Notice is hereby given that a Meeting of the Finance and Audit Committee will be held on:

 

Date:

Time:

Meeting Room:

Venue:

 

Thursday, 14 June 2018

9am

Council Chamber
Southland District Council
15 Forth Street
Invercargill

 

Finance and Audit Committee Agenda

OPEN

 

 

MEMBERSHIP

 

Chairperson

Ebel Kremer

 

 

Mayor Gary Tong

 

Councillors

John Douglas

 

 

Paul Duffy

 

 

Bruce Robertson – External Member

 

 

IN ATTENDANCE

 

Chief Financial Officer

Anne Robson

Committee Advisor

Fiona Dunlop

 

 

Contact Telephone: 0800 732 732

Postal Address: PO Box 903, Invercargill 9840

Email: emailsdc@southlanddc.govt.nz

Website: www.southlanddc.govt.nz

 

Full agendas are available on Council’s Website

www.southlanddc.govt.nz

 

 

 


Terms of Reference – Finance and Audit Committee

 

The Finance and Audit Committee is responsible for:

·                 Ensuring that Council has appropriate financial, risk management and internal control systems in place that provide:

-      An overview of the financial performance of the organisation.

-      Effective management of potential opportunities and adverse effects.

-      Reasonable assurance as to the integrity and reliability of Council’s financial and non-financial reporting. 

·                 Exercising active oversight of information technology systems. 

·                 Exercising active oversight of “Council’s health and safety policies, processes, compliance, results and frameworks”

·                 Relationships with External, Internal Auditors, Banking Institutions and Insurance brokers.

 

The Finance and Audit Committee will monitor and assess the following:

·                 The financial and non-financial performance of Council against budgeted and forecasted outcomes

·                 Consideration of forecasted changes to financial outcomes

·                 Council’s compliance with legislative requirements

·                 Council’s risk management framework

·                 Council’s Control framework

·                 Council’s compliance with its treasury responsibilities.

 

The Finance and Audit Committee shall have the following delegated powers and be accountable to Council for the exercising of these powers and will operate within:

·                 policies, plans, standards or guidelines that have been established and approved by Council;

·                 the overall priorities of Council;

·                 the needs of the local communities; and

·                 the approved budgets for the activity.

 

The Finance and Audit Committee will have responsibility and delegated authority in the following areas:

 

Financial and Performance Monitoring

(a)                 Monitoring financial performance to budgets;

(b)                Monitoring service level performance to key performance indicators.

 

Internal Control Framework

(a)                 Reviewing whether Council’s approach to maintaining an effective internal control framework is sound and effective;

(b)                Reviewing whether Council has taken steps to embed a culture that is committed to probity and ethical behaviour;

(c)                 Reviewing whether there are appropriate systems, processes and controls in place to prevent, detect and effectively investigate fraud.

 

Internal Reporting

(a)                 To consider the processes for ensuring the completeness and quality of financial and operational information being provided to the Council;

(b)                To seek advice periodically from internal and external auditors regarding the completeness and quality of financial and operational information that is provided to the Council.

 


 

External Reporting and Accountability

(a)                 Agreeing the appropriateness of the Council’s existing accounting policies and principles and any proposed change;

(b)                Enquiring of internal and external auditors for any information that affects the quality and clarity of the Council’s financial statements and statements of service performance, and assess whether appropriate action has been taken by management in response to the above;

(c)                 Satisfying itself that the financial statements and statements of service performance are supported by appropriate management signoff on the statements and on the adequacy of the systems of internal control (ie, letters of representation), and recommend signing of the financial statements by the Chief Executive/Mayor and adoption of the Annual Report, Annual Plans, Long Term Plans;

 

Risk Management

(a)                 Reviewing whether Council has in place a current, comprehensive and effective risk management framework and associated procedures for effective identification and management of the Council’s significant risks;

(b)                  Considering whether appropriate action is being taken to mitigate Council’s significant risks.

 

Health and Safety

(a)                 Review, monitor and make recommendations to Council on the organisations health and safety risk management framework and policies to ensure that the organisation has clearly set out its commitments to manage health and safety matters effectively.

(b)                Review and make recommendations for Council approval on strategies for achieving health and safety objectives.

(c)                 Review and recommend for Council approval targets for health and safety performance and assess performance against those targets.

(d)                Monitor the organisation’s compliance with health and safety policies and relevant applicable law.

(e)                Ensure that the systems used to identify and manage health and safety risks are fit-for-purpose, being effectively implemented, regularly reviewed and continuously improved.  This includes ensuring that the Council is properly and regularly informed and updated on matters relating to health and safety risks.

(f)                  Seek assurance that the organisation is effectively structured to manage health and safety risks, including having competent workers, adequate communication procedures and proper documentation.

(g)                Review health and safety related incidents and consider appropriate actions to minimise the risk of recurrence.

(h)                Make recommendation to the Council regarding the appropriateness of resources available for operating the health and safety management systems and programmes.

(i)                  Any other duties and responsibilities which have been assigned to it from time to time by the Council.

 

Internal Audit

 

(a)                 Approve appointment of the internal auditor, internal audit engagement letter and letter of understanding. 

(b)                Reviewing and approving the internal audit coverage and annual work plans, ensuring these plans are based on the Council’s risk profile;

(c)                 Reviewing the adequacy of management’s implementation of internal audit recommendations;

 

(d)                Reviewing the internal audit charter to ensure appropriate organisational structures, authority, access, independence, resourcing and reporting arrangements are in place.

 

External Audit

(a)                 Confirming the terms of the engagement, including the nature and scope of the audit, timetable and fees, with the external auditor at the start of each audit;

(b)                Receiving the external audit report(s) and review action(s) to be taken by management on significant issues and audit recommendations raised within;

(c)                 Enquiring of management and the independent auditor about significant business, political, financial and control risks or exposure to such risks.

 

Compliance with Legislation, Standards and Best Practice Guidelines

(a)                 Reviewing the effectiveness of the system for monitoring the Council’s compliance with laws (including governance legislation, regulations and associated government policies), with Council’s own standards, and Best Practice Guidelines as applicable.

(b)                Conducting and monitoring special investigations, in accordance with Council Policy, and reporting the findings to Council. 

(c)                 Monitoring the performance of Council organisations, in accordance with the Local Government Act. 

 

Business Case Review

(a)        Review of the business case of work, services, supplies, where the value of these or the project exceeds $2million or the value over the term of the contract exceeds $2million.

 

Insurance

(a)                 Consider Council’s insurance requirements, considering its risk profile

(b)                Approving the annual insurance renewal requirements

 

Treasury

(a)           Oversee the treasury function of Council ensuring compliance with the relevant Council policies and plans

(b)           Ensuring compliance with the requirements of Council’s trust deeds are met

(c)           Recommending to Council treasury policies.

 

 

The Finance and Audit Committee is responsible for considering and making recommendations to Council regarding:

(a)            Policies relating to risk management, rating, loans, funding and purchasing.

(b)           Accounting treatments, changes in generally accepted accounting practice, and new accounting and reporting requirements.

(c)            The approval of financial and non-financial performance statements including adoption of the Annual Report, Annual Plans and Long Term Plans.

 

The Finance and Audit Committee is responsible for considering and making recommendations to the Services and Assets Committee on business cases.

 


Finance and Audit Committee

14 June 2018

 

TABLE OF CONTENTS

ITEM                                                                                                                                                                                  PAGE

Procedural

1             Apologies                                                                                                                                                                7

2             Leave of absence                                                                                                                                                7

3             Conflict of Interest                                                                                                                                             7

4             Public Forum                                                                                                                                                         7

5             Extraordinary/Urgent Items                                                                                                                        7

6             Confirmation of Minutes                                                                                                                               7

Reports for Recommendation

7.1         Draft Policy on Development and Financial Contributions                                                   19

7.2         Draft Revenue and Financing Policy                                                                                                    63

7.3         Draft Long Term Plan 2018-2028                                                                                                          147

7.4         Accounting Policies for the year ended 30 June 2018                                                             505

7.5         Draft Health and Safety Plan for 2018/2019                                                                                  521

Reports

8.1         Health and Safety Update                                                                                                                        529

8.2         Financial Report for the month ended 30 April 2018                                                               531

8.3         Interim Management Report from Audit New Zealand for the year ended 30 June 2018                                                                                                                                                                                  579

8.4         Annual Report Timetable - Key Dates                                                                                               603

8.5         Finance & Audit Committee Work plan for the year ended 30 June 2019                   605   

Public Excluded

Procedural motion to exclude the public                                                                                                       609

C9.1      Quarterly risk register update - June 2018

C9.2      Fraud Risk Assessment

C9.3      Insurance for Underground Infrastructure

C9.4      Annual Insurance Renewal

 


1             Apologies

 

At the close of the agenda no apologies had been received.

 

2             Leave of absence

 

At the close of the agenda no requests for leave of absence had been received.

 

3             Conflict of Interest

 

Committee 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.

 

4             Public Forum

Notification to speak is required by 5pm at least two days before the meeting. Further information is available on www.southlanddc.govt.nz or phoning 0800 732 732.

 

5             Extraordinary/Urgent Items

To consider, and if thought fit, to pass a resolution to permit the committee to consider any further items which do not appear on the Agenda of this meeting and/or the meeting to be held with the public excluded.

Such resolution is required to be made pursuant to Section 46A(7) of the Local Government Official Information and Meetings Act 1987, and the Chairperson must advise:

(i)            the reason why the item was not on the Agenda, and

(ii)          the reason why the discussion of this 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.”

 

6             Confirmation of Minutes

6.1             Meeting minutes of Finance and Audit Committee, 26 March 2018


 

Finance and Audit Committee

 

OPEN MINUTES

 

 

 

Minutes of a meeting of Finance and Audit Committee held in the Council Chambers, 15 Forth Street, Invercargill on Monday, 26 March 2018 at 9am.

 

present

 

Chairperson

Ebel Kremer

 

 

Mayor Gary Tong

 

Councillors

John Douglas

 

 

Paul Duffy

 

 

Bruce Robertson

 

 

IN ATTENDANCE

Councillor Keast

Chief Executive Officer – Steve Ruru

Chief Financial Officer - Anne Robson

Group Manager, Environmental Services – Bruce Halligan

People and Capability Manager – Janet Ellis

Senior Projects Manager – Ian Marshall

Communications Manager – Louise Pagan

Committee Advisor - Fiona Dunlop

 

 


1             Apologies

 

There were no apologies.

 

 

2             Leave of absence

 

There were no requests for leave of absence.

 

 

3             Conflict of Interest

 

There were no conflicts of interest declared.

 

 

4             Public Forum

 

There was no public forum.

 

 

5             Extraordinary/Urgent Items

 

There were no Extraordinary/Urgent items.

 

 

6             Confirmation of Minutes

 

Resolution

Moved Cr Duffy, seconded Cr Douglas and resolved:

That the Finance and Audit Committee confirms the minutes of the meeting held on 11 December 2017 as a true and correct record of that meeting.

 

Reports for Recommendation

 

 

7.1

Risk Management Framework Project Development

Record No: R/18/2/4483

 

Chief Executive – Steve Ruru was in attendance for this item.

 

 

Resolution

Moved Chairperson Kremer, seconded Mayor Tong and resolved:

That the Finance and Audit Committee:

a)            Receives the report titled “Risk Management Framework Project Development” dated 9 March 2018.

 

b)           Determines that this matter or decision be recognised as not significant in terms of Section 76 of the Local Government Act 2002.

 

c)            Determines that it has complied with the decision-making provisions of the Local Government Act 2002 to the extent necessary in relation to this decision; and in accordance with Section 79 of the Act determines that it does not require further information, further assessment of options or further analysis of costs and benefits or advantages and disadvantages prior to making a decision on this matter.

 

d)           Endorse the approach to engage Structured Conversations Ltd on a preferred supplier basis to undertake the Risk Management Framework project.

 

e)            Recommends to Council to support the approach to engage Structured Conversations Ltd on a preferred supplier basis to undertake the Risk Management Framework project.

 

f)             Recommends to Council a request for approval for unbudgeted expenditure of up to $60,000 exclusive of GST to be split evenly over the two financial years of 2017-2018 and 2018-2019 and to be sourced from the Council District Operations Reserve to undertake the Southland District Council Risk Management Framework project.

