I hereby give notice that an ordinary
meeting of the Value For Money Committee will be held on:
MEMBERSHIP
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Chairperson
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Cr Desley Simpson, JP
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Deputy Chairperson
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Cr Tracy Mulholland
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Members
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Deputy Mayor Cr Bill Cashmore
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Cr Angela Dalton
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Mayor Hon Phil Goff, CNZM, JP
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Cr Shane Henderson
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IMSB Member Glenn Wilcox
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Cr Paul Young
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(Quorum 4 members)
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Duncan Glasgow
Kaitohutohu Mana Whakahaere /
Governance Advisor
10 February 2022
Contact Telephone: (09) 890 2656
Email: duncan.glasgow@aucklandcouncil.govt.nz
Website: www.aucklandcouncil.govt.nz
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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.
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Value for
Money Committee
17 February
2022
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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 Group
Shared Services - Feasibility phase 9
9 Update
on Council Benefits Management Improvement Work 17
10 Auckland
Council savings progress for the period ended 31 December 2021 23
11 Summary
of Value for Money Committee information memoranda and briefings (including the
forward work programme) - 17 February 2021 29
12 Consideration
of Extraordinary Items
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
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That the Value for Money Committee:
a)
confirm the ordinary minutes of its meeting,
held on Thursday, 18 November 2021, as a true and
correct record.
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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.”
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Value for
Money Committee
17 February
2022
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Group
Shared Services - Feasibility phase
File No.: CP2022/00174
Te take mō te
pūrongo
Purpose of the report
1. To
provide an update on the feasibility phase for the Group Shared Services
Project.
Whakarāpopototanga matua
Executive summary
2. The
review of council-controlled organisations (CCOs) was undertaken in 2020 and
included a recommendation that the council and CCOs should work together to
draw up a group policy on shared services. This
recommendation recognises that globally, shared service provision is a proven
model that can deliver improved services to an organisation in a cost-effective
and efficient way, through leveraging scale and best practice across people,
process, and technology.
3. Group
Shared Services is generally a term for defining an operating model where an
organisation’s internal support functions are centralised to deliver the
required services as effectively and efficiently as possible.
4. Our internal support
services functions such as Information, Communications and Technology (ICT),
human resources (i.e. People and Culture) and Finance play a critical part in
ensuring our organisations operate effectively. Across the council group,
delivery of some shared support services is in place, however there is no
overall group shared service strategy. An
opportunity exists to investigate the sharing of the remaining internal support
services across the group to determine whether the full benefits can be
realised.
5. This
project involves staff and executives across the group working collaboratively
to assess the feasibility of developing a coherent strategy to shared services,
in line with best practice and structured to promote operational excellence.
6. The
services currently in scope are largely internal support functions. This
includes Finance, ICT, Human Resources, Health Safety and Wellbeing, Corporate
Strategy, Communications, Procurement, Risk & Assurance, Legal, Enterprise
Project Management Office, Corporate Property, and other corporate services.
The feasibility phase will further determine if any areas should be removed
from scope of the project. It also does not limit the inclusion of other
out-of-scope services in the future.
7. This
project is a group initiative. Group collaboration is key to success and the
approach will be driven by leading practices.
8. The
potential benefit levers available to the council group are:
a) leveraging
scale and capability
b) standardisation
and operational excellence
c) enabling
the business to focus on strategic services
d) system
and process efficiencies
e) development
of the internal support staff
f) a
cost reduction.
9. The
feasibility phase includes Auckland Council, Auckland Transport, Auckland
Unlimited and Eke Panuku Development Auckland. Watercare are in scope, however
due to the Three Waters reform, data collection is on hold for Watercare
subject to the outcomes of the reform.
10. The
experience of other organisations tells us that implementing shared services is
difficult and takes time. The implementation process may take many years before
benefits are realised. Lessons learnt from examples
around the world are being carefully considered alongside managing the
following key risks:
a) buy-in
from all entities is essential to deliver the desired outcomes. Potential
conflicts may arise between decisions which optimise outcomes for an individual
entity versus the group. Group level governance and decision making will be
critical to success
b) staff
may become disengaged from the level of uncertainty this initiative creates. Clear
and consistent communication will be required throughout the feasibility and
subsequent phases to ensure staff are informed and motivated by the potential
opportunities for them
c) the time
between the feasibility phase and benefit realisation may extend due to
decision-making processes, initial investment required and potentially multiple
transition phases. Clarity on timeframes and demonstrating benefits will be
important
d) a key
stage in the feasibility phase is a change impact assessment and development of
a transition strategy (including migration options) considering group and
entity specific requirements and constraints. This is often the difference
between success and failure.
