Part 2: Statement of service performance

In this Part, we report on the services that we are paid to deliver and how well we delivered those services. We discuss:

• achieving our 2013/14 work programme;
• our Audit and assurance services; and
• our Statutory auditor function services.

Achieving our 2013/14 work programme

We set the theme for our 2013/14 work programme, Service delivery, in the context of the changing shape of the public sector and changes in the way that services are being delivered. The changes present opportunities and add complexity and risk for the public sector.

We drew on all our audit and assurance work to address the theme and carried out performance audits on the delivery of services that significantly affect people. For example, we carried out audits on education for Māori children, complaints and case management in the Ministry of Social Development and the Accident Compensation Corporation, Auckland Council's building consent process, and the customer operations of Watercare Services Limited.

We looked at ways that closer relationships between government and other partners are changing service delivery. For example, we will soon be reporting on our work on third-party delivery of services such as the Whānau Ora programme. We prepared reports on the results of our audits in important service delivery sectors of health, schools, and social services, which are available on our website. Appendix 1 lists the major reports that we published during 2013/14.

Throughout our Service delivery themed work, we saw how important it is for public services to have a culture oriented to customers and people and in line with the organisation's purpose, and to use the comments of customers and the public to improve those services. We plan to publish an overview of our work on how well the public sector is providing services to the public.

We looked at future themes for our work programme. We decided that the theme for audits and other projects in 2014/15 will be Governance and accountability and that the theme for 2015/16 will be Investment and asset management.

Output class: Audit and assurance services

We audit all public entities² that are required to prepare general purpose financial reports – from large government departments and district health boards to every state school and local authority. In 2013/14, our annual audits and other assurance services accounted for 88% of our total expenditure.

Annual audits

Annual audits provide independent assurance about the reliability of financial statements – and, in many instances, service performance information – that public entities are required to report. The Auditor-General, as the auditor of all public entities, has a statutory duty to audit that information. We produce an audit report for each audit we carry out, which includes our opinion about the fairness of the presentation of the financial statements (and service performance information, where relevant).

We use our annual audits to gather information about public entities to help us to advise Parliament and others, and to provide information for our other work. To be part of a trusted public sector, public entities must fairly report their performance and respond to audit recommendations to improve their systems and controls.

The main processes supporting annual audits

Appointing auditors and monitoring audit fees

The Auditor-General appoints auditors from Audit New Zealand and private sector accounting firms to carry out the annual audits of public entities. When appointing these auditors, the Auditor-General follows principles that are designed to ensure that auditors are independent, audits are of a high quality, and audit fees are reasonable. We continually monitor the allocation of audits among Audit New Zealand and private sector accounting firms to ensure that these principles are adhered to.

Each year an independent review examines the probity and objectivity of the methods and systems we use to allocate and tender audits, and to monitor the reasonableness of audit fees. This year's review confirmed the objectivity of those methods and systems. Appendix 3 contains the review report by John Marshall QC.

We regularly monitor audit fees to ensure that they are fair to public entities, and provide a fair return to auditors for the work required to meet the Auditor-General's auditing standards. In 2013/14, fees changed for a range of reasons, including changes in the scale of operations of some entities, the variable quality of the financial statements and service performance information prepared by some entities, and small changes in auditor charge-out rates (the average hourly cost of carrying out small audits).

Figure 4 summarises the movements in audit fees from 2011/12 to 2013/14, based on the agreed audit fees at the time the analysis was prepared. It shows how changes in the time spent on audits and the average hourly cost of carrying out audits have affected fees. The figures exclude additional audit fees negotiated with public entities as a result of unforeseen problems arising after audit fees had been agreed. These are usually the exception. However, for the school audits for the year ended 31 December 2012, additional audit fees were agreed with the Ministry of Education for the extra audit work resulting from problems with Novopay. We expect the problems with Novopay will again result in audit fee increases for the school audits for the year ended 31 December 2013. We are working with the Ministry of Education to ensure that the Novopay effect on the next round of school audits is minimised.

