Agenda of Finance and Performance Committee

FINANCE AND PERFORMANCE COMMITTEE
Membership:	10
Meeting Cycle:	Meets on a six weekly basis, as required or at the requisition of the Chair
Quorum:	Half of the members
Reports to:	Council

8 17 July 2019

Finance and Performance Committee

28 June 2019

File: (19/859)

Report no: FPC2019/3/153

Final 2019-2022 Statement of Intents for Urban Plus Group, Seaview Marina Limited, the Hutt City Community Facilitites Trust and the Local Government Funding Agency

Purpose of Report

1. The purpose of this report is to consider the final Statement of Intents (SOIs) for Urban Plus Group, Seaview Marina Limited and the Hutt City Community Facilities Trust, for the three years commencing 1 July 2019. Also to receive the Final SOI for the Local Government Funding Agency.

Recommendations

That the Committee recommends that Council:

(i) receives and agrees to the final Statement of Intent (SOI) for Urban Plus Group for the three years commencing 1 July 2019, attached as Appendix 1 to the report;

(ii) receives and agrees to the final SOI for Seaview Marina Limited for the three year commencing 1 July 2019, attached as Appendix 2 to the report; and

(iii) notes officers will best endeavour to distribute to members, the final SOI for the Hutt City Community Facilities Trust for the three years commencing 1 July 2019, prior to the Finance and Performance Committee meeting to held on 17 July 2019; and

(iv) notes and receives the final SOI for the Local Government Funding Agency for the three years commencing 1 July 2019, attached as Appendix 3 to the report.

Background

2. The Local Government Act 2002 (LGA) requires the board of a Council Controlled Organisation (CCO) to deliver to its shareholders, a final SOI on or before 30 June each year.

3. The LGA also requires Council to agree to a SOI, or if it does not agree, take all reasonable steps to require a SOI to be modified, as soon as practicable after a SOI of a CCO is delivered to it.

4. This Committee received and considered the draft SOIs for the three year period commencing 1 July 2019 for Urban Plus Group, Seaview Marina Limited and the Hutt City Community Facilities Trust, at its meeting held on 6 March 2019.

Discussion

Urban Plus Group (UPL)

5. Officers advised the Committee that the draft UPL SOI did not adequately address Council’s environmental objectives expectations. Council’s Sustainability and Resilience Manager has since worked with UPL to recognise Council’s carbon zero goal and specific performance measures are now included in the final SOI.

6. No further feedback on UPL’s draft SOI was provided to the UPL Board for consideration in finalising its SOI for the three year period commencing 1 July 2019.

7. Officers recommend that Council agree to the final SOI for UPL, attached as Appendix 1 to this report, noting:

a. There has been no change to the strategic direction or intent from the draft SOI, however the UPL Board is aware that Council could request changes to the UPL SOI when Council has completed its Housing Strategy.

b. The financial forecasts and projected number of units in UPL’s rental portfolio have been reviewed and updated since the draft SOI to reflect the recent acquisition of 38 Britannia Street and the now likely timing for completion of each project in UPL’s 4 year development programme.

c. Other changes to the draft SOI have been limited to grammatical corrections and amendments, and formatting (presentation) changes.

8. The 30 June final SOI delivery to shareholder requirement was met with the final SOI delivered to Council Officers on 27 June 2019.

Seaview Marina Limited (SML)

9. Officers advised the Committee that the draft SML SOI did adequately address Councils expectations with the exception that specific performance measures to recognise Councils carbon zero goal had not been included.

10. Council’s Sustainability and Resilience Manager has agreed to work with SML during 2019/20 to establish some specific carbon targets for inclusion in next year’s SOI.

11. Officers recommend that Council agree to the final SOI for SML, attached as Appendix 2 to this report, noting:

a. There has been no change to the strategic direction or intent from the draft SOI, however;

b. Due to recent increases in berth uptake pushing occupancy to near full capacity, the SML Board believe it is appropriate to bring forward the next phase of in water berth development by a year.

The change in the capital expenditure plan is summarised in the following table:

SOI	2019/20	2020/21	2021/22	Total 3 Years
Draft	$985,000	$1,355,000	$1,430,000	$3,770,000
Final	$2,142,000	$555,000	$1,340,000	$4,037,000

c. Increased insurance premiums of $45,000 per annum, plus the inclusion of a $50,000 per annum research and development budget to fund business cases for future investments, has reduced cash flow and Earnings from Operations (as measured by Earnings before Interest, Tax, Depreciation and Amortisation (EBITDA)), over the period of the SOI as follows:

SOI	2019/20	2020/21	2021/22	Total 3 Years
Draft	$1,020,000	$879,000	$1,121,000	$3,020,000
Final	$936,000	$815,000	$995,000	$2,746,000

d. As a result of the earlier capital investment and reduction in operational earnings, Return on Equity (ROE), has dropped by 1% in each of the years covered by the SOI.

SOI	2019/20	2020/21	2021/22
Draft	5%	3%	4%
Final	4%	2%	3%

e. SML has historically exceeded a 5% ROE and this remains Councils long term expectation. In addition to the changes made since the draft SOI, the draft SOI budget included for the first time, a $100,000 annual lease charge for the breakwater owned by Council and in 2020/21 a $200,000 provision was included for possible dredging of the marina (which is not expected to be required for at least another five years). The earlier capital investment to complete the marina in water development and to initiate other incremental revenue opportunities will maximise long term shareholder value.

12. The 30 June final SOI delivery to shareholder requirement was not met with the final SOI delivered to Officers on 10 July 2019. This (minor) breach will be self-disclosed in SML’s 2019 Annual Report.

The Hutt Community Facilities Trust (CFT)

13. Officers advised the Committee that the draft CFT SOI did adequately address Councils expectations with the exception that specific performance measures to recognise Councils carbon zero goal had not been included.

14. Councils Sustainability and Resilience Manager has agreed to work with CFT during 2019/20 to establish some specific carbon targets for inclusion in next year’s SOI.

15. Officers are currently working with the CFT trustees to update the financial forecasts following the June 2019 recommendation of the Community Plan Committee and subsequent Council approval to defer funding for the Naenae Community Hub.

16. Officers will best endeavour to distribute to members, the final CFT SOI prior to the meeting of this Committee.

Local Government Funding Agency (LGFA)

17. Officers received the final LGFA SOI on 27 June 2019. This is attached as Appendix 3 to the report.

18. The changes to the draft LGFA SOI now included in the final SOI are:

a. Net interest income has reduced by $500,000 in 2019/20 reflecting lower interest rates (approximately 0.4% lower) but has increased by $1.6 billion and $1.3 billion in the following two years because of the higher level of assets ($600 million) compared to the starting position.

b. Expenses have increased by between $200,000 and $300,000 across the forecast period due to higher fees relating to expected greater utilisation of Standby Facilities, increased IT and consultancy costs relating to LGFA’s transition to the SWIFT payments system and a greater focus on cyber security.

Options

19. If Council do not agree to any of the final SOIs, it may by resolution, require the respective board(s) to modify their SOI. Before giving notice of the resolution to the respective board(s), Council must consult the respective board(s) as to the matters requiring modification.

