Appendix 4: Details of the non-standard audit reports issued in 2011

Education sector: Results of the 2010/11 audits.

Disclaimers of opinion

Te Wharekura O Te Rau Aroha Financial statements year ended: 31 December 2008 There were no separate financial statements for the year ended 31 December 2007 because the school was a satellite of another school. This meant that we were unable to determine the opening balances of the school, and therefore unable to form an opinion on the financial statements of the school. Also, the school did not maintain adequate systems and controls over its revenue and expenditure so we were unable to obtain sufficient assurance over the completeness of revenue and expenditure.
Te Wharekura O Te Rau Aroha Financial statements year ended: 31 December 2009 We were unable to form an opinion on the financial statements because we could not determine whether the expenses were properly incurred, correctly classified, or included in the right year. In addition, we were unable to obtain sufficient assurance over the completeness of local fundraising income and locally raised funds income because of limited controls over that income.

Qualified opinions

Whitireia Performing Arts Company Limited (Whitireia Community Polytechnic) Financial statements and statement of service performance year ended: 31 December 2010 Our audit was limited because we were unable to obtain sufficient evidence to confirm some of the income for the comparative year. We also drew attention to the disclosures in the financial statements that referred to the disestablishment basis appropriately being used in preparing the financial statements (because the Board of Directors decided to merge the company with New Zealand Radio Training School Limited).
Ivey Hall and Memorial Hall 125th Anniversary Appeal Gifting Trust (Lincoln University) Financial statements year ended: 31 December 2010 Our audit was limited because limited controls over revenue meant that we were unable to obtain sufficient assurance over the completeness of revenue.
Ivey Hall and Memorial Hall 125th Anniversary Appeal Taxable Activity Trust (Lincoln University) Financial statements year ended: 31 December 2010 Our audit was limited because limited controls over revenue meant that we were unable to obtain sufficient assurance over the completeness of revenue.
Wellington Girls' College Financial statements year ended: 31 December 2010 We disagreed with the Board of Trustees not preparing group financial statements to consolidate the financial statements of its controlled entity, the Wellington Girls' College Charitable Foundation. This is a departure from New Zealand Equivalent to International Accounting Standard No. 27: Consolidated and Separate Financial Statements, which requires the Board of Trustees to present consolidated financial statements.
Wanganui City College Financial statements year ended: 31 December 2010 We disagreed with the Board of Trustees not preparing group financial statements to consolidate the financial statements of its subsidiary, the College House Hostel Trust. This is a departure from New Zealand Equivalent to International Accounting Standard No. 27: Consolidated and Separate Financial Statements, which requires the Board of Trustees to present consolidated financial statements.
Manawatu College Financial statements year ended: 31 December 2010 We disagreed with the Board of Trustees not preparing group financial statements to consolidate the financial statements of its subsidiary, the Manawatu College Educational Trust. This is a departure from New Zealand Equivalent to International Accounting Standard No. 27: Consolidated and Separate Financial Statements, which requires the Board of Trustees to present consolidated financial statements.
Wellington East Girls' College Financial statements year ended: 31 December 2010 We disagreed with the way the Board of Trustees made the provision for the increase in the amount owing to trusts for bequests, which took into account inflation for prior years. This is a departure from the New Zealand Equivalent to International Accounting Standard No. 37: Provisions, Contingent Liabilities and Contingent Assets, which requires provisions to be valued at their present obligation.
Fraser Community Childcare Society Incorporated (Hamilton's Fraser High School) Financial statements year ended: 31 December 2008 Our audit was limited because the results of investigations into the financial management of the crèche were not fully known and further enquiries were being carried out. We were unable to obtain independent confirmation of opening balances relating to current assets as at 31 December 2007, and the financial statements did not disclose comparative information about Ministry of Education grants, debtors, and accruals.
Fraser Community Childcare Society Incorporated (Hamilton's Fraser High School) Financial statements year ended: 31 December 2009 Our audit was limited because the results of investigations into the financial management of the crèche were not fully known and some legal action was yet to be concluded.
Edendale School (Auckland) Financial statements year ended: 31 December 2010 Our work was limited because of uncertainty over the recoverability of money owed by the Ministry of Education, for a claim the school made to be reimbursed for payments made to repair the damage to several leaky school buildings.
Pakuranga Health Camp School Financial statements year ended: 31 December 2010 We disagreed with the Board of Trustee's decision to omit a notional lease grant and expenditure from its 2010 financial statements. The Board of Trustees made this decision because there was uncertainty over the ownership of the school property. Omitting this notional lease amount caused the total income and total expenses to be understated but did not affect the net surplus for the year.
Puriri School Financial statements year ended: 31 December 2010 Our audit was limited because limited controls over revenue meant that we were unable to obtain sufficient assurance over the completeness of revenue.
Putorino School Financial statements year ended: 31 December 2010 Our audit was limited because limited controls over revenue meant that we were unable to obtain sufficient assurance over the completeness of revenue.
Red Beach School Financial statements year ended: 31 December 2010 Our audit was limited because limited controls over revenue meant that we were unable to obtain sufficient assurance over the completeness of revenue.
Riverslea School Financial statements year ended: 31 December 2009 Our audit was limited because limited controls over revenue meant that we were unable to obtain sufficient assurance over the completeness of revenue.
Taumarunui High School and Community Trust (Taumarunui High School) Financial statements year ended: 31 December 2010 Our audit was limited because limited controls over revenue meant that we were unable to obtain sufficient assurance over the completeness of revenue.
Te Kura O Waharoa Financial statements years ended: 31 December 2009 and 31 December 2010 Our audit was limited because limited controls over revenue meant that we were unable to obtain sufficient assurance over the completeness of revenue.
Tongariro Area School Financial statements year ended: 31 December 2010 Our audit was limited because limited controls over revenue meant that we were unable to obtain sufficient assurance over the completeness of revenue.
Paeroa Central School Financial statements year ended: 31 December 2010 Our audit was limited because limited controls over revenue meant that we were unable to obtain sufficient assurance over the completeness of revenue. We were also unable to obtain appropriate and sufficient audit evidence or explanations to support all expenditure, because invoices were missing.
Te Kura Kaupapa Māori O Ruamata Financial statements year ended: 31 December 2008 Our audit was limited because limited controls over revenue meant that we were unable to obtain sufficient assurance over the completeness of revenue. We were also unable to obtain appropriate and sufficient audit evidence or explanations to support all expenditure.
Kutarere School Financial statements year ended: 31 December 2010 Our audit was limited because of limited controls over expenditure. The Board of Trustees discovered a series of inappropriate and unauthorised payments made using the school's funds throughout 2009 and 2010. The unauthorised payments were estimated to be about $9,000 and there were no practical audit procedures that could be used to determine the effect of this limited control.
Tomahawk School Financial statements for the 15 months ended: 1 April 2010 Our audit was limited because we were unable to obtain sufficient appropriate audit evidence to support all payments.
Hunterville School Financial statements year ended: 31 December 2009 Our audit was limited because accounting records for part of the year were missing.
Tokoroa East School Financial statements years ended: 31 December 2009 and 2010 Our audit was limited because we were unable to obtain adequate assurance about the number of staff employed.
Allenvale Special School & Resource Centre Financial statements year ended: 31 December 2010 Our audit was limited because the results of an investigation into the financial management of the school were not known at the end of the audit.
Corstorphine School Financial statements for the period ended: 2 July 2010 Our audit was limited because we were unable to obtain the school's Board of Trustees' minutes after 29 March 2010, which could have included matters affecting the financial statements.

