Part 2: Our appropriations

Annual report 2019/20.

Our services are funded through the appropriations for Vote Audit 2019/20. In the table below, we show the links between the appropriations and our services.

Our services	Our appropriations
Provide advice and support for effective parliamentary scrutiny. Our advice to select committees, and our support for the international auditing community.	Statutory Auditor Function MCA MCA means multi-category appropriation – more than one aspect of our work is covered by this appropriation.
Monitor spending against parliamentary appropriations. Our Controller function.	Statutory Auditor Function MCA
Audit information reported by public entities about their performance. Our annual audits of public entities.	Audit and Assurance Services RDA RDA means revenue-dependent appropriation – the amount of money depends on the audit fees charged for audits of public entities. Audit and Assurance Services This appropriation is funded by the Crown, not by the small entities that we audit.
Carry out inquiries into matters of public interest. Our inquiries work and also our work on sharing good practice.	Statutory Auditor Function MCA
Assess public sector performance and accountability. Our performance audits and special studies.	Statutory Auditor Function MCA

Our appropriation statements are provided in the pages that follow in this Part.

Appropriation statements

The following statements report information about the expenses and capital expenditure incurred against each appropriation administered by the Office for the year ended 30 June 2020.

Statement of budgeted versus actual expenses and capital expenditure incurred against appropriations for the year ended 30 June 2020

This statement reports actual expenses incurred against each appropriation administered by the Office.

End-of-year performance information for all appropriations is reported in this annual report.

Annual and permanent appropriations for Vote Audit	Actual 2019/20 $000	Actual 2018/19 $000	Main Estimates 2019/20 $000¹	Supplementary Estimates 2019/20 $000¹	Main Estimates 2020/21 $000¹
Output expenses
Audit and Assurance Services RDA (revenue-dependent appropriation)²	81,818	82,570	81,617	85,573	94,429
Audit and Assurance Services	3,535	150	1,850	17,450	150
Total appropriations for output expenses	85,353	82,720	83,467	103,023	94,579
Other expenses
Remuneration of Auditor-General and Deputy Auditor-General PLA (permanent legislative authority)³	1,099	1,064	1,064	1,099	1,099
Multi-category appropriations
Statutory Auditor Function MCA (multi-category appropriation)
Performance Audits and Inquiries	6,769	6,226	9,939	9,939	11,040
Supporting Accountability to Parliament	6,620	3,444	4,937	5,482	5,636
Total Statutory Auditor Function MCA	13,409	9,670	14,876	15,421	16,676
Total appropriations for operating expenditure	99,861	93,454	99,407	119,543	112,354
Capital expenditure
Controller and Auditor-General Capital Expenditure PLA⁴	1,520	1,090	1,737	1,926	2,525
Total annual and permanent appropriations	101,381	94,544	101,144	121,469	114,879

1: All Estimates information is unaudited. The figures under Main Estimates 2019/20 reflect the forecasts published in Budget 2019 and in the Office's 2018/19 annual report, and the figures under Supplementary Estimates 2019/20 reflect the updated forecasts published in Budget 2020.

2: The Office is permitted to incur expenditure up to the amount of revenue earned for this appropriation. In 2019/20, revenue under this appropriation was $81.818 million – See page 14, Financial performance for Audit and Assurance Services RDA.

3: Costs incurred pursuant to clause 5 of Schedule 3 of the Public Audit Act 2001.

4: Costs incurred pursuant to section 24(1) of the Public Finance Act 1989.

Statement of expenses and capital expenditure incurred without, or in excess of, appropriation or other authority for the year ended 30 June 2020

The Office did not incur any expenses or capital expenditure without, or in excess of, appropriation or other authority in the year ended 30 June 2020 (2019: Nil).

Statement of capital injections without, or in excess of, appropriation or other authority for the year ended 30 June 2020

The Office did not receive any capital injections without, or in excess of, appropriation or other authority in the year ended 30 June 2020 (2019: Nil).

