Part 2: Introducing integrated reporting

Annual Report 2015/16.

This year, we introduce aspects of integrated reporting into our annual report.

This is our first step in taking up the challenge posed by the International Integrated Reporting Council (IIRC) to adopt integrated reporting. The IIRC defines an integrated report as a concise communication about how an organisation’s strategy, governance, performance, and prospects in the context of its external environment lead to value creation over the short, medium, and long term.

Introducing integrated reporting in our own reporting gives us an opportunity to:

  • provide greater insight into our organisational performance;
  • integrate our strategy, performance, and sustainability; and
  • build on our understanding of integrated reporting and its application to the New Zealand public sector.

We intend to progressively adopt principles of integrated reporting into our planning and reporting processes and external accountability documents.

The main features of integrated reporting are conciseness, strategic focus and future orientation, and key aspects of value (known as “capitals”) and the connections between them.

In this report, we introduce our six proposed capitals and provide insight into two of those capitals – independence and people.

Our capitals

Independence icon Independence
Our independence and strong mandate underpin all our work and activities.
Relationships icon. Relationships
Our mutually productive and respectful relationships with all our stakeholders.
Knowledge and learning icon. Knowledge and learning
Our collective knowledge and expertise about the public sector.
People icon. People
Our skills, competence, and engagement enable us to deliver high quality work.
Natural resources icon. Natural resources and environmental
Our use of natural resources to support our activities.
Financial resources icon. Financial and physical resources
Our use of financial and physical resources.

Independence icon. Independence
Our independence and strong mandate underpin all our work and activities.

Our independence is fundamental to everything we do and to our ability to create value over time.

The whole point of our governing legislation – the Public Audit Act 2001 – and our role as an Officer of Parliament is to provide an independent view on whether the public sector is operating as it said it would. Our independence is given statutory recognition and protection under our legislation. The Act requires the Auditor-General to act independently and gives us our strong mandate and status as an Officer of Parliament, separate from and independent of the Government and the entities that we audit. The Act also gives us power to report the results of our work to any person.

Our job is to impartially assess and report on how public entities are performing and spending public money, individually and collectively. We apply independent scrutiny and professional judgement to financial audits of about 3700 public entities each year, along with numerous performance audits, inquiries, and advice to parliamentary select committees about the Government’s proposed spending and audit results.

Our work gives public entities an objective viewpoint to work with and enables others – including Parliament, governing boards, and those who use public services – to hold public entities to account and to seek improvement in one, many, or all of the organisations that make up the public sector.

Our independence is critical to what we do

Being independent of the entity being audited is fundamental to the role of the auditor. It would be difficult to fulfil our auditing responsibilities and achieve our overall purpose of improving the performance of, and the public’s trust in, the public sector without being, and being seen to be, independent.

We do not take our independence for granted. Our reputation would suffer if we were to breach or compromise it, as would our ability to add value to the public sector. We are acutely aware of the significance and responsibility of having our independent role and mandate set and protected under law. Not all of our international counterparts are in the same position of having financial and operational independence from the executive government, or have broad reporting powers. Some of our international effort in the Pacific is focused on measures to help strengthen their independence and increase their effectiveness.

How we protect our independence

We have high expectations of the independence standards to be met by all auditors who work for us, as expressed in The Auditor-General’s Auditing Standards. These standards exceed the minimum independence standards required of auditors operating in the private sector.

In administering the Auditor-General’s independence requirements, we expect all our auditors to have a very good understanding of the requirements and the consequences of not meeting them. They have ready access to advice from staff within the Office of the Auditor-General about maintaining their independence.

All our audit reports to public entities about their financial and performance information confirm in writing the auditor’s independence from the entity being audited and the auditor’s compliance with the Auditor-General’s independence requirements. This is an important part of the assurance that we provide to public entities and to Parliament and the public.

Our independence requirements limit the amount and nature of additional work that can be carried out for public entities by auditors acting on the Auditor-General’s behalf. This eliminates the potential risk that other work could be seen to compromise the objectivity of the auditor and so diminish the standing of the auditor’s report and erode its value.

