In­ter­nal au­di­tor ‘would be costly’

Au­di­tors dis­cover theft

South Waikato News - - NEWS - By PETRICE TAR­RANT

Changes to the Fi­nance Au­dit and Risk Com­mit­tee have sparked de­bate over whether or not an in­ter­nal au­di­tor should be hired to de­tect fraud.

Coun­cil­lor Terry Mag­ill was one of two coun­cil­lors who op­posed the decision to drop the word ‘‘fi­nance’’ from the fi­nance and au­dit risk com­mit­tee and add an ex­ter­nal mem­ber.

The new au­dit and risk com­mit­tee will be a com­mit­tee of the full coun­cil plus an ex­ter­nal ap­pointee.

Chair­per­son Mag­ill said he agreed with get­ting the in­volve­ment of some­one with spe­cialised knowl­edge but ar­gued he/ she would have more of an im­pact if they were con­tracted in to com­plete an in­ter­nal au­dit and re­port back to the com­mit­tee.

‘‘I be­lieve that if that per­son is just sit­ting on the com­mit­tee go­ing along to the meet­ings with us, that there’s no guar­an­tee there ei­ther that any sneaky per­son couldn’t get around them. What I was sug­gest­ing was that we should rather have a suit­ably re­quired con­trac­tor – part of the gov­er­nance ex­pen­di­ture, an in­ter­nal au­di­tor paid for through democ­racy. That way there’s no em­ployer em­ployee sit­u­a­tion.’’

It is the job of se­nior man­age- ment to en­sure that all mid­dle man­age­ment are op­er­at­ing un­der strict pro­to­cols, but as it stands there is room for er­ror, he said.

‘‘If a per­son had the mind to be fraud­u­lent then there is the op­por­tu­nity to do that and it may not be picked up.’’

The se­nior com­mer­cial lawyer by trade said he had seen it in his line of work.

‘‘I’ve got the fullest con­fi­dence in our se­nior staff but it is a rel­a­tively large or­gan­i­sa­tion and there is the po­ten­tial for [fraud] to oc­cur.

‘‘ Th­ese things hap­pen un­for­tu­nately and if you are go­ing to have a vi­able risk com­mit­tee that just re­lies to­tally on what we’ve been told then why call it an au­dit com­mit­tee, if you’re not au­dit­ing any­thing?’’

Chief ex­ec­u­tive Craig Hobbs said he did not want an ex­ter­nal per­son ‘‘ com­ing in and be­ing God over our of­fi­cers’’.

Mean­while deputy CE Ben Smit Dur­ing the pre­sen­ta­tion of Deloitte’s an­nual fi­nan­cial state­ment au­dit, it was noted by their au­di­tors that the coun­cil had dis­cov­ered an in­ci­dent of theft ear­lier this year.

The coun­cil con­firmed it had oc­curred at a South Waikato Dis­trict Coun­cil run fa­cil­ity.

‘‘ Ap­pro­pri­ate ac­tion was said there was merit in Mag­ill’s sug­ges­tions but it would costly.

He said the pur­pose of the com­mit­tee was to iden­tify or­gan­i­sa­tional risk.

‘‘You would have to ques­tion whether fraud was one of the top risks the or­gan­i­sa­tion faces.’’

He said in his time as CE in­ter­nal fraud cases had been ‘‘ex­tremely rare’’. taken and the in­di­vid­u­als in­volved no longer work for the coun­cil. The in­ci­dent was re­ported to the coun­cil’s au­di­tors at the time,’’ com­mu­ni­ca­tions man­ager Kerry Fabrie said. A thor­ough in­ves­ti­ga­tion was held and sub­se­quent con­trol mea­sures have been put in place.

Mag­ill said the ex­ter­nal au­di­tors, who are paid ‘‘some six­fig­ure sum’’ made it quite clear that they do not au­dit the op­er­at­ing ac­counts.

‘‘Per­haps if you just em­ployed some­one part time to hone in on par­tic­u­lar things .

‘‘If I’m go­ing to be charged as chair­man I want it to be the best com­mit­tee it can be.’’

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