I hereby give notice that an ordinary meeting of the Value For Money Committee will be held on:

 

Date:

Time:

Meeting Room:

Venue:

 

Thursday, 18 November 2021

10.00am

This meeting will be held remotely and a recording of the meeting will be available on the Auckland Council website:
https://www.aucklandcouncil.govt.nz/about-auckland-council/how-auckland-council-works/meetings-council-bodies/Pages/webcasts-council-meetings.aspx

 

Kōmiti Tiaki Pūtea / Value for Money Committee

 

OPEN AGENDA

 

 

 

 

MEMBERSHIP

 

Chairperson

Cr Desley Simpson, JP

 

Deputy Chairperson

Cr 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

 

 

(Quorum 4 members)

 

 

 

Duncan Glasgow

Kaitohutohu Mana Whakahaere /

Governance Advisor

 

12 November 2021

 

Contact Telephone: (09) 890 2656
Email: duncan.glasgow@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.

 

 

Code of conduct

 

For information relating to Auckland Council’s elected members code of conduct, please refer to this link on the Auckland Council website - https://www.aucklandcouncil.govt.nz/about-auckland-council/how-auckland-council-works/elected-members-remuneration-declarations-interest/Pages/elected-members-code-conduct.aspx

 

 


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

18 November 2021

 

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                                                                                                8

8          Value for Money Update                                                                                                9

9          Auckland Council savings progress for the period ended 30 September 2021   15

10        'Optimise our Service Outcomes' Value for Money Committee Update               19

11        Forward Work Programme - Value for Money Committee                                      35

12        Consideration of Extraordinary Items

 


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 Value for Money Committee:

a)         confirm the ordinary minutes of its meeting, held on Thursday, 20 February 2020, 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.”


Value for Money Committee

18 November 2021

 

Value for Money Update

File No.: CP2021/16752

 

  

 

Te take mō te pūrongo

Purpose of the report

1.       To note the progress made on delivering increased value for money outcomes for Auckland Council.

Whakarāpopototanga matua

Executive summary

2.       The Value for Money Committee has not met since February 2020. Although the committee has not met, Value for Money remains a key focus for Auckland Council and the Finance and Performance Committee received value for money updates during the 2020/2021 financial year.

3.       COVID-19 presents challenges for the council, but the drivers for demonstrating value for money are largely unchanged. 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, growth infrastructure provision and environmental degradation)

·    improving community trust and confidence in council’s financial management.

4.       The response to COVID-19 required a focus on short-term cost savings to achieve the budget targets.  While this focus continues, there are also programmes of work to review and challenge current service delivery models, achieve tighter integration across the group and to drive improved cost-effectiveness.

5.       The key Value for Money highlights since February 2020 include:

·    savings since amalgamation. Cumulative savings of $1.9 billion have been realised so far across financial years 2011/2012 to 2019/2020. If these savings had not been made, the total rates requirement would have been 14 per cent higher over these years.

·    savings in response to Emergency Budget. Exceeding the $120 million savings target in 2020/2021 and establishing $90 million savings target for 2021/2022 and annually for the duration of the 10-year Budget 2021-2031. Council-controlled organisations (CCOs) had their own savings targets.

·    group procurement savings. COVID-19 brought significant change and disruption to group procurement in 2020/2021. From a results perspective, the Group has delivered $63 million of procurement benefits in 2020/2021.

·    asset recycling. Programme established to realise capital from non-service assets.

·    CCO Review implementation. The CCO Review panel included ‘value for money’ as one of their evaluation criteria. Many of the recommendations will improve effectiveness and some such as the creation of Auckland Unlimited will also improve efficiency.  A feasibility study is being developed for back-office shared services for the group.

·    optimise our service outcomes. Focused on Auckland Council this is consideration of the services council delivers and the best delivery model. This work contributes to the savings targets mentioned above.

 

6.       The previous value for money programme (planned to be temporary) has been replaced by the creation of a value for money department (permanent) to champion value for money opportunities across the group. This reflects the importance to continually improve the value for money from council’s services and assets.

Ngā tūtohunga

Recommendation/s

That the Value for Money Committee:

a)      note the update on value for money activity across the Auckland Council group since February 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.       Value for money is more than cost savings. Value for money is about efficiency and effectiveness which from a local government perspective, value can be viewed through the four well-beings (cultural, economic, environmental, and social).  The Office of the Auditor-General, defined ‘value for money’ as:

“… using resources effectively, economically, and without waste, with due regard for the total costs and benefits of an arrangement, and its contribution to the outcomes the entity is trying to achieve.”

