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Council
Controlled Organisation Direction and Oversight Committee
11 May 2023
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Approval
of shareholder comments on draft CCO Statements of Intent 2023-2026
File No.: CP2023/04509
Te take mō te
pūrongo
Purpose of the report
1. To
whakaae / approve shareholder comments on the draft Statements of Intent
2023-2026 for the substantive council-controlled organisations (CCOs),
excluding Auckland Transport, and three non-substantive CCOs; Contemporary Art
Foundation, Community Education Trust Auckland and Manukau Beautification
Charitable Trust.
Whakarāpopototanga matua
Executive summary
2. The
Statement of Intent (SOI) is an annual requirement of CCOs in the Local
Government Act 2002.
3. It
is one of several tools which provide accountability by CCOs to council and
provides an opportunity for the council to influence each organisation’s
direction. The SOIs set out the objectives and activities of each CCO for the
next three years, but as an annual document, it has a focus on the first of the
three years.
4. The
SOI process is a mix of legislative prescription and practices which have been
adopted by council over time. Due to the timing of the October 2022 local
government elections, it was necessary for the Mayor and his team to
immediately commence work on draft 2023/24 letters of expectation to
substantive CCOs.
5. The
proposed content of the draft letters of expectation were confirmed by
decisions of the Governing Body on 15 December 2022 (GB/2022/137). The final letters
were issued on 21 December 2022. Draft 2023-2026 SOIs were received by 1 April
2023, in accordance with prescribed timeframes. The draft SOIs (and cover
letters where applicable) are provided at Attachments A-H of this report.
6. Council
staff across various departments and the Mayoral Office have reviewed the draft
SOIs, with additional input sought from Independent Māori Statutory Board staff. This feedback has been collated and
synthesised into the proposed shareholder comments recommended for approval in
this report. The high-level themes and points of proposed shareholder feedback
on draft SOIs were also workshopped with this Committee on 19 April 2023.
7. Shareholder
comments are focused on alignment with statutory requirements, annual letters
of expectation, group strategy and policy and the draft 2023/24 annual budget.
The intention is not (generally speaking) to provide detailed direction on work
programmes.
8. Council
staff have also reviewed draft SOIs from three non-substantive CCOs and
recommend that the Manager, CCO Governance and External
Partnerships be delegated the authority to finalise the shareholder comments on
the draft SOIs for Contemporary Art Foundation, Manukau Beautification
Charitable Trust and Community Education Trust (COMET) Auckland.
9. Agreed
shareholder comments will be provided to CCOs in writing following agreement by
this committee. Staff will also work with colleagues at the CCOs to clarify any
additional matters of detail or formatting. Once received, CCO Boards must
consider shareholder comments before 1 June 2023 and provide council with final
SOIs by 31 July 2023.
10. Key
themes of proposed shareholder comments for all substantive CCOs are set out in
the box below.
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General shareholder
comments (proposed for all substantive CCOs)
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Financial
and non-financial performance
· Final SOIs should reflect the
council’s final decisions on the 2023/24 annual budget and financial
statements should be fully populated consistent with these decisions and
agreed with council’s Financial Planning staff.
· Final SOIs should include a clear view of any impacts on
activities from budget reductions.
· Final SOIs should ensure that all
performance measure targets are fully populated and that measures and targets
reflect those in the Long-term Plan, with agreed variances being clearly
identified.
· Activity based financial information should be provided in the
financial statements of final SOIs and reported quarterly.
Independent
Māori Statutory Board
· Final SOIs should outline the CCOs’
relationships with the Independent Māori Statutory Board and refer to
the IMSB’s Māori
Plan or Schedule of Issues of Significance.
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Response to letters
of expectation
· More
specifics should be provided in final SOIs on projects requested in letters
of expectation, including milestones and timeframes.
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11. The
key themes of feedback specific to individual CCOs are
in the box below.
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Key feedback
specific to individual CCOs
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Tātaki
Auckland Unlimited
· The final SOI should include more
information on the delivery of the operating savings required through the
final 2023/24 annual budget and have this clearly reflected in the work
programme and final financial statements.
· The final SOI should include performance
measures relating to capital expenditure delivery and condition of critical
assets.
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Eke
Panuku
· The draft
SOI needs to be revised to be more concise and to describe Eke Panuku
activities and deliverables clearly.
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Watercare
· Request to follow the SOI template that was developed
jointly with CCOs. This includes a work programme in which Watercare can set out clear
deliverables and dates for implementation of key work areas, including those
that respond to the letter of expectation and deliver on council
strategy.
