Part 3: The form and content of the planning document

Matters arising from Auckland Council's planning document.

In this Part, we explain the significant requirements for the form and content of the planning document and how these requirements were met. Information from the former councils underpins the planning document, but was significantly reorganised and amended to reflect:

  • best estimates at the date of transition;
  • the group reorganisation;
  • partial integration of accounting, financial, and funding policies; and
  • the consolidation of the former councils activities into a consistent activity framework for Auckland Council.

The planning document identifies and separates information to support the development of shared governance and accountability arrangements between Auckland Council's governing body and its local boards.

The planning document also includes forecast performance information, both financial and non-financial, for the major activities that Auckland Council's council-controlled organisations will deliver.

The former councils' underlying information

The planning document was required to be based on a consolidation of information contained in the 2009-19 long-term plans of the former councils and, to the extent relevant, their annual plans for 2010/11.6

The planning document was prepared from a detailed financial model, whose inputs were the relevant information and forecasts of the former councils. This information was reformatted for consistency and to reflect Auckland Council's new organisational and financial coding structures.

The planning document also reflects the more general underlying information of the former councils that underpinned their respective forecasts, such as their asset management plans.

Significant reorganisation and amendment

The planning document was required to present reorganised and amended information from the former councils.7 Significant changes were made to reflect:

  • the allocation of decision-making responsibility for non-regulatory activities between Auckland Council's governing body and its local boards;8
  • the reorganisation of Auckland Council's group, including the transfer of assets and liabilities, and the establishment of new, and disestablishment of old, council-controlled organisations – in particular, significant operations dealt with by the former councils and their council-controlled organisations were transferred to Watercare Services Limited and the new Auckland Transport Limited; and
  • the effective transfer to Auckland Council of the Auckland Transition Agency's remaining assets and liabilities at dissolution on 31 October 2010.9 The funding that had been provided for the Auckland Transition Agency's expenditure, both operating and capital, becomes a debt owed by Auckland Council to the Crown.

Other matters requiring adjustment

Generally accepted accounting practice

The planning document was required to be based on generally accepted accounting practice, including meeting the requirements of Financial Reporting Standard 42: Prospective Financial Statements.10 This means that the information included in the planning document had to be updated, where required, to best estimates that were current at the time the planning document was finalised.

A number of adjustments were made to the information of the former councils to reflect best estimates. These include:

  • Transition costs – The planning document reflects estimates for actual and further potential transition costs that were known at the time of its preparation. For example, it makes allowance for the estimated redundancy costs arising from the transition that were borne by the former councils. These costs were not included in the plans of the former councils, and are reflected in the planning document as adjustments to Auckland Council's estimated opening balance sheet.
  • Efficiency savings – The Auckland Transition Agency has set up a new structure for Auckland Council, and the staff costs in the planning document are forecast on this basis. This new structure is anticipated to yield cost savings relative to the staff structures and forecasts of the former councils. As well as these staff reorganisation savings, the planning document includes a further target for efficiency savings by Auckland Council. We cover this in more detail later in this Part.
  • Leaky building liabilities – The planning document reflects best estimates of the potential effects of dealing with leaky buildings and includes total liabilities of $395 million. These are higher than those included in the plans of the former councils by $172 million.11 These estimates take account of the Government's new proposed approach to the settlement of issues relating to leaky buildings.

Southern boundary changes to the Auckland region

The planning document excludes the estimated assets and liabilities, and the revenue and expenditure, associated with changes to the southern boundary of the new Auckland region. These were previously included in the plans of the Franklin District and Auckland Regional Councils, and will need to be taken up and reflected in the planning and financial forecasts of the neighbouring councils.12

Rating, financial, and funding policies

The reform legislation provides for a transition from the rating, financial, and funding policies of the former councils to fully integrated policies of Auckland Council. The requirements for the planning document reflect this transition.

Approach to rating

The reform legislation provided for the former councils to set 2010/11 rates for the full financial year.13 The first four months of this period are accounted for by the former councils, and the remaining eight-month period by Auckland Council. The forecast revenue for this eight-month period is included in Auckland Council's planning document.

Rates revenue included in the planning document for 2011/12 onwards is based on the plans and policies of the former councils, amended as a result of the adjustments made in the planning document's preparation. Rating decisions from 2011/12 are matters for Auckland Council to decide.

