Rotorua Lakes Council staff using a work credit card for a mini-bar and staying in $300-per-night hotels have been highlighted in a critical Audit New Zealand report.

Delays in producing information and performance and competency issues were also detailed in the report, released upon request to the Rotorua Daily Post this week.

A spokesman for the Office of the Auditor General said the final report was sent to the council on December 11.

Rotorua Lakes Council says it has taken the findings on board and made changes as required, but questions from the Rotorua Daily Post around the cost of delays remain unanswered.

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The management report covers the year ending June 2017 and provides commentary to council management alongside its audit report.

It was published on the council's website following queries from the Rotorua Daily Post.

In the report, auditors said there were "significant delays" in completing the audit.

"They occurred because of delays in [council staff] producing information and a lack of QA [quality assurance] review resulting in a significant number of misstatements."

As part of a sample test of expense claims, travel expenses, and P Card (work credit card) expenses, auditors found non-alcoholic mini bar expenses had been charged to a P Card.

There were also instances of accommodation costing more than $300 per night.

Accommodation should be "moderate, cost effective and appropriate to requirements", the report states.

The report recommended the council updated its sensitive expenditure policy to "specifically outline appropriate pricing for accommodation costs by region".

During the year, the council made four severance payments ranging from $4000 to $127,000.

"We found that a principled approach had been followed for all employment settlements and the disclosures made were complete and accurate," the reports states.

However, there was an instance where a redundancy payment was calculated incorrectly
and an employee was paid less than their contractual obligation.

The error was corrected and the previous employee was paid the difference.

Comment from council management was included in the report. It was unclear who provided that comment.

It stated there were several factors that contributed to the timing and quality of information provided by the council, including staff performance and competency issues, inadequate monthly processes in place related to work-papers and reconciliations, and a lack of error checks in the model used to prepare the annual report.

The "ongoing issue of not having monthly processes in place for updating the fixed
asset register" also contributed.

"Although an external consultant was engaged five months prior to year-end to prepare the FAR [fixed-asset register] and asset category reconciliations for year-end, unfortunately they did not deliver. This caused significant delay in compiling the information for the auditors."

In the months leading up to the audit, the council's financial controller identified "significant performance and process related issues within the finance function".

A programme to improve the performance over a six-month period was developed.

"Unfortunately this meant that the finance team was undergoing a restructure at the time of the audit which impacted a number of staff involved."

Once completed, the restructure saw four new staff come on board, including a senior accountant and a new accounting manager.

A project team was established to overhaul the monthly and year-end processes.

Auditors also looked for any instances of management overrides. They found no indications of inappropriate adjustments or management override of controls.

The council had a number of mechanisms in place to ensure it was complying with legislation, and used external legal advice when appropriate, the report states.

Remuneration for elected members was within the limits set by the Local Government Elected Members' Determination.

The auditors thanked the council and management for the "assistance and cooperation
provided to ensure audit issues were addressed and resolved in a positive manner".

The "significant additional time" it took to complete the audit meant Audit New Zealand would be discussing the "extent of the cost overrun recoveries" with council management.

Acting council chief executive Jean-Paul Gaston did not answer a written question from the Rotorua Daily Post about the costs to be incurred by the council for the delays.

Written questions regarding the amount spent at mini bars, and how often staff spent more than $300 per night on a hotel, initially went unanswered.

However, in a written statement sent to the Rotorua Daily Post today following publication, Gaston answered those questions saying "The following information should have been included in council's response to a media inquiry regarding the report in order to provide context."

Gaston's statement said the council had a sensitive spending policy, which covered expenditure such as travel, accommodation and hospitality, and staff were expected to adhere to it.

"Council deals with any breaches to the policy as appropriate.

"The mini bar spend highlighted in Audit NZ's report was a one-off error made by a staff member which was picked up through council's internal processes at the time it occurred. The amount was promptly repaid."

Instances of accommodation spending over $300 per night were not common occurrences, and steps were taken to ensure staff were aware of expenditure policies where breaches of policy occured, he said.

"There was one approved policy exception for a conference where all delegates stayed at the conference venue.

"Given public sensitivity around such spending, any instances identified by Audit NZ through sample testing are highlighted in its management report to council. The report has been thoroughly traversed by Council's independently-chaired Audit and Risk Committee and elected members have been briefed on its findings.

"Errors were promptly rectified and action taken to address all matters raised in the report."

In a written statement to the Rotorua Daily Post, last week, Gaston said the council had taken on board Audit New Zealand's findings and had made changes and improvements as required.

"This report is an annual exchange between Audit NZ and council which highlights areas for improvement for future financial and auditing processes.

"It should be noted that Audit NZ signed off on council's Annual Report for the 2016/17 year (ending 30 June 2017). Had any material issues been uncovered, it would not have done so."

The restructure of the finance department was part of last year's organisation-wide review aimed at aligning council's structure, roles and resources, he said.

"Implementation of the review occurred during the annual reporting process in mid-2017 and placed added pressure on the finance team."

At Thursday's Operations and Monitoring Committee meeting, councillor Mark Gould requested the report be added to the agenda in the public-excluded section of the meeting, which it was.

He said there were issues about staff that would be discussed that needed to remain confidential. He also said it was "not good publicity" for the council.

Speaking on Friday, Gould stood by his comments, saying the report would make the council look bad.

When asked about the report on Friday, mayor Steve Chadwick said she was "very confident" matters raised in the report had been dealt with.

Recommendations

-Adopt a project management approach to the production of the annual report to ensure the process runs smoothly.
-Implement rigorous processes to ensure asset additions and disposals are reviewed on a monthly basis and reconcile the general ledger and asset management system regularly.
-Ensure all assets within an asset class are included in future revaluations.
-Incorporate recommendations from the peer review into improvement plans going forward.
-Ensure asset classes are revalued at least every three years.
-Ensure staff are familiar with the council's sensitive expenditure policy.
-Renew the exemption granted to RDC Holdings Limited.
-Oversee Rotorua Regional Airport Limited's preparation of its statement of intent.
-Review the process for logging calls received after hours and on weekends to ensure that resolution times are accurately recorded.
-Review the process for calculating and reviewing redundancy payments, to ensure all employees are paid within their contractual obligations.