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Ngā tūtohunga
Recommendations
That the Council Controlled
Organisation Direction and Oversight Committee:
a) whakaae / approve the proposed shareholder comments on the draft statements
of intent 2023–2026 for the three substantive and three non-substantive
council-controlled organisations contained in this report, with any deletions or additions based on feedback at the meeting
b) whakaae / agree that the Mayor and Chair of the Council Controlled
Organisation Direction and Oversight Committee will prepare
letters to be sent to Tātaki Auckland Unlimited, Eke Panuku and Watercare
containing the shareholder comments
c) tautapa / delegate to the Manager, CCO Governance and External
Partnerships, the authority to finalise the shareholder comments on the draft
statements of intent for Manukau Beautification Charitable Trust, Contemporary Art Foundation and Community
Education Trust Auckland
d) tuhi
ā-taipitopito / note that staff will record any
feedback at the meeting that relates to performance or operational issues, or
issues of detail or wording, and ensure those are raised with the relevant council-controlled organisations.
Horopaki
Context
12. The purpose of a SOI is:
i) to provide an opportunity for shareholders to influence the
direction of the CCO
ii) for CCOs to outline intentions and activities for the forthcoming
year
iii) to provide a basis for the accountability of CCO directors to the
shareholders.
13. The
requirements and timeframes for SOIs are set out in Schedule 8 of the Local
Government Act 2002 (LGA). SOIs are one element of
council’s overall strategic, planning, reporting and accountability
documentation. Other documents include the statement of expectations, CCO
accountability policy, long-term plan and annual report.
14. The
Governing Body in December 2022 agreed to approve a one-month extension of
statutory deadlines for all CCO statements of intent for 2023-2026 (GB/2022/137), as provided for in the LGA Schedule 8,
section 4.
15. Following receipt of the draft SOIs by 1 April 2023, staff from the
CCO Governance department and other relevant divisions reviewed the draft SOIs,
along with staff from the Independent Māori Statutory Board. This review
has focused on considering statutory requirements, the letters of expectation,
group strategy and policy and the draft 2023/24 annual budget. The high-level themes and points of proposed shareholder feedback on
draft SOIs were also workshopped with this Committee on 19 April 2023.
16. Final shareholder comments will be sent to the chairs of each CCO
once approved. Each CCO is required to consider the shareholder comments at a
public board meeting before 1 June 2023, before submitting a final SOI to the council by 31 July 2023.
17. Any
matters relating to performance
or operational issues will be communicated separately to each CCO, along with
matters of specific detail and formatting. Performance issues can be further
followed up with the relevant chair and chief executive through their
attendance at quarterly reporting meetings of the CCO Direction and Oversight
Committee.
Tātaritanga me ngā
tohutohu
Analysis and advice
Comments for all substantive CCOs
Alignment to letter of expectation
18. The
Mayor’s 2023/24 letters of expectation contained directives common to all
CCOs and those specific to individual CCOs. The common expectations and
CCOs’ response to these are summarised below.
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Expectations
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Eke Panuku
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Tātaki
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Watercare
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Consistent
with Mayoral proposal and budget savings
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P
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x
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N/A
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Concise SOIs
with meaningful performance measures
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x
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P
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P
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Be more
transparent and accountable
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P
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P
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P
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Implement
shared services
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P
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P
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N/A
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19. In
general the CCOs’ response to the common expectations was good, with all
(where applicable) reflecting a commitment to implementing shared services,
which also translated to their work programmes for the coming year. The CCOs
also reflected on their commitments and processes to operate in a transparent
manner with the council and the public. Council wants to receive more
meaningful information about the activities of each CCO and expects to see
activity based financial information provided in the final SOIs and reported on
quarterly.
20. Draft
SOIs were consistent with the Mayoral proposal and reflected identified budget
savings. The exceptions to this were Tātaki, where their draft SOI is
based on a $27.5m operating savings budget scenario, and the draft 2023/24 annual
budget has consulted on $44m of operating savings. Officers note that the
financial information for final SOIs will be finalised through the annual
budget process, decisions are being made 8 June 2023.
21. Where
CCOs have been requested to make savings, the draft SOIs do not clearly explain
the impacts on CCO activities of the Mayoral proposal requested cost
reductions. CCOs are requested to address this in their final SOIs. Where
changes have made to performance measures we expect that targets will be set,
and that measures and targets align with the long-term plan, with justification
for any variances.
22. Some
draft SOIs reflected changes to performance measures and/or targets, or targets
were missing. This need to be populated in the final
SOIs, with measures and targets reflecting those in the long-term plan, with
agreed variances being clearly identified.
23. CCOs
have responded positively to the request for specific projects or areas of work
that were set out in the letters of expectations but this is generally at a
high level and we recommend that more detail is provided on associated activity
milestones and timeframes in the final SOIs.
24. Council needs to ensure that it has the resources to lead
or partner with CCOs to progress projects in the letters of expectation.
25. There
was a lack of consistency in how climate change response, emissions reduction
and the impacts of growth on infrastructure are addressed in the draft SOIs.
These are areas identified for further work through the upcoming long-term plan
process.
26. The
proposed shareholder comments for all substantive CCOs are set out in the box
below.
