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Council
14 December 2022
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Council Draft Annual Report for the year ended 30 June 2022
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Reference / Te Tohutoro:
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22/1500192
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Report of / Te Pou Matua:
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General Manager / Pouwhakarae:
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Leah
Scales, General Manager Resources/Chief Financial Officer (Leah.Scales@ccc.govt.nz)
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Confidentiality
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Section under the Act:
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The public conduct of the part of the
meeting would be likely to result in the disclosure of information for which
good reason for withholding exists under section 7.
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Sub-clause and Reason:
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s7(2)(b)(ii) - The withholding of the
information is necessary to protect information where the making available of
the information would be likely unreasonably to prejudice the commercial
position of the person who supplied or who is the subject of the information.
s7(2)(h) - The withholding of the
information is necessary to enable the local authority to carry out, without
prejudice or disadvantage, commercial activities.
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Plain English Reason:
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The information to be used as the
basis for the finalisation of the Council's 2022 Annual Report remains
subject to change. The Committee has a responsibility to consider and review
the annual report before adoption by the Council and to hold it in confidence
before it is finalised for adoption, and it is in the public interest that
the committee can review the annual report before it is publicly available.
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Report can be released:
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7 December 2022
The information included in, and
attached to, the staff report will be available on the public agenda for the
7 December 2022 meeting of the Council.
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1. Nature of Decision or Issue and Report Origin
1.1 The purpose of this report is to present the draft 2021/22
Annual Report for the Christchurch City Council to the Audit and Risk
Management Committee.
1.2 Council is required to adopt the annual report under
section 67 of the Local Government Act 2002.
2. Officer Recommendations / Ngā Tūtohu
That the Audit and
Risk Management Committee:
1. Receive the final Christchurch City Council and Group 2021/22 Annual
Report.
2. Note that verbal audit clearance is expected to be provided at the
meeting on the 22 November 2022.
3. Notes the sign off process by Council staff attesting to the
completeness of the information included in the financial statements.
4. That the Audit and Risk Management Committee recommends the Council:
a. Notes that the Audit and Risk Management Committee have reviewed the
draft Annual Report and are satisfied that proper processes have been followed
to ensure that the Annual Report and associated financial statements have been
prepared correctly.
b. Adopts the 2021/22 Annual Report for the Christchurch City Council,
subject to receiving the independent auditors report
5. Authorise the Chief Financial Officer to make minor changes to the
2021/22 Annual Report prior to publication if necessary.
3. Key Points
Accounting standards
3.1 The
Council is an early adopter of PBE IPSAS 41 Financial Instruments as of 1 July
2021. As the Council adopted PBE IFRS 9 Financial Instruments in 2019 early, transitioning
from PBE IFRS 9 to PBE IPSAS 41 does not have any material impact on the
Council’s reporting requirements.
Critical Judgements and Assumptions
3.2 The
critical judgements, decisions and assumptions used in the preparation of the
annual report are detailed in the paper prepared for the Committee at its
meeting on 15 June 2022 and updated at the meeting on 1 September 2022.
Audit Process
3.3 The
field work for the 2021/22 audit is still in progress, with expectation that it
will be completed by Audit New Zealand by the time of this meeting.
3.4 Audit
New Zealand will be in attendance at the meeting, to advise clearance on the
annual report.
3.5 At
the time of writing this paper, the following matter remains outstanding with
Audit:
3.5.1 Water quality performance
measure
Following the disestablishment of the drinking water assessor role
at the Ministry of Health, Audit New Zealand is unable to rely on this
independent expert to verify Council’s compliance to the Drinking Water
Standards for New Zealand (DWNZ) after 15 November 2021. The audit approach for
the subsequent period remained unclear for most this year.
At their 1 September 2022 meeting, the committee formally requested
audit to notify Council the required information in order to receive a clear
audit report in relation to this matter.
The Office of the Auditor General (OAG) released its guidance on 25
October requesting all Councils to engage independent expert to verify their
compliance.
Due to the late release of this guidance, Council is unable to find
a service provider with capacity to perform this review before the expected
sign off date. Staff’s suggestion of cross checking with neighbouring
Councils was not accepted by audit.
The audit team has therefore developed and performed their own audit
testing in relation to this performance measure.
At the time of writing this report, the audit work has been reviewed
and cleared by Audit’s internal technical team, but is still waiting on
clearance from the OAG.
3.5.2 Prior period error
A prior period error on the Cash Flow Statement is identified during
the audit. Proceeds from sale of investment and payment for investment were
incorrectly stated in 2021 due to a formula error.