Figure 4
Changes in audit fees, 2011/12 to 2013/14

	2011/12 to 2012/13				2012/13 to 2013/14
Sector	Increase in total fee	Because of changes in time	Because of changes in charge-out rate	Number of entities	Increase in total fee	Because of changes in time	Because of changes in charge-out rate	Number of entities
Central government	2.8%	2.7%	0.1%	385	1.8%	0.3%	1.5%	396
Local government	4.1%	1.9%	2.2%	430	4.2%	3.6%	0.6%	421
Schools	4.2%	3.9%	0.3%	2420	1.9%	-0.9%	2.8%	2426
Total	3.4%	2.6%	0.8%	3235	2.6%	1.2%	1.4%	3243

Maintaining auditors' independence

The Auditor-General's staff (including at Audit New Zealand) and appointed auditors and their staff from private sector accounting firms must meet high standards of independence. We monitor compliance regularly. The Auditor-General works to eliminate or reduce all identified threats to auditors' independence.

Publishing the Auditor-General's Auditing Standards

The Public Audit Act 2001 requires that the Auditor-General publish her Auditing Standards in a report to the House of Representatives at least once every three years, and that each annual report include a description of any significant changes to those standards.

In March 2014, we published the Auditor-General's Auditing Standards, which included updates on various technical matters. However, there were no significant changes to the auditing standards. The updated Auditor-General's Auditing Standards are available on our website.

Carrying out quality assurance reviews

We carry out quality assurance reviews of all appointed auditors to ensure that they have complied with the Auditor-General's Auditing Standards. We aim to review the performance of each of our appointed auditors at least once every three years.

Responding to regulatory and external reporting changes

In 2013, legislative reforms changed the obligations for subsidiaries reporting under the Crown Entities Act 2004 and for those who now report under the Companies Act 1993 (instead of the now repealed Financial Reporting Act 1993). As a result, some subsidiaries will no longer be required to separately report, and their parent entities will only be required to report as a group. The changes allow public entities to report service performance information more flexibly and collaboratively. We are working through the full implications of these reforms.

In 2013/14, we continued our preparation for auditing after the application of the External Reporting Board's new accounting standards for public benefit entities, which came into effect on 1 July 2014.

Our performance in 2013/14

The problems with Novopay continue to delay the completion of our school audits. In 2013/14, significantly fewer audited financial reports were issued within statutory time frames than in the three years from 2009/10 to 2011/12, although slightly more were issued than in 2012/13. If the effect of Novopay on the timeliness and completion of school audits is excluded, then our overall performance in annual audits and other assurance services for 2013/14 is comparable to how we performed in 2011/12 – the year before Novopay came into effect.

In 2012/13, the problems with Novopay resulted in audit fees for the 2012 school audits increasing by about 9% (about $0.9 million). We expect similar increases for the 2013 school audits because of the difficulties in gaining assurance about Novopay. It is disappointing that these problems continue to affect school audits. We will continue to work with the Ministry of Education to ensure that the effect on the 2014 school audits is minimised. In the pages that follow, we set out the measures we use to assess our performance and how we have performed against those measures.

We use one of three ratings to show performance for each measure:

• Achieved – meets or exceeds targets;
• Almost achieved – very close to target when reasonable judgement is applied; and
• Not achieved – below target.

Output class: Audit and Assurance services

2013/14 results and previous performance for Audit and Assurance services

Public entities respond to the recommendations for improvement from our annual audits
Measure	Result	Comment
Central government entities' management control environment (MCE), financial information (FISC), and service performance information systems and controls (SPIASC) are improved (or at least maintained), measured against the previous two years. Movements in MCE, FISC, and SPIASC grades indicate whether entities are accepting and responding to our recommendations, and improving their systems and controls.	Achieved overall	MCE, FISC, and SPIASC results for 2010/11 to 2012/13 show that, overall, these grades improved when measured against the previous two years. MCE and FISC rankings mostly improved, and overall SPIASC rankings improved. The 2013/14 grades will be determined during 2014/15.
			2010/11	2011/12	2012/13
		MCE
		Very Good	52%	56%	62%
		Good	41%	39%	32%
		Needs improvement	7%	5%	6%
		Poor	0%	0%	0%
		FISC
		Very Good	43%	47%	52%
		Good	51%	47%	45%
		Needs improvement	6%	6%	3%
		Poor	0%	0%	0%
		SPIASC
		Very Good	1%	4%	8%
		Good	52%	66%	74%
		Needs improvement	47%	30%	18%
		Poor	0%	0%	0%

Public entities prepare annual financial statements to a high standard
The percentage of public entities' audited financial reports containing modified audit opinions is reduced (or at least maintained), measured against the previous two years.	Not achieved	The percentage of public entities' audited financial reports containing modified audit opinions was not reduced when measured against the previous two years. The main reason for not achieving this measure was that, in 2013/14, we issued modified audit opinions for all district health boards. This was because we could not obtain assurance over the information used in some significant performance measures where third-party health providers, such as primary health organisations, provided the performance information to district health boards.

