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Audit and Risk
Committee
22 February
2021
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Auckland
Council's health, safety and wellbeing (HSW) performance
File No.: CP2021/01399
Te take mō te
pūrongo
Purpose of the report
1. To
update the committee on Auckland Council’s health, safety and wellbeing
(HSW) performance.
Whakarāpopototanga matua
Executive summary
2. During
the period December 2020 – January 2021, four events were notified to
WorkSafe, one of which WorkSafe have advised they shall investigate.
3. Lost
Time Injuries to employees reduced over the 2020 calendar year.
4. Auckland
Council is maintaining its capacity to respond to changes in COVID-19 Alert
Levels.
5. Reflecting
the increased focus on health, safety and wellbeing the Executive Leadership
Team and union representatives are meeting monthly as part of the new internal
Corporate Health, Safety and Wellbeing Committee.
6. Work
has commenced on council’s internal Mental Wellbeing Review. This review
looks at council’s policies, processes and procedures regarding mental
wellbeing and will make recommendations as to how council may better support
the mental wellbeing of employees.
7. Safe
365, our mechanism to assure elected members and senior managers that council
is meeting its various health, safety and wellbeing obligations, indicates a
strong focus on driving improvements in 2019 but was static in 2020. Council
remains just below its targeted level.
8. As
part of being in the Accident Compensation Corporation (ACC) Accredited
Employers Program (AEP) an annual audit was due to be conducted in October 2020
and was delayed until early February 2021 due to COVID-19 impacts. This audit
has now been undertaken. We will receive the audit report from ACC by March
2021.
9. A workshop has been scheduled with the Audit and Risk Committee on
22 February 2021. This will provide an opportunity for more discussion and
detail to the committee
Ngā tūtohunga
Recommendation/s
That the Audit and Risk
Committee:
a) note
the summary and organisational responses in the report and refer this report to
the Governing Body of Auckland Council along with any commentary the committee
thinks appropriate.
b) forward the report to Local Boards for their information.
Horopaki
Context
10. This
report provides information to enable the committee to provide objective advice
and recommendations to the Governing Body on the adequacy and functioning of
the council’s Health, Safety and Wellbeing risk management system.
Tātaritanga me ngā
tohutohu
Analysis and advice
COVID-19
11. Auckland Council is maintaining its focus as part of the ongoing all
of government response to COVID-19 on:
· ensuring hygiene requirements
· staff remaining home when sick
· encouraging staff to be tested when they have symptoms
· enabling track and tracing in council buildings for both staff and
customers.
12. Procedures
for appropriate closing and deep cleaning are in place and subject to regular
drills should a staff member or customer test positive for COVID-19.
13. During
January 2021 council supported the Ministry of Health
in their management of COVID-19 being found within the community. Land and
facilities were made available for pop up testing sites at Orewa and Albany.
14. Council staff who were
“contacts of contacts” or who were present in locations defined by
the Ministry of Health were impacted by requirements to remain at home and be
tested.
Organisation and culture
15. The
Executive Leadership Team have formed a Corporate Health, Safety and Wellbeing
Committee. This committee meets monthly and includes participation by union
representatives.
16. Communications
with staff at all levels across the organisation is highlighting the
significance of health, safety and wellbeing. The increased focus reflects
concerns associated with the implications of COVID-19 for our employees.
17. Following
a review, additional staff will be recruited, initially at least filling
current vacancies, to support the development and delivery of health, safety
and wellbeing programmes.
18. As
part of the requirements associated with being a member of the ACC Accredited
Employer Program (AEP), the council’s health and safety policies and
practices together with council’s processes to manage injuries was the
subject of an external audit in early February 2021. ACC agreed to delay the
audit from its scheduled October 2020 due to the impact on council of COVID-19.
The next audit is currently scheduled to be in October 2021.
19. This
audit involved extensive work being undertaken across all Departments of
council. The outcome is expected to be known by March 2021.