11. Recommendations
will be presented to the Shared Service Governance Group (an oversight group of
executive leaders from across the group) in early May 2022, followed by the
respective executive leadership teams and CCO boards and then the Value for
Money Committee in June 2022.
Ngā tūtohunga
Recommendation/s
That the Value for Money
Committee:
a) receive
this update report on the feasibility phase for Group Shared Services.
Horopaki
Context
12. Group
Shared Services is generally a term for defining an operating model where an
organisation’s internal support functions are centralised to deliver the
required services as effectively and efficiently as possible. Services that can
be shared among the various business units of a company are functions such as
finance, payroll, purchasing and information technology. In a decentralised
model, these tend to be performed in separate divisions or locations.
13. Since the
Auckland Council amalgamation in 2010, there have been numerous reviews
recommending some form of group shared services.
14. In 2015, Ernst
& Young recommended that Auckland Council undertake a current state
performance diagnostic in the context of moving to a centralised shared
services model.
15. More
recently, the 2020 review of council-controlled organisations (CCOs)
recommended Auckland Council and CCOs should work together to draw up a group
policy on shared services. This would include a coherent criteria about which
services to share, and which not to, recognising that a one-size-fits-all
approach does not work in some instances, and that council services must be
both of a high standard and cost-efficient. It also recommended that shared
services have formal supplier/purchaser agreements, with agreed service levels.
16. The analysis
and recommendations from the various reviews were high level, and did not
quantify the existing baseline, true benefit, or make explicit what services
were in scope. Detail around recommended operating models and governance for
each service was also not provided.
17. As an
organisation, we also have an obligation under Section 17A of the Local
Government Act to ensure we demonstrate value for money to ratepayers which
should include how best to operate internal support services (i.e. “back
office” functions). The finance value for money review in 2019 recommended
a shared service strategy.
18. In March
2021, the chief executives from across the group agreed to the establishment of
a Shared Services Governance Group (SSGG). The purpose of the SSGG is to
oversee the development of the recommendations on group shared services.
Tātaritanga me ngā
tohutohu
Analysis and advice
Approach
19. This is a
group initiative and group collaboration is key to success. The services
delivered across the group are diverse and each entity’s requirements
need to be considered to deliver a recommendation that is appropriate for each
of the entities and also benefits the group as a whole.
20. The approach
is being driven by leading practices. A shared service model is not a new
concept and for many decades has been a strategy successfully adopted by many
organisations globally. There are also examples where it has not been
successfully implemented.
21. Aligning to
leading practices and an effective transition strategy will avoid failing to
realise the maximum benefits for the group. Examples include:
a) Management
buy-in – management buy-in is critical to the success of shared
services. Without senior management support and leadership, the benefits of
shared services will not be realised. Agreed outcomes which benefit both the
entity and group incentivises all entities to participate and collaborate
b) Using
tested models – each service will be tested against the most
appropriate delivery model, with operating model options considered to assist
recommendations
c) Defined
roles/responsibilities and accountabilities – shared services should
have clear service level agreements to avoid ambiguity on what is being
provided and ensure performance is met
d) Relationships
and governance – having a strong focus on relationship management and
performance improvement with a clear and structured governance model will be
crucial
e) Focus
on common services – the scope of shared services should be focussed
to services that are common across all organisations and can be delivered
‘centrally’ either as a group entity, centre of expertise, and/or
with high degrees of collaboration.
Benefits
22. Globally,
shared services continue to deliver benefits across many multi-national and
large organisations. The Deloitte 2021 Global Shared Services and Outsourcing
Survey Report found that through developing specialised capabilities, shared
service organisations are adapting to the rapidly changing geographical
conditions. Ideally, they provide nimble and value-added services to deliver a
better customer experience and business outcomes.
23. In
addition, 88 per cent of organisations that adopted global business services,
achieved a cost reduction, and 78 per cent achieved process standardisation and
efficiency. Shared service centres provide focus on investment in
capabilities to drive better value for the organisations they support. Enablers
include prioritising talent, robotic process automation, and standardisation of
processes.
24. The potential
benefit levers available to the council group are:
a) Leveraging
scale and capability – the size and scale of the group presents a
significant opportunity for efficiencies and higher quality outcomes through
more effective utilisation of capabilities
b) Process
standardisation and operational excellence – process standardisation
and improved performance (including more effective controls and risk
management) will be better enabled through the structure and disciplines that
leading practice shared services demand
c) Enabling
the areas supported to focus on strategic services – internal support
services are essential for any large organisation and when operating
efficiently and effectively, allows enhanced focus delivering front-line
services
d) System
and process efficiencies – larger scale will enable better use of
technology, systems and tools removing duplication and enabling operational
excellence and improved service maturity reducing total cost to serve and an
enhanced customer experience
e) Development
of the internal support staff – a shared services operating model
will enable better career development opportunities with a wider scope,
learning leading practices, and create stronger market attraction.