Figure 5
Percentage of audited financial reports that contain modified audit opinions, 2009/10 to 2013/14

Public entities accept management report recommendations and act on them
Public entities' acceptance of audit service providers' management report recommendations is improved (or at least maintained), measured against the previous two years.	Almost achieved	Public entities' acceptance of audit service providers' management report recommendations was almost maintained at the same level as the previous two years, and public entities rejected fewer management report recommendations. For the year ended 30 June 2014, a sample of 45 entities was assessed against this performance measure.

Figure 6
Percentage of management report recommendations accepted by public entities, 2009/10 to 2013/14

Audit reports are produced within statutory time frames
The percentage of public entities' audited financial reports issued within the statutory time frame is improved (or at least maintained), measured against the previous two years.	Not achieved	The percentage of public entities' audited financial reports issued within the statutory time frame improved from 2012/13, but was lower than in 2011/12. The problems with Novopay continue to delay the completion of our school audits. More than 60% of the audits we are required to complete each year are school audits, and in 2013/14 only 45% of them were completed on time because of problems with Novopay. As a result, in 2013/14 only 57% of all our audits were completed on time.
Figure 7 Percentage of audited financial reports issued on time, 2009/10 to 2013/14
Less than 30% of the outstanding audit reports at 30 June are because of inaction on our part.	Achieved	An estimated 22% of the outstanding audit reports at 30 June are because of inaction on our part. This estimate excludes the outstanding audit reports for schools affected by the problems with Novopay. The result reflects our strong focus on reducing the number of audits in arrears during the last three years.
Management reports are produced within set time frames
All management reports are issued within six weeks of issuing the audit report.	Not achieved	93% of management reports were issued within six weeks of issuing the audit report, about the same percentage as in previous years.
Audit reports on local authorities' long-term plans are produced within statutory time frames
No outstanding long-term plan audit opinions at 30 June of the year in which long-term plans are to be adopted by local authorities are because of inaction on our part.	Achieved (in 2011/12)	Long-term plans are audited every three years. Long-term plans were last audited in 2011/12. The next audits will be carried out in 2014/15.
Objective methods are used to allocate audits and set reasonable audit fees
An annual independent review of our (the OAG's) processes confirms the probity and objectivity of the methods and systems we use to allocate and tender audits, and monitor the reasonableness of audit fees.	Achieved	The 2013/14 review confirmed that we achieved this measure. We have consistently achieved confirmation of the probity and objectivity of the methods and systems that we use to allocate and tender audits, and to monitor the reasonableness of audit fees. The review report by John Marshall QC, is provided in Appendix 3.
Skilled auditors, with a good understanding of public entities, carry out quality audits
Client satisfaction survey results show that, overall, 85% of respondents are satisfied with the quality of audit work (including the expertise of staff and the quality of the public entity's relationship with its audit service provider).	Achieved	Overall, 85% of respondents were satisfied with the quality of the audit work, which is slightly less than the 87% in 2012/13.
Quality assurance reviews for all appointed auditors are completed during a three-year period. Of the auditors reviewed in any given year, 100% achieve a grade of "satisfactory" or better. This measure reports the results of those auditors who were reviewed in 2013/14.	Almost achieved	92% of auditors reviewed in 2013/14 achieved a grade of satisfactory or better (compared to 89% of auditors reviewed in 2012/13). The 8% of auditors we assessed as not achieving a satisfactory standard are from small audit firms who perform small audits (such as school audits) on behalf of the Auditor-General. We expect that they will make improvements in order to meet our expectations. A follow-up review will be performed of these auditors in 2014/15.
We have sufficient resources to do audits effectively
The Officers of Parliament Committee accepts any significant proposals for an appropriation increase in audit fees and expenses.	Not applicable in 2013/14	2009/10 to 2013/14: no significant proposals for an increase in appropriation.

Figure 8
Financial performance of output class: Audit and assurance services

	2013/14 Actual $000	2012/13 Actual $000	2011/12 Actual $000	2013/14 Supplementary Estimates $000	2014/15 Main Estimates $000
Income
Crown	150	150	150	150	150
Other	72,139	70,089	71,644	71,042	75,390
Expenditure	(71,755)	(69,448)	(70,729)	(71,192)	(75,540)
Surplus/(Deficit)	534	791	1,065	0	0

* The 2014/15 forecast financial statements are unaudited.