Consultation

20. Consultation is not required. This Committee previously reviewed each of the draft SOIs.

Legal Considerations

21. Council’s General Manager, Corporate Services and General Counsel have reviewed the final SOIs for compliance with the requirements of the LGA. Any non-compliance issues identified in the draft SOIs have been addressed with the final SOIs now fully compliant.

22. There is an obligation on the board of a CCO, that each SOI and each modification that is adopted to a SOI, “must be made available to the public within one month after the date on which it is delivered to the shareholders or adopted, as the case may be”. The final SOIs will be made available to the public via the website of the respective CCO immediately after receiving notification of approval of the final SOIs by Council.

Financial Considerations

23. The SOIs contain the financial forecasts for the three year periods commencing 1 July 2019.

Urban Plus Group

24. UPL’s planned activities for the period covered by its SOI, are funded via retained earnings; profits on properties developed for resale; sales of properties no longer deemed appropriate for UPL’s residential rental portfolio; and approved loan agreements with Council. Council loans to UPL are funded by Council debt resulting in nil impact to Council net debt.

25. The Total Equity of UPL is estimated to be $31.1 million at 30 June 2020.

26. No dividends have been budgeted by UPL for the period covered by the SOI.

Seaview Marina Limited

27. SML’s planned activities for the period covered by its SOI, are funded via retained earnings, operating cash flows, and an approved loan agreement with Council. The Council loan to SML is funded by Council through borrowings resulting in nil impact to Council net debt.

28. The Total Equity of SML is estimated to be $9.3 million at 30 June 2020.

29. The SML Board do not foresee the ability to pay a dividend until completion of the marina in water development, expected to be completed in 2021/22. As such, no dividends have been budgeted by SML during the three year period covered by the SOI. At this stage the SML Board do not foresee the ability to pay a dividend until 2022/23, ie, a year after the period covered by this SOI.

30. During 2019/20 the SML Board will develop a Dividend Policy for Council consideration and approval.

Appendices (Available under separate cover)

No.	Title	Page
1 ⇩	UPL GROUP Statement of Intent 2019-2022 FINAL
2 ⇩	SML Statement of Intent 2019-2022 FINAL
3 ⇩	LGFA Statement of Intent 2019-2022 FINAL

Author: Brent Kibblewhite

General Manager Corporate Services

Reviewed By: Jenny Livschitz

Chief Financial Officer

16 17 July 2019

Finance and Performance Committee

01 July 2019

File: (19/880)

Report no: FPC2019/3/71

TechnologyOne SaaS Phase One Project Update

To provide the Finance and Performance Committee with an update on the TechnologyOne SaaS Project and Governance Structure.

Recommendation

That the report be noted and received.

Background

1. At the Finance and Performance Committee meeting on 2May 2018 the business case to move Council’s TechnologyOne software to SaaS (Software as a Service) was approved.

2. The Finance and Performance Committee requested a project update at each meeting while the project is in progress.

Final Report

3. This report forms the final status update report for phase one of the SaaS upgrade project which was closed as of 30/6/2019 and was delivered:

a. On time

b. On budget.

Governance

4. The governance group structure implemented for this project, consisting of General Manager level representation and an external Quality Assurance consultant, worked extremely well and is considered a key contributing factor to the overall success of the project. It is recommended that this governance model is retained for future phases of this project and that a similar governance model be used for other business impacting system and change projects.

5. The close out governance meeting for this phase has been held with phase one considered complete as of 30 June 2019.

Project Phase One Update

Scope:

GREEN

Schedule:

GREEN

Financials:

GREEN

Risks:

GREEN

6. The project was delivered on schedule with go live over Queens Birthday weekend (June 1-3). Council has been operating on the cloud version since Tuesday 4 June 2019.

7. The project will come in slightly under budget. The remaining forecast is associated with the final invoices and accruals for June expenditure.

8. Overall the system is operating as expected and business operations for the most part continue to operate as usual. Most of the issues have been associated with changes to the way the system is accessed and/or to the way some functions are performed, based on using a cloud vs an on premise system.

9. Where we have had functional issues, the project team has been working with the business and our vendors to resolve these in a timely manner.

10. Budget Summary of Phase One

	Budget	Actuals to Date	Forecast	EAC	Variance
TOTAL	$1,500,000	1,455,286	$27,500	$1,482,786	(1.0%)

Note – variance is a positive variance – project is forecast to come in slightly under budget.

11. Phase One Risk Summary

No risks remaining – project closed on 30 June 2019.

12. Project Alignment to IS Strategy

This TechnologyOne SaaS project sat within the stabilise category of projects. Now this is complete we can leverage cloud capabilities to optimise and transform TechnologyOne dependent business processes focused initially in finance and regulatory services.

Future Phases

13. IS Strategy

Empower and simplify though Innovation, Information and Technology

· We want to make it easy for everyone to understand what we are doing and why we are doing it, so we have broken our projects into three simple categories.

· We have a lot to do over the next three years stabilising and optimising the current environment, progressively providing the fundamental building blocks needed to support the digital transformation of the organisation.

· It is going to take time but the results will be transformational for both Council employees and our City. We will enable an agile approach that will allow us to take advantage of technology when it becomes available and continue to innovate.

14. IS Projects

Strategic Projects currently in flight or being scoped

Stabilise

Optimise

Transform

Network/Infrastructure

· WAN

· WiFi

· LAN

· Firewall

Enterprise budgeting *

Business Intelligence Reports (part 1) *

Online Payments

Document Management system improvements re health check, usage and adoption

Enterprise Cash Receipting *

Expense and Corporate card management

Business Intelligence (part 2)

Digital Experience/ Marketing platform

Office 365

Items marked with an * leverage TechnologyOne being in the cloud.

The IS Team is currently reviewing additional project opportunities and is currently working through requirements and scoping activities for the various opportunities and will develop business cases as required. We are also working in partnership with the business to review end to end business processes to identify opportunities to optimise and/or transform these to achieve business operational efficiencies.

Appendices

There are no appendices for this report.

Author: Rick Newton

Acting Chief Information Officer/Business Transformation Manager

Approved By: Matt Reid

General Manager City and Community Services

31 17 July 2019

Finance and Performance Committee

16 April 2019

File: (19/479)

Report no: FPC2019/2/79

Hutt City Council - Information on Options for Delivery of Council Housing

Purpose of Report

1. Explore the advantages and disadvantages of Urban Plus Limited (UPL) remaining as a Council Controlled Organisation (CCO), delivering Council housing in-house, or of Council selling or transferring its housing to a stand-alone organisation.

Recommendations

That the Committee:

(i) notes and receives the information in the report; and

(ii) refers the information to the in-coming Council for consideration.

For the reasons the report provides information on options available with regard to the future ownership and delivery of Council’s housing stock. The information was requested by Councillors to assist with discussions on Council’s housing and its overall housing strategy.

The in-coming Council would either need to undertake a special consultative process or consult on options via an amended Long Term Plan process if it wished to make any changes to the current position.

Background

2. UPL is a CCO, its activities include property development and rental property management, provision of strategic property advice to Council and the purchase of surplus property for development.