20. Following
a procurement process the council has adopted a new provider of Employee
Advisory Services (EAP). The new provider, Instep, commenced on 1 February
2021. These EAP services enable employees from across the Council Group to
access a range of wellbeing and wellness assistance.
21. Over
the period of September 2020 to December 2020 two new training programs have
been introduced.
i) An
e-learning program dealing with health and safety that is compulsory for all
people managers.
ii) An
e-learning program aimed at providing skills to improve the management of
wellbeing.
22. Many
council activities and projects are delivered via contractors. This is a
significant area of risk for council. A review led by the Chief Engineer
is underway with the focus being on identifying means to ensure strong health
and safety practices via improved contractor management. Initial outcomes of
the review are expected by March 2021.
Mental Wellbeing Review
23. As an employer of over 6,000 staff, Council can expect that at any
time, there are a number of staff members experiencing mental wellbeing issues, including issues unrelated to work.
24. Council
employees work on a diverse range of matters. This work may involve contentious
issues, engagement with internal and external stakeholders, members of the
public as well as the media.
25. For
many years the council has recognised staff mental wellbeing as an issue and
has responded via the provision of appropriate services as well as policies,
processes and procedures.
26. The
Chief Executive, in light of concerns around recent unexpected deaths, has
commissioned a review into such services, policies, processes and procedures
and to consider whether changes would be appropriate.
27. The
review has commenced with draft recommendations scheduled to be presented to
the Chief Executive by 31 March 2021. The outcomes of the review will be made
public.
Assurance
28. In
order to provide assurance that council is meeting its various health, safety
and wellbeing obligations it has implemented Safe 365, an online software
application that provides each business unit with a system to assess, improve
and monitor their health and safety performance on an ongoing basis.
29. Safe
365 allows Council to focus on various key health and safety management areas including:
· Director, management
and worker knowledge
· Audit and
verification
· Emergency
preparedness
· Health and safety
data collection
· Management reporting
· Workforce engagement
· Safety culture and
behaviours.
30. The
primary output from the ongoing safety assessments conducted by each business
unit is a “Safety Index” that enables directors and senior
management to meet their due diligence requirements outlined in
legislation.
31. The
Safety Index changes over time to reflect improvements undertaken within
departments and across council as a whole. As changes are recorded over time,
the Safe 365 Safety Index moves
to reflect those changes, providing our people leaders with visibility of
health and safety progress within their organisation.
32. During
2019 the Safe 365 Index moved from 50 per cent to 61 per cent reflecting a
strong focus on driving improvements.
33. However,
our aggregated YTD Safe 365 Index result for 2020/2021 is currently 61 per cent
- less than our target of 65 per cent. The Corporate Health, Safety
and Wellbeing team is reviewing the collation of data for the aggregated
dashboard and will provide an update in March 2021.
34. The Safe 365 system also allows the
council to benchmark our Safety Index performance relative to a range of
industry sectors. Overleaf is the monthly graph which indicates
council’s position compared to other users of Safe 365:
Action planning
35. Safe
365 is an important basis for prioritising areas to improve – both within
individual business units as well as the organisation overall.
36. Our current Action Plan with
respect to the overall organisation is as follows:
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Quarter
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Action
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January - March 2021
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Mental
wellbeing: review of assistance as well as policies and procedures
Contractor
management: review of ensuring health and safety
People
managers: deployment of enhanced training
Risk
and incident recording system: replacement of existing system (Risk Manager)
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April - June 2021
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Profiling
health, safety and wellbeing risks and identification of critical risks
Risk
and incident recording system: replacement of existing system (Risk Manager)
Worker
engagement and participation: deployment of means to enhance and ensure
consistent engagement at local level
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July – September 2021
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Working
from home: review policies and procedures to support health, safety and
wellbeing.
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37. Our
Action Plan will be subject to ongoing review.
Working from home
38. Auckland
Council provides for ‘flexible working’ where appropriate, and
staff may work from home according to the needs of the individual, the team and
the organisation.
39. Within
council’s corporate office buildings occupancy levels have significantly
reduced during the latter part of 2020 under COVID-19 Alert Level 1 conditions.
