Auditor-General's overview

Final audits of Auckland's dissolved councils, and managing leaky home liabilities.

My Office audited the financial and service performance statements in the final annual reports of the eight dissolved Auckland local authorities and 19 terminated council-controlled organisations. The former councils had significant final aggregate net assets of $25.4 billion, before consolidating subsidiaries. I am pleased to report that the former councils reached most of their service performance targets in a time of tremendous change and uncertainty.

The Auckland reform legislation provided a framework for transferring responsibility for finalising the annual reports of former local authorities and council-controlled organisations to the entities that received their operations. All the reports were finished under this framework, although some were not finished and made available to the public within the required statutory time.

With the former entities' final annual reports now completed, Auckland Council must quickly establish its opening financial position to underpin its planning and reporting. Its opening position will vary from the former councils' aggregate closing position, because about $18.9 billion in assets, together with related liabilities, became the responsibility of entities that the Council controls and because the Council must apply its own accounting policies to the balances it has inherited.

Auckland Council has begun to combine the former councils' frameworks for reporting service performance, both in its long-term plan and in its draft annual plan. The Council's overall performance framework must deal effectively with its emerging strategies and unique governance and accountability arrangements. These arrangements include decision-making and accountability shared between the governing body and local boards, and delivering key services through entities that the Council controls.

Part 3 of this report looks at the effects on local authorities of leaky home liabilities – effects greatest in cities, especially Auckland. I am pleased to note that accounting and disclosure for this improved in 2009/10, largely because of the preparations made for dissolving the former councils and identifying a good starting position for Auckland Council. I commend this approach.

The work the former councils did to prepare to be aggregated into the new Auckland Council sets a standard for other local authorities to consider for reporting. The work has shown that, for the local authorities most affected by leaky home claims, it is possible to estimate liabilities with sufficient reliability that they can be fully accounted for in the financial statements.

Lyn Provost
Controller and Auditor-General

1 June 2011

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