Summary annual report 2005-06
It is my pleasure to present this Summary Annual Report for the year ended 30 June 2006. The Summary provides highlights of our achievements during the year, and extracts from our financial report. It gives a sense of both our financial and our non-financial performance.
I am proud of the work we have undertaken over the past year, particularly in responding to significant changes in the auditing and accounting profession, in the legislative and operating environments of public entities, and in information and reporting requirements and methods. I believe our achievements put us in a good position to meet our key objectives for 2006-07 – strengthening the capabilities of the people work who for and with my Office, and to make further progress in advancing my Five-year Strategic Plan.
K B Brady
29 September 2006
Financial performance and financial position*
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2006 Actual $000 |
2006 Forecast $000 |
2005 Actual $000 |
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| The revenue we earned was: | 51,840 | 53,218 | 43,485 |
| We received this revenue from the following sources: • $42,737,000 of audit fees from public entities • $9,103,000 from the Crown, which included a funding increase from the previous year of $920,000 |
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| Our total expenditure was: | 51,700 | 52,974 | 42,709 |
| The amounts spent on each activity are shown on the opposite page. The main things we spent money on were personnel costs ($26,401,000), fees paid to contracted auditors ($14,619,000), and other day-to-day operating costs ($9,337,000) All our spending was within the limits set by Parliamentary appropriations |
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| Our surplus for the year, which is returned to the Crown, was: | 140 | 244 | 776 |
| Our total assets at 30 June were: | 10,747 | 10,030 | 11,111 |
| The assets consisted of: | |
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| • Current assets – including cash $2,992,000, work in progress $1,378,000, and receivables $3,510,000 | 8,242 | 7,726 | 8,764 |
| • Non-current assets – the physical assets we own or lease | 2,505 | 2,304 | 2,347 |
| Our liabilities at 30 June were: | 7,161 | 6,444 | 7,525 |
| The liabilities consisted of: | |
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| • Current liabilities – including payables and provisions $3,613,000, and provision for employee entitlements $2,951,000 | 6,704 | 5,944 | 7,071 |
| • Non-current liabilities – mostly provision for employee entitlements $457,000 | 457 | 500 | 454 |
| Movements in our taxpayers’ funds were: | |||
| Opening balance at 1 July | 3,586 | 3,586 | 3,586 |
| Surplus for the year (total recognised revenues and expenses) | 140 | 244 | 776 |
| Provision for payment of surplus to the Crown | (140) | (244) | (776) |
| Closing balance at 30 June | 3,586 | 3,586 | 3,586 |
| Our net increase/(decrease) in cash held was: | (1,321) | (1,077) | 1,273 |
| The net cash flows were from: | |
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| • Operating activities | 984 | 1,031 | 3,005 |
| • Investing activities | (1,368) | (1,170) | (1,310) |
| • Financing activities | (937) | (938) | (422) |
* This Summary Financial Report has been extracted from the full financial report. The full financial report, dated 29 September 2006, is in our Annual Report 2005-06 (available on our website – www.oag.govt.nz).
Service performance
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2006 Actual |
2006 Target/Forecast |
2005 Actual |
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| Reports and advice to Parliament and the public: | |
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| • Number of public reports issued | 25 | 21-23 | 17 |
| • Number of reports to select committees | 151 | 140-160 | 134 |
| • Responses to enquiries from taxpayers, ratepayers, and MPs | 228 | 270 | 238 |
| Cost | $8,666,000 | $8,785,000 | $7,469,000 |
| Controller function: | |
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| We monitor, on behalf of Parliament, the issue of funds from the Crown Bank Account, to ensure that releases of funds are supported by appropriations, and are for lawful purposes. | |
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| • Number of Controller statements certified1 | 10 | 12 | - |
| Cost | $53,000 | $91,000 | $83,000 |
| Audits and other assurance services:2 | |||
| • Number of audits completed | 4063 | 4036 | 4121 |
| • Audits completed within deadlines | 36%3 | 50-100%4 | 37%3 |
| • Management reports sent within 6 weeks | 95% | 100% | 97% |
| • Audit arrears at year end | 315 | 310 | 343 |
| Cost | $42,981,000 | $44,098,000 | $35,157,000 |
1 This is a new measure arising from the introduction of the Public Finance Amendment Act 2004. No comparisons to previous years are therefore possible.
2 From 1 July 2005, two output classes (D3 and D4) were merged. The comparative figures for the 2005 year are the combined figures for the two previous classes.
3 This figure represents the average timeliness standard across all groups of organisations audited.
4 Each group of organisations audited has an individual timeliness quality target within a range of 50% to 100%.
Highlights for 2005-06
Implementing our research and development programme
Our greatest achievement was the significant progress we made in implementing our three research and development projects:
- auditing long-term council community plans;
- the audit implications of new legislation in central government; and
- introducing New Zealand equivalents to International Financial Reporting Standards.
The focus of our research and development programme has shifted from design and development to implementation management. This is a significant milestone, as these large projects can now begin to move into the regular work of our annual and other audits.
Progressing our Five-year Strategic Plan
In 2005-06, we:
- published a record number of performance audit reports and good practice guides;
- strengthened our systems and processes for managing major inquiries, which is starting to result in improved timeliness of inquiries;
- enhanced our Corporate and Strategic Audit Planning processes to ensure integration, and to provide a clearer strategic perspective when setting our discretionary work programme;
- created greater consistency and efficiency through the alignment of corporate resources across our two business units – the Office of the Auditor-General and Audit New Zealand; and
- continued to invest significantly in the professional and leadership development of our people.
Improving our management and capability
We continued to look for ways to improve our management and governance, and to enhance the skills and abilities of the people who work for us.
- We focused on building our internal management capability, with an increased number of staff promoted to management positions.
- Audit New Zealand adopted a more national approach to professional development, and enhanced its graduate and technical programme.
- The Performance Audit Group reviewed its professional development approach in conjunction with our Australian counterparts.
- The Audit New Zealand client survey was redeveloped to gain a better understanding of clients’ needs and perceptions.
- Our staff numbers increased slightly, although we did experience some difficulty in recruiting suitably qualified staff in tight labour market conditions.
Delivering our outputs
We significantly increased the number of performance audits and other studies undertaken. This year we produced reports on 22 performance audits and other studies (our target was 19-21), compared with 15 in the previous year.
We completed 4063 audits of public entities (compared to 4121 in 2004-05). We issued 95% of our audit reports and management letters in a timely manner (our target was 100%).
The number of enquiries was slightly less than the previous year (228, compared to 238). We responded to substantially more enquiries within the measure of 30 days than in the previous year, although we advised less where the response was to take more than 30 days.
Maintaining and improving our outcomes
We sought to maintain or improve our desired outcomes.
- New Zealand maintained its rating on the Transparency International Corruption Perceptions Index (second equal with Finland behind Iceland);
- public entities accepted fewer of our recommendations but the number of recommendations rejected remained constant;
- feedback indicates that we are considered to focus on issues of importance, and that we work in a timely and effective way with our stakeholders;
- we produced guidance on local authority codes of conduct and public entities’ funding arrangements with non-government organisations (which may reduce the number of enquiries we receive on these topics); and
- overall, there has been a net improvement in entity management (as evidenced through our comparison of assessments of “the five management aspects”).