I hereby give notice that an ordinary meeting of the Value For Money Committee will be held on:
Date: Time: Meeting Room: Venue:
|
Thursday, 20 February 2020 10.00am Room 1, Level
26 |
Kōmiti Tiaki Pūtea /
OPEN AGENDA
|
MEMBERSHIP
Chairperson |
Cr Desley Simpson, JP |
|
Deputy Chairperson |
Tracy Mulholland |
|
Members |
Deputy Mayor Cr Bill Cashmore |
|
|
Cr Angela Dalton |
|
|
Mayor Hon Phil Goff, CNZM, JP |
|
|
Cr Shane Henderson |
|
|
IMSB Member Glenn Wilcox |
|
|
Cr Paul Young |
|
|
Chair of the Independent Reference Panel for the Value for Money Review Programme (yet to be appointed) |
(Quorum 4 members)
|
|
Sandra Gordon Kaitohutohu Mana Whakahaere Matua / Senior Governance Advisor
14 February 2020
Contact Telephone: (09) 890 8150 Email: sandra.gordon@aucklandcouncil.govt.nz Website: www.aucklandcouncil.govt.nz
|
Terms of Reference
Responsibilities
The Value for Money Committee ensures the pro-active assessment of money saving opportunities and considers the cost-effectiveness of the governance, funding and delivery across the Auckland Council Group, including those opportunities beyond the scope of s17A. Responsibilities include:
1. approving the s17A Local Government Act 2002 review forward work programme.
2. monitoring and reporting on the implementation of s17A reviews, and the recommendations arising from those reviews.
3. approving the terms of reference for individual s17A reviews
4. receiving and making recommendations on the outcome of individual reviews
5. requesting reports on Auckland Council parent and CCO value for money and cost effectiveness-focused initiatives that are beyond the scope of s17A reviews.
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
(c) the power to establish sub-committees.
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.
Value for Money Committee 20 February 2020 |
|
ITEM TABLE OF CONTENTS PAGE
1 Apologies 7
2 Declaration of Interest 7
3 Confirmation of Minutes 7
4 Petitions 7
5 Public Input 7
6 Local Board Input 7
7 Extraordinary Business 7
8 Value for Money work programme - 2020 9
9 Value for Money Programme quarterly update 21
10 Auckland Council savings progress for the period ended 31 December 2019 41
11 Consideration of Extraordinary Items
PUBLIC EXCLUDED
12 Procedural Motion to Exclude the Public 47
C1 Review of operating model for council maintenance services 47
At the close of the agenda no apologies had been received.
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.
There are no minutes to be confirmed.
At the close of the agenda no requests to present petitions had been received.
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.
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.
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.”
Value for Money Committee 20 February 2020 |
|
Value for Money work programme - 2020
File No.: CP2020/00529
Te take mō te pūrongo
Purpose of the report
1. To provide an overview of the planned approach to the Value for Money Programme (VfM) during 2020.
Whakarāpopototanga matua
Executive summary
2. Auckland Council has a number of drivers for continuing to review the cost effectiveness of its delivery of services and capital projects. These include:
· Legislative (Local Government Act 2002 section 17A)
· Delivering best value for the community
· Releasing resources for the macro challenges facing the council (e.g. climate change, housing provision and environmental degradation)
· Improving community trust and confidence in the Council’s financial management.
3. At the conclusion of the last term of Council the Appointments, Performance Review and Value for Money Committee, received a report reviewing the programme and resolved that a VfM programme briefing paper be prepared by the group chief financial officer for the incoming council. A full briefing paper has been prepared (Attachment A).
4. In preparing a draft VfM work programme consideration has been given to projects currently underway or about to start i.e.
a) Council-Controlled Organisations (CCO) review – this has commenced and has the potential to overlap with the VfM projects. In addition, two members of the former Independent Reference Panel have been appointed to the CCO review panel
b) Long-term Plan (LTP) 2021-2031 – the VfM programme can support the LTP process by identifying areas where resources can be released for higher priority projects or services, as well as enable the LTP community consultation to highlight these prioritisation decisions.
c) Determining efficiency savings since amalgamation – this work will potentially identify areas for more detailed review through the VfM programme.
d) Shared services opportunities with other local authorities.