25. Cost
reduction is also a key benefit from shared services models. For the council
group, the quantum of this possibility is subject to the completion of the
feasibility assessment, the implementation approach and integration costs.
Feasibility phase
26. The approach
to the feasibility phase has been to first undertake a baseline assessment.
This baseline informs a future state strategy and evaluation of potential
service delivery model options before developing an optimal transition strategy
to maximise benefits. An iterative approach is being taken to ensure focus on the
desired outcomes.
27. The
feasibility phase is covering three key steps:
a) Baseline
services assessment – assessment of current state across Auckland
Council and CCOs to validate the baseline for the group shared services
business case and identify potential opportunities
b) Future
state service delivery model design & analysis – high-level
design of future state service delivery model options and assessment of
potential benefits. At this point, the recommendation on the case for group
shared services (i.e. “Go / “No-Go”) will be presented
c) Change
impact assessment & transition strategy – high level change
impact assessment, transition strategy, and migration options to establish
group shared services and realise benefits.
Scope
28. The scope of
the feasibility phase includes Auckland Council, Auckland Transport, Auckland
Unlimited and Eke Panuku Development Auckland. Watercare are in scope of the
review, but due to competing priorities with the Three Waters reform, data
collection is on hold subject to the outcomes of the reform.
29. The services
in scope are largely internal support functions. This includes Finance, ICT,
Human Resources, Health Safety and Wellbeing, Corporate Strategy,
Communications, Procurement, Risk & Assurance, Legal, Enterprise Project
Management Office, Corporate Property, and other corporate services. The
feasibility phase may result in some service areas removed from scope and
therefore no change to the current service delivery. It also does not limit the
inclusion of out-of-scope services in the future.
30. Functions
that directly support customers are out of scope such as customer services or
community facilities management. Best practice recommends focusing on internal
support service functions that are common across all organisations.
31. The
final recommendations will not preclude the future inclusion of any
out-of-scope services where these align to the agreed shared service strategy.
Governance
32. Cross-council
group collaboration is fundamental to the success of the feasibility phase. To
this extent, a shared service governance group (SSGG) was established, which
includes executive representation from across the council group.
33. The SSGG set
the leadership imperative to do what’s right for our people and our
stakeholders and aim to answer the question of the viability of the shared
service opportunity for the council group once and for all.
34. The SSGG is
supported by a small project team and subject matter experts from across the
group.
35. Deloitte have
been engaged to ensure leading practices are followed.
Current insights
36. Since
amalgamation, group shared services have been developed organically with the
majority of the services that are offered provided by Auckland Council.
37. Eke Panuku
are utilising a moderate amount of shared services, followed by Auckland
Unlimited, with Auckland Transport using services such as fleet, print and
mail. A group approach to procurement has also been implemented. This has led
to some efficiencies already being realised, such as Treasury.
38. Where
internal support services are not provided by a group shared service offering,
they have also largely been centralised within each entity. For example, a
function like finance is provided as a centralised service and not embedded within
each business unit. This too has provided some efficiencies within each entity
across the group.
39. With services
being developed organically, they lack the management practices required to
successfully deliver service expectations. This includes many services having
little or no service level agreements (SLAs) or account management to resolve
issues, as well as an implicit opt in approach to the service.
40. This has led
to inconsistencies in services provided, a mix in performance, and duplication.
41. With internal
support costs representing at least $200 million across the group and around 15
per cent of the workforce, a significant potential opportunity exists if
operated through an appropriate model that can deliver on each entity’s
service expectations. However, challenges do exist around differing culture and
legacy, CCO board expectations, ICT integration, previous reviews, and a
‘one size fits all’ offering versus being nimble and differing
service level expectations.
Tauākī whakaaweawe āhuarangi
Climate impact statement
42. Through
the feasibility phase, there is no climate impact.
43. The
recommendations presented in early May 2022 to the SSGG will consider how we
operate our internal services to support a positive response to climate impacts,
such as greater coordination of sustainability on our corporate services.
Ngā whakaaweawe me
ngā tirohanga a te rōpū Kaunihera
Council group impacts and views
44. This
is a group initiative with decision-making shared across Auckland Council, Auckland
Transport, Auckland Unlimited, Eke Panuku and Watercare.
