Part 7: The status of Māori Trust Board audits

Central government: Results of the 2007/08 audits.

7.1
We have previously expressed concerns to Parliament about the audit and accountability arrangements for those Māori Trust Boards (MTBs) governed by the provisions of the Māori Trust Boards Act 1955 (the Act).1 The legislative framework for the MTB sector has remained largely unchanged during the last 15 years.

7.2
The previous Government was considering policy proposals that would have addressed many of the matters we have raised in previous reports to Parliament about the audit and accountability framework for MTBs. Until these policy proposals are reconsidered by the current Government, the Auditor-General will remain the auditor of all MTBs.

7.3
This article outlines the status of audits in the MTB sector as at 9 April 2009.

What is the Māori Trust Board sector?

7.4
MTBs have functions under section 24 of the Act to manage tribal assets for the general benefit of their beneficiaries. They are able to provide money for the benefit or advancement of their beneficiaries and to apply money towards the promotion of health, social and economic welfare, and education and vocational training.

7.5
Section 2 of the Act defines a beneficiary as any person for whose benefit the assets of an MTB are administered under the Act. Part 1 of the Act further defines who constitutes a beneficiary for each of the MTBs governed by the Act. Each definition is slightly different. Generally speaking though, MTB beneficiaries are those persons who have genealogical links to the tribe(s) that the MTB represents.

7.6
There has been a gradual reduction in the number of MTBs – from 19 in 1993 to 15 in 2009. The 15 MTBs that were subject to the Act for all or part of the 2007/08 audit period were:

  • Aorangi;
  • Hauraki;
  • Maniapoto;
  • Ngāti Whātua ki Orakei;
  • Taranaki;
  • Tauranga-Moana;
  • Te Aupōuri;
  • Te Tai Tokerau;
  • Te Rūnanga o Ngāti Porou;
  • Te Rūnanga o Ngāti Whātua;
  • Tūhoe-Waikaremoana;
  • Tūwharetoa;
  • Wairoa-Waikaremoana;
  • Whakatōhea; and
  • Whanganui River.

7.7
These MTBs are public entities under the Public Audit Act 2001, and are therefore audited by the Auditor-General.2

What are the audit arrangements for Māori Trust Boards?

7.8
The Act requires MTBs to prepare annual statements that set out their financial position and financial operations at the end of each financial year. These must be audited by the Auditor-General, who in turn forwards copies of the financial statements and audit report to the Minister of Māori Affairs.3

7.9
The Act does not specify a deadline for providing accounts for audit and completing the annual audit. However, the Auditor-General requests that his auditors complete the annual audit on his behalf within five months of the balance date. Since most MTBs have a balance date of 30 June, this means that their audits are due to be completed by 30 November each year. The audits for the four MTBs with a 31 March balance date are due to be completed by 31 August each year. We regard audits not completed within five months of the balance date as being in arrears.

What is the status of Māori Trust Boards’ audits?

7.10
In each of our previous reports to Parliament, we have expressed concern about the timeliness of MTBs’ preparation of their financial statements, and how this detracts from the purpose of having audited financial statements. As at 9 April 2009, our audit of financial statements for the 2007/08 year had been completed for only three MTBs – Te Rūnanga O Ngāti Porou, Ngāti Whātua o Orakei, and Wairoa-Waikaremoana. The 2007/08 financial statements had been received for audit from five other MTBs.

7.11
Of the 12 MTBs that had their 2007/08 audit in arrears, eight of them also had audits for earlier years still in arrears. Two MTBs have yet to have an audit opinion issued for the 2003/04 financial year. However, we have received the financial statements for these outstanding 2003/04 audits.

7.12
Similarly, progress is being made to bring the audits of other years up to date. We have received financial statements for the three outstanding 2004/05 audits, four of the five outstanding 2005/06 audits, and five of the eight outstanding 2006/07 audits.

7.13
Figure 19 shows the total number of audits in arrears, by year.

Figure 19
Status of Māori Trust Board audits as at 9 April 2009

Audit status 2004 2005 2006 2007 2008
Number of MTBs in audit portfolio 17 16 16 15 15
Number of audits completed 15 13 11 7 3
Number of audits in arrears (that is, not completed within five months of balance date) 2 3 5 8 12

* For Te Rūnanga o Ngāti Whātua, the Board opinion has been issued for 2005, but the Group opinion is still outstanding. We consider, on balance, that it is more accurate to classify that year’s audit as in arrears.

7.14
The reasons for the audits being in arrears include:

  • delays by MTBs or their accountants in producing financial statements for audit;
  • delays by MTBs or their accountants in making the necessary amendments after initial audit work has been completed;
  • delays in completing MTB subsidiary audits that are needed for Group consolidation purposes (as noted in footnote 2, the Auditor-General is not the statutory auditor of MTB subsidiary entities);
  • difficulty in resolving technical accounting and auditing issues, such as the valuation of assets; and
  • competing demands on audit resources when the initial time frames set to complete the audit are not met because of the reasons outlined above.

Are the audit arrangements for Māori Trust Boards appropriate?

7.15
In our view, there are a number of shortcomings in the current accountability framework for MTBs. It does not adequately encompass the usual characteristics of modern accountability frameworks, nor does it reflect the current operating environment for MTBs.

7.16
As a general principle, we consider that a trust’s beneficiaries and its trustees should have a direct accountability relationship. Such an arrangement enables beneficiaries to hold trustees to account for their performance. As we have reported in previous years, we believe that Parliament and policymakers could usefully consider how this general principle could underpin any reform of the Act.

7.17
We also consider that any review of the Act should examine the appropriateness of the audit arrangements. At the same time, the legislation could clarify MTBs’ requirements to prepare financial statements that comply with generally accepted accounting practice. This is not explicit in the Act. However, it is a requirement that we impose on MTBs because our audits must comply with the professional auditing standards set by both the New Zealand Institute of Chartered Accountants and the Auditor-General. Setting a statutory time frame within which an audit must be completed would also be desirable.

7.18
We understand that the previous Government was considering policy proposals to address these issues before the November 2008 General Election.

Conclusion

7.19
Although the number of MTBs governed by the Act has been gradually reducing, this is a slow process. In our view, the accountability framework needs to be changed so that it meets modern standards for holding governing bodies to account for their performance and stewardship of an entity’s operations. We again recommend that the new Minister of Māori Affairs and Te Puni Kōkiri give urgent attention to some legislative reform.


1: Reports of the Controller and Auditor-General, First Report for 1993, pages 23-26; First Report for 1995, pages 99-125; Second Report for 1998, pages 57-75; Central government: Results of the 2005/06 audits, pages 77-84; and Central government: Results of the 2006/07 audits, pages 61-63.

2: The Auditor-General is not the statutory auditor of any MTB subsidiary entities. However, he has accepted audit appointment requests for a number of MTB subsidiary entities under section 19 of the Public Audit Act 2001.

3: Section 31 of the Act.

page top