Development Trust Agrees With Treasury Report
West Coast Development Trust
15 June, 2007
Development Trust Agrees with Treasury report
The independent findings of Treasury conclude The West Coast Development Trust has been very successful in getting its operations established and supported by a strong set of policies and processes within a short time-frame.
The Minister of Finance Mr Cullen met with Trustees in Wellington yesterday to discuss the review and agree final changes to the Trust Deed.
In a summary report of the Treasury review tabled to Trustees, Mr Cullen noted the Trust's investment strategy, supported by its statement of Investing Policies and Objectives, has resulted in the growth of the initial capital from $92 million to $120 million over 6 years. He said the Trust had managed its funds well, achieving significant returns.
The role of council appointed Trustees was queried during the review. Both the Deed and the general law require that council appointed trustees act in the best interests of the beneficiaries "as a whole" (i.e., the West Coast Region, not any one district).
An appointing Council has the power to remove the trustee and to appoint another in his/her place if that trustee is not acting as the appointer would have wished.
However, to the extent that a council appointed trustee takes decisions for any interests of a district or council interest that is in conflict with the interests of the beneficiaries as a whole, the trustee would be in breach of his/her fiduciary duty and could possibly incur personal liability.
Treasury's recommendation for six Trustees was seriously considered and debated but ultimately agreed by the majority of Trustees at its June meeting. The new Trustee governance structure will include:
One Trustee jointly appointed by the four West Coast Councils (the appointed Trustee). Three Trustees elected – one for each of the three West Coast Districts (the elected Trustees). One Trustee appointed by Ngai Tahu (the Tangata Whenua Trustee): and One Trustee appointed jointly by the Law Society and Institute of Chartered Accountants (the independent Trustee).
"The operational enhancements agreed by all parties will certainly streamline governance and operational aspects of the Trust. Trustees, my team and I just want to continue providing the best possible service to the people, industry and key stakeholders of the region and working towards the goal we have been charged with in the Deed which is the economic sustainability of the region," said Mr Trousselot.
Treasury has recommended the Trust should reconsider its level of involvement in community distributions, particularly in minor distributions with limited economic impact but has agreed that a definition of infrastructure be utilised which allows flexibility to fund more discretionary projects in the community, such as aquatic and recreational facilities.
Treasury recommends community applications be vetted by the Trust's Advisory Body in a similar manner to its direct business applications.
Treasury acknowledged the Advisory Body and Trust management have put considerable work into developing an approach for assessing the extent that community projects contribute to the objects of the Trust.
As the Trust has steadily grown in size, capability and operations, Trustees have needed to adopt more of a governance focus i.e., determining the direction and major policy settings of the Trust. The Trustees are encouraged to strengthen the emphasis on the Trustees' governance role.
The Trustees' intended shift to a more tiered application processing approach will support this emphasis. A hierarchy of delegated authority was agreed to enable the timing of Trust approvals to be improved.
Acknowledging the Trust's capability in investment and the benefits of its long term investment strategies, Treasury has authorized the Trust to borrow up to 10% of the value of its investment funds, for the purposes of investment and capital markets.
"This borrowing will be utilised to enable funds currently held in short term markets, to be invested into longer term investments and to utilise borrowing for short term liquidity requirements," said Mike Trousselot.
Chairman, Frank Dooley said "Trustees are not only pleased with the ongoing strong financial performance of the Trust, but also the success of the large number of regional development projects with which it engages."
"The review has taken some time but the results have certainly been worth the wait," he said. The review shows the Trust is in good hands and I believe most of the people of the Coast know that too."
"We have a strong track record confirmed by several independent reports. The Trust is proud to say they have committed over $30 million of investments into local businesses, of which, over 50% have already been fully repaid, and contributed over $15 million to community projects and still we have been able to grow the pot for future generations."
A copy of the summary report and a report sent to stakeholders can be found on www.wcdt.org.nz