying the chart of accounts and controls around future changes.

Horopaki

Context

8. In March 2017 the Finance and Performance Committee endorsed a value for money programme for the Auckland Council group (resolution number FIN/2017/23).

9. In March 2018 the Governing Body approved the terms of reference for the Appointments, Performance Review and Value for Money Committee. This incorporated the oversight for the value for money programme required by section 17A of the Local Government Act 2002 (resolution number GB/2018/57).

10. The report (Attachment A) is the latest output from the value for money programme, which delivers on the requirements of the Act, to review the cost-effectiveness (or value) of current arrangements for delivering local infrastructure, local public services and regulatory functions.

11. Each review is the first step in identifying the key strategic opportunities to improve value for money. The recommendations contained in each report are at a conceptual stage. They require management review and detailed investigation, including feasibility studies, business case development and consultation on potential plans, options, process changes and associated decisions.

12. The value for money review uses a well-established strategic and evidence-based approach. It draws on published reports, council data, interviews and engagement with management and CCOs. Each report contains an overview of the review methodology.

13. The report is reviewed by the Independent Reference Panel and council management. CCOs were consulted as part of the review leading to this report.

14. A focused summary of the review has been developed which is attached (Attachment B) together with the full review report.

Tātaritanga me ngā tohutohu

Analysis and advice

15. Finance is part of the organisational support group of activities.

16. Finance is responsible for developing and implementing a long term sustainable financial strategy for the Group. Finance advises on the optimal way to invest in Auckland’s infrastructure while managing debt levels and maintaining confidence that financial management is robust.

17. Finance also manage council’s monies. This includes money received from ratepayers and customers, the money paid to staff and suppliers and maintaining controls so that only appropriate transactions are made. Finance is centred around the management of money.

18. Finance provides information both to meet statutory requirements but also to support council decision making.

19. All recommendations provide efficiency opportunities. Simplifying the planning and reporting process has been estimated to provide a saving of $18 million over the next ten years. Work has commenced on implementing this recommendation and some savings have already been made.

20. A summary of the key findings of the review:

Finance has delivered on key investment challenges	· Financial objectives of LTP achieved · Clear financial strategy to move to a sustainable financial position
Borrowing is within prudent levels	· AA credit rating maintained · Effective risk management
Capital delivery key to LTP objectives	· Step change in capital expenditure and associated borrowing · Greater role for finance to support capital forecasting
Costs are reasonable compared to benchmarks but there are efficiency opportunities	· 1 per cent of operating cost is spent on Finance which is higher than public sector benchmarks but local government has additional compliance requirements · Efficiency opportunities exist at Auckland Council to improve the plan to report processes
Good examples of shared services operating but more potential	· Shared services are successfully used. Auckland Council provides treasury across the Group and they also provide transactional Finance services to RFA, Panuku and ATEED · The Mayor has requested a shared services strategy for the Group. The business case for further shared service opportunities should be for all back-office services (not just Finance)
Finance has a number or roles. Overall is effective	· Finance performs well across its varied roles: strategy – planning and policy advisor; catalyst for change; steward of public money; financial operator · No significant internal control issues identified by auditors
New technologies are being used to automate repeatable transactions	· Finance teams have started to implement robotic process automation to reduce cost and errors. Further opportunities exist · Finance also manage changing accounting and tax requirements

Ngā whakaaweawe me ngā tirohanga a te rōpū Kaunihera

Council group impacts and views

21. The review considered all substantive organisations in the group who have been consulted with in the development of the final review report.

Ngā whakaaweawe ā-rohe me ngā tirohanga a te poari ā-rohe

Local impacts and local board views

22. The decision to endorse this report has no direct implications for local boards.

Tauākī whakaaweawe Māori

Māori impact statement

23. The decision to endorse this report has no direct implications for Māori.

Ngā ritenga ā-pūtea

Financial implications

24. Any financial implications arising from the implementation of these review reports will be determined when implementation plans are developed and reported back to this committee.

Ngā raru tūpono me ngā whakamaurutanga

Risks and mitigations

25. The primary risks arising from these recommendations are regarding their implementation which will be addressed through implementation plans and where required business cases.

Ngā koringa ā-muri

Next steps

26. Should the report and their recommendations be endorsed then the next step will be for the reports to be tabled with the Governing Body for adoption.