9.       While COVID-19 presents challenges for the council, the drivers for demonstrating value for money are unchanged. These drivers include:

·    political drive to demonstrate and communicate that council provides good value for money

·    management drive to achieve tangible savings and good practice to continually review cost effectiveness

·    macro financial challenges faced by council (transport, growth infrastructure, climate adaptation, environmental) which have been exacerbated by COVID-19

·    statutory requirements of section 17a of Local Government Act 2002.

10.     During the last election term, council chose to broaden the s17A process into a much more robust vehicle than that required by the legislation. From 2017 to 2020, a systematic approach to reviewing services and activities has been undertaken, incorporating the legislative requirements of s17A.

11.     The committee received a briefing paper in February 2020 of the Value for Money Programme and a proposed work programme for this term of council.[1]

12.     COVID-19 has required a much stronger focus on short-term cost savings and the previous Value for Money Programme was paused.

13.     The previous value for money programme (planned to be temporary) has been replaced by the creation of a value for money department (permanent) to champion value for money opportunities across the group.  This reflects the importance to continually improve the value for money from council’s services and assets.

 

14.     That focus on cost savings continues together with longer term programmes of work to review and challenge current service delivery models, achieve tighter integration across the group and to drive improved cost-effectiveness. These are essential to contribute to future savings targets.

Tātaritanga me ngā tohutohu

Analysis and advice

Progress against February 2020 Value for Money work plan

15.     In February 2020, the Value for Money Committee reviewed a draft work plan of activity for 2020. Progress has been made in many of these items.

Activity

Progress

Next steps

Efficiency savings since amalgamation

 

Reported to Finance and Performance Committee October 2020

·    Savings achieved from 2011/2012 to 2019/2020 mean operating costs are $316 million less than same level in 2019/2020

·    Compounded effect of $1.9 billion

·    Rates would be 14 per cent higher if savings not achieved

No further action

Shared service opportunities

·    Project established to consider shared service opportunities across the group (also CCO Review recommendation)

·    Feasibility study being undertaken to quantify the opportunity

Report to Value for Money Committee February 2022

Operating model for council services

·    Optimise our Service Outcomes programme (will meet S17A requirements)

·    Plan considered by Governing Body in July 2021

·    Update report to Value for Money Committee (on this agenda)

Progress updates to Value for Money Committee as required

Improving value from capital programme

·    Forward capital programme developed as part of 10-year budget

·    Capital prioritisation framework (based on risk) developed to compare capital requirements across activities

No further work planned at this time

CCO Review recommendations

·    Most recommendations improved effectiveness and some efficiency

·    Auckland Unlimited merger. Post implementation benefits being realised

·    Panuku reduced overheads

Reports to future Value for Money Committee meetings from CCOs

Other Value for Money activity

16.     The context of COVID-19 has required a much stronger focus on short-term cost savings and cash realisation from council’s assets. Progress has been made across the following areas (which are ordinarily reported to other committees):

 

Activity

Progress

Next steps

Savings target

Emergency Budget (FY 2020/21) $120m, FY 2021/22 $90m

 

Progress on Emergency Budget reported monthly to Finance and Performance Committee

·    $126 million savings achieved for 2020/2021

·    CCOs also had savings targets monitored by their boards

·    $90 million savings target for 2020/2021. Plan developed to reach the target

·    Update report to Value for Money Committee

Reports to future Value for Money Committee meetings

Procurement

 

Progress reported to Strategic Procurement Committee

·    Auckland Council Group Procurement Policy was approved by the Finance and Performance Committee on 17 June 2021

·    $63 million of benefits from procurement across the group for 2020/2021

·    Significant progress made on sustainable procurement including creating employment opportunities for target communities and an increase in contracts awarded to Maori and/or Pasifika business or social enterprises

The Group Procurement Policy is now in the process of being implemented.

 

Reports to future Strategic Procurement Committee meetings

Asset optimisation and recycling

Progress reported to Finance and Performance Committee

 

·    Asset recycling programme established as part of Emergency Budget response. Objective to release capital from non-service or poorly utilised assets

·    $62 million of $244 million achieved for 2020/2021. However, a strong forward pipeline has been developed

Reports to future Finance and Performance Committee meetings

 

Previous Value for Money programme ceased

17.     The recommendations from the previous Value for Money Programme are largely completed and no further monitoring is required. Those activities that were not completed have been captured in either savings targets or the Optimise our Service Outcomes Programme.

