31 Oct 2014

Licensing trusts need more scrutiny

8:18 am on 31 October 2014

The Auditor-General says licensing trusts need to be held to account as some smaller trusts are financially floundering and poorly managed.

In a new report, Controller and Auditor-General Lyn Provost said licensing trusts had little to no attention from Parliament, and were one of the least-scrutinised parts of the public sector.

Auditor-General Lyn Provost.

Auditor-General Lyn Provost. Photo: OFFICE OF AUDITOR-GENERAL

Ms Provost said increasing numbers of trusts were struggling with profitability, with closure on the horizon, and others had a lack of management and administrative resources to run them properly.

The president of the Oamaru Licensing Trust, Ali Brosnan, has been involved in the trust for more than a decade and at the helm for about five years.

His trust was one highlighted in the report as having problems with financial viability and performance.

Mr Brosnan said trustees decided to invest in its main assets in the town by revamping its three hotels - then the recession hit.

"Things did not take off the way we envisaged, and with the result we were under the pump, struggling for about four or five years," he said.

Mr Brosnan said despite the struggle, the trust was the biggest accomodation provider in the town, employed about 70 people, and supported local businesses.

He said the trust did not see closure in its future, and was confident it had turned its financial woes around.

"The value of the licensing trust in the community goes far beyond what the balance sheet shows, in the sense that it is a major employer, we do support a lot of sports, a lot of different organisations which can't always be totally read in the balance sheet."

Licensing trusts have been a part of the sale of alcohol in New Zealand since 1944, promoted as a more responsible and accountable alternative to the private sector in controlling the sale of alcohol.

The profits from their hotels, taverns and bottle stores are returned to their communities.

The head of the licensing sector for the Auditor-General, Sarah Lineham, said this was why their financial viability was so important.

"If they are no longer able to operate, and they wind up, the main impact is those contributions that they can make to the community if they're generating profit, will cease," she said.

Beyond balance sheets, the Auditor-General's report also noted a lack of management and administrative resources - ultimately hindering trusts from doing financial paperwork well, and on time.

Ms Lineham said some trustees may not have had the necessary business skills to run the organisation in tough times.

"There's also issues in terms of the experience of trustees elected that are elected from the community to deal with an organisation that is operating in a commercial environment, when economy makes making a profit difficult."

Lyn Provost said many trusts were well-managed and successful despite economic challenges, particularly in the hospitality industry.

Ms Provost said as a sector, licensing trusts were fragmented, and had not given much support to smaller members.

She said a working party of chief executives had been set up to support licensing trusts that were facing challenges, and that the Office of the Auditor-General would assist where appropriate.