Ngā tāpirihanga

Attachments

No.	Title	Page
a ⇩	Group Financial Services value for money review report	15
b ⇩	Finance value for money review summary	73

Ngā kaihaina

Signatories

Author

Ross Chirnside – Programme Lead – Value For Money

Authorisers

Kevin Ramsay - General Manager Corporate Finance and Property

Matthew Walker - Group Chief Financial Officer

Phil Wilson - Governance Director

Appointments, Performance Review and Value for Money Committee

06 June 2019

PDF Creator

Appointments, Performance Review and Value for Money Committee

06 June 2019

Auckland Council progress on savings up to 31 March 2019

File No.: CP2019/08041

Te take mō te pūrongo

Purpose of the report

1. To provide the Appointments, Performance Review and Value for Money Committee an update on the progress towards meeting the 10-year Budget 2018-2028 operating budget savings target for Auckland Council.

Whakarāpopototanga matua

Executive summary

2. The 10-year Budget 2018-2028 includes total cumulative operating savings for Auckland Council of $565 million over the next ten years. The target for the 2018/2019 financial year is $23 million.

3. A centralised process for identifying, measuring and reporting on savings to improve transparency on the achievement of the savings target within the 10-year Budget has been developed.

4. This approach captures benefits across six key workstreams, being:

· 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 – capturing benefits that have been identified through the Value for Money reviews.

5. Up to 31 March 2019 $18.2 million of savings have been realised, up from $13.5 million realised at the previous quarter. The majority of the additional savings have been met through a strong focus on prudent financial management (now totalling $12.3 million), with the rest spread across the other workstreams.

6. The balance of the $23 million has been identified and is anticipated to be realised in the final quarter. This equates to $230 million savings over the next ten years, or 41 per cent of the overall $565 million target.

7. On top of the $23 million, a further $7 million cost increase will be met through strong financial management within Infrastructure and Environmental Services. The additional cost is driven primarily by increased recycling and insurance costs.

Ngā tūtohunga

Recommendation/s

That the Appointments, Performance Review and Value for Money Committee:

a) receive the Auckland Council progress report on savings up to 31 March 2019.

Horopaki

Context

8. Savings are an important mechanism for Auckland Council to achieve a high level of cost efficiency and value for money. Savings targets are set at a level to provide enough focus on efficiencies without detriment to agreed service levels or health and safety.

9. Since Auckland Council was formed, it has included savings targets in its annual and long-term budgets after considering the level of the expenditure required to provide council services and the level of rates we collect.

10. From amalgamation to financial year 2017/2018, $270 million per annum savings have been realised.

11. Building on this progress, additional savings targets are included in the 10-year Budget 2018-2028, by including total cumulative operating savings for Auckland Council of $565 million over the next ten years. The target for the 2018/2019 financial year is $23 million.

12. There are many levers that can be used to deliver savings and efficiencies including:

· 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

· Value for Money – reviewing the cost effectiveness of our services. This report only captures the cost savings on operating expenditure, not the overall benefits of the programme, or other financial benefits such as cost avoidance and reductions in the cost of capital expenditure. Separate reporting is provided to this committee on the wider Value for Money programme.

13. The savings target relates to operating expenditure. It excludes any benefit relating to capital works and cost avoidance.

Tātaritanga me ngā tohutohu

Analysis and advice

14. Up to 31 March 2019, $18.2 million of savings have been realised, up from $13.5 million realised at the previous quarter end. The majority of the savings has been met through a strong focus on prudent financial management, with the rest spread across the other workstreams.

15. The balance of the $23 million has been identified and anticipated to be realised in the final quarter.

Procurement

16. Savings to date of $1.2 million have been achieved.

17. Initiatives in this workstream previously reported include lower reparation costs for corporate property leases and lower internet connection costs.

18. A further $0.1 million has been achieved in this workstream this quarter, primarily from implementing a supplier panel for professional services related to processing resource consent and other applications; and a reduction in bank charges.

19. Other procurement benefits have been achieved to avoid $26.1 million of cost pressures and reduce costs of planned capital projects.

20. Work is underway on streamlining low risk and low value procurements in order to reduce both the internal cost and external cost of these procurements with further initiatives in the pipeline.

