The audit sub-committee meeting was held on 19 March 2005. All councillors (Crs Higgins, Inglis, Sangster, and myself) were present with apologies from Cr King.
The meeting agenda included the following items: (1) 2013-14 annual plan audit report, (2) mayoral relief fund audit report, (3) motor vehicle audit report, (4) authorisation and delegation audit report, and (5) internal audit programme.
Annual plan 2013
In my opinion, the 2013-14 annual plan received a good audit report. In fact the council received an un-modified audit opinion.
By way of background, auditors are charged with the task of verifying the effectiveness of a business’s internal controls and must report any incidences they find that suggest mis-management, waste, or fraud. After the audit, the auditor must express a formal opinion on the records they have reviewed in their report, which may be either a modified or unmodified audit opinion.
When the financial statements “give a true and fair view” and the organisation under audit has complied with all the statutory and prescribed requirements, the auditor will issue an un-modified audit opinion. A modified audit opinion is issued when there are identified issues. For example, there is a possibility of a material mis-statement (or actual material mis-statement) in the financial records, or there is a material deviation from the financial reporting standards. Material mis-statements are differences or omissions of amounts and disclosures that are considered likely to influence a reader’s understanding of the financial statements.
However, the audit did identify several areas of non-compliance (although these were not material). For example, use of the word “GST exclusive” in the annual report, when it should have read “GST inclusive” (the figures were correct), insufficient explanation of the services level differences in the four differentiated rural zones, maps not being attached to resolution minutes when the resolution referred to attached maps, and the financial impact statement not including objectives of differentiated rates, or examples showing the impact of rating proposals. All things that have been addressed in the long term plan (LTP).
Mayoral relief fund
The audit report identified no significant matters. However, the audit report did draw to the council’s attention a future change in the applicable accounting standard – being the new “public benefit entities” (PBE) standard.
Given the trust does not hold a great deal of funds, and given the cost of auditing the fund is likely to increase substantially, consideration should be given to widening the purpose of the trust (and its ability to hold more funds), or winding it up.
A wider charitable purpose would allow the public to continue to provide charitable donations and receive tax credits. Donations directly to council do not have a tax benefit for the donor, as the council cannot be registered as a charity.
Staff propose to report back on a recommendation going forward.
Motor vehicle audit
A review of vehicle fleet use confirmed vehicles were being used for proper purposes and not for private benefits that might result in fringe benefit tax (FBT). All vehicle sales were conducted through Turner’s auctions or the council’s Trade Me account, and fully transparent. All vehicle purchases were conducted through authorised “All of Government” suppliers.
The scope of the audit of vehicle sales and purchases went back to October 2013. In my opinion, the sample size was good. A further audit on earlier periods will be carried out and reported back to the next audit sub-committee.
Staff have delegated authority to incur expenses. Generally, the higher the management level, the larger the delegated authority. Below general management level, delegated financial limits are based on job designation and function. All delegations are recorded in a delegations register.
The audit reviewed a random sample of electronic purchase orders in the last 2 payment runs. No issues with exceeding delegated authority were found. No other issues were found. The external audit of the annual report also did not identify any delegation issues.
However, in my opinion, the sample size was to small, and I suggested that a larger sample (over a different period) should be undertaken. Staff advised that the next review would be widened.
Internal audit programme
The audit sub-committee requested three internal audits on motor vehicles, delegated authority, and leases, that were reported back to this meeting. The audit sub-committee also endorsed commissioning an external contractor to provide audit planning services, with audit work plans being carried out by the finance team, and peer-reviewed by an external auditor before reporting to the audit sub-committee. Any costs will come from the existing audit budget. This approach should make some cost savings from not having to engage full audit services.
Agenda and minutes
The agenda and minutes are located at http://www.tasman.govt.nz/council/council-meetings/subcommittee-meetings/audit-subcommittee-meetings/?path=/EDMS/Public/Meetings/AuditSubcommittee/2015/2015-03-19.