This reflects council’s enhanced capability to support working from home
developed in response to COVID-19.
40. The
experience with a low proportion of office-based staff choosing to work at
their normal place of work is considered to have been detrimental to teamwork,
team dynamics and the mentoring and development of new talent.
41. The
reduced level of social and informal connection has been identified via staff
surveys to have an adverse impact on wellbeing as well as a sense of belonging
and connection to Auckland Council.
Notifiable Incidents
42. Three incidents have been
notified to WorkSafe in the period November 2020 to January 2021 as detailed in
the table below.
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#
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Incident Details
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Location
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Status
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1
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Person broke
through roof skylight
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Otahuhu town
hall and community centre
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Subject to
internal investigation, WorkSafe have advised they will take no
action
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2
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Unexpected
death
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Under
investigation by WorkSafe
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3
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Ride on mower
roll over
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Chamberlain
Park Golf Course (see photo)
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Subject to
internal investigation, WorkSafe have advised they will take no
action
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4
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Ducting
collapse
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Moana Nui a
Kiwi Leisure Centre Mangere (photo attached)
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Subject to
internal investigation, WorkSafe have advised they will take no
action
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5
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Spectator hit
by rock
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Maungauika /
North Head
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Subject to
internal investigation, WorkSafe have advised they will take no
action
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Ride
on mower roll over (point 3)
Ducting
collapse (point 4)
Key metrics
43. Lag
indicators
i) Lost
time injury numbers reported in Risk Manager have been found to be unreliable
as the data relies on people leaders updating Risk Manager when the injury
status of an accident occurs.
ii) The
above data is drawn from our ACC Accredited Partner Programme contractor WellNZ
and presents an accurate 12 month rolling frequency rate.
iii) Please
note that the frequency rate for November and December are based on estimated
hours worked as the data was not available from Payroll at the time this report
was compiled.
iv) Lost
time injury frequency rate has stabilised at 6.5.
44. Incidents
reported and status
i) While
incident reporting has continued at a good level in December 2020 the number of
incident reports which are overdue for closure has increased since the focus on
incident closure in September 2020.
45. Actions
raised and status
i) The
number of actions identified remains at a very low level compared to the number
of incidents reported, and the closure of actions indicates that few of them
are being completed. The best way to address this issue is currently being
evaluated following the temporary impact of the September 2020 focus
46. Lead
Indicators
i) Due
to the deficiencies in the Risk Manager system, since September 2020 all
incidents reported have been categorised in a stand-alone spreadsheet allowing
for analysis of the incidents reported. As a result, positive indicators such
as hazards identified and near misses can now be reported.
ii) The
deficiencies in the Risk Manager system include the inability to categorise the
incidents against the recently established list of council risks and the
inability to separate the approximately 50 per cent of incidents logged as not
work related or not related to health, safety or wellbeing.
iii) That
analysis has found that approximately half of the incidents logged in Risk
Manager are not health, safety or wellbeing related, with most of those non
health, safety or wellbeing incidents being security related.
iv) This
graph includes the top risks identified by hazard ID incident reports.
v) In
December 2020 there were a number of stress related incidents reported in Parks
Services which are understood to be related to business changes and the peak
summer season.
47. Staff
injuries
i) Auckland
Council is a member of the Accident Compensation Corporation (ACC) Accredited
Employers Programme (AEP).
ii) This
programme permits council to manage injuries incurred by staff who would
otherwise be managed directly by ACC. If managed efficiently costs to council
associated with injuries to staff are reduced. The cost impact of being in the
AEP will be evaluated after the close of the ACC financial year which ends on
March 31 2021.
iii) Council
has contracted out this management to a firm known as WellNZ.
iv) The
following summarises the impact of staff injuries for the 2020 year.
v) The
cost of work injuries follows the same pattern as the count of number of days
lost, as the major component of injury cost is paying for people’s weekly
compensation while they are away from work.
vi) Top
20 Injuries for the last 12 months by days lost – see table below:
Tauākī whakaaweawe
āhuarangi
Climate impact statement
48. The
continuation of high levels of working from home has increased the overall
energy consumption associated with work performed by council.
