Appendix 1: The audit reports issued on councils' 2021-31 long-term plans
Matters arising from our audits of the 2021-31 long-term plans.
The types of audit reports that can be issued
An audit report will be either standard or non-standard.57 A non-standard audit report is one that contains:
- an adverse opinion;
- a qualified audit opinion;
- an emphasis of matter paragraph; and/or
- an "other matter" paragraph.
An adverse opinion is quite rare and means that the auditor disagrees with the entity. It indicates that, in the auditor's professional opinion, the underlying information and assumptions in the long-term plan were unreasonable.
An adverse opinion or qualified opinion can also be called a modified opinion.
An auditor will include an emphasis of matter paragraph or an "other matter" paragraph in the audit report to draw attention to:
- a breach of law; or
- a matter or matters presented or disclosed that are of such importance that they are fundamental to readers' understanding of the audited information.
An emphasis of matter paragraph does not necessarily mean that the auditor has found anything wrong. Instead, the auditor wants to draw the readers' attention to a matter or matters that are fundamental to understanding the long-term plan.
An audit report can contain more than one modification to the audit opinion or more than one emphasis of matter paragraph.
The audit reports we issued
In summarising the non-standard audit reports we issued, we have not repeated the wording of the emphasis of matter paragraph included in 67 audit reports relating to the uncertainty of the three waters reforms. This emphasis of matter paragraph is as follows:
Uncertainty over three waters reforms
Without modifying our opinion, we draw attention to the disclosure on… [outline], which outlines the Government's intention to make three waters reform decisions during 2021. The effect that the reforms may have on three waters services provided is currently uncertain because no decisions have been made. The plan was prepared as if these services will continue to be provided by the Council, but future decisions may result in significant changes, which would affect the information on which the plan has been based.
Modified audit opinions – adverse opinions
| Mackenzie District Council |
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| Assumptions over three waters ownership and service delivery from 1 July 2024 are not reasonable In July 2020, the Government announced the Three Waters Reform Programme. The Programme included a review of water service delivery. At the consultation phase for the long-term plan, there were numerous uncertainties over the effects of the reforms on the Council, because no decisions had been made. Therefore, the Council assumed that it will retain ownership of three waters assets and remain responsible for the service delivery of three waters services for the life of the plan. On 27 October 2021, the Government publicly announced that legislation will be introduced to establish four publicly owned water services entities to take over responsibility for three waters service delivery and infrastructure from local authorities, from 1 July 2024. The Council has, however, not amended its forecast information, after this announcement, to reflect these changes in responsibility. The Council's assumption that it will continue to deliver three waters services after 1 July 2024 is now not reasonable or supportable, which means that the Council does not have a credible plan from 2024 onwards. The impact of the assumptions on the plan are pervasive given the significance of three waters infrastructure and service delivery to the Council. We did not determine the impact of the reforms on the plan because it was impracticable for us to do so. Emphasis of matters Breach of the Local Government Act 2002 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. We also draw specific attention to the following matters which affect the first three years of the plan. Delivery of the capital programme While the Council has taken steps to deliver its planned capital programme, there is uncertainty over the delivery of the programme, due to the availability of contractors. If the Council is unable to deliver on a planned project, it could affect intended levels of service. Canterbury flooding event A significant flooding event occurred during May 2021 in the Canterbury region. The Council has not made amendments to the forecasts contained in the plan because it assesses it can complete flood remediation work within existing budgets. This is because existing forecasts include allowances for weather related events, and existing works are able to be reprioritised to address flooding damage. This increases the risk that assets requiring renewals or maintenance may be deferred, which may impact service levels. |
| Palmerston North City Council |
| Underlying information and assumptions in the plan are inconsistent with the Council's financial strategy The underlying information and assumptions in the plan are not reasonable because they are inconsistent with the Council's financial strategy. The financial strategy caps the Council's debt at 200% of revenue. However, the forecasts in the plan show the Council expects to exceed its debt cap after year 4 of the plan (and is forecast to exceed the debt limits set by the New Zealand Local Government Funding Agency after year 5). The Council notes that it is highly unlikely that lenders would be prepared to lend the amounts of debt that the Council is forecasting and has included in the underlying information to the plan. This means that the Council does not have a credible plan for funding all its activities and planned projects. Therefore, the Council needs to consider reducing levels of service, removing or deferring planned projects, or increasing rates further. None of these matters are addressed in the plan. Because of the unreasonable underlying information and assumptions and inconsistencies with the Council's financial strategy, the plan does not provide a reasonable basis for long-term, integrated decision-making, or accountability to the community. Emphasis of matters Breach of the Local Government Act 2002 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. Uncertainty over three waters reforms |
Modified audit opinions – qualified opinions
| Ashburton District Council |
