Auditor-General's overview and strategic direction

I am pleased to submit this Statement of Intent 2011–14 for the Controller and Auditor-General.

My thoughts in preparing this statement are dominated by the Christchurch earthquake tragedy on 22 February 2011, which will remain the nation’s focus for some time to come and will test the resilience of us all. Of course, New Zealand is not alone in coping with natural disasters.

Since the global recession, reduced public revenue and increased levels of national debt are now part of our broader environment, while the recovery and rebuilding of Christchurch, our second-largest city, will require an extraordinary amount of human endeavour as well as financial support.

New Zealand’s landscape and physical environment is under increasing pressure from man-made activities and natural events and disasters, and our decision-makers and communities will be called on to balance immediate and ongoing economic imperatives with sustainable future needs. For many, the lure of living in Australia and other places overseas will be increasingly attractive, and we may struggle as a nation to keep our best and brightest and maintain our ability to support an ageing population.

In this context, there will be an increased drive for efficiency and better services in the public sector, with a range of structural, funding, and service changes being considered and implemented to do more with less. It is important that effectiveness does not become a casualty of that drive for efficiency. For those committed to keeping New Zealand strong, there will be many challenges. Our ability as a country to adapt cleverly will be the key to success. For my Office, these challenges will include managing pressure on audit quality, and potential loss of staff to domestic and overseas organisations.

Outlook for 2012

In 2010, I said our focus for the next two to three years would be on these main themes:

1. the local government reorganisation in Auckland;
2. performance reporting;
3. analysis and reporting of sector information (sector knowledge);
4. changes to financial reporting standards (and, more broadly, auditing standards and regulation of auditors); and
5. adding value through our 4000-plus annual audits, inquiries, and performance audits.

In addition, during this time, I wanted to identify a cross-cutting theme to underpin our audits and other work in 2012/13. We will select a topic during 2011 so that we can complete the necessary planning and research before starting work on the cross-cutting theme during 2012.

I am pleased to say that we have made good progress with the first two matters identified in 2010 – Auckland and performance reporting. Our stakeholders and clients are telling us that we have built a better understanding of their environments, businesses, and risks, and that we are bringing this understanding to our work with them. I am committed to building on this understanding to carry out audit work that addresses the change in, and growing complexity of, the public sector and the higher expectations of the public.

My emphasis for 2011/12 will be on sharing sector knowledge and accounting and auditing standards, and continuing to make an important contribution internationally.

Sharing sector knowledge

In February 2011, we started an initiative to improve the way we share knowledge within the organisation. This initiative consolidates and expands on our previous work, which focused on helping us to better understand and use our knowledge about individual public entities, various sectors, and the public sector as a whole. This new initiative will be a test of our ability to be flexible, agile, and adaptive.

Accounting and auditing standards

I am pleased that the Accounting Standards Review Board has decided to adopt two sets of accounting standards for New Zealand. In my view, this is likely to mean public sector standards will be based on International Public Sector Accounting Standards (IPSAS) in future. I am looking forward to our involvement in applying these new standards, and to resuming our involvement in the standard-setting process. We will be keen to ensure that changes to the standards are applied smoothly and sensibly for the New Zealand public sector context.

Our international contribution

My Office makes a significant contribution to the international audit community, ranging from input into the development of accounting and auditing standards to our involvement with public sector auditing in the Pacific and beyond. The respect and esteem with which we are held among our overseas colleagues is humbling and heart-warming. It underlines our responsibility and commitment to improving the standard of public sector auditing globally.

Concluding comments

In 2011/12, we will continue to focus on adding value to the public sector through our audits and other work, and to review our own effectiveness and efficiency. While I do not underestimate what will be involved, I am confident that my Office has the people and expertise to respond to the challenges ahead.

I thank the Speaker and the Finance and Expenditure Committee for the feedback they provided on my Draft statement of intent 2011–14, which has been taken into account in preparing this final Statement of Intent.

Lyn Provost
Controller and Auditor-General

5 May 2011