Ngā whakaaweawe me
ngā tirohanga a te rōpū Kaunihera
Council group impacts and views
49. This
report is based on council activities only and does not provide a group-wide
view.
Ngā whakaaweawe
ā-rohe me ngā tirohanga a te poari ā-rohe
Local impacts and local board views
50. Local
boards are aware of the changing environment and financial impact on council.
Tauākī whakaaweawe
Māori
Māori impact statement
51. No additional Māori impact.
Ngā ritenga
ā-pūtea
Financial implications
52. We
have gained agreement from the relevant Finance Department staff that there are
no additional financial implications in this report.
Ngā raru tūpono me
ngā whakamaurutanga
Risks and mitigations
53. The
risk of non-compliance with health and safety is recorded in the council’s
top risk register. This risk register entry details the controls and
mitigations in place.
Ngā koringa ā-muri
Next steps
54. The
following actions will be undertaken:
a) Actions identified by the external ACC AEP audit
will be addressed and the action plan modified to ensure resourcing is
appropriate
b) Safe 365 will be reviewed including
re-organising the dashboards to reflect the changed divisional and department
structures and ensuring that the aggregated scoring system reflects those changes.
c) Injuries and associated statistics will be
monitored to identify areas of improvement, and the statistics used will
continue to be refined to better reflect our performance
Ngā tāpirihanga
Attachments
There are no attachments for
this report.
Ngā kaihaina
Signatories
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Author
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Ian Maxwell – General Manager Health, Safety and
Wellbeing
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Authorisers
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Patricia Reade - Director of Group Services
Phil Wilson – Director, Governance & CCO Partnerships
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Audit and Risk
Committee
22 February
2021
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|
Significant
forecasting assumptions update for 10-year Budget 2021-2031
File No.: CP2021/00907
Te take mō te
pūrongo
Purpose of the report
1. To
provide oversight of the approach used to update the key COVID-19 related
significant forecasting assumptions that will be used to refresh financial
projections for the council group’s final 10-year Budget 2021-2031
(council’s long-term plan or LTP).
Whakarāpopototanga matua
Executive summary
2. Disruption
from the COVID-19 situation is adversely impacting many revenue streams for the
council group as well as affecting the delivery of capital projects. Because
there is not yet clarity on the severity, duration or longer-term impacts of
this disruption, the quantum of the financial implications for the council
group remains highly uncertain.
3. In
September 2020 the council’s Financial Strategy and Planning department
coordinated work on some COVID-19 impact scenarios to provide guidance on the
potential financial implications. Staff across the council group used this
information in developing their draft asset management plans, budgets and
capital programmes for the 10-year Budget 2021-2031.
4. Given
the continued high levels of uncertainty staff consider it prudent to continue
to take a scenario-based approach to developing these forecasting assumptions,
with three scenarios as follows:
· optimistic
scenario
· pessimistic
scenario
· balanced
scenario.
5. It
is important that final budget decisions for the 10-year Budget 2021-2031 are
informed by the latest budget information. To support this, council departments
and council-controlled organisations (CCOs) will refresh their draft budgets,
capital programmes and asset management plans over February and March 2021.
6. The
scenarios and associated assumptions were reviewed by staff from the Financial
Strategy and Planning department alongside the Chief Economist. Information
from various external organisations, such as financial institutions, was drawn
on to support the review.
7. Minor
changes have been made to our assumptions around COVID-19 related New Zealand
border restrictions. Given progress around vaccine development and rollout our
expected border opening dates have moved forward six months in the optimistic
and balanced scenarios. We have, however, looked to account for the fact that
the borders are likely to reopen gradually, with trusted partners at first.
8. Given
the updated assumptions around border restrictions and better-than-expected
economic results to date staff consider that the overall economic picture is
likely to be marginally better than we had projected in September 2020. These
changes are not, however, significant or likely to materially impact the cost
and revenue projections of the council group.