Multi-class output: Statutory auditor function

This multi-class output includes the following:

• Services to Parliament – providing advice and reports to help select committees and other stakeholders;
• Controller function – providing assurance to Parliament that public money has been spent lawfully and within the authority provided by Parliament; and
• Reports, studies, and inquiries – reporting on the results of annual audits, performance audits, and other studies, and inquiring into a public entity's use of its resources.

Services to Parliament

We use information from our annual audits of public entities to advise and inform Parliament, and our other stakeholders, including public entities and the public. Our reporting and advice to Parliament identifies and addresses issues and risks in the public sector.

Our advice and help to Parliament includes:

• reports and advice to select committees to help their financial reviews of public entities and their examination of the Estimates of Appropriations;
• reports to Ministers on the results of the annual audits; and
• reports to Parliament on more general matters arising from our annual audits.

Controller function

The Controller function provides independent assurance to Parliament that what is spent by government departments and Offices of Parliament is spent lawfully, and is within the scope, amount, and period of the appropriation or other authority.

The OAG and appointed auditors carry out standard procedures for the Controller function in keeping with the Auditor-General's auditing standards and a Memorandum of Understanding with the Treasury. We review monthly reports that the Treasury provides. We inform the Treasury of any problems and advise the action to be taken.

Each year, we report to Parliament on any significant matters related to the Controller function.

Reports, studies and inquiries

The Public Audit Act 2001 allows the Auditor-General to carry out performance audits, to inquire into how a public entity uses resources, and to study other matters affecting the public sector.

Each year, we publish reports on the results of our annual audits, performance audits, major inquiries, and other studies. Through this reporting to Parliament and other stakeholders, we consider matters in greater depth than is appropriate within the statutory scope of an annual audit, and examine ways that public entities can perform better.

Performance audits are comprehensive examinations of effectiveness and efficiency that the Auditor-General chooses to carry out. We plan our work programme carefully to provide Parliament with assurance about how well public entities manage a range of matters and programmes, making recommendations where we consider that improvements can be made.

By contrast, our inquiries work reacts to matters of current public concern. We usually receive about 200 requests for inquiries each year, spanning a wide range of concerns about central and local government entities. We deal with most of these through routine correspondence, but, each year, some require significant work. If there is general public interest in an inquiry, we will usually publicly report the results. The Auditor-General administers the Local Authorities (Members' Interests) Act 1968, which regulates pecuniary interest matters in local government. Each year, we usually receive about 50 to 100 enquiries under that Act.

We bring together matters arising from our annual audits in our sector reports, and carry out other studies that result in a range of published reports and information on topical matters affecting public sector accountability and performance.

International contribution

We make a significant contribution to the international auditing community by sharing our knowledge, skills, and expertise. At Parliament's request, we also assist visiting parliamentary delegations by informing them about our work supporting Parliamentary committees.

Hosting international delegations provides opportunities to exchange information and build professional networks. In 2013/14, there was a marked increase in visits by international delegations to our Office, and we were pleased to assist representatives from the Parliaments and/or audit offices of China, Malaysia, Korea, Bangladesh, Indonesia, Vietnam, and Australia. We agreed to an international secondment programme with the Audit Board of the Republic of Indonesia to share our knowledge and experience in auditing accrual-based accounting information.

We work to improve public sector auditing in the Pacific as part of our commitment to the Pacific Association of Supreme Audit Institutions (PASAI). The Auditor-General is Secretary-General of PASAI and represents PASAI on the governing board of the International Organisation of Supreme Audit Institutions (INTOSAI). In 2013/14, we provided substantial support in the drafting of PASAI's 2014-24 strategy, which all PASAI Auditors-General signed in February 2014. Our Office has a special relationship with the Samoa Audit Office. This year we assisted Samoa Audit Office staff with on-site training, performance auditing, and whole-of-government audits.

Our involvement in INTOSAI continued. We chaired two working groups tasked with preparing guidance for supreme audit institutions (SAIs). One of these working groups prepared a new INTOSAI standard on The Value and Benefits of SAIs making a difference to the lives of citizens. This standard sets out how SAIs can add value through their work in a way that benefits citizens. We have used this standard as a framework for the Auditor-General's Strategy 2013-17.

