Part 1: Introduction
- Report outline
- Key facts about the Office
- Key objectives and achievements for 2003-04
- Our role and purpose
- Organisation of resources
Report outline
“One of my major objectives as Auditor-General is to help improve the accessibility and readability of public entity annual reports” Kevin Brady, Auditor-General
What this Annual Report is about
The purpose of this Annual Report is to provide Parliament and the public with a complete and accurate picture of the performance of the Office of the Auditor- General for the year ended 30 June 2004.
“Performance” covers both financial and non-financial performance. Financial performance includes the financial statements and parts of the statements of objectives and service performance. Non-financial performance includes the extent of the Office’s delivery against our outcomes, outputs, business strategies and risk mitigation actions, and is measured against a range of dimensions; including quantity, cost and timeliness, and – increasingly – quality, effectiveness and adequacy.
The Annual Report is our key accountability document. As such, we have presented it so that Parliament and the public will be able to clearly see the link between what we set out to achieve in our Annual Plan 2003-04 and what we actually achieved over the year. We have tried to make the information understandable, relevant, and a model of good practice reporting in the areas of outcomes, governance, risk, and capability.
Structure of this Annual Report
We have set out this Annual Report in seven main parts:
Part One: Introduction
Part Two: Outcomes Report
Part Three: Governance Report
Part Four: Risk Report
Part Five: Capability Report
Part Six: Work Programme Report
Part Seven: Financial Statements
Parts Two to Five report on:
- the key objectives we had set out for 2003-04 for the respective Part topics;
- the framework we use to guide our development and implementation;
- the measures we use and the results of those measures as at 30 June 2004; and
- our assessment of whether or not we have met our key objectives for 2003-04.
Part Six provides a summary of the work of the Office and the reports we produced during the year.
Part Seven is set out in a format consistent with the requirements of the Public Finance Act 1989, and is in accordance with generally accepted accounting practice.
Key facts about the Office
Our guiding legislation
The Public Audit Act 2001 defines the mandate and responsibilities of the Auditor-General.
The role of Auditor-General
The office of Auditor-General is a statutory office continued by Parliament in the Public Audit Act 2001.
The Auditor-General is an Officer of Parliament, and in that capacity is independent of executive government and Parliament in discharging the functions of the office, but is answerable to Parliament for his stewardship of the public resources entrusted to him.
Size and scale of our operations
The Office has a statutory duty to conduct an audit of the financial reports of approximately 4000 public entities.
The Office has undertaken approximately 10 performance audits per year increasing to 17 in 2004-05.
In addition, the Office responds to between 150 and 300 enquiries each year from taxpayers, ratepayers and members of Parliament. Of these, approximately 6-10 result in the Office undertaking major inquiries.
The Office also provides reports and advice to Select Committees and portfolio Ministers. There are more than 140 reports prepared for financial reviews of entities and Estimates examinations, and approximately 120 reports on the results of annual financial report audits.
The Office also administers the provisions of the Local Authorities (Members’ Interests) Act 1968. There are approximately 80 enquiries each year in relation to the Act.
Our current capability
The Office employs approximately 250 staff based in 9 locations throughout New Zealand (see Appendix 2 on pages 166-167).
In addition, the Office engages 81 external Audit Service Providers to carry out annual audits of public entities.
In 2003-04, the Office received revenue of $40.8 million made up of $5.6 million from Crown revenue, and $35.2 million from audited entities.