Membership of the Value for Money Committee

18.     During last term of council, the Value for Money Programme was supported by an independent panel of three members. The terms of reference for the Value for Money Committee include the chair of the panel as a member of the committee.

19.     As the Value for Money Programme is no longer in operation, there is no independent panel and therefore no independent appointment will be made to the Value for Money Committee.

Tauākī whakaaweawe āhuarangi

Climate impact statement

20.     The council’s climate commitments are set out in Te Tāruke-ā-Tāwhiri: Auckland's Climate Plan. This update on value for money activity will not have any direct impact on climate change. Unlocking the potential financial benefits from value for money initiatives will assist in progressing council’s strategic priorities, such as climate change.

21.     The Optimise Our Service Outcomes Programme will consider our commitments to ensure that the service optimisation decisions positively contribute to achieving the targets.

Ngā whakaaweawe me ngā tirohanga a te rōpū Kaunihera

Council group impacts and views

22.     Value for money activity adopts a group perspective and considers activities undertaken both by Auckland Council and its substantive council-controlled organisations. The wider council group have not been engaged in the development of this report but will be included when the programme considers activities impacting their operations and will provide updates to future Value for Money Committee meetings.

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

Local impacts and local board views

23.     Most activities outlined this report have regional rather than local impacts. The Optimise our Service Outcomes and Asset Recycling programmes both have potential 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

24.     Kia Ora Tāmaki Makaurau is the framework that brings together Māori aspirations, the council group’s contribution towards achieving those aspirations, and performance measurement of the council’s activity.

25.     As part of the assessment of value for money, consideration will be given to how council services (and any decisions to change) advance Māori health and wellbeing, promote Māori success, and recognise and provide for Te Tiriti o Waitangi and Māori outcomes.

26.     Value for money activity will also consider the Independent Māori Statutory Board Schedule of Issues of Significance 2021 – 2025, and where appropriate, the process will include engagement with mana whenua and mataawaka.

27.     Under the ‘Thriving Business Networks’ issue of significance, the optimisation of service outcomes will facilitate further business growth opportunities and support promotion of Māori businesses through future procurement processes.

28.     In addition, Kia Ora Tāmaki Makaurau outlines the following measures in relation to Māori employment in council-led service provision:

·    realising rangatahi potential – the number of Māori youth employed in permanent and fixed term roles across the council group

·    an empowered organisation - the percentage of council employees in fixed term and permanent roles who identify as Māori, and the percentage of council staff in senior leadership positions who identify as Māori.

These measures will be considered as part of the service optimisation reviews that are underway.

Ngā ritenga ā-pūtea

Financial implications

29.     Value for money activity is focused on ensuring maximum value for the community from council expenditure. This work contributes to the savings targets required to balance the council’s financial position.

Ngā raru tūpono me ngā whakamaurutanga

Risks and mitigations

30.     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

31.     Staff will continue work on the activity outlined in this report providing the Value for Money Committee updates as this work progresses.

 

Ngā tāpirihanga

Attachments

There are no attachments for this report.     

Ngā kaihaina

Signatories

Author

Ross Chirnside - General Manager Value For Money

Authoriser

Peter Gudsell - Group Chief Financial Officer

 


Value for Money Committee

18 November 2021

 

Auckland Council savings progress for the period ended 30 September 2021

File No.: CP2021/16412

 

  

 

Te take mō te pūrongo

Purpose of the report

1.       To provide an update on the progress towards meeting the $90 million operating budget savings target for Auckland Council for 2021/2022 financial year.

Whakarāpopototanga matua

Executive summary

2.       A $90 million ongoing operating savings target has been included in the 10-year Budget 2021-2031 (Recovery Budget) after considering the level of the expenditure required to provide council services and the level of rates we collect.

3.       At 30 September 2021, Auckland Council has achieved $64.4 million (71 per cent) towards the $90 million savings target for the 2021/2022 financial year, with $16.3 million of savings achieved in the first quarter. $48.1 million (53 per cent) had been achieved at 30 June 2021 as part of the Emergency Budget savings initiatives.

4.       The majority of the savings in the first quarter have been achieved through detailed budget reviews where expenditure will be below what was planned due to a range of factors. There were also savings from procurement activities. Ongoing cost reductions were achieved through shifting more of the dog registration process online and staff training and development operating model changes.

5.       There is a pipeline of further savings which includes financial benefits from some initiatives in the operating model portfolio, further procurement savings opportunities and areas where expenditure is expected to be below budget, such as staff costs.