3. The number of rental housing units held by UPL is 171, excluding the recently acquired 18 bedroom property at 38 Britannia Street, Petone. Of the 171 units, 85% are let to people who are 65+ and on low incomes. Rents for the dwellings are at 80.3% of market rent. The aim in the Statement of Intent (SoI) is that rents should be no lower than 90% of market rent. In the current SoI UPL has indicated to Council that, due to increasing rent levels in the city, 90% of market rent is difficult to achieve and that the target should be reassessed. The occupancy level for the housing was around 97% for the 12 months to June 2018. It is currently forecast that UPL will increase its housing stock to 220 units in the period to December 2021. As at 17 April 2019, there was a waiting list of 91 households for one-bedroom dwellings and 22 for two-bedroom dwellings.

4. Condition of units

Condition	Number of units
Excellent	22 – new units
Good	102 – units from the 1980s
Average	47 – older style units
Poor	0
Very poor	0
Total	171

* The total number of units excludes the property at 38 Britannia Street.

5. The gross value of the portfolio is $32M. The approximate net value Council could realise if selling the portfolio is $15M after paying agents fees, repayment of debt and realisation of tax liabilities. Alternatively, Council could allow UPL to retain a proportion of the current debt to finance development which would enable a higher shareholder distribution. Similarly, Council may stipulate that it will sell its housing stock to a Community Housing Provider (CHP). This could mean realising a lower price for the stock and the tax liabilities would also be lower.

6. The current team at UPL has expertise and experience in housing and property development and the company is achieving good results in terms of development activity.

Government context

7. During its time in office, the previous government aimed to increase the number of providers delivering social and affordable housing and introduced a number of changes to support this policy. Key points:

· the Ministry of Social Development assesses housing needs and eligibility and manages the social housing register – for both Housing New Zealand stock and housing provided by registered CHPs;

· CHPs are able to access the Income Related Rent Subsidy (IRRS);

· Councils or CCOs cannot become registered CHPs or access IRRS; and

· Councils do not have access to capital grants for housing.

8. Income Related Rent is a rent that is subsidised by the government in order to make accommodation more affordable for those on low incomes. If a household qualifies for income-related rent, the government pays the difference between the rent paid by the household (based on 25% of their net income) and the normal market rental rate. Eligible housing providers receive the subsidy which tops up the tenant rent to a market rent.

9. The current government has changed some aspects of the previous approach and indicated that it will review other elements eg, there may be opportunities for councils to access funding for operating and capital spend for older persons housing. Ministers have said that access to IRRS for council housing will not be explored until any second term.

10. During the period since 2011, a number of Councils have reviewed the ownership of their housing portfolios. The considerations and main options proposed are similar in many areas and include the financial requirements of maintaining and increasing housing stock and ways of financing these aspects, potential disruption to tenants, delivering support for tenants, as well as the best ways of achieving housing and social aims. Several councils have either, retained their housing stock, sold housing to CHPs, or created charitable trusts to manage and develop the stock. Variations to the main options have included selling part of a portfolio and retaining some stock.

Housing context

11. Households in Lower Hutt are experiencing difficulty all along the housing continuum. Increasing demand coupled with restricted supply has led to increasing house prices and continued to reduce access to home-ownership. The private rented sector in the city is particularly competitive and has seen considerable rent increases during the last few years.

12. There is a growing need for social housing in the city. Housing Register numbers have increased across all territorial authorities. From March 2017 to March 2019 the housing register in Lower Hutt, including the transfer register, increased by 137% - from 226 to 536 households. The number of households who are in Band A ie, who are at most risk and have severe and persistent housing needs that should be addressed immediately, continues to increase. In the March 2019 quarter, 81% were in Band A.

13. Median sale prices increased by 7% up between December 2017 and December 2018. This is in addition to a 27% increase in the two years from December 2015 to December 2017. At ward level, prices have increased strongly, particularly in the central, northern and Wainuiomata wards.

14. Rents have increased across the city in the period since 2015 and there have been particular increases in some local areas. Between December 2017 and December 2018 data from the Ministry of Business, Innovation and Employment (MBIE) shows that rental costs increased by 10% at a city level. Areas which have historically been more affordable have become considerably more expensive for households. Bond data shows that there is very little turnover of tenancies. The rental market is the main source of homes for many households and the increasing competition means that more households find themselves excluded from the sector. The level of competition means that those with the greatest needs are at a particular disadvantage.

15. Homelessness and housing hardship increased in the city between the 2006 and 2013 Census. Both the data and information from local organisations, demonstrates that the situation has deteriorated during the last five years. Further data and information on homelessness is available in Council’s homelessness research and papers to the Policy and Regulatory Committee in November 2018 and March 2019 and to the Community Plan Committee in June 2019.

16. To inform the development of Council’s housing strategy, officers have commissioned Community Housing Aotearoa and Livingston and Associates Ltd to undertake a housing market needs assessment. The level of current and future housing need will be modelled using secondary data sources including census data and population and household projections. Analysis of a range of social outcomes by tenure and location will also be modelled using Statistics New Zealand’s IDI data lab. This modelling will include a range of factors such as justice and corrections outcomes, health including respiratory disease outcomes, educational outcomes, Social service (MSD) expenditure and well-being outcomes by tenure and sub-area (as the data allows). Officers are currently considering a draft report. Data Infrastructure (IDI) data and data from the 2018 Census, will be added when available.

Discussion

17. This section explores the advantages and disadvantages of the three main approaches to ownership and management of Council’s housing.

i. Status quo

ii. In house

iii. Stand-alone:

a. sell to a CHP;

b. transfer/lease to a housing trust which registers as a CHP; or

c. sell the housing portfolio to the open market.

18. In determining the future ownership of its housing stock Council needs to consider its social and financial priorities and how best to achieve these. The current approach (status quo) can maintain and increase the stock in the short-term. Further developing the stock, extending access to a broader group of households, increasing tenancy support and service delivery will require either changing the ownership model or Council investment in the capability of status quo to deliver more housing and services.

19. Investment in status quo will either mean ratepayers funding the development of more housing with a broader remit and the services required, or allowing UPL to take on more debt. Bringing the housing services in-house will also require ongoing investment and therefore ratepayer commitment, if Council wants to increase the stock. Options to sell or transfer the stock to a CHP or other entity could still enable Council to achieve its housing and social aims for the city and provide resources to invest in affordable housing developments or other priorities. Council would, however, have to relinquish control of the stock to some degree or other.

20. There are options to consider in terms of the stand-alone category eg, sell to a CHP, create a housing trust on which Council has representation but over which it does not have control, or sell to the open market.

21. Council would retain UPL as a CCO for development purposes.

22. Any consideration regarding the future of the stock needs to be mindful of the impact on existing tenants and households on the waiting list. There is also likely to be considerable interest from the community with regard to the housing and the role of Council in this area of work.