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General
shareholder comments (proposed for all substantive CCOs)
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Financial
and non-financial performance
· Final SOIs should reflect the
council’s final decisions on the 2023/24 annual budget and financial
statements should be fully populated consistent with these decisions and
agreed with council’s Financial Planning staff.
· Final SOIs should include a clear view of any impacts on
activities from budget reductions.
· Final SOIs should ensure that all
performance measure targets are fully populated and that measures and targets
reflect those in the long-term plan, with agreed variances being clearly
identified.
· Activity based financial information should be provided
in the financial statements of final SOIs and reported quarterly.
Independent
Māori Statutory Board
· Final SOIs should outline the CCOs’
relationships with the Independent Māori Statutory Board and refer to
the IMSB’s Māori
Plan or Schedule of Issues of Significance.
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Response to letters
of expectations
· More specifics should be provided in final SOIs on
projects requested in letters of expectation, including milestones and
timeframes.
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CCO specific comments
Tātaki Auckland Unlimited
Alignment to letter of expectation
27. The
letter of expectation focused on four key areas specific to Tātaki.
The response to each is outlined below.
· Deliver a plan for a single operator for Auckland’s four main
stadiums by 1 July 2023 - this has been captured in the draft SOI in a number
of places. The draft SOI refers to the preparation of a term sheet and separate
vision document by the Industry Advisory Group (IAG) based on the proposed model that all parties reached in-principle
agreement on and that council will be updated on the proposal before 30 June
2023.
· Focus on key events and facilities that are highly valued by
Aucklanders rather than branding and economic development - this is addressed
in the draft SOI in a several ways including the new strategic framework which
includes Facilities and Events and Experiences as key pillars (see
below). The draft SOI does not include content or activity relating to
branding and some economic development activity has been scaled back or
removed.
· Make progress on integrating Auckland’s cultural institutions
- this is not well covered in the draft SOI. It refers briefly to working
collaboratively with the other cultural institutions such as MOTAT and council
on options for future integration, within respective legislation and statutory
frameworks. There are no clear milestones or actions outlined in the work
programme for this. It is noted that if fundamental integration options are
desired, this is likely to require legislative change, given the statutory
frameworks that govern Auckland’s cultural institutions.
· Significantly reduce Tātaki’s
reliance on Council rates-based funding – this is covered in part in the
draft SOI. Tātaki
have been requested through the 2023/24 draft annual budget process to provide
$44m in operating savings. Tātaki outlines a series of high-level bullet points on how it intends to
achieve $27.5m in savings but these are not well reflected in the work
programme and/or financial statements. It is challenging to understand
which services or activities are proposed to be scaled back or stopped.
Proposed feedback to Tātaki Auckland Unlimited
28. We recommend that in the final SOI Tātaki Auckland
Unlimited:
· include actions and milestones on progressing work to integrate
Auckland’s cultural institution, including those managed by Tātaki
plus the independent Auckland War Memorial Museum, MOTAT and the Stardome
Observatory.
· include more information on the delivery of the operating savings
required through the final 2023/24 annual budget and have this clearly
reflected in the work programme and final financial
statements. For transparency, Tātaki should make clear the
changes/work now scaled back or stopped in the final SOI as a result of final
2023/2024 annual budget decisions.
Other matters
to be addressed
29. In
the draft SOI Tātaki have
introduced a new strategic framework with four strategic outcomes (previously
five). The Tātaki
vision and purpose remains unchanged. The strategic outcomes are:
· Experiences and Events – engaging experiences and events drive
and enhance Tāmaki Makaurau’s unique narrative, vibrancy and prosperity
· Facilities – Tāmaki Makaurau’s venues and
collections are cared for, utilized and enriched for the benefit of current and
future generations
· Investment and Innovation – Tāmaki Makaurau’s distinct
economic advantages are leverage to create prosperity for current and future
generations
· Social Enterprise – Tātaki is a
responsive and integrated organisation bound by strong values and a focus on
social good outcomes aligned with our charitable status
30. The
statement supporting the social enterprise outcome is “we build social
cohesion, provide lifelong learning opportunities, inspire our young people and connect
Auckland’s culture with the global community while generating a
sustainable surplus to reinvest in social good outcomes.” This
statement is unclear and the bullet pointed activities listed under this
outcome appear to be more focused on organisational efficiency and value for
money and are not clearly linked to social enterprise.
31. The
draft SOI refers to:
· working with Eke Panuku as the lead agency for the implementation of
the City Centre Masterplan/Action Plan to advance work on the Aotea Creative
Quarter
· continuing to work with MOTAT and key
stakeholders on a shared vision for the Western Springs precinct.
32. The
specific role of Tātaki, its actions and associated milestones in the
above areas is unclear. Associated budget or funding implications
(to the extent there are any) should be outlined.
33. As noted earlier, Tātaki has set out proposed operational
metrics for assessing performance of its facilities (events are to be
added). Tātaki notes these will not form part of its Annual Report
and that it will report on these on a per organisation basis as required.