45. A change
impact assessment will be carried out at the final stage of the feasibility
phase.
Ngā whakaaweawe
ā-rohe me ngā tirohanga a te poari ā-rohe
Local impacts and local board views
46. The
feasibility phase has no local impacts and therefore no views have been sought.
47. The
recommendations from the feasibility phase are expected (at a minimum) to hold
current internal service levels across all areas within scope.
Tauākī whakaaweawe
Māori
Māori impact statement
48. The recommendations from the
feasibility phase will consider how the group can better support Māori
outcomes in alignment with Kia Ora Tāmaki Makaurau.
49. This may
include identifying what shared service models within scope could better
support Māori outcomes such as Māori employment opportunities,
recruitment processes, and the use of Māori vendors.
Ngā ritenga
ā-pūtea
Financial
implications
50. The
financial cost to complete the feasibility phase is expected to total $360,000.
This has been funded from within existing budgets.
51. The potential
financial benefits will be quantified through the feasibility phase. This will
include the cost to implement the recommended model.
Ngā raru tūpono me
ngā whakamaurutanga
Risks and mitigations
52. The
breadth of services offered across the group vary considerably in size and
nature. A shared services operating model will need to consider how to meet the
differing requirements and cadences for internal support services efficiently
and effectively.
53. A lack of
buy-in and engagement from the different entities may result in a
recommendation which is not practical or feasible and will not deliver the
desired outcomes. The establishment of the governance group and business owners
from the council and each of the CCOs should ensure alignment and commitment to
the outcomes.
54. Potential
conflicts may arise between decisions which optimise outcomes for the CCO
versus the group. A shared services operating model must include a group shared
service governance model which is accountable to each CCO and Auckland Council.
55. Focus on cost
efficiencies may compromise service levels and customer expectations for
internal support services where gaps currently exist. Service maturity
assessment as part of the feasibility phase will ensure that the design will be
for the target state, which may require initial investment in capabilities.
56. Given the
breadth of services and underlying complexity, staff may become disengaged with
the level of uncertainty that an initiative such as this creates. Clear and
consistent communication will be required throughout the feasibility and
subsequent phases to ensure staff are informed and motivated by the potential
opportunities for them.
57. The time
period between the feasibility phase and benefit realisation may extend due to
decision-making processes, initial investment required and potentially multiple
transition phases. Clarity will need to be provided to phasing of investments
and realistic timeframes for benefits with a focus on early wins to demonstrate
progress and improvements.
58. Poor
transition strategy and execution is often the reason for failed migration to
an effective shared service operating model. A key stage in the feasibility
phase is a change impact assessment and development of a transition strategy
(including migration options) considering group and entity-specific
requirements and constraints.
59. Implementing
shared services is not easy and takes time. Some implementation processes can
take around five years before the full benefits are realised, however we are
working towards a phased approach to ensure earlier benefits are realised..
Lessons learnt from examples around the world will be a consideration including
the following:
a) follow
best practice and have leadership buy-in from day one
b) having a
clearly defined operating model, with strong governance and management
practices which include baseline information, measurable performance targets
and issue resolution
c) a
detailed change management plan that reflects the understanding of the services
requirements for each business, change impacts on staff and processes
d) unrealistic
timings – bringing multiple functions together takes time and needs to be
well planned
e) having a
good understanding of the differing cultures in each of the organisations
supported
f) adequate
resourcing – the change needs to be adequately resourced to ensure
effective communication and consultation with staff, how to retain key skills,
transfer functions and ability to recruit quickly for new roles
g) a
strategy where the ICT and service improvements support the visions and
expectations of the organisations supported.
Ngā koringa ā-muri
Next steps
60. The baseline
assessment will be completed by mid-March 2022.
61. During March
and April 2022, the future state service delivery model design and analysis
will be completed.
62. Recommendations
will be presented to the SSGG in early May 2022, followed by the respective
executive leadership teams and CCO boards. An update report will be provided
back to the Value for Money Committee meeting on 16 June 2022.
Ngā tāpirihanga
Attachments
There are no attachments for
this report.
Ngā kaihaina
Signatories
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Author
|
Kylie Thompson - Programme Manager
|
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Authorisers
|
Robert Irvine - General Manager Corporate Support
Services
Peter Gudsell - Group Chief Financial Officer
Ross Chirnside - General Manager Value For Money
|
|
Value for
Money Committee
17 February
2022
|
|
Update on Council Benefits Management
Improvement Work
File No.: CP2022/00196
Te take mō te
pūrongo
Purpose of the report
1. To
provide an update on improvement work currently underway within Auckland
Council in the area of benefits realisation management.