Our performance in 2013/14

Services to Parliament

Our work plays an important part in supporting accountability to Parliament. Strong demand from select committees for our advice continued. In 2013/14, we provided advice in support of 65 financial reviews and 44 Estimates of Appropriation examinations, and advised or gave evidence to committees on a number of our reports.

Each year, we survey a sample of our stakeholders about how they perceive the quality and usefulness of our work. In 2013/14, we interviewed 11 select committee chairpersons, one deputy chairperson, and 12 senior public servants. The interview results showed that, overall:

• the Office is well regarded;
• the Office carries out its work with integrity and independently of government;
• our staff carry out their work professionally; and
• our reports are clear and easy to understand.

Most of the select committee chairpersons we interviewed were positive about the support and advice we give to select committees. Some identified aspects to improve, including more consistency in the quality of our briefings and being more flexible in how we approach some of our briefings. We will consider these comments, and will act on them.

Our interviewees considered our reports to be generally constructive and of high quality and clear and easy to understand: 19 of the 24 (79%) stakeholders agreed that the advice they receive from us through our reports and services is relevant and useful. This is slightly less than our target of 85%. Interviewees suggested that we seek ways to enhance how we scope and configure our work, and broaden the range of evaluation tools we use. They suggested that working more closely with the organisations we report on would help to improve how the public sector performs. We will consider and act on the helpful suggestions made.

Reports, studies, and inquiries

Our reports

In 2013/14, we completed a range of reports on matters arising from performance audits, major inquiries, sector reports, and other studies. Appendix 1 lists these reports, which are available on our website.

Our reports encourage high performance in the public sector, and often highlight complexities to be managed and factors that support good decision-making. They make recommendations for improvement, where appropriate. Our work benefits the audited entities and the wider public sector by informing and promoting strong public sector management and performance. For example, our report, Earthquake Commission: Managing the Canterbury Home Repair Programme, identified lessons and made recommendations to the Earthquake Commission (EQC) to strengthen their service to the people of Christchurch. Our recommendations should benefit those people whose homes are being repaired under the programme. The EQC accepted the report's recommendations, including the need to improve communication with home-owners. We are following up on whether EQC has carried out the improvements we recommended.

Every year, two of our performance audit reports are reviewed independently. This year, our reports were highly rated, especially for approach, conclusions, and impact. The review panel said that our recommendations were clear, specific, and practical in highlighting ways to improve effectiveness and efficiency. We will continue to seek ways to make our reports as useful and compelling as possible.

Public entities' progress in acting on our recommendations

In 2013/14, we published a series of articles on our website that discussed public entities' progress in acting on recommendations from eight of our performance audit reports published between 2011 and 2012. The public entities concerned have made improvements by acting on our recommendations, but not all recommendations have been fully acted on. In some instances, this was because the recommendations are not "quick fixes". In other instances, the public entities need to do more to progress improvements. We will continue to monitor the progress these entities make on acting on our recommendations.

We published a report on the progress that the Plumbers, Gasfitters, and Drainlayers Board made in addressing the recommendations we made in the 2010 report on our inquiry into that organisation. The Board had worked hard to address our recommendations and now has the arrangements in place to properly govern and manage, including much more transparency about its work. Carrying out its responsibilities at a cost that is acceptable to trades people continues to significantly challenge the Board.

Progress with completion of our 2013/14 work programme

The theme for our 2013/14 work programme was Service delivery. The work we started under this theme will be completed by the end of 2014. Figure 9 shows the remaining work under the Service delivery theme that will be reported on by the end of 2014.

We plan to publish an overview of our work on the Service delivery theme in 2014/15.

Figure 9
Remaining work on the Service delivery theme that will be completed by the end of 2014

Reports on client-focused service delivery: Ministry of Social Development: How it deals with complaints (published 12 August 2014) Accident Compensation Corporation: How it deals with complaints (published 12 August 2014) Accident Compensation Corporation: Managing cases Ministry of Social Development: Managing cases Education for Māori educational success (third report): Education for Māori: Relationships between schools and whānau

Reports on service delivery through third parties: Progress in implementing Whānau Ora Ministry for Primary Industries: Administration, monitoring, and reporting of Primary Growth Partnership programmes

Consultation on our 2014/15 work programme

The theme for our 2014/15 work programme is Governance and Accountability. We consulted the Speaker and select committees, who endorsed our proposed work programme and gave us useful comments for our future work.