More clarity on the reporting frequency is needed. Council as shareholder
will expect these to be reported through the SOI quarterly reporting process
but notes they do not form part of the formal SOI performance measure set.
34. The draft SOI notes that Tātaki will continue to deliver
climate mitigation and resilience innovation through Climate Connect
Aotearoa. However it is unclear what activities are being delivered
through Climate Connect Aotearoa and how these actions support council plans
and strategies.
Proposed feedback to Tātaki Auckland Unlimited
35. We recommend that in the final SOI Tātaki Auckland
Unlimited:
· revisit the social enterprise outcome to make the objectives and
activities of this outcome clearer
· outline the role of Tātaki, specific actions and associated
milestones for its work on the Aotea Creative Quarter and the Western Springs
precinct.
· make clear that the operational metrics for facilities and events
contained in the SOI will be reported on quarterly through the regular SOI
process, noting these indicators will not form part of the formal SOI
performance measure set.
· include more
information on the activities of Climate Connect Aotearoa and how these support
council plans and strategies.
Performance
measures
36. Tātaki’s
performance indicator set remains largely the same (totaling 11 measures),
however some targets are incomplete or missing. These relate to:
· the ‘number of businesses and number of Māori businesses
that have been through a Tātaki programme or benefitted from a Tātaki intervention’ (both LTP measures) – three years of
targets missing
· attributable value of private sector investment secured during the
year – three years of targets missing
· four other measures require targets to be
added for the 2025/26 year
37. Tātaki
have proposed one additional measure on ‘number of school children
participating in experiences and events across Auckland Live, Zoo, Art Gallery,
Maritime Museum and Stadiums’, which is supported by staff.
Baseline and three-years of targets for this measure will be set through the
2024/25 SOI.
38. Tātaki
have an existing performance measure on 'percentage of operating expenses funded
through non-rates revenue'. Given the budget savings requested from Tātaki, the targets for 2023/24 will
need to increase, and increase year-on-year.
39. As
requested through the letter of expectation, Tātaki have included information on the purpose of each of its facilities,
how it evaluates the performance of each facility and the targeted performance
of each facility. Tātaki have also included budget information requested for each facility,
which is broken down into operating revenue, gross margin, operating
expenditure, net cost of service and capital budget. This
information was also sought for events and should be included in the final SOI,
along with targets for both facilities and events (targets are currently to be
confirmed).
40. Tātaki
do not presently have any performance measures around capital expenditure
delivery and other substantive CCOs do. Tātaki does report actuals
versus budget for capital expenditure through the SOI quarterly reporting
process but this lacks detail on what is being delivered for the capital
expenditure budget.
41. Tātaki
also does not have any performance measures relating to the condition of its
assets. The value of the Tātaki Trust assets at 30 June 2022 was
$1,875 million, based on the year-end accounts (non-current assets only).
Given the size of this asset base it is considered appropriate for an asset
condition measure to be introduced.
Proposed feedback to Tātaki Auckland Unlimited
42. We recommend that in the final SOI Tātaki Auckland
Unlimited:
· ensure targets across the three financial years
are provided for all measures and any variances to targets for LTP and non-LTP
measures are agreed with council staff
· increase the targets for the 'percentage of operating expenses funded through non-rates revenue' measure, as agreed with Financial Planning
staff and reflecting final 2023/24 annual budget decisions
· extend the information already provided in the
draft SOI on budget and performance metrics for its facilities to include the
same for events. Targets for both facilities and events metrics also need
to be completed.
· include a performance measure in the current
measure set around capex delivery. This should reflect the number of projects completed on time and budget for the total capex spend (not
just the percentage delivered).
· consider the introduction of critical asset condition performance
measure to the performance measure set.
Eke Panuku
Overall comments
43. The Eke
Panuku draft SOI needs to be amended to be shorter and
to clearly describe Eke Panuku activities and deliverables. In
particular, the section ‘nature and scope of
activities’ needs to be reviewed. This section should focus on providing
an overview of their two core functions – urban regeneration and property
and marina management.
44. The draft SOI is specific about the contribution that Eke
Panuku makes to key council strategies, including the Auckland Plan, Kia Ora
Tāmaki Makaurau and Te Tāruke-ā-Tāwhiri: Auckland’s
Climate Plan.
45. Eke Panuku will replace their Mana Whenua Outcomes
Framework with an Achieving Māori Outcomes plan from 1 July 2023, which
will align with Kia Ora Tāmaki Makaurau. Eke Panuku describe their work in
this area, which should also reference the potential to partner with
matāwaka entities on development projects and strengthening relationships
with mātāwaka partners.
46. The ongoing commitment of Eke Panuku to the implementation
of Te Tāruke-ā-Tāwhiri is noted. Council will continue to work
with Eke Panuku to ensure delivery against the outcomes. The importance of
climate resilient urban design has been proven in the recent flooding events.
