The Auditor-General's work

Councillors' guide to the Auditor-General.

The Auditor-General's work fulfils two statutory functions:

The audit function

The audit function involves:

Annual audits

About 88% of the Auditor-General's work involves carrying out annual audits of the financial and service performance information of public organisations.

Each year, the Auditor-General's appointed auditors and their teams audit each public organisation's accountability information, such as its annual report.

In carrying out the audit function, the Auditor-General's staff and appointed auditors apply audit procedures set out in The Auditor-General's Auditing Standards. These standards are based on the ethical and professional standards issued by the External Reporting Board, with additional standards that are unique to the public sector audit environment in New Zealand.

During an annual audit, the appointed auditor:

  • examines a public organisation's financial statements, service performance information, and other information that must be audited;
  • assesses the results of that examination against a recognised framework (usually generally accepted accounting practice); and
  • forms and reports an audit opinion.

An annual audit provides a high, but not absolute, level of assurance about whether a public organisation's financial statements comply with generally accepted accounting practice and fairly reflect its financial position and its financial performance for the year. The auditor evaluates the overall adequacy of all the accountability information.

An audit of the annual accountability statements of a public organisation results in two kinds of report. One is the audit report (including the audit opinion) that is included in the public organisation's published annual report. The other is a report to the public organisation's governing body and/or managers on matters arising from the audit.

The published audit report gives readers assurance about the reliability of the public organisation's annual accountability information.

Councils' long-term plans and consultation documents

Every three years, councils are required to prepare a long-term plan (LTP). The LTP is the main way for councils to describe the services they plan to provide, the community outcomes they plan to contribute to, and the forecast cost of those services. LTPs must include the council's financial strategy and infrastructure strategy.

Consultation with communities is an important step in making sure that the LTP is the right one for the community and councils are required to produce a consultation document for their LTPs.

The Local Government Act 2002 requires each consultation document to contain an audit report from the Auditor-General providing an opinion on:

  • whether the consultation document achieves its purpose; and
  • the quality of the information and assumptions underlying the information provided in the consultation document.

We audit each council's consultation document to determine whether it provides an effective basis for consultation, with a particular emphasis on whether it fairly represents the matters a council proposes to include in its LTP. We determine whether the consultation document identifies and explains the main issues and choices facing a council and the consequences of those choices for rates, debt, and levels of service provided. We also audit each council's underlying supporting information, to determine its reasonableness.

The purpose of an LTP is, broadly, to describe the council's proposed 10-year activities and community outcomes in an integrated and co-ordinated way, and provide a basis for accountability to the community. In doing so, it should outline the financial and service delivery circumstances that the council faces and the proposed response to those circumstances. Our role is to assess, and provide an opinion on, whether the LTP achieves this purpose. Again, we audit and provide an opinion on the underlying supporting information, to determine its reasonableness.

Performance audits

In carrying out performance audits, the Auditor-General gives Parliament independent assurance about the performance and accountability of public organisations, including councils. Under section 16 of the Public Audit Act, the Auditor-General may at any time examine:

  • the extent to which public organisations are carrying out their activities effectively and efficiently;
  • public organisations' compliance with their statutory obligations;
  • any act or omission of public organisations, to determine whether waste has resulted, may have resulted, or may result; and/or
  • any act or omission showing or appearing to show a lack of probity or financial prudence by public organisations or one or more of their members, office holders, and employees.

The aim of a performance audit is to assure Parliament, public organisations, and the public that public organisations are delivering what they are required to. The Auditor-General reports both good and poor performance, and often highlights aspects of performance that apply to the wider public sector.

Performance audits usually result in a report that is presented to Parliament. As soon as the report is tabled in the House, a copy is published on the Auditor-General's website and an email link to the document is sent to website subscribers. Under Standing Orders, a performance audit report will be referred to the Finance and Expenditure Committee. If the Finance and Expenditure Committee refers the report to another select committee, the Auditor-General will offer a briefing on the report to the relevant select committee(s).

Reviews of Auckland Council's service performance

The Local Government (Auckland Council) Act 2009 requires the Auditor-General, from time to time, to review the service performance of the Auckland Council and each of its council-controlled organisations. We aim to carry out one of these reviews at least annually.

The final decision on whether to carry out an investigation into any particular issue rests with the Auditor-General.

Our reports about these reviews are likely to be of interest to all councils.

Inquiries

The Auditor-General may carry out an inquiry into any matter concerning a public organisation's use of its resources. An inquiry might involve looking into financial, accountability, governance, or conduct issues. The concerns might have arisen in the course of the Auditor-General's work or have been raised by a member of the public, a member of Parliament, a select committee, or another organisation. The final decision on whether to carry out an inquiry rests with the Auditor-General.

An inquiry might cover questions such as whether the public organisation:

  • applied its resources effectively and efficiently;
  • complied with its legal obligations;
  • acted honestly and with integrity in its dealings; and
  • managed its finances prudently.

When a matter is referred to the Auditor-General, they and their staff decide whether to carry out an inquiry and determine its scope. The Office may decide not to look into it (for example, because the Auditor-General is not the appropriate authority to do so), or might refer it to the appointed auditor to consider during the next annual audit of the public organisation, or might consider the matter when planning performance audits.

The Auditor-General decides what information to report, based on its relevance, and taking into account principles of fairness and natural justice.

Good practice guidance

The Auditor-General also publishes good practice guidance to help public organisations develop effective systems, policies, and procedures.

Our current good practice guidance covers a range of topics, including guidance for members of councils about the Local Authorities (Members' Interests) Act 1968, conflicts of interest, charging fees for public sector goods and services, and procurement.

Other assurance services

The Auditor-General's staff advise and provide assurance to public organisations about a range of matters. They also advise public organisations on matters of accountability information, in order to improve the quality of the information available to Parliament and the public.

At the request of a public organisation, the Auditor-General can provide other auditing or assurance services, such as providing assurance about tendering or contract procedures.

The Controller function

The Controller function supports the constitutional principle that the Government cannot spend without the consent of Parliament.

Under this function, the Auditor-General provides independent assurance to Parliament that the expenses and capital expenditure of government departments and officers of Parliament are lawful and within the scope, amount, and period of the appropriation or other statutory authority given by Parliament. This function does not apply to councils.