Part 2: Our desired outcomes

Our desired overall outcome is trust in the effectiveness and efficiency of the public sector. A measure of trust in the effectiveness and efficiency of the public sector is that New Zealand’s Transparency International Corruption Perception Index score is maintained or improved. In 2006, New Zealand’s score was 9.6, meaning it scored first equal on the index with Finland and Iceland.

The Auditor-General helps create trust in the effectiveness and efficiency of the public sector by providing independent assurance and advice to Parliament and the public that governance and management arrangements are suitable to address five key areas¹ – our intermediate outcomes – and where they are not by saying so. These five key areas are that:

• public entities undertake activities in keeping with Parliament’s intentions, and in an effective and efficient manner;
• activities, resourcing, and accountability requirements are carried out within the authority granted by Parliament;
• resources are obtained and applied in an economical manner (that is, taxpayers’ dollars are not being wasted);
• public entities meet parliamentary and public expectations of an appropriate standard of behaviour for the public sector; and
• entities give full and accurate accounts of their activities, and of their compliance with Parliament’s intentions, through the annual reporting cycle.

We gather the information necessary to provide this independent advice and assurance through the activities that form our output classes. The activities are:

• auditing all public entities;
• providing advice to Parliament and others and performing the Controller function; and
• carrying out performance audits and inquiries.

We will seek to confirm that our activities are contributing to these intermediate outcomes through an external peer review of our two business units in 2007. The peer review will be undertaken by an international panel. In 2008 and 2009, we will seek independent confirmation that we are implementing any recommendations arising from the peer review.

Figure 2 shows our outcome framework.

Figure 2
The Auditor-General's outcome framework

Our output classes, performance measures, and targets

In Part 3, we set out our output classes and their associated performance measures and targets. We describe:

• how we assess whether our outputs are contributing to the outcomes we seek (as required by section 40(d)(i) of the Public Finance Act 1989). We will use these as our main measures and standards for the forthcoming financial year and the next two financial years; and
• how we assess the performance achieved as a result of our output classes (as required by section 41(1)(e)(ii) of the Public Finance Act 1989).

Our logic is that:

• our performance measures and targets help us to understand whether we are producing quality outputs within time and resource constraints;
• our planning process helps us to determine the right work to do at the right time;
• our areas of strategic focus help us to ensure that we are effectively deploying the full range of audit services to address areas needing development work;
• our outcome measures for each of our three output classes help us to understand whether these outputs are having the effect we want; and
• evaluation reviews provide assurance that we are meeting good practice expectations when compared with our peers internationally.

If all of the above function as intended and have the desired effect, we will be contributing to an effective and efficient public sector that is trusted within the five areas that form the Auditor-General’s mandate under the Public Audit Act 2001.

A failure to achieve satisfactory performance against an output target or budget, or to maintain a static situation or trend in the opposite direction to that desired in outcome measures, could indicate a cost-effectiveness² issue that we would explore and plan to improve.

It is worth noting that 80% of the Auditor-General’s expenditure is on carrying out annual audits. To assess the effectiveness of annual audits, our performance measures include:

• ensuring the timely completion of audits or that arrears in the completion of audits are not caused by inaction on our part;
• issuing timely management reports;
• achieving client satisfaction with the quality of Audit New Zealand’s audit work;
• obtaining assurance about the quality of annual audit work; and
• obtaining independent confirmation of the probity and objectivity of the methods and systems that we use to allocate and tender audits and monitor the reasonableness of audit fees.

Our outcome measures focus on the effectiveness of this work by comparing the numbers of audits completed according to statutory timelines, audit qualifications, and the response of entities to management letter recommendations, with data from the previous two years.

In 2007/08 an independent peer review will take place, which is in addition to this annual performance management framework. Further information about the peer review is provided in Appendix 4.

1: These five key areas reflect the mandate given to the Auditor-General in the Public Audit Act 2001.

2: See section 40(d)(ii) of the Public Finance Act 1989.