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| Qualified opinion Assumption related to the funding of a second urban bridge between Ashburton and Tinwald The Council plans to spend $37 million to build a second urban bridge to connect Ashburton and Tinwald. In its plan, the Council is proposing to fund $7.5 million of the bridge through debt and rates. The Council assumes that the remaining cost of the bridge will be funded by $18.8 million from Waka Kotahi NZ Transport Agency and $10.7 million from central government. We consider the assumption that $10.7 million will be funded by central government is unreasonable, because central government has not made any funding available. Due to the uncertainty over the assumed central government funding, we have not determined the impact that this may have on the plan. Emphasis of matters Extent of damage from the significant flooding event during May 2021 is unknown A significant flooding event occurred during May 2021 in the Canterbury region. The Council has not made amendments to the forecasts contained in the plan. This is because the extent of the damage to the Council's essential assets and the estimated cost and timing of the repairs that will be required are currently unknown, and have yet to be assessed by the Council. Once this information is known, the Council will determine whether to amend its plan or include the information in the 2022/23 annual plan. Uncertainty over three waters reforms |
| Buller District Council |
| Qualified opinion Westport port and the Kawatiri dredge The Council assumed that $25.2 million in revenue will be received from a large commercial operator, throughout the 10 years of the plan. This revenue is needed for dredging the Westport Harbour, which will be required for the operator to ship out of the port. We consider this assumption is unreasonable because there is no contract in place with the potential operator to secure this revenue. If the large commercial operation does not proceed, the Council will not receive this revenue and the Council has signalled that no additional costs will be incurred to dredge the Westport Harbour. However, fixed operational costs will continue, and these would need to be funded through other port revenues or by some other means. Karamea special purpose road The Karamea highway is currently 100% funded by Waka Kotahi NZ Transport Agency (Waka Kotahi) because of its special purpose road status. The Council has assumed that Waka Kotahi will continue to fund the Karamea highway at 100% during the 10 years of the plan. We consider this assumption is unreasonable because Waka Kotahi has advised that the status of the highway will change from a special purpose road to a local road, resulting in Waka Kotahi funding only 72%, effective from the start of the 2024/25 financial year. If the 100% funding is not received beyond the 2023/24 year, the levels of service could reduce due to the Council not being able to afford the maintenance of the road. It could also have a major impact on rates. Punakaiki water supply scheme The Council plans to spend $6.7 million to upgrade and extend its Punakaiki water supply scheme during the 2024/25 and 2025/26 financial years. In the information underlying the plan, the Council has assumed that the Government will fully fund the planned upgrade. We consider this assumption is unreasonable because the Government has not made any funding available. If the upgrade proceeds and the government funding is not received, debt funding would be required, resulting in a large rates impact for each of the 93 households in Punakaiki. If the upgrade does not proceed the levels of service will not improve. Emphasis of matter Uncertainty over three waters reforms |
| Gore District Council |
| Qualified opinion Lack of condition and age information for water supply and wastewater assets The Council does not have sufficient reliable information about the condition of the assets in the water supply and wastewater networks, many of which are nearing the end of their useful lives. Further, the exact age of assets more than 60 years old is unknown due to a fire that destroyed the underlying infrastructure records in the 1950s. The Council has used historical failure rates of its assets to determine the investment required to renew these networks. We consider it unreasonable for the Council to use historical failure rates alone to develop its forecasts for renewing its networks. Planning on this basis increases the risk of asset failures, which could result in reduced levels of service, and increased costs that will need to be funded through either rates or debt. Emphasis of matters Breach of the Local Government Act 2002 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. Uncertainty over three waters reforms |
| Hastings District Council |
| Qualified opinion Assumption related to Waka Kotahi funding Funding for the transport activity is dependent on a subsidy from Waka Kotahi NZ Transport Agency (Waka Kotahi). On 27 May 2021, the Waka Kotahi Board endorsed an indicative subsidy of $53 million for the Council's local road maintenance over the first three years of the plan. This is $10.4 million lower than the Council had requested and has forecast in its plan. The Council has not adjusted its forecast assumption to the indicative subsidy of $53 million from Waka Kotahi, despite that being the best information available at the time of preparing and finalising the Council's plan. The effect of not adjusting this forecast assumption is that the estimated subsidies and grants is overstated by $3.47 million per annum over the first three years of the plan. Given the Council has not made any decisions on alternative funding sources, including increasing rates or increasing debt, we cannot determine the possible effects on other areas of the plan. There are no satisfactory audit procedures we could perform to confirm the impact of the reduction in the subsidy on the plan. Emphasis of matter – Uncertainty over three waters reforms |
| Hauraki District Council |
| Qualified opinion Assumption related to the upgrade of wastewater treatment plants The Council plans to spend $41 million to upgrade its wastewater treatment plants within the next 10 years. The Council assumes that the Government will fund 50% of the upgrades. We consider this assumption unreasonable because the Government has not made any funding available. If this assumption was removed, the impact on the underlying information over the next 10 years, as described by the Council, would be debt increasing to $85 million and targeted wastewater rates increasing by another 39% to a total of $1,040 per household. Emphasis of matter Uncertainty over three waters reforms |
| Hurunui District Council |
