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Draft Annual Report to 30 June 2018

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Draft Annual Report to 30 June 2018 SP-18-603 Chairperson and Committee Members AUDIT AND RISK COMMITTEE 13 SEPTEMBER 2018 Meeting Status: Public Purpose of Report: For Decision DRAFT ANNUAL REPORT TO 30 JUNE 2018 PURPOSE OF REPORT 1 This report seeks the Committee’s consideration of the audited draft Annual Report 2017/18 with a view to recommending it be adopted by Council on 27 September 2018. DELEGATION 2 The Audit and Risk Committee has delegated authority to consider this report. BACKGROUND 3 The Council is required under the Local Government Act 2002 (the Act) to produce an audited Annual Report each year (the draft Annual Report 2017/18 is attached as Appendix 1). This report shows the Council’s performance for the year in both a service and financial context, against measures set out in year three of the FutureKāpiti Long Term Plan 2015-35 (LTP). 4 At a meeting held on 16 August 2018 the Operations and Finance Committee reviewed the fourth quarter Activity Report and the unaudited Financial Report for the year ended 30 June 2018. 5 Since then, the Council’s auditors, Ernst & Young, have completed their audit of the financial statements, service performance information and the Debenture Trust Deed of the Council for the year ended 30 June 2018. Subject to adoption by Council, Ernst & Young are expected to provide a draft unqualified audit opinion on the Annual Report prior to the meeting of the Audit and Risk Committee on 13 September 2018. This opinion will be formally issued following the adoption of the Annual Report 2017/18 which is scheduled to occur at the Council meeting on 27 September 2018. 6 The draft Annual Report contains the following sections: Introduction section (pages 4-20) - includes messages from the Mayor, Tāngata Whenua and the Chief Executive as well as progress on the key initiatives and major projects determined in the long term plan, and a snapshot of activities for the year. This also includes a summary of how the Council’s activities aligned to its key focus areas and outcomes since they were identified in the 2015-35 LTP. The introduction concludes with a financial overview summarising the major aspects of the Council’s financial management and results for the year. Page 1 of 5 SP-18-603 Our activities and services (pages 21-99) - comments on significant developments over the year, key performance indicator results and a financial summary for each of the 13 activities. Our Finances (pages 100-154) - presents all the key financial information, the accompanying explanatory notes, the disclosure statement and the auditor’s report. Other information (pages 156-164) - includes information about the governance structure, meeting attendance, contact details for elected members and the organisation structure. 7 No significant changes have been made to the overall structure of the Annual Report from that tabled last financial year. OVERVIEW Achievements 8 The draft Annual Report highlights the significant achievements for the year in the mayor’s foreword and the chief executive’s introduction. As noted above, it also gives an update on the specific key initiatives and major projects on pages 14-15 as well as a broader snapshot of achievements in the sub- sections on pages 16-17. 9 Significant projects or achievements during the year included: Reduced capital expenditure in line with the ‘green line’ strategy to reduce the Council’s debt to income ratio. The completion of the modernisation and upgrading of the Ōtaki Pool and the construction of an adjoining Splash pad. The completion of a youth development centre in partnership with Zeal Education Trust. Drafting of a development plan for a major upgrade of Otaraua Park. Completed significant remedial works on Waterfall Road after a major slip. Achieved a 11% reduction in leakage in the water supply network. 10 Work continued on the Paraparaumu and Waikanae town centres that aims to take advantage of the new Expressway. Progress in 2017/18 included the upgrade of Kāpiti Road and the redevelopment of the area between Paraparaumu train station and the civic precinct. Work also commenced on the Waikanae cultural thread project to better integrate Whakarongotai marae into the town centre. 11 We continued our focus on economic development during the year, which included the establishment of a new website to promote Kāpiti widely to potential visitors and business investors, and continued support for the district’s major events. 12 The Proposed District Plan was approved by Council in November and 18 appeals were received which staff are now working to resolve. 13 There was again a need to respond to some major weather-related events which tested the Council’s response plans. Page 2 of 5 SP-18-603 14 The following table summarises achievement against the 87 key performance indicators. Overall the Council achieved 81% of its 2017/18 KPI’s. The previous results were 79% in 2016/17 and 86% in 2015/16. Year End Result Percentage Key Performance Indicators to 30 June 2018 Achieved 70 81.4% 1 Not yet available 2 2.3% Not achieved 14 16.3% Total KPIs 86 100% Financial results Changes to audited financial statements 15 Council’s financial statements, annual report disclosure statement (prudence benchmarks) and cost of activity statements are presented in the Our finances section of the draft Annual Report 2017/18. 