Appendix 2: Summaries of the non-standard audit reports issued in 2015

Local government: Results of the 2014/15 audits.

Modified audit opinions – disclaimers of opinion

Vbase Limited (Christchurch City Council) Year ended 30 June 2015 We were unable to obtain enough appropriate audit evidence to determine the: Carrying value of insurance receivable of $125 million – the company has not made any allowance for any amount that might not be recoverable. Further, the company has also recognised an expense of $23 million for a reduction in the nominal value of the insurance receivable is appropriate because it considers that this amount will be received in future years. Current and deferred tax – any misstatements in the company's financial statements arising from the above matter would have a consequential effect on the company's current and deferred tax liability, which would be affected by any change in the recoverability of the insurance receivable and any decision about the possible replacement or repair of Lancaster Stadium. Also, we could not provide assurance on the comparative information presented in the financial statements of the company because we needed to issue a disclaimer of opinion on the company's financial statements for the year ended 30 June 2014. Our audit was also limited on the statement of service performance because we could not get enough appropriate audit evidence to support the "financial performance targets" section of the statement of service performance. We issued an unmodified opinion on the statement of cash flows.
Counties Power Limited and Group Year ended 31 March 2015 We were unable to form an opinion on two performance measures that are used to measure the network reliability performance – the System Average Interruption Duration Index (SAIDI) and System Average Interruption Frequency Index (SAIFI) – in the statement of service performance. We could not confirm the completeness and accuracy of all the SAIDI and SAIFI outages because of: no independent evidence to record electricity connection faults; and limited control over the completeness and accuracy of interconnection point data, representing individual customer connections to the network. Also, we could not provide assurance on the comparative information presented in the 31 March 2015 statement of service performance because we needed to issue a disclaimer of opinion on the company and Group's previous year's statement of service performance (due to the same limitations). We issued an unmodified opinion on the financial statements and other performance measures in the statement of service performance for the years ended 31 March 2015.
Network Waitaki limited Year ended 31 March 2015 We were unable to form an opinion on two performance measures that are used to measure the network reliability performance – the System Average Interruption Duration Index (SAIDI) and System Average Interruption Frequency Index (SAIFI) – in the statement of service performance. We could not confirm the completeness and accuracy of all the SAIDI and SAIFI outages because of: no independent evidence to record electricity connection faults; and limited control over the completeness and accuracy of interconnection point data, representing individual customer connections to the network. Also, we could not provide assurance on the comparative information presented in the 31 March 2015 statement of service performance because we needed to issue a disclaimer of opinion on the company and Group's previous year's statement of service performance (due to the same limitations). We issued an unmodified opinion on the financial statements and other performance measures in the statement of service performance for the year ended 31 March 2015.

Modified audit opinions – adverse opinions

Otago Museum Trust Board Year ended 30 June 2014 The Trustees did not recognise the Trust Board's museum collection assets it owns, nor the associated depreciation expense, in the Trust's financial statements. This is not in keeping with New Zealand Equivalent to International Accounting Standard 16 (NZ IAS 16): Property, Plant and Equipment, which requires assets to be recognised and depreciated during their useful lives in the financial statements.
Otago Museum Trust Board Year ended 30 June 2015 The Trustees did not recognise the Trust Board's museum collection assets it owns, nor the associated depreciation expense, in the Trust's financial statements. This is not in keeping with Public Benefit Entity International Public Sector Accounting Standard 17 (PBE IPSAS 16): *Property, Plant and Equipment*, which requires assets to be recognised and depreciated during their useful lives in the financial statements.
Pukaki ki Rotorua Charitable Trust Year ended 30 June 2014 The Trustees did not recognise the Trust's artwork assets in its financial statements. This is not in keeping with New Zealand Equivalent to International Accounting Standard No.16 (NZ IAS 16): *Property, Plant and Equipment*, which requires assets to be recognised and depreciated during their useful lives in the financial statements.
BG Contracting Sicon Ferguson Joint Venture Year ended 31 March 2014 The Joint Venture did not report performance information because it failed to prepare a statement of intent for the year beginning 1 April 2013. The Local Government Act 2002 requires a statement of intent and performance information to be prepared. We drew attention to the disclosure in the financial statements that the Joint Venture failed to prepare a statement of intent for the year beginning 1 April 2014.
He Tini Awa Trust (Manawatu-Wanganui Regional Council) Year ended 30 June 2015 The Trust did not report performance information because it failed to prepare a statement of intent for the year beginning 1 April 2013. The Local Government Act 2002 requires a statement of intent and performance information to be prepared. We drew attention to the fact that the Trust failed to prepare a statement of intent for the reporting period beginning 1 July 2015. Also, our audit was limited because we could not get enough assurance about the completeness of hall hire receipts. The Trustees had limited controls over that revenue. Finally, we drew attention to the disclosures in the financial statements that referred to the disestablishment basis appropriately being used in preparing the financial statements. The Trust was expected to be wound up within 12 months.