| Qualified opinion Improvements to the "Route 70 – Inland Road" and the consequences of those improvements have not been included in the underlying information The plan outlines that Waka Kotahi NZ Transport Agency (Waka Kotahi) obtained the power to operate the "Route 70 – Inland Road" after the 2016 Kaikōura Earthquake. Waka Kotahi was responsible for maintaining, repairing, and upgrading the road until 24 December 2020, when this responsibility was formally transferred back to the Council for its share of the road. The Council has not recognised its share in the value of Waka Kotahi's improvements to the road, because the Council did not have the information available during the preparation of the plan. As a consequence, the Council has not adjusted its forecast maintenance, renewals, and depreciation for the road in its plan. We are unable to determine the possible effect of these matters on the plan because it is impracticable to do so. Emphasis of matter Uncertainty over three waters reforms |
| Kaipara District Council |
| Qualified opinion Waka Kotahi funding Funding for the transport activity is dependent on a subsidy from Waka Kotahi NZ Transport Agency (Waka Kotahi). On 27 May 2021, the Waka Kotahi Board endorsed an indicative subsidy of $49.6 million for the Council's local road maintenance over the first three years of the plan. This is $6.2 million lower than the Council had requested and has forecasted in its plan. The Council has not adjusted its forecast assumption by the reduction in the subsidy from Waka Kotahi, despite that being the best information available when the Council prepared and finalised its plan. The effect of not adjusting this forecast assumption is that estimated subsidies and grants is overstated by $3.8 million. Given that the Council has not adjusted for this, we are uncertain of the effects this would have. Emphasis of matters Uncertainty over the delivery of the capital programme The Council is proposing to spend $339 million on capital projects over the next 10 years. Although the Council has taken steps to deliver its planned capital programme, there is uncertainty over the delivery of the programme due to significant constraints in the construction market. If the Council is unable to deliver on a planned project, it could affect intended levels of service. Uncertainty over debt repayment of the planned Mangawhai wastewater scheme development The Council is proposing to fund planned development of the Mangawhai wastewater scheme through development contributions rather than rates. The Council plans to fund the initial expenditure through debt, which will be recovered by associated development contributions over the life of the entire scheme. The Council's ability to repay the debt is uncertain because it is dependent on the Council's assumptions around growth and the collection of the proposed development contributions. Should these assumptions not be achieved the Council would need to reconsider the timing of future capital works projects and/or obtain alternative funding sources to repay the debt. Uncertainty over three waters reforms |
| Kāpiti Coast District Council |
| Qualified opinion Assumption related to Waka Kotahi NZ Transport Agency funding Funding for the transport activity is dependent on a subsidy from Waka Kotahi NZ Transport Agency (Waka Kotahi). On 27 May 2021, the Waka Kotahi Board endorsed an indicative subsidy of $12.5 million for the Council's local road maintenance over the first three years of the plan. This is $3.9 million lower than the Council requested and has forecast in its plan. The Council has not adjusted its forecast subsidy by the reduction in the subsidy from Waka Kotahi, despite that being the best information available at the time of preparing and finalising the Council's plan. The Council's assumption is that Waka Kotahi will provide the Council the $3.9 million shortfall within the next three years. If Waka Kotahi does not provide the Council with this additional funding, the Council may need to obtain additional borrowing to maintain the district's transport network. The effect of not adjusting the forecast subsidy is that estimated grants and subsidies revenue is overstated, on average, by $1.3 million per annum over the first three years of the plan. Given the Council has not adjusted for the forecast subsidy, we are uncertain of the effects this could have. Emphasis of matters Uncertainty over the delivery of the capital works programme The Council is proposing to spend $225 million on capital projects over the next three years of the plan. Although the Council is taking steps to deliver its planned capital programme, there is uncertainty over the delivery of the programme due to significant constraints in the construction market. If the Council is unable to deliver on a planned project, it could affect intended levels of service. Uncertainty over three waters reforms |
| Wellington City Council |
| Qualified opinion Infrastructure asset condition information The Council has challenges with its ageing three waters networks. Many of the assets in the networks are old, and a significant percentage have already passed the end of their expected useful life. The Council has also experienced several high-profile pipe failures, which have affected levels of service. The Council does not use information about the condition of its three water assets to inform its investment in its three waters networks. Rather, the renewal of assets has been forecast based on the age of the assets, capped by what the Council considers is affordable. Given the challenges outlined above, we consider this approach to be unreasonable. This could result in more asset failures during the 10-year period of the long-term plan, reduced levels of service, and greater costs than forecast. Emphasis of matters Uncertainty over the delivery of the capital programme The Council is proposing to spend $3.2 billion on capital projects over the next 10 years. Although the Council is taking steps to deliver its planned capital programme, there is uncertainty over the delivery of the programme due to a number of factors, including significant constraints in the construction market. If the Council is unable to deliver on a planned project, it could impact on levels of service. Uncertainty over funding of wastewater treatment plant The Council has assumed that external funding investment in the Moa Point wastewater treatment plant will be obtained by using the mechanisms in the Infrastructure Funding and Financing Act 2020. The project is currently uncertain because funding has not yet been confirmed. If the forecast level of external funding is not received, the Council notes that the project would not be able to proceed and will have to be reprioritised. This could affect improvements to levels of service. The Council's debt limit is forecast to be exceeded The Council's debt limit is based on a debt to income ratio of 225%. Forecast debt is expected to exceed this limit for the first six years of the plan. The Council notes that the forecast debt is prudent as it is below the Local Government Funding Agency debt to income ratio covenant level. However, given the Council has not used asset condition information to direct its investment in its three waters networks, the Council may need to incur greater costs than forecast. Should this occur these additional costs will need to be funded. Unless the Council reprioritises other projects, which could affect levels of service, it would need to increase rates or increase debt to fund the additional costs. Uncertainty over three waters reforms |