5. The proposed VfM work programme also incorporates ongoing monitoring of previous reviews to ensure benefit realisation and review of operating models to deliver council services. A focus will be the group capital programme which represents the largest expenditure area and the greatest value opportunity.
6. Given the context of the other projects which may influence the ongoing VfM work programme, it is proposed that the work programme be reviewed six monthly.
Recommendation/s That the Value for Money Committee: a) endorse the approach of a six-monthly review of the forward work programme. b) agree the work programme, as set out in the report, for the first six months of 2020. |
Horopaki
Context
7. The Local Government Act 2002 (LGA) section 17A requires all councils to undertake regular reviews of the cost-effectiveness of their delivery of “good-quality local infrastructure, local public services, and performance of regulatory functions”. The LGA also requires that these reviews “consider options for the governance, funding, and delivery of infrastructure, services, and regulatory functions”.
8. Auckland Council has several strong drivers for seeking to manage costs and chose to broaden the 17A process into a much more robust vehicle than that required by the legislation. Since 2017 a systematic approach to reviewing services and activities has been undertaken, incorporating the legislative requirements of s17A. The programme was initially overseen by the Finance and Performance Committee, but in March 2018 the Terms of Reference of the existing Appointments and Performance Review Committee were amended to provide governance oversight of the VfM programme.
9. At the conclusion of the last term of the council, the Appointments, Performance Review and Value for Money Committee, received a report reviewing the programme and resolved that a VfM programme briefing paper be prepared by the group chief financial officer for the incoming council. A full briefing paper has been prepared (Attachment A). This paper covers:
a) The drivers for continuing the programme and, in particular, the need to ensure that Council is able to release resources for priority projects including the macro challenges of climate change, housing provision and environmental degradation
b) Options for shaping the programme going forward
c) Aligning the programme with other key initiatives, in particular, the Long-term Plan 2021-2031 and the CCO review
d) The advantages of an independent overview of the programme
e) Suggestions related to improving the effective governance of the programme.
10. As part of the new committee structure, the Mayor has created this Committee reporting directly to the Governing Body. Membership of the Committee includes the Chair of the Independent Reference Panel (IRP). Both of these initiatives align with the recommendations in the briefing paper.
Tātaritanga me ngā tohutohu
Analysis and advice
11. In proposing a VfM programme of work for 2020 – 2022, consideration has been given to the issues identified in the briefing paper with particular focus on other key pieces of work that are currently underway or about to start.
Projects that need to be aligned with the VfM programme
CCO review
12. Council have commissioned an independent review of the Group structure and the CCO model. The CCO review has three main lines of enquiry
· the effectiveness of the CCO model, roles and responsibilities
· the accountability mechanisms between CCOs and the council
· the culture of CCOs.
13. The work of the CCO review impacts on the VfM programme i.e.
a) Assessing the effectiveness of the CCO model is aligned to the adopted approach for assessing value for money - approximately 70% of group expenditure is incurred by CCOs. Undertaking separate VfM review work of CCOs during this period would not be effective.
b) Two members of the former VfM IRP have been appointed to the CCO Review panel and the former VfM Programme staff lead is supporting the CCO Review panel.
Long-term Plan 2021-2031
14. The LTP process will be commencing in the near future. There will be many competing priorities for council resourcing for the 10-year period. Given its fiscal constraints it will be key to delivery of the LTP to ensure that savings can be identified and released to enable application of resources to the highest priority projects and services. The VfM programme can be targeted towards supporting the LTP process in that regard. In addition:
a) The current LTP has capital investment of $26bn and there are opportunities in improving the efficiency and effectiveness of delivering the programme. Improving the phasing of delivery will in turn allow better cash flow management to maximise the capital programme within current financial constraints.
b) Where changes in existing services and projects require community consultation, the LTP can be an effective mechanism for consultation with the community as it provides the broad context in which these decisions need to be made.
Determining efficiency savings since amalgamation
15. 1 November 2020 will be the 10th anniversary of the amalgamation of local government in Auckland and the formation of Auckland Council. This presents an opportunity to determine what efficiency savings have been delivered to Auckland since the amalgamation. This work will also support the CCO Review and may identify areas for future VfM reviews.
