Appendix 2: Responsibility for finalising the reports of dissolved and terminated entities

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

The former councils and council-controlled organisations dissolved and terminated by the Auckland reform legislation prepared annual reports for their final 16-month period up to dissolution on 31 October 2010. These annual reports had to be completed by the entities that became responsible for them, and made available to the public within the usual statutory time periods after that date.

Figure 2
Responsibility for finalising the annual reports of dissolved and terminated entities

Responsible entity Dissolved or terminated entity

Local authorities
Auckland Council The eight former councils

Council-controlled organisations – 20 in total
Auckland Council Auckland Regional Holdings Limited, NSC Holdings Limited, Waitakere City Holdings Limited, Manukau Leisure Services Limited, Manukau Building Consultants Limited, Waitakere Properties Limited, Rodney Properties Limited, Tomorrow's Manukau Properties Limited, TMPL (Flat Bush) Limited (9)
Auckland Transport Auckland Regional Transport Authority, Auckland Regional Transport Network Limited, ARTNL Britomart Limited (3)
Watercare Services Limited Metro Water Limited, Manukau Water Limited (2)
Auckland Waterfront Development Agency Limited Auckland Transport Infrastructure Limited*, Sea + City Projects Limited (2)
Auckland Tourism, Events and Economic Development Limited Waitakere Enterprise Trust Board, Enterprise North Shore Trust, Manukau Enterprise and Employment Trust (3)
Regional Facilities Auckland Limited Aotea Centre Board of Management (1)

* Auckland Transport Infrastructure Limited was wound up and struck off the companies register before the dissolution date.

Six of the former councils had their annual reports completed, and made available to the public, on time before the end of February 2011. In March 2011, the annual reports and summaries of all six were made available to the public, and the annual reports of Papakura District Council and Auckland Regional Council were completed and adopted. In April 2011, Papakura District Council finalised its annual report and made its summary available to the public. Auckland Regional Council's summary was made available to the public within a month of its annual report being finalised.

None of the 19 terminated council-controlled organisations had their annual reports completed and made available to the public within the statutory time of before the end of January 2011. The Auckland Transition Agency completed its final financial statements on time in February 2011. They were presented to the House of Representatives in March 2011 as part of the Agency's final report.

Where entities failed to meet statutory deadlines for completing annual reports, this fact was disclosed in the annual reports.

The Local Government Act 2002 requires annual reports to be finalised by local authorities within four months of the financial period end (completed and adopted by resolution), and by council-controlled organisations within three months (delivered to the shareholders, and made available to the public). Every local authority must publish the annual report and a summary of the information it contains within a month of adoption. The Auckland reform legislation retained these deadlines. The statutory deadlines for completing the final annual reports of dissolved and terminated entities are shown in Figure 3.

Figure 3
Statutory deadlines and compliance dates for finalising annual reports of dissolved and terminated entities

Entity Statutory deadline for completing annual reports
Dissolved local authorities Annual report to be completed and adopted by 28 February 2011

Annual report and summary made available to public one month after completion and adoption (by 31 March 2011)
Terminated council-controlled organisations 31 January 2011
Auckland Transition Agency Financial statements to be completed by 28 February 2011, then presented to the House of Representatives as part of the final report

With the receiving entities becoming responsible for finalising the annual reports, shareholders in terminated council-controlled entities were able to see those entities' annual reports in draft form before the statutory deadline. The annual reports were completed after the statutory deadline so were not made available to the public within the statutory time period. At the time of publishing, not all the completed annual reports of terminated council-controlled organisations had been made available to the public.

Financial statements included in entities' annual reports are usually prepared on a going concern basis, because the entity and its operations are expected to continue. However, the financial statements of the dissolved councils and terminated entities were prepared on a dissolution basis.

When financial statements are prepared on a dissolution basis, there can be substantial adjustments to the carrying values of assets and liabilities, and the resulting financial statements are significantly different from their going-concern equivalent. For example, the dissolution basis would apply to an entity that became insolvent, and the financial statements would then reflect distress sales of assets at heavily discounted values. In the context of the Auckland reform, however, where the operations of the former entities were generally being continued by the respective receiving entities, the relatively few significant adjustments relate to redundancies and asset write-downs.

All the financial statements included in the annual reports of dissolved councils and terminated entities were prepared appropriately on a dissolution basis. We drew attention in our audit opinions to the disclosures made in the annual reports about the effect of the Auckland reform, and the appropriate use of the dissolution basis of preparation. All of the financial statements made adequate disclosures, which included details of the adjustments made to the financial statements as a result of the reform.

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