Council has also decided to produce a Shareholder’s Expectation Guide that will outline the operational processes, policies, roles and responsibilities that CCOs will be expected to follow.
Mayor Len Brown says the council’s CCOs are vital to achieving Auckland’s vision.
“How we work together is absolutely critical. We’ve been refining this relationship for a year now and it was time to formalise and strengthen how we make it work.

“It also signals that their decisions must be in the public interest and that for the most part it is public money is being used and it is the people of Auckland who hold us accountable for that.”

Also being introduced are:

• decision-making guidelines to clarify when decisions are made by a CCO board or shareholders;

• a clarified purpose for each CCO;

• funding principles.

Council is also reviewing the board appointment and remuneration policy with the aim of increasing diversity on the boards. CCOs have worked alongside council to develop these guidelines.

The timing of a report released by the council dealing with the operations of CCOs coincides with the start of the long-term plan (LTP) process and council sees it as an opportunity to reflect on the first nine months of operation, and to identify what has worked well and what areas should see improvement.

Specific issues include:

• how to ensure the funding arrangement provides CCOs with the flexibility they need to meet their objectives, without compromising the council’s accountability for the use of ratepayer money and other public funding;

• how to define what types of decisions should be made by the Governing Body and by CCO boards;

• how to hold CCOs accountable, by using performance measures and targets that reflect the outcomes that the council intends them to achieve.

The report notes that officers will develop a Shareholder’s Expectation Guide based on the material in this report and incorporating feedback from the subcommittee. The guide will include the operational processes, policies, roles and responsibilities that will endure year-on-year. The council also notes that central government has adopted similar guides for the governance of its state-owned enterprises and crown entities.

The report highlights the council’s legislative ability to require CCOs to act consistently with its plans and strategies, and recommends that the council considers this when it adopts plans and strategies.

It also recommends a review of the council’s board appointment and remuneration policy, to ensure that the policy is targeting the necessary skills and attributes, and to increase diversity of board composition.

In a backgrounder to the report, the Auckland Council says it is operating under a new model with CCOs delivering services and activities that are funded by more than 35 per cent of the council’s total rates. CCOs and Watercare also manage $25 billion of assets owned for the benefit of the public.

The council has established a strong governance relationship with its CCOs, with statements of intent now agreed for 2011/2012, and key policies in place, such as CCOs holding open board meetings.
“Nevertheless, the governance relationship is still evolving,” the council says. “Officers have led two workshops with the subcommittee, and have met with the boards and/or board chairs of the CCOs to identify what has worked well, and areas for improvement.

Council officers noted a recently released report on Dunedin City Council and its governance of Dunedin City Holdings Limited and its subsidiaries, which they said illustrates the consequences of poor and a lack of clarity about roles. The report reveals a dysfunctional situation, which allowed DCHL to meet the council’s increased demands for dividends from borrowing rather than profits.

While none of the major issues identified in the report are applicable to the Auckland Council and its CCOs, the Dunedin report highlights the importance of sound governance principles and practices.