The annual Audit Report on Waipa District Council from Audit NZ has recently been publicly released. The overall conclusion is a favourable one: ‘the financial statements and statement of performance present fairly the Waipa’s activity for the year and its financial position at the end of the year’.
That’s good. But there were a few things later in the report that were not quite so favourable.
First, there was a list of 10 recommendations from previous year’s NZ Audit reports. Only four of them had been implemented. The other six were still in various stages of progress. All of these recommendations had a NZ Audit classification of ‘necessary’. Their three classifications are urgent, necessary and beneficial. The council must have agreed that the proposed changes were necessary or they should have challenged that classification at the time. Two of the recommendations were made in 2019/20.
When I was Governor of the Central Bank of Bosnia and Herzegovina the reports to the board Audit committee were done on an ‘exceptions basis’. The emphasis was put on the things that had not been implemented, not the things that had been done. I had to explain to the board every month why something was still on the list of uncompleted issues. We backed it up by paying all the staff a small bonus twice a year if the budget was met and most of the plan implemented.
This system of reporting and monitoring had a significant impact on the performance of the bank. No part of the bank wanted to be on the ‘exceptions list’ that went to the board and possibly cost the rest of the staff their bonus. In the report to the council’s Audit committee the things that haven’t been implemented aren’t at the beginning – they are on page 24.
Second, the two items that are outstanding from 2019/20 are a financial delegations register and improving the central register for contractors. I can’t understand why things like this take more than three years to complete.
Third, another open recommendation relates to the interest register for councillors. Audit NZ said ‘we continue to note instances where interests are not disclosed to the interests register’. The council had some problems in this area a year or two ago which led to some very negative publicity. Given that, I would have thought that everybody at the council would be ensuring that this register was up-to-date and complete at all times.
Fourth, Audit NZ said that ‘during our testing of capital commitments we noted inherent difficulties in obtaining supporting information on contractual commitments the council has entered into’. This looks like a serious weakness to me. The council has a significant on-going capital programme, costs for many projects seem to rise significantly after a project has been approved, and a recent study said New Zealand has the highest costs in the world for infrastructure projects.
All of these things mean the recording of capital commitments has to be accurate and complete or there could be some nasty surprises and shocks. The management’s response to Audit NZ was that ‘finance will work with the project delivery team to ensure system reports at year end accurately reflect the capital commitments we have entered’. It is not just at year end that this data needs to be accurate. It needs to be accurate and complete at all times.