From the Chief Executive - Councils Must be Meticulous

26/06/2014 12:00 a.m.

Every year the Auditor-General (Lyn Provost) reports to Parliament on the results of audits conducted on New Zealand's local authorities.  Alongside the specialist one-off investigations her Office undertakes into the local government sector, all councils annual reporting information is audited. This is to give the public and Central Government a level of confidence in council performance and accountability.

In her most recent report to Parliament, concerning the 1 July 2012 to 30 June 2013 financial year, there are hard hitting findings that will result in changes to wide-spread rating practices throughout the sector. Putting Kaipara District Council and the issue of poor management and governance oversight to one side as an extreme example of what can go wrong, the report still makes for a sobering read for the local government sector.

Last year, auditors were specifically instructed to look more closely at council rate setting processes than they have in the past. What they found, and what the report documents in detail, is that a significant number of councils throughout the country had poor, deficient, or questionable rates practices, particularly with their processes for setting rates.

Many councils failed to comply with the detailed requirements of the law. A number of councils were found to have procedural problems with their rates-resolution processes and practices. A number had problems with their Funding Impact Statements. One council might not have properly adopted its final Long Term Plan, which could affect the validity of all rates in the district. Others omitted to include all the information required for their Long Term Plans and Revenue and Financing Policies for rates to be validly set. In some cases councils failed to comply with the Local Government (Rating) Act 2002 requirements about general rates. One council incorrectly charged and collated rate penalties. For others, their rates resolutions failed to comply with the statutory requirements of the Rating Act. Auditors found "complexity, confusion, and lack of clarity with how local authorities rated for water charges, especially water meter charges." Many councils did not pay enough attention to the legal requirements, and had poor and incomplete processes, for lump-sum contributions.

Why has this occurred? The Rating Act is okay in itself, but the problems come about as council officers try to implement and integrate the Act's requirements with the requirements of another piece of legislation, the Local Government Act 2002. Practices have evolved over time as officers have tried to be pragmatic. We are frequently asked by the public to use plain language rather than bureaucratic jargon. Often the level of non-compliance that has been found could be described as quite minor, but … in the Auditor-General's view "…near enough is not good enough."

The message from the Auditor-General is that councils need to be meticulous about complying with the Rating Act. We have a responsibility to meet the obligations of the Act. The risk of not addressing the poor practice that has been identified is that anyone can challenge the validity of rates through the High Court. Any uncertainty or ambiguity in existing processes needs to be rectified.

Thankfully Ashburton District Council is not one of the 15 plus councils signalled out by the Auditor-General. We obtained a standard or unqualified audit report (i.e. a clear audit opinion) for our 2012/13 Annual Report. Council officers did report some minor technical issues through to our Audit and Risk Subcommittee. These have been or will be covered-off with Council setting the rates this Thursday for the 2014/15 financial year, and also with our next audit, which will occur over the coming months for the 2013/14 year. This audit will be conducted by Audit New Zealand (on behalf of the Auditor-General) at an expected cost of $111,000 excluding GST and Council officer time.

The Auditor-General's full report for the 2012/13 year is available on their website.

Andrew Dalziel
Chief Executive 

Page reviewed: 26 Jun 2014 9:10am