Part 1: Introduction

1.1
Successive governments have identified education and skills as central to building a strong society and economy. For 2012/13, the Government budgeted $9.6 billion for Vote Education and $2.8 billion for Vote Tertiary Education.¹ Education remains one of the largest (and steadily increasing) categories of government spending.

1.2
As a percentage of gross domestic product, New Zealand's spending on education is among the top of the Organisation for Economic Co-operation and Development (OECD) countries. However, in absolute terms, New Zealand's spending on education for each student remains below the OECD mean.²

1.3
New Zealand has a highly devolved education system that relies on the contribution of education providers such as schools and tertiary education institutions (TEIs) and education professionals.³ Third-party monitoring of education providers and external reporting by education providers are important checks and balances in any devolved system.

1.4
Our Office plays an important part in this system. The primary value we add is through our annual audits, which provide independent, professional assurance of the quality of education providers' public reporting. The assurance we provide on the financial and (where applicable) the non-financial performance information tells readers whether that information, in our opinion, fairly reflects the public entities' performance. If it does fairly reflect performance, then Parliament and the public can evaluate it and it should provide confidence in decision-making (for example, on funding). Relevant parts of this report provide an overview of the results of our annual audits of education providers in 2011.

1.5
We intend our audit work to contribute to the quality of financial and (where applicable) non-financial performance reports and, consequently, to effective and efficient management and performance. We also aim to help education providers manage risk and prioritise business needs. In this report, particularly in Parts 2 and 4, we have sought to use some of the data we have gained from our audits of education providers to highlight potential risk and pose relevant questions.

1.6
In Part 2, we briefly note recent changes to the operating environment for TEIs and the Government's current tertiary education priorities. We report on the audit results for 2011, including the nature of our audit reports, the timeliness of the audits, and other focus areas, and note what we will focus on during the 2012 TEI audits. We then provide some comparative financial information on TEIs.

1.7
We have been working with public entities for some years now to lift the quality of non-financial performance reporting in the public sector. In Part 3, through a review of a small selection of TEIs' 2011 annual reports, we re-confirm important elements of a good performance framework, identify attributes specific to annual reports, and give illustrative examples from TEIs' reporting, where appropriate.

1.8
We noted in our December 2011 report, Education sector: Results of the 2010/11 audits, our view that many TEIs needed to better assess the business need for their subsidiaries, and their reporting about those subsidiaries. Part 4 gives the results of some initial information we have gathered, which poses questions that might assist with any such assessment and improve any related reporting.

1.9
Part 5 reports on the results of our 2011 school audits. We note non-standard audit reports and any significant matters coming out of the nearly 2500 audits. We give a summary of the process we used to appoint school auditors for 2012-14 and provide progress reports on certain matters raised in previous reports – integrated schools, principals' remuneration, and financial management in kura kaupapa Māori.

1.10
Part 6 highlights changes to financial reporting in New Zealand during the past 12 months, which include high-level changes to the financial reporting framework and proposed changes to financial reporting standards. We comment on how these changes are likely to affect public entities in the education sector.

1.11
Part 7 notes our recent and ongoing work in the education sector. We summarise our recently completed reports and other work on fraud, school governance, the financial health of schools, internal moderation of the National Certificate of Educational Achievement (NCEA), arrangements for training, registering, and appraising teachers, child obesity, and education for Māori.

1: Education and science sector, Information supporting the estimates, 24 May 2012, pages 10 and 153.

2: OECD Publishing (2012), Education at a Glance 2012. Based on 2009 figures.

3: Nusche D., et al (2012), OECD Reviews of Evaluation and Assessment in Education: New Zealand 2011, OECD Publishing.