We have comprehensive systems and processes in place to identify and mitigate risks to our independence. These include:
  • a formal declaration of our independence for every audit or assurance engagement we do;
  • formal monitoring systems to ensure staff with independence conflicts prohibiting them from working on certain public entities are not inadvertently assigned to work on those entities;
  • formal declarations from all our staff every six months to confirm their independence from public entities they audit or are otherwise involved in through their work;
  • training and regular reminders to staff about declaring potential risks and updating changes to their own independence situations;
  • a gift and hospitality register that is regularly reported to the Office of the Auditor-General and Audit New Zealand leadership teams;
  • good working relationships with all audit service providers who work for the Auditor-General so that any difficult independence situations are communicated and resolved before they become a problem;
  • experienced staff, who understand the absolute importance of preserving independence and administering the Auditor-General’s independence requirements;
  • referral of difficult independence situations to senior staff within the Office of the Auditor-General and Audit New Zealand for appropriate resolution; and
  • regular reporting on independence situations and their resolution to the Office of the Auditor-General and Audit New Zealand leadership teams.
Although we currently report on the above matters internally, we will consider whether to introduce external reporting measures for independence as we move to fully integrated reporting.

Our skills, competence, and engagement enable us to deliver high quality work.

Our people are an absolutely critical resource. Their experience, knowledge, skills, and commitment are vital to our work, and to our vision to improve public sector performance, and the public’s trust in the public sector. It is essential that we attract, develop, and retain talented staff.

We are a relatively small organisation of 367 people whose work takes us into every part of the public sector. We aspire to be a model organisation demonstrating the behaviours and standards expected from public entities. We act with independence, integrity, and professionalism in all we do. Creating a workplace that supports and enables our people to make a difference is very important to us.

A learning organisation

As a professional workforce, we recognise the importance of ongoing professional development, ensuring that we have the best skills available for our work. We are recognised by Chartered Accountants Australia and New Zealand as an approved training organisation, and we provide practical experience and support for about 32 new graduates each year as they work and study to become chartered accountants. In 2015/16, 23 of our people qualified as chartered accountants. We are proud that many of our qualified chartered accountants retain a strong public sector ethos and continue to develop their careers within the New Zealand public sector.

Our focus on development extends to all our people. We recognise that their collective knowledge and expertise about the public sector and the quality of their professional relationships are assets that help us to achieve our vision. We encourage and support the development of our people through on-the-job learning, and formal training and development programmes.

Organisational culture and employee engagement

We recognise how important a positive organisational culture is to the engagement and motivation of our people and the quality of their work and professional relationships. Each year, we formally “take the temperature” through an employee engagement survey. This year, we again exceeded our target (3.8) with a rating of 4.0 out of 5.0.

We know that auditing and the role of the auditor is likely to change in the future. Our workforce planning project is helping us to identify our future capability and capacity needs and how we might meet these.

Supporting our people in their work

Our people carry out their work in a diverse range of entities throughout New Zealand. They also work in parts of the Pacific, such as Niue and Samoa. We work to ensure that they have the right tools, technology, and support services to work effectively wherever they are.

Our people work hard – especially during peak periods – and we are very focused on providing a safe and healthy workplace. We carry out workplace assessments, and we provide free influenza vaccinations and eye tests, subsidised eyewear, and advanced driver training.

We have an active employees’ Health and Safety Committee, with staff representatives from each of our seven office locations. The committee works to promote positive health and safety policies and practices in all of the Office’s workplaces, identifies risks to staff, and implements health and safety activities.

Equal employment opportunities

Our equal employment opportunities programme is designed to enable us to attract and appoint people who have the appropriate skills, values, and attributes to meet our needs. The principles and practice of equal employment opportunities are embedded in our human resources policies. We have continued to give effect to those principles during the year.

We are committed to inclusive work practices and culture, and base appointments on merit. Our managers are made aware of, and give support to fulfil, our good employer obligations through specific programmes and courses. We monitor our recruitment and employment decisions and practices. Details about our staff profile are shown in the table below. Further details are available on our website.

Figure 2
Staff profile

at 30/6/16at 30/6/15
Staff numbers (full-time equivalents)
Office of the Auditor-General 74 72
Audit New Zealand 247 267
Corporate Services* 46 52
Total 367 391
Gender distribution – all staff
Women 54% 53%
Men 46% 47%
Gender distribution – executive management
Women 5 4
Men 7 7
Ethnicity distribution
NZ European 47% 44%
NZ Māori 3% 3%
Pacific Islander 2% 3%
Asian 16% 15%
Other European 15% 12%
Other ethnic groups 11% 7%
Undeclared 6% 16%
367 people working to achieve our vision:

To improve the performance of, and the public's trust in, the public sector

* The Corporate Services function is shared between the Office of the Auditor-General and Audit New Zealand.