9. Staff
from both the council departments and the CCOs will use these COVID-19 related
forecasting assumptions to update their asset management plans, capital
programmes and budgets for consideration by the Finance and Performance
Committee.
10. The Audit and
Risk Committee is responsible for oversight of the methodology to develop the
assumptions for the 10-year Budget 2021-2031 to ensure they are complete,
reasonable and supportable. This responsibility was outlined in the Risk
Management and Assurance Approach for the Long-Term Plan 2021-2031 report
provided to the Audit and Risk Committee on 24 August 2020.
11. The 10-year
Budget 2021-2031, including the significant forecasting assumptions, is subject
to audit review. Amongst other things, the Office of the Auditor General will
be interested in the forecasting assumptions Auckland Council uses to assess
the impact of COVID-19 on its financial position.
12. Staff will
continue to monitor the data sources used to develop these assumptions in case
there are any significant changes that require the assumptions to be revised.
As part of this continual review staff met on 18 February 2021 to consider the
impacts of Auckland’s brief period in February 2021 at alert level 3 and
agreed that assumptions do not need to be changed.
13. Staff will
also report to Audit and Risk Committee on the full set of significant
forecasting assumptions as part of the LTP process prior to the Governing Body
adopting the final LTP.
Ngā tūtohunga
Recommendation/s
That the Audit and Risk
Committee:
a) note
that the extent of the impacts of the disruption from the COVID-19 situation
remain highly uncertain and therefore the financial implications for the
council group are also highly uncertain.
b) agree to
advise the Finance and Performance Committee that the methodology used to
update the COVID-19 related significant forecasting assumptions for the 10-year
Budget 2021-2031 continues to be complete, reasonable and supportable given the
uncertainty.
Horopaki
Context
14. The Audit and
Risk Committee is responsible for oversight of the methodology to develop the
assumptions for the 10-year Budget 2021-2031 to ensure they are complete,
reasonable and supportable. This responsibility was outlined in the Risk
Management and Assurance Approach for the Long-Term Plan 2021-2031 report
provided to the Audit and Risk Committee on 24 August 2020.
15. The 10-year
Budget 2021-2031, including the significant forecasting assumptions, is subject
to audit review. Amongst other things, the Office of the Auditor General will
be interested in the forecasting assumptions Auckland Council uses to assess
the impact of COVID-19 on its financial position.
Tātaritanga me ngā
tohutohu
Analysis and advice
16. Disruption
from the COVID-19 situation is adversely impacting many revenue streams for the
council group as well as affecting the delivery of capital projects. Because
there is not yet clarity on the severity, duration or longer-term impacts of
this disruption, the quantum of the financial implications for the council
group remains highly uncertain.
17. The longer
the COVID-19 situation continues, the more significant and varied the impacts
and consequences.
18. In September
2020 the council’s Financial Strategy and Planning department coordinated
work on COVID-19 impact scenarios to provide guidance on the potential
financial implications. Staff across the council group used this information in
developing their draft asset management plans, budgets and capital programmes
for the 10-year Budget 2021-2031.
19. These initial
scenarios and assumptions were presented to the Audit and Risk Committee on 14
October 2020 and the committee agreed to advise the Finance and Performance
Committee that the methodology used to develop the COVID-19 related significant
forecasting assumptions for the 10-year Budget 2021-2031 was complete,
reasonable and supportable given the uncertainty.
20. These assumptions form part of a broader set of
significant forecasting assumptions which are required to be included in the 10-year
Budget 2021-2031. The remaining
assumptions were developed as the LTP process progressed, drawing on new
information from internal and external sources. The full set of LTP assumptions
are included in the Consultation Document and Supporting Information for
adoption by the Governing Body on 18 February 2021. The Audit and Risk
Committee considered the controls around these assumptions and the three key
assumptions not related to COVID-19 (climate change, water reform, and
government funding of transport) on 9 February 2021.