6.       Progress against the savings target is reported monthly to the Executive Leadership Team and closely monitored for risks and opportunities.

 

Ngā tūtohunga

Recommendation/s

That the Value for Money Committee:

a)         note the Auckland Council savings progress for the period ended 30 September 2021.

 

Horopaki

Context

7.       Auckland Council continues to experience significant financial impacts from the COVID-19 pandemic. Because of this, Auckland Council set an operating expenditure savings target of $120 million for the 2020/2021 financial year (Emergency Budget) and achieved this ambitious target in April 2021.

8.       To maintain essential services and high levels of spending on infrastructure, a $90 million operating savings target has been included in the Recovery Budget after considering the level of the expenditure required to provide council services and the level of rates we collect. This considers changes to operating budgets impacted by items such as growth, interest and inflation, the levels of external revenue, political decisions and the overall affordability of rates increases.

9.       The savings target is set at a level to provide enough focus on efficiencies without detriment to agreed service levels or staff health and safety.

10.     The target for the 2021/2022 financial year follows on from the $120 million operating savings target included in the Emergency Budget 2020/2021. Of the $120 million savings achieved in 2022/2021, over one-third ($48.1 million) were enduring savings which have contributed to the $90 million savings target in 2021/2022.

11.     A centralised process for identifying, measuring and reporting on savings was developed for monitoring and reporting against the Emergency Budget target and continues to be used as the basis for this reporting.

Tātaritanga me ngā tohutohu

Analysis and advice

12.     At 30 September 2021, Auckland Council has achieved $64.4 million (71 per cent) towards the $90 million savings target, with $16.3 million of savings achieved in the first quarter. Savings of note include:

Prudent financial management

·    $1.8 million reduction in budgeted operating expenditure as a result of detailed budget reviews of anticipated spend compared to allowed budget, for example, closure of a community centre for renovation saving operating costs, review of funding agreements and service contracts

·    $2.0 million one-off saving from 2021/2022 amenities grants below budget allowance  

·    $2.2 million of other expenditure not spent in the first quarter due to lower than budgeted consequential opex as a result of delays in capital projects by Community Facilities (Flatbush facilities) and Corporate Property (northwest hub in Albany)

·    $2.2 million contribution from the Mayoral Office below the statutory minimum budget

·    $0.8 million saved in utilities across all community facilities due to water restrictions

·    $0.6 million saved in insurance premium lower than budget allowed

·    $0.3 million reduction of the travel budget following further review

·    $3.2 million of staff cost budget not spent in the first quarter due to vacancies not able to be filled

13.     These savings are primarily due to a continued focus on cost control and budget reviews. Also included are savings resulting from actual expenditure less than budget at the end of the first quarter, which will not be needed in the current financial year.

Process optimisation and efficiency savings

·    $0.5 million permanent cost reduction from a change to the operating model for staff training and development

·    $0.4 million permanent savings from online dog registration renewal project

14.     The change to the operating model for staff training and organisational capability achieved savings through adopting a hub and spoke model. By strengthening the central planning and provision of training and development, improvements will be made at an overall lower cost of externally provided training.

15.     The online dog registration improvements programme went live in June, resulting in an increase in customers paying earlier and through the online portal for dog registration renewals. Change of details, including addresses, as well as advising of deceased dogs, can now be made through the online portal, resulting in lower administration costs and lower call centre volumes.

Procurement

·    $0.2 million cost reduction from negotiating better pricing for the supply of food and food services to council’s cafeteria and catering services

·    $0.1 million permanent savings from negotiating better prices for bulk printing solution

·    $0.5 million multi-year savings from SAP system support renegotiation

·    $0.1 million multi-year savings through favourable contract negotiation for recycling collection at council facilities

·    $0.2 million reduction in electoral postal costs leveraging council’s postal contract

16.     The procurement savings are primarily achieved by reducing operating contract spend with third parties through negotiating better terms for the council.

17.     A total of $1.7 million (annualised) potential savings opportunities have been identified from Procurement’s work programme.

18.     The council procurement team is currently exploring further savings opportunities from panel agreements and syndicated contracts for services delivered across the group. These agreements allow the council to benefit from work already completed, saving time and money for the wider organisation. They are also actively working on supplier diversity and engaging Māori businesses.

19.     Good progress has been made overall, however it remains challenging to find ongoing cost reductions that contribute to future years’ savings targets, given the current inflationary environment for goods, services and labour.

