Appendix 2: Areas of strategic focus

Annual Plan 2008/09.

The Auditor-General has identified areas of concern within his mandate about which he wishes to give particular assurance to Parliament and the public. These areas have been identified in response to the main risks discussed by the Auditor-General in his overview (see pages 7-9). They have been selected because they are “hard” issues and risks for the public sector. They cut across central and local government and across the interventions of the Office, and include areas where the Auditor-General considers that public sector performance must be improved.

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 “hard” and cross-cutting nature of these concerns means that work will generally involve multiple initiatives during two or more years. These initiatives are likely to result in external products (such as reports) and internal development and process improvements (to, for example, our audit approach), and will also be significant areas of focus within our research and development programme.

During 2008/09, the areas of strategic focus for the Auditor-General are:

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


Our Five-year Strategic Plan indicated our intention to do more work on probity in our annual audits. Probity is also of public interest, and features 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 guides (for example, our 2007 reports Managing conflicts of interest: Guidance for public entities and Controlling sensitive expenditure: Guidelines for public entities). We intend to maintain our efforts to ensure probity through the continuing development of guidance statements where there is an apparent need, and through including this guidance in annual audits.


The most recent Transparency International report on corruption within governments places New Zealand high among the “clean” countries. However, this is a reputation that 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 managing fraud risk through:

  • identifying fraud trends and patterns, and informing auditors about them; and
  • considering opportunities for raising the awareness of public entities about fraud and corruption issues by issuing good practice and other guidance material to assist public entities to detect and prevent fraud and corruption.

Sustainable development

It is becoming increasingly important for public entities to work and think in ways that take account of long-term sustainability. The Local Government Act 2002 requires local authorities to take a sustainable development approach. For other parts of the public sector, a sustainable development approach can be a means to give effect to statutory requirements (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 work takes account of the increasing importance of sustainable development to the public sector. We intend to continue this work with specific areas for focus, which are likely to include:

  • participating in forums with overseas audit offices to build methodologies for sustainable development audit work (for example, through specific performance audits such as, in this proposed annual work programme, Effectiveness of the Electricity Commission’s reporting against the Government Policy Statement on Electricity Governance);
  • continuing to develop our own audit methodologies to address public entities’ sustainable development-related statutory requirements – in particular, by enhancing our methodology to take account of sustainable development principles in our 2009 audits of Long-Term Council Community Plans (LTCCPs); and
  • contributing to broader understanding of, and debate about, how public sector planning, budgeting, and subsequent evaluation would be done 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, primarily of network utility assets. We have taken an active interest in the management and stewardship of infrastructure assets for nearly two decades, including through:

  • performance audits (with several projects on asset management featuring in this proposed annual work programme);
  • annual audits (primarily in the local government sector);
  • LTCCP audits; and
  • liaison with stakeholders in the development of good practice guides.

We now wish to give broad assurance and information to Parliament and the public about the state of, management of, and planning for important infrastructure assets throughout the public sector. In particular, in 2008/09 we will work with the Treasury on its Capital Asset Management project, to identify mechanisms that the Treasury could consider to provide greater assurance about the service levels, maintenance, and useful lives for important state sector asset groups.

Service performance information

We intend to put in place initiatives to enhance the depth of annual audit work on service performance information. We intend these initiatives to address issues arising as a result of statutory change and other audit reporting improvement work (for example, the Crown Entities Act 2004 and the changes to the Public Finance Act in 2004 and the Local Government Act 2002).

The focus will be to improve the depth of our service performance information audit work, to better position us to contribute to improving the quality of service performance information reported by public entities. It will also take account of our strategic focus on sustainable development. Work on this area will be through two main initiatives:

  • continuing with our focused reviews of Statements of Intent for government departments and Crown entities, and carrying out similar work for local authorities as part of our audits of LTCCPs; and
  • incorporating the lessons from our extensive work on service performance information into audit tools and guidance for auditors and providing support for their use, including:
    • incorporating the effect of any revisions to the Auditor-General’s standard on the Audit of Service Performance Reports (which is due to be reported with his other standards to Parliament in May 2008 under section 23 of the Public Audit Act 2001); and
    • making revisions to the approach and process of our audit work arising from the review of accountability documents carried out by the Treasury.
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