Part 1: Completing the school audits

1.1
In this Part, we report on the completion status of the school audits, including audits of entities related to schools.

1.2
Of the 2444 school audits for 2018, we completed 2014 (82%) by the statutory deadline of 31 May 2019.¹ This was a disappointing result because timeliness had begun to improve in recent years. In 2017, we completed 86% of school audits by the statutory deadline.

1.3
We expect to complete at least 95% of school audits before the 31 May deadline each year. However, we have not met this expectation since the Novopay system was introduced in August 2012. We have now resolved the payroll reporting problems that contributed to this.

1.4
This year, the Ministry of Education (the Ministry) provided all financial information, including the payroll reports, to schools, their service providers, and auditors on time. The Ministry did this earlier than in previous years. However, this did not result in improved completion rates for school audits.

1.5
Figure 1 sets out the reasons why the 2018 school audits were completed late and how many of each category were still outstanding at 30 September.

Figure 1
Reasons for late and still outstanding 2018 school audits

The number of school audits that missed the statutory deadline is 430. The number of school audits that were still outstanding at 30 September is 123. The main reason for audits being late or still outstanding is because of school (or service provider) delay.

1.6
The 207 school audits that were late because of school (or service provider) delays include schools that did not provide their financial statements for audit by the statutory deadline of 31 March. Many schools, particularly small schools, use a service provider to prepare their financial statements for audit. Our auditors experienced significant delays with one service provider, which affected about 100 schools.

1.7
Auditor resourcing problems contributed to the delay of 115 school audits. Our auditors are located throughout New Zealand, and those in small towns can find it hard to recruit experienced replacements quickly when staff members leave unexpectedly. In these cases, the school’s financial statements did not disclose a breach of the statutory deadline.

1.8
By the end of September each year, we usually expect less than 1% of the previous-year school audits to be outstanding. At 30 September 2019, 5% (123) of the 2018 school audits were outstanding. Of these, 67 school audits were outstanding because of ongoing problems with schools and service providers. Auditor resourcing problems caused 12 audits to be outstanding at 30 September 2019. We have agreed time frames with auditors to ensure that these audits are completed as soon as possible.

Improving the timeliness of school audits

1.9
If school audits are not completed on time, the information presented is less relevant and accountability is diminished. We worked with the Ministry to improve the timeliness of the 2018 school audits. As we have done in previous years, we agreed on a time frame with the Ministry for providing financial information to the schools and auditors. The Ministry met this time frame and provided information earlier than in previous years. However, as mentioned in paragraphs 1.3 and 1.4, this did not result in improved audit timeliness.

1.10
Auditors received 2197 (91% of all schools) financial statements for audit by the statutory deadline of 31 March,² which was less than the previous year (93%). Delays from one service provider that prepared financial statements for a large number of schools affected this.

1.11
In recent years, auditors have received most financial statements for audit close to the statutory deadline. For the 2018 school audits, 1291 financial statements (54%) were received in the last two weeks of March. Of those, 867 were received in the last week and 525 of them in the last three working days.

1.12
Although schools have until 31 March to provide their financial statements to auditors, meeting the 31 May audit deadline depends on auditors receiving financial statements throughout February and March. We allocate schools to auditors, and the auditors resource their audits and agree audit fees on that understanding.

1.13
To ensure that audits go as smoothly as possible, schools, service providers, auditors, and the Ministry need to work together. In response to our recommendations in last year’s report, the Ministry communicated with a wider range of stakeholders during the 2018 school audit process (including schools, service providers, and regional Ministry staff) and updated its annual reporting workshops for the 2019 audits.

1.14
The School Sector Working Group has also been working on how to improve communications throughout the school sector. We encourage the school sector to keep working together to improve the timeliness of school audits and the accountability of schools.

Completing the school audits for previous years

1.15
Timeliness of reporting is essential to good accountability. We completed 77 school audits from previous years since we last reported on the results of the school audits in November 2018. Figure 2 shows the number of outstanding audits from previous years continues to increase, after several years of poor timeliness for school audits. At 30 September 2019, 47 previous-year audits were still outstanding. This is significantly higher than we would expect if schools are to achieve good accountability. These outstanding audits include 23 from 2017, 14 from 2016, and the oldest is from 2013.

1.16
Appendix 3 lists all the audits that were outstanding at 30 September 2019. As we have noted in previous years, the list of outstanding audits includes a high proportion of kura. Eighteen kura have audits from 2018 outstanding (25% of all kura), and 10 of these kura have audits from previous years outstanding. We discuss this further in Part 4.

Figure 2
Number of outstanding audits, as at 30 September, for the years 2012 to 2019

The figure shows the number of outstanding current and previous-year audits for every year since 2012. The number of outstanding audits from previous years continues to increase from 2014.

1: This number includes the audits of 45 entities related to schools.

2: Financial statements received on 1 April were considered to have met the deadline because 31 March 2019 was on a Sunday.