Additional requirement for councils

Accounting standards require some disclosing of severance payments, regardless of any confidentiality agreement. And under the Local Government Act 2002, councils have to be even more open about these sorts of payments.

A council has to disclose in its annual report the amount of a severance payment to an employee in return for the employee's agreement to end their employment. The council has to disclose the number of severance payments and the amount of each payment, but doesn't need to identify the employees who received them.

If a severance payment is made to a council's chief executive, it must be disclosed separately in the annual report.

What we audit

We're required to audit how councils comply with the disclosure requirements in the Local Government Act 2002 and the accounting standards.

We review the severance payment documents and processes to confirm that the council has met the disclosure requirements. We also check that the:

  • decision to settle was soundly based;
  • council had legal or external advice as appropriate; and
  • person(s) agreeing to make the payment had appropriate financial authority.

We don't make judgements about the merits of a decision to end an employee's employment.