Snapshots of the timeliness of reporting

27 November 2018

Hon Michael Wood
Chairperson
Finance and Expenditure Committee
Parliament Buildings
Wellington

Dear Mr Wood

TIMELINESS OF REPORTING BY PUBLIC ENTITIES

In May 2015, the former Auditor-General, Lyn Provost, presented the report Being accountable to the public: Timeliness of reporting by public entities (the 2015 report). It provided a “snapshot” of how well public entities met their reporting deadlines during 2013/14.

The Finance and Expenditure Committee (the Committee) at the time found the 2015 report helpful. Both before and since that report, we have included information about timeliness of entities’ reporting in reports to Parliament about our audits of different categories of public entities. For example, our report to Parliament on the results of local government audits, which we produce annually, includes the timeliness of reporting by local authorities. Also, we take the opportunity to report annually any concerns with the timeliness of government department audits in our report to Parliament on the results of central government audits.

We thought it would help the current Committee to receive another snapshot of how well public entities met their reporting deadlines during 2016/17. The Attachment to this letter provides that snapshot and, for comparison, the snapshot for 2013/14. The snapshots are explained on the first page of the Attachment.

Overall, the 2016/17 snapshot shows more public entities reporting on time (or early), and fewer public entities not reporting on time, than was the case in 2013/14. The improvement in timeliness of reporting by schools is the main reason for the overall improvement. Administering bodies, reserve boards, and cemetery trustees continue to not report in a timely manner. Also, there are a few categories of entities where timeliness has deteriorated. We comment on these matters below.

Improvement in timeliness of reporting by schools

Schools are the dominant sector when it comes to the overall timeliness of reporting by public entities. This is because each school is a separate Crown entity. At the time of our 2015 report, ongoing difficulties with the reliability of data from the Novopay payroll system was the main cause for about 55% of schools not meeting their reporting deadline for their financial year ended 31 December 2013.

We have worked closely with the Ministry of Education and our auditors each year to improve the flow of information generated by the Ministry (e.g. payroll), so that schools are better able to meet their statutory reporting deadline. More than 80% of schools met their reporting deadline in 2016/17, which compares favourably to 45% in 2013/14. We expect the percentage of schools meeting their reporting deadline to continue to improve.

We report on the timeliness of reporting by schools annually to the Secretary for Education in our report on matters arising from school audits. We publish this report on our website.

Poor timeliness of reporting by administering bodies, reserve boards, and cemetery trustees

Most administering bodies, reserve boards, and cemetery trustees do not report in a timely manner. This has been a longstanding issue. 

Auditors put in a lot of effort with these entities, and are willing to help them with their reporting requirements, but with limited success. 

Although there is a public interest in auditing large administering bodies, reserve boards, and cemetery trustees, most of these entities are small. In my view, the cost of auditing them outweighs the public accountability benefit. I am pleased to see the Statutes Amendment Bill being considered by the Governance and Administration Committee proposes to amend the Burial and Cremation Act 1964 to remove the audit requirement on cemetery trustees, unless the cemetery trustee exceeds a specified monetary threshold. We understand that similar legislative changes have been proposed to remove the audit requirement for most administering bodies and reserve boards.

Categories of entities where timeliness has deteriorated

Government departments and entities related to government departments

The government departments’ category shows that one department reported late in 2016/17. This was the New Zealand Defence Force. As part of the 2015/16 audit we found that the Defence Force did not adequately assess whether there had been a material change in the fair value of its assets. Additional work was required, which was not fully completed until after the September 2016 reporting deadline. Our report Central government: Results of the 2015/16 audits, published in December 2016, commented on the matter.

For entities related to government departments, 15 did not report on time in 2016/17 compared to six in 2013/14. Most of these entities that did not report on time were small trusts or funds related to government departments.

Tertiary education institutions and subsidiaries and entities related to tertiary education institutions

The tertiary education institutions category shows that one tertiary education institution reported late in 2016/17. The tertiary education institution was Tai Poutini Polytechnic, and the late reporting was due to it dealing with an investigation into delivery and organisational failures, and going concern issues, which were dependent on a government decision on a proposed business case. We reported on this matter in a letter to the Chairperson of the Education and Workforce Committee in November 2017, and published the letter on our website.

The total number of subsidiaries and entities related to tertiary education institutions in 2016/17 is lower than in 2013/14. This is due to many of those entities no longer having to separately report. Thirty of those entities did not report on time in 2016/17, compared to 21 in 2013/14. Most of the entities that did not report on time were subsidiaries of tertiary education institutions that did not have to report but had chosen to do so.

Council-controlled organisations and other local government entities

The council-controlled organisations and other local government entities categories show that 44 entities reported late in 2016/17 compared to 27 in 2013/14. Some of the entities that reported late were subsidiaries that were consolidated into local authorities’ group financial statements. Others were small stand-alone entities. The delays in reporting were due to matters such as the entities not prioritising timely reporting.

Energy companies and subsidiaries and entities related to energy companies

The energy companies’ category shows that one energy company did not report on time in 2016/17. This was Scanpower Limited. It reported a few days after its statutory deadline, due to delays in the audit.

For subsidiaries and entities related to energy companies, seven did not report on time in 2016/17 compared to one in 2013/14. The late reporting for some subsidiaries was due to disruption caused by the Kaikoura earthquake. Others lost key staff during the reporting process.

Concluding comments

We are pleased that most entities generally meet their reporting deadlines. The entities where audit reports were issued late or had not been issued as at 30 June 2017 were mostly subsidiaries and small public entities. Importantly, audits that involve significant amounts of public money and assets were (and continue to be) largely completed and audit reports issued on time.

However, there is still room for further improvement in the timeliness of reporting by public entities. In particular, given the latest snapshot, we will continue to work closely with the Ministry of Education and our auditors to help schools better meet their statutory reporting deadline.

Also, we note that, if enacted, the proposed legislative changes to remove auditing requirements for most administering bodies, reserve boards, and cemetery trustees will have a positive effect on the timeliness snapshot in future with no discernible loss of accountability.

In the interest of proper accountability, we will continue to report to Parliament on the timeliness of entities’ reporting when we report on different categories of public entities.

I would be happy to discuss these matters with the Committee.

Yours sincerely

John Ryan
Controller and Auditor-General