Shared Service opportunities with other local authorities
16. Auckland Council has been approached by other local authorities about working together in a shared service environment. This work will determine whether there is value for Auckland Council to provide these services, developing an approach to assessing opportunities and an action plan for implementation.
Other considerations
Previous VfM programme review – follow up
17. There are follow-up activities from work already completed on the VfM programme that need to be continued:
a) Savings and benefit realisation - Implementation of completed reviews and progress against savings targets will continue to be monitored
b) Auckland Council operating model – some previous reviews identified the need to simplify and/or improve the Council’s operating model. Work has begun on some of these opportunities – one of these is reported in a separate item on this agenda. These are likely to be reported as part of the confidential agenda due to commercial and/or employment sensitivities.
Appointing the Independent Reference Panel
18. During last term of Council, the VfM IRP was appointed by the Group Chief Financial Officer (Programme Sponsor) and had three independent members.
19. The VfM IRP was effective during the last term of Council and management planned to appoint panel members for the new term of Council, taking the opportunity to assess whether changes were needed to the skills required for the work programme. However, two of the former IRP members have since been appointed to the CCO review panel and it is proposed to delay appointment of the IRP in the interim.
20. In April, the committee will receive an update on proposed membership of the VfM IRP for appointment by the Group CFO commencing 1 July 2020. Until the panel is appointed there will not be a member on VfM Committee.
VfM work programme during 2020
21. Given the considerations outlined above, in particular the CCO review, a different approach from that previously adopted, is proposed for 2020 i.e.
· detailed planning will occur every 6 months to provide flexibility to respond to changing circumstances
· reviews will not only be activities but also consider value chains e.g. capital delivery which spans multiple activities.
22. The group capital programme represents the largest area of expenditure and potential value for money opportunity. During this term of Council, the VfM Programme will focus on aspects of the programme to both support the development of the LTP and deliver improved value. Some of the focus areas include
23. Developing an integrated delivery pipeline (group and other Auckland infrastructure providers e.g. NZTA, Kiwirail to provide the supply market greater certainty to invest and to “dig once” where possible
24. Implement different procurement opportunities through bundling long-term work packages, risk sharing and aligning capital delivery to supply market capacity
25. Build partnerships with suppliers, Infrastructure Commission, Infrastructure New Zealand and other councils (Tauranga, Hamilton)
26. However, over time, all areas where there is potential benefit will be assessed so that Council meets legislative requirements.
27. The proposed programme for 2020 is as follows:
Period |
Activity |
February 2020 |
· Overview of programme · Review of operating models of council services · Quarterly update of completed reviews |
April 2020 |
· Update on proposed membership of IRP · Efficiency savings since amalgamation |
June 2020 |
· Improving value from capital delivery programme (Phase 1 – integrated pipeline) · Quarterly update of completed reviews · Shared services opportunities with other local authorities · Review of next six-month programme |
July – December 2020 |
· Areas of review identified by CCO review · Continuation of review of operating models of council services · Improving value from capital delivery programme (continuation) · Any new areas of review identified by Committee, management or the programme |
Tauākī whakaaweawe āhuarangi
Climate impact statement
28. A decision on the VfM programme will not have any direct impact on climate change. Maximising the financial benefits from the VfM programme will assist in freeing resources for applying to Council’s strategic priorities such as climate change.
Ngā whakaaweawe me ngā tirohanga a te rōpū Kaunihera
Council group impacts and views
29. The Value for Money programme adopts a group perspective and considers activities undertaken both by Auckland Council and its substantive council-controlled organisations. The Group have not been engaged in the development of this report but will be included when the programme considers activities impacting their operations.
Ngā whakaaweawe ā-rohe me ngā tirohanga a te poari ā-rohe
Local impacts and local board views
30. The programme to date has not significantly impacted at a local level. Many of the activities have been corporate support activities and others have been within the regional decision-making allocation. As the programme progresses there will be impacts at a local level and consideration needs to be given to the involvement of local boards at the appropriate time for each project.
Tauākī whakaaweawe Māori
Māori impact statement
31. Throughout the programme to date, at an individual project level, there has been consideration of the impact for Māori and some specific recommendations on this. This will continue.