Unmodified opinions with "emphasis of matter" paragraphs
| Auckland Council |
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| Uncertainty over forecast funding We drew specific attention to the following assumptions, which are subject to higher levels of uncertainty and could affect the Council's ability to fund its planned capital expenditure:
Uncertainty over the City Rail Link project The Council assumed that it will cost $4.4 billion to deliver the City Rail Link project, which it expects to complete in late 2024. The Council's share of the estimated total cost is $2.2 billion. There remains a level of uncertainty about the costs related to the project. An agreement has not yet been reached between the Crown and the Council over the future ownership of the assets that comprise the City Rail Link. The Council has assumed that it will need to fund $408 million of future operating costs over the 10-year period of the plan and depreciation for 50% of the assets. Changes in these assumptions would affect the total estimated project cost, future operating costs, and depreciation, incorporated into the underlying information to the plan. Uncertainty over three waters reforms |
| Central Hawke's Bay District Council |
| Balancing the budget The Council is planning a balanced budget in year 1 of its plan but not a balanced budget for the remaining nine years. The Local Government Act 2002 requires a council to budget operating revenue that meets planned operating expenses for each year of the plan unless, after considering certain matters set out in the Act, it resolves that it is financially prudent to budget less operating revenue. The Council explains why it is financially prudent to plan not to have a balanced budget, how and when it is likely to have a balanced budget, and the impact of the decision on future debt and rates. Uncertainty over three waters reforms |
| Central Otago District Council |
| Uncertainty over the delivery of the capital programme The Council is proposing to spend $333 million on capital projects over the next 10 years. Although the Council is taking steps to deliver its planned capital programme, there is uncertainty over the delivery of the programme due to a number of factors, including significant constraints in the construction market. If the Council is unable to deliver on a planned project, it could affect levels of services. Uncertainty over three waters reforms |
| Chatham Islands Council |
| Reliance on funding from the Government The Council is reliant on funding from the Government to remain financially sustainable. The Government has confirmed financial support for operational costs until the end of the 2023/24 financial year. The Council also receives grants from various government agencies to fund capital expenditure to renew assets and improve levels of service. The long-term plan outlines those capital expenditure projects that the Council has not included in its financial forecasts because such funding has not yet been secured. We drew specific attention to the following matters, because of the Council's unique circumstances:
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| Clutha District Council |
| Uncertainty over the delivery of the capital works programme The Council is proposing to spend $278 million on capital projects over the next 10 years. Although the Council is taking steps to deliver its planned capital programme, there is uncertainty over the delivery of the programme due to significant constraints on the construction market. If the Council's is unable to deliver on a planned project, it could affect intended levels of service. Uncertainty over three waters reforms |
| Environment Canterbury Regional Council |
| Extent of damage from the significant flooding event during May 2021 is unknown A significant flooding event occurred during May 2021 in the Canterbury region. The Council has not made amendments to the forecasts contained in the plan because the extent of the damage to the region's flood protection infrastructure and the estimated cost and timing of the remediation work that will be required are currently unknown and have yet to be assessed by the Council. Once this information is known, the Council will determine whether to amend its plan or include the information in the 2022/23 annual plan. |
| Environment Southland Regional Council |
| Breach of the Local Government Act 2002 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. |
| Far North District Council |
| Uncertainty over water supply and wastewater assets condition information The condition information used to support the Council's planned water supply and wastewater assets renewal programme is not complete. The Council uses the available condition assessment information and performance of the assets to determine the renewals required. There is therefore a risk that all assets that may need replacing have not been identified. The Council sets out how it plans to reduce this risk and notes that it proposes to spend more on better understanding its assets. Uncertainty over the delivery of the capital programme The Council is proposing to spend $1.1 billion on capital projects over the next 10 years. Although the Council is taking steps to deliver its planned capital programme, there is uncertainty over the delivery of the programme due to significant constraints in the construction market. If the Council is unable to deliver on a planned project, it could affect intended levels of service. Uncertainty over three waters reforms |
| Greater Wellington Regional Council |
| Uncertainty over the delivery of the capital programme The Regional Council is proposing to spend $1,023 million on capital projects over the next 10 years. Although the Regional Council has taken steps to deliver its planned capital programme, there is uncertainty over the delivery of the programme due to a number of factors, including significant constraints in the construction market. If the Regional Council is unable to deliver on a planned project, it could affect intended levels of service. Uncertainty over the decarbonisation of the bus and rail networks The Regional Council plans to decarbonise its bus and rail networks. The Regional Council has assumed that the Government will provide a significant level of funding to enable decarbonisation of the bus and rail networks. If the Regional Council does not receive the assumed government funding, its bus and rail programme affordability will be at risk and it will need to significantly revise its decarbonisation plan. Uncertainty over three waters reforms |
