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Audit drama carries a cost


Carterton boosts financial firepower after audit

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A highly critical Audit NZ report has been taken on the chin by Carterton District Council but it rejects the suggestion its long term plan “was done on an ad hoc basis without a detailed project plan”.

The report also said the council was underfunding its roading, requiring it to fund renewals from borrowing, which was “not a financially prudent position”.

The council is hiring a business analyst to help manage its financial processes, but chief executive Jane Davis disagreed roading was underfunded, “nor is there evidence to conclude the current arrangements for renewals are putting the council in a position that is not financially viable”.

She stressed that the report was an “unmodified opinion” on the consultation document, meaning the underlying facts were sound – a fact reiterated by Audit NZ.

“This means that the information in the document was reliable, and the document provided an effective basis for public participation in the decision-making process,” Audit NZ said.

The accounting drama stems from the council’s decision to end a 12-year relationship with PriceWaterhouseCoopers to manage financial processes.

That cost-cutting meaure forced the council to come up with its own financial modeling system, which took longer than expected.

When the numbers came in for its long term plan, Audit NZ questioned depreciation calculations for the proposed $4.2 million water treatment project.

When the preferred method was used, the rates rise, already the largest in the region, increased by a further 1 per cent to an average of 9.4 per cent.

Carterton District Council chief executive Jane Davis. PHOTO/FILE.

But Ms Davis said there was nothing ad hoc about the process.

“We did have a plan . . . but we ran into trouble with our plan in terms of timing,” Ms Davis said.

“We should have done it better and I definitely agree we put councillors into an uncomfortable position.

“When we brought financial systems in house, rather than pay consultants, we had to build our financial model from scratch . . . we were a bit naive about the time required to do that.”

Any savings made by dropping PWC will be cancelled out by the hiring of a business analyst to work with the council’s accountant, brought on board when it stopped using PWC.

But Ms Davis said there would be gains from the change.

“I expect the combined cost of an accountant and a business analyst to be marginally more than the cost of PWC if we still had them on board,” Ms Davis said.

“And with these two positions we will be able to do a lot more than we could with PWC – including much more reporting as is now required.”

Ron Shaw, spokesman for ratepayer advocacy group Wairarapa Voice, believes the council was probably on a hiding to nothing when it decided to jettison PWC, one of the so-called “Big Five” accounting firms in the country.

“Because the numbers came from CDC, and not PWC, they [Audit NZ] probably decided to have a closer look at them.

“The problems that came to light were probably already there,” he says.

He said the issue highlighted the need for a shared services approach between Wairarapa councils, and says the group can offer practical help.

“We have the skills we would like to deploy if anyone is interested,” he said.

That includes one member with shared services knowledge, and a charge-out rate of $3500 a day “in the real world”, who would be prepared to provide some free advice.

“We are prepared to do something for free, certainly to get them started,” he said.

“To get even a few hours for free would be money well saved.”

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