Organisational design

21. Savings to date of $2.6 million have been achieved.

22. Initiatives in this workstream previously reported include the redesign of Commercial Finance and the disestablishment of ACIL.

23. A further $0.5 million has been achieved in this workstream this quarter, primarily from changes to the composition of the executive leadership team.

24. The Corporate Support Review is still ongoing. To date this has resulted in organisational changes, consolidating the Commercial and Finance teams for operations and support into a single team reporting to the Group CFO and closing-off three vacant roles.

25. Discussions are in progress with another local authority on shared service options. They are investigating replacing their end-of-life finance technology platform. The discussions have been on a model based on co-operative principles that could potentially work for wider sector opportunities.

Technology

26. Savings to date of $1.1 million have been achieved.

27. Initiatives in this workstream previously reported include the reduction of technology infrastructure licencing costs and robotics process automation. The mobile consents inspection platform was also rolled-out, giving inspectors new devices with robust connections, a new inspections app and access to historical information. This allows our inspectors to provide a better service with less administration work required.

28. A further $0.2 million has been achieved in this workstream this quarter, primarily from further reductions in technology infrastructure licensing costs which has been found through the council’s Oracle licence.

29. Further to this, the robotics process automation programme has developed a new BOT to process ‘Change of Address’ details for dogs and owners. The council processes over 8,000 ‘Change of Address’ requests each year and engages 14 temporary staff to handle spikes in requests.

30. The BOT is expected to reduce the temporary staff requirement by seven, resulting in cost avoidance of $134,000. To deliver further value we are now considering implementing the BOT for other ‘Change of Address’ activities across all of the council.

31. Other further work underway that will be delivering benefits in the future include:

· digital engagement platform

· governance technology - phase 1

· legacy property records digitisation

· multi-cloud data centre

· pools and leisure staff rostering

· regulatory billing improvements

· further robotic process automation.

Increasing non-rates revenue

32. Additional non-rates revenue to date of $0.5 million has been earned.

33. This has been achieved primarily through venue and facilities hire. With the improvements in the digital booking system, revenue is 17 per cent above budget. In the first three quarters of 2018/2019, 29 per cent of venue hire bookings and 87 per cent of regional parks bookings were online.

34. Ongoing improvements in digital technology will help support future revenue growth through more self-service offerings and increasing awareness of the services council offer.

35. Further to this, the council is currently looking at opportunities to commercialise SafeSwim, a real-time, region-wide water quality monitoring system. This will be through selling the system to third parties such as other councils and regional authorities around the world in partnership with global engineering firm Mott MacDonald.

Prudent financial management

36. Savings to date of $12.3 million have been achieved.

37. This is primarily due to a general focus on costs through a culture of questioning and challenging all expenditure.

38. Specific initiatives relating to employee spend include:

· better use of contingent workers

· decommissioning budgeted inactive roles

· improved workforce planning and reporting

· reductions in redundancy costs as a result of a new redeployment function.

39. Specific initiatives relating to other council costs includes:

· use of tools such as Skype for Business to reduce the need for travel

· a review of utilities spend by Community Facilities has led to reductions in cost and usage.

40. The savings have been achieved primarily across the Finance, Planning and People and Performance functions.

Value for Money

41. Savings to date have resulted in an operating cost reduction of $0.5 million.

42. Initiatives in this workstream previously reported include reduced costs for Our Auckland and research reports for communications and engagement.

43. The Value for Money s17A programme has realised $260 million of benefits to date ($208 million in 2017/2018 and $52 million in 2018/2019). This includes benefits that are not direct cost savings (benefits that will reduce the council’s operating expenditure), such as cost avoidance and reductions in the cost of the council’s capital programme.

44. In total the programme has identified potential benefits of over $500 million across the wider council group over the next ten years.

45. Separate reporting is provided to this committee on the progress of the Value for Money s17A programme.

Ngā whakaaweawe me ngā tirohanga a te rōpū Kaunihera

Council group impacts and views

46. The target for 2018/2019 applies to Auckland Council. The council-controlled organisations have their own internal targets.

Ngā whakaaweawe ā-rohe me ngā tirohanga a te poari ā-rohe

Local impacts and local board views

47. The centralised savings approach has been set at a regional level. None of the initiatives delivered or in delivery have specific local board impact on service level reductions.

