2010 ANNUAL REPORT - Watercare

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WATERCARE SERVICES LIMITED ANNUAL REPORT 2010GovernanceThe board and management of Watercare are committed to ensuring thatthe company applies best-practice governance policies and procedures.BackgroundWatercare Services Limited (Watercare) is a limited liability companyregistered under the Companies Act 1993 which governs the conductof companies in New Zealand. The Local Government Acts of 1974 and2002 define the role and duties of local government organisations inNew Zealand and contain specific provisions for Watercare. The companyis defined as a ‘council organisation’ for which the voting rights to appointdirectors are controlled by the shareholding councils. As a consequenceof the legislative framework:ÌÌ Watercare must set the bulk prices for water and wastewater servicesin the Greater Auckland area and may arrange such borrowing as itneeds to finance its activities.ÌÌ The company must manage its infrastructure efficiently whilemaintaining prices at minimum levels consistent with maintaining thelong-term integrity of the assets.ÌÌ The company’s shares are held by the six territorial authoritiesidentified under Ownership, below, with the shareholders appointingthe directors through a Shareholders’ Representative Group (SRG).ÌÌ Elected members and employees of local authorities are prohibitedfrom being Watercare directors.ÌÌ The company is prohibited from paying a dividend to its owners or anyshareholder; however, a surplus may be returned to customers by wayof rebate, discount or price adjustment.ÌÌ The company’s financial statements must be audited by the Auditor-General, or by an auditor acting on her behalf.OwnershipWatercare’s shareholding councils are: Auckland City Council (41.6 per cent);Manukau City Council (25.1 per cent); Waitakere City Council (16.7 per cent);North Shore City Council (11.5 per cent); Papakura District Council (3.7per cent); and Rodney District Council (1.4 per cent). Each of the ownersappoints two representatives to the SRG. A shareholders’ agreement sets outthe role of the SRG and the relationships between shareholders.From 1 November 2010, the existing shareholders will no longer exist andWatercare will become a wholly owned subsidiary of the Auckland Council,the new unitary authority replacing the regional and local councils.New Governance LegislationFrom 1 November 2010, Watercare will become the regional provider of waterand wastewater services in Auckland. The legislative framework enabling andgoverning Watercare's new operations is largely found in four Acts:1. Local Government (Tamaki Makaurau Reorganisation) Act 20092. Local Government (Auckland Council) Act 20093. Local Government (Auckland Council) Amendment Act 20104. Local Government (Auckland Transitional Provisions) Act 2010Under the new legislation, the company will continue to operate as acouncil organisation until 2015 and will continue to operate under similarlegislative requirements to those already in place.Board of DirectorsResponsibilitiesThe board is appointed by the shareholders to govern Watercare inaccordance with the statutory obligations and with the statement ofcorporate intent (SCI) agreed annually with the shareholders through theSRG. The board is ultimately responsible for all decision-making withinthe company. Operational responsibility is delegated to the chief executiveby way of a formal delegated authority framework. The performance ofthe chief executive is reviewed annually by the board. The SCI lays out theactivities to be undertaken by Watercare, sets specific economic, socialand environmental objectives for the company and establishes performancetargets which will be used to measure the company’s performance. The SCIis published on Watercare’s website www.watercare.co.nzCorporate Governance CharterThis charter defines the duties and obligations of the board and boardmembers in areas such as fiduciary duty, duty of care, diligence, legal andstatutory duties and conflicts of interest. It incorporates the principles of theNew Zealand Institute of Directors’ Code of Proper Practice for Directors,relevant sections of the New Zealand Exchange Limited (NZX) CorporateGovernance Best Practice Code and the Securities Commission’s nineprinciples of corporate governance.Board Membership and CompositionThe board currently comprises seven independent, non-executive directors.Their profiles and disclosures of interests are published on page 12.Directors, including the chairman, are appointed by shareholders throughthe SRG. Board appointments are for a term of three years in accordancewith the company’s constitution. Retiring directors are eligible forreappointment at the discretion of the shareholders.Board PerformanceThe board undertakes its own internal review of performance annually, bothin relation to the board as a whole and the contribution of individual boardmembers. Due to the impending industry integration and changes to theBoard membership, no review was conducted in 2010.Board RemunerationThe board remuneration is determined by the SRG after taking external advice.Indemnity and InsuranceWatercare has executed a deed of indemnity with each director whichindemnifies the director in accordance with the company’s constitutionand grants certain rights in respect of access to documents and themaintenance of liability insurance cover.Board MeetingsWatercare’s board has 11 scheduled meetings per year. In 2010 the boardmet on a twice monthly basis in order to manage the information andgovernance workload associated with the integration of water and wastewaterservices for the Auckland region. A special meeting was also held in May 2010in preparation for an amendment to the Trade Wastes Bylaw 1991.Audit and Risk CommitteeThe board is responsible for appointing the members of the Audit andRisk Committee. The committee’s role is to assist the board to fulfil itsresponsibilities in the areas of financial reporting and to provide assuranceregarding compliance with internal controls, policies and procedures.Its responsibilities are established in the Audit and Risk Committee Charterwhich is reviewed annually. The committee has no delegated authority.In carrying out its duties, the committee meets regularly with the externaland internal auditors (both with and without management present) and themanagement of the company. At least one member must have accountingor financial management expertise. The chairman of the board may not bechairman of the Audit and Risk Committee. The current members of theAudit and Risk Committee are: Jeff Todd (Chairman), Graeme Hawkins andRoss Keenan. All Watercare directors receive the papers of the Audit and RiskCommittee in advance and all are invited to attend committee meetings.16
