Appendix 1. Terms of reference for the review

Appendix 6, Inquiry into the Mangawhai community wastewater scheme

Background: the overall inquiry

The Auditor-General is carrying out an inquiry into the Kaipara District Council’s management of the Mangawhai community wastewater scheme. The inquiry is examining Kaipara District Council’s development, implementation and oversight of the Mangawhai community wastewater scheme (and any related projects), from inception, including:

  • the Council’s planning and decision-making, including how well it complied with its policies and strategies, and the legal and other requirements for decision-making;
  • the governance, management and contracting arrangements for the project;
  • the Council’s financial management, monitoring, and reporting;
  • the funding for the scheme, including the use and setting of rates, borrowing and development contributions;
  • the overall suitability and cost-effectiveness of the scheme that has been constructed.

The inquiry will also consider:

  • the role played by the Council’s auditor;
  • the role played by other relevant agencies; and
  • any other matters that the Auditor-General considers it desirable to report on.

The Auditor-General is the auditor of the Kaipara District Council, and appointed Audit New Zealand to provide audit services over the period being considered in the inquiry. As part of the inquiry work, the Auditor-General wishes to commission an independent expert to review and report on the sufficiency and appropriateness of the planning, performance and reporting of the audit work over this period.

Scope of the review of audit work

The Reviewer will assess and report on the sufficiency and appropriateness of the planning, performance and reporting of the audits by Audit New Zealand of Kaipara District Council’s:

  • Long Term Community Council Plans (‘LTCCPs’) for 2006, 2009 and the Long Term Plan for 2012,
  • Annual Reports for the years 2003 to 2012; and
  • Annual Plans for the years 2003 to 2012.

The Reviewer will assess whether the work of Audit New Zealand was carried out in accordance with New Zealand auditing and assurance standards (including those issued by the Auditor-General), that applied at the time the audits were performed. In particular the Reviewer will assess and report on the following matters:

Planning and performance of the audit engagement

  • Whether the auditors sufficiently and appropriately planned and performed the audits, including whether they had a sufficient and appropriate focus on significant material risks or financial matters, including in relation to the Mangawhai scheme;
  • Whether the auditors planned the audits so that they identified the key legislative matters that needed to be addressed in the audit and whether they appropriately performed the audits to ensure that these matters were addressed;
  • Whether the auditors planned the audits with due care, competence, independence and with sufficient professional judgement and scepticism;
  • Whether the auditors had and applied sufficient and appropriate quality control mechanisms in planning and performing the audits;
  • Whether the auditors in planning and performing the audits sufficiently and appropriately took into account key issues affecting the financial management of the Council;
  • Whether the auditors sufficiently and appropriately communicated with Kaipara District Council staff in planning and performing the audits;
  • Whether the auditors used adequate and appropriate resources in planning and performing the audits, including the use of appropriately skilled staff or experts;

Audit reporting and conclusions

  • Whether the auditors’ conclusions were supported by sufficient and appropriate evidence;
  • Whether the auditors’ conclusions were appropriately reported both in the audit report and management letters;

Audit documentation

  • Whether the audit files contained sufficient and appropriate documentation of the audits;
  • Whether the audit files contained evidence to show that the auditors had obtained sufficient and appropriate audit evidence to support their conclusions;

Audit methodology

  • Whether the Audit New Zealand audit methodology adequately supported the planning and performance of the audits of Kaipara District Council;

Audit communications

  • Whether the audit opinions in the audits were appropriate;
  • Whether the management letters were appropriate.

Process for carrying out the review

To carry out the review, the Reviewer will:

  • review the information collected by the OAG that is relevant to his work;
  • collect and review any other information that he considers relevant to his work;
  • interview people with information that is relevant to work;
  • prepare a written draft report of his findings;
  • allow any person criticised in the draft report an opportunity to comment;
  • revise the report as needed to address any comments received;
  • finalise the report in a form that can be published alongside the overall inquiry report; and
  • assist the OAG inquiry team to incorporate his findings into the overall inquiry report.

Support from OAG

Although OAG staff will provide administrative support as needed, the Reviewer must carry out the review independently and make his own assessment of the audit work being reviewed.

OAG staff will provide the Reviewer with background information about issues that have been identified in recent reviews, including the other parts of the overall inquiry, which are relevant to the audit work. Where these reviews have reached conclusions on adequacy or defects in what has been done by Kaipara District Council or others, the Reviewer can rely on these conclusions for the purposes of this review.

The Reviewer will have full access to background information held by the OAG that is relevant to his work, and to all relevant information held by Audit New Zealand.