Proposed feedback to
Eke Panuku
47. We
recommend that in the final SOI Eke Panuku:
· Revise the document to make it more concise, with a clearer
explanation of their core functions, activities and
deliverables.
· Acknowledge mātāwaka relationships
and potential partnerships in the section on ‘Achieving Māori
Outcomes plan and Kia Ora Tamaki Makaurau’.
Alignment to the letter of expectation
48. Eke Panuku have committed to delivering all the pieces of work
requested in the letter of expectation:
· delivering priority urban regeneration projects to ensure tangible
public benefits and local ownership of the projects – this is outlined in ‘Part 2 –
Statement of performance expectations’. It
includes an outline of the programmes, projects and quantifiable deliverables,
but needs to be more succinct. With the reduction in funding, some Eke Panuku
projects and programmes have been reduced, slowed or deferred. More information
is needed on what the impacts of these reductions will be for the scope, scale
and speed of the urban regeneration programmes.
· Plans for port land – Eke Panuku is scoping the port concept
plan and staging programme for the consolidation of port activity, to be
completed by December 2023. Eke Panuku advise that they may need to discuss the
funding for this work with council, once scoping is completed.
· Management of non-service properties – Eke Panuku will
endeavor to deliver an improved commercial return on the portion of the property
portfolio that can be leased commercially. They will also support council to
develop principles governing its property ownership and to assess the case for
consolidating management of non-service properties / group property functions.
· Reducing corporate costs and becoming a
smaller, more focused agency – the organisational size and corporate
spend of Eke Panuku will be reduced to meet this direction and to achieve the
savings set out in the annual plan consultation document 2023/2024.
49. The letter of expectation requests that SOIs are concise
and informative. As noted above, the draft SOI needs to be revised to be
shorter and clearer. SOIs are public documents and should be easy to
understand. The CCO review noted that many people have little understanding of
what Eke Panuku do, so it is particularly important for their SOI to be clear.
Performance
measures
50. Eke Panuku performance measures remain the same as previous years. This is in
line with the KPMG review of CCO performance measures, which noted that the key
urban regeneration and property and marina management measures are suitable.
The review noted the challenges in measuring urban regeneration, with progress
taking place over the medium-long term.
51. There are some recommendations from the KPMG review that will be
progressed over the next year:
· potentially adding a measure on the quality of partnerships, for
example a survey with development partners.
· discontinuing the measure ‘commercial / retail gross floor
area or net lettable area (sqm)’. This is because these projects are
irregular and the quantum of new commercial space is quite small. This is a
current LTP measure, therefore the change will be considered in the next LTP
process.
· improving climate and Māori outcome measures (together with
other CCOs), with work to be led by council. In the interim it would be helpful
to have an explanation of the nature of the 40 initiatives that support
Māori outcomes.
52. Some of the measures need the role of Eke Panuku explained more
clearly. For example the role of Eke Panuku in delivering net new dwellings.
53. Eke Panuku have provided an explanation around the changes to key
performance targets:
· Net new dwellings are delivered through development agreements with
partners, from the sale or long-term lease of council land. The target for
2023/2024 has reduced from 350 (LTP) to 180 (draft SOI). This is due to
developments slowing down due to property market conditions.
· Commercial / retail gross floor area or net lettable area (sqm) is
also delivered through development agreements. The target for 2023/2024 has
reduced from 29,000 (LTP) to nil (draft SOI). The reduction is due to property
market conditions and lower demand for retail and office space, meaning
developments are delayed.
· Public realm (sqm) improvements in town centres - the target for
2023/2024 has reduced from 57,000 (LTP) to 7,000 (draft SOI). This is mainly
due to external dependencies affecting project delivery. For example, the
Auckland Harbour Bridge Park (21,508 sqm) is on hold due to the cancellation of
the Northern Pathway and works in Manukau are contingent on land acquisition
from a third party.
· The asset recycling target: yet to be discussed and agreed between
Eke Panuku and council.
Proposed feedback to
Eke Panuku
54. We suggest that in the final SOI Eke Panuku:
· ensures that all performance measures are
clearly outlined.
Other comments
55. A review of Eke Panuku urban regeneration work, by KPMG,
was completed in March 2023. The SOI should reference this work, specifically
how key recommendations will be taken forward, in particular:
· the need to refresh urban regeneration
programmes, roughly every five yearly to reconfirm the outcomes and to support
councils investment decisions
· enhanced reporting against programme
outcomes.
56. There are omissions in the ‘partnerships and
relationships’ section of the draft SOI, including mana whenua,
mātāwaka and the Independent Māori Statutory Board. The NZ
Superfund partnership is also not mentioned here (or throughout the draft
document). The focus and timing of this relationship should be outlined, given
its importance. Likewise local board decision-making and quarterly reporting
requirements at a governance level should be covered in the ‘about us’
section.