The theme is an important focus for our work in 2014/15 given that changes in legislation and financial reporting standards have significantly changed the public sector's accountability requirements. The new arrangements and ways of delivering services can put management and financial control environments at increased risk, and it is important that those in positions of responsibility govern and manage public expenditure well.

Inquiries

Our inquiry into Kaipara District Council's management of the Mangawhai community wastewater scheme dominated our inquiries work in 2013/14 and was a major focus for staff throughout the Office until December, when we published our report Inquiry into the Mangawhai community wastewater scheme. The other major inquiry completed during 2013/14 looked at investment decisions by Delta Utility Services Limited, a subsidiary of Dunedin City Council.

In 2013/14, we received 181 new requests for inquiries and 69 requests about Local Authorities (Members' Interests) Act 1968 (Members' Interests Act matters). These numbers are in line with the pattern in recent years.

We met our timeliness goals for general inquiries in central and local government. We did not meet our usual timeliness standard on Members' Interests Act matters because we prioritised completing our major inquiries, and several matters required relatively long investigation.

Each year, we usually receive a small amount of correspondence under the Protected Disclosures Act 2001. We manage this correspondence as part of our general inquiries work. We have seen no need to report on this correspondence separately. Although the total amount of correspondence remains small, it has increased noticeably in the last year or so. We will continue to monitor this increase and we plan to discuss changes to how we manage protected disclosures with other public entities that commonly receive them.

As we signalled in last year's annual report and in our 2014/15 annual plan, we are reviewing the way we manage our inquiries work to respond to the growing pressure on workload and public expectations of what we can deliver. We will introduce changes in the coming months.

Inquiry into Kaipara District Council's management of the Mangawhai community wastewater scheme

We published our report on this inquiry on 3 December 2013. We presented the report to community meetings in Mangawhai at the same time as we presented it to Parliament.

The 423-page report included a 100-page review of Audit New Zealand's work at Kaipara District Council during the last decade and a review of how our Office and other accountability agencies responded to the complaints. We published a separate summary of the report.

Overall, the inquiry found that Kaipara District Council:

• was out of its depth and effectively lost control of a major infrastructure project;
• failed to attend to its fundamental legal and accountability obligations; and
• had poor governance, management, record-keeping, contracting, and financial management practices.

Although the Mangawhai community needed a wastewater scheme and now has one that works, it has come at a significant cost. As well as the financial cost, the relationship between the Council and the community has been severely damaged.

The independent review of the audit work found problems with the way that some of the audit work had been carried out over the years. Audit quality varied significantly during the decade. The independent reviewer concluded that some aspects of the work on the audits were inadequate between 2006 and 2009 but improved later. We have put in place steps to address the problems that the review identified. In particular, the Auditor-General decided not to allocate any new audits to Audit New Zealand until she is satisfied that it is consistently achieving appropriate quality in its audit work. Audit New Zealand has an Audit Quality Improvement Programme, overseen by two independent advisors.

We reviewed the way that the Office and other accountability agencies had dealt with concerns that members of the public raised. We found that many of the concerns were well founded. However, we concluded that the public entities' responses were generally reasonable, given the roles, approaches, and information available at the time. As a result of this review, we are reconsidering how we communicate with correspondents and trying to work more closely with the other accountability bodies, to ensure that we collectively "join the dots" better.

Our inquiry identified many lessons that we think will be relevant for other local authorities as well as for many other public entities. We summarised the lessons in Part 6 of our report Summary: Inquiry into the Mangawhai community wastewater scheme, which is available on our website.

Other processes that were under way at the same time made completing the inquiry more complex. In particular:

• Parliament was considering a Bill to validate the rates that the Council had set unlawfully for many years. This Bill received its final reading the day after our report was published.
• Judicial review proceedings had been filed with the High Court to challenge the legality of many of the Council's actions, including its rating decisions and its decisions to enter into the construction contracts. The hearing took place in February 2014 and a decision was released in May 2014. Aspects of that decision have now been appealed.

Kaipara District Council has announced that it intends to pursue legal action against the Auditor-General. We will not comment publicly on these matters, beyond the comments made in the report, while the possibility of legal action remains.