 

 

7.2

Annual Report Audit Plan for year ending 30 June 2018

Record No: R/18/3/5772

 

Chief Financial Officer – Anne Robson was in attendance for this item.

 

Audit New Zealand Audit Director – Ian Lothian was also in attendance for this item.

 

 

Resolution

Moved External Member Robertson, seconded Cr Douglas and resolved:

That the Finance and Audit Committee:

a)            Receives the report titled “Annual Report Audit Plan for year ending 30 June 2018” dated 19 March 2018.

 

b)           Determines that this matter or decision be recognised as not significant in terms of Section 76 of the Local Government Act 2002.

 

c)            Determines that it has complied with the decision-making provisions of the Local Government Act 2002 to the extent necessary in relation to this decision; and in accordance with Section 79 of the Act determines that it does not require further information, further assessment of options or further analysis of costs and benefits or advantages and disadvantages prior to making a decision on this matter.

 

d)           Accepts the audit plan as set out attachment A of the officer’s report.

 

 

7.3

Health and Safety

Record No: R/18/2/4223

 

People and Capability Manager – Janet Ellis was in attendance for this item.

 

 

Resolution

Moved Chairperson Kremer, seconded Cr Duffy and resolved:

That the Finance and Audit Committee:

a)            Receives the report titled “Health and Safety” dated 14 March 2018.

 

b)           Determines that this matter or decision be recognised as not significant in terms of Section 76 of the Local Government Act 2002.

 

c)            Determines that it has complied with the decision-making provisions of the Local Government Act 2002 to the extent necessary in relation to this decision; and in accordance with Section 79 of the Act determines that it does not require further information, further assessment of options or further analysis of costs and benefits or advantages and disadvantages prior to making a decision on this matter.

 

d)           Endorses the work that is being undertaken in Health and Safety within Council.

 

e)            Recommends to Council that there is a continued focus on Health and Safety and the implementation of the Health and Safety Plan including training and focus on critical risks.

 

 

Reports

 

 

8.1

Health and Safety Update

Record No: R/18/2/4221

 

People and Capability Manager – Janet Ellis was in attendance for this item.

 

 

Resolution

Moved Mayor Tong, seconded Cr Douglas and resolved:

That the Finance and Audit Committee:

a)            Receives the report titled “Health and Safety Update” dated 2 March 2018.

 


 

 

8.2

Digitisation Project

Record No: R/18/2/2526

 

Chief Information Officer – Damon Campbell and Team Leader Knowledge Management – Gillian Cavanagh were in attendance for this item.

 

 

Resolution

Moved Cr Douglas, seconded External Member Robertson and resolved:

That the Finance and Audit Committee:

a)            Receives the report titled “Digitisation Project” dated 19 March 2018.

 

 

8.3

Financial Report for the month ended 31 January 2018

Record No: R/18/2/4137

 

Project Accountant – Dipal Patel was in attendance for this item.

 

 

Resolution

Moved Chairperson Kremer, seconded Mayor Tong and resolved:

That the Finance and Audit Committee:

a)         Receives the report titled “Financial Report for the month ended 31 January 2018” dated 19 March 2018.

 

 

8.4

Forecasted Financial Position for the year ending 30 June 2018

Record No: R/18/3/5114

 

Graduate Accountant – Kate Westenra was in attendance for this item.

 

 

Resolution

Moved Chairperson Kremer, seconded Cr Duffy recommendations a to f and g with an addition (as indicated) and resolved:

That the Finance and Audit Committee:

a)            Receives the report titled “Forecasted Financial Position for the year ending 30 June 2018” dated 19 March 2018.

 

b)           Determines that this matter or decision be recognised as not significant in terms of Section 76 of the Local Government Act 2002.

 

c)            Determines that it has complied with the decision-making provisions of the Local Government Act 2002 to the extent necessary in relation to this decision; and in accordance with Section 79 of the Act determines that it does not require further information, further assessment of options or further analysis of costs and benefits or advantages and disadvantages prior to making a decision on this matter.

 

d)           Notes the forecasted changes to Council’s year-end financial performance and position as detailed in attachments B and C of the officer’s report.

 

e)            Recommends Council approve the changes as detailed in attachment A of the officer’s report

 

f)             Recommends to Council that it include in the 2018-2028 Long Term Plan the projects indicated to be deferred from the current year as detailed in attachment D of the officer’s report

 

g)           Recommends Council approve the following unbudgeted expenditure for the 2017/18 financial year:

 

Business Unit

Expense

Amount

Funding Source

Customer Service

Acquisition of ex roading vehicle

$15,000

Loan

Financial Services

Increases in valuation contract and legal fees

$77,500

District Op Reserve

People and Capability

Uniform re-branding

$24,196

Corporate Uniform reserve

People and Capability

Increased recruitment costs

$58,425

District Op reserve

Community Leadership

Training and associated costs

$20,000

District Op Reserve

Community Leadership

Stewart Island/Rakiura Economic Study

$40,000

Grant

Community Leadership

Purchasing two vehicles instead of leasing.

$62,592

Loan

Chief Executive

Increased operational costs

$133,504

District Ops reserve

Operations & Community Service

1 early replacement , 1 vehicle purchased instead of leased and 1 additional team leader vehicle

$95,041

Loan & Reserve

Communications and Engagement

Increased operational costs

$20,000

District Ops reserve

Building Regulation

Increased operational costs

$35,023

District Ops reserve & unused budget

Building Regulation

Purchasing two vehicles instead of leasing.

$72,258

Loan

Resource Planning/Policy

Increased district plan costs

$30,000

District Ops reserve

Venture Southland - Grant

Budgeting error, Te Anau Destination Fiordland contribution

$13,601

District Ops reserve

Buildings - Invercargill Office

Office refurbishments

$13,337

Property Development reserve

Roading - Administration

One early replacement vehicle

$45,204

Depreciation Motor Vehicle reserve

Roading - Special Purpose

Sealing of lower Hollyford Road

$286,620

100% NZTA

Hall - Colac Bay

Urgent repairs to building.

$11,600

Colac Bay Com Centre reserve & unused budgets

SS Riversdale - Sludge Removal

Increase in sludge removal costs

$84,014

Loan

Stormwater Drainage - Winton

Clyde/Eglington St SW Repairs

$18,488

Winton General reserve

SIESA - Operations

Increased operational costs

$103,489

SIESA Operations reserve

SIESA - Waste Recovery

Increased operational costs

$18,000

SIESA Operations reserve

Water Services

Potential cost allowance for Havelock North drinking water implications

$100,000

District Water Reserve

Water, Wastewater and Stormwater

Potential cost allowance for Water and Land plan appeals

$100,000

District Water & Wastewater Reserves and Local reserves

Tuatapere Community Board

Purchase of railway irons, sleepers and other materials

$9565

Tuatapere General Reserve

 

 

8.5

Audit NZ report of Council's LTP Consultation Document for the period 1 July 2018 to 30 June 2028

Record No: R/18/3/5297

 

Project Manager, Corporate Planning – Nicole Taylor was in attendance for this item.

 

Audit New Zealand Audit Director – Ian Lothian was also in attendance for this item.

 

 

Resolution

Moved Mayor Tong, seconded Chairperson Kremer and resolved:

That the Finance and Audit Committee:

a)            Receives the report titled “Audit NZ report of Council's LTP Consultation Document for the period 1 July 2018 to 30 June 2028” dated 19 March 2018.

 

The Meeting adjourned for morning tea at 10.32am and reconvened at 10.49am.

 

Mayor Tong, Councillors Kremer, Douglas, Duffy, external member Robertson and Councillor Keast were in attendance for this item.

 

8.6

Outstanding Debt as at 31 January 2018

Record No: R/18/2/3595

 

Finance Officer, Credit Controller – Shirley Carruthers was in attendance for this item.

 

 

Resolution

Moved Chairperson Kremer, seconded Cr Douglas and resolved:

That the Finance and Audit Committee:

a)            Receives the report titled “Outstanding Debt as at 31 January 2018” dated 19 March 2018.

 

Public Excluded

 

Exclusion of the Public: Local Government Official Information and Meetings Act 1987

Resolution

Moved Chairperson Kremer, seconded Cr Duffy and resolved:

That the public be excluded from the following part(s) of the proceedings of this meeting.

C9.1 Corporate Performance Report for period two - 1 November 2017 to 28 February 2018

C9.2 Quarterly Risk Register Update - March 2018

C9.3 Review of Animal Control Processes

C9.4 Insurance options for Underground Infrastructure

 

The general subject of each matter to be considered while the public is excluded, the reason for passing this resolution in relation to each matter, and the specific grounds under section 48(1) of the Local Government Official Information and Meetings Act 1987 for the passing of this resolution are as follows:

 

General subject of each matter to be considered

Reason for passing this resolution in relation to each matter

Ground(s) under section 48(1) for the passing of this resolution

 

Corporate Performance Report for period two - 1 November 2017 to 28 February 2018

s7(2)(c)(i) - The withholding of the information is necessary to protect information which is subject to an obligation of confidence or which any person has been or could be compelled to provide under the authority of any enactment, where the making available of the information would be likely to prejudice the supply of similar information or information from the same source and it is in the public interest that such information should continue to be supplied.

s7(2)(h) - The withholding of the information is necessary to enable the local authority to carry out, without prejudice or disadvantage, commercial activities.

That the public conduct of the whole or the relevant part of the proceedings of the meeting would be likely to result in the disclosure of information for which good reason for withholding exists.

 

Quarterly Risk Register Update - March 2018

s7(2)(e) - The withholding of the information is necessary to avoid prejudice to measures that prevent or mitigate material loss to members of the public.

s7(2)(i) - The withholding of the information is necessary to enable the local authority to carry on, without prejudice or disadvantage, negotiations (including commercial and industrial negotiations).

That the public conduct of the whole or the relevant part of the proceedings of the meeting would be likely to result in the disclosure of information for which good reason for withholding exists.

 

Review of Animal Control Processes

s7(2)(c)(i) - The withholding of the information is necessary to protect information which is subject to an obligation of confidence or which any person has been or could be compelled to provide under the authority of any enactment, where the making available of the information would be likely to prejudice the supply of similar information or information from the same source and it is in the public interest that such information should continue to be supplied.

s7(2)(i) - The withholding of the information is necessary to enable the local authority to carry on, without prejudice or disadvantage, negotiations (including commercial and industrial negotiations).

That the public conduct of the whole or the relevant part of the proceedings of the meeting would be likely to result in the disclosure of information for which good reason for withholding exists.

 

Insurance options for Underground Infrastructure

s7(2)(e) - The withholding of the information is necessary to avoid prejudice to measures that prevent or mitigate material loss to members of the public.

s7(2)(i) - The withholding of the information is necessary to enable the local authority to carry on, without prejudice or disadvantage, negotiations (including commercial and industrial negotiations).

That the public conduct of the whole or the relevant part of the proceedings of the meeting would be likely to result in the disclosure of information for which good reason for withholding exists.

 

That the Chief Executive Officer, Group Manager, Environmental Services, Chief Financial Officer, Senior Projects Manager, People and Capability Manager, Communications Manager and Committee Advisor be permitted to remain at this meeting, after the public has been excluded, because of their knowledge of the items C9.1 Corporate Performance Report for period two - 1 November 2017 to 28 February 2018, C9.2 Quarterly Risk Register Update - March 2018, C9.3 Review of Animal Control Processes and C9.4 Insurance options for Underground Infrastructure.  This knowledge, which will be of assistance in relation to the matters to be discussed, is relevant to those matters because of their knowledge on the issues discussed and meeting procedure.

 

That the Planning and Reporting Analyst and Audit NZ Audit Director – Ian Lothian be permitted to remain at this meeting, after the public has been excluded, because of their knowledge of the items C9.1 Corporate Performance Report for period two - 1 November 2017 to 28 February 2018 and C9.2 Quarterly Risk Register Update - March 2018.  This knowledge, which will be of assistance in relation to the matters to be discussed, is relevant to those matters because of their knowledge on the issues discussed.

 

That the Environmental Health Manager be permitted to remain at this meeting, after the public has been excluded, because of his knowledge of the item C9.3 Review of Animal Control Processes.  This knowledge, which will be of assistance in relation to the matter to be discussed, is relevant to that matter because of his knowledge on the issues discussed.

 

That Shaun Sellwood – Broker Manager with JLT be permitted to remain at this meeting, after the public has been excluded, because of his knowledge of the item C9.4 Insurance options for Underground Infrastructure.  This knowledge, which will be of assistance in relation to the matter to be discussed, is relevant to that matter because of his knowledge on the issue discussed.