Ngā ritenga ā-pūtea
Financial implications
32. The Value for Money programme is focused on ensuring maximum value for the community from council expenditure. The programme expenditure is included in existing budgets ($800k per annum).
Ngā raru tūpono me ngā whakamaurutanga
Risks and mitigations
33. There are no specific risks associated with adopting the recommendations of this report. Risks associated with adopting recommendations of individual projects within the overall programme are dealt with at the time of each report back.
Ngā koringa ā-muri
Next steps
34. Following agreement from the committee meeting today, staff will commence the work programme for 2020.
Attachments
No. |
Title |
Page |
a⇩ |
Value for Money briefing paper |
15 |
Ngā kaihaina
Signatories
Author |
Ross Chirnside – Programme Lead – Value for Money |
Authoriser |
Matthew Walker - Group Chief Financial Officer |
20 February 2020 |
|
Value for Money Programme quarterly update
File No.: CP2020/00530
Te take mō te pūrongo
Purpose of the report
1. To provide an update on the Value for Money (VFM) Programme and the implementation progress of the completed reviews.
Whakarāpopototanga matua
Executive summary
2. Overall the programme status is green.
3. The approach to the VFM Programme has been modified reflecting findings from “End of Council term – status and review report” and the CCO Review which is currently underway.
4. The VFM reviews with approved terms of reference are summarised in the table below
Phase |
Closed |
Benefits realisation |
In progress |
On hold |
No. of reviews |
4 |
5 |
0 |
2 |
5. Detailed implementation progress updates are provided for those reviews in the benefit realisation phase; being:
· Domestic waste services
· Information, communications and technology
· Customer services
· Financial services
· Legal and risk services
6. Business managers responsible for implementation are available to address specific questions on those reviews in paragraph 5 above.
Recommendation/s That the Value for Money Committee: a) note the Value for Money Programme status and the progress updates on: · Domestic waste services · Information, communications and technology · Customer services · Financial services · Legal and risk services. |
Horopaki
Context
7. In March 2017 the Finance and Performance Committee endorsed a value for money programme for the Auckland Council group (resolution number FIN/2017/23).
8. During the last term of Council terms of reference were approved to commence 11 VfM reviews with 9 being completed. A summary of these reviews was provided in the “End of Council term – status and review” report to the September meeting of the Appointments, Performance Review and Value for Money committee. The findings in this report will also inform the VfM work programme for 2020.
Tātaritanga me ngā tohutohu
Analysis and advice
Programme status
9. Overall the programme status is green with no significant issues to report. The programme now has a range of reviews in different phases from initiation through to benefit realisation.
10. The VFM reviews with approved terms of reference are summarised in the table below
Phase |
Closed |
Benefits realisation |
In progress |
On hold |
No. of reviews |
4 |
5 |
0 |
2 |
Reviews |
Three Waters Communications& engagement Investment attraction and global partnerships Group procurement |
Domestic waste Information, communications and technology Customer services Financial services Legal and risk services |
|
Parks and open spaces Human Resource services |
11. Parks and open spaces is on hold until completion of the next phase of the governance review. The Human Resource services review is on hold until the CCO Review is completed.
2020 work Programme
12. The proposed programme for 2020 is included in another report to the VFM committee. Once approved progress will be reported in future quarterly updates to the committee.
Detailed implementation progress for reviews in benefit realisation phase
13. Detailed implementation status updates are provided for the following reviews:
Review |
Status |
Comment |
Domestic waste |
|
This will be the final report for domestic waste now that the procurement of new contracts has been completed. The new integrated waste collection model has one supplier providing all three waste collection services (refuse, recycling and food scraps) for each single contract area across the region. These contracts are expected to deliver financial benefits and involve the implementation of electric collection vehicles which will help significantly reduce carbon emissions, air pollution and other environmental harm |
Information, communications and technology |
|
|
Customer services |
|
|
Financial services |
|
Quarterly status update provided (first status report) Resourcing contention has resulted in delays to developing shared service strategy. This is now resolved. |