Proposed feedback to
Eke Panuku
57. We suggest that in the final SOI Eke Panuku:
· include an overview of the KPMG review of
urban regeneration and how key recommendations will be implemented.
· ensure that key partnerships and relationships are reflected
appropriately in the final SOI.
Watercare
Overall comments
58. Watercare’s draft SOI is streamlined and very concise. It is
structured around six activities which are clear to understand and a good basis
for accountability to the council and the public.
59. A key element of the 2020 CCO Review were recommendations about
improving the consistency of the CCO SOIs. This reflects that these are
documents intended to inform the public about CCO activities and programmes,
support good reporting and monitoring, and reinforce the sense of a group
approach. One recommendation was to institute a new template for SOIs, which
was agreed in 2021. While Tātaki and Eke Panuku have followed the
template, Watercare has not. We consider that applying the template to the
final SOI will provide for better strategic alignment and the inclusion of
milestones for key actions and programmes.
60. The strategic alignment referred to in the draft SOI is limited and
includes climate, health and safety and Māori outcomes at a high
level. We would expect more information on Watercare’s delivery of
the Auckland Water Strategy actions it is leading in the final SOI.
61. The work with the Waikato Tainui Governance Board and Te Taniwha o
Waikato is not reflected. It is an important response to the Waikato River
consent and is recommended it is included in the final SOI.
62. The message from the chief executive and chair includes resilience
as climate change results in more frequent extreme weather events and it is
expected that this should be more strongly reflected under the activity on the
climate change strategic outcome.
Alignment to letter of expectation
63. Watercare’s
draft SOI has largely addressed the specific expectations set in the letter of
expectation:
· Progress as
required on Government’s Three Waters programme – The draft
SOI includes as one of the six activities the preparation for the
government’s waters reform, while preserving the ability to implement
alternative arrangements if reforms do not proceed as planned. Since the draft
SOI was prepared, the government announced its reset of the reform programme on
13 April 2023, increasing the number of water services entities from four to
ten and staggering their establishment. The composition of Entity A remains
unchanged (Auckland and Far North, Kaipara and Whangarei district water
services) and its establishment date has yet to be confirmed. The impact of
reform transition on Watercare’s other five activities, any new changes
to the government’s programme and risks will need to be carefully
scrutinised by the council throughout the transition period.
· Development
of local growth charges – While the draft SOI refers to the problem
with local network delivery and funding and the investigation of opportunities
to enhance the model, it does not include what is planned to be achieved and
the milestones and timeframes.
· Maintain low water costs for ratepayer users – The
draft SOI includes as one of the six activities, ‘Delivering our services
and infrastructure projects efficiently, keeping a strong focus on operating
costs, so we can minimise water charges’. There are also new financial
performance measures on capital project delivery and controllable costs.
· Continue to
meet targets relating to climate, drought resilience and supply – This is covered at a high level in the draft SOI. There is limited
information on work underway and progress expected to be achieved in 2023-24.
· Improve performance on resource consent report delays and reduce the
costs of development – A new performance measure is included in the draft
SOI to meet agreed resource consent timelines.
Proposed feedback to Watercare
64. We
recommend that in the final SOI Watercare:
· follows the
SOI template that was developed with CCOs in 2021. The agreed template is
structured in two parts: first, strategic overview which includes contribution
to Auckland Plan outcomes and second, statement of performance expectations,
noting that this includes a three-year work programme that should have clear
deliverables and implementation dates.
· provides
milestones for the work on local growth charges, and work on climate, drought
resilience and supply so it is clear what is planned to be achieved and the
timeframes involved. This could be included in a work programme.
· is clear
that preparing for the government’s water services reform will not
compromise the other five key activities.
· includes the
Auckland Water Strategy actions led by Watercare. Watercare should also include
the Future Development Strategy which provides the basis for strategic and
long-term planning of growth and development in the region.
· includes the
primary outcomes Watercare delivers against the Kia Ora Tāmaki Makaurau
Framework.
· strengthens
how climate change resilience is addressed in the climate change activity.
· confirms
that quarterly reporting on the work of the Waikato Tainui Governance Board and
Te Taniwha o Waikato will be maintained within existing quarterly reporting
regime.
Performance
outlook
65. The
number of performance measures has been reduced in Watercare’s draft SOI
from 32 to 28. This includes 14 measures required by the Department of Internal
Affair to be included in the council’s long-term plan. Watercare also has
a number of measures to report on to Taumata Arowai, the new water services
regulator.
66. Watercare
has introduced four new measures:
· Two new
measures have been included in response to the KPMG review of performance
measures across CCOs. A measure on the delivery of the capital programme in
line with the asset management plan baseline approved by the Board (Target 80
per cent of projects are delivered within the approved budget and 80 per cent
of projects are in service within the approved time). A measure on reactive and
proactive maintenance spend against budget has also been introduced. We expect
the final SOI to include the methodology for this measure.
