Auditing firm backflip clears Gosford accounts

Accounting firm Price Waterhouse Coopers appears to have done a backflip in its assessment of the former Gosford Council’s finances.

The auditing firm has now reported to Central Coast Council that it could only find “minor errors” and no evidence of fraud in the former Gosford Council’s financial transactions. This has been confirmed by the NSW Audit Office, whose representative said: “We did identify minor misclassification or minor errors, but they were not material at all. “Overall, there was nothing to report,” he said. One year ago, Price Waterhouse Coopers took the unusual step of refusing to express an opinion about those financial statements based on their audit at the time. Central Coast Council chief Mr Rob Noble said at the time that there were anomalies which meant that he could neither rule out nor confirm whether the former Council’s financial transactions had been recorded accurately.

The action by Price Waterhouse Coopers and failure of Mr Noble to express confidence in Gosford Council was taken by State politicians, local councillors and community leaders as indicative of poor financial management if not corruption within Gosford Council. The statements were seen to be used as a basis for removing senior Gosford Council staff from senior positions in the new amalgamated council, in favour of senior Wyong staff. At the time, Parliamentary Secretary for the Central Coast Mr Scot Macdonald commented on allegations that resulted from the audit process of double-counting of assets, $74 million in missing assets and a total over-valuation of assets by $1.39 billion. He said: “We are angry at the Government level, but relieved it has come to light.” At the time, former Wyong councillor Mr Carl Veugen described the situation as a “colossal financial mess that the former Gosford Council has left our community in”.

He said “nearly all” speakers at a community forum called for “those who were charged with keeping an eye on the financial position (senior staff and councillors) of the former Gosford Council over the past decade to be held accountable for this unadulterated mess”. A year later, the NSW Audit Office, which had also appointed Price Waterhouse Coopers to conduct an audit on its behalf, has issued a clean audit report. Mr James Sugarman from Price Waterhouse Coopers said he was the auditor responsible, under delegation, for conducting the audit of Central Coast Council’s accounts, following new provisions of the Local Government Act which require the Auditor-General to audit all councils.

Mr Sugarman told the March 26 Council meeting that the Gosford finance system had a number of asset control deficiencies. “We did identify the risk of errors and the potential for fraud due to a lack of access controls to the finance system for Gosford Council,” he said. “The risk was identified and we escalated the level of audit required. “We increased the amount of sample testing and validation by other means, including external sources. “The number of samples increased significantly, and we worked with management to identify transactions and track down the details on those transactions. “We did identify minor misclassification or minor errors, but they were not material at all. “Overall, there was nothing to report,” he said. He said he was able to issue a clean audit report and that Central Coast Council’s financial statements complied with relevant accounting standards. An outstanding critic of the former Gosford Council’s financial affairs, Cr Greg Best moved the motion for the merged Council to adopt the audited financial statements. “This has been an extraordinary financial journey this council has gone on from the day of infamy on May 12, 2016,” Cr Best said.

“The auditor has given a clean slate to all the actions of both councils. There was nothing illegal or inappropriate,” Cr Best acknowledged. Seconding the motion, Cr Doug Vincent said: “Funds were accounted for and well spent. “When I understood the drilling down, and the recognition of no impropriety, I rested a lot easier,” he said. “We still have to pay for this amalgamation, which will be between $120 and $150m, and the ratepayers are still concerned about that and still questioning whether it is the best use of their money. “PWC and the Audit Office have gone to extensive lengths to ensure things are right and correct and to the best of my knowledge, they are,” Cr Vincent said. Following the meeting, Cr Vincent, who is a member of Council’s Risk and Audit Committee, said “I went there with a healthy scepticism and I was asking a lot of blunt pointy questions. “Normally, if you have a finance system, it locks out the bulk of the people and only allows a small number of senior people and key finance people to enter the system.

“When the Gosford system was implemented, it didn’t have its full lockout application and more people than you would prefer had to access. “I think they did over 16,000 samples with Gosford staff, PWC and the audit office. “They all over-sampled and couldn’t find anything. “They have put their own reputation on the line here. “They have said they could not find any malpractice, misconduct or anything that was untoward. “At every meeting, I was really probing and fingering because I knew that externally, people had been asking questions. “Over time, the openness with which they were discussing the process and the frankness that they didn’t feel anyone was blocking them from trying to check things. “Halfway through the process they said they wanted more time to double check, which they were given, and at the end of the day they were happy to sign off,” Cr Vincent said.

SOURCE: Central Coast Council Agenda Item 4.6, 26 Mar 2018 Interview, 27 Mar 2018 Doug Vincent, Central Coast Council Reporter: Jackie Pearson

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