Whakarāpopototanga matua
Executive summary
2. The
Enterprise Portfolio Management Office (EPMO) was created in March 2021 and is
part of the Corporate Strategy & Business Improvement department within
Group Services.
3. It
provides portfolio, project process, project governance and benefit support for
ten major portfolios, consisting of approximately 1,400 projects and programmes
(internal and external facing).
4. These
10 portfolios span across council, and include: ICT, Corporate Property,
Operating Model (Organisational Strategy), Development Programme Office (DPO),
Community, Environmental Services, Healthy Waters, Resilient Land & Coast,
Waste Solutions, Regulatory and Organisational Support.
5. A
benefit can be described as a measurable improvement resulting from change,
which has a positive perception, and which contributes to organisational
objectives. Benefits can be financial (e.g. cost saved or avoided) or
non-financial (e.g. improved customer satisfaction). Council only invests in
projects and programmes where there are potential benefits, and considers this
alongside other factors such as effort required, impacts of the change and
complexity to deliver.
6. Benefit
realisation management aims to ensure potential benefits arising from
investment in change are actually achieved. It is a continuous process that
operates throughout the change lifecycle and is applicable to portfolios, a
programme or a project.
7. At
present, there is significant variability across council in terms of how well
programmes and projects clearly define and measure benefits (in particular
non-financial) and how they focus on realising anticipated benefits.
8. Between
2020 and now, a number of reviews including reviews by Audit New Zealand, the
Audit and Risk Committee, and the council’s internal Risk & Assurance
team have identified a series of recommended actions related to these areas of
challenge and variability.
9. To
implement these recommended actions, the EPMO is managing a programme of
improvement work and aims to fully deliver this by December 2022, followed by
an ongoing focus on raising the maturity of benefits management across council.
10. The
recommendation areas and related improvement work are summarised below:
a) Lessons
learned and benefits realisation exercise be completed at project closure
– to deliver this, the programme will refine and embed a benefits framework,
leverage “spokes” within divisions and partner with the Auckland
PMO Community of Practice.
b) Stronger
assessment of whether the benefits used to justify a project are realised
– to deliver this, the programme will support the finance team to
provide oversight and audit review processes, develop sponsor training
and improve transparency of reporting of benefits to the Executive Leadership
Team (ELT).
c) Greater rigor around definition of measurable benefits in
business cases – to deliver this,
the programme will create a benefits library based on the long-term plan
and establish a process for the EPMO to conduct selective audits & quality
health checks.
d) Strong focus on realising benefits throughout each
project’s life and beyond – to
deliver this, the programme will make improvements to portfolio
governance processes.
11. The
expected long-term benefits from this programme of work include improved
quantity and quality of described benefits (particularly showing contributions
to climate and Māori outcomes), increased accuracy of benefits realised
vs. initial estimates (applicable to both financial and non-financial
benefits), and higher rates of knowledge and best practice sharing amongst the
project and programme community within council.
Ngā tūtohunga
Recommendation/s
That the Value for Money
Committee:
a) note the
update provided on benefits management improvements underway at Auckland
Council.
Horopaki
Context
12. A portfolio
is a centralised list of programmes and projects, aligned to
business plans and strategic priorities. A programme is created to
manage, coordinate, direct and oversee the implementation of a set of related
projects in order to deliver outcomes and benefits. A project is aligned
to a programme or portfolio and designed to deliver one or more outputs (a
product, service, capability or an asset).
13. A benefit can
be described as measurable improvement resulting from change, which has a
positive perception, and which contributes to organisational objectives.
Benefits can be financial (e.g. cost saved or avoided) or non-financial (e.g.
improved customer satisfaction). Council only invests in projects and
programmes where there are potential benefits, and considers this alongside
other factors such as effort required, impacts of the change and complexity to
deliver.
14. Benefit
realisation management aims to ensure potential benefits arising from
investment in change are actually achieved. It is a continuous process running
throughout the change lifecycle and is applicable to portfolios, a programme or
a project.
15. At present,
there is significant variability across council in terms of how well projects
and programmes clearly define and measure benefits (in particular
non-financial), focus on realising anticipated benefits, and close out of
projects and programmes.
16. Between 2020
and now, reviews by Audit New Zealand, the Audit and Risk Committee, and the
council’s internal Risk & Assurance team have identified a series of
recommended actions related to these areas of challenge and variability.
17. In addition,
the EPMO is currently conducting an assessment of a sampling of significant
projects across council to ascertain the level of benefits returned against
business case projections. This assessment is also identifying a number of
insights and recommendations to improve the benefits framework.
