Auditor wants local body change

Press, 3 August 1985, Page 1

Auditor wants local body change

Local authorities should be required to prepare and have audited separate accounts of trading activities, according to the AuditorGeneral.

Mr Brian Tyler, the Controller and Auditor-General, believes the present regulations which do not require separate accounts for trading activities, such as municipal electricity departments, are not satisfactory.

In a letter to Mrs Margaret Murray, chairman of the Waimairi District Council, Mr Tyler said the matter was being pursued with the Government agency responsible (the Ministry of Energy). _

Mr Tyler delivered yesterday to the office of the Minister of Energy, Mr Tizard, a “response” to the Minister’s inquiry about the regulations governing local body accounts. The inquiry was

prompted by allegedly improper transfers of moneys from the Christchurch City Council’s M.E.D. accounts to its general account. Mr Tizard asked the Auditor-General to look generally at the accounting requirements for local bodies.

Mr Tizard was in Auckland yesterday and will not be in his office again until Monday.

The alleged improprieties that triggered his inquiry were referred to in articles in “The Press” by Dr Donald Gilling, a senior lecturer in accounting at the University of Canterbury. He said that between 1976 and 1984 the M.E.D. transferred at least $l3 million in subsidies to the council’s general rates account.

Mrs Murray yesterday gave “The Press” a copy of Mr Tyler’s letter. In it the Auditor-General dealt with

Mrs Murray’s query about the propriety of transferring funds from the M.E.D. to the general council account. He acknowledged that the unaudited copy of the M.E.D. accounts in the M.E.D. annual report that Mrs Murray had sent to him did not contain any reference to the way in which the interest earned on M.E.D. funds had been treated.

A note had been included in the audited accounts to provide “full disclosure” of the transaction and an explanation of the council’s policy since 1979-1980. Since 1980-1981 the amount of the interest had also been shown, Mr Tyler said.

“The transfer of funds, including interest, is within the statutory powers and authority of the council and therefore the policy is en-

tirely the prerogative of the council,” Mr Tyler said. Any doubt over the intent of the position, particularly in relation to the criteria governing transfers outlined in 1979 by the Ministry of Energy, should be referred to the Ministry, he said. It was his view that the audited set of accounts, rather than the unaudited copy, should be included in any annual report made publicly available. Mrs Murray yesterday reiterated her concerns about the transfers, ■ saying Waimairi electricity consumers were subsidising Christchurch City ratepayers.

“I have a duty to the residents of Waimairi to see that they get electricity at the cheapest price or to have the services improved. In nine years the (City) council has creamed off $l3 million from M.E.D. funds

into its own accounts,” she said.

Mrs Murray said the transfers of interest had been hidden by the council, and such transfers would be even easier to disguise under amalgamation and a much larger city. “A great advantage of having two large units (Waimairi and the City) is that we can keep the system honest,” Mrs Murray said.

The council’s actions, in charging more for electricity than it needed had lost South Island authorities credibility with the Government in its campaign to keep lower tariffs for South Island consumers. “The Government looks at $l3 million surplus in nine years, and decides we in the South can pay more,” she said.

The City Council should provide audited accounts that explained in detail

what was being done with surplus M.E.D. funds, Mrs Murray said. It was under a moral obligation to do so.

The council had to do that to regain the confidence of consumers and its credibility with the Government. Mr John Gray, the City Council’s Town Clerk, said the annual report for the M.E.D. was prepared using unaudited accounts because of the time it took for accounts to be audited.

The annual report was presented to the council’s airport and electricity committee about June or July, he said. The council’s accounts were not usually audited by that stage. In the past the council has prepared and had audited separate accounts for the M.E.D. and Christchurch Airport. It decided last year no longer to have a separate set of M.E.D. accounts audited.