21. The Audit and
Risk Committee has a key role to play in ensuring that the council is in a
position to make sound decisions based on robust assumptions. To support the
committee in this role, this report outlines the methodology and information
sources used in updating the COVID-19 related forecasting assumptions that have
been provided to the council departments and CCOs.
COVID-19 impact scenarios
22. Given the
continued high levels of uncertainty staff consider it prudent to continue to
take a scenario-based approach to developing these forecasting assumptions,
with three scenarios as follows:
· optimistic
scenario
· pessimistic
scenario
· balanced
scenario.
Initial scenarios
23. The initial
scenarios were presented to the Audit and Risk Committee on 14 October 2020.
24. The Financial
Strategy and Planning department worked with various council departments
including the Chief Economist and the Auckland Plan Strategy and Research
department to develop these scenarios. Information from Treasury and other
financial institutions was also used in developing these scenarios.
25. The initial
optimistic scenario was largely aligned with the main scenario used by Treasury
for the pre-election economic and financial update (PREFU). The Treasury
scenario made no allowance for further lockdowns or an extended time with
borders closed. In effect, it presented
the most optimistic scenario where there are no further negative events in New
Zealand due to COVID-19, and relatively rapid border openings. Therefore, any
alternative scenario is likely to be more pessimistic.
26. Staff also developed a significantly more
pessimistic scenario, with borders closed for longer and six weeks of further
lockdowns at level 3 or 4. It assumed that in such an event, a wage subsidy
similar to that seen in wave one would be provided, which would stop
unemployment from rising even more sharply than it would under this
border/lockdown scenario. It is worth noting that this is not the most
pessimistic scenario possible, but the staff view at that time was that the
number of full lockdowns would be limited before a different approach to the COVID-19
situation was taken.
27. Due to the
high levels of uncertainty around the two alternative scenarios (optimistic and
pessimistic) staff also prepared initial assumptions based on a balanced
scenario in between the optimistic and pessimistic scenarios. The balanced
scenario also reflected council’s low appetite for financial risk.
28. The balanced scenario did not assume the best
possible outcome, but also did not assume any further lengthy lockdowns, with
only a delay in borders reopening. The delay in opening the borders meant the
region would not get the post-reopening migration surge that drives economic
growth until financial years 2023/2024 and 2024/2025.
29. The three
scenarios were distributed by the Financial Strategy and Planning department to
council departments and CCOs on 24 September 2020 to support the preparation of
draft budgets, capital programmes and asset management plans.
30. Alongside the
core information around COVID-19 impacts such as future lockdowns and border
controls, the scenarios included projections around:
· the
economy (unemployment, inflation, and economic growth)
· people
and houses (migration, residential and commercial growth in rateable units)
· travel
and events (international travel, major events)
· behavioural
trends (working from home, reluctance to gather).
31. Detailed,
year by year, projections for economic and growth factors were included for the
balanced scenario to support cost and revenue modelling and budget preparation.
32. A number of
questions were also included for council departments and CCOs to consider the
impacts of such as:
· How
long before we return to pre-COVID-19 public transport patronage?
· What
limitations will we experience in our supply chains?
· What
are the consequences on their services if the workforce (including our
workforce) shifts to a largely work from home basis?
· If
New Zealand becomes a ‘safe haven’, what are the rewards and
consequences of this?
· How
are elderly and vulnerable people affected in the long-term if they are forced
to isolate from the rest of the community? Would this affect how they use our
services?
Review of scenarios and COVID-19 related assumptions
33. It is
important that final budget decisions for the LTP are informed by the latest
budget information. To support this council departments and CCOs will refresh
their draft budgets, capital programmes and asset management plans over
February and March 2021.
34. The scenarios
and associated assumptions were reviewed by staff from the Financial Strategy
and Planning department alongside the Chief Economist. Information from various
external organisations, such as financial institutions, was drawn on to support
the review.
35. In reviewing
the scenarios staff considered a number of factors such as:
· the
apparent success so far of managing COVID-19 in New Zealand (resulting in no
further prolonged lockdowns since the scenarios were first prepared)
· emerging
news about vaccine development, approval and roll-out
· the
emergence of new COVID-19 strains abroad
· better
than expected economic and unemployment results
· the
re-emergence of COVID-19 in Australia resulting in periodic, localised
lockdowns.