"Emphasis of matter" paragraphs for non-school entities

University of Auckland and Group Financial statements and performance information year ended: 31 December 2010 We drew readers' attention to the Partnerships for Excellence funding, which was appropriated by the Crown as capital for increasing the University's capability. This funding should have been recognised as equity and not recognised as income in advance. Also, some research contract funding should also been recognised as a capital contribution from the Crown in 2010 rather than partly as revenue and partly as a payable.
Telford Rural Polytechnic Financial statements and statement of service performance year ended: 31 December 2010 We drew readers' attention to the disclosures in the financial statements that referred to the disestablishment basis appropriately being used in preparing the financial statements (because the Polytechnic was disestablished and incorporated in Lincoln University on 1 January 2011).
iPredict Limited and Group (Victoria University of Wellington) Financial statements year ended: 31 December 2010 We drew readers' attention to the disclosures in the financial statements that referred to the going-concern assumption appropriately not being used in preparing the financial statements (because the company had negative equity).
Predictions Clearing Limited (Victoria University of Wellington) Financial statements year ended: 31 December 2010 We drew readers' attention to the disclosures in the financial statements that referred to the going-concern assumption appropriately not being used in preparing the financial statements (because the company had negative equity and its immediate parent entity had negative equity).
Weltec Connect Limited (Wellington Institute of Technology) Financial statements year ended: 31 December 2010 We drew readers' attention to the disclosures in the financial statements that referred to the going-concern assumption appropriately being used in preparing the financial statements (because the Wellington Institute of Technology provided a letter of comfort that it will not recall the loan from Weltec in the next 12 months). The going-concern assumption on which the financial statements were prepared depended on the loan not being recalled within this period.
Tai Poutini International Limited and Group (Tai Poutini Polytechnic) Financial statements year ended: 31 December 2010 We drew readers' attention to the disclosures in the financial statements that referred to the disestablishment basis appropriately being used in preparing the financial statements (because in March 2011, the company shareholders resolved not to provide ongoing financial support to the company, and approved the dissolution of the company subsidiary, the Qatar Technical Institute LLC, which ceased trading on 31 March 2011).