Options

23. There are a number of elements to consider when exploring the options. These include:

· Delivering more social and affordable housing for future needs

· Ensuring that the housing is fit for purpose

· Providing services appropriate for the needs of tenants

· Disruption to tenants

· Enabling Council to achieve its vision for the city

· Financial considerations – rates and debt impact.

i. Status Quo

Advantages:	Disadvantages
Continuity for existing tenants.	Limited scale and efficiency – UPL is a small scale housing provider. Efficient tenancy management requires 250+ properties. (KPMG, 2015)
The Statement of Intent process enables Council-led governance and accountability for service delivery and shareholder return.
At current scale UPL can deliver its housing function without requiring a cash injection from ratepayers	Increasing the housing portfolio and delivering housing beyond the current remit will require either ratepayer funding or increased debt funding.
UPL has market presence and property management expertise.	Rent affordability – Rents were at 80.3% of market rental rates in 2018. KPI is ‘Rentals charged shall not be less than 90% of ‘market’ rent.’
	UPL cannot access to IRRS. Tenants access Accommodation Supplement if they are eligible.
	There is limited potential and expertise to extend the remit to house a broader range of households and deliver the support services required by such a change.
	Opportunity cost - as with all Council investments, investment in one project affects Council’s ability to invest in other projects.
Retaining the portfolio and increasing the stock could enhance the value over time if property prices increase.	If Council retains the portfolio and the property market declines – and Council then decided to sell – it would realise a lower amount for the stock.
	Without investment there is limited potential, particularly beyond the short-term, to contribute to fulfilling Council’s aspiration to increase the supply of public and affordable housing beyond the current target of 220.

24. If Council is willing to invest public money in UPL then it could continue with the current CCO model. There is forecast to be an increase in UPLs housing units over the period to the end of 2022 and Council could invest in enabling further growth in the medium term and extend the remit to include a wider range of households in housing need. Expanding the remit to a range of households with higher social needs would also require resources to increase the capacity and capability to support tenants.

b. Enhanced status quo

Retain the CCO model but invest ratepayer money in delivering more housing. This would need $3.3 - $3.5M in debt or equity for every 10 new houses built.

Advantages	Disadvantages
Continuity for existing tenants.	No access to IRRS.
The Statement of Intent process enables Council-led governance and accountability for service delivery and shareholder return.	Would need ratepayer funding to invest and grow.
	New builds will increase expenses and rents may end up being less affordable.
	Limited potential and expertise to extend the remit to a broader range of households and deliver the support services required by such a change. This would require prioritisation and resources.
UPL has market presence and property management expertise.	Limited scale and efficiency remains an issue – UPL is a small scale housing provider.
	The potential, particularly beyond the short-term, to contribute to fulfilling Council’s aspiration to increase the supply of affordable housing may still be an issue.
Retaining the portfolio and increasing the stock could enhance the value over time if property prices increase.	If Council retains the portfolio and the property market declines – and Council then decided to sell – it would realise a lower amount for the stock.

ii. Bring the rental housing of UPL into Council

Advantages		Disadvantages
Continuity for existing tenants.		No access to government funding or IRRS.
Focus on housing stock and clear in terms of accountability and monitoring performance.		Will require ratepayer funding to increase the portfolio and deliver housing for future needs.
		Without investment there would be limited potential, particularly beyond the short-term, to contribute to fulfilling Council’s aspiration to increase the supply of affordable housing.
		The current model allows Council to influence the direction taken through the Statement of Intent process. Controlling the housing stock directly through the political process would need to be managed. However, this is done in several local authority areas.
		The current market presence and reputation in terms of development is associated with UPL, not Council
		Potentially more bureaucratic processes eg, some decisions may require Council approval.
		Would require ratepayer funding to meet social housing needs and provide support services to tenants.
		Loss of limited liability protection. Although, it is likely that Council would honour any losses/claims.
		Council would need to change its financial strategy to accommodate the transfer of debt from UPL back to Council.
		Loss of industry expertise on the development side particularly. Council would also need to recruit the expertise required for tenancy management.
Retaining the portfolio and increasing the stock could enhance the value over time if property prices increase.	If Council retains the portfolio and the property market declines – and Council then decided to sell – it would realise a lower amount for the stock.
Nil tax implications as the transaction is within the Hutt City Council consolidated tax group.

25. If Council is willing to invest public money then it could bring the housing stock in house, grow the stock, and extend access to a range of households in housing need. This would require considerable ongoing investment, and expanding the remit to include a range of households eligible for social housing would also require resources to increase capacity and capability to support tenants.

iii. Stand–alone:

a. Sell to a Community Housing Provider

26. Under this option stock would be sold to an existing CHP which is registered with the Government’s Community Housing Regulatory Authority (CHRA) and which aims to provide social rental housing and/or affordable rental housing.

Advantages	Disadvantages
Eligible new tenants would have access to IRRS and would pay lower rents.	There is some uncertainty for tenants in any process to sell the stock. Disruption for tenants can be minimised eg, negotiate security of tenure for existing tenants and the remit for the housing in future.
Council receives money to pay debt and could reinvest in UPL developing social and/or affordable housing, or fund other priorities.
A CHP would be in a better position to enable extending the remit of the housing to a broader range of households.	Depending on the focus of the CHP there could be a reduction in the stock available for older people on a low income. This aspect could however be negotiated.
CHPs can provide wrap-around services eg, support etc, for tenants and are experienced in offering social support services and linking to the services provided by other agencies. Council could do the above. It depends on priorities eg, some councils contract external support providers.	The sale price is likely to be less than the market value/price This is based on considerations such as condition, need for investment, restrictions on the use of stock eg, for certain households, its retention as social housing.
	$2.3M of deferred tax liabilities would be triggered. Nil cash impact due to availability of historical group tax losses. But a reduction in group tax losses available to offset future taxable profit.
Council would not have any governance or management, requirements.	No Council control over the housing or its future direction or remit. The sale process can set out the use of the housing and a CHP must have providing social rental housing and/or affordable rental housing as one of its objectives.
Does not require ratepayer funding. Government grants and IRRS would enable the CHP to invest in the stock and new stock – potential increase of stock for broader social housing needs. This would contribute to delivering on the housing needs in the city.

27. Selling to a CHP is an option taken by several Councils, for example, Whakatane District Council, Hamilton City Council and Horowhenua District Council. Council could sell to a CHP that would either continue the focus on housing for older people or which could extend its remit eg, Nelson City Council, which provides housing for people 60+, recently proposed that the future remit of the housing could be extended if stock was sold to a CHP.

28. A variation on this option, considered by several councils, is transferring part of the housing portfolio to a CHP. For example, Waipa District Council is selling part of its stock of 129 units to Habitat for Humanity to provide funding for new stock.

29. If Council decides that it does not want to invest in growing its public housing, selling to a CHP would appear to be the most effective way to contribute to delivering housing for households on lower incomes in the city. Council could also use the money received from the sale to enable UPL to develop further social and/or affordable housing.

b. Housing charitable trust model – Council leases its housing to a newly created or existing trust at little or no cost. The trust would manage the housing stock.