Modified audit opinions – qualified opinions

Christchurch City Council and Group Year ended 30 June 2015 Because of the effects of the earthquakes on the assets owned by the Council and Group, it has been difficult to prepare financial statements that comply with generally accepted accounting practice and legislation. As a result, our work was limited – we were unable to get enough audit evidence about a range of matters: Valuation of property, plant and equipment – the Council was unable to quantify the financial effect of unrepaired earthquake damage to roading, sewerage, and stormwater systems. Although the Council revalued its roading network and sewerage system assets at 30 June 2015, we were unable to confirm that the valuations had adequately accounted for the unrepaired earthquake damage to these assets. Also, the Council was unable to revalue its stormwater system assets because it did not have enough information on the condition of these assets to prepare a valuation that complies with generally accepted accounting practice. Our audit on the comparative information presented for the land, buildings, roading network, sewerage system, and stormwater system classes was also limited, for the same reasons. The Council was unable to determine the amount of revaluations and depreciation expense that relate to earlier reporting periods for certain property, plant and equipment – as a result, the carrying value and the associated depreciation expense might be materially incorrect. This matter also affected the comparative information. Our audit of the comparative information for water supply assets was also limited, for the same reasons. Capital work in progress balance – the Council was unable to accurately classify the amount of capital work in progress of $804 million (completed by the Stronger Christchurch Infrastructure Rebuild Team) into completed assets, assets still under construction, and operating expenditure that would otherwise be recognised in the statement of comprehensive income. Further, the Council was unable to identify completed assets within the completed work in progress balance. The completed assets have not been depreciated and the old and damaged assets that have not been replaced have not been written off. Carrying value of insurance receivable – the Council is still negotiating with its insurers and has not allowed for any amount that might not be recoverable. We were not able to get enough appropriate audit evidence to confirm that the receipt of the insurance receivables is virtually certain, in keeping with the Council's and Group's accounting policy, because of uncertainties about the timing and amount of any insurance receivables. We were also unable to determine whether current and deferred tax balances are materially correct until the Council decides on the future of the Lancaster Park Stadium. For tax purposes, the Stadium is deemed to be irreparable and a replacement stadium will be built. This decision is subject to negotiations between the Council and its insurers. Due to the limitations in scope affecting our audit, we were unable to obtain audit evidence in "what did it cost" sections and the associated variance explanations, including the reported comparative information in the statement of service provision.
Destination Coromandel Trust (Thames-Coromandel District Council and Hauraki District Council) Year ended 30 June 2014 Our audit was limited because of the uncertainty over the tax expense and tax liability for the Trust. The tax status of the Trust has not been confirmed with the Inland Revenue Department. Without knowing the Trust's tax status, we could not verify whether the tax expense and tax liability were overstated or whether the Trust could be charged interest or penalties by the Inland Revenue Department.
Bay Venues Limited (Tauranga City Council) Year ended 30 June 2014 Our audit of the comparative information presented in the 30 June 2014 financial statements was limited because the information included the 30 June 2013 financial information for Tauranga City Aquatics Limited. That company's information was qualified because of limited controls over revenue. (Tauranga City Aquatics Limited was amalgamated with Tauranga City Venues Limited on 1 July 2013 to form Bay Venues Limited.)
The World Buskers' Festival Trust (Christchurch City Council) Year ended 30 June 2015 Our audit was limited because we could not get enough assurance about the completeness of door donations revenue. The Board of Trustees had limited controls over that revenue.
Experience Mid Canterbury (Ashburton District Council) Year ended 30 June 2014 Our audit was limited because we could not get enough assurance about a liability for unpresented vouchers.
