Part 1: Introduction

Controlling sensitive expenditure: Guidelines for public entities.

Why we have prepared these guidelines

Every public entity spends public money, and all such spending must meet standards of probity that will enable it to withstand Parliamentary and public scrutiny.

All public entities incur expenditure, including sensitive expenditure, to help them achieve their objectives. The public expects that decisions to commit to, and make payments for, goods and services should be subject to proper authorisation and controls.

“Sensitive expenditure” is expenditure by a public entity that could be seen as giving some private benefit to an individual staff member that is additional to the business benefit to the entity of the expenditure. Travel, accommodation, and hospitality spending are examples of areas where problems often arise. It also includes expenditure by a public entity that could be considered unusual for the entity’s purpose and/or functions.

There is heightened public sensitivity when individuals in the public sector are perceived to benefit personally, or do directly benefit, from sensitive expenditure incurred during the conduct of a public entity’s business.

The Public Audit Act 2001 allows the Auditor-General to examine and report on any act or omission that shows, or appears to show, waste or a lack of probity or financial prudence by a public entity or one or more of its members, office holders, or employees. A list of our past reports that include discussion on poor sensitive expenditure practices is provided in Appendix 1.

From these reports, and the questions asked of us by entities, we identified some themes that have been apparent from time to time in sensitive expenditure decision-making by public entities. The most frequently occurring problems (or issues that cause entities difficulty or concern) arise with expenditure that is:

  • of a nature that is, or could be regarded as, extravagant or immoderate for the public sector;
  • incurred without there being a justifiable and adequately documented business purpose;
  • subject to poorly defined policies and procedures;
  • not adequately substantiated by invoices, receipts, or other relevant documentation to support claims or payments;
  • committed before appropriate authority has been obtained; and
  • made without proper scrutiny to ensure compliance with an entity’s policies and procedures.

For these reasons, we are bringing together updated guidance for public entities in relation to sensitive expenditure.

These guidelines provide a hierarchy of three levels:

  • the basic principles or ground rules that derive from general public sector norms and principles (Part 2);
  • the components of a strong organisational approach to managing sensitive expenditure (Part 3); and
  • guidance on specific issues (Parts 4-8).

Purpose of these guidelines

The purpose of these guidelines is to help public entities improve, where necessary, their organisational approach to, and control of, sensitive expenditure.

In practice, this responsibility rests with the leaders and senior managers of the public sector. The guidelines aim to assist these people, and any others who have responsibility for sensitive expenditure policies, procedures, and other controls.

This guide outlines the principles applicable to sensitive expenditure, and an organisational approach that embraces leadership from the top of the organisation and having suitable sensitive expenditure policies and procedures. It also provides practical guidance on specific types of sensitive expenditure.

Using these guidelines

These guidelines represent our view of good practice for controlling sensitive expenditure. We may use the guidelines when undertaking future audits or inquiries, including annual financial audits. We intend to review these guidelines from time to time, and publish any changes on our website (

These guidelines are intended to complement, not repeat, the advice that has already been published by other organisations. The titles, sources, and a brief description of other advice are listed in Appendix 2.

We expect entities to build the principles outlined in these guidelines into their systems, and to have an organisational approach that adapts the components suggested here into their own working environment. We expect entities to carefully consider the advice in Parts 4-8 and to have thought carefully about the justification and principles before taking a different approach.

Regardless of the advice in these guidelines, entities remain responsible for sensitive expenditure that is appropriate in their circumstances. Entities are also responsible for ensuring that their sensitive expenditure policies, procedures, and decisions will withstand Parliamentary and public scrutiny.

These guidelines do not replace any legislative requirements that an entity has to meet for sensitive expenditure. For instance, the remuneration, expenses, and allowances payable to elected members of territorial and regional councils are those set out in the Local Government Elected Members Determinations, and actual and reasonable expenses are outlined in council policies that have been formally approved by the Remuneration Authority (but subject to the provisions in the Determinations).


The following topics are not covered by these guidelines:

  • items of sensitive expenditure specifically provided for by employment agreements;
  • severance payments1; and
  • the tax implications, if any, of either private or organisational benefits obtained from sensitive expenditure.

Nevertheless, the principles articulated here are generic, and are likely to be useful to consider in these other situations. Such expenditure will also need to adhere to public sector norms and be able to withstand Parliamentary and public scrutiny.

These guidelines do not cover members of Parliament or the judiciary.

1: Refer to our report Severance Payments in the Public Sector (May 2002, ISBN 0-477-02895-0) for advice on severance payments. This guide was updated in 2019.

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