Legal and risk services |
|
Quarterly status update provided (first status report) |
Benefit realisation
14. Details of the reviews in benefit realisation phase are included in the status report. A summary is
|
Cash releasing benefit ($m) |
||
Review phase |
Benefit opportunity |
Benefit forecast |
Benefit realised |
Closed |
467 |
430 |
270 |
Benefits realisation |
88.5 |
40 |
0.5 |
15. In the table above, benefits are the cash benefit (both operating and capital expenditure).
· Closed – implementation is largely complete with no further reporting or monitoring
· Benefit realisation – review completed and approved by committee with management implementing. Detailed implementation status reports are provided for these reviews
· Benefit opportunity – potential identified by VFM review (10 years)
· Benefit forecast – amount forecast by management based on implementation progress (10 years)
· Benefit realised – amount “banked” in accounts (or included in LTP). This reflects that only 2 financial years has been completed since the review findings were approved.
Tauākī whakaaweawe āhuarangi
Climate impact statement
16. The decision to receive this report has no direct impact on climate change. As recommendations from completed reviews are implemented the impact of climate change is considered.
Ngā whakaaweawe me ngā tirohanga a te rōpū Kaunihera
Council group impacts and views
17. The VFM reviews consider all organisations in the group. Group organisations are involved in the development of the implementation status updates, where appropriate.
Ngā whakaaweawe ā-rohe me ngā tirohanga a te poari ā-rohe
Local impacts and local board views
18. The decision to receive this report has no direct implications for local boards. As recommendations from completed reviews are implemented the impact on local boards is considered.
Tauākī whakaaweawe Māori
Māori impact statement
19. The decision to receive this report has no direct implications for Māori. As recommendations from completed reviews are implemented the impact on Māori is considered.
Ngā ritenga ā-pūtea
Financial implications
20. Any financial implications arising from the implementation of the VFM reviews will be determined as implementation plans are developed and included in the reporting back to this committee.
Ngā raru tūpono me ngā whakamaurutanga
Risks and mitigations
21. 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
22. The next quarterly progress report will be provided to the committee at its April meeting.
Attachments
No. |
Title |
Page |
a⇩ |
Value for Money Programme Status report December 2019 |
25 |
Ngā kaihaina
Signatories
Author |
Ross Chirnside – Programme Lead – Value for Money |
Authoriser |
Matthew Walker - Group Chief Financial Officer |
20 February 2020 |
|
Auckland Council savings progress for the period ended 31 December 2019
File No.: CP2019/21629
Purpose of the report
1. To provide an update on the progress towards meeting the 10-year Budget 2018-2028 operating budget savings target for Auckland Council.
Whakarāpopototanga matua
Executive summary
1. The 10-year Budget 2018-2028 includes total cumulative operating savings for Auckland Council of $565 million over the 10 years. The target for the 2018/2019 financial year was $23 million, out of which $24.6 million of savings were realised. There is a further target of $23 million for the 2019/2020 financial year.
2. A centralised process for identifying, measuring and reporting on savings to improve transparency was developed and has been used for savings progress reporting since last financial year.
3. 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 and process improvement – leveraging existing investments for better outcomes or implementing new tools and process improvements 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.
4. For the period ended 31 December 2019, $10.2 million of savings have been realised for the current financial year, leaving a balance of $12.8 million to be achieved by 30 June 2020.
5. The majority of the savings have been realised from organisational design changes ($5.5 million) and process improvements in Regulatory Services ($2.5 million), with the balance being achieved primarily from prudent financial management.
6. The balance of the savings target is expected to be achieved from further organisational design changes, other initiatives currently in the pipeline and a continued focus on prudent financial management.
Recommendation/s That the Value for Money Committee: a) note the Auckland Council savings progress for the period ended 31 December 2019. b) request staff to send the presentation to all councillors and local board members for their information. |
Horopaki
Context
7. 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.
8. Since Auckland Council was formed, savings targets have been included in its annual and long-term budgets. From amalgamation to financial year 2017/2018, $270 million per annum savings have been realised.
9. Building
on this progress, additional savings targets are included in the 10-year Budget
2018-2028, consisting of total cumulative operating savings for Auckland
Council of
$565 million over the 10 years.
10. The target for the 2018/2019 financial year was $23 million, out of which $24.6 million of savings were realised. There is a further target of $23 million for the 2019/2020 financial year.
11. The savings target relates to operating expenditure. It excludes any benefit relating to capital works and cost avoidance. These benefits are tracked separately.