The planning document reflects the changes in collection method for rates relating to water supply and wastewater. Over time, Watercare Services Limited will collect all rates for water, except for services in the Papakura area, which continues to be serviced on Auckland Council's behalf by a private sector provider.14

For 2011/12, Auckland Council is required to set transition rates such that there is a uniform percentage variation for each rating unit from the actual rates set for 2010/11.15 Auckland Council will also set wastewater rates for 2011/12 for those properties that had a wastewater or sewerage rate in 2010/11. Otherwise, Auckland Council is prohibited from setting rates for 2011/12.16

From 2012/13, Auckland Council must set general rates using a single rating system based on the capital value of land. Ultimately, Auckland Council will have a single rating system that is applied on a fully unified basis across the Auckland region. However, the reform legislation provides an optional mechanism (a rates transition management policy) for gradually adjusting significant changes arising from the single rating basis over the ensuing three years from 2012/13.17

In future years, local boards will be able to recommend a local rate to the governing body to generate additional funding for their area.

Approach to financial and funding policies

The reform legislation creates a framework within which the financial and funding policies reflected in the planning document must be either integrated or unintegrated. In some cases, the policies could be integrated at the discretion of the Auckland Transition Agency. Figure 1 summarises this framework.

Figure 1
Policy integration requirements for the planning document

Policies that must be integrated in the planning document Policies that must not be integrated in the planning document (date by which they must be integrated) Policies that may be integrated or unintegrated in the planning document (date by which they must be integrated)
Accounting, and associated assumptions Development or financial contributions (30 June 2012) Private sector partnerships (30 June 2012)
Liability management and investment Rates remission and postponement, rates remission and postponement relating to Māori land (30 June 2011) Revenue and financing (30 June 2012)

Integrated policies

Auckland Council's combined treasury management policy covers the integrated policies for liability management and investment required to be included in the planning document.

Accounting policies and associated assumptions

The integration of accounting policies and assumptions in the planning document means that the forecasts are prepared on the basis that Auckland Council is a single entity. Some adjustments to the former councils' forecasts arose because of the integration of accounting policies. The information and plans of the former councils reflected their individual policies and assumptions, and these were different in many instances.

The planning document includes a set of assumptions and related uncertainties that either reflect the combined assumptions of the former councils or have been revised where the Auckland Transition Agency has deemed it appropriate to do so, on the basis of current best estimates.

The planning document includes an assumed efficiency target. The assumption reflects an estimate of efficiency savings, although the sources and timing for realising these savings have yet to be identified in detail. Auckland Council will decide these matters. The planning document assumes that the savings, of $47.7 million annually from 2011/12, will directly reduce rates funding from that year onwards. The planning document highlights the importance of this assumption, together with the associated risks, and we have drawn readers attention to this significant disclosure in our audit opinion.

Unintegrated policies

The policies that were required to be unintegrated were included in the planning document on that basis. The Auckland Transition Agency chose not to integrate the policies whose integration was optional – the policies for private sector partnerships and for revenue and financing – in the planning document.

Auckland Council will need to integrate the remaining policies within the statutory time frames provided for in the reform legislation. These time frames are shown in Figure 1. The remaining integration of financial and funding policies by Auckland Council is a significant matter that we highlighted in our audit opinion on the planning document.

Non-financial performance framework

A performance framework includes the activities and services provided, and the performance measures and targets against which they will be measured, within a strategic context that provides their purpose.

The planning document clearly indicates that, when Auckland Council chooses its strategic direction, it will need to revisit its performance framework to reflect this direction.

Consolidation of former councils' activities

As far as practicable, the planning document is required to consistently identify Auckland Council's activities. However, if this is not practicable, the Council could present this information on the basis of the districts of the former councils.18

The planning document sets out a new and consistent structure for Auckland Council's groups of activities in Volume 2. This new activity structure is the result of a process the Auckland Transition Agency used to consolidate the activities of the former councils, and identify common and new performance measures as relevant indicators for the future assessment and reporting of organisational performance by Auckland Council. Figure 2 sets out Auckland Council's new groups of activities.

Figure 2
Auckland Council's groups of activities

Groups of activities
Community Water supply and waste water
Lifestyle and culture Stormwater
Economic development Transport
Planning and regulation Commercial and investment
Environmental management Governance
Solid waste

The planning document also presents Auckland Council's activity structure within a framework of a vision for Auckland and strategic priorities.19

Despite these changes and new measures, the underlying forecast levels of service reflected in the planning document have generally20 not changed from those being delivered by the former councils.21

The planning document's presentation of consolidated activities of the former councils as a consistent activity structure for Auckland Council includes different levels of service across the Auckland region being presented on an average basis. We highlighted this significant feature of the planning document in our audit opinion.

Although the planning document presents Auckland Council's performance measures and targets as being for a new organisation, it also usefully shows the range of comparative actual results from historic information associated with the former councils to provide meaning and context.