Tauākī whakaaweawe āhuarangi

Climate impact statement

20.     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

21.     The $90 million savings target for 2021/2022 only applies to Auckland Council.

22.     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

23.     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

24.     The savings initiatives delivered or in delivery have no specific impact on Māori outcomes. The Māori outcomes budget is ring-fenced for delivery on the Kia Ora Tāmaki Makaurau framework and is not considered an area for cost reductions.

Ngā ritenga ā-pūtea

Financial implications

25.     This report provides visibility on how Auckland Council is performing against its operating savings target which supports meeting the annual budget for 2021/2022. Savings reporting is included in the Auckland Council quarterly performance reporting to the Finance and Performance Committee for context as part of the council’s overall financial performance.

26.     There are financial implications on the annual budget if the savings target is not met for 2021/2022. This may result in slightly higher debt levels and would have flow-on effects through to financial year 2022/2023.

27.     Any additional budget pressures may also result in savings becoming more difficult to realise.

Ngā raru tūpono me ngā whakamaurutanga

Risks and mitigations

28.     Progress towards the savings target is on track, with a sufficient pipeline of expected efficiency improvements, procurement opportunities and anticipated expenditure below budgeted levels.

29.     The significant risks to achievement of the target include: inflationary pressure on staff and operating costs which may reduce savings opportunities; and the pace at which process and efficiency improvements are implemented in order to enjoy benefits in the current financial year.

30.     Any savings as a result of COVID-19 lockdown related impacts, have not been counted towards the $90 million savings target as they will be used to offset revenue losses.

Ngā koringa ā-muri

Next steps

31.     The next update will be provided after the council’s quarter two results are finalised.

 

Ngā tāpirihanga

Attachments

There are no attachments for this report.    

Ngā kaihaina

Signatories

Authors

Nicole Heng - Senior Finance Advisor - Programmes

Nicola Mills - General Manager Financial and Business Performance

Authoriser

Peter Gudsell - Group Chief Financial Officer

 


Value for Money Committee

18 November 2021

 

'Optimise our Service Outcomes' Value for Money Committee Update

File No.: CP2021/16778

 

  

 

Te take mō te pūrongo

Purpose of the report

1.       To note the ‘Optimise our Service Outcomes’ activity update and provide feedback on a draft prioritisation framework to assist the identification of new opportunities.

Whakarāpopototanga matua

Executive summary

2.       To meet Aucklanders needs effectively and efficiently, Auckland Council services and service delivery must continue to evolve, particularly with recent drivers of service change including COVID-19, the council-controlled organisation review (CCO), and government policy reforms.

3.       Optimise our Service Outcomes is a key programme of work to support the drivers of change and to realise value for money opportunities including contributing to future savings targets. The programme is part of the Chief Executive’s performance objectives FY22 - FY24.  An overview of the programme and progress update was provided at the 29 July Governing Body meeting.[2]

4.       Good progress is being made across the first group of services being reviewed which are: Amenities and Infrastructure Maintenance Services (AIMS), Pools and Leisure service review (was active recreation) which includes early childhood education (ECE), holiday parks management, Own Your Own home portfolio (OYO), Waitakere Transfer Station and the Waste Disposal Services joint venture.

5.       An approach to prioritisation is being developed to assist in selecting the next services to be reviewed. The committee’s feedback is sought on this draft framework and how the next group of services should be selected and prioritised for review.

 

Ngā tūtohunga

Recommendation/s

That the Value for Money Committee:

a)      receive the update on the Optimise our Service Outcomes programme and refer the agenda report to the Governing Body and Independent Māori Statutory Board for information

b)      review and provide feedback on the draft prioritisation framework at Attachment C of the agenda report.

 

Horopaki

Context

6.       Over the last 10 years, Auckland Council has made progress to address significant challenges facing the region, including record levels of growth, meeting changing community expectations, and creating efficiencies with our size and scale.

7.       To meet Aucklanders needs effectively and efficiently, Auckland Council services and service delivery must continue to evolve, particularly with recent drivers of service change including COVID-19, the CCO review, and government policy reforms.

8.       Optimise our Service Outcomes is a key programme of work to support the drivers of change and to realise value for money opportunities including contributing to future savings targets. The programme is part of the Chief Executive’s performance objectives FY22 - FY24. An overview of the programme and progress update was provided at the 29 July Governing Body meeting.[3]

Tātaritanga me ngā tohutohu

Analysis and advice

Strategic context

9.       During the last term of council, the Value for Money Programme was introduced to meet council’s ongoing requirements under Section 17A of the Local Government Act 2002 to continually assess the cost-effectiveness of council services.

