Wood MichaelClause 5 Section 39 amended (Specified amenity does annual report)MICHAEL WOOD (Labour—Mt Roskill): Look like a good suspense author I foreshadowed that I was quite interested in making a contribution on this clause earlier on. That was in the debate on the preamble which was very engaging and I spoke about the submission of Julia Durkin that was received at that point and foreshadowed that I'd be keen to get a little bit more into the issues that she raised. As I said Julia Durkin's submission was a very substantial one. I'm not particularly familiar with Ms Durkin but in her submission she makes it clear that she has significant knowledge about how Auckland's cultural sector works clearly has a broader perspective about the funding model and is critical of it but has engaged in a rational and constructive way in terms of her feedback on this particular piece of legislation.Now in respect of clause 5 she has quite a bit to say and there's quite a substantial issue here that I do think the committee needs to examine and I really really do want to hear from the member in the chair Dr Parmjeet Parmar about this because what clause 5 does is amend section 39—it specifically replaces section 39(2)(b). Now the critique and the issue that is raised by Julia Durkin—and you know I at this point haven't settled on a firm view on this but I want to hear from the member her views on it—the point that Ms Durkin raises is that she believes that the changes to section 39(2)(b) effectively reduce the reporting requirements and therefore the transparency that is applied across these organisations—which as we've said have taken around about $14 million of public money in Auckland. So we need a high level of transparency. The other thing I'll just say on this—and again it's raised in Ms Durkin's submission—is that this is quite an unusual piece of legislation in which it lists a schedule of organisations effectively to whom this publicly appropriated money applies to. This goes to why it's important that the financial reporting standards are appropriate because these organisations to some extent are privileged. I'm not saying that in a pejorative way. I'm not saying that they shouldn't be there. But there are other organisations outside the tent who don't get publicly appropriated money to support their organisation who do provide regional services. So the point that Ms Durkin raises is that you have to have a high level of probity and transparency about the funding that these organisations are getting and about the decisions that the funding board itself is making because it's the allocations body effectively.So if we actually go to the text here Ms Durkin points out that the text in the current piece of legislation is bigger and broader. Let me just go through this—I'm reading from section 39(2)(b) here in the original legislation: there has to be an assessment of the amenity's application of the funding against the matters specified in the amenity's annual plan for the year under section 23(4); and (b) contains financial statements for the year consisting of—" and this is where the difference kicks in "(i) a statement of financial position prepared in accordance with the New Zealand International Financial Reporting Standards; and (ii) an overall operating statement; and (iii) a statement of cash flows; and (iv) any other statements necessary to fairly reflect the amenity's financial position the resources available to it and the financial results of its operations; and (v) any other information reasonably necessary to enable the Funding Board to make an informed assessment of the amenity's operations for the financial year as set out in its annual plan."So that's what we currently have. What Ms Durkin points out to us is that that is replaced with wording which is a bit more limited. We replace section 39(2)(b) which I've just gone through with this: It must contain financial statements for the year prepared in accordance with the generally accepted accounting practice (GAAP). So OK we understand there that we're shifting from the New Zealand International Financial Reporting Standards (IFRS) to GAAP. We get that. That's clean; that's done. Secondly it must contain any other information reasonably necessary to enable the funding board to make an informed assessment of amenity's operation for the year as set out in its annual plan. So that's effectively the same as subparagraph (v) in the current legislation.So what we're missing from the current legislation transferring across to the new bill is the second point which is that it must include an overall operating statement; thirdly a statement of cash flows; and fourthly—I think this is probably the most important one—any other statements necessary to fairly reflect the amenity's financial position the resources available to it and the financial results of its operations.So that's in the current legislation; it's not in the bill which is being presented by the member. I think we really do need to understand what the rationale is for removing these quite important requirements in terms of the reporting standards because this goes to the heart of Ms Durkin's concerns in her submission that the reporting standards are actually being lowered. At face value she's got a point because we are reducing the number of things that must be reported on. This is really important because of those points that I've made and that Ms Durkin's made about public money involved and about the fact that these organisations to some extent are privileged so we need to have a high level of probity. I've got to say knowing a little bit and being a bit involved in Auckland politics that this is not entirely uncontentious. There are organisations who are not included and are not funded through the amenities board who think they should be. There are some people in the cultural sector who think that the way in which funding decisions are made is not quite right and should be done in a different way and different things should be weighted and it's too much this way and not enough that way. Now I'm not expressing a particular view on those things but what I am saying is that given it is public money given that there are those different views out there the reporting processes that we have when that money is allocated have to be watertight and the public and the sectors that are involved and the people that are missing out need to be able to have confidence in that as well.So let's just go through those again. An overall operating statement—that has to be reported on at the moment. It's not included in the new legislation so let's hear about why an overall operating statement has been removed. Now there might be a really good reason. I do note that my colleague Dr Deborah Russell has asked for some detailed explanation about the differences between the two accounting standards. We haven't yet heard that detail in the committee. Now it might be that the answer's within that. Perhaps a shift from one accounting standard to another means you get that information anyway. I don't know that; I'm not an expert in these affairs but I do know that the member—and the chair who's overseeing this legislation Dr Parmjeet Parmar she will have read up. She will know the difference between IFRS and GAAP. She'll have the detail at her fingertips. So she'll be able to tell us whether the removal of an overall operating statement as a reporting requirement can be accounted for by the fact that we have moved from one accounting standard to another. Maybe that accounts for it. The same goes for a statement of cash flows. There's a point I make here which is that the reporting statements of large organisations are often exceptionally complicated. Here we have organisations which do take in public money—it's publicly appropriated—and some of these simpler documents like an operating statement and a statement of cash flows are far more accessible for the average Auckland ratepayer who ultimately is paying to support these organisations. So I want to have assurance that the average Auckland ratepayer who wants to know how this money is being spent doesn't have to wade through a 150-page document that they can't make head or tail of and that there's some good simple transparent information that they can get to—and at face value an overall operating statement and a statement of cash flows would really help with that. But we've removed that through this legislation so we do need to hear from the member in the chair who's overseeing this bill why that is why that's being removed and her level of confidence that we're still going to have reporting that's done in a really accessible way and her response to Julia Durkin's assertion that we're effectively lowering the reporting standards here when in fact we should have higher reporting standards.I've left what I think is the most significant one for last and that's section 39(2)(b)(iv) of the Act. This is the one that's missing and again it says "any other statements necessary to fairly reflect the amenity's financial position the resources available to it and the financial results of its operations;" It seems to me to be quite substantial that that is being removed because that really goes to the core activities of many of these organisations. So for example let's take an organisation like the Auckland Regional Rescue Helicopter Trust and the resources available to it. It has financial resources. It has resources in terms of a physical base—I've visited it to see the great work of the men and women in that incredible service. They have a volunteer base that's an important resource for them. They have a significant fundraising organisation. They have significant goodwill. They have this wide range of resources available to them. At the moment that is included in the legislation as something that is reported on and we are removing the wording that ensures that that continues to be reported on. So we do need to understand why that is and I hope there's a really good reason. I hope it hasn't just slipped through and that we can have confidence that the people of Auckland who are paying for this stuff can continue to have transparency and good oversight of these organisations. So I would ask the member in the chair to address those questions and give us some satisfaction that there's a good reason behind these very significant changes that are raised in Julia Durkin's submission. Thank you."