Appendix 2: Areas of focus for the Auditor-General

Annual plan 2007/08.

The Auditor-General has identified areas of key concern within his mandate about which he wishes to give particular assurance to Parliament and the public. Work in these areas will help us to achieve our strategic intentions of better deploying our interventions and extending the depth and breadth of our annual audits.

The work will generally involve multiple initiatives undertaken during two or more years. These initiatives are likely to result in external products (such as reports) and internal development and process improvements, and will also be the focus of our research and development programme.

During 2007/08, the areas of focus for the Auditor-General are:

  • probity;
  • fraud;
  • sustainable development;
  • stewardship and management of infrastructure assets; and
  • performance information.

Probity

Our Five-year Strategic Plan indicated our intention to do more work on probity in our annual audits. Probity is also of public interest, with probity concerns featuring strongly in our inquiry work. The base for enhancing our audit work on probity has been emerging in recent years through the development of a suite of good practice guidance (for example, our 2006 report Principles to underpin management by public entities of funding to non-government organisations, our 2007 report Controlling sensitive expenditure: Guidelines for public entities, and our forthcoming report on managing conflicts of interest). We intend to maintain our efforts to ensure probity. Effort will be put into continuing to produce guidance statements where there is an apparent need, and testing against the guidance in carrying out annual audits.

Fraud

The most recent Transparency International report on corruption within governments places New Zealand high among the least corrupt countries. However, this reputation is unlikely to be maintained without taking positive action. There is growing concern that, even if some forms of fraud or corruption are not prevalent in New Zealand, complacency may pose risks to New Zealand’s reputation. For example, a recent Anti-Bribery Convention report from the Organisation for Economic Co-operation and Development recommended that New Zealand strengthen its laws to combat foreign bribery.

We intend to increase our focus on the management of fraud risk through:

  • identifying fraud trends and patterns, and informing auditors about them;
  • carrying out performance audits that look at fraud management (for example, in our proposed annual work programme, and in audits on immigration identity fraud and benefit fraud); and
  • considering opportunities for raising the awareness of public entities about fraud issues, by issuing good practice and other guidance material to help public entities to detect and prevent fraud.

Sustainable development

It is becoming increasingly important for public entities to work and think in ways that take account of long-term sustainability. For local authorities, taking a sustainable development approach is a requirement of the Local Government Act 2002. For other parts of the public sector, a sustainable development approach can be a means to ensure that statutory requirements are given effect (such as the managing for outcomes/results initiatives, which are reflected in the Public Finance and Crown Entities Acts).

We have been considering how we can ensure that our own work takes account of the increasing importance of sustainable development to the public sector. We intend to continue this work by:

  • exploring methodologies and participating in forums with overseas audit offices to build methodologies for sustainable development audit work (for example, through specific performance audits);
  • continuing to develop our own audit methodologies to address public entities’ sustainable development-related statutory requirements; and
  • contributing to broader understanding and debate about how public sector planning, budgeting, and subsequent evaluation would be undertaken if sustainable development considerations were to have a greater prominence in these systems.

Stewardship and management of infrastructure assets

For some time, there has been general public concern about asset management, and mostly about network utility assets. We have taken an active interest in the management and stewardship of infrastructure assets for nearly two decades, through:

  • performance audits (with several projects on asset management featuring in our proposed annual work programme);
  • annual audits (primarily in the local government sector);
  • Long-Term Council Community Plan (LTCCP) audits; and
  • liaison with stakeholders in the development of good practice guidance.

We now wish to give broad assurance and information to Parliament and the public about the state of, management of, and planning for, key infrastructure assets throughout the public sector.

Service performance information

We intend to enhance the depth of annual audit work on service performance information. Enhancements are needed to address issues arising as a result of statutory change (for example, the Crown Entities Act and the changes to the Public Finance Act and the Local Government Act), as well as general improvements.

The work we carry out in this area will place us in a better position to contribute to improving the quality of service performance information reported by public entities. It will also take account of our focus on sustainable development. There will be two main pieces of work in this area:

  • a review of 2007/08 Statements of Intent for government departments and most Crown entities, and incorporating the lessons learned into our audit methodology; and
  • developing a methodology to support auditors in reporting on annual reports under the LTCCP framework.
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