Advantages	Disadvantages
Access to government funding and IRRS. Government grants and IRRS could enable more investment in the stock and new stock.	There would set-up and governance costs.
Council maintains involvement and influence in the housing, the strategic direction, growing the stock etc.	Council involvement and influence but no overall control.
No ratepayer subsidy required to improve or increase the housing stock.	Council may choose to continue to provide funding depending on the model chosen eg, Christchurch City Council.
Wrap-around services eg, support etc, for tenants – as a CHP.	No immediate lump sum from sale that could be used for other Council priorities.
Continuity for tenants.	Some perceived uncertainty for tenants as it is a new entity. However, existing tenants could remain in the housing.
Could help contribute to fulfilling Council’s aspiration to increase the supply of affordable housing.

30. The trust would register as a CHP which would enable access to government funding and IRRS. The option allows Council to maintain an involvement in the housing, growing the stock, strategic direction and so forth. It is a viable option if Council wants to maintain its involvement in housing as a priority. Christchurch City Council pursued this option. Auckland Council created a partnership with The Selwyn Foundation and set-up Haumaru housing Ltd. which registered as a CHP. Council leased its stock to the partnership along with development loans.

31. A variation of this considered in some areas is transferring part of the portfolio to a trust.

c. Sell the portfolio at market price

Advantages	Disadvantages
This option may maximise the potential value and return for ratepayers. Council would have to pay deferred tax liabilities. Council receives money to pay debt and could reinvest in UPL developing social and/or affordable housing, or fund other priorities.	No Council control over the housing, its future direction, or remit.
No ratepayer money required.	No IRR subsidy. This remains unchanged from the current position.
UPL could use the money to develop and sell.	Creates the greatest uncertainty for tenants. Existing tenants would have to move unless housing is sold as having sitting tenants.
	Would reduce access to affordable housing for low income households during a period of growing needs. A commercial /private landlord is unlikely to deliver affordable homes.
	The option would not be in line with Council aims for more affordable homes in the city.
	This option is likely to attract the most opposition from the community.
	$2.3M of deferred tax liabilities would be triggered. Nil cash impact due to availability of historical group tax losses. But a reduction in group tax losses available to offset future taxable profit.

32. This option may achieve the highest price, after paying deferred tax liabilities and repaying loans, but is not in-line with other criteria or Council’s aims for the city. Although councils have considered this option eg, Nelson City Council in its current consultation and Whakatane District Council in 2014, none appear to have taken this route.

Examples of how councils have responded

33. As noted in paragraph 10, local government has been responding to government policy in relation to public housing, changing housing needs and the ongoing financial requirements of maintaining the standard and increasing the supply of housing stock.

34. Over 40 councils across the country continue to own and manage their housing stock. (Source: Napier City Council – Review of Community Housing Delivery, MorrisonLow, March 2018.)

35. The examples below are of councils that have recently sold stock to a CHP, established community housing trusts to which housing stock was then leased and that have consulted and decided to retain the housing stock.

Whakatane District Council

36. In 2015, the Council sold its stock to Tawanui Community Housing Trust, previously called the Tauranga Community Housing Trust, for less than the market value of the portfolio. The trust is a CHP. A condition of sale was that the 79 units continued to be let to older people. The Council considerations included that:

· The Council did not have access to social housing grants; and

· the tenants did not have access to income related rents.

37. By selling the units to the trust, the Council believed that it could ensure the housing was well-maintained and developed to meet future needs. The units were transferred with all existing tenancies continuing on the same terms and conditions.

Horowhenua District Council

38. The Council sold its stock to Compassion Housing, a CHP, which was backed by Willis Bond & co private investment company. This option was in line with the Council’s primary aim of ensuring elderly residents and over 60s living with disabilities continue to have access to social housing and that social housing continues to be provided in Horowhenua in the long-term. A condition of sale was that the purpose remained providing rental housing for older people and those over 60 years of age with a disability. (Compassion Housing registered as a CHP in March 2017 and is also a charitable trust.)

39. There was an approximate investment of $4.3M needed in the 115 unit stock over 20-25 years. This would require significant Council investment with the consequential cost to ratepayers. The selected option provided stability for tenants as the CHP agreed to continue letting to existing tenants. The Council was keen to continue its leadership role in advocating and facilitating for wider community issues with regard to accessibility and affordability of quality housing.

40. Compassion Housing has also operated in Upper Hutt since 2000. Upper Hutt City Council sold its 92 housing units to Compassion Housing for $2,650,000. During its annual plan process in 1999, the Council had confirmed that it would sell its housing stock providing the buyer was a social service provider. (Upper Hutt City Council, Proposed Sale of Elderly Persons Housing Units, 4 April 2000)

Tauranga City Council

41. In 2017, the Council reviewed its elder housing portfolio, operations and future service delivery. The Council decided to sell its older person housing to a CHP. The main options considered included retaining the stock, retaining stock but with vigorous redevelopment and investment, leasing and partnering with a CHP, or selling to a CHP. The Council also considered establishing a CCO but this was discounted on the basis that it would not be able to access government grants or IRR subsidy. The Council considered and discounted, selling the portfolio on the open market due to potentially negative impacts on tenants and the wider community. They considered it unlikely that a commercial landlord would be able to provide affordable rental housing for elder adults.

Christchurch City Council

42. The Council established the Ōtautahi Community Housing Trust with representation from the Council but no overall Council control. The Council has a 49% interest in the trust. The other organisations involved are Christchurch Methodist Mission, Age Concern, Canterbury District Health Board, Rata Foundation (formerly Canterbury Community Trust). The stock of around 2,300 housing units was leased for a period of 50 years with the trust, established in 2016, taking over the day-to-day management of the housing portfolio. The Council considered the in-house model it currently operated was not financially sustainable and that rental costs would need to increase substantially if the stock was to be retained. The formation of the Trust reflected the Council’s wish to move to a more financially sustainable model for its social housing portfolio of units and complexes, improve the quality of its housing and the satisfaction of its tenants and allow for new developments responding to social housing needs in Christchurch.

43. To assist in the establishment the Council transferred $0.5M to the new Trust in addition $50M worth of land and assets. The Ōtautahi Community Housing Trust has access to IRRS. The lease agreement protected existing tenants in regards to rent increases, security of tenure, terms of tenancy agreements, tenancy management and ongoing relationships.

44. Tenant rents are paid to the trust and, after debiting the net operating expenditure, net proceeds of approximately $12M per annum will be paid to the Council for maintenance, refurbishment and replacement of the housing stock. This payment is expected to increase to a maximum of $19M per annum which will be paid to the Council to ensure the long term financial viability of the portfolio.

Auckland Council

45. Auckland Council tendered out the delivery of its older person housing services and through a two staged process appointed With the Selwyn Foundation to be a 51% member of a new joint venture entity. This is a partnership between Auckland Council and the Selwyn Foundation, together they set up the Haumaru Housing Limited Partnership which is a registered CHP. The objectives of the partnership are to maintain current stock or increase the levels subject to funding availability and develop housing that is fit for purpose. Haumaru Housing Limited Partnership took over operation of Auckland Council’s Housing for Older People service on 1 July 2017.