18. The EPMO will
then work with key teams across the council’s divisions and portfolios to
enhance and embed the framework and relevant processes.
19. The expected
long-term benefits from this programme of work include improved quantity and
quality of described benefits (particularly showing contributions to climate
and Māori outcomes), increased accuracy of benefits realised vs. initial
estimates (applicable to both financial and non-financial benefits), and higher
rates of knowledge and best practice sharing amongst the project and programme
community within council.
Tātaritanga me ngā
tohutohu
Analysis and advice
20. To deliver on
the recommended actions from the reviews mentioned above, the EPMO is managing
an improvement programme of work. Further details and delivery timeframes are
outlined in the below table.
|
Recommended action
|
Current state
(February 2022)
|
Planned action(s)
(expected completion)
|
|
A. That a lessons learned and benefits realisation exercise
is completed in a timely manner during project closure
|
A
closure process that includes lessons learned and benefits realisation
currently exists but is not well embedded.
There are challenges in
monitoring and measuring benefits as projects conclude. These include the
identification of benefit owners/reporters and their understanding of their
roles and responsibilities, tracking benefits once a project has completed,
and the method and reporting of metrics.
|
(1) Refining and embedding
a practical yet proven benefits framework, with guidance based on project
scale (December 2022)
(2) Leverage
“spokes” within divisions to promote and oversee the process
including lessons learnt & benefits realisation (June 2022)
(3) Leveraging the
Auckland PMO Community of Practice to garner good practice learnings (June
2022)
|
|
B. That there should be stronger assessment of whether the
benefits used to justify a project are realised
|
Council’s
project and programme management (PPM) tool (Sentient) enables the recording
of benefits, their baselines and benefits achieved.
At
present benefits are often poorly formed, or not measurable, together with a
lack of visibility at executive level.
Responsibility
for ongoing benefit measurement and realisation is not clearly
defined.
|
(1)
Work with the Finance team to ensure
strong oversight of stated financial benefits, realisation and reporting (September 2022).
(2)
Sponsor training launched to include benefit ownership and assessment (trial
completed, full launch by June 2022)
(3)
Include benefits reporting into existing ELT reports for visibility and
improved focus (September 2022)
|
|
C. That there should be greater rigor around definition of
measurable benefits in business cases at the time that investment is
approved.
|
The
business case clearly requests benefits to be defined with clear measures and
timeframes.
The
EPMO has to date reviewed a small sample of business cases.
Quality
varies and a clear process and criteria for non-financial benefits needs to
be defined.
|
(1)
Introduce a library of benefits with suitable measures that can be selected
by projects (draft completed and full launch by March 2022)
(2)
Refining governance processes across council to include an EPMO triage
for high-risk projects for a quality health check of business cases (December
2022)
|
|
D. There needs to be a strong focus on realising
benefits throughout each project’s life and beyond to ensure that the
council gets the full value of its investments.
|
Benefit
realisation maturity varies across council portfolios.
|
Combination
of the above with a library of quality benefits, business case quality
checks, divisional “spoke” support, together with Finance and
existing long-term plan monitoring.
(1)
Improved executive visibility through improved reporting and more frequent
portfolio governance processes (September 2022)
|
Tauākī whakaaweawe
āhuarangi
Climate impact statement
21. There are no
specific climate impacts identified through this project at this time. However,
any work to improve benefits management aims to improve how projects and
programmes can demonstrate positive contributions to the goals identified in
Auckland Council’s Te Tāruke-ā-Tāwhiri: Auckland's Climate
Plan.
Ngā whakaaweawe me
ngā tirohanga a te rōpū Kaunihera
Council group impacts and views
22. This activity
is currently focused on benefits management of projects and programmes operated
by Auckland Council. Therefore, views from the wider council group have not
been sought at this time.
Ngā whakaaweawe
ā-rohe me ngā tirohanga a te poari ā-rohe
Local impacts and local board views
23. No local
board engagement has been undertaken as part of this work to date.
Tauākī whakaaweawe
Māori
Māori impact statement
24. There are no
specific Māori impacts identified through this project at this time.
However, any work to improve benefits management aims to improve how projects
and programmes can demonstrate positive contributions to Māori outcomes
set out in Auckland Council’s Māori Outcome Framework, Kia Ora
Tāmaki Makaurau.
Ngā ritenga
ā-pūtea
Financial implications
25. Councils
current business case process is modelled off the international standard Better
Business Case (BBC) ’five case model’, which has been adopted by
Treasury for government agencies. This ensures that financial benefits are
identified at the business case stage. One of the aims of this programme of
work is that the benefit realisation process is strengthened to ensure
financial benefits claimed in the business case are delivered.