Key objectives and achievements for 2003-04
| What we set out to achieve | What we achieved |
|---|---|
| Business as usual | |
| Continue delivering our outputs to the agreed standards set out in our Annual Plan 2003-04 | Largely met. Some timeliness issues remain, particularly with inquiries. Key Results: - 18 reports produced against a target of 12 - 4070 audit opinions issued |
| Auditor-General’s key objectives | |
| Prepare our Strategic Business Plan | Met. Our five-year Strategic Plan and three-year Business Plan were completed, and endorsed by Parliament |
| Plan to provide the required capability for changes in our operating environment, particularly in local government | Met. We identified our future capability needs and received additional funding to address these needs |
| Implement changes for the appointment of Audit Service Providers resulting from the review of the contestability of annual audits | Met. We implemented our “audit resourcing model” |
| Implement our governance and risk framework | Met. - We reviewed and implemented new “leadership model” for the Office - Our risk management framework is fully integrated into our business planning process |
| Financial performance | |
| Financial Performance | Met. The Office returned a surplus of $158,000 to the Crown |
| Other | |
| Improve our development, measurement and reporting of outcomes, governance, risks and capability | Significant progress made. In this Annual Report, we trial an example of good practice in outcomes, governance, risk and capability reporting |
| Commence alignment of processes across the Office consistent with our Strategy | Good progress made. - Business planning processes were aligned across the Office - We completed development work on an Office-wide Information Systems Strategic Plan - A draft Communications Strategy for the Office was developed |
Our role and purpose
The office of Controller and Auditor-General is a statutory office constituted by Parliament in the Public Audit Act 2001. The office (abbreviated from here on to “Auditor-General”) exists as a constitutional safeguard to maintain the financial integrity of New Zealand’s parliamentary system of government. The Auditor-General acts on behalf of Parliament by assisting it to strengthen the effectiveness, efficiency and accountability of public sector organisations.
The Auditor-General is an Officer of Parliament, and in that capacity is independent of executive government and Parliament in discharging the functions of the office, but answerable to Parliament for his stewardship of the public resources entrusted to him.
In New Zealand’s system of government, Parliament is supreme – all authority for governmental activity ultimately stems from Parliament. Public sector organisations (except local authorities) are therefore accountable to Parliament for their use of public resources and powers it has conferred on them.
Parliament seeks independent assurance that those organisations are operating, and accounting for their performance in accordance with Parliament’s intentions. There is also a need for independent assurance in local government – local authorities are accountable to the public for the activities they fund through locally raised revenue. As an Officer of Parliament, the Auditor-General provides this independent assurance to both Parliament and the public.
The Auditor-General’s key concerns are a reflection of his mandate under the Public Audit Act 2001. His key concerns are:
- Performance – Have public entities undertaken activities in accordance with Parliament’s intentions, and in an effective and efficient manner?
- Authority – Have activities, resourcing and accountability requirements been undertaken within the authority granted by Parliament?
- Waste – Have resources been obtained and applied in an economical manner? That is, taxpayers’ dollars are not being wasted.
- Probity and Financial Prudence – Are entities meeting parliamentary and public expectations of an appropriate standard of behaviour in the public sector?
- Accountability – Have entities given full and accurate accounts of their activities, and of their compliance with Parliament’s intentions, through the annual reporting cycle? Are governance and management arrangements suitable to address the concerns identified above?
Organisation of resources
The Auditor-General employs staff and engages private sector auditing firms to carry out his statutory functions in relation to public entities. The Auditor-General has recently introduced an “audit resourcing model” which replaces the previous contestable audit model for selecting auditors to carry out annual audits of public entities.
The audit resourcing model
For the majority of public entities, the Auditor-General now allocates auditors to carry out the annual audit. He chooses from a pool of Audit Service Providers (ASPs) – which includes Audit New Zealand, the four major CA firms and a range of smaller audit firms. In total, 81 private accounting firms act as ASPs. Some audits of public entities with a strong commercial focus remain subject to the contestable regime.
The audit resourcing model allows the Auditor-General greater choice and flexibility in the allocation of his work to the auditors who carry out annual audits. The introduction of this new way of working has created opportunities for greater collaboration within his own office and between the organisations that support the Auditor-General.
The functions of these organisations in relation to the work of the Office are described on the next page.
| Office of the Auditor-General | Audit New Zealand | Audit Service Providers (ASPs) |
|---|---|---|
| The Office of the Auditor-General (OAG) undertakes: - Strategic audit planning - Policy development and standard setting - Appointing auditors and overseeing their performance - Carrying out performance audits - Parliamentary reporting and advice - Inquiries and other special studies. |
Audit New Zealand is the Auditor-General’s operating arm and carries out audits allocated to it under the audit resourcing model. Audit New Zealand also provides other assurance services to public entities, within the Auditor-General’s mandate and the Auditor-General’s Auditing Standard relating to independence of auditors. |
Audit Service Providers are private sector accounting firms which carry out annual audits allocated to them under the audit resourcing model. ASPs also offer wider assurance services to public entities within the limits of the Auditor-General’s Auditing Standard relating to independence of auditors. |