Auditors unable to express an opinion on former Gosford Council’s books

The disclaimer to replace the auditor's opinion for 2015-16

Price Waterhouse Coopers (PWC), the auditors chosen by Central Coast Council to audit the accounts of both the former Wyong and Gosford Councils, has not expressed an opinion on the Gosford Council financial statements based on the audit.
PWC were engaged to audit the special purpose financial statements of the former Gosford Council, which included the Statement of Financial Position by Business Activity for the period ended May 12, 2016, the Income Statements by Business Activity, notes to the financial statements and the statement by the Administrator and Management made pursuant to the Local Government Code of Accounting Practice and Financial Reporting.
According to the Independent Auditor’s Report, published on on June 9: “The Administrator of the council is responsible for the preparation and fair presentation of the financial statements and has determined that the accounting policies described…are appropriate to meet the requirements of the Local Government Code of Accounting Practice and Financial Reporting.
“The Administrator’s responsibility also includes such internal control as the Administrator determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
“Our responsibility is to express an opinion on the financial statements based on our audit.
“We conducted our audit in accordance with Australian Auditing Standards.
“Those standards require that we comply with relevant ethical requirements relating to audit engagements, and plan and perform the audit to obtain reasonable assurance whether the financial report is free from material misstatement.
“Due to control issues identified during their preparation of the financial report, management have been unable to provide us with required written representation that all transactions have been recorded and are reflected in the financial statements.
“As a result of these matters, we were unable to determine whether any adjustments might have been found necessary in respect of recorded or unrecorded transactions in the financial statements.
“Because of the matters described…we were not able to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion.
“Accordingly, we do not express an opinion on the financial report,” PWC signed off.
Employees of Central Coast Council have been provided with a ‘frequently asked questions’ fact sheet to explain the status of the former Gosford Council’s financial reports.
According to the fact sheet, “The Independent Auditors have each given disclaimers of opinion in regard to the accounts of the former Gosford Council… as there is insufficient appropriate audit evidence to provide a basis for an opinion.
“During preparation for the audit, Central Coast Council identified significant control issues where additions, deletions and changes to transactions could have been made without leaving an audit trail,” the fact sheet said.
“For this reason, Central Coast Council was not able to provide either of the auditors with an unqualified statement on completeness and accuracy of transactions, as required under the relevant Acts and auditing standards.
“Assurance testing over this period was not possible and so the auditing standard prescribes a disclaimer of opinion,” the fact sheet to Council employees said.
“It is rare for a Council to get a disclaimed audit report,” the fact sheet said.
“However, the internal control issues have been rectified and all prior year errors corrected.
“There is a plan in place to validate all transactions of the merged Central Coast Council for this financial year.
“Council is working to ensure it is able to provide assurance to secure a ‘clean’ audit report from the independent auditors for the current financial year.”
In response to the question, “did I pay more water rates because of the over counting of Council assets?”, the fact sheet answered: “No, when the Independent Pricing and Regulatory Tribunal (IPART) determines water supply authority sewerage and drainage prices for water supply authorities (which include the former Gosford Council), it uses a theoretical asset value (known as the regulated asset base) and did not use the former Gosford Council’s assets values in their calculations.
“So, the inaccuracies in the former Gosford Council’s asset count did not affect water pricing for residents.

“Currently, water, sewerage and drainage prices are frozen at 2016 levels, and will remain at these levels until the next IPART pricing determination.
“Council’s current Operational Plan is fully funded and is available to view on its website.
“The draft Operational Plan for next year is currently out on public exhibition and highlights a record spend on capital works in the key areas the community wants [including] roads and drainage, water and sewer, and open space and recreation.
“There is sufficient cash available to meet commitments and fund the plan and it has $9.5b in assets.
“The asset valuation issues do not impact Council’s capacity to deliver services to the community.
“It has the money in the bank to deliver the services our community need, want and value.
“The Central Coast Council inherited an operating surplus from both former Councils.
“This surplus will be used to fund a record $207.5m capital works program next financial year and we will continue to deliver $551m in essential services to the community.”
In answer to the question of whether external agencies are still investigating, the fact sheet said: “Various statutes impose obligations to refer certain matters to external agencies.
“Council has met its obligations under those statutes.
“It is not appropriate for Council to make further comment.
As to whether ICAC has investigated the matters relating to Gosford’s record keeping, the fact sheet said: “Central Coast Council cannot comment on external agency investigations.”
In response to whether any former or current staff are expected to be investigated over the recent matter, the fact sheet said: “The matter was referred to external agencies and any actions are a matter for those agencies.
“No staff are under any Central Coast Council action with respect to this matter.”
UHY Haines Norton audited the accounts of the former Gosford Council for the year ended June 30, 2015, and gave the opinion that the Council’s accounting records had been kept in accordance with the requirements of the Local Government Act, Chapter 13, part 3, Division 2; and had been presented, in all material respects, in accordance with the requirements of this Division; were consistent with Council’s accounting records; and presented fairly, in all material respects, the Council’s financial position as at June 30 and its financial performance and its cash flows in accordance with Australian Accounting Standards and the Local Government (General) Regulations 2005.
“There are no material deficiencies in the accounting records or financial statements that have come to light during the course of the audit,” UHY Haines Norton signed off the previous year.
The Central Coast Council has continued to state that it would not be appropriate for it to name the third parties that it informed about the former Gosford Council’s financial control problems.
Coast Community News has contacted the Independent Commission Against Corruption (ICAC) and the Audit Office of NSW to ask if they are investigating any issues relating to the finances of the former Gosford Council.
ICAC would neither confirm nor deny any investigation, as is its standard practice.
It does not place information in the public domain unless the matter proceeds to a public inquiry and/or report.
The Audit Office of NSW has confirmed that it has now been given a mandate by the NSW Government to audit all local councils throughout the state.
That means the NSW Auditor General will be responsible for auditing the first set of reports from the newly-formed Central Coast Council for the period May 13, 2016 to June 30, 2017.
Future audits of the Central Coast Council will either be performed by the staff of the Audit Office or field work may be tendered to a private sector auditor but under the direction of the Auditor General.
This will mean local councils will no longer be able to select their own auditors and that the Auditor General and Audit Office will also need to understand and be happy with the internal controls each council has in place.
The Central Coast Council will hold an extraordinary meeting on Monday, June 19, for the presentation of the audited financial statements and the auditor’s report.
The audited financial statements for the former Gosford City Council are available for inspection at Council’s administrative buildings in Mann St, Gosford, and Hely St, Wyong, customer service centres, libraries and online at
Any person may make written submissions to Council with respect to the former Gosford City Council’s audited financial statements or audit reports until June 27.
Also available for inspection are the audited financial statements of the former Gosford Water Supply Authority.
The meeting will be held at the Council Chambers in Mann St, Gosford, at 6:30pm.
Council will hold a residents’ forum at 6pm before the Extraordinary Meeting.
Residents are required to register to speak by calling 4325 8361 and will have a maximum of five minutes.

Financial Reports former Gosford Council
Jul 1, 2015 to May 12, 2016
Independent Auditor’s Report, Oct 28, 2015
UHY Haines Norton
Media statement, Jun 8
Central Coast Council media
Fact sheet, Jun 8
Central Coast Council media
Jackie Pearson, journalist

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