46. The Council provided a $20M loan facility through Panuku to support the development and growth of the portfolio. The 1,452 housing units were transferred on a 25 year lease and management agreement. The Council retains ownership of the land. The Selwyn Foundation manages the units and provides tenant services while also giving development advice about the portfolio. Panuku Development Auckland (the Council’s CCO development entity) will project manage the redesign and redevelopment of its villages. Rental income which is surplus to operating income is to be re-invested in social housing. Together with the peppercorn rent and the income related rent subsidy this enables the joint venture to build a sustainable operating business.

Retaining the stock

47. Several councils have considered the ownership of their housing and subsequently retained the stock. New Plymouth District Council considered a number of options in 2014, including selling its older person housing on the open market, selling to a CHP, partial sale of the housing, transfer and retaining the housing. The Council decided to retain its pensioner housing and increased rents to cover costs. It is not completely clear why the Council retained the housing, however raising the rents may have made this option cost neutral or at least less costly than previously. In 2015, Whanganui District Council consulted on selling, or selling part, of its housing stock. In its proposal the Council noted that, although ratepayer funding was not currently required to support the housing, it would be required to fund work on the housing in future. Most submitters were against proposals to sell the stock.

Legal Considerations

48. There are no legal considerations at this time.

Financial Considerations

49. There are no financial considerations at this time.

Appendices

There are no appendices for this report.

Author: John Pritchard

Principal Research and Policy Advisor

Reviewed By: Wendy Moore

Divisional Manager, Strategy and Planning

Approved By: Helen Oram

Acting General Manager, City Transformation

32 17 July 2019

Finance and Performance Committee

21 June 2019

File: (19/836)

Report no: FPC2019/3/140

Risk and Assurance Update and Operational Risk Report 2019

Purpose of Report

1. The purpose of this report is to update the Committee on risk and assurance actions and activities to maintain and improve Council’s internal control framework and to present the Operational Risk Profile.

Recommendations

That the Committee:

(i) notes the information in this report; and

(ii) notes the Operational Risk Profile 2019 as approved by the Strategic Leadership Team, attached as Appendix 1 to the report.

For the reason that risk reporting provides the Committee with information to support its governance role. Periodic reporting is stipulated in the internal audit charter and the internal audit functional reporting line to the Finance and Performance Committee supports its authority, objectivity and independence.

Background

2. The Risk and Assurance Manager provides an update twice a year on the actions and activities to maintain and improve Council’s assurance and risk management framework. The Risk and Assurance Update was last presented to the Finance and Performance Committee meeting on 28 November 2018.

3. Over this period, there has been a focus on fraud. The presence of fraud has not been detected (further details on paragraphs 25 and 28 of this report).

Discussion

Operational Risk Profile

4. Attached as Appendix 1 to the report is the Operational Risk Profile 2019, as approved by the Strategic Leadership Team and Risk Management Working Group.

5. Operational risk arises from uncertainties around internal activities, processes, people, systems or from external events that may impact on the achievement of specific operational objectives. The profile provides a high level snap shot of operational risk as a means of identifying context, risk and treatment actions.

6. Risk ratings are derived from a combination of consequence and likelihood assessments for the risk based on the risk ranking matrix^{^[1]}. The risk status update provides an indication of a decrease, no change or increase in the risk ranking since the previous profile.

7. Risk can be defined as the effect of uncertainty on the achievement of objectives. Council’s purpose has been updated to align with Local Government (Community Well-being) Amendment Act 2019.

8. The overall risk ratings for operational risks in the profile are unchanged. The underlying risk factors are dynamic and change overtime. In turn, awareness of the moving/changing risk factors and circumstances are met by corresponding activity and treatment actions to address the arising opportunities and threats. Therefore the risk ratings remain the same.

9. Refer to paragraphs 11 to 15 for key changes since the previous Operational Risk Profile presented to the Finance and Performance Committee on 4 July 2018.

10. Responsibilities and supporting processes of the risk management framework are reinforced regularly. Managers periodically review risk in their respective division, identifying emerging themes, and provide assurance on risk treatment actions in place and any issues. Divisional Managers will next report on risk in July 2019.

Key changes since the previous Operational Risk Profile

11. The likelihood of “Ongoing ability to obtain adequate insurance”, risk number 8, has been increased (worsened) from Rare^{^[2]} to Possible^{^[3]}. The overall risk rating remains unchanged at ‘Medium’.

12. The Wellington region insurance market continues to tighten and there has been a reduction in the availability of insurance capacity. At its last renewal, Wellington City Council was not able to obtain all the insurance cover it sought. If insurance capacity continues to reduce, the likelihood of this risk occurring increases. Several work streams are underway. Council’s current insurance programme has renewal dates ranging between 1 October 2019 and 1 May 2020. More details are provided in the periodic insurance updates provided to this Committee.

13. “Council’s ability to recruit and retain quality staff…”^{^[4]} (previous risk number 11) has been removed from being reported in the top risks, but it remains a medium rated risk^{^[5]} that continues to be monitored. This risk presents itself in pockets where there are national skill shortages for certain roles in certain industries or very specialist roles, eg, Environmental Consents and District Planning. Overall, Council’s ability to attract and retain talent is considered adequate.

14. Council’s brand is buoyant and attracting people to apply for advertised roles.

15. The risk description for risk number 4 has been updated to align to the wording of the three areas of Information Systems strategic focus.

Compliance

16. Every year the conflict of interest policy requires Council officers to confirm/disclose interests that might lead to circumstances whereby an individual’s ability to apply judgement or act in one's role is, or could be impaired or influenced by a secondary interest. Of course, this should be done sooner if circumstances change or at the earliest opportunity, as interests arise. The annual circulation has been expanded to incorporate managers confirming the registering of gifts, that all suspected and detected fraud has been reported (none noted), and all significant changes in personal circumstances have been notified (eg, charged with criminal offence, bankruptcy, drivers licence disqualification or suspension etc,).

17. The annual disclosure circulation process was completed on 17 April 2019.

Internal Audit

Cash handling

18. The preliminary scope proposed in the 2018/2019 internal audit plan for Revenue, Fees and Charges (non-rates revenue) was re-scaled, with a focus on cash receipting, as a segway from the fraud risk review.

19. The cash handling internal audit objective:

To ensure cash handling within Council has adequate and effective system of internal controls over material business risks, and to identify any improvement opportunities. To ensure cash received is completely and accurately recorded, appropriately safeguarded and deposited intact on a timely basis and correctly accounted for in the General Ledger.

20. The cash handling internal audit is in the final stages of completion. Full details will be provided to the incoming Committee in the new triennium Risk and Assurance update.

21. Sensitive Expenditure / Probity - this review, which was planned to be undertaken in 2018/2019 has been postponed until 2020, after a period where the updated Policy has had a time to embed. In the proposed internal audit plan 2019-2022, a separate paper to this Committee, this audit is to go ahead in 2020 regardless of whether the Policy has been revised or not. NB: The Sensitive Expenditure Policy will be reviewed as part of the Corporate Services group revised policy framework charter to: streamline, right size the safeguards, promote and raise awareness of key corporate policies.