Statutory Auditor Function MCA

About the appropriation Statutory Auditor Function MCA

The purpose of this appropriation is to support Parliament in ensuring accountability for the use of public resources. It includes two categories:

Supporting Accountability to Parliament

This category is limited to reporting to Parliament and others as appropriate on matters arising from audits and inquiries, reporting to and advising select committees, and advising other agencies in New Zealand and abroad to support Parliament and the public in holding public entities to account for their use of public resources.

This category is intended to provide advice and assistance to Parliament and our other stakeholders to assist them in their work to improve the performance and accountability of public entities. Our Controller function operates under this category and provides independent assurance to Parliament that public money has been spent lawfully and within Parliamentary authority.

Performance Audits and Inquiries

This category is limited to undertaking and reporting on performance audits and inquiries relating to public entities under the Public Audit Act 2001 and responding to requests for approvals in relation to pecuniary interest questions regulated by the Local Authorities (Members' Interests) Act 1968.

This category is intended to provide Parliament and the public with assurance about how well public entities use resources and manage a range of matters and programmes. We make recommendations where we consider that improvements can be made.

Financial performance for Statutory Auditor Function MCA

	Actual 2019/20 $000	Actual 2018/19 $000	Main Estimates 2019/20 $000*	Supplementary Estimates 2019/20 $000*	Main Estimates 2020/21 $000*
Income
Crown	14,633	9,611	14,633	14,633	16,233
Other	522	273	243	788	443
Expenditure	(13,409)	(9,670)	(14,876)	(15,421)	(16,676)
Surplus	1,746	214	-	-	-

* All Estimates information is unaudited. The figures under Main Estimates 2019/20 reflect the forecasts published in Budget 2019 and in the Office's 2018/19 annual report, and the figures under Supplementary Estimates 2019/20 reflect the updated forecasts published in Budget 2020.

Statutory Auditor Function MCA costs were $2.012 million lower than in the Supplementary Estimates, mainly due to the effects of the Covid-19 pandemic on our work, which included delays to recruitment of key staff.

Audit and Assurance Services RDA

About the appropriation Audit and Assurance Services RDA

This appropriation is limited to audit and related assurance services as authorised by statute. It provides for audit services to all public entities (except smaller public entities, such as cemetery trusts and reserve boards) and other audit-related assurance services. The audit services we provide are funded by audit fees charged to public entities.

Financial performance for Audit and Assurance Services RDA

	Actual 2019/20 $000	Actual 2018/19 $000	Main Estimates 2019/20 $000*	Supplementary Estimates 2019/20 $000*	Main Estimates 2020/21 $000*
Income from third parties	81,818	82,602	81,617	85,573	94,429
Expenditure	(81,818)	(82,570)	(81,617)	(85,573)	(94,429)
Surplus**	-	32	-	-	-

** Note 15 to the financial statements provides more information about transfer of surpluses and deficits to and from the Office's memorandum account.

Audit and Assurance Services RDA revenue was $3.755 million lower than in the Supplementary Estimates, due to lower levels of work to date on audits that were under way at 30 June 2020, mainly due to the effects of the Covid-19 pandemic, which have delayed audit work.

Because this is a revenue-dependent appropriation, expenditure appropriations for this output class are capped at the revenue total for the year. In years where there is a deficit, the remainder of the costs relating to these outputs are reported in the Audit and Assurance Services appropriation below.

Audit and Assurance Services

About the appropriation Audit and Assurance Services

This appropriation is limited to the performance of audit and related assurance services as required or authorised by statute. It provides for audit and related assurance services of smaller entities, such as cemetery trusts and reserve boards, which are funded by the Crown rather than by audit fees charged to these entities.

This appropriation also provides for when costs exceed revenue under the Audit and Assurance Services RDA appropriation. Deficits reported through this appropriation are attributed to the Audit and Assurance Services memorandum account.

Appropriations were increased in the Supplementary Estimates to mitigate the financial risk of the Covid-19 pandemic affecting the timing of audit work between financial years.

