Introduction

This report serves two broad purposes:

• it constitutes our “annual report” on the audits for 2003-04 of the Crown and its sub-entities – mainly as reflected in the Financial Statements of the Government of New Zealand for the Year Ended 30 June 2004 (the Financial Statements), parliamentary paper B.11, 2004; and
• it brings to attention a number of other matters (related both directly and indirectly to events occurring in the financial year 2003-04) that we believe warrant consideration by Parliament.

Part One (pages 9-18) deals with the Government’s Financial Statements as audited and presented to the House. Specific topics addressed include:

• consolidation issues;
• valuation issues;
• issues with significant impacts on future financial statements; and
• resolution of issues raised previously.

Part Two (pages 19-25) deals with the results of our audits of government departments for the year ended 30 June 2004. We include our usual:

• commentary on the audit opinions on the departments’ financial reports; and
• assessments of the departments’ financial and service performance management.

Part Three (pages 27-39) sets out details of the non-standard audit reports we issued during the period 1 July 2003 to 31 December 2004 on the annual financial statements of:

• entities that are part of the Crown reporting entity; and
• other public entities not within the local government portfolio.

Part Four (pages 41-49) outlines the adoption of International Financial Reporting Standards in New Zealand, and comments on the impacts this will probably have on both the preparation of financial statements by public entities and our auditing of those statements.

Part Five (pages 51-57) describes the “Controller” function performed by the Auditor-General, and examines changes in that function resulting from the Public Finance Amendment Act 2004.

Part Six (pages 59-73) reports on the results of our examination of expenses incurred by the chairpersons of the boards of 98 public entities. We set out our expectations for proper control over different classes of expenditure.

Part Seven (pages 75-78) sets out our planned work programme for examining issues relating to contract and other funding arrangements between government and non-government organisations.

Part Eight (pages 79-82) describes the responsibility of public entity management to minimise fraud – we mention key elements in a fraud policy – and the duties of public entity management in the event of fraud being detected or suspected.

Part Nine (pages 83-92) reports on the assessments made by our auditors in their annual audit of school Boards of Trustees, on the extent of their compliance with certain legislative financial provisions.

Part Ten (pages 93-98) describes the establishment of the Electricity Commission in September 2003, and the new responsibility of the Auditor-General to conduct an assurance audit and report to the House of Representatives on the Commission’s annual performance report.

Part Eleven (pages 99-121) gives the current status of follow-up action on reports we have presented to the House during the past financial year.