"Emphasis of matter" and "other matter" paragraphs for schools

"Emphasis of matter" paragraphs, by type and number*

Serious financial difficulties (32 schools) Some schools are in serious financial difficulties, mainly because of large working capital deficits. We noted that 32 schools had included disclosures in their financial statements that outlined their financial difficulties and the actions they were taking to address the factors that had resulted in those difficulties.
Closures of schools (13 schools) Accounting standards require schools that have been or are being closed to prepare their financial statements on the basis that they are not a going concern. We noted that 13 closed schools had prepared their financial statements on the appropriate basis.
Potential closure of schools (eight schools) Some schools have their financial statements prepared on a going-concern basis while waiting for the Minister of Education's decision and community consultation about whether to close. We noted that eight schools were in this situation.
Other reasons (eight schools) Our audit reports included "emphasis of matter" paragraphs for other reasons: Two schools had significant related-party transactions. One school had made payments to some of its staff, which it then charged to the Ministry of Education by submitting incorrect financial records. This resulted in the school accessing funding to which it was not entitled. One school had receipts and payments on behalf of the Crown for capital works funding that were not disclosed in the financial statements. One school had financial irregularities covering several years when employees of the Board of Trustees had access to fuel cards that enabled them to charge petrol to an account in the school's name. Some staff were paid in advance, which involved submitting incorrect financial records to the Ministry of Education. This gave the Board access to funding to which it was not entitled. One school had suffered losses because of the fraudulent activity of a staff member. One school showed a lack of prudence in proceeding with an overseas trip without first ensuring that funds had been raised to cover the cost of the trip. One school transferred funds collected from overseas students to the proprietor for the use of buildings that the Board had the right to use without charge.

* This section includes any "emphasis of matter" paragraphs in the audit reports for the schools listed earlier in this Appendix.

"Other matter" paragraphs: Breaches of law, by type and number*

Not reporting by 31 May 2011 (54 schools) Boards of Trustees have a statutory obligation to issue their audited financial statements by 31 May. We noted that 54 schools had breached the law by failing to meet this deadline, and had chosen not to disclose the breach in their financial statements.
Not submitting financial statements for audit by 31 March 2011 (11 schools) Boards of Trustees have a statutory obligation to submit their financial statements for audit by 31 March. Eleven schools had breached the law by failing to meet this deadline, and had chosen not to disclose the breach in their financial statements.
Borrowing above the permitted limit without approval (nine schools) Boards of Trustees are not permitted to borrow above a permitted limit without the approval of the Ministers of Education and Finance. Nine schools had breached the law by not seeking authority from the joint Ministers for borrowing above the permitted limit and had chosen not to disclose the breach in their financial statements.
Not having a 10-year property plan (eight schools) Boards of Trustees have a statutory obligation to prepare and review annually, and have professionally reviewed every three years, a property plan that includes all the maintenance requirements of the school for a prospective 10-year period. Eight schools had breached the law by failing to update the 10-year property plan annually and had chosen not to disclose the breach in their financial statements.
Loans to third parties (six schools) To safeguard public money, schools may invest their surplus funds only in approved banking and other institutions. Six schools had breached the law by lending money to third parties without the authority of the Ministers of Education and Finance.
Loans to staff (four schools) To safeguard public money, schools may invest their surplus funds only in approved banking and other institutions. Four schools had breached the law by lending money to staff without the authority of the Ministers of Education and Finance.
Other reasons (11 schools) Our audit reports included "other matter" paragraphs for other reasons: Three schools had trustees who were interested in contracts with the Board of Trustees, under which the total payments made or to be made by or on behalf of the Board of Trustees exceeded $25,000 in a financial year, without the approval of the Minister of Education. Two schools failed to keep proper accounting records. One school acquired land and buildings without the authority of the Minister of Education. One school failed to provide a statement of variance. One school operated a bank account without the authority of the Minister of Education. One school acquired an equitable leasehold interest without the authority of the Minister of Education. One school acquired securities without the authority of the Minister of Education. One school did not prepare financial statements with budget figures.

* This section includes any "other matter" paragraphs in the audit reports for the schools listed earlier in this Appendix.

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