Independent Auditor's Report

The Auditor-General is the auditor of Kaipara District Council (the District Council). The Auditor-General has appointed me, Karen MacKenzie, using the staff and resources of Audit New Zealand, to carry out the audit of the financial statements, groups of activity statements, and compliance with the other requirements of Schedule 10 of the Local Government Act 2002 that apply to the annual report of the District Council on her behalf.

We have audited:

• the financial statements of the District Council on pages […] to […], that comprise the Balance Sheet as at 30 June 2011, the Statement of Comprehensive Income, Statement of Changes in Public Equity, and Statement of Cash Flows for the year ended on that date, and the notes to the financial statements that include accounting policies and other explanatory information;
• the groups of activity statements of the District Council on pages […] to […]; and
• the District Council’s compliance with the other requirements of Schedule 10 of the Local Government Act 2002 that apply to the annual report (other Schedule 10 information).

Opinion on the financial statements, groups of activity statements, and other Schedule 10 information

In our opinion:

• The financial statements of the District Council on pages […] to […]:
  • comply with generally accepted accounting practice in New Zealand; and
  • fairly reflect:
    • the District Council’s financial position as at 30 June 2011; and
    • the financial performance and cash flows for the year ended on that date.
• The groups of activity statements of the District Council on pages […] to […]:
  • comply with generally accepted accounting practice in New Zealand; and
  • fairly reflect the District Council’s levels of service for the year ended 30 June 2011, including:
    • the levels of service as measured against the intended levels of service adopted in the long-term council community plan; and
    • the reasons for any significant variances between the actual service and the expected service.
• The District Council has complied with the other requirements of Schedule 10 of the Local Government Act 2002 that apply to the annual report.

Legal issues associated with targeted rates

Without modifying our audit opinion, we draw your attention to the legal issues associated with the revenue from various targeted rates (see note 2 in the financial statements). As noted, these rates lacked proper statutory authority, given errors in the way they were set. We also draw your attention to the significant contingent liability which would crystallise should any legal challenge result in rates having to be repaid to ratepayers (see note 6 in the financial statements).

Restatement of comparative information relating to the Mangawhai Community Wastewater Scheme

We also draw your attention to the restatement of comparative information in note 27 that relates to the Mangawhai Community Wastewater Scheme. The adjustments relating to the Scheme affect the years ended 30 June 2008, 30 June 2009, and 30 June 2010, and are necessary to restate information previously presented.

Auditor-General’s inquiry into management of the Mangawhai Community Wastewater Scheme

Further, we draw your attention to the fact that the Auditor-General, after a request from the Council, agreed to proceed with an inquiry into the Council’s development, implementation, and oversight of the Mangawhai Community Wastewater Scheme as set out in note 6. That inquiry will also look at Council’s planning and decision-making processes, and its financial management, monitoring and reporting for the Scheme.

Significant delay to adoption of the annual report

Finally, we draw your attention to the fact that the Council did not adopt its annual report within the statutory time frame as set out in note 29.

Our audit was completed on [date]. This is the date at which our opinion is expressed.

The basis of our opinion is explained below. In addition, we outline the responsibilities of the Council and our responsibilities, and explain our independence.

Basis of opinion

We carried out our audit in accordance with the Auditor-General’s Auditing Standards, which incorporate the International Standards on Auditing (New Zealand). Those standards require that we comply with ethical requirements and plan and carry out our audit to obtain reasonable assurance about whether the financial statements, groups of activity statements and other Schedule 10 information are free from material misstatement.

Material misstatements are differences or omissions of amounts and disclosures that would affect a reader’s overall understanding of the financial statements, groups of activity statements and other Schedule 10 information. If we had found material misstatements that were not corrected, we would have referred to them in our opinion.

An audit involves carrying out procedures to obtain audit evidence about the amounts and disclosures in the financial statements, groups of activity statements and other Schedule 10 information. The procedures selected depend on our judgement, including our assessment of risks of material misstatement of the financial statements, groups of activity statements and other Schedule 10 information whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the preparation of the District Council’s financial statements, groups of activity statements and other Schedule 10 information that fairly reflect the matters to which they relate. We consider internal control in order to design audit procedures that are appropriate in the circumstances but not for the purpose of expressing an opinion on the effectiveness of the District Council’s internal control.

An audit also involves evaluating:

• the appropriateness of accounting policies used and whether they have been consistently applied;
• the reasonableness of the significant accounting estimates and judgements made by the Council;
• the adequacy of all disclosures in the financial statements and groups of activity statements;
• determining the appropriateness of the reported groups of activity statements within the Council’s framework for reporting performance; and
• the overall presentation of the financial statements, groups of activity statements and other Schedule 10 information.

We did not examine every transaction, nor do we guarantee complete accuracy of the financial statements, groups of activity statements and other Schedule 10 information. We have obtained all the information and explanations we have required and we believe we have obtained sufficient and appropriate audit evidence to provide a basis for our audit opinion.

Responsibilities of the Council

The Council is responsible for preparing:

• financial statements and groups of activity statements that:
  • comply with generally accepted accounting practice in New Zealand;
  • fairly reflect the District Council’s financial position, financial performance and cash flows;
  • fairly reflect its service performance, including achievements compared to its forecast; and
• other information required by Schedule 10 of the Local Government Act 2002.

The Council is responsible for such internal control as it determines is necessary to enable the preparation of financial statements, groups of activity statements and other Schedule 10 information that are free from material misstatement, whether due to fraud or error.

The Council’s responsibilities arise from the Local Government Act 2002.

Responsibilities of the Auditor

We are responsible for expressing an independent opinion on the financial statements, groups of activity statements and compliance with the other Schedule 10 information and reporting that opinion to you based on our audit. Our responsibility arises from section 15 of the Public Audit Act 2001 and section 99 of the Local Government Act 2002.

Independence

When carrying out the audit, we followed the independence requirements of the Auditor‑General, which incorporate the independence requirements of the New Zealand Institute of Chartered Accountants.

The Auditor-General is carrying out an inquiry into the District Council’s management of the Mangawhai Community Wastewater Scheme. Other than the inquiry, and this report, and in conducting the audit of the Long-Term Plan Statement of Proposal, we have no relationship with or interests in the District Council.

Karen MacKenzie
Audit New Zealand
On behalf of the Auditor‑General
Auckland, New Zealand