WATERCARE SERVICES LIMITED ANNUAL REPORT 2010Risk ManagementWatercare’s framework for risk identification, measurement and reportingis well developed, and meets the requirements of the Australian andNew Zealand Standard 4360. There are regular external reviews ofWatercare’s framework to ensure the company meets and exceeds goodpractice measures in risk management. As part of the risk managementframework, the company has established a Risk Steering Committee whichmeets six times per year to monitor emerging risk and risk-mitigatingactions and strategies. The committee comprises the chief executive,senior management, the internal auditor and the risk manager. Risks thathave serious consequences are in turn directly monitored by the board.External AuditorsThe Auditor-General is the auditor of the company’s financial statements.The Auditor-General has appointed Jamie Schmidt from Deloitte to undertakethe external audit work on behalf of her office, in accordance with theAuditor-General’s Audit Standards, which incorporate New Zealand AuditingStandards. Deloitte has no relationship with the company outside of the auditand related assurance activities it undertakes under its mandate from theAuditor-General. This satisfies the independence requirements of the Auditor-General and the Institute of Chartered Accountants of New Zealand.Transparency in ReportingWatercare is committed to transparent reporting. Recognising this,Watercare publishes:ÌÌ An annual Statement of Corporate IntentÌÌ An annual Funding PlanÌÌ An annual Asset Management PlanÌÌ An annual report that records performance against guidelines developedunder the United Nations’ Global Reporting G3 Initiative (see page 109)ÌÌ Special project newsletters for interested parties.Additionally, the company’s website www.watercare.co.nz gives an overviewof Watercare and provides a live update of current water storage levelsand other data as well as information on education and recreation, majorprojects and publications. Laboratory Services and Trade waste also havededicated sections of the website. Information is presented on workingfor Watercare and electronic tenders can be submitted via the website.Watercare closely monitors the quality and format of the information thatit reports. Feedback on the annual report from interested parties andprofessional reviewers is incorporated into future reports. Feedback formscan be downloaded from www.watercare.co.nzSetting Standards of Conduct for StaffWatercare demands the highest standards of behaviour from its staff. Amongthe company’s policies governing employee behaviour, a specific ethics policyaddresses employees’ responsibilities with regard to contractual relationshipswith suppliers of goods and services to Watercare, and conflicts of interest.All contracts managed by staff must be in writing. The policies set out thedelegated authority within the company. All policies governing the conductof staff are published on the company’s intranet. Watercare’s projects aresubject to internal probity reviews, and external probity auditors are appointedto provide additional assurance on major projects.Responsiveness to StakeholdersThe Shareholders’ Representative Group (SRG)Watercare provides a written quarterly report on its operations to the SRG.Additionally the board and management meet the SRG two times a yearto brief them and supply any further information requested. The Chairmanand Transition Chief Executive also attend regular SRG meetings.Other StakeholdersThe company consults extensively with its shareholders, customers,environmental regulators, special interest groups, advisory groups and thecommunity. The company engages with customers in regular managementmeetings, quarterly operational meetings, regular project meetings andworkshops to set priorities for the development and maintenance of assetsin the Asset Management Plan and to consult on the price path andFunding Plan processes.Watercare consults closely with all its communities and aims to build longtermrelationships. Project-specific community liaison groups are convenedas deemed necessary and communication occurs through a wide range ofstakeholder contact mechanisms.Advisory GroupsWatercare has three standing consultative and advisory committees thatcomment on company plans and projects. They are the EnvironmentalAdvisory Group, the Maori Advisory Group and the Consumer AdvisoryGroup. The Environmental Advisory Group comprises experts who adviseon how the company’s activities impact on the environment. The MaoriAdvisory Group advises Watercare on how its plans and operations impacton Maori and on the relationship between the natural environment andMaori. The group also provides advice that enhances the company’srelationship with Maori. The Consumer Advisory Group was establishedin 2009 in response to integration and Watercare’s new relationship withcustomers across the region. The group provides independent advice onWatercare’s commitment to treat all consumers in a fair and equitablemanner. The reports of the Maori Advisory Group, the EnvironmentalAdvisory Group and the Consumer Advisory Group for 2009/10 can befound on pages 19, 20 and 21.RegulatorsWatercare is subject to regulation in planning, health and environmentalmatters. The principal regulators include: the Auckland Regional Council,Environment Waikato, the city and district councils and the Ministry of Health.The company also engages with these bodies by providing input on the impactsof existing and proposed policy and regulation on Watercare’s activities.Regular Independent ReviewsWatercare validates its planning, operations and reporting with independentconsultants on a regular basis. In addition, the SRG commissions regularexternal reviews of various aspects of company performance. This year,as a result of the extensive work required for integration of the water andwastewater industry, less emphasis has been placed on process reviews.However, Watercare has continued to follow best-practice processes whichinclude feedback and continuous improvements from previous reviews.WhistleblowingThe company has a specific policy to receive and deal with informationabout any serious wrongdoing within the company, as required by theProtected Disclosures Act 2000. Watercare’s policy prescribes howWatercare staff and others would report matters of serious wrongdoing, andprovides contacts to whom such reporting can be made. The policy definesserious wrongdoing and applies to present and past employees, and to anyindividual either seconded to, or working on a contract basis for, Watercare.17
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IndexWATERCARE SERVICES LIMITED ANN
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2010 ANNUAL REPORT - Watercare

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