Tauākī whakaaweawe Māori

Māori impact statement

48. The savings initiatives delivered or in delivery have no specific impact on Māori outcomes.

Ngā ritenga ā-pūtea

Financial implications

49. This report provides visibility on how council is performing on its savings target which supports meeting the annual budget for 2018/2019.

50. There are financial implications on the annual budget if the savings target is not met for 2018/2019. This may result in a slightly higher debt level and will have flow on effects through to financial year 2019/2020.

51. Any additional budget pressures may also result in additional savings being required.

Ngā raru tūpono me ngā whakamaurutanga

Risks and mitigations

52. Some of the initiatives that have been identified to deliver savings are active projects currently being delivered. As with any project there are risks to delivery including resource availability, competing priorities and technical dependencies.

Ngā koringa ā-muri

Next steps

53. Work will continue developing a robust benefits register to support the 10-year budget savings programme.

54. The next update will be provided after the council’s annual results are finalised.

Ngā tāpirihanga

Attachments

There are no attachments for this report.

Ngā kaihaina

Signatories

Authors

Nick Bird - Financial Analyst

Robert Irvine - Head of Group Financial Planning

Authorisers

Matthew Walker - Group Chief Financial Officer

Phil Wilson - Governance Director

Appointments, Performance Review and Value for Money Committee

06 June 2019

Update report on board appointments to council-controlled organisations and Tamaki Redevelopment Company Limited.

File No.: CP2019/05076

Te take mō te pūrongo

Purpose of the report

1. To provide an update on the programme of appointments to the boards of Auckland Tourism, Events and Economic Development (ATEED) and Panuku Development Auckland Limited (Panuku).

2. To update the committee on the board intern for Regional Facilities Auckland.

3. Tamaki Redevelopment Company Limited (TRC) is a jointly owned external partnership with the Crown. Two jointly appointed directors are due to retire in June 2019, and staff are seeking decisions from the committee regarding reappointment of these directors.

Whakarāpopototanga matua

Executive summary

4. On today’s committee agenda is a confidential report that includes the shortlist of candidates chosen by the Panuku and ATEED’s selection panels to be considered for pre-interview by council’s external director recruitment support partners Kerridge and Partners (Kerridge).

5. The committee will also receive an update regarding Regional Facilities Auckland’s board intern appointed for the 2019-2020 programme.

6. Auckland Council owns 41 per cent of the shares in TRC. The Crown owns the other 59 per cent of the shares. TRC’s constitution provides that the Crown and council independently appoint one director each, and jointly appoint the other directors.

7. A second confidential report on today’s committee agenda seeks decisions from the committee regarding two jointly-appointed TRC directors.

Ngā tūtohunga

Recommendation/s

That the Appointments, Performance Review and Value for Money Committee:

a) note that two confidential reports are included on today’s committee agenda that provides information to:

i) make decisions on the shortlist candidates for the three Auckland Tourism, Events and Economic Development Limited director vacancies and one Panuku Development Auckland Limited director vacancy

ii) make decisions regarding the reappointment of two jointly-appointed directors on the board of Tamaki Redevelopment Company Limited.

b) note that the reports referred to in clause a) are confidential as they contain personal information relating to the candidates.

Horopaki

Context

8. The board appointment process for appointing directors to any council-controlled organisation (CCO) or external partnership board is outlined in the table below.

9. The confidential reports on this agenda provide advice and options to assist the committee to make decisions regarding the shortlist candidates for interviews.

10. There are no significant impacts on other parts of the council group as a result of these director appointments.

Ngā whakaaweawe ā-rohe me ngā tirohanga a te poari ā-rohe /
Local impacts and local board views

11. Board appointments to CCOs and external partnerships are the role of the Governing Body. Local boards can participate in the nomination process for each director vacancy. The nomination of a candidate requires the consent of that candidate.

Tauākī whakaaweawe Māori / Māori impact statement

12. Council’s policy also aims to achieve a diverse range of directors to all CCO boards.

13. This can have positive impacts for Māori by creating opportunities for Māori directors.

14. In line with the policy, an Independent Māori Statutory Board member may be appointed to the selection panel to provide a Māori perspective throughout the process.

