Mike Sabin
National MP for Northland
Media Statement
3 December 2013
Sabin calls on OAG to do the honourable thing
Mike Sabin, MP for Northland, has called for the Office of the Auditor General and their insurer to engage with the Kaipara District Council to resolve by way of a negotiated settlement the cost of the failure stemming from the Council Auditor who has been shown to have departed from the minimum professional standards and expectation required of an auditor.
“The independent inquiry into Audit NZ, the Council Auditor over the time of the planning and construction of the waste water scheme, is nothing short of damning,” says Mr Sabin.
The report of the Office of the Auditor General (OAG) was tabled today in parliament and also contained the report of Auditing and Assurance Standards Board Chairman Neil Cherry highlighting significant areas of deficiency and non-compliance related to the:
Auditor’s planning and audit engagement;
The identification and assessment of audit risks;
The sufficiency and appropriateness of audit documentation; and
The collection of sufficient appropriate audit evidence
The report determines that the primary reasons for the deficiencies by Audit NZ outlined above were a:
Lack of understanding of the requirements of the Local Government Rating Act;
Lack of understanding of the objective or purposes of the audit test procedure; and
Failure to adequately identify the risks and significance of non-compliance
“The report is particularly scathing of the Auditor between the periods of 2006 and 2009, saying their understanding of the wastewater scheme was inadequate, and didn’t allow for the audit process to be effectively planned .
“These deficiencies in the planning and performance of audit test procedures over this period also demonstrate that it was reasonable for the Auditor to have identified many of the errors and irregularities being dealt with in the Local Bill. The Auditor should have picked these up,” says Mr Sabin.
“The report highlights that because of the deficiencies in the planning and performance of the audit, that Mr Cherry concluded the Auditor failed to plan for, detect or appropriately consider numerous potentially material deficiencies in the Council’s 2006 – 2009 annual reports and in doing so failed to satisfy the overall audit objective.
“Furthermore given there was evidence to indicate the Council’s 2009 annual report was materially misstated, Mr Cherry concluded that the author incorrectly issued an unqualified audit opinion on that annual report when it should have been qualified.
“It is clear through both the OAG report and inquiry into the Auditor, that the Council were out of their depth on all levels and failed to question and re-asses their approach to building and financing the scheme when the Local Government Act changed in 2002, something further compounded when the company who won the original tender went into receivership.
“The Council got on a treadmill and continued down a path that wasn’t fit for purpose, was overly complicated and was dogged by counterproductive incentives within the Private, Public Partnership model first proposed and persisted with,” says Mr Sabin.
“The Council got it badly wrong, but it appears to me the Auditor’s lack of understanding and focus on the financial risks and rapidly escalating costs of the scheme over this 3 year period are contributory to the major debt blow-out from approximately $35 million to a final cost of over $63 million.
“It is quite apparent from this inquiry that the overseer – Audit NZ also got it badly wrong and failed to meet the minimum professional standards and expectation of an auditor, in particular between 2006 and 2009 when more than $25 million was added to the cost of the scheme.
“I am pleased that the inquiry and findings of Mr Cherry has been reported in full in the OAG report and issues of conflict have been well addressed.
“I know the Auditor General’s Office have been very careful and responsible in their handling of this very sensitive matter. I now implore them on behalf of the ratepayers of the Kaipara to do the honourable thing and settle with the Council to meet these additional costs and help restore faith in the system which has so badly let the ratepayers of the Kaipara down during this sad and preventable episode.” says Mr Sabin.
Copies of the summary and full reports can be found on the website of the Office of the Auditor General
ENDS
MEDIA CONTACT: Mike Sabin 0277052707