Inquiry into property investments by Delta Utility Services Limited at Luggate and Jacks Point

We inquired into property investments by Delta Utility Services Limited (Delta), a council-controlled trading organisation of Dunedin City Council. These property investments were at Luggate, near Wanaka, in mid-2008, and Jacks Point, near Queenstown, in mid-2009.

We agreed to carry out this inquiry because of widespread and persistent questions about what had happened and allegations of impropriety. Our inquiry report provided a clear and dispassionate view of the facts. Inquiry into property investments by Delta Utility Services Limited at Luggate and Jacks Point, available on our website, explains in detail what happened.

We identified some positive aspects and some deficiencies on the part of Delta, the Dunedin City Council, and the Council's holding company. We considered that there were lessons to be learned for all involved, and for other local authorities and their council-controlled organisations. The lessons are summarised in Part 7 of the inquiry report.

Solid Energy New Zealand Limited

In December 2013, we decided to carry out additional assurance work on aspects of the governance and management of Solid Energy New Zealand Limited (Solid Energy), so that information about some specific issues could be provided to the Commerce Committee for its financial review of Solid Energy in early 2014. We carried out this work because concerns had been raised with us about the circumstances leading to Solid Energy's deteriorated financial situation.

The Office typically helps select committees with their work by providing a financial review briefing on a public entity in two parts the results of the annual audit, and suggestions for lines of enquiry and questions relevant to the entity. For the briefing on Solid Energy, we provided a third part. We considered that a deeper analysis of the facts leading to Solid Energy's financial situation would help the Commerce Committee to review Solid Energy's finances. Our briefing provided clear, impartial, and relevant information to the Committee. We separately published the third part of our briefing on our website to ensure transparency of the process.

2013/14 results and previous performance for Statutory auditor function

Public entities respond to the recommendations for improvement made from our performance audits, studies, and inquiries Parliament, local government, and other stakeholders are supported and get value from our advice
Measure	Result	Comment
Entities accept or respond to the recommendations made in our reports, studies, and inquiries.	Achieved for performance audits	Periodically we review how public entities have responded to some of our reports and present the results to Parliament. A series of articles published on our website during 2013/14 showed that although entities had made improvements by acting on our recommendations from eight previous reports, not all recommendations had been fully put into practice. Our report Public entities' progress in implementing the Auditor-General's recommendations 2012 showed that entities had made good progress in putting into effect most of the recommendations that we made in six performance audit reports published in 2009 and 2010.
	Achieved for inquiries	In 2013/14 we followed up on a major inquiry report from 2010. The entity had acted to address all points raised. In 2012/13, there were no assessments. In 2011/12, we followed up on three major inquiry reports. In two instances, our recommendations were accepted in principle. In 2010/11, we followed up on three inquiries. In all instances, the entities accepted our comments and acted to address our concerns.
At least 85% of select committee members we survey confirm that our advice assists them in Estimates of Appropriation and financial review examinations.	Almost achieved	Ten of the 12 select committee members (83%) agreed that our advice helped them in Estimates of Appropriation and financial review examinations. The 2014 stakeholder survey sample size was 12, an increase from five in 2013.

Figure 10
Percentage of select committee members who agreed that our advice helped them in Estimates of Appropriation and financial review examinations, 2009/10 to 2013/14

