Report highlights: Report on Local Government 2020

What the report is about

Results of the local government sector council financial statement audits for the year ended 30 June 2020.

What we found

Unqualified audit opinions were issued for 127 councils, 9 county councils and 13 joint organisation audits in 2019–20. A qualified audit opinion was issued for Central Coast Council.

Councils were impacted by recent emergency events, including bushfires and the COVID-19 pandemic. The financial implications from these events varied across councils. Councils adapted systems, processes and controls to enable staff to work flexibly.

What the key issues were

There were 1,435 findings reported to councils in audit management letters.

One extreme risk finding was identified related to Central Coast Council’s use of restricted funds for general purposes.

Fifty-three high risk matters were identified across the sector:

  • 21 high risk matters relating to asset management
  • 14 high risk matters relating to information technology
  • 7 high risk matters relating to financial reporting
  • 4 high risk matters to council governance procedures
  • 3 high risk matters relating to financial accounting
  • 3 high risk matters relating to purchasing and payables
  • 1 high risk matter relating to cash and banking.

More can be done to reduce the number of errors identified in financial reports. 61 councils required material adjustments to correct errors in previous audited financial statements.

Fast facts

  • 150 councils and joint organisations in the sector
  • 99% unqualified audit opinions issued for the 30 June 2020 financial statements
  • 490 monetary misstatements were reported in 2019-20
  • 61 prior period errors reported
  • 53 high risk management letters findings identified
  • 49% of reported issues were repeat issues

Rural fire fighting equipment

Sixty-eight councils did not record rural fire fighting equipment worth $119 million in their financial statements.

The NSW Government has confirmed these assets are not controlled by the NSW Rural Fire Service and are not recognised in the financial records of the NSW Government.

What we recommended

The Office of Local Government should communicate the State's view that rural firefighting equipment is controlled by councils in the local government sector, and therefore this equipment should be properly recorded in their financial statements.

Central Coast Council

A qualified opinion was issued for Central Coast Council (the Council) relating to two matters.

Council did not conduct the required revaluation to support the valuation of roads.

Council also disclosed a prior period error relating to restrictions of monies collected for their water, sewer, and drainage operations, which, based on the NSW Crown Solicitor’s advice, should be considered a change in accounting policy.

What we recommended

The Office of Local Government should clarify the legal framework relating to restrictions of water, sewerage and drainage funds (restricted reserves) by either seeking an amendment to the relevant legislation or by issuing a policy instrument to remove ambiguity from the current framework.

Key financial information

In 2019-20, councils:

  • collected $7.3 billion rates and annual charges
  • received $4.7 billion grants and contributions 
  • incurred $4.8 billion of employee benefits and on-costs
  • held $14.2 billion of cash and investments
  • managed $160.0 billion of infrastructure, property, plant and equipment
  • entered into $3.3 billion of borrowings.

Further information

Please contact Ian Goodwin, Deputy Auditor-General on 9275 7347 or by email.