· A new
controllable costs measure has been introduced but there is little information
provided. We expect the final SOI to include methodology, baseline and target
for the measure, as a reflection of the considerable work Watercare has
undertaken in this area with the Water Industry Commission for Scotland.
· As requested
in the letter of expectation, a new measure is included on the adherence to the
Service Level Agreement with council of ten working days for Watercare to
provide specialist input into resource consents
67. Watercare
has removed eight measures from the SOI:
· formal engagements with mana whenua*
· integration/ adoption of Te Reo and Tikanga Māori*
· workforce measures on percentage of Māori employees*
· workforce gender ratio*
· employee net promoter score*
· sourcing water from a diversity of sources; and preparing
for alternative sources of drinking water in the future
· health, safety, wellbeing improvement plans
· leadership walks
* monitored internally
68. For
the Māori outcomes measures that were removed we expect that results
relevant to Kia Ora Tāmaki Makaurau and Watercare’s Achieving
Māori Outcomes plan will continue to be reported to council. It is
positive that Watercare have a measure on the procurement sources through
Māori-owned businesses but note it is different to the council
target.
69. The emissions reduction performance measure includes scope 1 and 2
emissions. We suggest that the reporting of scope 3 emissions be consistent
with the group’s commitments.
Proposed feedback to Watercare
70. We
recommend that in the final SOI Watercare:
· includes
information on how compliance will be ensured with the Taumata Arowai
regulatory requirements
· ensures the
targets for water leakage and consumption is consistent with the Auckland Water
Strategy targets.
· sets out the
methodology for the maintenance and controllable costs measures and look to set
targets for this next year.
· adopts the
council standard measure and target for consistency of five per cent direct
spend to Māori and Pasifika business or social enterprises and 15 per cent
of indirect spend.
· considers
noting that reporting scope 3 greenhouse gas emissions to be consistent with
the group approach.
Non-substantive CCOs and external partnerships
71. Council has eight other CCOs that are not considered ‘substantive’ under the Local Government
(Auckland Council) Act 2009. The focus of these CCOs is either more local in
nature than the substantive CCOs, or significantly smaller in scale, though the
Governing Body is still responsible for their governance.
72. Three of these CCOs must provide the council
with an SOI. The others have been exempted from CCO status and are therefore
not subject to the normal accountability requirements of a CCO under the LGA,
including preparing a SOI.
73. It is recommended that the Manager, CCO Governance and External
Partnerships be delegated the authority to finalise the shareholder comments on
the draft SOIs for Contemporary Art Foundation, Manukau Beautification
Charitable Trust (MBCT) and Community Education Trust (COMET) Auckland.
Contemporary Art Foundation
74. Contemporary Art Foundation’s draft SOI has generally appropriate
performance measures and targets and its proposed budget is within budgeted
allowances.
75. The main
areas of proposed shareholder comment are that the Contemporary Art Foundation
should:
· ensure
that their Thriving Communities Outcomes reflect the updated Ngā
Hapori Momoho – Thriving Communities Strategy 2022-2032
· consider
inclusion of an assessment of their contributions to the actions in Te
Tāruke-ā-Tāwhiri – Auckland’s Climate Plan.
Manukau Beautification Charitable Trust
76. The
MBCT draft SOI has appropriate measures and targets and reflects a steady
financial position with projected surpluses for 2023/34 to 2025/26.
77. The
main areas of proposed shareholder comment are that MBCT should:
· consider
restructuring the order of sections within the draft SOI for improved flow
· retitle
some section headings to provide for greater clarity and linkages between areas
of work, key focus areas and programmes
· to
better reflect section 64(6) of the LGA, include major accounting policies by
either providing a link/referencing page numbers for the relevant section in
the latest annual report or quoting specific accounting policies.
Community Education Trust Auckland
78. The consultation document for the annual budget
2023/2024 proposes that council stops all funding for COMET. In response, COMET
have put in a submission requesting that their funding reduces over time,
rather than stops in one go - $350k for 2023/2024, $250k for 2024/2025 and
$150k for 2025/2026 (note that council previously funded COMET $558k per year).
79. The content of the draft SOI reflects
COMET’s submission, the financial information and also the deliverables
and performance targets. This means
the content of the COMET SOI may need to be amended to reflect budget decisions
made on 8 June 2023. In their
submission COMET state that ‘losing all council funding at short notice
would pose a significant risk to our ability to delivery our vision and mission
because it will take several years to build up other funding’. Much of
their current work would cease and it is possible that they would close.
80. In early 2023, the Youth Employability Programme
that COMET developed, transitioned to Youthtown Inc (in accordance with their
business model). Therefore the draft SOI has a couple of new initiatives
proposed around youth voice and school attendance. Most performance measure
targets have also reduced, given the reduced level of funding.
