Part 1: Introduction

1.1
Each year, we publish information about the results of our audits and other work in the central government sector. For the 2009/10 year, we have published the content of this annually produced report in two volumes. We published Volume 1 before Christmas. This second volume includes information about the results of our audits in sectors that are subject to later statutory time frames for reporting and auditing. It should be read in conjunction with Volume 1.

1.2
Volume 2 completes our reporting of the 2009/10 audit results for the central government sector.

Summary of Part 2

1.3
In Part 2, we report on our 2009/10 assessments of the management control environment, information systems, and controls of 66 Crown entities. The results continued to be positive and show further improvement on previous years.

1.4
The 2009/10 results of our assessment of the management control environment were consistent with 2008/09, with 95% of Crown entities assessed as "very good" or "good" (it was 94% in 2008/09).

1.5
The results of our assessment of the financial information systems and controls were particularly positive. Although 96% of Crown entities were graded as "very good" or "good" in 2009/10, compared to 97% in 2008/09, there was a significant increase in the number of Crown entities receiving a grade of "very good" – from 52% to 64%.

1.6
Finally, the grades for service performance information and associated systems and controls improved notably from 2008/09, with 13 (20%) of the Crown entities receiving improved grades.

1.7
These results are particularly welcome in the context of the ongoing changes and improvement initiatives in central government. In Volume 1, we described the potential effect of such initiatives on public entities' capability and capacity, including the need for those entities to:

• manage core services along with change and improvement processes;
• maintain capacity and capability in the event of restructuring and/or staff redeployment;
• understand costs and cost drivers, and maintain good financial and strategic management; and
• maintain effective control environments and be alert to a potentially greater risk of fraud.

1.8
Six audits in 2009/10 were of Crown entities that were due to be disestablished. All these Crown entities maintained sound management control environments in 2009/10.

Summary of Part 3

1.9
Part 3 presents some background information on the health sector. It summarises some of the challenges the sector is facing, and sets out some recent changes in the sector – including changes to accountability arrangements. We have previously reported on the need for the range of planning and accountability documents used in the health sector to be reviewed.

1.10
We describe the financial performance of each district health board (DHB) in 2009/10. The results show that DHBs continue to face considerable financial pressures, which are not likely to reduce in the short term.

1.11
We report on our 2009/10 audit assessments of the management control environment, information systems, and controls of DHBs. We assessed most DHBs as "good" for the management control environment and for financial information systems and controls. However, it is disappointing that DHBs have not shown the steady improvement in these aspects during the past four years that we have seen in other types of public entities.

1.12
In 2008/09, we assessed all DHBs' service performance information and associated systems and controls as "poor/needs improvement" because DHBs did not identify clearly and comprehensively the services that they delivered. Also, the quality of their performance measures for the outcomes they achieved and for the services they provided was poor. Many DHBs have been carrying out extensive work to improve their non-financial performance reporting. For 2009/10, we concluded that the quality of DHBs' non-financial reporting has improved. We graded 60% of DHBs as "needs improvement" and 40% as "poor". We will continue to work with the health sector to help improve the quality of DHBs' reporting.

1.13
Part 3 also reports on our follow-up of previous audit findings about DHBs' procurement policies and practices. Overall, DHBs have shown some improvement, particularly in their procurement policies.

Summary of Part 4

1.14
Part 4 sets out some background information about Māori Trust Boards and their audit arrangements. We have previously been concerned about the timeliness with which audits are completed and the number of audits in arrears. There are many reasons for delays in completing audits. It is pleasing to see that timeliness improved in 2009/10, although it remains low compared to other sectors that we audit. However, there has been a substantial reduction in the number of audits in arrears – from 35 two years ago to 13 (as at 28 February 2011).

1.15
We have previously reported to Parliament about shortcomings in the current accountability framework for Māori Trust Boards. We are pleased that there is now a Bill before Parliament that addresses our concerns. The Māori Purposes Bill provides for a direct accountability relationship between each trust's beneficiaries and Board. It also requires Boards to prepare an annual report (including financial statements that comply with generally accepted accounting practice) and establishes a statutory time frame within which an audit must be completed.