Appendix 8: Non-standard audit reports
Matters arising from our audits of the 2018-28 long-term plans.
In this Appendix, we set out summarised extracts from the 10 non-standard audit reports that we issued for the 2018-28 LTPs.
Modified audit opinion – qualified opinion
| Westland District Council Because the Council does not have reliable information about the condition of its three waters assets, we could not conclude that the condition information used to support the three waters assets was reasonable. The Council's financial forecasts provide for the renewal of only critical three waters assets, as defined by the plan. As a result, the Council is forecasting an increase in its cash investments in the forecast statement of financial position to $24.4 million in 2028. The Council plans to invest in improving its knowledge of its three waters assets. Once it has better knowledge, the Council will re-forecast its renewals programme for all of its three waters assets. The Council believes that this will result in higher costs than it has forecast for renewing those assets. Because the Council expects the costs to be higher, it does not expect the high cash balances that it has forecast will eventuate and has assumed that these high cash balances will not generate any interest revenue. |
Unmodified opinions with "emphasis of matter" paragraphs
| Central Hawke's Bay District Council We drew attention to disclosures in the long-term plan about the resource consent breach for the Waipukurau and Waipawa wastewater treatment plants. More investigative work is required to find a viable solution before remedial work can be carried out that will meet resource consent requirements. The cost of this work is uncertain and could be significant. These costs will be in addition to those included in the financial forecasts in the plan. As a result, the Council expects to carry out formal consultation with the community once viable options have been identified and funding options determined. |
| Chatham Islands Council We drew attention to disclosures in the long-term plan about the Council's significant reliance on central government funding support to continue to operate and provide services to its community. This funding support is negotiated periodically. The Council is also borrowing externally to fund some capital expenditure. The total amount of borrowings including bank overdraft is forecast to reach a peak of $4.2 million in 2020/21, reducing to $1.3 million in 2027/28. The plan has been prepared on the basis that sufficient support will be obtained from central government to fund planned operating and capital expenditure. We drew attention to these matters because any significant reduction in funding support from the forecast levels could affect rates, debt, investments, borrowings, expenditure, or levels of service over the 10-year period of the plan. |
| Hamilton City Council We drew attention to disclosures in the long-term plan about the assumptions made in relation to planned efficiency savings and the forecast financial impacts of these savings. The Council has forecast to achieve $94.498 million (inflation adjusted) of savings over the 10-year plan period. Council expects the savings to be made through changes in current procurement and service delivery models. However, there is uncertainty as to whether savings will amount to the levels estimated and in the years expected. If the savings are not realised, the Council has stated that it would need to increase rates or reduce the capital programme to stay within its debt-to-revenue limits. If the savings are not realised, and no changes are made to rates or the capital programme, the Council would breach its debt-to-revenue limits. |
| Hurunui District Council We drew attention to disclosures in the long-term plan about earthquake recovery. This outlines some uncertainty over the full extent of damage that has been done to Council-owned bridge and water supply assets as a result of the Hurunui/ Kaikōura earthquake, and the forecast costs to repair that infrastructure. Some of these costs will be met by Council debt, which will be repaid through a separate earthquake rate. Should the actual cost of repairs be greater than the financial forecasts, the Council will incur additional debt. It will need to reassess the proposed period to repay debt and amount of the rate required to repay the debt. |
| Ōpōtiki District Council We drew attention to disclosures in the long-term plan about uncertainties over the proposed Ōpōtiki Harbour Transformation project. There is uncertainty about the estimated cost of the project because a revised business case has not been completed for reconsideration. As a result, there is uncertainty about whether the amount of external funding needed for the project will be made available and, if funding is made available, when the project will proceed. The District Council has committed to draw down $5.4 million of borrowings to contribute to the project. If external funding is not available, the District Council has stated that the project will not proceed because the District Council does not have the financial resources to carry out the project on its own. Should the project not proceed, the expected economic and social benefits to the District Council and the community as reported in the plan are unlikely to eventuate. |
| Queenstown-Lakes District Council We drew attention to Queenstown-Lakes District Council's assumption about funding, which could affect the timing and extent of capital expenditure projects to be carried out during the next 10 years. The Council has proposed a capital expenditure programme of $990 million over 10 years, which is a significant increase from $380 million proposed in the 2015-25 Long-Term Plan. A number of the projects in the capital expenditure programme are for the Queenstown Town Centre Master Plan, and these projects are interconnected. A significant project in the Queenstown Town Centre Master Plan is the Queenstown Arterials Programme, which is expected to cost $148.8 million, where the Council has assumed that the New Zealand Transport Agency will provide $119 million (80%). A decision by the New Zealand Transport Agency about whether it will provide this funding is not expected until 2019. If the funding from the New Zealand Transport Agency is significantly less than assumed, the Council has stated that it will need to defer some of the projects in the Queenstown Town Centre Master Plan, which might include parking, public transport, street upgrades, and walking/cycling facilities. As a result, actual capital projects and the level of capital expenditure might differ significantly from forecast, which could affect proposed levels of service. |
| Waikato Regional Council We drew attention to disclosures in the long-term plan about the assumptions made about funding the proposed Hamilton to Auckland passenger rail service. The Council is planning to collect $1.625 million in rates from year two of its long-term plan to fund its share of the start-up passenger rail service. The estimated cost of running the service is expected to be $8.8 million. The Council has assumed that it will receive a subsidy from the New Zealand Transport Agency of $5.7 million to fund 75% of the operating costs (after taking into consideration annual fare revenue of $1.5 million). The Council has also assumed that, before the service commences:
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| Wairoa District Council We drew attention to disclosures in the long-term plan that outlined that the Council failed to adopt the plan before the commencement of the first year to which it relates. This is a breach of section 93(3) of the Local Government Act 2002. |
| West Coast Regional Council We drew attention to two disclosures in the long-term plan. The first disclosure outlined that the Council increased the uniform annual general charge by $450,000 to fund the proposed increase in emergency management activities, rather than fund the increase from the emergency management rate, and amended the Revenue and Financing policy accordingly. The second disclosure outlined that the Council failed to adopt the plan before the commencement of the first year to which it relates. This is a breach of section 93(3) of the Local Government Act 2002. |