81. COMET’s submission and draft SOI request
that council support a change in COMET’s Trust Deed, to disestablish them
as a CCO. They would then re-settle as an independent charitable trust (with
the timing of this shift to be jointly determined). We suggest that staff work
with COMET to progress this.
Tātakiākī
whakaaweawe āhuarangi
Climate impact statement
82. CCOs
are responsible for demonstrating how their draft SOI aligns with Te
Tāruke-ā-Tāwhiri: Auckland's Climate Plan. This has been
reviewed by staff as part of reviewing the draft SOIs. Comments relating to
climate impacts are included in the shareholder comments recommended
above. In general terms Eke Panuku, Tātaki Auckland Unlimited and
Watercare have covered alignment with Te Tāruke-ā-Tāwhiri: Auckland's
Climate Plan outcomes, with more detail needed in some sections.
Ngā whakaaweawe me
ngā tirohanga a te rōpū Kaunihera
Council group impacts and views
83. Staff
have sought and incorporated feedback from various departments across the
council.
84. When
the official letters with feedback are provided to the CCOs, staff will work
with the CCOs on how best to incorporate the shareholder feedback. This will
also include providing further detail and addressing any formatting issues.
Ngā whakaaweawe
ā-rohe me ngā tirohanga a te poari ā-rohe
Local impacts and local board views
85. The
CCO Direction and Oversight Committee is responsible for providing shareholder
comments on the draft SOI, and feedback from local boards is not sought. A
range of additional mechanisms to build the relationship between local boards
and CCOs has been implemented following the 2020 CCO Review, including new
local board engagement plans, to ensure that CCOs appropriately consider the
governance role of local boards.
Tātakiākī
whakaaweawe Māori
Māori impact statement
86. The
activities of CCOs have significant potential to improve Māori wellbeing
and to influence the achievement of the Auckland Plan and Kia Ora Tāmaki Makaurau. The draft SOIs were
separately provided to the Independent Māori Statutory Board secretariat
and council’s Nga Mātārae team. As noted in the individual
sections, Eke Panuku and Tātaki Auckland Unlimited have covered Kia Ora
Tamaki Makaurau outcomes in their draft SOIs, however additions in this area
are needed to the Watercare draft SOI.
87. Recognition of the IMSB’s Māori Plan
or Schedule of Issues of Significance was missing across all SOIs. This is
highlighted in the proposed shareholder feedback common to all substantive
CCOs.
Ngā ritenga
ā-pūtea
Financial implications
88. As
noted in the comments above, the final SOI financial sections need to be
aligned with the Annual Budget 2023/2024 decisions.
Ngā raru tūpono me
ngā whakamaurutanga
Risks and mitigations
89. There are no direct risks associated with the proposed shareholder
comments.
90. There is a risk that
the CCOs may not adequately reflect the shareholder comments. This can be mitigated by working closely with the CCOs.
Also, if the shareholder comments are not adequately reflected, the council can modify a SOI at any time.
91. The
government’s reform programme, including resource management reform, the
Future of Local Government review, and National Policy Statement
on Urban Development, all have the potential for significant impacts on the
activities of council’s CCOs. Staff will continue to provide advice on
these matters, including staff from the CCOs.
92. Risk monitoring and
oversight of the government’s water services reform during the current transition period is led by an executive governance group, comprised of executive leadership from Auckland
Council, Watercare and Auckland Transport.
Ngā koringa ā-muri
Next steps
93. If the committee agrees with the feedback contained in this report,
staff will draft letters based on this feedback and any other matters directed
to be included by the Committee. These will be sent by the Mayor and the Chair
of the CCO Direction and Oversight Committee to the chair of each CCO board, as
soon as possible after this meeting, so that the CCOs can revise their SOIs
accordingly and meet the deadline for final submission of 31 July 2023.
Ngā tāpirihanga
Attachments
|
No.
|
Title
|
Page
|
|
a⇨
|
Tataki Auckland Unlimited letter enclosing draft
2023-2026 Statement of Intent
|
|
|
b⇨
|
Tataki Auckland Unlimited draft 2023-2026 Statement of
Intent
|
|
|
c⇨
|
Eke Panuku draft 2023-2026 Statement of Intent
|
|
|
d⇨
|
Watercare letter enclosing draft 2023-2026 Statement
of Intent
|
|
|
e⇨
|
Watercare draft 2023-2026 Statement of Intent
|
|
|
f⇨
|
Contemporary Art Foundation draft 2023-2026 Statement
of Intent
|
|
|
g⇨
|
Manukau Beautification Charitable Trust draft 2023-2026
Statement of Intent
|
|
|
h⇨
|
COMET Auckland draft 2023-2026 Statement of Intent
|
|
Ngā kaihaina
Signatories
|
Authors
|
Rachel Wilson - Principal Advisor
Sarah Johnstone-Smith - Principal Advisor
Trudi Fava - CCO Programme Lead
|
|
Authoriser
|
Alastair Cameron - Manager - CCO Governance &
External Partnerships
|