 

 

The public were excluded at 10.58am.

 

Resolutions in relation to the confidential items are recorded in the confidential section of these minutes and are not publicly available unless released here.

 

 

The meeting concluded at 12.28pm.                   CONFIRMED AS A TRUE AND CORRECT RECORD AT A MEETING OF THE Finance and Audit Committee HELD ON MONDAY 26 MARCH 2018.

 

 

 

DATE:............................................................................................

 

 

 

CHAIRPERSON:........................................................................

 


Finance and Audit Committee

14 June 2018

 

Draft Policy on Development and Financial Contributions

Record No:             R/18/5/11016

Author:                      Robyn Rout, Policy Analyst

Approved by:         Anne Robson, Chief Financial Officer

 

  Decision                                        Recommendation                                  Information

 

 

 

Purpose

1        This report presents the draft Policy on Development and Financial Contributions 2018-28 (the draft Policy) to the Finance and Audit Committee (the Committee). The draft Policy is included as Attachment A. It is requested that the Committee recommends to Council that it adopts the draft Policy.

Executive Summary

2        In the draft Policy, the development contributions (DCs) part of the Policy, which allow councils to apportion the costs associated with additional demand to those creating the demand, has been kept in remission. Financial contributions (FCs), which are to mitigate the environmental effects of development, are covered in the draft Policy and would continue to be collected through the Southland District Plan.

3        The draft Policy and an associated Statement of Proposal were endorsed for consultation by Council last year, and the draft Policy was consulted on through a consultation process that was run in parallel to the consultation undertaken on the Long Term Plan 2018-28. The majority of respondents (49%) supported Council’s policy approach.

4        Council received the submissions obtained on the draft Policy on 18 April, and deliberated on the draft Policy on 2 May. On 2 May Council endorsed the draft Policy subject to some minor adjustments.

5        Staff have made minor updates to the Schedules of the draft Policy to reflect adjustments that have fed through from the LTP deliberations.

6        The proposed next step for this draft Policy is to present it to Council for adoption on 20 June.

 

Recommendation

That the Finance and Audit Committee:

a)            Receives the report titled “Draft Policy on Development and Financial Contributions” dated 6 June 2018.

 

b)           Determines that this matter or decision be recognised as not significant in terms of Section 76 of the Local Government Act 2002.

 

c)            Determines that it has complied with the decision-making provisions of the Local Government Act 2002 to the extent necessary in relation to this decision; and in accordance with Section 79 of the Act determines that it does not require further information, further assessment of options or further analysis of costs and benefits or advantages and disadvantages prior to making a decision on this matter.

 

d)           Considers the draft Policy on Development and Financial Contributions 2018-28.

 

e)            Recommends to Council that it adopts the draft Policy on Development and Financial Contributions 2018-28.

 

Background

7        Council currently has a combined policy on development and financial contributions. For the 2015-25 LTP, the DCs part of the Policy was put into remission, so no DCs are currently being collected. FCs are covered by the current policy and are currently being collected, but they are set through the Southland District Plan.

8        Development contributions are established under the Local Government Act 2002 (the Act) and allow councils to apportion the costs associated with additional demand to those creating the demand.  Financial contributions are established under the Resource Management Act 1991 (RMA) to mitigate the environmental effects of development. 

9        DCs and FCs have not been a significant revenue stream for Council. Approximately, $389,000 of FCs and DCs have been collected between 2012 and 2017. While contributions do have the potential to be a useful funding source for some specific projects, the ability to realise that revenue is dependent on the economic cycle and trends in development and also what demand-related capital expenditure is carried out.

10      In the LTP Workshop in September 2017, Councillors outlined that they were keen to continue with the current approach of having the DC part of the Policy in remission in order to encourage growth. Councillors were keen to continue to have FCs covered in the draft Policy and to collect FCs through the Southland District Plan.

11      The draft Policy and an associated Statement of Proposal were presented to and endorsed by Council in 2017. A summary of the Statement Proposal was included in the LTP Consultation Document as a way to make the Proposal as widely available as was reasonably practicable. Submissions were invited on the draft Policy from 7 March to 9 April 2018. Forty eight submissions were received that related to the draft Policy. The majority of respondents (49%) supported Council’s policy approach.

12      Very little feedback, aside from responses to a multi-choice question, were received on the draft Policy through the submission process. Federated Farmers stated that the strategic use of DCs and FCs, as well as the District Planning provisions, are the most effective way to promote development as an alternative to the spending of ratepayer funds on district promotion. Federated Farmers also felt that while other councils are increasing DCs the Southland region remains a more attractive prospect for investment while contributions are not required, and that as an interim approach, not applying DCs is reasonable.

13      On May 2 Council deliberated on the feedback received on the draft Policy. As there was public support for the policy approach Council did not propose any changes to the draft Policy to incorporate community views, and Council endorsed the draft Policy subject to some minor amendments.

Issues

14     The draft Policy is very similar to Council’s current Development and Financial Contributions Policy, but minor updates and amendments have been made. These are:

·        amending population projection data

·        clarify that the DC part of the Policy is being placed in remission on the basis that Council would like to encourage growth

·        amending financial data

·        making a minor change to ensure that the description of the contributions Council uses to collect contributions, is completely accurate.

·        amending growth assumptions

·        updating the projects being undertaken

·        amending dates

·        amending catchments.

·        including in Schedule 3 when a DC is required to be paid.

15      As was indicated at the Council meeting held on 2 May, staff have also included in Schedule 3, the event that gives rise to the requirement to pay a DC. This was previously outlined in the body of the draft Policy, and has now also been included in Schedule 3 to satisfy a legal requirement.

16      Since the deliberations meeting on 2 May, staff have updated Schedules 1 and 2 of the draft Policy, to reflect adjustments to costs and projects that have fed through from the LTP deliberations. The changes that have been made are marked up in the draft Policy attached to this report. Staff have also deleted a repeated paragraph (paragraph 2.10.5).

Factors to Consider

Legal and Statutory Requirements

17      Section 102 of the Act requires that Council have a policy on DCs or FCs. Section 106 of the Act sets out the requirements of the policy. Sections 197-211 and Schedule 13 cover the application and calculation methodology related to contributions.

18      When developing a financial and development contributions policy, Council must consider a number of principles that are outlined in the Act. Section 197AB(a) outlines that DCs should only be required if developments will create or have created the need for Council to provide new or additional assets or assets of increased capacity.

19      Council must also consider the principle in Section 197AB(c) of the Act, which outlines that cost allocations used to establish DCs should be determined according to, and be proportional to, the persons who will benefit from the assets to be provided (including the community as a whole) as well as those who create the need for those assets.

20      Council may review its position on contributions at any time, but is required to review the policy at least once every 3 years. If Council wants to make changes to the Policy after it is adopted, it would have to undertake a consultation process providing information on the proposed change to people interested in or affected by the matter, and encourage people to present their views to Council.

21      There is no legislative requirement for this Policy to be included in the LTP. The draft Policy was required to be released for public consultation in compliance with section 82 of the Act, however Council decided to undertake consultation in parallel to the consultation process for LTP, so a more thorough process (the Special Consultative Procedure) was used.

22      It should also be noted that any DCs and FCs collected, which are not used for the specified purposes for which they were collected, must be returned within 10 years. For FCs, this only includes FC collected under the provisions of the current District Plan. Under the previous District Plan, not all FCs included a time limit for return.

23      In relation to FCs, there is an impending legislative change that will remove Council’s ability to collect FCs through the RMA in 2022. Councillors have previously outlined that Council should continue collecting FCs as it is currently, and that a review should be undertaken on how to deal with the RMA changes, in preparation for the 2021-31 LTP.

Community Views

24      The consultation document on the LTP, which included information about the draft Policy, was made available for public consultation during the period 7 March 2018 to 9 April 2018. Council received 48 submissions related to the draft Policy.

25      The consultation process undertaken has allowed Council to capture and consider community views on the content of the draft Policy. Council was presented with a copy of all the written submissions that were received, and heard all the people wanting to speak to their submission, on 18 April. The majority of respondents (49%) supported Council’s approach in the draft Policy.

 

Costs and Funding

26     As the draft Policy has the same approach (to both DC and FC) as the current Policy, the funding obtained through FCs is likely to be reasonably similar to what is currently collected. The revenue collected will be dependent on the economic cycle and trends in development.

Policy/Risk Implications

27      The draft Policy would continue to have DCs in remission. This means that if the draft policy is adopted, DCs will not be assessed when development takes place.

28      Continuing to have the DC part of the draft Policy in remission would mean that the costs associated with demand are borne by ratepayers (and by those who have paid previous DCs). However, Council has taken an approach to encourage development in the Southland District, recognising that this would benefit the community as a whole.

29      At the September workshop, Councillors recognised that there is a risk that if the DC part of the Policy is in remission, Council will not be able to assess DCs if there is a new substantial development or further development of properties in the Kepler Block in Te Anau.

30      If operative, in its current state, the draft Policy would allow DCs to be taken for water supply, sewerage and community facilities. 

31      In the draft Policy, FC, which are collected through resource consents under the Southland District Plan, apply to development in the Southland District and will be taken for roading and reserves.

Analysis

Options Considered

32      Two reasonably practicable options have been identified regarding how the Committee could proceed. These are:

·        Option 1     That the Committee recommends to Council that it adopts the draft Policy.

·        Option 2     That the Committee recommends changes to the draft Policy.

Analysis of Options

Option 1 –That the Committee recommends to Council that it adopts the draft Policy.

Advantages

Disadvantages

·        The draft Policy complies with the Act and was prepared by an external consultant (prior to being adopted in 2015), who is a subject matter expert.

·        May encourage growth and development in the Southland District, which would have wide public benefit.

·        Consistent with the Southland Regional Development Strategy, which aims to promote ease of doing business in Southland and have 10,000 more people living in Southland by 2025.

·        By having the DC part of the Policy in remission, it may frustrate some developers who have already paid DCs.

·        Council may miss assessing DCs on a large scale development or further development.

·        Rate payers may not like bearing the cost of demand related expenditure.

 


 

Option 2 – That the Committee recommends changes to the draft Policy

Advantages

Disadvantages

·        Would give further clarity on the Committee’s view regarding the Policy.

·        If the Committee would like to recommend changes to the draft Policy (that are more than minor wording changes), it may jeopardise auditor approval and completing the LTP within the required timeframe.

·        Any proposed changes would need to be minor and require no additional steps to be undertaken by Council, as there is a legal requirement for the Policy to be reviewed.

Assessment of Significance

33      The decisions the Committee are being asked to make in this report have been assessed as not significant in relation to the Council’s Significance and Engagement Policy. The draft policy would impact a small number of residents and ratepayers, and does not involve a significant amount of money. 

34      It has been recognised, however, that the draft Policy has broad effects because of its potential impacts on development activity, as well as economic and population growth.  It also raises issues of equity and affordability in funding assets and infrastructure.

Recommended Option

35      It is recommended that the Committee recommends to Council that it adopts the draft Policy (Option 1).

Next Steps

36      If the Committee proceeds with Option 1, staff will present the draft Policy to Council at its meeting on 20 June 2018, for adoption.

 

 

Attachments

a             Draft Policy on Development and Financial Contributions 2018-28    

 


Finance and Audit Committee

14 June 2018

 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


Finance and Audit Committee

14 June 2018

 


 


 


 


Finance and Audit Committee

14 June 2018

 


 


 


 


 


 


 


 


 


 


Finance and Audit Committee

14 June 2018

 

Draft Revenue and Financing Policy

Record No:             R/18/5/11017

Author:                      Robyn Rout, Policy Analyst

Approved by:         Anne Robson, Chief Financial Officer

 

  Decision                                        Recommendation                                  Information

 

 

 

Purpose

1        This report presents the draft Revenue and Financing Policy (the draft Policy) to the Finance and Audit Committee (the Committee). The draft Policy is included as Attachment A. It is requested that the Committee recommends to Council that it adopt the draft Policy.

Executive Summary

2        The draft Policy gives an overview of Council’s intended funding sources and expenditure for each activity.

3        The draft Policy, an associated Statement of Proposal and the draft Activity Needs Funding Analysis were presented to and endorsed by Council on 13 December. The draft Policy was consulted on through a consultation process that was run in parallel to the consultation undertaken on the LTP.