10.     The Recovery Budget (10-year Budget 2021-2031) outlines a $90 million savings target for the 2022-2024 financial years and while there is uncertainty in how this will be achieved, it is anticipated that projects within the Optimise our Service Outcomes Programme will play an important role in contributing to filling this gap.

Context and the Optimise our Service Outcomes programme approach

11.     The Optimise our Service Outcomes Programme assesses whether parts of council are fit for purpose to address the needs of Aucklanders in the future.

12.     As opportunities are identified, a principles-based approach is used across a three-phase service review process where options are analysed, and recommendations are made before being approved to move into delivery.

13.     Depending on the service review findings, recommendations may be brought to elected members for decision-making with the Value for Money Committee playing an important role as contributors to the development of the future pipeline, and what is prioritised for delivery.

14.     Service assessments are underway for six services. These services are a mix in terms of scale, complexity, number of staff and customers impacted, risks and length of time required to review. This mix of projects allows us to test the review approach and identify any improvements that may be needed.

Optimise our Service Outcomes status update

15.     The scope and status of projects within the first group of services are outlined in Table 1.

Table 1: ‘Optimise our Service Outcomes’ in-flight projects

Projects

Description

Update

Status

Project Whakapai (AIMS)

Sale of the AIMS business via a “carve out” of contracts, plant, and staff from council.  Scope includes transition to a new service provider.

Market engaged and offers received by potential purchasers.

Due diligence is underway with potential purchasers, staff, and unions.

The project is on track to conclude the deal by Christmas and transition by Q4 2021-2022.

On Track

Pools & Leisure

Review of leisure centre operating model and strategy. A mixed management model exists for leisure centres with outsource contracts expiring in June 2023. Scope includes S17A compliance and 11 ECE (early childhood education centres).

Current state assessment is progressing and due for completion at the end of the 2021 calendar year.

Elected members will be briefed via PACE Committee in the first half of 2022.

On Track

Holiday Park Management

Review the business model of the three council-owned and managed holiday parks.

Relevant local boards have approved a proposed outsource approach. The project is currently on hold until after the peak summer season.

Relevant local boards will be briefed on progress in the first half of 2022.

On Hold

Own your Own Home

Assess optimal future state model of the Own Your Own Home, a shared equity housing scheme for older people, with approximately 50/150 units vacant.

Third party consultants, Bayleys have completed divestment options and due diligence analysis.

The findings will be workshopped with the Finance and Performance Committee prior to decision making in March 2022.

On Track

Waitakere Transfer Station

Review of Waitakere Transfer Station including S17A and optimal future state model assessment.

Current state analysis underway to assess potential future options.

The timing of elected member involvement will not be determined until the service assessment is more advanced.  It is anticipated that this will occur in the first half of 2022.

On track

Waste Disposal Services Joint Venture

Review of Waste Disposal Services Joint Venture (Whitford landfill and transfer station) including S17A and optimal future state model assessment.

Discussions underway with quarry operator (located on same site) around decommissioning and vacating in 2022.

External support engaged to assist with options analysis.

The timing of elected member involvement will not be determined until the service assessment is more advanced.  It is anticipated that this will occur in the first half of 2022.

On track

 

16.     A more detailed update on each project is in Attachment A.

17.     Further details on the approach and methodology are included as Attachment B.

18.     The Optimise our Service Outcomes Programme will play an important role in contributing to the savings target with some services such as Own Your Own Home also contributing to asset recycling. Benefits for each review have been identified and will be validated during the next review phases.

How will we decide the next group of services?

19.     The Optimise our Service Outcomes Programme is developing a methodology to be used to guide how the next group of services could be selected for review. Table 2 illustrates the criteria to be tested to guide the services we must, should, could, and won’t do.

Table 2: ‘Optimise our Service Outcomes’ prioritisation

 

Must do?

Should do?

Could do?

Won’t do?

Tests:

-  Mandatory Requirement

-  Strategically aligned to priority objectives

 

-  Value & risk

-  Low strategic alignment and low value for money (cost, utilisation, benefits, risk)

Asks:

-  Is there a clear legislative imperative for this service and expenditure?

-  Is the expenditure aligned to council priority objectives and aligned to identified essential services?

-  Is the expenditure aligned to the 10-year budget and provides positive benefits and/or manages risks?

-  Is there market failure?

-  Is the activity government’s or another organisation’s role?

-  Does the expenditure detrimentally impact priority objectives?