Kaikoura Enhancement Trust and Group (Kaikoura District Council) Years ended 30 June 2011, 30 June 2012, and 30 June 2013 Our audit was limited because we could not get enough assurance about the carrying value of the inventory and the associated cost of goods sold. This is because the Trust did not perform a stock take of inventory and there were insufficient records to determine the balance of inventory.
The Hauraki Rail Trail Charitable Trust Year ended 30 June 2014 Our audit was limited because we could not get enough assurance about the completeness of commission revenue. The Board of Trustees had limited controls over that revenue.
Waipa Community Facilities Trust (Waipa District Council) Years ended 30 June 2014 and 30 June 2015 Our audit was limited because we could not get enough assurance about the completeness of cash receipts. The Trustees had limited controls over some cash receipts.
Waimakariri District Libraries Trust Incorporated (Waimakariri District Council) Year ended 30 June 2014 Our audit was limited because we could not get enough assurance about receipts from fundraising. The Board had limited controls over that revenue.
Parakai Licensing Trust Years ended 31 March 2011 and 31 March 2012 Our audit was limited because we could not get enough assurance about rental revenue and debtors. The Board had limited controls over that revenue and debtors. We also drew attention to the disclosures in the financial statements that referred to the disestablishment of the Trust on 10 July 2013.
Te Kauwhata Licensing Trust Year ended 31 March 2015 Our audit was limited because we could not get enough assurance about the completeness of some public bar, lounge bar, and wholesale revenue. The Trust had limited controls over that revenue.
Mataroa Hall Board Year ended 30 June 2014 Our audit was limited because we could not get enough assurance about hireage revenue. The Board had limited controls over that revenue.
Whatitiri Domain Board Years ended 30 June 2013 and 30 June 2014 Our audit was limited because we could not get enough assurance about local authority grants and interest revenue. The Board had limited controls over that revenue.
Oakura Reserve Board Years ended 30 June 2012 and 30 June 2013 Our audit was limited because we could not get enough assurance about revenue and bonds held. The Board had limited controls over the revenue and bonds held.
Ohau Hall Board Year ended 30 June 2014 Our audit was limited because we could not get enough assurance about revenue other than grants. The Board had limited controls over that revenue.
Ruakaka Central Domain Board Year ended 30 June 2014 Our audit was limited because we could not get enough assurance about the completeness of hall hire receipts. The Board had limited controls over that revenue.
Awakaponga Public Hall Board Year ended 30 June 2013 Our audit was limited because we could not get enough assurance about revenue other than interest. The Board had limited controls over that revenue.
North Canterbury Fish and Game Council Years ended 31 August 2014 and 31 August 2015 Our audit was limited because we could not get enough assurance about the quantity of inventories or biological assets held as at balance date.
Poukiore Hall Board Year ended 30 June 2014 Our audit was limited because we could not get enough assurance about the balance of inventories at balance date. There was not enough appropriate audit evidence about the quantities and condition of livestock recognised in the statement of the financial position. Our audit was also limited because we could not get enough assurance about donation revenue. The Board had limited controls over that revenue.
Balfour Cemetery Trust Year ended 31 March 2012 Our audit was limited because we were unable to obtain enough appropriate evidence to support payments for the purchase and installation of a shed.
Mangere Lawn Cemetery Years ended 31 March 2011 and 31 March 2012 Our audit was limited because we could not get enough assurance about the receipt of operating revenue, other than revenue from sale of monuments. We drew attention to the fact that the Board had limited controls over that revenue. Also, the Trustees failed to comply with the law by engaging in the business of selling headstones.
Calcium Cemetery Years ended 31 March 2012, 31 March 2013, and 31 March 2014 Our audit was limited for the years from 31 March 2012 to 31 March 2014 because we were unable to obtain enough appropriate audit evidence to support payments for grave digging. Also, our audit was limited for the year ended 31 March 2013 because we could not get enough assurance about donation receipts. The Board had limited controls over that revenue.

