Introduction

This is our report on the 2007/08 audits in the central government sector.

The purposes of this report are to:

• report on the 2007/08 audit of the Government Reporting Entity and its sub-entities – as reflected in the Financial Statements of the Government of New Zealand for the Year Ended 30 June 2008;
• report on the results of, and matters arising from, our 2007/08 audits of the central government sector; and
• raise other matters that we believe warrant consideration by Parliament.

Summary

Section 1 has four Parts that cover the overall audit results for 2007/08:

• In Part 1, we discuss the significant matters arising from the 2007/08 audit of the Government’s financial statements, and set out the recommendations we have made.
• In Part 2, we report on our 2007/08 assessments of central government entities’ environment, systems, and controls. Similarly to 2006/07, in 2007/08 we found that either the management control environment or financial information systems and controls of a significant number of district health boards (DHBs) and government departments needed to improve.
• In Part 3, we briefly outline the public finance principles underpinning our Controller function and appropriation audit work, discuss the unappropriated expenditure for 2007/08, and report on some of the issues we have considered during the year. While there were fewer instances of unappropriated expenditure in 2007/08 than in 2006/07, it is always of concern when government agencies incur expenditure without the necessary authority from Parliament.
• In Part 4, we report on the non-standard audit reports issued during the 2008 calendar year on the financial statements of public entities within our central government portfolio of audits. These audit reports contain qualified opinions and/or explanatory paragraphs.

Section 2 has three Parts that address audit matters arising in specific sectors:

• In Part 5, we discuss the results of DHB audits for 2007/08. In particular, we discuss our assessments of DHBs’ environment, systems, and controls, our views on the quality of information about DHBs’ future operating intentions, and how the sector manages procurement.
• In Part 6, we discuss results of tertiary education institution audits for 2007/08. We also discuss procurement policies and capital asset management, which were focus areas in the audits.
• In Part 7, we report on the status of Māori Trust Board (MTB) audits, including the ongoing trend of audit arrears in the sector. We reiterate our view that the Minister of Māori Affairs and Te Puni Kōkiri should give urgent attention to proposals for improving the governance and accountability of MTBs.

Section 3 has two Parts that consider cross-sector matters arising from audit work in 2007/08:

• In Part 8, we report on our review of 2008-11 statements of intent (SOIs) for government departments and many Crown entities. We conclude that the quality of SOIs has not improved between our reviews of the 2007-10 and 2008-11 SOIs. We also set out the work we intend to do in 2009/10 to help improve agencies’ performance information.
• In Part 9, we discuss the findings of work we carried out during the 2007/08 annual audits examining procurement policies and practices in departments, Crown entities, Crown Research Institutes, and State-owned enterprises. Although increasing numbers of entities are improving their policies and practices, we will continue to monitor progress in 2008/09.

Section 4 has two Parts:

• In Part 10, we discuss the Auditor-General’s inquiry function, and provide an overview of some of the larger inquiries we completed in the central government sector during the year.
• In Part 11, we report on what the Ministry of Education has done to address the issue of unlawful expenditure by schools – a matter we have drawn to the Ministry’s attention on previous occasions.