Financial performance for Audit and Assurance Services

	Actual 2019/20 $000	Actual 2018/19 $000	Main Estimates 2019/20 $000*	Supplementary Estimates 2019/20 $000*	Main Estimates 2020/21 $000*
Income	150	150	150	150	150
Expenditure	(3,535)	(150)	(1,850)	(17,450)	(150)
(Deficit)**	(3,385)	-	(1,700)	(17,300)	0

** Note 15 in the notes to the financial statements provides more information about transfer of surpluses and deficits to and from the Office's memorandum account.

Audit and Assurance Services expenditure was $13.915 million lower than in the Supplementary Estimates. The Supplementary Estimates included additional appropriations of $15 million, to allow for potential higher deficits arising from the effects of the Covid-19 pandemic. This allowance was forecast at the maximum possible effect on audit fees but was ultimately not required.

A combined view of the financial performance for the two appropriations is shown below:

Combined financial performance for Audit and Assurance Services RDA and Audit and Assurance Services

	Actual 2019/20 $000	Actual 2018/19 $000	Main Estimates 2019/20 $000*	Supplementary Estimates 2019/20 $000*	Main Estimates 2020/21 $000*
Income	150	150	150	150	150
Income from third parties	81,818	82,602	81,617	85,573	94,429
Total Income	81,968	82,752	81,767	85,723	94,579
Expenditure	(85,353)	(82,720)	(83,467)	(103,023)	(94,579)
Surplus/(Deficit)**	(3,385)	32	(1,700)	(17,300)	0

** Forecast deficits are funded by the Office's memorandum account, which is explained further in Note 15 to the financial statements.

Remuneration of Auditor-General and Deputy Auditor-General PLA

About the appropriation Remuneration of Auditor-General and Deputy Auditor-General PLA

This appropriation is limited to remuneration expenses for the Auditor-General and the Deputy Auditor-General, as authorised by clause 5 of Schedule 3 of the Public Audit Act 2001. This permanent appropriation provides for payment to the Auditor-General and Deputy Auditor-General as determined by the Remuneration Authority.

Financial performance for Remuneration of Auditor-General and Deputy Auditor-General PLA

	Actual 2019/20 $000	Actual 2018/19 $000	Main Estimates 2019/20 $000*	Supplementary Estimates 2019/20 $000*	Main Estimates 2020/21 $000*
Income	1,099	1,064	1,064	1,099	1,099
Expenditure	(1,099)	(1,064)	(1,064)	(1,099)	(1,099)
Surplus	-	-	-	-	-

The Auditor-General and Deputy Auditor-General lead the performance of the Office. The performance of the Office's activities, including this appropriation, is reflected in the information provided in this annual report.

Controller and Auditor-General – Capital Expenditure PLA

About the appropriation Controller and Auditor-General – Capital Expenditure PLA

This appropriation is limited to the purchase of assets by, and for the use of, the Auditor-General, as authorised by section 24(1) of the Public Finance Act 1989. It is intended to achieve the renewal and replacement of assets that support the delivery of the Auditor-General's operations.

Financial performance for Controller and Auditor-General – Capital Expenditure PLA

	Actual 2019/20 $000	Actual 2018/19 $000	Main Estimates 2019/20 $000*	Supplementary Estimates 2019/20 $000*	Main Estimates 2020/21 $000*
Property, plant, and equipment	1,034	509	559	1,127	685
Intangible assets	290	242	950	419	1,688
Other	196	339	228	380	152
Total Capital Expenditure	1,520	1,090	1,737	1,926	2,525

Our capital expenditure programme provides for the purchase of facilities and tools to enable our staff to carry out their work – for example, hardware and software for information systems, vehicles, building fit-out, and furniture and fittings.

This year, we met our objectives for maintaining our physical assets, including the prioritisation of spending to refresh furniture in our Wellington office. The upgrade of the Office's document management system was completed during the year, and we agreed our information systems strategy that will see increased investment in software assets in coming years.

Section 24(1) of the Public Finance Act 1989 allows the purchase or development of assets from working capital and asset disposal proceeds, without any further appropriation.