The audit sub-committee meeting was held on 16 September 2015. All subcommittee members (Crs Higgins, King, Sangster, Inglis, and myself) were present, including the newly appointed independent advisory member, Graham Naylor.
The agenda included two items: (1) internal audit programme update, and (2) draft annual report. As might be expected with two agenda items the meeting was relatively brief.
At the conclusion of the meeting we took the opportunity to speak with the auditor, without the presence of staff. We had done this with the 2014 annual audit report and it had proved a good exercise. Generally, the audit process had substantially improved on the previous year. This was put down to better staff preparation and planning. Although, I suspect it had to also do with increasing the resourcing for the finance team.
Internal audit programme
This item was an update (information only) report. Crowe Horwath have been engaged to provide internal audit services. This includes undertaking a review of councils processes and procedures for leasing and licensing arrangements. The review will also examine contract terms and conditions, pricing, billing, and collection). A list of relevant issues that will be examined are outlined on page 21 of the agenda.
Mr Naylor suggested this amount of detail was not necessary to present to the audit subcommittee. I disagree. I thought it was very useful for governance (especially for inexperienced members) to know what was being addressed in the review (and what was not). Knowing this provided me confidence that the review would be specifically examining some issues that had arisen in the past. For example (question 3.13), does the lease agreement include council approval clauses for subletting arrangements? The overall budget for this activity will be around $10,000. In addition, Crowe Horwath will provide some staff training.
The draft annual report for the financial year ended 30 June 2015 was presented to the subcommittee for comment, before its presentation to council. This is the financial report that outlines the performance of council for the 2014-15 year and is reviewed by the auditor general (which is a legislative requirement).
Feedback from the auditor has been very positive and the council has received another unmodified audit report. In my opinion, both the financials and the audit process have seen a marked improvement on the previous year.
For an explanation of what is an “unmodified audit report” as well as a summary of last years audit report, see my earlier post at www.greeningtasman.wordpress.com/2015/03/28/audit-sub-committee-meeting-19-march/.
Generally, there were few comments from the subcommittee – with most being minor typographical changes. A confidential discussion (without staff being present) was held with the auditor after the meeting closed. The discussion was good and the confirmed that the financial team are doing a good job with the audit visit being smoother than earlier years. No doubt this is a reflection of better resourcing of the finance team (both inn terms of people and technology).
In summary, non-financial performance for the 2014-15 year was good. Overall, 82% of non financial measured targets were achieved and 12% not achieved. Council also ended the 2014-15 financial stronger than previous years.
Debt levels were lower than budgeted for year end. Rather than the projected $172 million, debt came in at $145 million. Total rates income (general rates and targeted rates) was $65.4 million. Other income (development contributions, subsidies and grants, fees and charges, other revenue) totaled $57.4 million. General rates increased $310,000 as a direct result of growth (ie, more ratepayers). Assets under council control totaled $1.26 billion. The accounting position records a $21.1 million surplus, compared to a budgeted surplus of $9.1 million. Effectively, an improved performance (positive variance) of $12 million above budget (the forecasted outcome).
In my opinion, council need to use any surplus to further reduce existing debt levels (and thus further reduce interest repayments), address the communities desire to further reduce storm water risks that have still not been addressed in residential Richmond, and provide for future potential natural disasters.
The annual report will now be presented to full council for approval.
Agenda and minutes
The agenda and minutes are located at www.tasman.govt.nz/council/council-meetings/subcommittee-meetings/audit-subcommittee-meetings/?path=/EDMS/Public/Meetings/AuditSubcommittee/2015/2015-09-16.