In a recently released Report by the NSW Audit Office on 27 May 2021, entitled “Report on Local Government 2020”, MidCoast Council came in for considerable criticism for its reporting in the 2018/19 Financial Statements.
The current Report updates the original Audited Reports issued to Councils back 2019, and rather embarrassingly slams MidCoast Council under the category of ‘Key Audit Findings’ with a number of ‘new findings’ essentially in what have all been described as ‘High-risk findings’.
Five high areas were identified:
Council submitted draft financial statements for audit on 16 October 2019, one month after the scheduled audit start date. Council advised the delay was due to:
• the implementation of the new accounting system
• council resources redirected away from the financial statement preparation process due to the bushfires.
The financial statements contained numerous errors and disclosure deficiencies. Extensive consultation and direction were subsequently necessary to ensure that the financial statements were compliant with the Australian Accounting Standards and relevant directions prescribed by the OLG.
Council’s records management practices relating to information to support balances and disclosures in the 2019 financial statements were not sufficiently embedded to enable the timely preparation of the financial statements.
Council lacked documentary evidence to support unit rates applied for assets revalued under the replacement cost method.
There was insufficient documentation to support council’s rationale, method and approach in conducting the revaluation.
There was a lack of quality review performed over the valuation, resulting in an additional $47.7 million error.
Accounting implications for revaluation increments and decrements did not reflect the not-for-profit requirements of AASB 116 Property, Plant and Equipment.
There were multiple versions of financial statements and supporting schedules provided to the audit team, as management adjusted information originally supplied.
Cash and banking
Council did not reconcile external confirmations from financial institutions to their investment register. Furthermore, confirmations:
• were incomplete and did not cover all investments in council’s register
• included balances that were not recorded in council’s register.
From a review of council’s external confirmations, council did not record balances, totalling $110,000 as they were unaware of its existence. The bank account was for loan repayments made by a former constituent council (pre-amalgamation).
4.9 Information technology (IT) Management could only provide limited evidence to demonstrate how it performs its oversight function for IT general controls over the key systems relevant to financial reporting. There were deficiencies in IT policies, IT risk management, user access management, segregation of duties, backup and monitoring and disaster recovery.
This Report only serves to support articles and questions that have been raised over the past three years, and it re-affirms concerns about the Financial Management of Council, and the role of the serving Councillors.