Prior year comparatives have been restated. Staff are still waiting
on Audit’s clearance on the related disclosure.
3.5.3 Other matters still being complete relate to the audit of the
3 waters asset fair value assessment and consolidation review.
4. Summary Result
Operating results – parent
surplus of $183.5 million (2021: $95.6 million)
4.1 Impacts
on revenue
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Revenue Type ($million)
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2022
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2021
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Movement
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Rates
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595.8
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556.7
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39.1
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7%
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Reason: From an increase in rates and number of rating units.
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Subsidies
and grants
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139.9
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109.5
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30.5
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28%
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Reason: Grants received for Te Kaha Multi Use Arena and Three
Water Reforms.
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Development
contributions
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39.5
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44.3
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-4.8
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-11%
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Reason: Lower than last year but still higher than budget
reflecting continued increase in building activities.
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Finance
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22.5
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23.3
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-0.8
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-3%
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Reason: Reflecting lower interest rate on subsidiary on-lending.
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Other
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285.6
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242.0
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43.6
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18%
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Reason: Relating to transfer of red zone land from the Crown and
insurance receipts for the trickle filters fire.
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Total revenue
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1,083.3
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975.8
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107.5
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11%
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4.2 Impact
on expenses
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Expenses Type ($million)
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2022
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2021
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Movement
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Depreciation
and amortisation
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281.1
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276.8
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4.4
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2%
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Reason: Additional depreciation on capitalised assets and impact
of asset revaluations.
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Finance
costs
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86.8
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86.7
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0.1
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0%
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Reason: In line with last year’s low interest rate.
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Personnel
costs
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205.6
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202.8
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2.8
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1%
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Reason: Small increase reflecting increase in current job
market.
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Other
expenses
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323.0
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292.6
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30.4
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10%
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Reason: Higher donations and grants and maintenance costs this
year.
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Gains
and losses
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3.5
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21.1
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-17.5
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-83%
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Reason:
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Total expenses
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900.1
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880.0
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20.1
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2%
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Surplus before tax
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183.3
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95.8
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87.4
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91%
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Tax
expenses (credit)
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-0.2
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0.3
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-0.5
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-184%
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Reason: Current year’s credit mostly relating to deferred
tax.
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Surplus after tax
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183.5
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95.6
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87.9
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92%
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Total comprehensive revenue and expense – Parent surplus of $2.4
billion (2021: $ 0.96 billion)
4.3 The
total comprehensive revenue and expenses have been impacted by three
classifications of valuations:
4.3.1 An increase in the
valuation of property plant and equipment of $1,793 million, arising from the
valuation of land and buildings, transport assets, and fair value assessment of
three water assets;
4.3.2 An increase in the
valuation of subsidiary companies of $238 million (2021: $312 million),
primarily in the valuation of Christchurch City Holding Limited following
growth in underlying investments and Venues Ōtautahi with increases in the
value of its property; and
4.3.3 An increase in
valuation of interest rate derivatives of $193 million (2021: increase
$130 million), primarily due to the movement in interest rates.
Financial Position – Parent net assets of $15.9 billion
($2021: $3.5 billion)
4.4 Impact
on assets
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Asset Type ($million)
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2022
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2021
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Movement
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Property,
plant and equipment
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14,221.6
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12,188.9
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2,032.7
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17%
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Reason: made up of a valuation increase of $1,793 million and
net capital expenditure of $501 million, less depreciation of $262 million.
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Intangible
assets
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90.1
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86.5
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3.6
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4%
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Reason: Increase made up of net capital expenditure of $31
million less amortisation and impairment of $27 million.
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Investments
in CCOs
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3,491.0
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3,296.1
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194.9
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6%
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Reason: Largely relating to revaluation of investments.
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Cash
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167.3
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192.7
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-25.4
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-13%
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Reason: Reduced cash as a result of timing of expenditure.
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Other
financial assets
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114.1
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66.2
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48.0
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72%
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Reason: Largely relate to advances to OCHT for housing
development.
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Receivables
and other assets
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95.7
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82.8
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12.9
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16%
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Reason: Largely relating to receivables timing.
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Total assets
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18,179.7
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15,913.1
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2,266.6
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14%
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4.5 Impact
on liabilities
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Liability Type ($million)
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2022
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2021
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Movement
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Borrowings
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2,114.6
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2,246.9
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-132.2
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-6%
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Reason: Mostly due to change in fair value of derivatives
instruments slightly offset by a small increase in external borrowings.
