Part 4: Reserve Boards

4.1 Reserve Boards – financial overview

• Introduction
• Overview of financial performance
• Crown Entities Act 2004 and Public Finance Amendment Act 2004
• Conclusions

Introduction

4.101
The purpose of this article is to provide an overview of the financial performance of Reserve Boards since we last reported on the sector in 1998.¹It continues our practice of reporting, on a rotational basis, the financial performance of the smaller sectors that fall within the Auditor-General’s mandate in our annual “results of the audits” reports.²

4.102
Reserve Boards are appointed under the Reserves Act 1977 (the Act) to control and manage reserve land.

4.103
The Auditor-General is the auditor of 29 Reserve Boards under section 88A(2) of the Act and section 15 of the Public Audit Act 2001.

4.104
Reserve Boards are one type of Board appointed under the Act, which defines Boards as any “Reserves Board, Trust, Trust Board, or other special Board appointed under this Act or any corresponding former Act”.³

4.105
A Board is also one of several types of Administering Body defined in the Act as –

“Administering body”, in relation to any reserve, means the Board, Trustees, local authority, society, association, voluntary organisation, or person or body of persons, whether incorporated or not, appointed under this Act or any corresponding former Act to control and manage that reserve or in which or in whom that reserve is vested under this Act or under any other Act or any corresponding former Act; and includes any Minister of the Crown (other that the Minister of Conservation) so appointed.⁴

4.106
The Auditor-General is also the auditor of a small number of these administering bodies, primarily boards of Racecourse Trustees. Administering bodies are not covered by this article.

Overview of financial performance

4.107
The information in Figure 4.1 is based on figures extracted from the most recently audited annual report of each Reserve Board (except as noted otherwise).

4.108
In our 1998 report, we drew attention to the fact that many Boards were in arrears in preparing their annual financial statements. We noted that 145 sets of accounts were in arrears over a period of 10 years for the then 61 administering bodies (including Reserve Boards). Since writing that article, the situation has improved. However, as can be seen from Figure 4.1, some Boards are still having difficulty, because the most recent accounts that we have received and audited for some Boards is for the year ended 30 June 2002 or 2003.

4.109
In our 1998 report we also drew attention to the reporting requirements of Reserve Boards, noting that many Boards were having difficulty complying with their reporting obligations and this had, in part, contributed to an increase in the number of Boards that were in arrears.

4.110
Under the now repealed (but still in force) section 41B of the Public Finance Act 1989, the Minister of Finance may grant an exemption from the financial reporting requirements of the Act. The section also allows the Minister to require a Board to include other statements, figures, or accounts in place of the statements dispensed with.

4.111
Since our 1998 report, the Minister has exercised his discretion and exempted Reserve Boards below specific financial thresholds from some of the Public Finance Act 1989 reporting requirements. This exemption has made the reporting requirements less onerous, and has assisted with reducing the number of Boards that are in arrears in preparing their annual financial statements.

Crown Entities Act 2004 and Public Finance Amendment Act 2004

4.112
The Crown Entities Act 2004 and the Public Finance Amendment Act 2004 affect the financial reporting arrangements of Boards from 1 July 2006.

4.113
Before the Public Finance Amendment Act 2004 was enacted, Boards were Crown entities under the Public Finance Act 1989 and were required to prepare financial statements under that Act. The Public Finance Amendment Act 2004 amended the Reserves Act 1977 and the Public Finance Act 1989 so that Boards are deemed to be Crown entities for some purposes only. Boards are listed on a new Schedule 4 of the Public Finance Act 1989, which lists a number of individual entities and classes of entity, such as Boards and Fish and Game Councils.

4.114
As the new financial reporting regime in sections 153 to 156 of the Crown Entities Act 2004 does not apply to Boards until the year beginning 1 July 2006, financial reporting and audit until that time is under the Public Finance Act 1989 as if that Act had not been amended by the 2004 Amendment Act.

Figure 4.1
Summary of Reserve Boards’ most recent audited financial information

* Sufficient and appropriate prime source documentation was not available to enable receipts and payments to be accurately reflected in the Statement of Receipts and Payments.
** Figures are unaudited.
*** Figures are for the year ended 30 September, and are unaudited.

4.115
The Minister’s exemption power in section 41B of the Public Finance Act 1989 is replaced by a new power in section 39A(1) of the Reserves Act 1977, as amended by the Public Finance Amendment Act 2004.⁵ Our understanding is that the Minister’s current exemption will continue to apply to the 30 June 2006 reporting period, unless revoked or replaced.

Conclusions

4.116
The timeliness of reporting by Reserve Boards has improved since we last reported on the sector in 1998. However, some Boards remain several years in arrears. Our appointed auditors will continue to work with those Boards to improve the timeliness of their reporting.

4.117
Because of the legislative changes affecting the financial reporting arrangements of Boards from 1 July 2006, it may be necessary to review and confirm the current reporting exemptions provided to Boards. We understand that the Treasury and the Department of Conservation have written to Boards advising them of the changes to the Public Finance Act 1989 and, as part of that process, they have indicated that this matter will be considered.

1: Our First Report for 1998, parliamentary paper B.29[98a], pages 137-142, reported on issues associated with the audit of Cemetery Trustees and Reserve Boards.

2: In last year’s Local Government: Results of the 2003-04 Audits report (parliamentary paper B.29[05b]), we provided an update on the financial performance of the Provincial Patriotic Councils sector. Next year we intend to report on the Cemetery Trustees sector.

3: Section 2, Reserves Act 1977.

4: Ibid.

5: Section 39A of the Reserves Act 1977, as amended by the Public Finance Amendment Act 2004, provides that a Board may, with the consent of the Minister of Finance, dispense with preparing any of the statements referred to in section 150 (annual report), section 153 (statement of service performance), or section 154 (annual financial statements) of the Crown Entities Act 2004.