22. Monitoring processes are in place to track and follow up findings from internal audits, to ensure corrective actions are cleared as the resolution date falls due. Outstanding findings include:

a) Public Records Act 2003 - Compliance Maturity Review - follow up review of September 2015 ‘medium’ rated finding that back up recovery testing has not been undertaken for CM9 document management system. CM9 back up files are an upcoming priority, following on from the largely successful project move in June 2019 of Ci to the cloud for Finance One and Property and Rating. Steps will be taken in the next month, with the aim to have a full test done by the end of the year.

b) Fraud review July 2018 – the low rated issue will be closed out with the development and rollout of a fraud control plan that will establish a robust fraud management framework encompassing prevention, detection and response, and sits alongside the Fraud Policy.

23. Monthly reporting continues to assess management’s compliance with legislative and regulatory requirements. For the year 2018/2019, there have been no significant issues. Environment Court proceedings are underway with Forest and Bird in relation to protections for ecology and landscape.

Fraud risk framework

24. Subsequent to the July 2018 fraud risk review^{^[6]}, the following enhancements have been made to strengthen the fraud risk framework:

Fraud focused data analytics

25. This was a first time exercise. Based on further internal investigations, Risk and Assurance is satisfied the exceptions from the analysis results do not indicate that fraud is present. It has provided comfort and peace of mind around controls over vendor maintenance and invoice processing.

26. PricewaterhouseCoopers (PwC) were engaged to run fraud focused data analytics to look for patterns, unusual or potentially suspicious transactional data that may indicate fraud is present within the two year period to 31 August 2018. Data analysed included all purchase orders, invoices and payments looking for areas of risk, potential fraud, control breakdown or breach of Council policies.

27. The analysis used scenario logic as defined in the 20 tests (including Benford’s law^{^[7]}). As with any scenario based analysis, a number of false positives were identified. Risk and Assurance validated a selection of potential exceptions from the analysis. No material fraud has been detected.

28. The PwC Fraud Focused Analytics report of 10 May 2019 made the observation that when compared to other similar sized organisations, the volume of exceptions was relatively low in most areas, indicating good control in the management of creditors and payments processed. A number of suggested steps from the report are complete. Key observations:

a) master data management – vendors not used since July 2017 have been made inactive;

b) know your creditors – results have been investigated and validated for potential undisclosed relationships, creditors struck-off, in liquidation or in receivership, creditor name not match companies office, appropriateness of payments to employee bank accounts. No issues noted or action required;

c) segregate key activities – it is acknowledge that the small size of the Accounts Payable team creates limitations in how activities can be segregated. Ongoing periodic monitoring of key master data field changes (eg, bank account changes) by the Financial Accounting Manager will continue;

d) consolidate creditor invoices – Finance will work through high volume creditors to agree on how invoices can be consolidated, where feasible; and

e) use Purchase Cards for low value spend – a business case has been approved to change the credit card system that will increase the card roll out and aims to have associated transaction capture and processing efficiencies. Suggestions to explore optical character recognition and robotic process automation technologies to automate invoice processing will be considered in the future.

Fraud risk workshops

29. PwC ran a fraud risk workshop in December 2018 for senior managers and in February 2019 for Council and Council Control Organisations (CCOs) board members. The workshop sessions raised awareness of fraud risk, identified key areas of exposure and to:

§ identify the perceived greatest fraud risks across Council and CCOs;

§ confirm personal accountability in respect of culture, fraud and controls;

§ reinforce stance on fraud, and how culture/controls bring this to life; and

§ identify practical next steps to take away from the workshop.

30. Reporting of Fraud and Wrongdoing via a new online form was launched to staff on 7 June 2019. This provides an additional internal reporting avenue for tips off (‘whistleblower’), suspected or detected fraud, or wrongdoing.

31. The Fraud Policy is due for review in 2019, which will be expanded to include a fraud control plan. The promotion of the associated updates will support ongoing staff awareness of fraud risk and expectations of staff.

32. The next two yearly fraud risk review will take place in 2020.

Risk Management Working Group

33. The Risk Management Working Group has met three times since the 28 November 2018 update provided to this Committee.

34. The staff Conflict of Interest Policy revisions were reviewed by the Risk Management Working Group and the updated policy approved by the Strategic Leadership Team in April 2019. The Policy and updates have been disseminated to Council officers. The Council officers interests register continues to be maintained by Councils Risk and Assurance Manager.

35. The essence of the Conflict of Interest Policy remains the same, but is now clearer and more concise. Some minor adjustments: a) whereby the annual declaration for senior managers now includes ‘nil returns’ if the person has no interests to disclosed. This is the current practice in place; and b) to clarify that the application of the policy explicitly excludes elected members, who are governed by Local Authorities (Members’ Interests) Act 1968, Standing Orders and Elected Members’ Code of Conduct.

36. Emergency evacuation plan/procedures in case of armed aggression and activation of panic alarms at the Administration Building awaits a fix to link the close circuit TV cameras and floor warden desk monitors to be operational. This is being progressed by IT and Facilities Management.

37. The scoping of photovoltaic (PV) systems/solar power systems for community evacuation centres is being investigated, as an alternative to (or amalgam with) generators, for used in a city wide emergency.

38. Clarification and training on the requirements for the roles of Recovery Manager and (Administration Building) Crisis Manager will be undertaken in the upcoming six months.

39. The risk management system is due for its three yearly review in 2019. The criteria for risk impact/consequence and likelihood guides will be updated, particularly the financial impact guide. Progress updates will be provided to this Committee in due course.

Appendices

No.	Title	Page
1 ⇩	Operational Risk Profile 2019	38

Author: Enid Davids

Risk and Assurance Manager

Approved By: Brent Kibblewhite

General Manager Corporate Services

63 17 July 2019

Finance and Performance Committee

02 July 2019

File: (19/891)

Report no: FPC2019/3/147

Carbon Targets for Hutt City Council's Council Controlled Organisations

Purpose of Report

1. To provide an update on the work to apply Council’s carbon target and associated performance measures, to its wholly-owned and partly-owned Council Controlled Organisations (CCOs).

Recommendations

That the Committee:

(i) notes that the proposed Statement of Intent 2019/20 to 2021/22 for Urban Plus Group Limited now includes a requirement for any homes that have not already received resource consent to only use electricity or renewable sources of energy for space heating, water heating and cooking facilities;

(ii) notes that new performance measures for the Statements of Intent 2019/20 to 2021/22 for the Hutt City Community Facilities Trust and Seaview Marina Ltd have not yet been developed and officers plan to engage with the leadership of these organisations during the 2019/20 financial year; and

(iii) notes that the finalised Statement of Intent 2019-22 for Wellington Water Ltd now includes a requirement to produce a carbon reduction plan during 2019/20, with a view to implement its recommendations in the following years.

Background

2. Council set an organisational Zero by 2050 target in December 2018 (refer to PRC2018/5/314).

3. At the time, Council agreed that the target should apply to its wholly-owned and partly-owned CCOs, ie, Urban Plus Ltd (UPL), the Hutt City Community Facilities Trust (CFT), Seaview Marina Ltd (SML) and Wellington Water Ltd (WWL). Officers were also asked to propose specific and measurable performance measures, in line with the target, for the respective Statement of Intents (SOI) for these organisations.

