Part 2: Focus of our proposed work programme for 2014/15

Our 2014/15 theme – Governance and accountability

The theme for our 2014/15 work programme is Governance and accountability. (The Appendix gives an overview of the specific reports contributing to our five-year work programme.)

We selected this theme in recognition of recent significant changes in legislation and financial reporting standards affecting public sector accountability arrangements. The changes also affect our annual audits.

The External Reporting Board (XRB) has been establishing tailored reporting requirements for different types of entities through the financial reporting standards. New reporting standards based on International Public Sector Accounting Standards take effect in 2014/15.

Alongside the changes to financial reporting standards, amendments to the legislation setting out public sector accountability arrangements come into effect in 2014/15; these affect many of the public entities we audit. The legislative changes include:

• amendments to the Public Finance Act 1989 and the Crown Entities Act 2004 – an important part of implementing the legislation will be the guidance that the XRB provides for entities preparing service performance information;
• the Financial Reporting Act 2013 and related amendments to the Companies Act 1993; and
• the Financial Markets Conduct Act 2013 (and related reforms).

Proposed amendments to the Local Government Act 2002 are currently before the House. These changes will have some effect on our annual audit and long-term plan audit responsibilities, including for the long-term plans due to be prepared by local authorities in 2015.

In dealing with these changes, our main focus is to provide guidance for our auditors about how the new requirements affect our auditing responsibilities and the reporting responsibilities of the entities we audit.

The changes have the potential to affect the audit of most public entities in some way. The changes might be complex – particularly where an entity such as a subsidiary is affected by several different reforms. The changes will affect many different parts of our audit work, from the negotiation of engagement agreements and fees through to the way in which entities report, the form of our audit reports, and the way in which we analyse and report on the overall financial information that is produced.

We will monitor how public entities implement these various changes during the year and will report to Parliament on any significant issues.

Our planned performance audits and special studies for 2014/15 focus on how governance and accountability mechanisms in the public sector support effective public spending and investment. We will focus on whether:

• the roles and responsibilities of the various people in new and changing governance arrangements are clear and understood;
• public entities have appropriate governance and accountability arrangements to help them to focus on strategy, risk, and performance, and to adapt to new information and change;
• public transparency and accountability expectations are supported by robust internal processes for providing advice and managing conflicts of interest; and
• the Estimates and financial reporting provide Parliament and select committees with information to assess the achievement of longer-term public-sector-wide results and stewardship of public resources.

Figure 2 lists the matters we intend to report on related to our Governance and accountability theme.

Figure 2
Governance and accountability performance audits and studies to be started in 2014/15

1	Education for Māori – Performance information and accountability
2	Public accountability system – How people can hold public entities to account
3	Auckland Council: Review of service performance: Auckland Transport – Governance and accountability of the Auckland Manukau Eastern Transport Initiative
4	Governance and accountability in the arts, culture, and heritage sector
5	Effectiveness of governance models in the environment sector
6	Canterbury rebuild – Follow-up of Earthquake Commission: Managing the Canterbury Home Repair Programme
7	Canterbury rebuild – Governance arrangements for community projects in Christchurch
8	Audit committees in the public sector
9	Inland Revenue Department business transformation – Governance and foundations for success

In Part 3, we provide a brief description of each of the audits or studies we propose to carry out in 2014/15.

We will also:

• complete governance-focused work on council-controlled organisations that we began in 2013/14;
• prepare follow-up reports on the implementation of the recommendations of our performance audits, inquiries, and other studies;
• provide assurance on Defence major procurements to the Foreign Affairs, Defence and Trade Committee; and
• prepare our fourth monitoring report on the response of the New Zealand Police to the recommendations of the Commission of Inquiry into Police Conduct.

Looking forward to our future themes

The Appendix sets out our current thoughts about work that we could carry out towards our themes for 2015/16 and 2016/17. We will develop these thoughts for consultation with Parliament on our proposed work programmes for those years.

2015/16 – Investment and asset management

We have already carried out a range of work towards our 2015/16 theme, Investment and asset management. We reported on Managing public assets in 2013. We are currently collecting and analysing information as part of work that we began in 2013/14 on local government asset and service-level management. As part of the 2013/14 audits of district health boards, our auditors are collecting information on asset management that we will report on in the coming year.

2016/17 – Information

The study we will carry out during 2014/15 on Inland Revenue Department business transformation – Governance and foundations for success will be the foundation work for our Information theme. From our learning through this study and other scoping work, we will develop our plans for the work we will carry out toward our Information theme. We will include specific work proposals in our 2015/16 and 2016/17 work programmes.

Sector reports to Parliament on the results of our audits

We publish sector reports under our Public Audit Act responsibility to report on matters arising out of the Auditor-General's work. In 2014/15, these reports will cover the results of our audits of State-owned enterprises and licensing trusts for 2012/13, and of central government and local government for 2013/14. We will also consider ways in which we can improve our reporting on these matters.

Inquiry reports

For some years, we have been concerned about the growing pressure on our inquiries function, in terms of both workload and public expectations of what our inquiries can deliver. Because our inquiries work is reactive, we cannot plan the number of inquiries or the topics in advance. Sometimes, we need to reprioritise or stop other work so that we can resource unplanned work, such as major inquiries.

We are currently reviewing the way in which we manage this part of our work and intend to introduce changes from 1 July 2014. The changes we are introducing should help us to be more transparent about the consequences for other parts of our planned work programme of deciding to do major inquiries.

Concluding work on our 2013/14 theme – Service delivery

We will complete our work on our Service delivery theme in 2014/15 and present an overview report on the results of that work. Figure 3 lists the reports under the Service delivery theme that we started in 2013/14, which we expect to finish in 2014/15.

Figure 3
Service delivery performance audits and studies started in 2013/14 and due to be finished in 2014/15

1	Accident Compensation Corporation complaints process
2	Ministry of Social Development complaints processes
3	Whānau Ora – progress so far
4	Education for Māori: Educational success (third report)
5	Primary Growth Partnerships
6	Auckland Council – Review of service performance for building and resource consent processes
7	Governance of council-controlled organisations
8	Accident Compensation Corporation case management
9	Ministry of Social Development case management

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