Audit New Zealand is requiring Tauranga City Council to change its ways over a variety of issues discovered during an audit carried out last year.

Included are how internal costings are managed - an issue which in 2016 saw $1 million worth of staff time spent on various projects, including the civic heart project, reclassified from capital to operating costs at the end of the calendar year.

Audit NZ says the capitalised staff time which is based on timesheets, was not reviewed for accuracy and authorisation and incorrectly coded.

Project manager timesheets were not approved on a one- up basis and there were instances where operating expense items were being capitalised, says the audit report.

'We were advised that there are limitations around the time reporting in that it cannot identify the list of Works in Progress as at a particular date in the past.

'This meant we could not obtain the system reports required to enable adequate review of additions to works in progress. We were therefore forced to adopt alternative audit procedures for satisfy the WIP additions were correct.

'These alternative procedures delayed the audit.”

The audit results were received at the city council's Audit, Finance, risk and Monitoring Committee this week.

'I think it looked to me as though they didn't have any comments about the financial type audit so they tended to look at the non-financial things,” says committee chair Gail McIntosh.

'In my view there's nothing alarming or urgent. It happens every year that management report. One year they said the cash handling was up the crap. The council contracted out, got rid of it.

'Like all auditors they are trying to find something wrong to justify their existence. They can't come back and say we are perfect, because people would then say why are you wasting money on it – because it's a requirement.”

The internal costing issues arise because when a bill comes in to council someone quickly codes it to somewhere or other, and then at the end of the financial year or end of the project staff have another look and decide if the wages are correctly coded, says Gail. But some projects last over several years.

Audit NZ says projects should be capitalised during the year, because it can have an impact on the amount of depreciation charged on an assets during the final year of operation.

The management comment from council is that the council is continuing to improve processes around capitalisation of assets. And alignment of new assets with the Acela Asset system.

The delay in 2015/16 was primarily to avoid complications with revaluation of infrastructure assets.

Some capitalisation at year end including vehicles purchased in June did not take place due to time pressures.

The audit also found fault with the council's handling of complaints regarding sewerage overflows, and complaints about the city stormwater system.

In both cases the city was encouraged to change in line with department of internal affairs guidelines.