Unmodified opinions with "emphasis of matter" paragraphs

Kaipara District Council Year ended 30 June 2015 We drew attention to the disclosures in the financial statements that referred to the possible significant financial effect that could arise if the ruling on the Mangawhai Ratepayers and Residents Association's appeal to the Court of Appeal was not in favour of the Council. This would overturn the High Court's judgement on the Council's ability to use rates revenue, both past and future, to service the debt raised to fund the Mangawhai Community Wastewater Scheme.
Chatham Islands Council Year ended 30 June 2015 We drew attention to the disclosures in the financial statements that referred to the Council failing to adopt a rates resolution when setting the 2013/14 rates, as required by the Local Government (Rating) Act 2002.
Tuam Limited (Christchurch City Council) Year ended 30 June 2015 We drew attention to the disclosures in the financial statements that referred to the uncertainties associated with the carrying value of settlement receivables recognised in trade and other receivables.
Creative HQ Limited (Wellington City Council) Year ended 30 June 2015 We drew attention to the disclosures in the financial statements about the uncertainties in measuring the fair value of shares in incubator and accelerator companies. The uncertainties were due to the early nature of the investments, the absence of quoted market prices, and the reliance placed on the information supplied by the incubator and accelerator companies.
Grow Wellington Limited and Group (Wellington City Council) Years ended 30 June 2014 and 30 June 2015 We drew attention to the disclosures in the financial statements about the uncertainties in measuring the fair value of shares in incubator and accelerator companies. The uncertainties were due to the early nature of the investments and the absence of quoted market prices.
Wellington Regional Economic Development Agency Limited Group (Wellington City Council) Year ended 30 June 2015 We drew attention to the disclosures in the financial statements about the uncertainties in measuring the fair value of shares in incubator and accelerator companies. The uncertainties were due to the early nature of the investments, the absence of quoted market prices, and the reliance placed on the information supplied by the incubator and accelerator companies.
Dunedin Venues Limited (Dunedin City Council) Year ended 30 June 2014 We drew attention to the disclosures in the financial statements that outlined the uncertainty of the outcome of a review of the company's operations, including its governance and management structures and its funding model, by Dunedin City Council. We also drew attention to the disclosures in the financial statements about the company's financial difficulties.
Dunedin Venues Management Limited (Dunedin City Council) Year ended 30 June 2014 We drew attention to the disclosures in the financial statements that outlined the uncertainty of the outcome of a review of the company's operations, including its governance and management structures and its funding model, by Dunedin City Council. We also drew attention to the disclosures in the financial statements about the company's financial difficulties.
Innovation Waikato Limited and Group (Hamilton City Council) Year ended 30 June 2014 We drew attention to disclosures in the financial statements about adjustments made to the closing balances in the 2013 financial statements (to correct errors from an earlier year).
New Zealand Food Innovation (Waikato) Limited (Hamilton City Council) Year ended 30 June 2014 We drew attention to disclosures in the financial statements about the 30 June 2013 financial statements not being audited. Because of this, the comparative information in the current year's financial statements has not been audited.
Waikato Innovation Park (Waikato) Limited and group (Hamilton City Council) Year ended 30 June 2014 We drew attention to disclosures in the financial statements about the 30 June 2013 financial statements not being audited. Because of this, the comparative information in the current year's financial statements has not been audited.
New Zealand Local Authority Protection Programme Disaster Fund Year ended 30 June 2014 We drew attention to disclosures in the financial statements about the Trustees' decision to prepare special purpose financial statements rather than general purpose financial statements. They did this so that members of the Fund could assess the performance of the Fund consistently with information used in the past. We also drew attention to disclosures in the financial statements about uncertainties in the gross claim liabilities and related reinsurance recoveries after the Canterbury earthquakes in 2010 and 2011.
