3.1 Issues for Attention in the 2003-04 Annual Audits

Local government: results of the 2002-03 audits.

Review of Preparation for 2006 LTCCPs

Other articles in this report have discussed the challenges that local authorities face in preparing long-term council community plans (LTCCPs) that address the full scope of the requirements of the Local Government Act 200239 (the 2002 Act).

Local authorities will need to plan carefully to prepare LTCCPs that are based on robust underlying information, integrate all relevant council policies, and communicate clearly to the public about intended services, issues, and choices.

Because 2006 is the first year in which we are required to give an opinion on LTCCPs under sections 84(4) and 94 of the 2002 Act, local authorities will also need to incorporate working with appointed auditors in their planning.

We intend to ask local authorities about their planning to prepare their 2006 LTCCP in order to:

  • identify points at which auditor input would be appropriate;
  • manage the workload demands of undertaking the audit both for the sector and for our Office; and
  • identify any issues in advance that may otherwise affect our opinions.

Review of Contents of 2004 LTCCPs

In our view, preparation of LTCCPs by local authorities will be easier for those that previously had a long-term financial strategy (LTFS) based on sound information. While the LTCCP adds new dimensions to the content of the LTFS – its predecessor under the Local Government Act 1974 – the disciplines of LTFS preparation are transferable to the LTCCP.

Our observation of the nine local authorities that prepared LTCCPs for the period starting 2003 suggests that these documents and the processes for their preparation will develop by iteration over the next two to three triennial adoption cycles. In our view, this is why the Act provides a transition for auditing these documents, with our first opinions to be issued on the LTCCPs adopted in 2006.

While we have no mandate to audit LTCCPs in 2004, we have asked our appointed auditors to assess how local authorities have fared in presenting the content requirements of the 2002 Act in their 2004 LTCCPs. Our objective in undertaking this work is to identify common areas for improvement where there may be a need for good practice to be applied.

We have also asked appointed auditors of local authorities to note any areas where disclosures appear insufficient or errors are identified with the local authorities for consideration in adopting 2006 LTCCPs.

Review of Summary of 2004 LTCCPs

The 2002 Act has introduced requirements for summaries to be prepared of three key accountability documents – the Statements of Proposal for the LTCCP and the annual plan (sections 83(1)(a)(ii), 93(2), 95(2) and 89), and the annual report (section 98(4)(b)).

These summaries are required to give a fair presentation of the “major matters” covered in the document on which they are based (sections 89(a) and 98(5)) and are established by the 2002 Act as the primary bases for general consultation and accountability.

Financial Reporting Standard No. 39: Summary Financial Reports (FRS-39) applies to the annual report summary (section 111), but there is no generally accepted accounting practice that explicitly applies to the other two summary documents.

Nonetheless, in our view, when suitably adjusted to reflect the future-oriented nature of the information, FRS-39 provides sound and relevant guidance to local authorities in preparing summaries of the LTCCP and annual plan Statements of Proposal. Summary LTCCP Statements of Proposal should also be prepared with an understanding of what will be reported in the annual report summary for the corresponding period.

We have asked our appointed auditors to assess whether:

  • the “major matters” in each local authority’s LTCCP Statements of Proposal have been covered in the summary; and
  • the summary provides information that will give readers a good basis for consultation and subsequent accountability.

Elected Members’ Remuneration

The Remuneration Authority assumed responsibility for setting the remuneration of elected members in December 2001, with the enactment of the Local Government (Elected Member Remuneration and Trading Enterprises) Amendment Act 2001. The provisions in this Act relating to remuneration were carried through into the Local Government Act 2002 (the 2002 Act).

The Remuneration Authority now determines the remuneration, allowances, and expenses payable to any elected member of a local authority, and to any member of a community board. The Authority’s first determination on these matters is set out in The Local Government Elected Members Determination 200340, which took effect from 1 July 2003.

The Determination therefore applies to the 30 June 2004 reporting year. As this is the first year of this regime, we have asked our auditors to ensure that local authorities have complied with certain aspects of the Determination.

Specifically, we have asked our auditors to ensure that the Determination has been complied with in relation to:

  • the aggregate amount that the Council is entitled to pay to all elected Council members in respect of salaries; and
  • the annual salary amounts for Office holders (Mayor/Chair, Deputy Mayor/ Deputy Chair, Chairs of Committees, and Councillors), where these amounts are specified in the Determination.

We expect that there should be no instances of non-compliance with the Determination. However, if any such instances are found, our auditors will report those instances to the local authority concerned and to this Office.

In next year’s report to Parliament, we will report on the results of this work.

Footnote 39: Learning in Local Government’s New Statutory Environment, pages 37-41.

Footnote 40: SR 2003/146.

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