16 The audited financial statements include one minor change t hat was made to the Financial Report to 30 June 2018 (Corp 18-558) presented to the Operations & Finance Committee on 16 August 2018. This related to a transfer between Accumulated funds and Reserves and special funds of $242,000. There was no change to the operating surplus for the year. Disclosure statement 17 The Annual Report Disclosure Statement for the year ending 30 June 2018 presents Council’s financial performance in relation to seven prudence benchmarks to enable assessment of whether the Council is prudently managing its revenues, expenses, assets, liabilities and general financial dealings. 18 The Council met four of these benchmarks for the year ended 30 June 2018. The following benchmarks were not met: Balanced Budget benchmark - due to Council currently not fully funding its annual depreciation of assets; Spending on network services as a proportion of depreciation – due to the timing of the renewals cycle for the three waters assets, Council’s capital expenditure was below the level of depreciation; and Debt Servicing Benchmark – The Council’s net finance expense exceeded 10% of total revenue mainly due to significant capital investment in the Kāpiti District over the past four years. 1 Results for two KPIs measuring compliance with drinking water standards are not yet available from the Drinking Water Assessors. Page 3 of 5 SP-18-603 Rates Increase Affordability – For 2017/18 we increased rates by an average of 5.7% across the district. This was higher than the 5.5% financial strategy limit set in the long term plan. Two years on, a higher average rates increase was deemed necessary to address operational changes and intergenerational equity, while continuing to progress towards the vision agreed with the community in the long term plan. CONSIDERATIONS Policy considerations 19 There are no policies for the committee to consider in regard to this matter. Legal considerations 20 The draft Annual Report has been prepared to meet the requirements of the Act. The final Annual Report must contain an auditor’s opinion on whether it meets the requirements of the Act. 21 The Act requires that the Council, within one month after the adoption of its Annual Report, must make publicly available both its Annual Report and a summary of the information contained in its Annual Report. The Annual Report Summary must also be audited to ensure that it represents, fairly and consistently, the information regarding the major matters dealt with in the full Annual Report. 22 The Annual Report and the Summary Annual Report will be made available to the public on the Council’s website and through service centres and libraries within one month of Council adopting the Annual Report. Financial considerations 23 There are no financial or funding implications for the committee to consider. Tāngata whenua considerations 24 A message from Tāngata Whenua has been included in this draft Annual Report. Strategic considerations 25 The delivery of the Annual Report contributes indirectly to the Council’s key outcome to improve its financial position against financial constraints, and its ten- year outcome to maintain or improve community satisfaction with Council services. Through its reporting of financial and service performance, the Annual Report provides a comprehensive and transparent demonstration of how the Council is tracking against these strategic outcomes. SIGNIFICANCE AND ENGAGEMENT Significance policy 26 This matter has a low level of significance under Council policy. Page 4 of 5 SP-18-603 Publicity 27 A media release will be developed to support the public release of the Annual Report 2017/18. RECOMMENDATIONS 28 That the Audit and Risk Committee considers the draft Annual Report 2017/18 (see Appendix 1) and recommends, subject to any final changes from audit, the Annual Report be adopted by Council on 27 September 2018. 29 That the Audit and Risk Committee delegates to the Mayor, Chair of the Operations and Finance Committee and Chief Executive the authority to approve minor editorial changes to the material contained in Appendix 1 to this report SP-18-603 prior to its being submitted to the Council for adoption on 27 September 2018. Report prepared by Report prepared by Chris Pearce Jacinta Straker Acting Manager Corporate Planning Chief Financial Officer and Reporting Approved for submission by: Approved for submission by: Kevin Black Janice McDougall Acting Group Manager Acting Group Manager Strategy and Planning Corporate Services ATTACHMENTS 1 Draft Annual Report 2017/18 Page 5 of 5 1 Introduction The Council reports each year on performance against the plans made for that year.
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