Part 15: Issues for provincial patriotic councils seeking to cease operations
15.1
In 20001 and 2005,2 we reported on provincial patriotic councils. Our articles in both reports highlighted the lack of mechanisms for provincial patriotic councils to wind up their activities. However, in practice, a number of them have ceased to operate and others have indicated that they would like to do so.
15.2
Provincial patriotic councils are created by statute, so further legislation is needed to abolish them. The relevant legislation is administered by Veterans' Affairs New Zealand.3 We have raised with Veterans' Affairs New Zealand the need to promote legislation to allow these councils to choose to stop operating.
15.3
Without an effective mechanism to wind up the activities of such councils, the councils and our Office have adopted a pragmatic approach. In practice, a council will pass a resolution agreeing to wind up its activities. The council will also decide how to distribute any remaining funds. We then conduct an audit of the council's final set of financial statements. The council notifies Veterans' Affairs New Zealand that it no longer operates. The responsibility for removing the council from the statute book then rests with Veterans' Affairs New Zealand.
Northland Provincial Patriotic Council – steps taken to cease operation
15.4
Consistent with the approach outlined above, the Whangarei-based Northland Provincial Patriotic Council (the Council) transferred its remaining funds to The Northland District RSA Charitable Trust Incorporated (the Trust) on 30 July 2007, and effectively ceased to exist.
15.5
The Council remains a legal entity, despite transferring its remaining funds to the Trust and ceasing to operate. Our appointed auditor audited the final set of financial statements, up to the point of transferring the remaining funds to the Trust.4 Even though the Council continues to exist as a legal entity, it will not prepare any further accounts. Because the Council has ceased to operate, no further audits will be carried out.
15.6
The Council has for many years provided welfare-based support for returned servicemen and women in its district. However, in common with a number of other councils, it recognised that it was becoming less reasonable to maintain its operations.5
15.7
To cease its operations, the Council had to:
- identify a suitable recipient for the remaining funds – in this case, the Trust, which the Council noted was operating “with similar ideals and principles”;
- advertise the Council's intention to cease operating, transfer its remaining funds to the Trust, and invite comment;
- inform Veterans' Affairs New Zealand of its intention; and
- arrange for our appointed auditor to audit the final set of financial statements.
15.8
On 30 July 2007, the Council transferred the amount of $92,713 in cash and $335 in assets to the Trust, and ceased operations. The Council noted that, in doing so, it was seeking “economies of scale” (with the Trust) and “strength in unity”.
Conclusion
15.9
The Council responded in a pragmatic and effective way to its circumstances.
15.10
A number of other councils have followed a similar course, and more councils are likely to face similar circumstances in the future. It would be desirable for the legislation to be amended to create an effective mechanism to recognise when councils cease to operate, and to stop them existing in law as well as in practice.
1: Second Report for 2000, parliamentary paper B.29[00b], page 115.
2: Local Government: Results of the 2003-04 Audits, parliamentary paper B.29[05b], page 95.
3: Veterans' Affairs New Zealand is a semi-autonomous body within the New Zealand Defence Force.
4: Our statutory audit responsibility is based on section 40 of the Patriotic and Canteen Funds Act 1947 and section 15 of the Public Audit Act 2001.
5: Our previous articles on provincial patriotic councils point out the diminishing size of the remaining councils in New Zealand and that a number of councils were similarly ceasing their operations and disbursing any remaining funds.