4        Sixty submissions were received on the draft Policy. On 2 May, Council considered and deliberated on the feedback. Council then endorsed a number of proposals to include in the draft Policy.

5        The proposed next step for this draft Policy is to present it to Council for adoption on 20 June.

 

Recommendation

That the Finance and Audit Committee:

a)            Receives the report titled “Draft Revenue and Financing Policy” dated 6 June 2018.

 

b)           Determines that this matter or decision be recognised as not significant in terms of Section 76 of the Local Government Act 2002.

 

c)            Determines that it has complied with the decision-making provisions of the Local Government Act 2002 to the extent necessary in relation to this decision; and in accordance with Section 79 of the Act determines that it does not require further information, further assessment of options or further analysis of costs and benefits or advantages and disadvantages prior to making a decision on this matter.

 

d)           Considers the draft Revenue and Financing Policy and associated Activity Funding Needs Analysis.

 

e)            Recommends to Council that it adopts the draft Revenue and Financing Policy and associated Activity Funding Needs Analysis.

 

Background

6        The draft Policy summarises Council’s intended funding sources and explains operating expenses and capital expenditure for each activity. The draft Policy also covers all intended sources of funding including rates, lump sum contributions, fees and charges, financial contributions and grants and subsidies.

7        In preparation for the LTP, staff reviewed the funding impact statement for rates in full, and identified the areas needing updated. These various changes were discussed at Council workshops held on 26 September and 19 October. A formal report and associated recommendations for inclusion in the proposed documents supporting the LTP consultation document were approved at Council on 23 November 2017.

8        The draft Policy, an associated Statement of Proposal, and the draft Activity Needs Funding Analysis were then presented to and endorsed by Council on 13 December. Council endorsed the Statement of Proposal as the basis for public consultation and agreed that a summary of the Proposal should be included in the LTP Consultation Document (as it was an appropriate way to ensure the proposal was released as widely as reasonably practicable in accordance with the provisions of section 83(1)(c) of the Local Government Act 2002 (the Act)).

9        The draft Policy was written to align with the draft Development and Financial Contributions Policy. It assumes that development contributions will remain in remission.

10      The consultation document on the LTP, which included information about the draft Policy, was made available for public consultation during the period 7 March 2018 to 9 April 2018. Sixty submissions were received that related to the draft Policy.

11      In the consultation process, six questions related to the Policy, and people were asked to indicate whether they supported Council’s proposed approach. Responses to the questions are summarised in the pie charts below.

 

 

 

 

12      On 2 May Council considered all the feedback received and deliberated on the draft Policy. The submissions were analysed and used to inform the identification of issues for proposed changes to the draft Policy. As is shown above, there was support from the community for most of Council’s proposed changes, and on this basis, Council decided to continue with those proposed changes.

13      In relation to funding for health licencing, the community did not support the proposed change, but Council decided to continue with the proposed change as it felt that the wider public benefitted from the activity, and that the change had a very small financial impact on ratepayers (an increase in UAGC of approximately $0.98 (GST excl) per rateable property).

14      In relation to the proposal to use the UAGC to collect rates of the AMCT, the community also did not support the proposed change, but Council decided to continue with the change as submissions were in favour of a user pays approach, and this isn’t a practicable option.

 

Issues

15      On 2 May, Council resolved to include the following proposals in the draft Policy and supporting documentation as part of the LTP process. The proposals outlined below include the key changes to the current Revenue and Financing Policy that will be made if the draft Policy is adopted.

·                 Revise the current Separately Used or Inhabited Part (SUIP) definition to include all property types so that a SUIP is defined as:

A separately used or inhabited part of a rating unit includes any portion inhabited or used by the owner/a person other than the owner, and who has the right to use or inhabit that portion by virtue of a tenancy, lease, licence, or other agreement”.

·                 Agree to assess the Stewart Island Waste Management Targeted Rate as a service rate.

·                 Accept proposed boundary changes for Athol Hall, Browns Hall, Waianiwa Hall, Edendale-Wyndham Hall, Tokanui-Quarry Hills Hall and Te Anau Community Board Rating boundaries as per Attachment D, remove Edendale Pool rate and further investigate funding approach for halls and pools for the 2021-2031 Long Term Plan.

·                 Set and assess all Community Board/Community Development Area Subcommittee rates as a Uniform Targeted Rate (UTR), with differentials as required by the individual Community Board/Community Development Area Subcommittee.

·                 Fund 100% of all library services across the district from the Uniform Annual General Charge (UAGC).

·                 Introduce rates funding for Health Licensing activity to 10% of total costs.

·                 Fund the loan repayments for the Around the Mountain Cycle Trail (AMCT) from the UAGC as proposed in the 2018-2028 LTP consultation document.

·                 Endorse the proposed roading rate model (where the uniform targeted rate is fixed at $80.00 (GST exclusive) per rating unit, heavy use rate is $1.10 (GST exclusive) per tonne, minimum tonnage applied to each relevant sector is 230,000 tonnes and other use factors are 1.15 (dairy), 1.2 (forestry) and 1.15 (farming non-dairy)) as per section 5 of the attachment to this report.

·                 Revise the categories and share of categories between General rate and UAGC as per the table below, including retain funding of work schemes 85% general rate and 15% UAGC:


Activities

General Rate

UAGC

Building Control

100%

 

Civil Defence & Emergency Management

100%

 

Community Housing

85%

15%

Council Facilities

85%

15%

Community Futures

25%

75%

District Support

85%

15%

Animal Control

 

100%

Environmental Health

 

100%

Grants & Donations

 

100%

Library Services

 

100%

Parks & Reserves

85%

15%

Public Toilets

 

100%

Representation & Advocacy

25%

75%

Resource Management

90%

10%

Strategy & Communications

90%

10%

Work Schemes

85%

15%

Roads & Footpaths (Around The Mountains Cycle Trail loan repayments only)

 

100%

 


 

 

·                 Make no changes to the current approach for water supply rates for properties on restricted supply.

·                 Make no change to the current approach for rating stormwater/wastewater discharge.

·                 Retain the status quo and not apply a differential to the general rate for Meridian Energy.

 

16      As has been noted above, the draft Policy has been amended to retain the funding of work schemes to 85% general rate and 15% UAGC. It was unintentionally stated, when the Policy went out for consultation, that work schemes would be funded from 100% UAGC. The oversight and the potential for change in the final policy was noted in the statement of intent. Retaining the previous funding approach was also discussed at the Council meeting on 2 May.

17      The table outlining how the roading rate model will allocate sector rates has also been updated on page 52 of the Activity Funding Needs Analysis (see Attachment B). The updates have been made as a result of submissions and adjustments to budget information, which have fed through from the LTP deliberations. The adjustments are also a result of updated rating data information.

Factors to Consider

Legal and Statutory Requirements

18      Council is required by legislation to adopt and include a Revenue and Financing Policy in its final adopted LTP. This is to provide predictability and certainty about sources and levels of funding of Council’s activities. The draft Policy must be adopted before the LTP.

19      The statutory provisions relating to the review of a Revenue and Financing Policy are detailed in Part 6 of the Act. Council’s draft Policy meets the requirements of Section 102(2)(a) of the Act. Sources of funding listed in the draft Policy are listed in Section 103(2) of the Act. Council’s analysis of section 101(3) is outlined in the draft Activity Funding Needs Analysis that was endorsed by Council on 13 December.

20      The Act requires local authorities to consider set factors and follow a particular process in developing a Revenue and Financing Policy, and this was outlined to Councillors at the Council meeting in November.

21      Due to the importance of the draft Policy, Council has undertaken consultation in accordance with the Special Consultative Procedure outlined in the Act.

Community Views

22      The consultation document on the LTP, which included information about the draft Policy, was made available for public consultation during the period 7 March 2018 to 9 April 2018.

23      Council received 60 submissions relating to the draft Policy.

24      The consultation process undertaken has allowed Council to capture and consider community views on the content of the draft Policy. Council was presented with a copy of all the written submissions that were received, and heard all the people wanting to speak to their submission, on 18 April. A summary of the feedback received and excerpts of feedback were also included with the report presented to Council on 2 May.

Costs and Funding

25      As has been outlined to Council previously, the draft Policy would impact both the selection of funding mechanisms and the quantum to be funded from each tool, for each activity.

26      Information on the impacts of the selection of funding mechanisms and the quantum to be funded from each tool, was presented to Council on 2 May. The financial impact of each of the recommendations was also included in the Consultation Document and supporting information that was provided to Council when the draft Policy went out for consultation.

Policy/Risk Implications

27      Policy implications have been discussed with Council a number of times throughout the course of the policy review. On 2 May and 23 November, when Council endorsed proposals to include in the draft Policy, the implications of the proposals (including the impact the decisions had on ratepayers in the community), were clearly outlined.

28      The main risk associated with this policy is that Council do not actually fund or collect revenue in accordance with the policy.  In order to mitigate this risk, Council staff monitor compliance of actual revenue and funding streams against the policy.  Additionally, the operational funding contributions are expressed as percentage ranges (low 0-33%, medium 34-66% or high 67-100%) rather than specific amounts.

Analysis

Options Considered

29      Two reasonably practicable options have been identified regarding how the Committee could proceed. These are:

·        Option 1     That the Committee recommends to Council that it adopts the draft Policy.

·        Option 2:     That the Committee recommends changes to the draft Policy.

 

Analysis of Options

Option 1 – That the Committee recommends to Council that it adopts the draft Policy and associated Activity Funding Needs Analysis

Advantages

Disadvantages

·        The draft Policy considers efficiency and equity and shows that Council is operating in a financially prudent manner.  It is also legislatively compliant and aligns with good practice in the local government sector.

·        While there are a number of options available to fund Council activities, no significant disadvantages to the overall approach proposed in the draft Policy have been identified.

·        Some ratepayers have raised issues through their submissions regarding various aspects of Council’s proposed funding methodology.  However, the funding methods identified within the draft Policy have been identified as the most equitable funding mechanisms for the community overall.

 


 

Option 2 – That the Committee recommends changes to the draft Policy and associated Activity Funding Needs Analysis

Advantages

Disadvantages

·        No advantages have been identified.

·        If the Committee would like to recommend changes to the draft Policy and associated Activity Funding Needs Analysis (that are more than minor wording changes), it may jeopardise auditor approval and completing the LTP within the required timeframe.

·        Any proposed changes would need to be minor and require no additional steps to be undertaken by Council, as there is a legal requirement for the Policy to be reviewed.

 

Assessment of Significance

30      The draft Policy is a fundamental policy of Council. It determines how Council will collect revenue and fund activities, services and assets. The draft Policy will affect all ratepayers and raises issues of equity and affordability.

31      As the draft Policy will affect all ratepayers and there is likely to be a level of interest in the draft Policy, the decision to endorse the draft policy for consultation was assessed as being significant and Council consulted on the draft Policy in accordance with the Special Consultative Procedure.

32      In relation to Council’s Significance and Engagement Policy and the Act, the decision the Committee is making in relation to this report has been assessed as not being significant, as the decision being made by the Committee will not have a large impact on or consequences the District, or people affected by or interest in this matter. This is on the basis that the Committee cannot make significant changes to the draft Policy at this time, and the Committee is making a recommendation to Council.

Recommended Option

33      It is recommended that the Committee recommends to Council that it adopts the draft Policy (Option 1).

Next Steps

34      If the Committee proceed with Option 1, staff will present the draft Policy to Council at its meeting on 20 June 2018, for adoption.

 

 

Attachments

a             Draft Revenue and Financing Policy

b             Draft Activity Funding Needs Analysis    

 


Finance and Audit Committee

14 June 2018

 


 


 


 


 


 


 


 


Finance and Audit Committee

14 June 2018

 


 


 


 


 


 


 


 


 


 


 


 


 


 


Finance and Audit Committee

14 June 2018

 


Finance and Audit Committee

14 June 2018

 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


Finance and Audit Committee

14 June 2018

 

Draft Long Term Plan 2018-2028

Record No:             R/18/5/12020

Author:                      Nicole Taylor, Project Co-ordinator Corporate Planning

Approved by:         Rex Capil, Group Manager Community and Futures

 

  Decision                                        Recommendation                                  Information

 

 

 

Purpose

1        This report presented the draft of the final Long Term Plan (LTP) 2018-2028 to the Finance and Audit Committee for its information. A copy of the plan is included as Attachment A. It is requested that the Committee recommends that Council adopt the plan at its meeting on 20 June 2018.