Tātaritanga me ngā tohutohu
Analysis and advice
12. In the six months to 31 December 2019, $10.2 million of savings have been realised, leaving a balance of $12.8 million to be realised in the second half of the financial year.
Procurement
14. Savings to date of $0.1 million have been achieved.
15. This was achieved through negotiations with MBIE for capping the administration fee for the All-of-Government (AOG) recruitment contract.
16. Procurement for the replacement of the council’s contact centre technology platform has been completed, as the current software was at the end of its life and no longer meeting our internal and external customer needs. A globally leading platform was selected using a Lean Agile Procurement Approach, which shortened the procurement timeframe from months to weeks and enabled better assessment of qualitative attributes such as cultural fit. The new platform is in the implementation phase and will allow improved customer engagement and simplified workflows for staff.
17. Work is also underway to complete the procurement for waste collection services. The new integrated waste collection model has one supplier per area providing all three waste collection services (refuse, recycling and food scraps). These contracts are expected to deliver financial benefits in the medium term and involve the implementation of electric collection vehicles which will help reduce carbon emissions, air pollution and other environmental harm.
18. A full procurement process is underway for mobile voice and data services. Given these services have similar requirements, a group strategy approach has been taken to achieve the best outcomes that can be leveraged across the council entities. This collective procurement will enable the mobile voice and data services requirements to be met at a very competitive rate and save staff time and effort across the group.
Organisational design
19. Savings to date of $5.5 million have been achieved.
20. As Auckland continues to grow, there is increasing pressure on council services and investment in infrastructure. With constraints on budgets and staffing, council remains focused on efficiency and effectiveness to ensure frontline services and delivery functions are sufficiently supported.
21. Organisational design expectations include minimisation of duplication, targeting spans of control (allowing for flexibility based on geographical challenges, risks and the nature of the service), minimisation of supervision layers and creation of a more flexible structure.
22. By the end of December 2019, change processes had been completed in six areas across the council. Key structure changes implemented include disestablishment of vacant positions, increases to spans of control by reducing middle management, and a reduction of management layers.
23. The changes contribute towards meeting the chief executive’s objectives for full-time equivalent employees (FTE) and efficiency savings. Where an employee is affected by the disestablishment of a role, we are committed to providing re-deployment opportunities where possible in addition to providing career support services. However, in some cases redundancy costs are incurred in order to generate enduring savings.
24. For the period ended 31 December 2019, salary savings of $5.5 million have been achieved from a reduction in current and planned staffing, totalling 106 FTE, for this financial year.
25. Staff cost savings have been realised from the following areas:
· Finance including ICT: $4.2 million
· People and Performance $1.0 million
· Legal & Risk: $0.3m
26. Reviews are currently underway for areas in Customer and Community Services, Regulatory Services and Governance, which are expected to deliver further savings on completion.
Technology and process improvement
27. Savings to date of $2.6 million have been achieved.
28. This was achieved primarily through process improvements in Regulatory Services.
29. As reported previously, a mobile consents inspection platform was rolled-out last year, giving inspectors new devices and tools for inspection bookings, scheduling and onsite checklists. These tools along with billing process improvements such as automated travel time charging, and cancellation fees for inspection bookings have resulted in a net favourable year end forecast of $1.0 million for the building inspections activity, representing improved productivity.
30. The Regulatory Engineering department of Regulatory Services has undertaken an in-sourcing programme to increase the number of technical engineers by 13 and reduce the reliance on external providers. Together with volume growth, this has enabled the department to forecast a net favourable year-end result of $1.5 million. More efficient and cost-effective processes are reflected in the calculation of fees and charges.
31. Further to this, the robotics process automation programme has developed two BOTs to automate steps involved in the direct debit and credit control processes for payments for membership at our swimming pools. This includes sending out reminder letters to customers who have missed payments, sending final invoice letters and flagging non-paying customers with credit control.
32. The above automations have reduced staff time and effort spent on manual data entry tasks, improved the customer experience on dealing with payment issues and allowed staff to spend more time with customers at our pools.
