Submission on the Water Services Entities Amendment Bill

We provided a submission to the Finance and Expenditure Committee on the Water Services Entities Amendment Bill.

5 July 2023

Committee Secretariat
Finance and Expenditure Committee
Parliament Buildings
WELLINGTON

Tēnā koe

SUBMISSION ON THE WATER SERVICES ENTITIES AMENDMENT BILL

Thank you for the opportunity to comment on the Water Services Entities Amendment Bill (the Bill).

As you know, the Controller and Auditor-General is an independent Officer of Parliament. In that role, he is responsible for giving Parliament and the public assurance that public entities are operating and accounting for their financial and non-financial performance in keeping with Parliament’s intentions and public expectations. We also have a keen interest in the accountability of public entities to Parliament.

We note that the Water Services Entities Amendment Bill forms part of the suite of bills to reform New Zealand’s drinking water, wastewater, and stormwater services. The Water Services Entities Act 2022 established four water services entities (WSEs). This Bill would disestablish the four WSEs and replace them with 10 WSEs.

INCREASE OF POSSIBLE SCENARIOS DURING TRANSITION

Although this Bill does not change the accountability arrangements for the 10 new WSEs, it does provide a longer period for establishing WSEs (between 1 July 2024 and 1 July 2026) and enables a WSE to “go live” partway through a financial year.

The ability for WSEs to be established and to go live during a financial year, and on dates likely to differ for each WSE, increases the scenarios the Bill needs to attend to regarding accountability arrangements during the transition. In reading the Bill, we can see where additional clarity would be beneficial. We have provided these examples below but note that there might be others.

We suggest the Committee ask officials to work through different scenarios for all WSE planning and reporting documents, both those that relate to the establishment period and those that relate to the rest of the financial year after the establishment date. The objective is clarity about which documents are prepared when, and for which period, with no gaps in accountability or unnecessary reporting.

The following shows some scenarios where there might be gaps or unnecessary reporting.

Establishment annual report and overlap with first annual report

The Bill is unclear whether a WSE’s first annual report is intended to also cover some of the WSE’s establishment period if the entity’s establishment date is partway through the year. For example, if a WSE 2 is established¹ on 1 November 2023, and the go-live date² is 1 October 2024, then its establishment period will be 1 November 2023 to 1 October 2024. The establishment annual report will be for the period 1 November 2023 to 30 June 2024 (clause 15 of Schedule 1). Section 160 (annual report) applies to the WSE only on and after 1 October 2024 (section 6A(1), as inserted by the Bill). The Bill does not state whether a report would cover the period 1 July 2024 to 1 October 2024. This leaves a potential gap in accountability.

Consumer engagement stocktake

The consumer engagement stocktake required by section 208 applies to a WSE only on or after its establishment date (section 6A(1), as inserted by this Bill). The WSE chief executive must prepare a consumer engagement stocktake annually and no later than three months before the end of a financial year, to be published by the end of the financial year.

The first consumer stocktake covers the period from the establishment date (section 208(3)(a)). If a WSE’s establishment date is 1 January 2025, then the first consumer stocktake must be prepared no later than 31 March 2025 (three months before 30 June 2025) and cover a three-month period.

We note that the stocktake must contain a report from the Auditor-General on whether the stocktake gives effect to its statutory purpose and on whether the WSE has given effect to the principles of engagement in section 209. The purpose of the stocktake is to record consumer and community feedback on, and satisfaction with, how the WSE is performing, and set out how the WSE will respond to consumer and community needs and concerns. A stocktake three months after establishment date might be too soon to form a view on a WSE’s performance in this regard.

Infrastructure strategy

Another example is that the date on which a WSE must provide its first infrastructure strategy is 1 July 2026, 1 July 2027, or 1 July 2028 (clause 16 of Schedule 1, as amended by this Bill). It appears that the WSE can choose which of these dates it would prefer to use. Theoretically, this means that a WSE with an establishment date of 1 July 2024 could provide its first infrastructure strategy on 1 July 2028, four years after it goes live. We consider four years is a long time (especially as the WSEs have the councils’ infrastructure strategies and other asset information to use as a starting point) and has the potential to create a gap in accountability in the intervening period.

Thank you for the opportunity to make a submission on the Bill. As my Office does with our other submissions on government proposals, we will publish this on our website in due course.

Nāku noa, nā

Melanie Webb
Assistant Auditor-General - Legal, Policy and Inquiries

1: A WSE is established on the date on which the appointment of the WSE’s establishment board takes effect: section 11(2), as amended by this Bill.

2: Its establishment date: section 6A(4), as inserted by the Bill.