Executive Summary

2        The 2018-2028 LTP consultation document “We’re just getting started, Southland” and draft LTP supporting information was adopted by Council on 27 February 2018.

3        Public consultation occurred from 7 March 2018 to 9 April 2018. 162 submissions were received (including one late submission) on the LTP, Draft Revenue and Financing Policy and Draft Development and Financial Contributions Policy. Hearings were held on 18 and 19 April 2018 with the late submission heard on 2 May 2018. 26 submitter’s presented in total.

4        The supporting draft LTP 2018-2028 document has now been amended. These changes reflect the submission and hearing process and subsequent decisions made by Council during the deliberations meeting on 2 May 2018. The draft also includes changes from staff and Council’s auditors.

5        The document is also required to include a report from the Auditor-General on whether the plan gives effect to the purpose of a LTP and the quality of the information and assumptions underlying the forecast information provided in the plan. Council’s auditors are in the process
of completing their review of the final LTP with this work expected to be completed by
8 June 2018. Once this is completed the report will be included in the final plan.

6        This report asks the Committee to review the document and recommend Council adopt the final plan, subject to any final changes from audit.

 

Recommendation

That the Finance and Audit Committee:

a)            Receives the report titled “Draft Long Term Plan 2018-2028” dated 7 June 2018.

 

b)           Determines that this matter or decision be recognised as significant in terms of Section 76 of the Local Government Act 2002.

 

c)            Determines that it has complied with the decision-making provisions of the Local Government Act 2002 to the extent necessary in relation to this decision; and in accordance with Section 79 of the Act determines that it does not require further information, further assessment of options or further analysis of costs and benefits or advantages and disadvantages prior to making a decision on this matter.

 

d)           Recommends to Council to resolve that in accordance with section 100 of the Local Government Act 2002, it is financially prudent for the Council to project operating deficits in the first five years of the plan. This principally reflects Council’s policy to move towards fully funding depreciation in 2024/2025.

 

e)            Recommends to Council that it adopts the final Long Term Plan 2018-2028.

 

Background

7       All councils are required by legislation to adopt an LTP.  When adopted the LTP is Council’s primary activity planning document and is reviewed every three years.  It also forms the Annual Plan for the 2018/19 year. 

8       The LTP sets out Council’s activities, plans, budgets and policies and must be adopted before the beginning of the first year it relates to, having used a special consultative procedure to consult with the community.

9        Many of the projects and budgets that form part of the LTP were discussed with the Community Boards, Community Development Area Subcommittees and Water Supply Subcommittees at their estimates meetings held in October 2017. 

10      Council released its consultation document “We’re just getting started, Southland” on 7 March 2018. The consultation document was distributed to all households in the District and advertised by newspaper, radio and facebook.  The consultation document and associated supporting information was available on Council’s website, at Council’s offices and community libraries.  Individual letters were also sent to key stakeholders with the submission period closing on
9 April 2018.

11      The consultation document identified a number of key issues that Council wished to receive feedback on as well as seeking feedback on the draft Revenue & Financing Policy and Development and Financial Contributions Policy.  These issues were:

·     Investing in community future planning

·     Improving the Around the Mountains Cycle Trail experience and funding the costs

·     Investing in open space experiences.


 

12      The consultation document also highlighted to the community:

·     The increased environmental standards impacting on water and stormwater discharges

·     Drinking water quality projects as a result of the Havelock North inquiry

·     The approach being taking to road pavements, replacing bridges and Council facilities

·     The financial and infrastructure strategies and changes to key policies.

13      162 submissions were received (including one late submission) on the LTP, Draft Revenue and Financing Policy and Draft Development and Financial Contributions Policy. Hearings were held on 18 and 19 April 2018 with the late submission heard on 2 May 2018. 26 submitter’s spoke to Council about their submission.

14      Council would like to acknowledge all those who took the opportunity to make a submission on the LTP. All submissions were considered but not all can be funded.

15      Council worked through the issues raised on 2 May 2018 and made decisions on the
submissions received. Staff have now amended the draft LTP supporting document adopted on 27 February 2018 to reflect the decisions made and outline the submissions that were received.

Issues

16      The following is a summary of the decisions on the key issues outlined in the LTP Consultation Document that have been included in the final LTP:

-     Investing in Community Future Planning: Option 1- providing additional $150,000 in year 1 increasing to $250,000 a year by year 4;

-     Improving the Around the Mountains Cycle Trail experience: Option 1 – providing $126,000 for Centre Hill Road Connection option;

-     Funding of the Around the Mountains Cycle Trail: Option 1 – via 100% Loans;

-     Investing in Open Spaces: Option 1 – provide annual provision of $150,000 for open space design and planning and $5.5 million capital expenditure from years 4-10 (inflation adjusted);

-     Other Rating Changes: Confirms the change to the SUIP definition to include all property types; confirms the boundary changes for Athol Hall, Browns Hall, Waianiwa Hall, Edendale-Wyndham Hall, Tokanui-Quarry Hills Hall and Te Anau Community Board Rating boundaries and removal of the Edendale Pool rate.

17      The following is a summary of the changes to the Consultation Document budgets that have been approved for inclusion in the final LTP:

-     Provide funding to the Loss and Grief centre of $15,000 in 2018/19 funded from District Operations reserve;

-     Removal of grant funding of $10,000 set aside for Biodiversity co-ordinator and $10,000 Winton Wallacetown ward grant to Central Southland Swimming Pool;

-     Increase in capital cost and funding of the Winton stormwater pipe replacement with an additional $876,518 in year 2. Total project cost is $1,875,518 with project to be carried out in year 1 and 2;

-     Additional water tank replacements in Ohai ($90,000) and Kakapo ($40,000) in year 1;

-     Additional operating costs - $295,000 in years 1, 2 and 2 (staffing changes); $25,000 in year 1 (Finance and Audit Committee independent representative); $30,000 in year 1 (Risk Management Framework);

-     Changes to the timing of projects - $263,136 for RFID purchase and Winton building work moved from year 1 to year 2; refurbishment of Millars Beach Jetty moved from year 9 to year 1 and refurbishment of Little Glory Jetty deferred from year 3 to year 9;

-     Adjustments to budgets from February 2018 forecasting to reflect a number of 2017/18 projects now expected to be completed in year 1 of the project changes.

18      In addition, at its meeting 2 May 2018, Council also confirmed its intention to proceed with plans to carry out a feasibility study into a Te Anau community hub (relating to the Te Anau library/office), programmed for 2019/20.

 

19      These decisions have been reflected in the final LTP which is attached for review. The plan includes the updated:

-     Infrastructure Strategy (from page 217)

-     Financial Strategy (from page 211)

-     Prospective Financial Statements (from page 143)

-     Financial Prudence Benchmarks (from page 56)

-     Funding Impact Statement – Rates Section (from page 149) and New Rating Boundaries (from page 166)

-     Significant Forecasting Assumptions (from page 251)

-     Accounting Policies (from page 308)

-     Activity Information incorporating Performance Management Framework (from page 65)

-     Revenue and Financing Policy (from page 262)

-     Development and Financial Contributions Policy (from page 276)

-     Significance and Engagement Policy (from page 300)

-     Schedule of Capital Projects (from page 330)

-     Schedule of Community Assistance Funding (from page 80)

-     Schedule of Fees and Charges (from page 173)

-     Schedule of Reserves (from page 197)

20      The plan (page 322) also includes a summary of the Statements of Intent for Council Controlled Organisations (Milford Community Trust and Southland Museum and Art Gallery). With the recent closure of the Southland Museum and Art Gallery due to earthquake risks, the Trust Board may change the Statement of Intent at a future date.

21      The various Activity Management Plans have also been updated for the changes as well some additional wording changes to reflect decisions on submissions.

Factors to Consider

Legal and Statutory Requirements

22      The 10 Year Plan (Long Term Plan) is a statutory requirement under the Local Government Act 2002 (section 93).

23      The purpose of the LTP is to:

-    Describe the activities of the local authority

-    Describe the community outcomes of the local authority

-    Provide integrated decision-making and coordination of the resources of the local authority and provide a long term focus for the decisions and activities of the local authority

-    Provide a basis for accountability of the local authority to the community.

24      A LTP must cover a period of not less than 10 consecutive financial years, and include the information required by Part 1 of Schedule 10 of the Local Government Act 2002.  It must also include in the plan such detail as the local authority considers on reasonable grounds to be appropriate. 

25      The LTP must also include a report from the Auditor-General. Audit New Zealand is undertaking the audit of the final document 21 May – 8 June 2018.  There may be further changes to the LTP which will be discussed at the Committee meeting and included in the copy for Council adoption 20 June 2018.

26      Audit New Zealand also prepare a management report regarding the LTP audit process. A draft of this report will be tabled at the meeting if it is available.

Community Views

27      Consideration of the communities’ view were included as part of preparing the LTP and compiling the supporting information.  This was facilitated by the local estimates and ward estimates processes.  In addition, discussions occurred with Te Ao Mārama Incorporated on behalf of local iwi.  The consultation document and the supporting information were made publicly available on Council’s website during the LTP public consultation period as well as the Council’s facebook site.

28      The following is an outline of the consultation key dates:

27 February 2018                      2018-2028 LTP Consultation Document adopted
                                                  2018-2028 Supporting Information adopted

7 March 2018                            Public submissions opened

9 April 2018                              Public submissions closed

18/19 April and 2 May 2018    Hearing of submissions

14 June 2018                             Finance and Audit to recommend Council adopt 2018-2028 LTP

20 June 2018                              Council to adopt 2018-2028 LTP


 

Costs and Funding

Rating implications

29      The rating effect of the LTP budget for 2018/19 is an overall rates increase of 3.9% with an average rate increase over the 10 years of 3.06% per annum.

30      The 2018/19 rates increase has increased from 3.19% as proposed in the draft 2018-2028 LTP budgets as a result of the following amendments (rounded):

 

Rates ($)

Rates (%)

2018/19 total rates as per draft LTP

31 

$46,193,379

3.19%

Operational changes from staff amendments

$295,000

0.66%

Reduction in grants/increase consultants per staff amendments

$15,000

0.03%

Changes to loan repayments

$(9,489)

(0.02)%

Amendments as a result of rating database changes etc

$15,797

0.04%

2018/19 total rates as per final LTP attached

$46,509,687

3.9%

32      This does not mean that every property in the district will see a 3.9% increase for 18/19 as it is dependent on valuation, location and the nature of services received.

33      A summary of the indicative rates movements for different property types is included on page 165 of the LTP.

34      The prospective financial statements reflect the position reached following review of the budgets for the next 10 years and the decisions made as a result of submissions.  Rates have been calculated to increase annually as indicated below:

Rate

2017/18

(excl GST

2018/19

(excl GST

2019/20

(excl GST

2020/21

(excl GST

2021/22

(excl GST

2022/23

(excl GST

2023/24

(excl GST

2024/25

(excl GST

2025/26

(excl GST

2026/27

(excl GST

2027/28

(excl GST

Total Rates $

44,764,752

46,509,687

48,065,118

49,637,306

50,387,866

51,788,980

53,288,586

55,502,000

57,155,550

59,117,672

60,491,328

Rate Increase $

1,607,619

1,744,934

1,555,432

1,572,187

750,560

1,401,114

1,499,607

2,213,413

1,653,550

1,962,123

1,373,656

 

 

 

 

 

 

 

 

 

 

 

 

Rate Increase %

3.73%

3.90%

3.34%

3.27%

1.51%

2.78%

2.90%

4.15%

2.98%

3.43%

2.32%

BERL

 

2.00%

2.20%

2.20%

2.20%

2.30%

2.30%

2.40%

2.50%

2.60%

2.70%

Financial Benchmark

 

4.00%

4.20%

4.20%

4.20%

4.30%

4.30%

4.40%

4.50%

4.60%

4.70%

Debt implications

35      There is minimal projected external debt over the 10 years of the plan with a forecast balance of $14.71 million at 30 June 2028.

Balanced budget

36      As stated above, section 100 of the Local Government Act 2002 requires that local authorities must ensure that each year’s projected operating revenues are set at a level sufficient to meet that year’s projected operating expenses OR resolve that is it financial prudent to set projected operating revenues at a different level.