New Zealand Local Authority Protection Programme Disaster Fund Year ended 30 June 2015 We drew attention to the disclosures in the financial statements that referred to the uncertainties associated with the gross claim liabilities and the related reinsurance recoveries arising from the Canterbury earthquakes during 2010 and 2011.
New Zealand Mutual Liability Riskpool Year ended 30 June 2014 We drew attention to disclosures in the financial statements about uncertainties associated with the outstanding claims liability and reinsurance receivables of the Scheme. There are inherent uncertainties involved in estimating those amounts using actuarial assumptions, and also a high degree of uncertainty about leaky building claims.
West Coast Development Holdings Limited and Group Year ended 31 March 2015 We drew attention to disclosures in the financial statements that referred to uncertainties associated with assessing and measuring any impairment of the carrying value of investments in associates due to deteriorating milk pay-out prices.
New Zealand Local Government Insurance Corporation Limited Year ended 31 December 2014 We drew attention to disclosures about New Zealand Local Government Insurance Corporation Limited and Group (trading as Civic Assurance) preparing its financial statements using the going-concern assumption, despite the company being in arbitration with its reinsurers about the limits of cover under the reinsurance programme. We also drew attention to the uncertainty about when Civic Assurance will be able to resume its normal business activities and whether it will make enough profit to allow all of its deferred tax assets to be recovered.
Te Horowhenua Trust (Horowhenua District Council) Year ended 30 June 2015 We drew attention to disclosures in the financial statements about the uncertain outcome of a review by the Horowhenua District Council, which includes reviewing the services currently provided by the Trust. The validity of the going concern assumption depends on the Council's decision about whether the Trust will continue to deliver its services.
Northland Fish and Game Habitat Trust Year ended 31 August 2014 We drew attention to disclosures in the financial statements about the Trust's uncertain future. The validity of the going concern assumption depends on decisions that the Trustees will make about the future of the Trust.
Rimutaka Licensing Trust and Group Years ended 31 March 2014 and 31 March 2015 We drew attention to disclosures in the financial statements about uncertainty over the use of the going concern assumption. There is pressure on the Trust's turnover and the validity of the going concern assumption depends on decisions to be made by the Trustees.
Ruawhata Hall Board Year ended 30 June 2014 We drew attention to disclosures in the financial statements about uncertainties over the disestablishment of the Board and the transfer of its activities to the Department of Conservation or Tararua District Council. The Department of Conservation is yet to decide whether it would approve the disestablishment of the Hall Board.
Vision Manawatu Trust Year ended 30 June 2015 We drew attention to disclosures in the financial statements about the Trust expecting to cease operations within the next 12 months.
Christchurch Stadium Trust Year ended 31 December 2014 We drew attention to disclosures in the financial statements about the going concern basis appropriately not being used in preparing the financial statements. The Trust had a limited life and an obligation to decommission the stadium and wind up once Christchurch has a new permanent stadium. We also drew attention to disclosures in the financial statements about expected financial difficulties, which the Trust will not be able to manage without additional support from external parties.
Auckland Council Property Limited (Auckland Council) Year ended 30 June 2015 We drew attention to disclosures in the financial statements about the disestablishment basis appropriately being used in preparing the financial statements. The company was to be disestablished on 1 August 2015.
FreightGate Limited Year ended 30 June 2015 We drew attention to disclosures in the financial statements about the disestablishment basis appropriately being used in preparing the financial statements. The directors have resolved to wind up the company.
Kauri Finance Limited (Porirua Community Trust) Year ended 31 March 2015 We drew attention to disclosures in the financial statements about the disestablishment basis appropriately being used in preparing the financial statements. The directors have resolved to wind up the company.
Mana Community Grants Foundation (Porirua Community Trust) Year ended 31 March 2015 We drew attention to disclosures in the financial statements about the disestablishment basis appropriately being used in preparing the financial statements. The Trustees have resolved to wind up the Foundation.
