Introduction

This report is our “annual report” on the audits for 2001-02 of the local government sector in the Auditor-General’s portfolio under the Public Audit Act 2001. Most of these audits are of regional and territorial local authorities and their subsidiary entities that were established and governed principally by the former Local Government Act 1974.

As we describe in paragraph 1.101 on page 11, the new Local Government Act 2002 has replaced that 1974 Act. In addition, the legislation under which local authorities levy and collect their income from rates has also been updated in the form of the Local Government (Rating) Act 2002.

The number of entities within the Auditor-General’s local government audit portfolio has also grown as a result of the definition of a “public entity” in the Public Audit Act including “controlled” entities. We discuss this consequence in section 2.1 of the report on pages 31-37.

Purposes of this Report

The purposes of this report are to:

• tell Parliament and the local government sector about matters arising from carrying out our role as auditor of the sector;
• identify areas that are, in our view, appropriate for legislative or other clarification or amendment; and
• describe examples of our expectations of “best practice” on various matters of financial management and reporting, governance, and administration.

Contents of this Report

The contents of this report are grouped into four parts:

Part 1 (starting on page 9) reports on matters that arose during the course of the conduct of the 2001-02 annual audits. This year, we have chosen to identify those entities on whose financial reports – some of which relate to financial years before 2001-02 – we issued a qualified audit opinion (see pages 12-16).

Part 2 (starting on page 29) deals with other issues that arose during 2001-02 and have some longer-term consequences. Notable among these issues are the new public entities subject to the Auditor-General’s audit under the Public Audit Act 2001 (see pages 31-37), and the outcome of and issues arising from a prosecution that we initiated under the Local Authorities (Members’ Interests) Act 1968 (see pages 50-53).

Part 3 (starting on page 55) describes some of the issues that we have identified for attention during this year’s 2002-03 annual audits. We will give particular attention to local authorities’ implementation of the two new major pieces of legislation under which they now operate – the Local Government Act 2002 and the Local Government (Rating) Act 2002 (see pages 57-62).

Part 4 (starting on page 71) provides a review and commentary on the recent financial performance of licensing trusts and their related entities. The scope of business activities conducted by them has become increasingly wide and complex, and some have been more successful than others in the changed environment.