37      Council is projecting the following operating results for the next 10 years:

 

2018/19

2019/20

2020/21

2021/22

2022/23

2023/24

2024/25

2025/26

2026/27

2027/28

Surplus/(Deficit)

(4,360)

(4,264)

(3,138)

(2,770)

(1,465)

126

114

414

3,254

3,103

38      Therefore it is not operating a balanced budget in five of the ten years.


 

39      There are five areas contributing to Council not having a balanced budget.  These are:

·     Phasing in the funding of depreciation on key district assets.

·     Council’s decision not to fund depreciation on some buildings and all local assets.

·     Forestry Operations, which in some years are incurring costs that are funded from previous years surpluses put to reserves. This combines with the accounting entry to revalue the forest assets. During the period of the plan the first three years are devaluations, with the quantity of trees harvested is greater than any expected growth, and the remaining seven are revaluations.

·     Council’s partial use of depreciation reserves to fund interest repayments on loans borrowed to fund capital renewals in principally water and wastewater projects.

40      If the impact of these was to be removed Council’s surplus/(deficit) would look as follows:

Phasing in the funding of depreciation on key district assets

41      In 2015 Council agreed to start to fund depreciation to ensure that those using our assets such as roads, water and wastewater systems are contributing towards their renewal. It is important to Council that each generation contributes fairly to the cost of the assets it uses.  Previous to 2015, Council’s asset management policies meant that it was investing more into replacement and new assets than what residents were consuming in a year.  In 2015, Council changed the way it prioritises its roading expenditure (80/20 policy) and recognised that no additional water or waste schemes will be implemented with central government funding.  As such Council agreed to start to fund depreciation.

42      In deciding to fund depreciation, Council recognised that rates would increase significantly if it were to fully fund depreciation in year one.  As such it decided to phase it in over 10 years starting in 2015/16, increasing each year by 10% until it was fully funding the annual cost in 2024/25.  The Council also decided to only collect depreciation for district funded activities of roading, water, wastewater, council buildings, information technology, wheelie bins and solid waste. 

Council’s decision not to fund depreciation on some buildings and all local assets

43      Given Council’s approach not to automatically replace local halls or community housing when they reach the end of their useful lives, Council also decided it was not appropriate to collect depreciation funds for their replacement.  Instead Council has signalled that any funding decisions on replacements for these types of assets would be made at the time. 

44      Taking into account considerations around affordability of rates in some local communities, Council has also chosen not to fund the depreciation on locally rated infrastructure assets such as footpaths, stormwater and playground equipment at this time.  Council will continue to review this policy as part of its LTP decision making process.

 

 

Forestry Operations

45      Council’s Forestry operations are run as a commercial operation with surpluses available to offset rates.  In 2021/22, 2024/25, 2025/26 and 2026/27, the costs of land preparation are higher than any revenue being received from harvesting.  To fund the costs, monies are drawn down from reserves (previous years’ surpluses). However the additional costs in these years contribute to the unbalanced budgets.

46      There is an expected devaluation of the forestry assets in 2018/19, 2019/20 (both $1.5 million) and 2020/21 ($321 thousand). For the remainder of the Long Term Plan revaluations are expected between $594 thousand and $1.0 million.

 

Council’s partial use of depreciation reserves to fund interest repayments

47      Council believes that all generations should contribute a fair and equitable share of the costs of using Council’s assets.

48      To ensure that Council does not collect for asset replacement twice, Council uses the funding collected for depreciation in any year to contribute to any capital renewal projects planned and to fund the principal and interest repayments on loans taken out to fund the balance of renewal projects in the year.

49      Because the interest expense is included in the operational expenditure, but the revenue source is from reserves, this contributes to the unbalanced budget position.

Overall

50      As such, in considering intergenerational equity, Council’s policies and ongoing consideration of affordability for its communities, it is considered financially prudent that Council operates financial deficits in the years indicated.

Policy Implications

51      The LTP is Council’s major mechanism to strategically manage and develop the District.  A number of policies have informed the preparation of the LTP and have been previously adopted by Council or been subject to a public consultation process.  Separate reports have been included on the meeting agenda regarding the development and Financial Contributions Policy and Revenue and Financing Policy.

52      Council will meet on 20 June 2018 to adopt these policies prior to adopting the LTP.

Analysis

Options Considered

53      There are two options for how the Committee could proceed. These are:

-    Option 1:        That the Committee recommends to Council that it adopts the LTP.

-    Option 2:        That the Committee recommends changes to the LTP.


 

Analysis of Options

Option 1 – That the Committee recommends to Council that it adopts the LTP

Advantages

Disadvantages

·     The LTP reflects Council’s deliberations over the past 22 months and set the budgets, levels of service and work programme that Council will deliver.

·     Adoption of the LTP will enable staff to move forwards work on delivery.

·     Meets the legislative requirements to adopt a LTP.

·        None.

 

Option 2 – That the Committee recommends changes to the LTP.

Advantages

Disadvantages

·        The LTP reflects objectives for the Committee.

·      The budgets/levels of service/work programme proposed for the LTP 2018-2028 have been carefully considered by staff and elected members over the past 18 months. Significant or material changes to at this stage would not be able allow sufficient time for any further consultation due to time constraints required to adopt the LTP and have the changes reviewed by audit.

·      Any proposed changes would need to be minor and require no additional steps to be undertaken by Council.

Assessment of Significance

54      The LTP is a significant decision as it is the primary way that Council is held accountable for public expenditure.

55      In relation to Council’s Significance and Engagement Policy and the Act, the decision the Committee is being asked to make in this report may have a small impact on ratepayers in the District, as the Committee’s decision may influence the decision made by Council when it next considers the Plan.

56      As the Committee’s delegations only allow the Committee to make a recommendation to Council about the plan, it lessens the significance of the Committee’s decision. On this basis, staff believe that the decision the Committee is being asked to make in this report, does not constitute a significant decision in relation to Council’s Significance and Engagement Policy, and the Act.

Recommended Option

57      That the Committee recommends to Council that it adopts the LTP.

Next Steps

58      Staff will present the final LTP to Council at its meeting on 20 June 2018, for adoption. The final management report will also be circulated to the committee when it is available.

 

 

Attachments

a             Draft Long Term Plan (LTP) 2018-2028    

 


Finance and Audit Committee

14 June 2018

 

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Finance and Audit Committee

14 June 2018

 

Accounting Policies for the year ended 30 June 2018

Record No:             R/18/5/12182

Author:                      Jacobus Meyer, Financial Accountant

Approved by:         Anne Robson, Chief Financial Officer

 

  Decision                                        Recommendation                                  Information

 

 

 

Purpose

1        To consider and recommend to Council the adoption of the accounting policies to be used to compile the Council’s Annual Report for the year ended 30 June 2018. 

Executive Summary

2        The draft accounting policies (Attachment A) set the basis on which Council’s Annual Report for the year ended 30 June 2018 will be prepared and associated financial information compiled.

Recommendation

That the Finance and Audit Committee:

a)            Receives the report titled “Accounting Policies for the year ended 30 June 2018” dated 7 June 2018.

 

b)           Determines that this matter or decision be recognised as not significant in terms of Section 76 of the Local Government Act 2002.

 

c)            Determines that it has complied with the decision-making provisions of the Local Government Act 2002 to the extent necessary in relation to this decision; and in accordance with Section 79 of the Act determines that it does not require further information, further assessment of options or further analysis of costs and benefits or advantages and disadvantages prior to making a decision on this matter.

 

d)           Recommends to Council that the accounting policies as outlined in Attachment A, including any amendments from this meeting, be adopted for use in preparation of the Council’s Annual Report for the year ended 30 June 2018.

 

Background

3        All councils are required by legislation to adopt an Annual Report (AR) every year.  The Annual Report informs the reader about how Council did against what Council said it was going to do in the 2017/18 Annual Plan.

4        In arriving at the accounting policies proposed, Council staff have used the 2016/17 Annual Report policies as the base, and reviewed for any changes needed, including any additional policies.

Issues – Accounting Policies

5        The accounting policies proposed for the annual report for 30 June 2018 are based on those used by Council in the AR for the year ended 30 June 2017.

6        There are no changes to the proposed accounting policies for the annual report to 30 June 2018 from those used for the Annual Report for the year ended 30 June 2017.  

Issues – Other Council Entities

7        Audit NZ noted as part of the 2016-17 Management Report that Council should consider the use of equity accounting for Venture Southland and also questioned the accounting treatment of a number of Council joint venture entities and council controlled entities.

Accounting for Venture Southland

8        Historically Council have proportionately consolidated its 42% share of Venture Southland in accordance with section 35 PBE IPSAS 8: Interests in Joint Ventures.  In discussing this with Audit NZ during the 2016/2017 AR audit, they advised that under section 35 and 43 of this standard, Council have the choice of accounting for this jointly controlled entity either using proportionate consolidation or equity accounting.  Equity accounting is a much simpler approach with a single entry in the statement of financial performance and statement of financial position. Staff noted the suggestion, but opted to retain proportionate accounting for Venture Southland until 30 June 2018 so that the actual results would be consistent with what was budgeted in both the 16/17 and 17/18 Annual Plans. 

9        As part of the 2018-2028 Long Term Plan the accounting policy for joint ventures has been changed to equity accounting to simplify the year end accounting for Venture Southland.

Accounting for other joint venture entities

10      During the audit of the AR for the year ended 30 June 2017, Audit New Zealand suggested in its management report potential changes to the way we account for various other joint ventures Council is involved in.

11      Currently in addition to Venture Southland, Council has interests in Southland Regional Heritage Committee, Emergency Management Southland, and WasteNet Southland, all which Audit NZ consider joint ventures.  

12      Currently Council accounts for the payments to these entities but does not record a share of any surplus of assets held by these entities. 

13      In the case of the Southland Regional Heritage Committee disclosure is made in the notes of the net assets of the entity at balance date.

14      To date Council have considered the operations and assets of SRHC and EMS to be immaterial and thus have not consolidated these and Audit NZ have concurred that these interests are not sufficiently material to affect the audit opinion. However, Audit NZ are suggesting that Council apply a consistent accounting policy to all joint venture interests in accordance with PBE IPSAS 8: Interests in Joint Ventures, ideally equity accounting for all, which will provide a consistent approach across the various interests and simplify year end accounting processes.

15      As noted above, PBE IPSAS 8 allows for a choice in accounting approach for jointly controlled entities (proportionate consolidation or equity accounting).  For the AR for the year ending 30 June 2018, staff are proposing that the accounting policy does not change and that these entities continue to be excluded on the basis of the interests are immaterial.  This will result in easier comparison to prior year ARs and also the 2017/2018 Annual Plan.

16      The 2018-2028 Long Term Plan has included joint ventures on an equity basis and the accounting policy for 2018/2019 and future years AR will be in alignment with the budget.

17      To further this matter, council staff a preparing a position paper in relation to each entity, how Council views the entity, the current and any proposed accounting treatment and the potential impact of this.  After presenting to the Finance & Audit Committee in August a copy will be given to Audit NZ for their consideration.

Consolidation of MCT

18      Additionally, during the audit of the AR for the year ended 30 June 2017, Audit New Zealand suggested in its management report potential changes in accounting for Milford Community Trust (MCT).

19      Milford Community Trust is a Council Controlled Organisation and therefore Audit NZ are recommending that in accordance with PBE IPSAS 6: Consolidated and Separate Financial Statements that the financial results of MCT be consolidated into Council’s Annual Report.  To date Council have considered the operations and assets of MCT to be immaterial and thus have not consolidated the Trust, however a summary of key financial and performance indicators have always been disclosed in the CCO section of the Annual Report.  For the year ended 30 June 2017, MCT’s total revenue equated to $116,000 and an overall Net Surplus of $51,000.  Net Assets at 30 June 2017 were $213,000.   

20      We note Audit NZ also referenced Southland Museum and Art Gallery (SMAG) in its management report. 

21      The treatment of the Milford Community Trust and SMAG will also be included in the position paper discussed above.

Factors to Consider

Legal and Statutory Requirements

22      Section 98 of the Local Government Act 2002 requires the Council to prepare and adopt an Annual Report within four months of the end of the financial year.

23      Section 111 of the Local Government Act states that any information to be prepared must be in accordance with generally accounting practice where the information is of a form or nature for which generally accepted accounting practice has developed standards. 

