Auckland Council is more than 87 percent of its way towards achieving an operational savings target of $50 million following the stern missives of last year’s annual budget.
Following news of an operating shortfall of an estimated $325m, a range of services were on the table to cut to get the council back in the red.
A savings target of $50m was decided in the annual budget, which came into play in June last year.
That figure included $33.8m worth of new savings on top of $17.2m already pledged to be saved from existing savings targets.
Documents from Auckland Council seen this week show the organisation has not been slow off the mark when it comes to trimming what the budget deemed as fat, saving $37.6m in the first quarter following the new budget.
The operating costs were reduced largely by improved commercial terms in contract negotiations and budget reviews, with council staffers also saying “one-off savings were also achieved from expenditure falling below budget through careful financial management and staff vacancies”.
Along with these were a list of other savings such as withdrawing from early childhood education and removing $100,000 worth of printers from council buildings.
But though exiting early childhood education was expected to net about $1m a year, around half of that may not be coming in because of the costs of redundancies and delays in renting the childhood centres out to new tenants.
“The latest ECE service financial review showed that no operating savings are expected for 2023/2024 due to existing costs and redundancy provisions,” council staff wrote to councillors.
“A further $0.5m of ongoing savings are at risk due to the uncertainty around the extent of overhead cost reductions achievable and the ability to commercially lease the ECE premises.”
Four council-funded early childhood centres in Howick, Glenfield, Beach Haven and Birkdale chose to continue their service through local boards and will carry on with the direct provision of ECE services in their board area via a third-party provider and the current service will be funded until June 30, 2024.
Six centres have already been shut down across the city, with the time running out for the remaining four.
The decision to cut costs by getting out of the early childhood game came after it was revealed the service had operated at a loss of $200,000 over the previous financial year.
Union representatives, however, said it was unfair to base the programme’s fate on data cherry-picked from the difficult pandemic years.
At the time, NZEI Te Riu Roa national secretary Stephanie Mills estimated the closure of Kauri Kids would cost about $1m just in redundancy packages for the highly unionised staff across the centres.
It’s a warning that appears to have come to fruition, with no operating savings reported from the dismantling of Kauri Kids for this year.
Nevertheless, the council financial team appears confident it will meet savings targets for this financial year, saying progress towards the target is “on track, with a sufficient pipeline of expected efficiency improvements, procurement opportunities and anticipated expenditure below budgeted levels”.
Council staff said significant risks to future savings included inflationary pressure on staff and operating costs and policy changes from the Government.
Some areas of saving were surprising – apparently, $100,000 a year has been saved by decommissioning printers in council buildings.
The hefty contract for the printer lease expired for good last November.
Meanwhile, labour shortages had a perversely positive effect on council finances.
Staff costs for the second quarter were below budget because of the effect of unusually extended recruitment times and struggles to fill engineering, sustainability and IT roles.
That saved some that would otherwise have been spent on payroll, but also placed pressure on the delivery of services and in some cases forced the council to outsource at cost.
Staff savings represented $4.1m in the second quarter of 2023.
Other savings included $200,000 of one-off and permanent savings from telecommunications costs by moving from copper lines to fibre.
“A permanent saving opportunity in telecommunication cost was identified through the continued reduction of copper line connections to our council facilities by migrating to the fibre network.”
$100,000 worth of savings is expected from this each year of the rest of the current long-term plan.