26. The planned
actions underway to improve benefits management will be delivered within
existing budgets.
Ngā raru tūpono me
ngā whakamaurutanga
Risks and mitigations
27. Council
currently has a low-medium level of maturity in terms of benefits management.
This therefore poses a risk that we are unable to maximise the benefits returned
from our projects and programmes.
28. This
improvement work involves improving the benefits framework and processes,
communicating and embedding these changes, and raising the maturity and
behaviour across council. This work is expected to take 12-18 months, and then
be an ongoing focus area.
29. There are
risks to achieving successful delivery of these improvements, including
engagement and buy-in across the organisation. This will be mitigated by
building strong relationships in the various divisions and portfolios (spokes),
leveraging good practice that already exists at council, and then together
building solutions that can be championed by departments and teams across the
organisation.
30. There is also
complexity risk regarding the vast variety of benefit types council needs to
deliver against. The benefits library is intended to address this, ensuring
there are quality benefits defined with clear ownership, measures, and
identified benefit reporters for the key benefit types.
Ngā koringa ā-muri
Next steps
31. The programme
of work to improve benefits management at council is expected to run until
December 2022 with some initial work planned for completion by early 2022.
Ngā tāpirihanga
Attachments
There are no attachments for
this report.
Ngā kaihaina
Signatories
|
Authors
|
Shameel Sahib - General Manager Corporate Strategy
& Business Improvement
Malcolm Savage – Head of Enterprise Portfolio
Management Office
|
|
Authorisers
|
Patricia Reade - Deputy Chief Executive
Ross Chirnside - General Manager Value For Money
|
|
Value for
Money Committee
17 February
2022
|
|
Auckland Council savings progress for
the period ended 31 December 2021
File No.: CP2022/00573
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 the 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
31 December 2021, Auckland Council has achieved $70.6 million (78.4 per cent)
towards the $90 million savings
target for the 2021/2022 financial year, an increase of $6.2 million of savings
achieved in
the second quarter.
4. The
savings in the second quarter have been achieved mainly because expenditure is
less than what was planned due to cautious financial management, different ways
of working during COVID-19 restrictions, delays in capital projects meaning
consequential operating costs will commence later, as well as staff vacancies
not able to be filled due to labour market conditions. There were some
additional procurement savings achieved through contract negotiation.
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 continue 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
progress of $70.6 million (78.4 per cent) achieved towards the $90 million
operating budget savings target for the 2021/2022 financial year, including
$6.2 million achieved during the quarter ended 31 December 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, an
annual $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
31 December 2021, Auckland Council has achieved $70.6 million (78.4 per cent)
towards the $90 million savings target, an increase of $6.2 million savings
achieved in the second quarter. Savings of note in the quarter include:
Prudent
financial management
· 
$1.60 million one-off saving of consequential opex
(repairs and maintenance and other expenditure) not required due to project
delays for the new premises for Records & Archives plus Civil Defence in
this financial year
· $1.0
million one-off saving in budgeted operating expenditure as a result of
different ways of working during COVID-19 restrictions, for example, online
council meetings resulted in lower costs in catering, office consumables and
related support activities, lower spend on motor vehicles, rent and lease and
materials in Regulatory Services and reprioritising of engagement activities to
focus on COVID-19 response/recovery activities
· $0.30
million professional services savings from cultural heritage review due to work
programme reprioritisation and lower costs in Hearings due to drop in volume
and change to online
· $0.20
million one-off outsourced works and services saving as no by-elections will
need to be held in the current financial year
· $0.07
million of travel and training budget not spent in this quarter due to
continuing COVID-19 travel restrictions
· $0.15
million one-off reduction in other expenditure from a review of printing lease
contract costs vs budget allowed, further analysis is being worked on to assess
any permanent savings
· $2.30
million of staff cost budget not spent in the second quarter due to vacancies
not filled due to labour market conditions and caution hiring in areas affected
by COVID-19 restrictions.
13. Staff costs
are below budget due to the effects of longer than normal time to hire and
difficulties in filling some roles due to competition for certain skill sets.
This means roles remain vacant and therefore budget is not spent.
14. 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 second quarter, which will not be needed in the current financial
year.
Process optimisation and efficiency savings
· $0.03
million permanent saving from reduced printing of rates notices
· $0.41
million one-off saving from lower year to date ACC costs compared to budget
allowed.
15. The Rates,
Valuation and Data Management unit implemented a new process and stopped
mailing quarterly rates notices to people who are on direct debit from
instalment two - four each rating year, saving printing and postage costs. Further
savings opportunity had been identified, however, it will be validated after
instalment four.