Ngā ritenga ā-pūtea / Financial implications

15. The costs associated with the appointments to CCOs will be managed from existing budgets.

16. The costs associated with TRC director appointments are managed by Treasury New Zealand.

Ngā raru tūpono / Risks

17. There are risks associated with all board appointments including:

i) reputational risk: all candidates are appropriately screened to meet the skill requirements for directors of a board such as this and have appropriate governance experience especially within public-facing entities. To mitigate any potential risks of disqualified directors or under-qualified candidates:

a) a thorough due diligence process will be completed on all candidate applications in line with the council’s appointment policy

b) short-listed candidates have completed the council’s director consent form prior to interview which requires directors to confirm that there is nothing that would disqualify them from being a director

c) thorough reference checks of candidates who are approved for appointment to the CCOs are being conducted by Kerridge and Partners.

d) Crown’s Treasury group undertake due diligence and reference checking for all board members and directors appointed to the Crown owned entities and joint partnership arrangements with council.

ii) reputational risk: breach of privacy if confidential candidate information is provided to media outlets prior to final decisions being made by the committee. The risk is fewer and potentially less qualified candidates being attracted into future board appointment programmes. To mitigate the risk staff will continue to highlight the need for maintaining confidentiality during the board appointment programme.

iii) governance risk: the risk of an unbalanced board where a loss of institutional knowledge impacts decision-making. Conversely, retaining board members for too long can mean the board lack innovation and fresh thinking.

Ngā koringa ā-muri / Next steps

18. Following approval from this committee, staff from the CCO Governance and External Partnerships department and Kerridge will maintain progress on the appointment programmes for 2019.

19. Staff will discuss the outcome of the director appointments for the Tamaki Redevelopment Company Limited board with the crown’s agent and ensure current directors are notified of the outcome.

Ngā tāpirihanga

Attachments

There are no attachments for this report.

Ngā kaihaina

Signatories

Author

Josie Meuli - Senior Advisor

Authorisers

Alastair Cameron - Manager - CCO Governance & External Partnerships

Phil Wilson - Governance Director

Appointments, Performance Review and Value for Money Committee

06 June 2019

Completion report: Three Waters Value for Money review

File No.: CP2019/08889

Te take mō te pūrongo

Purpose of the report

1. To provide an update on the joint completion report from Healthy Waters and Watercare for the Three Waters: Value for Money (S17A) Review 2017.

Whakarāpopototanga matua

Executive summary

2. In November 2017 Auckland Council completed a S17A value for money review of three waters services (FIN/2017/153). This recommended that the council group achieve savings through more efficient and collaborative delivery of three waters services.

3. In response Healthy Waters and Watercare identified $288 million of savings that could be achieved through deferred or avoided capital works and joint delivery. Up to 80 per cent of this value has been realised and the remainder is captured in the 10-year Budget 2018-2028.

4. Four key recommendations of the review have been implemented, as summarised below:

· Produce a joint three waters strategy – The Our water future - Tō tātou wai ahu ake nei discussion document was consulted on in March and April 2019 and will be completed by late 2020.

· Consolidated capital planning – Watercare and Healthy Waters have identified areas where capital planning can be aligned or consolidated, particularly in the western isthmus, and developed asset management plans that support this.

· Joint project delivery and procurement – Watercare, Healthy Waters and Auckland Transport have identified locations where roading, stormwater, wastewater and water supply projects are needed in the same area. These projects are being jointly procured and delivered to achieve operational savings and reduced disruption for communities.

· Joint operations and maintenance – Watercare and Healthy Waters have commissioned a strategic assessment by Martin Jenkins of options for coordination and collaboration between Auckland Council and Watercare.

5. The results will be discussed in more detail in the confidential section of the 6 June 2019 Appointments, Performance Review and Value for Money Committee agenda.

Ngā tūtohunga

Recommendations

That the Appointments, Performance Review and Value for Money Committee:

a) note the information contained in this report, on the completion of the three waters value for money review, enables transparency on the topic due for discussion in the public excluded part of the meeting

b) note that the confidential report contains information that could prejudice council's position in negotiations with three waters suppliers.

Horopaki

Context

6. A Value for Money review of Three Waters services was completed for Auckland Council in November 2017. The review highlighted opportunities for Watercare and Healthy Waters to achieve savings through working more closely together.