Criteria:

Yes or no

Priority objectives

-  Climate adaptation

-  Māori outcomes

-  Transport mode shift

-  Road safety

-  Environmental improvement

-  Community well-being

-  Improving equity

Benefits

-  Financial

-  Non-financial (4 well-beings), customer

Risks

-  Current

-  Future

 

Yes or no

Optimisation opportunities

-  Do more / less

-  Do differently

-  Do better

-  Do more / less

-  Do differently

-  Do better

-  Do more / less

-  Do differently

-  Do better

-  Stop

 

 

20.     Attachment C includes additional detail on the draft prioritisation framework.

21.     Committee feedback is sought on the draft framework. Guidance has still to be developed on how to use the framework and scoring or weighting of different criteria. The framework will be finalised in 2022.

22.     The committee is also requested to provide any guidance on areas they have observed which may be a candidate for a future service review.

Tauākī whakaaweawe āhuarangi

Climate impact statement

23.     Our climate commitments are set out in Te Tāruke-ā-Tāwhiri: Auckland's Climate Plan. The Optimise our Service Outcomes Programme will consider our commitments to ensure the decisions we make positively contribute to achieving the targets.

24.     Climate adaptation has also been included as part of the priority objective criteria in the draft prioritisation framework for determining the next group of services for review.

Ngā whakaaweawe me ngā tirohanga a te rōpū Kaunihera

Council group impacts and views

25.     The Optimise our Service Outcomes programme is largely focused on Auckland Council. However, some initiatives do require input, guidance and leadership from CCOs such as Own your Own Home and Waste Disposal Service joint venture which is supported by Eke Panuku.

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

Local impacts and local board views

26.     Local board chairs had an initial confidential briefing via an update on the Shaping our Future portfolio on 12 April 2021, of which Optimise our Service Outcomes forms a part.

27.     The involvement of local boards in the various service reviews will align to the decision-making responsibilities set out in the long-term plan.[4]

28.     The programme will align with the approach, findings and future decisions of the Governance Framework Review - funding and service levels.

Tauākī whakaaweawe Māori

Māori impact statement

29.     The Optimise our Service Outcomes Programme will contribute to the long-term priority of “An Empowered Organisation” in the Kia Ora Tāmaki Makaurau - Māori Outcomes Performance Measurement Framework.

30.     As part of the assessment of services, consideration will be given to how council services (and any decisions to change) advance Māori health and wellbeing, promote Māori success, and recognise and provide for Te Tiriti o Waitangi and Māori outcomes.

31.     Service decisions will also consider the Independent Māori Statutory Board Schedule of Issues of Significance 2021 – 2025, and where appropriate, the process will include engagement with mana whenua and mataawaka.

32.     Under the ‘Thriving Business Networks’ issue of significance, the optimisation of service outcomes may facilitate business opportunities for Māori businesses through future procurement processes. This has been undertaken throughout the AIMS procurement process.

33.     In addition, Kia Ora Tāmaki Makaurau outlines the following measures in relation to Māori employment in council-led service provision which will be considered in service reviews:

·    realising rangatahi potential – the number of Māori youth employed in permanent and fixed term roles across the council group

·    an empowered organisation - the percentage of council employees in fixed term and permanent roles who identify as Māori, and the percentage of council staff in senior leadership positions who identify as Māori.

Ngā ritenga ā-pūtea

Financial implications

34.     Optimise our Service Outcomes contributes to the both the $90 million annual savings target for the duration of the Recovery Budget (10-year Budget 2021-2031) and the annual asset recycling target of $70 million.

35.     There are financial implications on the annual budget if the savings target and asset recycling are not met.  This may result in higher debt levels with corresponding impact on increased operating costs.

36.     Cost benefit analysis will form part of each service assessment and inform any potential service improvements or changes.

Ngā raru tūpono me ngā whakamaurutanga

Risks and mitigations

37.     Optimise our Service Outcomes programme has two groups of risks.  Risks at a programme level and risks for each area being assessed.

38.     At a programme level, the key risk is working on the right opportunities with adequate resourcing to deliver the scale of programme at pace to contribute to the targets for savings and asset recycling. Development of the prioritisation framework mitigates part of this risk by focusing on the right opportunities.

39.     Other programme risks are engagement with staff and stakeholders, elected member decision-making, alignment with policies and activity already underway at council, perception of the public and media, and the ongoing impact of the extended COVID-19 lockdown.

