Auditor-General's overview

Annual report 2019/20.

E ngā mana, e ngā reo, e ngā karangarangatanga maha o te motu, tēnā koutou.

It has been a challenging year for the country, the public sector, and my Office. We have all been deeply affected by the Covid-19 pandemic. At times of crisis, public trust and confidence in the public services that are there to support and protect us is critical.

In this environment, the role of my Office is more important than ever in helping to ensure that the public sector remains accountable for its performance, is trusted, and delivers value for money.

This annual report outlines our achievements during the year, how we have responded to the challenges of the Covid-19 pandemic, and how we have prepared ourselves to be better positioned to play our role into the future.

Our core work

Our annual audits continue to lay the foundation for all our work.

These regular audits give assurance that the financial and performance information published by the public sector is reliable and can be trusted. This work is fundamental to public accountability – without relevant and reliable information, it would be impossible to hold the public sector to account.

Through our work and our emphasis on strong financial management across the public sector, we continue to see improvement in the relevance and reliability of the information presented by public organisations.

Our performance audits and inquiries also influence improved performance. They go beyond compliance with accounting and reporting rules and look at broader questions concerning organisation performance, value for money, and probity. All of these are important elements of public trust in those charged with administering public money.

Helping get it right

Audits and inquiries typically look at matters after they have occurred. While this remains core to our work, it is also important that we help public organisations and public sector staff to get things right from the outset.

By providing more real-time assurance on some major programmes, including the New Zealand Police's firearms buy-back scheme and the Provincial Growth Fund, we helped improve controls and processes when those improvements had the most effect, rather than reporting what could have been done better only at the end of our work.

This year, we updated our guidance on severance payments, conflicts of interest, and the Local Authorities (Members' Interests) Act 1968. After the 2019 local authority elections we ran workshops for 31 councils, covering key governance matters such as conflicts of interest and the use of audit and risk committees, and published Councillors' guide to the Auditor-General. We are delighted that almost every council now has an audit and risk committee – many with independent chairpersons and members.

We have also worked to make our guidance and publications more engaging for those who use them. This includes an interactive quiz to help people test their knowledge on conflicts of interest, and animated videos to support our good practice guidance and findings from our performance and other audits.

Our research programme has also looked at how we can improve public accountability for the 21st century. This has allowed us to add our independent views to the major public sector reform programmes that are under way.

Assurance over the Government's Covid-19 response

Significant public money has been committed to the response to the Covid-19 pandemic. We have therefore prioritised providing assurance over aspects of the Covid-19 response and expenditure from the start.

In March 2020, we began publishing monthly Controller updates to improve transparency over how the substantial extra government spending on responding to the Covid-19 pandemic is being managed. We issued guidance on Covid-19 related matters to public organisations and supported legislative changes to extend statutory reporting dates.

Critical to trust and confidence in the public sector response to the Covid-19 pandemic was the management of personal protective equipment. We carried out a rapid review of the Ministry of Health's management and distribution of personal protective equipment when responding to the pandemic. Prompt action by the Ministry of Health to address our recommendations will ensure that New Zealand is well prepared as the Covid-19 virus inevitably continues to re-emerge.

Strengthening the Office

After nearly a decade of minimal new Crown investment in the Office, we received additional funding from Parliament to address the growth in demand for our services and to invest in our people and capability. We wanted to do more and to increase the impact of what we are doing.

We have now largely completed our plans to add additional resources and reorganise the Office to deliver more work, faster, and with greater impact.

The impact of our work

I am pleased that our stakeholders continue to value our work.

Public organisations' satisfaction with our auditing services has increased since 2018/19. However, we recognise that there will always be more that we can do in this area and that we are not yet at the target levels we have set ourselves.

This year's survey of select committee chairs shows Parliament's ongoing appreciation of our performance audits, inquiries, and other reporting and advice. Ultimately, it is Parliament, on behalf of the public, that holds the public sector to account, and we must continue to meet its needs in doing this.

Challenges remain

There are challenges, here and overseas, to the audit profession generally and to public audit in particular.

The Covid-19 pandemic has severely affected the ability of many public organisations to meet their statutory reporting deadlines. These delays also caused a significant drop in our audit fee revenue in 2019/20, as audit work could not be progressed in a timely fashion.

The External Reporting Board estimates that extra work from Covid-19 means audits will take up to 40% longer to complete. Audit fees must rise to catch up with the ever-growing costs of auditing, but the economic costs of the pandemic make it challenging to increase fees by as much as is needed at this time.

The audit profession faces increased scrutiny overseas, with growing concerns about auditors' independence from those they audit. While I do not have the same concerns about my own auditors, we have this year further strengthened our own independence requirements.

There is more work to do on our own timeliness. We did not meet our target for our performance audits and inquiries, due largely to the Covid-19 pandemic and delays in recruiting for key positions. However, I am pleased with the impacts from our reports – from shining a light on matters of high public interest to influencing improvements in sectors and programmes critical to our country's well-being.

Our future work

Our Annual plan 2020/21 is the most ambitious we have produced.

We have developed a three-year plan to provide clear and independent information about the Government's Covid-19 response.

Our programme on Improving the lives of New Zealanders seeks to answer how the public sector is improving outcomes in health, in education, and for Māori (among other areas), and how the public sector is working in new ways to address family and sexual violence.

We will continue to work to stay abreast of emerging issues. If the past few months have taught us anything, it is that nothing can be taken as certain. We will review our work programme in late 2020 to ensure that our planned work remains relevant to New Zealand's challenges.

Thank you

The public sector is well led and has generally performed well, exceptionally so in many aspects of its response to the Covid-19 pandemic. I thank those public organisations that prepared quality reporting, as it underpins their accountability and transparency, and also makes our auditing easier. I value the relationships my Office has with public organisations and those who work in them.

I thank all staff and audit service providers for their resilience, hard work, and support for the mission of the Office. I am proud that we have continued to deliver high-quality work, whether working in our office premises or at the kitchen table.

Finally, I thank Parliament for their strong support and interest in the Office and the work we do. We remain committed to providing members of Parliament with the information, advice, and support they need, to do their work on behalf of New Zealanders.

Nāku noa, nā

Signature - JR

John Ryan
Controller and Auditor-General

25 September 2020