7. Healthy Waters and Watercare developed a response plan which was approved by Finance and Performance Committee in February 2018 (FIN/2018/13). The two organisations also identified $288 million of savings that could be achieved through deferrals of Watercare capital expenditure and joint procurement of capital works. These were captured in the 10-year Budget 2018-2028 and 80 per cent have now been achieved.

8. The remaining savings will be achieved through joint programme and project delivery work and more efficient delivery of operations and maintenance.

9. An update on implementation of the recommendations of the S17A review is provided below.

Tātaritanga me ngā tohutohu

Analysis and advice

Develop a joint three waters strategy

10. The first recommendation of the S17A review was that a Three Waters Policy and Strategy should be developed to guide the work of Auckland Council and Watercare.

11. The Our water future - Tō tātou wai ahu ake nei discussion document was developed by Healthy Waters staff with input from Watercare and other parties. It was released for public consultation in March and April 2019 and over 4,000 submissions were received.

12. A report summarising the public feedback and outlining the framework for developing the draft strategy will be provided to Environment and Community Committee on 11 June 2019. It is intended that the final strategy is adopted by September 2020.

Consolidated capital planning

13. The S17A review recommended that Healthy Waters and Watercare engage in joint capital planning for water infrastructure. Watercare and Healthy Waters have identified areas where capital planning can be aligned and developed asset management plans that support this.

14. The largest opportunity for savings is in the western isthmus. In this area capital planning for the two organisations has been fully consolidated through the western isthmus water quality improvement programme.

15. The two organisations are now delivering various aspects of the programme. For example, Watercare is leading delivery of the Central Interceptor project while Healthy Waters is delivering various stormwater upgrades in the western isthmus, such as the Waterview and Picton Street stormwater separation projects.

16. Consolidated planning has contributed to efficiencies – for example, it was initially planned that the Grey Lynn extension project would be delivered separately to the Central Interceptor. $50 million of savings have now been achieved through procurement of this project as part of the Central Interceptor construction contract.

17. The Waterview separation project provides another positive example of savings being achieved through joint capital planning. Waterview is located within the Central Interceptor area but is a considerable distance from the current main route.

18. Watercare considered an option to extend collector pipes to Waterview and this was originally included in the consented Central Interceptor scheme at a cost of $40 to $50 million. During the consolidated planning process, staff identified targeted separation to reduce overflows from the combined sewer system as a more cost-effective option.

19. The targeted separation project is still in the initial design phases but has a significantly lower estimated cost.

Joint project delivery and procurement

20. The S17A review recommended that Watercare, Healthy Waters and Auckland Transport engage in joint procurement and project delivery. In response, staff have identified locations where roading, stormwater, wastewater and water supply projects are needed in the same area. These projects are being jointly procured and delivered.

21. This approach significantly reduces duplicated expenditure on contract management, traffic management and reinstatement of road surfaces. It also reduces the impact of construction on residents and local businesses.

22. Some examples of capital works projects achieving savings through joint delivery are:

· Sunnynook Park, Sunnynook - dry pond upgrade to manage flooding. Healthy Waters constructed a shared path as part of this project, which Auckland Transport had identified as being needed in their greenways plan, saving $100,000.

· Morgan Street, Newmarket combined stormwater separation project. Healthy Waters installed stormwater pipes and wastewaste pipes on behalf of Watercare for 15 properties. Planned foothpath and roading upgrades by Auckland Transport were also delivered at the same time. This saved $70,000 in site establishment costs and ‘digging once’ meant reduced disruption for local residents.

23. As these examples demonstrate, savings are being achieved by staff across Auckland Council, Watercare and Auckland Transport through joint delivery of capital works as recommended in the S17A review. Ongoing collaboration will generate further savings.

Shared governance for key water programmes

24. To ensure ongoing collaboration on three waters issues, shared governance structures have also been established for key water programmes. These include:

· the Auckland water strategy (whose governance structure also includes representatives of mana whenua and Auckland Transport)

· the Safe Networks programme, which investigates sources of pollution at our popular swimming beaches and identifies solutions to these

· the Western Isthmus Water Quality Improvement Programme – as outlined above, this is being delivered through fully consolidated planning between the two organisations.

25. In addition, regular six-monthly reporting will be provided to the group Chief Financial Officers on savings achieved through joint planning, procurement and delivery initiatives.