40.     Risk assessments are completed as part of the planning for and throughout each service assessment.

Ngā koringa ā-muri

Next steps

41.     Staff will continue to deliver the first group of service reviews with progress updates provided to the Value for Money Committee and Governing Body as appropriate.

 


 

 

Ngā tāpirihanga

Attachments

No.

Title

Page

a

Optimise our Service Outcomes

19

b

Service review approach

29

c

Prioritisation framework

33

     

Ngā kaihaina

Signatories

Author

Ross Chirnside - General Manager Value For Money

Authoriser

Peter Gudsell - Group Chief Financial Officer

 


Value for Money Committee

18 November 2021

 



Value for Money Committee

18 November 2021

 

PDF Creator

PDF Creator

PDF Creator


Value for Money Committee

18 November 2021

 


Value for Money Committee

18 November 2021

 

Forward Work Programme - Value for Money Committee

File No.: CP2021/16277

 

  

 

Te take mō te pūrongo

Purpose of the report

1.       To riro / receive and whakaae / approve the 2022 Value for Money Committee forward work programme appended as Attachment A.

Whakarāpopototanga matua

Executive summary

2.       The Value for Money Committee has not met since February 2020. The committee meeting schedule experienced various cancellations and disruptions due to COVID-19 in 2020/2021.

3.       The emergence of COVID-19 required additional Finance and Performance Committee meetings to prioritise, first the Emergency Budget and then reporting monthly progress against that, and then the development of the Recovery Budget (10-year Budget 2021-2031).

4.       As the Recovery Budget has now been adopted and the Emergency Budget year-end results have been published, the Value for Money Committee meetings can now resume bi-monthly for the remainder of the term.

5.       The proposed 2022 forward work programme for the Value for Money Committee is appended at Attachment A.

6.       Following the approval of the forward work programme, it will be reported to the Governing Body, for oversight as per the Terms of Reference. 

Ngā tūtohunga

Recommendation/s

That the Value for Money Committee:

a)      riro / receive and whakaae / approve the 2022 forward work programme as appended at Attachment A of the agenda report.

Ngā tāpirihanga

Attachments

No.

Title

Page

a

Forward Work Programme

37

     

Ngā kaihaina

Signatories

Authors

Duncan Glasgow - Kaitohutohu Mana Whakahaere / Governance Advisor

Kerri Foote - Executive Officer : CFO Division

Authoriser

Peter Gudsell - Group Chief Financial Officer

 



Value for Money Committee

18 November 2021

 

 

Kōmiti Tiaki Pūtea / Value for Money Committee
Forward Work Programme 2022

The Value for Money Committee looks for money saving opportunities and considers the cost-effectiveness of the governance, funding and delivery across the Auckland Council Group.

The full terms of reference can be found here: Auckland Council Governing Body Terms of Reference

 

Area of work and Lead Department

Reason for work

Committee role

(decision and/or direction)

Expected timeframes

2022

Jan

Feb

Mar

Apr

May

Jun

Jul

Aug

Sep

Oct

Nov

Dec

Optimise our Service Outcomes

General Manager Value for Money

Auckland Council established the Optimise our Service Outcomes programme to evaluate whether council is providing the services Aucklanders need in the most effective and efficient way.

Receive programme progress updates and provide input as required

 

Progress to date:

 

 

 

 

 

 

 

 

 

 

 

 

 

Savings

General Manager Financial and Business Performance

A $90 million ongoing operating savings target has been included in the 10-year Budget 2021-2031 (Recovery Budget).

Receive updates on the savings target pipeline and progress

 

Progress to date:

 

 

 

 

 

 

 

 

 

 

 

 

 

Council-controlled organisation review implementation

Various CCOs

Overview of value for money benefits delivered through implementation of council-controlled organisation review recommendations

Receive information on value for money activity delivered as part of the implementation of council-controlled organisation review recommendations

 

Progress to date:

 

 

 

 

 

 

 

 

 

 

 

 

 

Other Value for Money activity

Group Treasurer

 

Receive information on value for money activity across the council group and provide input as required

 

·    Benefits Realisation Framework (February 2022)

·    Group Shared Services (February 2022)

·    Enterprise Programme Office (June 2022)

 

Progress to date:

 

 

 

 

 

 

 

 

 

 

 

 

 

 



[1] See Value for Money Agenda February 2020

[2] This is a confidential report

[3] This is a confidential report

[4] The 10-year Budget 2021-2031 – Our Recovery Budget, Volume 2, Section 3.5 Decision-Making Responsibilities of Auckland Council’s Governing Body and Local Boards, p.277-290.