4. This report provides an update on the progress so far.

Urban Plus Ltd

5. In May 2019, in a report to the Finance and Performance Committee (see FPC2019/2/83), officers provided an overview of potential new performance measures for UPL and noted that:

a. UPL’s SOI 2018/19 to 2020/21 already makes direct references to various desired sustainability outcomes (eg, “best practice, “providing warmer, healthier homes”), but it currently lacks specific performance measures for UPL to objectively measure, verify and report these outcomes; and

b. a range of tools and standards are available that could be used as potential new performance measures, including requiring a minimum HomeStar rating, implementing a “no natural gas” policy for new homes, requiring a minimum GreenStar rating for new commercial buildings, and requiring UPL to benchmark its rental housing portfolio against the HomeFit standard.

6. Following this report, officers discussed the potential performance measures with UPL staff and came to the following agreements.

7. From 1 July 2019, any new developments that have not already received resource consent shall only utilise electricity or renewable sources of energy for space heating, water heating and cooking facilities.

8. With regard to the implementation of a minimum HomeStar rating for new homes, or a minimum GreenStar rating for commercial buildings, this will require sufficient lead-in time so that UPL can become familiar with the tools and their requirements.

9. It was agreed that during the financial year 2019/20, UPL would become familiar with these rating tools, with assistance from the Sustainability and Resilience Division at Council and Council’s Eco-Design Advisor. However, as part of the familiarisation process, it was agreed that UPL would achieve a HomeStar rating of at least six stars for one of their new housing units (standalone house or townhouse) during 2019/20.

10. For existing rental properties, it was agreed that during 2019/20, UPL would carry out an assessment of all UPL managed residential properties against the HomeFit standard, and report back on these.

11. These agreements have been reflected in the finalised SOI 2019/20 to 2021/22 for UPL.

Hutt City Community Facilities Trust

12. In principle, a “no natural gas” policy and minimum GreenStar rating as described in the report on potential performance measures for UPL (see FPC2019/2/83) could also apply to the CFT for any future building projects.

13. However, while officers have briefed CFT staff on these potential measures, there has been a recent change in leadership at CFT. As a result, it was not possible to progress discussions sufficiently to enable the development of specific performance measures for CFT’s SOI 2019/20 to 2021/22.

14. Officers plan to engage with CFT’s leadership during the 2019/20 financial year, and discussions can inform the development of the next SOI 2020/21 to 2022/23.

Seaview Marina Ltd

15. In principle, measures such as a “no natural gas” policy in relation to facility renewals as described in the report on potential performance measures for UPL (see FPC2019/2/83) could also apply to SML.

16. However, recognising that SML’s energy use is relatively limited (natural gas is only used in their shower facilities) and that there are no significant facility renewals or upgrades planned at the present time, the work on performance measures for SML’s SOI was of lower priority than the other CCOs.

17. As a result, discussions with SML’s leadership have not yet taken place and performance measures for the SML’s SOI 2019/20 to 2021/22 have not yet been developed.

18. Officers plan to engage with SML’s leadership during the 2019/20 financial year, and discussions can inform the development of the next SOI 2020/21 to 2022/23.

Wellington Water Ltd

19. Wellington Water Ltd is jointly owned by Hutt, Porirua, Upper Hutt and Wellington City Councils and Greater Wellington Regional Council.

20. Therefore, while Hutt City Council has flagged that its carbon target should also apply to WWL, this request is subject to the agreement by the other Councils.

21. Following discussions between WWL staff, and officers of the different Councils, WWL commenced a work stream on carbon and is currently in the process of developing a carbon footprint for the organisation.

22. WWL is also flagging further work through its finalised SOI 2019-22, which now includes a requirement to produce a carbon reduction plan during 2019/20, with a view to implement its recommendations in the following years.

Appendices

There are no appendices for this report.

Author: Jörn Scherzer

Manager, Sustainability and Resilience

Approved By: Helen Oram

Acting General Manager, City Transformation

[1] As noted in paragraph 39 of this report, the risk matrix to be revised as part of 2019 Risk management system review.

[2] Rare: the event may occur only in exceptional circumstances or under a combination of circumstances.

[4] Full risk description: Council’s ability to recruit and retain quality staff and effectively resource projects and operations, particularly the availability of people and mix of skills, will enable the successful delivery of Council’s vision, strategies, services and commitments

[5] Medium rated risk – impact: Moderate | likelihood: Possible

[6] Below are extracts from update provided to this committee in the Risk and Assurance update on 28 November 2018 regarding the fraud risk review:

The Fraud Review was completed in July 2018. This is a cyclical review undertaken on a two yearly basis. The overall objective was to assess the adequacy and effectiveness of management’s control of fraud risk, and to identify opportunities for improvement.

The Fraud Review internal audit opinion on management control is ‘effective’. The control framework is appropriate and effective. Controls are appropriately designed and executed as intended. One low rated finding was raised, that elements of the fraud control framework could be improved.

[7] Data for both invoice number and invoice dollar amount followed the line of Benford’s Law satisfactorily. This means the analysis did not detect unusual patterns in the anticipated naturally occurring numbers. If someone was “making up” significant fraudulent payments (as opposed to payments occurring naturally) the leading digit of fictitious and valid transactions would no longer follow Benford's law.

Deputy Mayor D Bassett	Cr G Barratt
Cr C Barry	Cr J Briggs
Cr MJ Cousins	Cr S Edwards
Cr M Lulich
Mayor WR Wallace (ex-officio)

Cycle 3 17 July 2019	Officer	For Council
Risk and Assurance Update and Operational Risk Register	E Davids
Internal Audit Plan 2019 - 2022	E Davids
Carbon Targets for CCOs	J Scherzer
Information on Options for Delivery of Council Housing	J Pritchard
Final SOIs for CCOs	B Kibblewhite	·
Technology One SaaS Phase One Project Update	R Newton
Finance & Performance Work Programme	Committee Advisor

Cycle 4 4 September 2019	Officer	For Council
Standard and Poor’s Credit Rating Review	J Livschitz
2018/19 Financial Performance and Position	P Benseman
Sale & Supply of Alcohol (Fees) Regulations 2013 – Regulation 19 (1) – Reporting by Territorial Authorities	D Bentley
Health & Safety Officer Due Diligence Report	A Kok
Finance & Performance Work Programme	Committee Advisor
26 September 2019	Officer	For Council
Annual Reports for CCOs – CFT, SML, UPL	B Kibblewhite
Annual Report for LGFA	J Livschitz

Cycle 2 8 May 2019	Officer	For Council
JSP – Extension of Area Subject to Targeted Rate	W Moore
Information on Potential New Performance Measures for UPL	J Scherzer
Tax Risk Governance Framework Update	D Newth
Financial Report for the Period Ended 31 March 2019	P Benseman
Strategic Property Portfolio - Six Monthly Update	G Craig
NZ LGFA Six Month Report to 31 December 2018	B Kibblewhite
Review of 2019/20 SOI for the NZ LGFA	B Kibblewhite
Technology One SaaS Project Update	R Newton
Finance & Performance Work Programme	Committee Advisor

Determine and monitor:

Consider and make recommendations to Council:

General: