Additional Funding for Mercury Bay Multi-Sport Park Project 24 December 2012 An additional spend of $1.069m has been approved by Council to progress the Mercury Bay Multi Sport Park Complex in Whitianga to completion. An additional spend of $1.069m has been approved by Council to progress the Mercury Bay Multi Sport Park Complex in Whitianga to completion. The decision was made in an extraordinary Council meeting on Friday 21 December, which was publically excluded due to sensitivities around business contracts for the construction and completion of the facility. "This further overrun in the project has come about from several factors such as project management decisions taken many months ago in order to save costs on the project, which has in fact led to further cost increases," says Chief Executive David Hammond. "The emergency team I put in to take management of the project several months ago has done an excellent job to get on top of project problems, which have plagued construction this year. I am confident that we have now got to the bottom of all of the issues." The most significant increase was a decision made at the beginning of 2012 for the removal of the air conditioning unit and replacing it with opening windows for ventilation to try to reduce costs. This decision in fact increased the cost of the project as it affected the structural design and the overall cost of the ablution block construction. Council supported the additional expenditure as the most financially prudent option given the circumstances and in the best interest of providing the community with a useable facility and less exposure to contractual risk. These additional funds will go towards the completion of toilets, showers and changing rooms and a secure lock-up space for storage. The cost for the completion of the project will still be subject to negotiations with the building contractor. The Mayor and Chief Executive will confirm the final amounts, provided it is not significantly different from what has been provided for. The Council considered an option to stop the project but determined it would likely result in additional costs to the community in the long-term. Council believes this to be the most financially prudent decision given the potential exposure to contractual risk and given the scale of the rating impact being marginal. This latest decision takes the total overrun for the Multi Sport Park Project to $2.07m. As well as the latest overrun of $1.069m, Council approved additional funding last September of $1001195. This was made up of $583,395 of historical costs investigating suitable sites and consent works between 2006 and 2010 as well as an additional $417,800 overrun for project management and building costs identified earlier by the emergency project team The completion of the project will now cost an average $23.50 rate increase per Mercury Bay ratepayer from next year. This will be funded out of loans, future development contributions and rates. "An internal investigation is now underway looking at staff involvement in decision making on projects along with how to improvement Council project management processes," says Mr Hammond. "Now that I have finally gotten to the bottom of what has happened with this project I can say I am truly gutted about how it has been managed," says Mayor Glenn Leach. "There was no one more surprised than me to discover there had been no day-to-day budget run against progress and variances." "I felt something wasn't right with this project back in July and called for an internal report, which has helped bring this to light," says Mayor Leach. "Our organisational restructure this year has also helped pick up that there was significant risk to the completion of this project within the approved budget." "Along with the responsibility comes accountability," says Mayor Leach. "This is something I am taking on board and have discussed with the Mercury Bay Community Board and our Chief Executive." A public meeting will be arranged in early February in which Mayor Leach, Chief Executive Mr Hammond , the Mercury Bay Area Manager and representatives of the Mercury Bay Community Board will meet with the Mercury Bay community to discuss the cost overruns, the complications the project has faced and what support will be in place for the project in the future. The three options Council had to make a decision on in regards to the future of the Multi-Sport Park complex ranged from completing construction of the facility, reducing the scope of the construction significantly to putting the project on hold indefinitely. Audit of Mercury Bay Multi-Sport Park Project Meanwhile a report investigating the project management and processes to build the Mercury Bay Multi Sports Park Project in Whitianga will be released publically in early 2013. Our Council's audit committee commissioned Deloitte to investigate the MultiSport Park project following a growing sense of concern about the build since Council granted an additional $1million at its September 2012 meeting. "Since receiving the draft report from Deloitte we have taken up elected Council's concerns for interim measures to be developed and acted on immediately, to provide for more controls around all our significant and also sensitive projects," says Council Chief Executive David Hammond. "This includes expenditures, reporting, tender processes and informing elected members and staff of project's progress in terms of spend and build." Deloitte's Report Council's Audit Committee has the budget and authority to ask for an audit of any Council project. In November the Committee commissioned Deloitte to review the Mercury Bay Multi Sport Park Project in light of concerns raised over the projected cost of construction of the facility increasing by more than $1m back in September 2012. The scope of Deloitte's review was to investigate the preparation of the initial business case approved by Council, through to detailed design, procurement, project management and completion. This was compared against recommended best practice for projects of this size and nature. To fulfill the brief Deloitte's reviewed Council systems and processes, reviewed Council's documentation on the Multi Sport Park Project dating back to 2004, interviewed relevant Council staff and carried out visits to the Multi Sport Park construction site. Changes Council Has Already Made The report from Deloitte has been essential to help Council now assess the best practice for project management and decision making processes. In the past year a Chief Financial Officer and three Area Managers from Thames, Whitianga and Whangamata have been appointed and now sit on Council's Strategy Team. As part of the executive structure this allows for better communication and more scrutiny over projects. None of these positions had been on the leadership team in previous councils Restructuring Council staff by appointing Area Managers and a Chief Financial Officer directly contributed to identifying that there were issues with the budget and aspects of the construction and build of the Multi-Sport Park project. There is more discipline over project budgets. What was a "place holder" figure in a project budget in the Ten Year Plan is now broken down into more specific terms and details to account for exactly where every dollar is going. Mercury Bay Multi-Sport Park Project Council is working with the Mercury Bay Recreation Programme Steering group, the Mercury Bay Recreation Trust and sports codes throughout Mercury Bay to ensure the facility is well-used and supported once it is fully operational. "Despite the difficulties around this project has faced we want the Mercury Bay community to embrace this facility being made available to them," says Mr Hammond. "The Mercury Bay community worked hard some years ago to advocate for the facility they thought was important for the growth of sports in the area, and to support families. Irrespective of the issues we are over the top of, the future of the facility needs to be well supported." Junior and senior netball competition will start in late January and the tennis courts will be open to the public in the new year. Council will provide porta-coms as an interim measure until the toilet blocks are completed. A meeting with sports codes and other key agency partners will be held early in the new year to provide an opportunity to further discuss the facilities at the Multi Sport Park. Council is also investigating the potential to get more recreational groups involved at the sport park. Council staff will continue to provide strategic support and direction to the Mercury Bay Recreation Trust, which has a focus on fundraising for the development of the facility and the Mercury Bay Steering Group which is involved in the governance of the project. Frequently Asked Questions What will the increase in funding to finish the Multi Sport Park mean for ratepayers? The additional requirement will add a further $23.50 on average rate per Mercury Bay ratepayer from next year. The cost will be met from additional loans in the short term and these loans will be paid over time in part from future development and rates. When will the full report from Deloitte on the Multi Sport Park be made public? The report was presented to Council's audit committee on Friday 14 December for the very first time. It now needs to be proof checked and allow time for the audit committee to read the report in full. The audit committee will meet again in early February to make its recommendations on the report. Then it will be made available to the public. Mayor Glenn Leach and Chief Executive David Hammond will also hold a public meeting in February to discuss with the community the report's findings and the budget overrun of $2m to finish the MultiSport Park Project. What is the role of Council's audit committee? The Audit Committee work on matters around Council's budgets and finances. The following Councillors have been appointed and represent the Committee: Councillor, Tony Fox (Chairperson) Councillor, Jan Bartley Councillor, Tony Brljevich Who is Deloitte? Deloitte is an independent firm which provides audit, consulting, financial advisory, risk management and tax services to clients.