36. In weighing
up the above factors staff considered that the assumptions used in the preparation
of the Consultation Document and Supporting Information remained largely sound.
Some factors, however, have been updated to reflect a slightly more optimistic
position.
37. The updated
scenarios were distributed by the Financial Strategy and Planning department to
council departments and CCOs on 8 February 2021. This information was also
shared on the council’s LTP 2021-2031 intranet page.
38. Staff met
again following the brief period at level 3 in February 2021 and the
announcement of a move to level 2 from 18 February 2021. The consensus was
that, without a prolonged further period at level 3 or level 4, the assumptions
distributed do not need to be changed.
Alert levels and border restrictions
39. Minor changes
have been made to our assumptions around COVID-19 related New Zealand border
restrictions. Given progress around vaccine development and rollout our
expected border opening dates have moved forward six months in the optimistic
and balanced scenarios. We have, however, looked to account for the fact that
the borders are likely to reopen gradually, with trusted partners at first.
40. Under the
optimistic scenario we had assumed borders will open on 1 January 2022. For
this scenario we now assume that some restrictions would be removed from 1 July
2021, with all restrictions removed from 1 January 2022.
41. Under the
balanced scenario we had assumed that borders would open on 1 January 2023. We
now assume that borders will be substantially open by 1 July 2022, with no
restrictions from 1 January 2023.
42. The
pessimistic scenario assumed two further 3-week lockdowns (one in 2020/2021 and
one in 2021/2022) and borders closed to 1 July 2023. While New Zealand is
generally seen as successful in managing COVID-19 at the border, recent events
(such as those related to the Pullman Hotel) have shown that the virus can
enter the community and further lockdowns are possible. As such it is important
that the council continues to undertake sensitivity analysis that considers
this possibility. This scenario has, therefore, not been changed.
Economic assumptions
43. Given the
updated assumptions around border restrictions alongside better-than-expected
economic results to date, staff consider that the overall economic picture is
likely to be marginally better than we had projected in September 2020. These
changes are not, however, significant or likely to materially impact the cost
and revenue projections of the council group.
44. Modelled
projections indicate slightly improved projections around unemployment and
economic growth but no change to the projected inflation path.
45. Unemployment
figures to date are below where they had been projected to be at the time our
initial assumptions were prepared. Modelling by our Chief Economist now has the
unemployment rate (based on Jobseeker numbers) for financial year 2020/2021,
under our optimistic and balanced scenarios, 1.5% lower than we had assumed in
September 2020. Additionally we now project the rate to fall to 4% two years
earlier under the optimistic scenario and one year earlier under the balanced
scenario.
46. While the
overall patterns expected in economic growth have not changed, the expected
year-on-year growth under the balanced scenario for the current year is now
projected to be 1% rather than -2% in our initial assumptions. Growth
projections for financial years 2021/2022 and 2022/2023 have also improved by
0.4% and 0.5% respectively.
Other COVID-19 related assumptions
47. Following
from the assumptions around border restrictions, indications around migration
under the optimistic and balanced scenarios have been moved forward. Given the
level of uncertainty, however, detailed growth and population projections have
not been updated.
48. When the
initial scenarios were prepared it was assumed that there would be no
international events until the borders were opened, and that only few domestic
events would occur in the interim. This has proven to be incorrect with some
international events going ahead including rugby test matches and cricket tours.
Additionally, domestic events appear to be largely going ahead including sports
seasons and events, music festivals, and community and cultural events. Our
scenarios have therefore been updated to assume limited international events
prior to borders opening and a broad allowance of domestic events (except under
the pessimistic scenario where events will be limited by lockdowns and the
weaker economy).