16. A review of
the ACC levy assumption rate is in the delivery pipeline to be assessed for any
permanent savings following the change in service provider.
17. The ICT multi-cloud migration programme was one of the enduring
savings achieved as part of the $120 million target. The multi-cloud platform
will continue to deliver more efficiencies through increased flexibility and
data centre processing and storage capacity at a lower cost. It is anticipated
additional savings will be realised as long-term backups can be deleted in the
next financial year.
Procurement
· $0.15
million further cost reduction from reviewing terms and conditions on contract
contingency for the council’s cafeteria and catering services contract.
18. The
procurement savings are primarily achieved by reducing operating contract spend
with third parties through negotiating better terms for the council.
19. A total of $1
million (annualised) potential savings opportunities have been identified from
Procurement’s work programme.
20. 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.
21. 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. While $70.6
million of the current year savings have been achieved, only $52.0 million
(57.8 per cent) have been achieved towards the $90 million savings target for
the 2022/2023 financial year.
Tauākī whakaaweawe
āhuarangi
Climate impact statement
22. 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
23. The $90
million savings target for 2021/2022 only applies to Auckland Council.
24. However, new
tools and process improvements successfully implemented in Auckland Council can
potentially be introduced to the council-controlled organisations for greater
efficiencies and other benefits.
Ngā whakaaweawe
ā-rohe me ngā tirohanga a te poari ā-rohe
Local impacts and local board views
25. 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
26. The savings
initiatives delivered or in delivery have no specific impact on Māori
outcomes. The Māori outcomes budget is ring-fenced for delivery of the Kia
Ora Tāmaki Makaurau framework and is not considered an area for cost
reductions.
Ngā ritenga
ā-pūtea
Financial implications
27. 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.
28. 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.
29. Any
additional budget pressures may also result in savings becoming more difficult
to realise.
Ngā raru tūpono me
ngā whakamaurutanga
Risks and mitigations
30. Progress
towards the savings target is on track, with a sufficient pipeline of expected
efficiency improvements, procurement opportunities and anticipated expenditure
below budgeted levels.
31. 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.
32. Any savings
as a result of the COVID-19 Alert Level 4 lockdown related impacts, have not
been counted towards the $90 million savings target as they were used to offset
revenue losses.
Ngā koringa ā-muri
Next steps
33. The next
update will be provided after the council’s quarter three 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
|
|
Authorisers
|
Peter Gudsell - Group Chief Financial Officer
Ross Chirnside - General Manager Value For Money
|
|
Value for
Money Committee
17 February
2022
|
|
Summary of Value for Money Committee
information memoranda and briefings (including the forward work programme) - 17
February 2021
File No.: CP2022/00438
Te take mō te
pūrongo
Purpose of the report
1. To
note the progress on the forward work programme appended as Attachment A.
2. To
receive a summary and provide a public record of memoranda or briefing papers
that may have been held or been distributed to Value for Money Committee
members.
Whakarāpopototanga matua
Executive summary
3. This
is a regular information-only report which aims to provide greater visibility
of information circulated to Value for Money Committee members via
memoranda/briefings or other means, where no decisions are required.
4. There
were no information items distributed.
5. There
were no workshops or briefings.
6. Value
for money activity delivered as part of the implementation of
council-controlled organisation review recommendations will be reported to
Council Controlled Organisation Oversight Committee rather than Value for Money
Committee and the forward work programme has been updated accordingly.
7. Note
that, unlike an agenda report, staff will not be present to answer
questions about the items referred to in this summary. Value
for Money Committee members should direct any questions to the
authors.
|
Ngā tūtohunga
Recommendation/s
That the Value for Money
Committee:
a) note
the progress on the forward work programme appended as Attachment A of the
agenda report.
b) receive
the summary of information memoranda and briefings – 17 February 2022.
|
Ngā tāpirihanga
Attachments
|
No.
|
Title
|
Page
|
|
a⇩
|
Forward Work Programme
|
31
|
Ngā kaihaina
Signatories
|
Author
|
Duncan Glasgow - Kaitohutohu Mana Whakahaere /
Governance Advisor
|
|
Authoriser
|
Ross Chirnside - General Manager Value For Money
|
|
Value for
Money Committee
17 February
2022
|
|
|
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:
Update
received in November 2021 VFM/2021/5
|
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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:
Update
received in November 2021 VFM/2021/4
|
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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 and
June 2022)
·
Enterprise Programme Office (June
2022)
Progress
to date:
Update
received in November 2021 VFM/2021/3
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