| Hamilton City Council |
| Uncertainty over cost savings The Council expects to achieve cost savings of $106 million over the next 10 years. If the Council is unable to achieve all the expected cost savings, the Council will need to find alternative funding sources or reduce costs elsewhere. The Council notes that it intends to maintain levels of service. Uncertainty over infrastructure asset condition information Although the Council continues to update its asset information, the asset condition information used to support its planned infrastructure assets renewal programme is not complete. The Council uses information about the age and performance of assets and the types of materials the assets are made of to determine the renewals required. There is therefore a risk that some assets that may need replacing have not been identified. The Council sets out how it reduces this risk and notes that it proposes to spend more on better understanding its assets. Uncertainty over three waters reforms |
| Hawke's Bay Regional Council |
| Uncertainty over the delivery of the capital programme The Council is proposing to spend $156 million over the next 10 years. Although the Council is taking steps to deliver its planned capital programme, there is uncertainty over the delivery of the programme due to a number of factors, including significant constraints in the construction market. If the Council is unable to deliver on a planned project, it could affect intended levels of service. |
| Horowhenua District Council |
| Uncertainty over the delivery of the capital programme The Council is proposing to spend $47 million per year on capital projects over the next 20 years. Although the Council is taking steps to deliver on its planned capital programme, there is uncertainty over the delivery of the programme due to a number of factors, including significant constraints in the construction market. If the Council is unable to deliver on a planned project, it could affect intended levels of service. Uncertainty over infrastructure asset condition information The Council's decision on when to replace ageing assets is informed by continual assessment of asset condition and monitoring of reactive maintenance costs. The renewal of assets is however budgeted for based on the age of the assets. There is therefore a risk that additional funding may be required to pay for renewals that are needed earlier than planned, and this could result in an increased risk of disruption in services. Uncertainty over three waters reforms |
| Hutt City Council |
| Uncertainty over the three waters asset renewals forecasts The Council continues to improve its asset condition information. The Council primarily uses age-based information to forecast its three waters asset renewals, which means there is a higher degree of uncertainty about how the Council prioritises its investment needs. Uncertainty over the delivery of the capital programme The Council is proposing to spend $1.5 billion on capital projects over the next 10 years. Although the Council is taking steps to deliver its planned capital programme there is uncertainty over the delivery of the programme due to a number of factors, including significant constraints in the construction market. If the Council is unable to deliver on a planned project, it could affect intended levels of service. Uncertainty over three waters reforms |
| Invercargill City Council |
| Uncertainty over the delivery of the capital programme The Council is proposing to spend $115 million on capital projects over the next 10 years. While the Council is taking steps to deliver its planned capital programme, there is uncertainty over the delivery of the programme due to significant constraints in the construction market. If the Council is unable to deliver on a planned project, it could result in disruption to services as a result of asset failures. Uncertainty over external funding of capital projects The Council has assumed that external funding contributions will be obtained to build the City Centre Masterplan Streetscape and Urban Play, reopen and refurbish the Southland Museum and Art Gallery, and construct Arts and Creativity Invercargill over the next 10 years. The external funding contributions are currently uncertain because funding agreements are not in place. If the level of external funding is not achieved and where significant ratepayer funding is required, the Council has noted that it intends to consult with the community on contributing more ratepayer funding or whether to explore other options. Uncertainty over three waters reforms |
| Kaikōura District Council |
| Achieving a balanced budget The Council is not planning to meet the balanced budget benchmark from years 2025 to 2031 of the plan. This is because the Council is not fully funding depreciation on its assets. The Council explains the reasons why it considers this is financially prudent and describes how it plans to achieve a balanced budget beyond the 10 years of this plan. Breach of the Local Government Act 2002 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. Uncertainty over three waters reforms |
| Kawerau District Council |
| Uncertainty over three waters renewals forecasts The Council's forecasting for three waters asset renewals is based on the assets' minimum lifespan. We note that using mostly age-based information increases the risk that assets requiring renewal are not replaced at the best time. The Council plans to carry out an asset evaluation programme and to use this information to determine the actual renewals required. Breach of the Local Government Act 2002 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. Uncertainty over three waters reforms |
| Manawatū-Wanganui Regional Council (Horizons Regional Council) |
| Uncertainty over the delivery of the capital programme The Council is proposing to spend $138.5 million on capital projects over the next 10 years. Although the Council is taking steps to deliver its planned capital programme, there is uncertainty over the delivery of the programme due to a number of factors, including significant constraints in the construction market. If the Council is unable to deliver on a planned project, it could affect intended levels of service. |
| Masterton District Council |