Community Views

Costs and Funding

24      There are no direct cost implications of Council adopting accounting policies.

Policy Implications

25      Council has by way of Section 6.1 of the Finance and Audit Committee’s terms of reference delegated to the committee to consider and make recommendations to Council in regards to accounting treatments, changes in generally accepted accounting practice and new accounting and reporting requirements.

Analysis

Options Considered

Analysis of Options

Option 1 – Recommends to Council the use of the accounting policies attached, including any amendments agreed at this meeting, for use in preparation of the Council’s 2017/2018 Annual Report

Advantages

Disadvantages

·        The Annual Report can continue to be prepared in line with the timetable.

·      The Committee would not get any further information if it required it before Committee endorses the report for adoption by Council in September.

Option 2 – Do not recommend accounting policies as presented

Advantages

Disadvantages

·        Changes can be made to the accounting policies to incorporate the Committee’s views.

·      The preparation of the accounts process may be held up depending on the time needed to provide the necessary information.

 

Assessment of Significance

26      In terms of Council’s Significance and Engagement Policy, the accounting policies which form part of the AR are not considered significant.

Recommended Option

27      Option one - Recommends to Council the use of the accounting policies attached, including any amendments agreed at this meeting, for use in preparation of the Council’s 2017/2018 Annual Report.

Next Steps

28      If the committee approves the policies, they will be presented to Council for adoption in due course.

29      The accounting policies (incorporating any changes agreed at this meeting) will be reviewed by Audit New Zealand as part of their audit of the AR.

 

Attachments

a             Draft Accounting Policies Annual Report year ended 30 June 2018    

 


Finance and Audit Committee

14 June 2018

 


 


 


 


 


 


 


 


 


 


 


Finance and Audit Committee

14 June 2018

 

Draft Health and Safety Plan for 2018/2019

Record No:             R/18/5/11791

Author:                      Janet Ellis, People and Capability Manager

Approved by:         Steve Ruru, Chief Executive

 

  Decision                                        Recommendation                                  Information

 

 

 

Purpose

1        To seek approval for the Draft Health and Safety Plan 2018/2019 to be presented to Council for formal approval.

Executive Summary

2        Southland District Council has an obligation to manage the health and safety of workers.  To be able to do this Council needs to continue on its journey with improving the focus on health and safety in the coming year.

3        A draft Health and Safety Plan for 2018/19 has been drafted which contains the proposed objectives for the year ahead. The plan is being presented to the Committee for their endorsement prior to seeking formal approval from Council.

 

Recommendation

That the Finance and Audit Committee:

a)            Receives the report titled “Draft Health and Safety Plan for 2018/2019” dated 25 May 2018.

 

b)           Determines that this matter or decision be recognised not significant in terms of Section 76 of the Local Government Act 2002.

 

c)            Determines that it has complied with the decision-making provisions of the Local Government Act 2002 to the extent necessary in relation to this decision; and in accordance with Section 79 of the Act determines that it does not require further information, further assessment of options or further analysis of costs and benefits or advantages and disadvantages prior to making a decision on this matter.

 

d)           Recommends to Council that it approves the Health and Safety Plan for 2018/2019.

 


 

Background

4        In 2017/18 good progress was made on health and safety within Council including the development of the health and safety framework, development of both leading and lagging indicators, improved contractor approval process, development of health and safety training and the start of development of critical risk control plans.

5        An update on the Health and Safety Plan as of 20 May 2018 is attached for the Finance and Audit Committee’s information.  The critical control plan work is proposed to continue into 2018/19 along with the training on the procedures.

6        In 2017 our progress was benchmarked and reviewed by Simpson and Grierson and it is proposed that we will continue to use this to focus and inform our actions for the 2018/19 years. 

7        A Health and Safety Plan for 2018/2019 has been drafted and is attached (Attachment A) for the Committee’s consideration. Also attached (Attachment B) is a table providing a review of progress against the agreed focus areas for the 2017/18 year.

8        The plan contains a review of previous performance and objectives and spells out proposed improvement measures and targets.  It identifies key elements to deliver improvement and allocates sponsors to ensure momentum is maintained.

9        In early 2019 it is proposed that we once again undertake an external gap analysis to assess our improvements and detail any areas for focus for our 2019/2020 Health and Safety Plan.

 

Factors to Consider

Legal and Statutory Requirements

10      Council has a legislative obligation to manage the health and safety of workers.

11      The Health and Safety Plan continues the focus on a risk based approach to managing health and safety based within its undertakings.

Costs and Funding

12      There will be ongoing health and safety costs with the implementation of this plan.  Current known costs have been budgeted in the Long Term Plan.  Both the Finance and Audit Committee and Council in March 2018 have endorsed the continued spending on health and safety to ensure our staff get home safe every day.

Policy Implications

13      The current Health and Safety Policy will need to be amended following finalisation of the Plan.

Analysis

Options Considered

14      The options considered are to recommend to Council for the approval of the Health and Safety Plan as presented (Option 1), recommend them subject to some minor amendments (Option 2) or Do Nothing (Option 3).

 

Analysis of Options

Option 1 – Agree to the Draft Health and Safety Plan 2018/2019

Advantages

Disadvantages

·      Improvement of health and safety culture

·      Illustration that Council and ELT are committed to caring for the wellbeing and safety of our people

·      Decline in the number of injuries

·      Meet legislative requirements.

·      Possible additional financial implications

 

 

Option 2 – Modifies the Draft Health and Safety Plan 2018/2019

Advantages

Disadvantages

•    Save some initial costs in the short term

·      No clear guidelines

·      Health, safety and wellbeing of our people in jeopardy

·      May not be consistent with legislative obligations.

 

Option 3 – Do Nothing

Advantages

Disadvantages

·      Avoids short term cost implications

·      Inconsistency in procedures

·      No clear guidelines

·      Health, safety and wellbeing of our people in jeopardy

·      Not consistent with legislative obligations

 

Assessment of Significance

15      The matter being considered is of an administrative matter and hence is not considered to be significant in terms of section 76 of the Local Government Act 2002

Recommended Option

16      Agrees to recommend to Council adoption of the draft Health and Safety Plan for 2018/19.

Next Steps

17      Seek final approval of the plan from Council and continue working on the execution of the plan.


 

 

Attachments

a             Draft Health and Safety Plan 2018/2019

b             Update on Health and Safety Plan    

 


Finance and Audit Committee

14 June 2018

 


Finance and Audit Committee

14 June 2018

 


 


 

 


Finance and Audit Committee

14 June 2018

 

Health and Safety Update

Record No:             R/18/5/11736

Author:                      Janet Ellis, People and Capability Manager

Approved by:         Steve Ruru, Chief Executive

 

  Decision                                        Recommendation                                  Information

 

 

 

Purpose

1        To provide an update on health and safety related incidents and activity over the last quarter.

Content

Incidents/Near Misses – Southland District Council

2        As part of the Health and Safety Plan for 2017/2018 we are ensuring that we have consistency of reporting on both lead and lag indicators. 

3        Lagging indicators are typically “output” oriented, easy to measure but hard to improve or influence while leading indicators are typically input oriented, hard to measure and easy to influence.

4        Lead indicators include Near Misses, Audits and Inspections and progress to the Health and Safety Plan.  Lag indicators include Medical Treatment Interventions (MTI), Incidents, Lost time due to injury, Worksafe notifications and Number of Incident Investigations completed.

5        Please find below a summary of these indicators for the year from 1 January 2018 to 31 April 2018.  Please note we currently do not record the number of Audits and inspections carried out.

 

Key Performance Indicator

1 January – 31 April  2018

Worksafe Notifications

0

Medical Treatment Injury (MTI) as reported to ACC

3

Incidents

14

Lost time due to injury

1

Near misses

7

Investigations completed

8

 

6        The Medical Treatment Injuries (MTI’s) are related to:

·        An incident that occurred within the Work Scheme where one of the Supervisors injured his back undertaking manual labour digging a hole; an incident with a staff member with tightness in their shoulder that needed to see a physiotherapist and a staff member with a hand injury on Stewart Island while undertaking bush clearing work. 

·        The incident within the Work Scheme involved the staff member having a period of approximately three weeks off work.

Other Health and Safety Related initiatives

7        In March 2018 Council ran Healthy Thinking workshops for a number of our staff.  These workshops were designed to help the participants to learn the tools of healthy thinking and to learn simple tools and techniques to control unhealthy emotions such as stress, frustration and anxiety.

8        The Health and Safety Committee had their first meeting of 2018 on 28 February 2018. Representation on the committee is from across the organisation including leaders of people and operational staff.  The purpose of the Health and Safety Committee is to actively participate in the formation of our H&S plan and enable the health and safety representatives to formally review progress against plans and to collaboratively discuss and agree any opportunities for improvement.  The committee meets quarterly and more often when needed.

9        Currently, Council is recruiting for a Health and Safety Advisor, this will provide more dedicated resources to this area and will ensure it continues to make it a priority.

10      Health and Safety training continues with staff completing the Health and Safety e-learning modules based on the health and safety procedures.  Overall staff are finding the training interesting and enjoyable; with over 85% of our staff saying they are satisfied or very satisfied with the training. 

11      Ongoing progress is being made on the Health and Safety Control plans with the risk group meeting in mid-May.  GPS in vehicles and ongoing training and education for drivers being some of the priorities the group have highlighted.

 

Recommendation

That the Finance and Audit Committee:

a)            Receives the report titled “Health and Safety Update” dated 23 May 2018.

 

Attachments

There are no attachments for this report.  

 


Finance and Audit Committee

14 June 2018

 

 

Financial Report for the month ended 30 April 2018

Record No:             R/18/5/10525

Author:                      Dipal Patel, Project Accountant

Approved by:         Anne Robson, Chief Financial Officer

 

  Decision                                        Recommendation                                  Information

 

  

 

Background

1.         This report outlines the financial results for the ten months to 30 April 2018 or 83.33% of the financial year.

2.         The Monthly and YTD Actual results are compared to the Full Year Budget (Projection) in the attached Summary Monthly Financial Report. 

3.         The projection values include any 2016/2017 carried forward items approved by Council in September 2017 and February forecast changes approved by Council in March 2018.

4.         The 2017/2018 Annual Plan budget is shown in the Reports as the Full Year Budget (Budget).

Overview

5.         The Summary Monthly Financial Report consolidates the business units within each of the key areas of the Executive Leadership Team (ELT) responsibility.  The following commentary focuses on the year to date (YTD) results excluding GST.

6.         The Detailed Monthly Financial Report includes more detailed explanations and commentary on variances by the Executive Leadership Team.  Commentary generally focuses on the year to date (YTD) results and, where specified, monthly results. 

7.         In the Council Summary and Detailed Reports, the values in the columns for:

·              The Monthly Budget, is phased where appropriate and is based on the full year projection and includes carry forwards and forecasting.

·              The YTD Budget is based on the full year projection and is a combination of the Annual Plan, carry forwards and forecasting. 

·              The Full Year Budget is the Annual Plan budget for the year.

·              The Full Year Projection is the forecasted year end result.

8.         Phasing of budgets occurs in the first 2 months of the financial year, at forecasting and when one-off costs have actually occurred. This should reduce the number of variance explanations due to timing.

9.         Where phasing of budgets has not occurred, one twelfth of annual budgeted cost is used to calculate the monthly budget.

10.       Council staff will continue to refine the format of this report to enhance the financial information reported.  We welcome any feedback or suggestions on further improvements that could be made to this report.

 

11.       The Council Summary Report (actuals vs phased and forecast budget) year to date are as follows:

Income

12.       Operating Income is $2.3 million (3%) under projection year to date ($65.2 million actual vs $67.6 million projection).

 

13.       Transport (Roading) income is 6% under projection, a variance of $1.6 million. This is predominantly due to the timing of capital expenditure.

14.       Services and Assets is under projection YTD by $617 thousand (3%). This relates predominantly to harvesting activities within the forestry business unit. It is forecasted that this shortfall against budgeted income will have corrected by year end due to significant harvesting activities currently underway.


 

Operating Expenditure

15.       Operating Expenditure is $1.9 million (3%) under projection for the year to date ($58.7 million actual vs $60.5 million projected).

 

 

16.       Transport (Roading) costs are 3% under projection, a variance of $724 thousand. This relates to the timing of various works and those being weather dependent.

