Local Government Magazine

OAG audit highlights risk

Photo by Chris Tse

Eighty percent of local authorities now have audit committees but only 67 percent of them are considered effective. That’s one of the main messages from assistant auditor-general, local government Bruce Robertson as the Office of the Auditor-General (OAG) releases its latest observations from council annual audits for the financial year 2013/14.

Commenting on the just-released report Local Government: Results of 2013/14 audits, Bruce says local authorities need to continue to focus on developing their approach to, and expertise in, risk management.
The audit report picks up on consistent themes on which the OAG has been commenting for some time: governance and risk management; rates; and the management of assets associated with delivering core services.
Bruce says that, as expected, rates and the rate-setting process continue to be of concern, especially in the Chatham Islands and Taupo. Although he adds that the OAG expects councils to perform better in the 2014/15 financial year as they have had the opportunity to correct processes.
Many councils are continuing to under-deliver on capital projects affecting the assets delivering core services, he says, “which also means projected debt levels across the sector are lower by $1 billion”.
“Worryingly, we note that the area of greatest under-delivery is renewal / replacement of the existing asset base,” he says, with replacement at 75 percent and renewal at 79 percent, in contrast to new assets at 91 percent.
The report also notes that 34 of the country’s 78 councils only completed their accountability requirements for the financial year in the last week of October 2014. This is the last available week for doing so and three local authorities did not report within this timeframe.
Bruce says such councils risk short-changing the ratepayer and have limited the time they have to devote to planning, as they are required to do for the 2015-25 long-term plan.
The OAG recently provided additional comment on how local authorities are managing the future challenges of delivering core services through assets (See its report Water and roads: Funding and management challenges). In this report it stated that while management of short-term challenges is reasonable, councils must step up to manage the strategic / long-term challenges.

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