| Uncertainty over external funding The Council has assumed that government subsidies and external funding will be obtained to fund a project estimated to cost $2.5 million to facilitate growth at Panama. The project is currently uncertain because funding has not yet been sought. The Council notes that it will work with the Government, community housing providers, and iwi to determine the most appropriate arrangement for a provider to fund and build the public housing. The Council will also seek external funding for infrastructure required on the site. Uncertainty over three waters reforms |
| Napier City Council |
| Uncertainty over the delivery of the capital programme The Council is proposing to spend $811 million on capital projects over the next 10 years. Although the Council is taking steps to deliver its capital programme, there is uncertainty over the delivery of the programme due to a number of factors, including significant constraints in the construction market. If the Council is unable to deliver on a planned project, it could impact on levels of service. Achieving a balanced budget The Council is not planning to meet the balanced budget benchmark for the first nine years of the plan. This is because the Council is not fully funding its depreciation. The Council explains the reasons why it considers that it is financially prudent not to meet the balanced budget benchmark, and how it proposes to increase rates and debt over the period of the plan in order to meet the balanced budget benchmark by year 10. Uncertainty over three waters reforms |
| New Plymouth District Council |
| Uncertainty over the delivery of the capital programme The Council is proposing to spend $963 million on capital projects over the next 10 years. Although the Council is taking steps to deliver its planned capital programme, there is uncertainty over the delivery of the programme due to a number of factors, including significant constraints in the construction market. If the Council is unable to deliver on a planned project, it could affect intended levels of service. Uncertainty over three waters reforms |
| Ōpōtiki District Council |
| Uncertainty over the delivery of the capital programme The Council is proposing to spend $117 million on capital projects over the next 10 years. Although the Council is taking steps to deliver its planned capital programme, there is uncertainty over the delivery of the programme due to a number of factors, including significant constraints in the construction market. If the Council is unable to deliver on a planned project, it could affect intended levels of service. Uncertainty over external funding The Council faces challenges with funding large-scale housing developments. The Council has assumed that government subsidies will be obtained to fund projects of approximately $22 million, to facilitate growth in Hukutaia. These projects are currently uncertain because funding has not yet been sought. If the level of external funding is not achieved, the Council notes that it would consider other funding sources as part of the next long-term plan. Uncertainty over three waters reforms |
| Porirua City Council |
| Uncertainty over the three waters forecasts The Council continues to improve its asset condition information. The Council primarily uses age-based information to forecast its three waters asset renewals, which means that there is a higher degree of uncertainty about how the Council prioritises its investment needs. Uncertainty over the delivery of the capital programme The Council is proposing to spend $2.7 billion on capital projects over the next 30 years. Although the Council is taking steps to deliver its planned capital programme there is uncertainty over the delivery of the programme due to a number of factors, including significant constraints in the construction market. If the Council is unable to deliver on a planned project, it could affect intended levels of service. Uncertainty over three waters reforms |
| Queenstown-Lakes District Council |
| Uncertainty related to the proposed visitor levy The Council has proposed the introduction of a visitor levy from 2024 to fund visitor-related infrastructure. The Council does not yet have the legal authority for the levy. If the visitor levy is not available from 2024, the related capital programme will be significantly impacted or rates will increase. Uncertainty over the delivery of the capital works programme The Council is proposing to spend $1.67 billion on capital projects over the next 10 years. Although the Council is taking steps to deliver its planned capital programme, there is uncertainty over the delivery of the programme due to significant constraints in the construction market. If the Council is unable to deliver on a planned project, it could affect the levels of service. Uncertainty over three waters reforms |
| Rangitīkei District Council |
| Uncertainty over the three waters asset renewals forecasts The Council continues to improve its asset condition information. The Council primarily uses age-based information to forecast its three waters asset renewals, which means there is a higher degree of uncertainty about how the Council prioritises its investment needs. Uncertainty over the delivery of the capital programme The Council is proposing to spend $221 million on capital projects over the next 10 years. Although the Council is taking steps to deliver its planned capital programme, there is uncertainty over the delivery of the programme due to a number of factors, including significant constraints in the construction market. If the Council is unable to deliver on a planned project, it could affect intended levels of service. Uncertainty over forecast cost savings The Council is pursuing operational efficiencies with forecast cost savings of $8 million included in the plan. To the extent that the Council does not achieve the forecast savings there will be an impact on future debt levels, service levels, and/or rates. Breach of the Local Government Act 2002 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. Uncertainty over three waters reforms |
| Rotorua Lakes Council |
| Uncertainty over external funding of capital projects The Council assumed that external funding contributions will be obtained for the Aquatic Centre, Museum, Westbrook Sports Precinct, and Rotoiti/Rotoma sewerage scheme. The external funding contributions are currently uncertain because funding has not yet been sought. If the level of external funding is not achieved the Council notes that it will have to determine how to proceed with these projects, including increasing its funding commitments. Uncertainty over three waters reforms |
| Ruapehu District Council |