49. Under
behavioural trends our initial scenarios looked at growth in working from home
and at people’s reluctance to gather, to protect against transmission. It
is still too early to identify trends around working from home, but some
anecdotal evidence is that workers are gradually moving back to offices. While
following the initial national lockdown and the later August 2020 Auckland
lockdown the public seemed reluctant to congregate in large groups, this seems
to have largely disappeared. Our balanced scenario has therefore been updated
to remove the reference to a “cautious approach” and assume
pre-COVID-19 levels of gatherings subject to changing patterns (noting current
down-turn in the night-time economy).
Tauākī whakaaweawe
āhuarangi
Climate impact statement
50. There is no
climate impact from the recommendations of this report.
51. The council
departments and CCOs will update their budgets and capital programmes based on
these assumptions. The climate change impacts will be considered as part of the
10-year Budget 2021-2031 process.
Ngā whakaaweawe me
ngā tirohanga a te rōpū Kaunihera
Council group impacts and views
52. This report
considers the process by which the key COVID-19 related forecasting assumptions
have been updated with expertise from within the council group and external
sources. The council departments and CCOs will update their draft budgets and
capital programmes based on these assumptions for consideration by the Finance
and Performance Committee as part of the 10-year Budget 2021-2031 process.
Ngā whakaaweawe
ā-rohe me ngā tirohanga a te poari ā-rohe
Local impacts and local board views
53. There are no local impacts associated with the
recommendations of this report.
54. The council
departments and CCOs will update their budgets and capital programmes based on
these assumptions. The local impacts will be considered by the Finance and
Performance Committee as part of the 10-year Budget 2021-2031 process.
Tauākī whakaaweawe
Māori
Māori impact statement
55. There are no
impacts for Māori associated with the recommendations of this report.
56. The council
departments and CCOs will update their budgets and capital programmes based on
these assumptions and considerations. The impacts for Māori will be
considered by the Finance and Performance Committee as part of the LTP
2021-2031 process.
Ngā ritenga
ā-pūtea
Financial implications
57. There are no
financial implications associated with the methodology to develop COVID-19
related scenarios and assumptions.
58. The financial implications of the resulting
budget projections will be discussed as part of the 10-year Budget
2021-2031 process once the assumptions have
been used to prepare those projections.
Ngā raru tūpono me
ngā whakamaurutanga
Risks and mitigations
59. The
uncertainty of the COVID-19 situation for the council group is the subject of
this report and its attachments.
60. The updated significant
forecasting assumptions based on the balanced scenario provide a reasonable and
supportable basis for the council departments and CCOs to refresh their budgets
and capital programmes for consideration by the Finance and Performance
Committee as part of the 10-year Budget 2021-2031 process.
61. Staff will
continue to monitor the data sources used to develop these key assumptions in
case there is a significant change.
62. The Audit and
Risk Committee plays a key role in maintaining oversight and advising the
Finance and Performance Committee on the management of these financial risks
and the associated compliance matters, including whether or not a robust
process has been followed.
63. The risks
associated with the LTP process are being actively managed and mitigated
through the LTP process and governance arrangements. The key risks and
mitigations are regularly reported to this committee.
Ngā koringa ā-muri
Next steps
64. Staff from
both the council departments and the CCOs will use these COVID-19 related
forecasting assumptions to update their asset management plans, capital
programmes and budgets for consideration by the Finance and Performance
Committee.
65. Staff will
continue to monitor the data sources used to develop these assumptions in case
there are any significant changes that require the assumptions to be revised.
Staff will also report to Audit and Risk Committee on the full set of
significant forecasting assumptions as part of the LTP process prior to the
Governing Body adopting the final LTP.
Ngā tāpirihanga
Attachments
|
No.
|
Title
|
Page
|
|
a⇩
|
Updated COVID-19 Assumptions
|
27
|
Ngā kaihaina
Signatories
|
Authors
|
Michael Burns - Manager Financial Strategy
Pramod Nair - Head of Group Financial Planning
Ross Tucker - General Manager, Financial Strategy and
Planning
|
|
Authorisers
|
Peter Gudsell - Group Chief Financial Officer
Phil Wilson – Director, Governance & CCO
Partnerships
|