17.       Services and Assets are $320 thousand (2%) under projection. The most significant variation is associated with Forestry ($486 thousand under projection) due to the later harvesting currently underway. Road safety is considerably over budget ($247 thousand over projection) due to a limited budget being included in the Annual Plan.  The costs associated with road safety are recovered from all councils involved in this shared service.


 

Capital Expenditure

18.       Capital Expenditure is $3.2 million (12%) under projection year to date ($23.3 million actual v $26.5 million projection).

19.         Customer Support, Services & Assets, Environmental & Financial Services have vehicle replacements in their budgets, some of which have not been spent to date. 20 vehicles are due for replacement by 30 June 2018.  15 replacement vehicles have been delivered during January-April, 2 others have been ordered in February and are scheduled to arrive in June. Orders for the remaining vehicles are anticipated to be placed by the end of May.

 

 

 

20.         Capital expenditure for Services and Assets is 33% ($1.4 million) under projection for the year to date. It is anticipated that by year end this deficit will be approximately 36%. This is predominantly due to District Water activities and District Sewerage activities.

 

®   Wastewater ($597 thousand under projection):

·   Desludging is currently $145 thousand under projection with the contractor having set up in Riversdale in February the contractor is expected to set up at Riverton before the end of May. This is expected to be on projection at year end.

·   Otautau ($228 thousand) – the Otautau upgrade of plant, equipment and SCADA is currently under budget by $228 thousand, but is expected to be completed by the end of the year.

·   The upgrade on Stewart Island is currently $60K under budget. Staff time is a significant component of the work completed during the year and this time has yet to be allocated.

·   $117 thousand relates to the funds allowed for ongoing work relating to Te Anau. Work is ongoing in order to undertake the updated business case work comparing CPI and SDI disposal methods.

 

®   Water ($828 thousand under projection):

·    Water loss analysis across the district is currently ongoing through a number of projects. These are collectively $146 thousand under budget with the work planned expected to be completed by 30 June.

·    Eastern Bush water supply upgrade ($83K under projection) – Stantec is currently working on required consenting documentation (including confirming design) that should be completed by 30 June.

·    Winton Water Supply ($468 thousand under projection) – The physical work is expected to be completed by the end of June and under projection.

 

21.         Overall roading capital expenditure is $1.8 million less than projected for the year to date. This variance is predominantly due to the timing of the Capital Expenditure in relation to the seasonality of the programmed works.

·   During the recent forecasting process the rehabilitation of Wreys Bush Otautau was not captured, this is expected to increase the total budget by $527K.  Roading are working towards the original NZTA approved budget for the 3 year period, currently roading are on track to meet this budget.

·   The Alternative Coastal Route: Slope Point Road is complete, all that remains here is completion of the car park which is expected to be completed by 30th June. Kerbing has been laid to the perimeter of the car park and preparation for sealing will happen in May.  The project has 77% surfaced, and the remaining 23% will be completed early into the new construction season later this year. Opus have completed the thrust gauging and curve advisory investigation on the first 50% of the main route, and will be undertaking the second half in early May.

·   Waipapa Point earthworks and drainage are still underway, with around 60% of earthworks and drainage completed at the end of April. Waipapa Point will not be sealed this season, although 100% construction of AP65 sub-basecourse and 50% of M4 AP40 basecourse layers is anticipated to be completed over the winter months as weather allows. The car park works at the Waipapa information centre will be completed next construction season. A defects driveover has been completed with The Roading Company for all of Slope Point and around 60% of the main route, in anticipation for issuing Practical Completion in the coming weeks.

·   Special Purpose Roads are currently under budget. This Business Unit is 100% funded from NZTA this has no overall impact on SDC.  The Lower Hollyford Road has required no emergency works this year however the section down to Marion Falls has been sealed by NZTA.  An item was identified in the forecasting process as the sealing is expected to cost in excess of $275K.  The Chaslands Slip project was put to tender however the tender price was significantly higher than estimate.  This is currently awaiting approval from NZTA.  Based off the programme supplied it is expected that the completion date will be late January 2019.


 

Update on the Three year NZTA roading programme

22.         The three year roading programme is forecasted to be over budget by $800K this includes NZTA portion of $416K and SDC contribution of $384K.  Below is a breakdown of NZTA approved funding vs forecasted spend by NZTA category.

 

23.       The forecasted overspend will be absorbed in the 2018/19 – 2020/21 NZTA approved funding.  Strategic Roading are ensuring that all the available funds for the 2015/16 – 2017/18 period are utilised as this attracts a funding assistance rate of 52%.  The forecasted overspend of $800K is a 1% variance to the approved three year NZTA funding.  While this is a forecast many factors will contribute to Strategic Roading achieving this, as identified above there is potential for $256K of works to be completed if weather condition and resourcing allow in which case the overspend will increase to $1.1M.  Conversely there is potential for the forecasted overspend to reduce below $800K.

Balance Sheet Commentary

24.       Council’s financial position as at 30 April 2018 is detailed below and is for the activities of Council only.  The balance sheet as at 30 June 2017 represents the audited balance sheet for activities of Council only.

25.       Trade and Other Receivables is higher this month due to including the fourth instalment of rates.  This instalment was due at the end of May.

26.       At 30 April 2018, Council had $12 million invested in four term deposits ranging from three to six month maturities as follows:

 

Our SDC Investment Policy states that we can invest no more than $5 million with one bank. Investments and Funds on Call, comply with this policy.

 

27.       Funds on call are : 

 

28.       The movement in Property, Plant and Equipment is due to capital additions during the year less budgeted depreciation.

29.       $4 Million was used from the Westpac Overdraft Debt Facility to ensure that the Operating Bank Account had enough funds in it to ensure that the payment run on the 20th of April was completed. $800 thousand of this overdraft debt facility was repaid on 24th April. The remaining $3.2 million was repaid on the 1st of May, as funds became available in the Operating Account.

 

 

Recommendation

That the Finance and Audit Committee:

a)         Receives the report titled “Financial Report for the month ended 30 April 2018” dated 5 June 2018.

 

Attachments

a             Council's District Activities - Summary Monthly Financial Report - 30 April 2018

b             Council's District Activities - Summary Monthly Financial Report - 30 April 2018    

 


Finance and Audit Committee

14 June 2018

 


 


Finance and Audit Committee

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Finance and Audit Committee

14 June 2018

 

Interim Management Report from Audit New Zealand for the year ended 30 June 2018

Record No:             R/18/5/11536

Author:                      Jacobus Meyer, Financial Accountant

Approved by:         Anne Robson, Chief Financial Officer

 

  Decision                                        Recommendation                                  Information

 

 

 

Summary of Report

1        As part of the audit process, Audit New Zealand provides Council with a report on the interim audit of Council’s Annual Report.  This report outlines the findings of the work that was performed and makes a number of recommendations that it seeks commentary from management on (Attachment A).

2        A copy of the report is attached for the Committee’s reference. 

3        Audit New Zealand did not identify any significant or material issues during Council’s interim audit for the year ended 30 June 2018, however they have made a number of recommendations as noted in the attached table.

4       Council staff will work to implement/resolve the recommendations identified by Audit NZ, in accordance with the self-imposed timelines noted on the attached table (Attachment B). 

 

Recommendation

That the Finance and Audit Committee:

a)            Receives the report titled “Interim Management Report from Audit New Zealand for the year ended 30 June 2018” dated 6 June 2018.

 

 

Attachments

a             Interim Management Report from Audit New Zealand for the year ended 30 June 2018

b             Staff Feedback - Audit New Zealand - Interim Management Report    

 


Finance and Audit Committee

14 June 2018

 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


Finance and Audit Committee

14 June 2018

 


 


 


 


Finance and Audit Committee

14 June 2018

 

Annual Report Timetable - Key Dates

Record No:             R/18/5/12249

Author:                      Shannon Oliver, Planning and Reporting Analyst

Approved by:         Rex Capil, Group Manager Community and Futures

 

  Decision                                        Recommendation                                  Information

 

 

 

Purpose

1        The purpose of this report is to provide the committee with the key dates for the Annual Report timetable for their information.

Key Dates

2        The committee will be presented with the unaudited Annual Report in draft form at the 30 August 2018 meeting.  The report will then be audited by Audit New Zealand who will be on site from 3-21 September 2018.

3        On 24 September 2018 the committee will receive the final draft of the Annual Report for recommendation for adoption by Council on 25 September 2018.

 

Recommendation

That the Finance and Audit Committee:

a)            Receives the report titled “Annual Report Timetable - Key Dates” dated 31 May 2018.

 

 

Attachments

a             Key Dates - Annual Report timetable 2017 2018    

 


Finance and Audit Committee

14 June 2018

 

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Finance and Audit Committee

14 June 2018

 

Finance & Audit Committee Work plan for the year ended 30 June 2019

Record No:             R/18/5/11807

Author:                      Anne Robson, Chief Financial Officer

Approved by:         Steve Ruru, Chief Executive

 

  Decision                                        Recommendation                                  Information

 

 

 

Background

1        The purpose of preparing a draft work plan is to get the committees discussion and agreement as to the agenda items it expects to see during the year to 30 June 2019.  This has been done to ensure that the reports staff are preparing are meeting the expectations of the committee and also allowing staff to plan for and ensure that they are delivering the appropriate reports.

2        In preparing this draft work plan, Council staff have met with both the Chair of the Finance & Audit committee and the independent committee member as well as discussing with the relevant team member responsible.

3        Additionally, Council staff have also referenced back to the Finance and Audit Committee terms of reference to ensure that where appropriate, standard reports required to complete key responsibilities are included.

4        The adoption of the work plan does not preclude the Committee or staff from including any other additional reports as and when required and it is expected that over the coming year this work plan will be refined further.

5        An annual work plan for the committee will come up in June of each year for discussion and adoption. 

 

Recommendation

That the Finance and Audit Committee:

a)            Receives the report titled “Finance & Audit Committee Work plan for the year ended 30 June 2019” dated 7 June 2018.

 

b)           Adopts the Finance and Audit Committee Work plan for the year ended 30 June 2019.

 

 

Attachments

a             Finance & Audit Workplan to 30 June 2019    

 


Finance and Audit Committee

14 June 2018

 

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Finance and Audit Committee

14 June 2018

 

Exclusion of the Public: Local Government Official Information and Meetings Act 1987

 

Recommendation

 

That the public be excluded from the following part(s) of the proceedings of this meeting.

C9.1   Quarterly risk register update - June 2018

C9.2   Fraud Risk Assessment

C9.3   Insurance for Underground Infrastructure

C9.4   Annual Insurance Renewal

The general subject of each matter to be considered while the public is excluded, the reason for passing this resolution in relation to each matter, and the specific grounds under section 48(1) of the Local Government Official Information and Meetings Act 1987 for the passing of this resolution are as follows:

General subject of each matter to be considered

Reason for passing this resolution in relation to each matter

Ground(s) under section 48(1) for the passing of this resolution

Quarterly risk register update - June 2018

s7(2)(e) - The withholding of the information is necessary to avoid prejudice to measures that prevent or mitigate material loss to members of the public.

s7(2)(i) - The withholding of the information is necessary to enable the local authority to carry on, without prejudice or disadvantage, negotiations (including commercial and industrial negotiations).

That the public conduct of the whole or the relevant part of the proceedings of the meeting would be likely to result in the disclosure of information for which good reason for withholding exists.

Fraud Risk Assessment

s7(2)(f)(ii) - The withholding of the information is necessary to maintain the effective conduct of public affairs through the protection of such members, officers, employees and persons from improper pressure or harassment.

That the public conduct of the whole or the relevant part of the proceedings of the meeting would be likely to result in the disclosure of information for which good reason for withholding exists.

Insurance for Underground Infrastructure

s7(2)(b)(ii) - The withholding of the information is necessary to protect information where the making available of the information would be likely unreasonably to prejudice the commercial position of the person who supplied or who is the subject of the information.

That the public conduct of the whole or the relevant part of the proceedings of the meeting would be likely to result in the disclosure of information for which good reason for withholding exists.


 

General subject of each matter to be considered

Reason for passing this resolution in relation to each matter

Ground(s) under section 48(1) for the passing of this resolution

Annual Insurance Renewal

s7(2)(b)(ii) - The withholding of the information is necessary to protect information where the making available of the information would be likely unreasonably to prejudice the commercial position of the person who supplied or who is the subject of the information.

That the public conduct of the whole or the relevant part of the proceedings of the meeting would be likely to result in the disclosure of information for which good reason for withholding exists.