Smaller councils face 'considerable difficulty' to meet audit deadline

5:07 pm on 20 September 2023
West Coast Regional Council chief executive Darryl Lew.

West Coast Regional Council chief executive Darryl Lew says a large number of councils are facing "considerable difficulty" in meeting the audit deadline due to new requirements. Photo: LDR / Greymouth Star / Brendon McMahon

Smaller councils are facing bigger audit costs and more difficulties after the government introduced new requirements, a West Coast council boss says.

The West Coast Regional Council has been granted a three-month extension to file its 2022-23 annual report due to new government requirements for asset valuations.

It follows several years of audit challenges for local government in the wake of Covid-19.

At a council meeting on 12 September, council chief executive Darryl Lew said he had been called to a meeting with the Auditor General and other council chief executives regarding new asset valuation requirements for the annual report.

Lew said a large number of councils were facing "considerable difficulty" in meeting the statutory deadline due to the new requirements.

"The valuation bar has significantly increased," he said.

That "much higher bar" was being felt most by smaller councils, which must engage the necessary expertise or find in-house staff in order to file on time.

"All of the councils are reporting considerable increases in costs to complete that valuation, plus significant delays to secure the resources to do it.

"Our challenges here are not just ours alone," he said.

Lew told Local Democracy Reporting on 20 September that smaller councils were facing significant costs due to the new requirements.

The costs of the new regulatory demand from Wellington was going to "increase significantly and possibly even double" auditing costs, he said.

"It's not the auditing companies - they're just working to the standards the government is setting."

It was "a big concern", especially when small councils had to meet exactly the same auditing requirements as the largest local bodies in the country like Auckland.

This was despite a tiny council like the West Coast Regional having a budget just a few percent of some of the biggest local bodies meeting exactly the same audit requirements, Lew said.

"The audit approach and the process seems to be indifferent to the size of the budget and the risk.

"It's my view that the extent of the auditing should be commensurate with the size of the budget and the risks."

Lew said it looked as if any change in approach would take time, given the electoral cycle, but the auditor general was "very sympathetic".

"The Auditor General's office and the officials at the meeting definitely heard the concern.

"All they can do is take it back to the government.

"All councils are facing this. There is a struggle around the country to be able to do these valuations."

In the meantime, the regional council had negotiated an agreed extension for filing the annual report, by December.

"Again, this was a common theme around the country."

Lew noted that council's 2022-23 annual report was essentially ready for the formal audit process barring "the enhanced requirement" around the valuation of council assets that required the services of a consultant engineer.

Council had now engaged an engineer and was on track to file to the new December deadline.

The Office of the Auditor General has been approached for comment.

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