| The Council's debt limit is forecast to be exceeded The Council's financial strategy notes that the Council's debt limit is based on borrowings being no more than twice the total annual rates bill for the period of the plan. Forecast debt is expected to grow to $100 million which will exceed the limit from year 4 of the plan. The Council notes that forecast debt is affordable (but not ideal) and that the Council has a number of opportunities to review its financial position and may need to consider revising its debt limits in the next annual and long-term planning cycles. Uncertainty over the delivery of the capital programme The Council is proposing to spend $234 million on capital projects over the next 10 years. Although the Council is taking steps to deliver its planned capital programme, there is uncertainty over the delivery of the programme due to a number of factors, including significant constraints in the construction market. If the Council is unable to deliver on a planned project, it could affect intended levels of service. Uncertainty over three waters reforms |
| Selwyn District Council |
| The extent of damage from the significant flooding event during May 2021 is uncertain A significant flooding event occurred during May 2021 in the Canterbury region. The Council has not made amendments to the forecasts contained in the plan because the extent of the damage to the Council's infrastructure and the estimated cost and timing of the remediation work that will be required are currently based on a preliminary assessment only. Should repair costs be much higher than expected, the Council will determine whether to amend its plan or include the information in the 2022/23 annual plan. Uncertainty over three waters reforms |
| South Taranaki District Council |
| Uncertainty over the delivery of the capital programme The Council is proposing to spend $336 million on capital projects over the next 10 years. Although the Council is taking steps to deliver its planned capital programme, there is uncertainty over the delivery of the programme due to significant constraints in the construction market. If the Council is unable to deliver on a planned project, it could affect intended levels of service. Uncertainty over three waters reforms |
| South Wairarapa District Council |
| Uncertainty over the delivery of the capital programme The Council is proposing to spend $110 million on capital projects over the next 10 years. Although the Council is taking steps to deliver its planned capital programme, there is uncertainty over the delivery of the programme due to a number of factors, including significant constraints in the construction market. If the Council is unable to deliver on a planned project, it could affect intended levels of service. Uncertainty over the three waters forecasts The Council continues to improve its asset condition information. The Council primarily uses age-based information to forecast its three waters asset renewals, which means there is a higher degree of uncertainty about how the Council prioritises its renewals programme. Uncertainty over Featherston wastewater treatment plant The Featherston wastewater treatment plant will be an investment focus over the next 10 years. There is a high level of uncertainty over identifying a long-term sustainable solution that is feasible and affordable to the community, due to complexities around the location of the plant. The Council has included $16 million over the first five years of the plan to make improvements to the existing plant and to fund the new consent process. However, further investment will be required for a new wastewater treatment plant, which could have a significant impact on the Council's forecast debt and levels of service. The Council notes that it is working with Wellington Water, industry experts, key stakeholders, and the community to identify a shortlist of options and their estimated costs. Uncertainty over three waters reforms |
| Southland District Council |
| Uncertainty over the delivery of the capital programme The Council is proposing to spend $458 million on capital projects over the next 10 years. Although the Council is taking steps to deliver its planned capital programme, there is uncertainty over the delivery of the programme due to a number of factors, including significant constraints in the construction market. If the Council is unable to deliver on a planned project, it could affect intended levels of service. Uncertainty over three waters reforms |
| Tasman District Council |
| Uncertainty over the Waimea Community Dam construction costs The plan outlines a range for the revised cost estimate of the Waimea Community Dam. The Council has estimated the cost to be $158.5 million and the Council's plan has been based on this estimate. In addition, the costs to enable future hydro power of $350,000 have been included in the Council's plan. The total cost of the dam is uncertain due to risks associated with the project, including any further Covid-19 related costs, and the scale of work still required to complete the dam. The estimated cost overrun is $54 million higher than the original cost estimate in 2018. The Council is contractually obliged to meet all cost overruns above the first $3 million and $1.5 million of that first $3 million. The Council describes how it will fund the cost over-run and the additional costs to enable future hydro power in the plan. Uncertainty over three waters reforms |
| Taupō District Council |
| Uncertainty over the delivery of the capital programme The Council is proposing to spend $418 million on capital projects over the next 10 years. Although the Council is taking steps to deliver its planned capital programme, there is uncertainty over the delivery of the programme due to significant constraints in the construction market. If the Council is unable to deliver on a planned project, it could affect intended levels of service. Uncertainty over three waters reforms |
| Tauranga City Council |
| Uncertainty over the delivery of the capital programme The Council is proposing to spend $4.6 billion on capital projects over the next 10 years. Although the Council is taking steps to deliver its planned capital programme, there is uncertainty over the delivery of the programme due to a number of factors, including significant constraints in the construction market. If the Council is unable to deliver on a planned project, it could affect intended levels of service. Breach of the Local Government Act 2002 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. Uncertainty over three waters reforms |
| Timaru District Council |
| Breach of the Local Government Act 2002 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. Uncertainty over three waters reforms |
| Upper Hutt City Council |
