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Looking back over the last year … we’re not just about the numbers!

Posted by Kristin Aitken | Local government | Jun 21, 2017
Sharing some insights from our 2015/16 annual audits...

Our audit work is our bread and butter – from this work, alongside what we hear from you and our oversight of the local government sector more generally, we gain insights into the challenges, issues, risks, and opportunities that you face.

Every year we publish a report to communicate the local government annual audit results. We published our latest report in April 2017. Here are the key messages, focusing on engaging with your communities, setting rates, and the main financial trends.

Engaging with your communities – timely, relevant, and accessible information

Communities need timely, relevant, and accessible information so they can engage with you on the issues that matter. This information includes annual reports (including summary annual reports), annual plans, and long-term plans, and the approach you take to consultation.

Timely means, at the very least, meeting statutory deadlines. Although most of you meet these deadlines, we did see a decrease in the number who met the deadlines in 2015/16 for publicly releasing your annual reports and summary annual reports. Just a reminder to check that your systems and processes enable you to produce and publish these documents on time.

In 2014, there were changes to the LGA to make consultation on long-term plans and annual plans simpler - which hopefully means they are more relevant and accessible for communities. You now have to formally consult on your annual plan only if it involves a significant or material difference from your long-term plan, and consultation on long-term plans and annual plans (if required) is via a concise and focused consultation document.

We looked at how you responded to these changes.

Some of you still chose to consult even though you weren’t required to. Others didn’t formally consult but still chose to engage with your communities via seeking feedback, holding workshops, and other methods. The decision whether to consult is one for your elected members, who should consider the legal requirements, the significance of issues, and the nature of your community.

Precision required when setting and collecting rates

A 2016 High Court decision on Northland Regional Council’s rates collection arrangements with the territorial authorities in its region highlights the importance of getting it right when setting and collecting rates. The decision was an interim one, but found that:

  • rating resolutions must specify the actual calendar dates for payment of a local authority’s rates;  and
  • local authorities can’t delegate some powers to another local authority – assessment of rates, recovery of unpaid rates, and imposing penalties.

You should check your rates resolutions and rates collecting arrangements for lawfulness – this is not the auditor’s responsibility. The role of the auditor is to get reasonable assurance that rates revenue has been properly calculated and that there has been no major risk to collecting rates – this requires the auditor to consider whether the key legal requirements have been met but not to confirm lawfulness of all aspects of rate setting.

Financial trends

As with previous years, we’re still concerned that you may not be reinvesting enough in your assets. We’ve also noted a continuing trend of not spending as much as you planned on your assets.

There is a risk that the condition of assets is deteriorating and that future generations who will bear the costs may not be able to afford to pay. We’ve based our view on a low level of capital expenditure that the sector is reporting for renewals compared to depreciation expenditure.

You should each consider whether you’re investing enough to maintain your existing infrastructure.

This requires you to have a comprehensive understanding of your critical assets and the cost of adequately maintaining them, and to consider whether you’ve set appropriate depreciation rates that cover the asset over its useful life. We’ll examine this more in our 2018-28 LTP audits.

Elected members need this information to make deliberate decisions about how to manage their community’s assets so they can have meaningful conversations with their community about whether to reinvest in assets, and, if so, how to fund it.

Next blog

In our next blog, we plan on discussing collaboration activity in local government – what do some of the working arrangements look like?

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