We deliver an appropriate work programme
Select committees and other stakeholders are satisfied with the proposed work programme (as indicated by feedback on our draft annual work programme).	Achieved	We received useful comments from two select committees and from other stakeholders, which we considered in finalising our work programme. Consultation on our work programme ensures that our proposed work will be relevant and responsive to our main stakeholders. Comments from 2009/10 to 2012/13 mainly supported our proposals and approach, with useful suggestions for improving the scope of some of our performance audits.
Quality advice is given to Parliamentary select committees, local government, and other stakeholders
At least 85% of select committee members and other stakeholders we survey rate the advice they receive from us through our Statutory auditor function as 4 or better on a scale of 1 to 5 for relevance and usefulness.	Not achieved	This measure was changed in the 2013/14 annual plan to include all our advisory work across the Statutory auditor function. The 2014 Stakeholder survey sample size was 24. 19 of the 24 (79%) stakeholders interviewed agreed that the advice that they receive from us through our Statutory auditor function is relevant and useful. Three of those surveyed were neutral and two disagreed. We will give attention to the comments from these stakeholders about how we can improve our advice to help them in their work.
Independent reviews of two performance audits confirm the quality of our reports.	Achieved	Overall, the reviews confirmed the quality of our reports. They were highly rated for quality, approach, conclusions, and impact. Our recommendations were acknowledged as being clear, specific and practical in highlighting ways to improve effectiveness and efficiency. Every year since 2010, reviews have confirmed the quality of our reports and suggested aspects to improve.
We use relevant standards and quality processes to carry out our Statutory auditor function
Internal quality assurance is carried out to gain assurance that our policies, procedures, and standards for our Statutory auditor function have been applied appropriately and that they meet relevant standards and procedures. The review is carried out over aspects of our Statutory auditor function at least once every three years. The nature, extent, and frequency of these reviews are based on risk.	Achieved	Performance audit reports An internal quality assurance review of performance audits carried out in 2013/14 found that the Office's overall approach to performance audit is in line with the fundamental principles set out in relevant professional standards. The review made recommendations for strengthening the design and use of our quality control framework for performance audits. These recommendations are being acted on.
	Achieved	Administration of the Local Authorities (Members' Interests) Act 1968 enquiries and responses to requests for inquiries The 2013/14 review of the Local Authorities (Members' Interests) Act 1968 enquiries system confirmed that responses to requests were provided in keeping with the relevant policies, procedures, and standards.
	Achieved	Financial review and Estimates examination reports A 2012/13 review of our financial review and Estimates examination reports found that these were of high quality. Recommendations about the policies and procedures for preparing reports for financial reviews and Estimates examinations were adopted.
	Achieved	Controller function The 2011/12 review of the Controller function confirmed that appropriate systems were in place and worked effectively. Some process improvements were recommended.
Our performance audit methodology reflects good practice for carrying out audits, as assessed every second year by the Australian National Audit Office.	Achieved	In 2013, the Australian National Audit Office reviewed two of our performance audits and found that the methodology for these audits was largely in keeping with the Office's processes and practices. We are putting into effect the useful improvement opportunities that the review identified.
Our advice and inquiries are completed in a timely way
Reports and advice are given to select committees and Ministers at least two days before an examination, unless otherwise agreed.	Achieved	From 2009/10 to 2013/14, all reports and advice were given to select committees and Ministers at least two days before an examination, unless otherwise agreed.
At least 80% of our findings on completed inquiries are reported to the relevant parties within three months for routine inquiries, six months for significant inquiries and 12 months for major inquiries.	Achieved for routine inquiries Not achieved for significant and major inquiries	90% of findings for routine inquiries were reported within three months, and 50% of findings for significant inquiries were reported within six months. We completed two major inquiries in 2013/14. Neither were reported on within the 12-month target period.

Figure 11
Percentage of findings on routine inquiries and significant inquiries reported to the relevant parties within the target period, 2009/10 to 2013/14

Figure 12
Number of findings on major inquiries reported to the relevant parties within the target period, 2009/10 to 2013/14

Year	Completed major inquiries	Reported within 12 months
2013/14	2	0
2012/13	4	4
2011/12	1	1
2010/11	3	1
2009/10	5	4

We complete at least 80% of enquiries under the Local Authorities (Members' Interests) Act 1968 within 30 working days.

Not achieved

76% of enquiries were completed within 30 working days. We did not meet our timeliness target, because priority was placed on completing major inquiries and several matters that required long investigation.

Figure 13
Percentage of enquiries under the Local Authorities (Members' Interests) Act 1968 completed within 30 working days, 2009/10 to 2013/14

Controller function is carried out effectively
Monthly statements provided by the Treasury are reviewed for the period September to June inclusive. Advice of issues arising and action to be taken is provided to the Treasury and appointed auditors within five working days of receipt of the statement.	Achieved	2009/10 to 2013/14: All monthly procedures were followed and agreed time frames achieved.

Figure 14
Financial performance of multi-class output: Statutory auditor function

	2013/14 Actual $000	2012/13 Actual $000	2011/12 Actual $000	2013/14 Supplementary Estimates $000	2014/15 Main Estimates $000
Income
Crown	9,047	9,047	9,047	9,047	9,047
Other	176	156	174	275	260
Expenditure	(8,799)	(9,065)	(8,837)	(9,322)	(9,307)
Surplus/(Deficit)	424	138	384	0	0

* The 2014/15 forecast financial statements are unaudited.

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2: In accordance with section 19 of the Public Audit Act 2001, we also audit some organisations that are not public entities. See Appendix 2.

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