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Other
liabilities
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181.8
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190.1
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-8.3
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-4%
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Reason: Mostly relating to reduction in holiday pay provision
and landfill aftercare provision.
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Total liabilities
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2,296.4
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2,437.0
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-140.6
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-6%
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Net assets/Ratepayers funds
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15,883.3
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13,476.2
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2,407.2
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18%
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Prudential reporting
4.6 These
ratios and benchmarks enable the reader to determine that the Council is
prudently managing its revenues, expense, assets, liabilities and general
financial dealings.
4.7 Council
has met all of these benchmarks in 2022.
Audit opinion
4.8 The
Council is anticipating receiving an unmodified audit report for the parent and
group from Audit New Zealand.
4.9 There
is a possible emphasis of matter on green house gas disclosure consistent with
CCHL group.
4.10 Council
have incorporated all proposed changes made by Audit New Zealand in the
preparation of the financial statements.
5. Background
5.1 The
Annual Report of the Christchurch City Council has been prepared and is
proposed to be adopted at the 7 December 2022 meeting of Council.
5.2 The
Annual Report comprises four sections: The Council, Groups of Activities,
Financial Statements and summary information from Council-controlled
organisations.
5.3 The
Council section gives background information on the Council and high level
summaries of achievements for the year.
5.4 The
Group of Activities (GOA) sections in the Annual Report includes commentary on
“what we do”, “what we did”, “how did we measure
up”, “how much did it cost” and “what next” for
each activity.
5.4.1 These sections are
prepared by the individual business units in conjunction with the Finance
Business Partners. Once completed, a comprehensive review and sign off
process is completed by General Managers.
5.4.2 The “how did we
measure up” information has been prepared by the Performance Management
team and reviewed as part of the comprehensive sign off review. The performance
measure are linked back to the targets set as part of the 2021-31 Long Term
Plan.
5.5 The
Financial Statements have been prepared in line with generally accepted
accounting practice and in accordance with the relevant Public Benefit Entity
accounting standards.
5.5.1 The financial
statements have undergone a review for completeness and a comprehensive signoff
matrix has been completed by relevant staff.
5.6 The summary information from Council-controlled organisations is
sourced from the financial statements and annual reports of these entities that
go through their own review and audit processes.
Preparation
of Summary Annual Report
5.7 A summary annual report has been drafted and currently in design
for users of the Council’s financial statements. A copy of
this will be circulated prior to ARMC.
5.8 The
summary report is a condensed view of the two major areas of the Annual Report
namely, the Group of Activities reports and financial statements.
5.9 It
also includes an extract from the prudential reporting section of the Annual
Report.
Signoff
Matrix
5.10 As
mentioned in paragraph 5.5.1, a comprehensive sign off matrix is prepared for
the Annual Report. At the time of writing this report, as the field work is
still not complete, the final sign off sheet staff absences has meant there
remain some gaps. These will be completed before the meeting. A current draft
is attached to this paper. A complete version will also be table at the
meeting.
Audit
representation letter
5.11 Separate
audit representation letters are required for the full annual report and the
summary annual report and these will be presented to the Council meeting on 7
December 2022. A draft of these letters will be circulated to the ARMC prior to
presentation to Council.
5.12
These audit representation letters are provided by Council in connection with
the audit of the financial statements and activities and services statements of
Christchurch City Council (the City Council and group) for the year ended 30
June 2022 for the purpose of expressing an opinion on the information
presented. The audit is carried out by Audit New Zealand on behalf of the
Auditor General.
Attachments / Ngā Tāpirihanga
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No.
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Title
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Reference
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Page
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a
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Draft 2021/22
Annual Report
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22/1602118
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b
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Draft sign off
sheet
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22/1602120
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In addition to the attached documents, the following background
information is available:
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Document
Name – Location / File Link
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Not
applicable
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Confirmation of Statutory
Compliance / Te Whakatūturutanga ā-Ture
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Compliance with Statutory Decision-making
Requirements (ss 76 - 81 Local Government Act 2002).
(a) This report contains:
(i) sufficient information about all reasonably practicable
options identified and assessed in terms of their advantages and
disadvantages; and
(ii) adequate consideration of the views and preferences of
affected and interested persons bearing in mind any proposed or previous
community engagement.
(b) The information reflects the level of significance of the
matters covered by the report, as determined in accordance with the Council's
significance and engagement policy.
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Signatories / Ngā Kaiwaitohu
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Author
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Daisy Yu -
Financial Team Leader
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Approved By
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Russell Holden
- Head of Finance
Leah Scales -
General Manager Resources/Chief Financial Officer
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