Merging of operations and maintenance

26. The value for money review recommended that a business case be developed to evaluate the case for council’s Healthy Waters department contracting with Watercare to deliver operation and maintenance of stormwater assets.

27. Martin Jenkins were commissioned in 2018 to carry out an independent strategic assessment of how stormwater services are currently delivered and assess whether alternative options would be more effective.

28. The results of this assessment and staff advice will be provided in the confidential section of the 6 June 2019 Appointments, Performance Review and Value for Money Committee agenda.

Ngā whakaaweawe me ngā tirohanga a te rōpū Kaunihera

Council group impacts and views

29. Implementation of the S17A Value for Money Three Waters review has been delivered as a joint project between Watercare and Healthy Waters with input from Auckland Transport.

30. More detail will be provided in the confidential section of the 6 June 2019 Appointments, Performance Review and Value for Money Committee agenda.

Ngā whakaaweawe ā-rohe me ngā tirohanga a te poari ā-rohe

Local impacts and local board views

31. Consultation with local boards has not been carried out on the completion of the three waters value for money review. However, local boards and communities were consulted on the Our water future - Tō tātou wai ahu ake nei discussion document.

32. Overall, feedback from the public and local boards endorsed the vision and values proposed in the discussion document, which involve taking a more integrated approach to water. An integrated approach by Healthy Waters and Watercare to capital planning and delivery of three waters services will be achieved through the initiatives outlined above.

Tauākī whakaaweawe Māori

Māori impact statement

33. Watercare and Healthy Waters have received consistent feedback from mana whenua in previous consultations that the council group should take a more integrated approach to management of water issues. This theme was also apparent in mana whenua feedback on the Our water future - Tō tātou wai ahu ake nei discussion document.

34. An integrated approach by Healthy Waters and Watercare to capital planning and delivery of three waters services will be achieved through the initiatives outlined above.

Ngā ritenga ā-pūtea

Financial implications

35. Healthy Waters and Watercare identified $288 million of savings that could be achieved. As shown in Table 1, up to 80 per cent of these savings have now been realised. These include $179 million of savings from deferred or avoided capital expenditure by Watercare and $50 million of savings from the Grey Lynn extension.

Table 1. Savings achieved and forecast through the value for money review

Benefit opportunity identified by S17A review	Benefit forecast identified by council group	Benefit realised to date	Future benefits still to be realised
$300M	$293M	$231M	$59M

36. The remaining expected savings over the next nine years include $59 million of capital expenditure from joint programme and project delivery work between Healthy Waters, Watercare and Auckland Transport and $3.6 million of operational and maintenance savings. These savings have been captured in the 10-year Budget 2018-2028.

37. Going forward, regular six-monthly reports on savings achieved through the initiatives described above will be provided to the group Chief Financial Officers.

Ngā raru tūpono me ngā whakamaurutanga

Risks and mitigations

38. Risks arising from the completion report for the three waters value for money review will be discussed in more detail in the confidential section of the 6 June 2019 Appointments, Performance Review and Value for Money Committee agenda.

Ngā koringa ā-muri

Next steps

39. Staff will continue to implement the recommendations of the S17A review as outlined above.

Ngā tāpirihanga

Attachments

There are no attachments for this report.

Ngā kaihaina

Signatories

Authors

Andrew Chin, Auckland Waters Portfolio Manager

Anin Nama, Watercare Network Efficiency Manager

Authorisers

Craig McIlroy, General Manager Healthy Waters

Barry Potter - Director Infrastructure and Environmental Services

Matthew Walker - Group Chief Financial Officer

Phil Wilson - Governance Director

Appointments, Performance Review and Value for Money Committee

06 June 2019

Exclusion of the Public: Local Government Official Information and Meetings Act 1987

That the Appointments, Performance Review and Value for Money Committee

a) exclude the public from the following part(s) of the proceedings of this meeting.

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 follows.

This resolution is made in reliance on section 48(1)(a) of the Local Government Official Information and Meetings Act 1987 and the particular interest or interests protected by section 6 or section 7 of that Act which would be prejudiced by the holding of the whole or relevant part of the proceedings of the meeting in public, as follows:

C1 CONFIDENTIAL : Board appointments to Tāmaki Redevelopment Company Limited

Reason for passing this resolution in relation to each matter

Particular interest(s) protected (where applicable)

Ground(s) under section 48(1) for the passing of this resolution