| Uncertainty over the three waters asset renewals forecasts The Council continues to improve its asset condition information. The Council primarily uses age-based information to forecast its three waters asset renewals, which means there is a higher degree of uncertainty about how the Council prioritises its investment needs. Uncertainty over the delivery of the capital programme The Council is proposing to spend $359 million on capital projects over the next 10 years. Although the Council is taking steps to deliver its planned capital programme, there is uncertainty over the delivery of the programme due to a number of factors, including significant constraints in the construction market. If the Council is unable to deliver on a planned project, it could affect intended levels of service. Uncertainty over three waters reforms |
| Waimate District Council |
| Breach of the Local Government Act 2002 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. Uncertainty over three waters reforms |
| Waikato District Council |
| Uncertainty over the delivery of the capital programme The Council is proposing to spend $1,026 million on capital projects over the next 10 years. Although the Council is taking steps to deliver its planned capital programme, there is uncertainty over the delivery of the programme due to significant constraints in the construction market. If the Council is unable to deliver on a planned project, it could affect intended levels of service. Uncertainty over three waters reforms |
| Waikato Regional Council |
| Uncertainty over funding of Te Huia services The Council has launched a start-up passenger rail service (Te Huia) in April 2021 and intends to extend the service. The Government has approved funding for the first five-year trial service. The Council assumes that the Government will continue to fund this rail service after the trial period. The Council also assumes that additional funding will be provided to support the proposed extension of the service's operation after December 2021. If the start-up funding is not continued or the additional funding for the planned additional services is not received, the Council would need to meet the shortfall in funding through other sources or rates, which may result in changes being made to the rail service, including not proceeding with the planned improvements. |
| Waitaki District Council |
| Uncertainty over external funding of capital projects The Council has assumed that external funding contributions will be obtained to build an indoor sports and events centre. The external funding contributions are currently uncertain because funding agreements are not in place. A decision to build the facility will not be made until there is certainty about what could be delivered within the funding constraints. If the level of external funding is not achieved the Council notes that it will either change the scope of the project or abandon the project. Uncertainty over three waters infrastructure assets forecast The Council's forecasting for three waters infrastructure asset renewals is based on age and asset failure rates. Planning on this basis increases the risk of disruption in services. Uncertainty over the delivery of the capital programme The Council is proposing to spend $313 million on capital projects over the next 10 years. Although the Council is taking steps to deliver its planned capital programme, there is uncertainty over the delivery of the programme due to a number of factors, including significant constraints in the construction market. If the Council is unable to deliver on a planned project, it could affect levels of service. Uncertainty over three waters reforms |
| West Coast Regional Council |
| Breach of the Local Government Act 2002 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. Uncertainty over the delivery of the capital programme The Council is proposing to spend $44.02 million on capital projects over the next 10 years. There is uncertainty over the delivery of the programme within the set timeframes due to a number of factors, including delays in receiving resource consents, adverse weather events, and the inability to procure the appropriate contracted services. If the Council is unable to deliver on a planned project, it could affect intended levels of service. |
| Westland District Council |
| Uncertainty over the delivery of the capital programme The Council is proposing to spend $108 million on capital projects over the next 10 years. Although the Council is taking steps to deliver its planned capital programme, there is uncertainty over the delivery of the programme due to a number of factors, including significant constraints in the construction market. If the Council is unable to deliver on a planned project, it could affect intended levels of service. Uncertainty over the three waters renewals forecasts The Council continues to improve its asset condition information. The Council primarily uses age-based information to forecast its three water asset renewals, which means there is a higher degree of uncertainty about how the Council prioritises its investment needs. Uncertainty over three waters reforms |
| Whakatāne District Council |
| Uncertainty over external funding The Council requires $13.7 million in external funding for a new wastewater treatment plant in Matatā. The Council has assumed that $6.7 million and $7 million will be funded by the Ministry of Health and the Bay of Plenty Regional Council respectively. The external funding contributions are currently uncertain because they have not yet been confirmed. If the Council is not able to obtain this level of funding, it will reconsider how to proceed with the project. Breach of the Local Government Act 2002 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. Uncertainty over three waters reforms |
Further, the following councils received an unmodified audit opinion with an "emphasis of matter" paragraph about the uncertainty over the three waters reforms only.
- Carterton District Council
- Christchurch City Council
- Dunedin City Council
- Gisborne District Council
- Grey District Council
- Manawatū District Council
- Marlborough District Council
- Matamata-Piako District Council
- Nelson City Council
- Ōtorohanga District Council
- South Waikato District Council
- Stratford District Council
- Tararua District Council
- Thames-Coromandel District Council
- Waimakariri District Council
- Waipā District Council
- Wairoa District Council
- Waitomo District Council
- Western Bay of Plenty District Council
- Whanganui District Council
- Whangarei District Council
57: For a plain English explanation of the different forms of audit reports, see our blog post, "The Kiwi guide to audit reports", at oag.parliament.nz.