Taranaki Provincial Patriotic Council Year ended 30 September 2013 We drew attention to disclosures in the financial statements about the disestablishment basis appropriately being used in preparing the financial statements. The Council transferred its activities and assets to the Taranaki Patriotic Trust on 1 October 2013.
Whanganui District Council Sinking Fund Commissioners Year ended 30 June 2014 We drew attention to disclosures in the financial statements about the disestablishment basis appropriately being used in preparing the financial statements. The Sinking Fund was wound up on 30 June 2014.
Puhoi Cemetery Period ended 20 February 2014 We drew attention to disclosures in the financial statements about the disestablishment basis appropriately being used in preparing the financial statements. The control and management of the cemetery was transferred to Auckland Council on 20 February 2014.
Blacks Cemetery Trustees Years ended 31 March 2011 and 31 March 2012 We drew attention to disclosures in the financial statements about the disestablishment basis appropriately being used in preparing the financial statements. Central Otago District Council decided to disestablish the Trust and take over its functions in December 2012.
Taranaki Tree Trust Year ended 30 June 2015 We drew attention to disclosures in the financial statements about the going concern basis appropriately not being used in preparing the financial statements. The Trust has indicated that its business operations are ending in the next 12 months.
Tararua Foundation Year ended 31 March 2015 We drew attention to disclosures in the financial statements about the going concern basis appropriately not being used in preparing the financial statements. The Foundation sold all of its assets and liabilities to Trust House and became a dormant entity.
Partnership Wellington Trust Incorporated (Wellington City Council) Year ended 30 June 2015 We drew attention to disclosures in the financial statements about the realisation basis appropriately being used in preparing the financial statements. Partnership Wellington Trust Incorporated and Wellington Regional Economic Development Agency Limited signed an asset transfer agreement in December 2014.
Canterbury Economic Development Company Limited Year ended 30 June 2015 We drew attention to disclosures in the financial statements about the company not having a statement of service performance because it is inactive and did not have any performance information to report. We also drew attention to the company not complying with the law because it failed to complete a statement of intent for the period beginning 1 July 2015 by 30 June 2015.
Tauwhareparae Forests Limited (Gisborne District Council) Year ended 30 June 2015 We drew attention to disclosures in the financial statements about the company not having a statement of service performance because it is inactive and did not have any performance information to report. We also drew attention to the company not complying with the law because it failed to complete a statement of intent for the period beginning 1 July 2015 by 30 June 2015.
Westland Nature Trust (Westland District Council) Year ended 30 June 2014 We drew attention to disclosures in the financial statements about the company not having a statement of service performance because it is inactive and did not have any performance information to report. We also drew attention to the company not complying with the law because it failed to complete a statement of intent for the period beginning 1 July 2014 by 30 June 2014.
Whanganui Gas Limited (Whanganui District Council) Year ended 30 June 2015 We drew attention to disclosures in the financial statements about the company not preparing a statement of service for the year ended 30 June 2015, as required by the Energy Companies Act 1992. We also drew attention to disclosures about the company reporting its performance information according to measures that would have been agreed and approved by the Board of Directors in the statement of intent for the year ended 30 June 2015 if a statement of intent had been prepared under the Energy Companies Act.

Unmodified opinions with "other matter" paragraphs

New Zealand Food Innovation South Island Limited (Christchurch City Council) Year ended 30 June 2014 We drew attention to the company failing to comply with the law because it did not issue a statement of intent by 30 June 2013 for the reporting period beginning 1 July 2013.
Aoraki Development and Promotions Limited (Timaru District Council) Year ended 30 June 2015 We drew attention to the company failing to comply with the law because it breached the statutory reporting deadline.
Aorangi Stadium Trust (Timaru District Council) Year ended 30 June 2015 We drew attention to the company failing to comply with the law because it breached the statutory reporting deadline.