Initial separation of activities between governing body and local boards

Shared decision-making and accountability between the governing body and local boards is a unique governance feature of Auckland Council.

As required by the reform legislation, the planning document (Volume 3) identifies non-regulatory activities for which decision-making responsibility is initially allocated to local boards (local activities).22 For example, under the Community group of activities, each local board area is responsible for decision-making and oversight of local community facilities, including leasing and change of use and developing tailored community programmes. Before it prepares its first long-term plan for 2012-22, Auckland Council may make further allocations of decision-making responsibility to local boards but must not remove or alter the initial allocations included in the planning document.23

The planning document also identifies, as required, initial local board budgets for 2011/12. These initial budgets are based on achieving levels of service for local activities and providing administration and support in each local board area.24

Major services of Auckland Council provided by its council-controlled organisations

The reorganisation has vested major activities and services – including water supply, waste-water, and transport – into Auckland Council's council-controlled organisations.25 Because council-controlled organisations provide these activities and services on behalf of Auckland Council, relevant key performance measures and targets for these activities have also been reflected in the planning document as part of Auckland Council's performance framework. This information is contained both in Volume 2: Visions, strategies and activities and in Volume 4: Council-controlled organisations.

We also refer to this in Part 4.

Council-controlled organisations

The planning document reflects the new group structure of Auckland Council (including its new and continuing council-controlled organisations) and provides information about each of its council-controlled organisations in Volume 4. Figure 3 sets out the major subsidiaries in Auckland Council's group.

Figure 3
Auckland Council's group structure

Major subsidiaries
Auckland Council Investments Limited
Auckland Council Property Limited
Auckland Tourism Events and Economic Development Limited
Auckland Waterfront Development Agency Limited
Regional Facilities Auckland Limited
Auckland Transport Limited
Watercare Services Limited

Auckland Council's financial forecasts in the planning document are prepared only for the parent (Auckland Council). They do not consolidate the financial forecasts of Auckland Council's council-controlled organisations.

The planning document also includes detailed forecast financial information about the major council-controlled organisations, which was optional under the reform legislation.26 This makes the financial disclosures more consistent with the disclosure of non-financial performance information, which includes the relevant key performance measures and targets for activities delivered by council-controlled organisations.

Financial forecasts for Auckland Council

Volume 5 contains the financial forecasts for Auckland Council. These forecasts are prospective balance sheets and cash-flow and comprehensive income statements for each relevant period covered by the planning document.

The forecasts also include funding impact statements and, for the 2010/11 and 2011/12 financial periods, summary funding statements on the basis of the districts of the former councils.

6: Clause 1(1) of Schedule 2 of the Local Government (Tamaki Makaurau Reorganisation) Act 2009.

7: Clause 1(2) of Schedule 2 of the Local Government (Tamaki Makaurau Reorganisation) Act 2009.

8: The Local Government (Auckland Council) Act 2009 provides for regulatory matters to be dealt with by Auckland Council's governing body. Other matters are to be dealt with by either local boards or the governing body in keeping with the principles set out in section 17.

9: Clauses 1 and 2 of Schedule 2 of the Local Government (Tamaki Makaurau Reorganisation) Act 2009.

10: Clause 9 of Schedule 2 of the Local Government (Tamaki Makaurau Reorganisation) Act 2009.

11: The former councils formally estimated liabilities as at 30 June 2009.

12: These are Waikato and Hauraki District Councils, and Environment Waikato.

13: Section 29B of the Local Government (Tamaki Makaurau Reorganisation) Act 2009.

14: United Water Limited, under a franchise agreement dated 23 April 1997, for a period of 30 years with a renewal option for a further 20 years.

15: Sections 33 and 34 of the Local Government (Auckland Council) Act 2009.

16: Section 35 of the Local Government (Auckland Council) Act 2009.

17: Section 41 of the Local Government (Auckland Transition Provisions) Act 2009.

18: Clause 2 of Schedule 2 of the Local Government (Tamaki Makaurau Reorganisation) Act 2009.

19: This is outlined in Volume 2, page 5.

20: There have been some changes in the regulatory area after consolidating the consenting and licensing activities of the former councils.

21: Until Auckland Council decides that they should be changed.

22: Section 19A of the Local Government (Tamaki Makaurau Reorganisation) Act 2009.

23: Section 48 of the Local Government (Auckland Transitional Provisions) Act 2010.

24: Clause 2 of Schedule 2 of the Local Government (Tamaki Makaurau Reorganisation) Act 2009.

25: We include Watercare Services Limited, which will become a council-controlled organisation from 1 July 2012.

26: Clause 3 of Schedule 2 of the Local Government (Tamaki Makaurau Reorganisation) Act 2009.

page top