33. Other work underway that will be delivering benefits in the future include:
· Regulatory billing enhancements
· Dog registration renewal improvements
· Customer data improvements stage 2
· Development contributions data entry process automation
· ICT procurement request process automation
34. No specific non-rates revenue initiatives have been realised to date.
35. However, the process improvements in Regulatory Services above have led to improved billing accuracy, completeness and overall quality of information. This supported the favourable revenue result of Regulatory Services for the half-year.
36. Given the revenue increase was also a result from other factors such as an increase in volume, it is difficult to quantify the increase portion due to process improvements only.
37. The Business Opportunities Advisory Group (BOAG) at the council has been meeting regularly and discussing the non-rates revenue growth opportunities with a focus on new revenue streams. There are currently 14 commercial initiatives identified, two of which are currently in delivery phase, and the rest are mostly at the ideation and planning stage.
38. These initiatives have the potential to generate additional non-rates revenue in future financial years upon completion.
Prudent financial management
39. Savings to date of $2.0 million have been achieved.
40. This is primarily due to a continued focus on controlling costs through a culture of questioning and challenging all expenditure.
41. Specific initiatives include:
· Improved workforce planning and reporting
· Monitoring and reporting against sensitive spend such as professional services
· Tracking project spend closely and return of any underspend
42. The savings have been achieved primarily across the Finance, Planning and Governance functions.
43. This workstream also captures the savings resulted from minor technology and procurement process improvements that are not captured under specific workstreams.
Value for Money
44. A separate item on the Value for Money s17A programme is included in the agenda for this meeting.
Tauākī whakaaweawe āhuarangi
Climate impact statement
45. Several completed savings initiatives and initiatives in the pipeline consider climate change impacts and deliver non-financial benefits such as reducing carbon emissions and improving the environment.
Ngā whakaaweawe me ngā tirohanga a te rōpū Kaunihera
Council group impacts and views
46. The savings target for 2019/2020 currently only applies to Auckland Council. The council-controlled organisations (CCOs) have their own internal targets.
47. However, new tools and process improvements successfully implemented in Auckland Council can potentially be introduced to the CCOs for greater efficiencies and other benefits.
Ngā whakaaweawe ā-rohe me ngā tirohanga a te poari ā-rohe
Local impacts and local board views
48. The centralised savings approach has been set at a regional level. None of the initiatives delivered or in delivery have specific impacts on local board service levels.
Tauākī whakaaweawe Māori
Māori impact statement
49. The savings initiatives delivered or in delivery have no specific impact on Māori outcomes.
Ngā ritenga ā-pūtea
Financial implications
50. This report provides visibility on how council is performing against its savings target which supports meeting the annual budget for 2019/2020.
51. There are financial implications on the annual budget if the savings target is not met for 2019/2020. This may result in slightly higher debt levels and will have flow on effects through to financial year 2020/2021.
52. Any additional budget pressures may also result in additional savings being required.
Ngā raru tūpono me ngā whakamaurutanga
Risks and mitigations
53. Some of the initiatives in the savings pipeline are active projects currently being delivered. As with any project there are risks to delivery including resource availability, competing priorities and technical dependencies.
54. Ongoing structural changes across the council may also have an impact on business led project delivery and prioritisation, increasing risks of not realising savings in the pipeline.
55. Progress of these initiatives are monitored and reported regularly within the savings reporting project overview group.
Ngā koringa ā-muri
Next steps
56. The next update will be provided after the council’s quarter three results are finalised.
Attachments
There are no attachments for this report.
Ngā kaihaina
Signatories
Author |
Tracy Xu - Senior Analyst |
Authorisers |
Pramod Nair - Head of Group Financial Planning Nicola Mills - General Manager Financial and Business Performance Matthew Walker - Group Chief Financial Officer |
Value for Money Committee 20 February 2020 |
|
Exclusion of the Public: Local Government Official Information and Meetings Act 1987
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 Review of operating model for council maintenance services
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 |
The public conduct of the part of the meeting would be likely to result in the disclosure of information for which good reason for withholding exists under section 7. |
s7(2)(h) - The withholding of the information is necessary to enable the local authority to carry out, without prejudice or disadvantage, commercial activities. In particular, the report contains commercially sensitive information. |
s48(1)(a) The public conduct of the part of the meeting would be likely to result in the disclosure of information for which good reason for withholding exists under section 7. |