Part 2: Our audit of the Government's financial statements

2.1
Our audit report on the Government's financial statements provides independent assurance that the financial statements present fairly the Government's financial performance and position. Confidence in the reliability of government reporting allows Parliament, the public, and the international community to confidently scrutinise the Government's financial performance.

2.2
The audit report included an unmodified opinion and a description of the key audit matters arising during the audit.

2.3
Each year we review whether the previous year's key audit matters remain relevant and consider any new matters that should be included in the audit report. For this year, we needed to carefully consider the effects of Covid-19 on the key audit matters.

2.4
The key audit matters in the audit report for the year ended 30 June 2020 were:

• recognising other persons' and corporate tax revenue;
• recognising a loss on the large-scale asset purchase programme;
• valuing property, plant, and equipment;
• valuing financial assets where market data is not available (including student loans and the small business cashflow (loan) scheme);
• valuing insurance liabilities, superannuation liabilities, and veterans' disability entitlements liabilities; and
• entitlements under the Holidays Act 2003.

2.5
Overall, we were satisfied that the balances and disclosures in the Government's financial statements relating to these matters were reasonable and appropriate.

Key audit matters

Recognising other persons' and corporate tax revenue

2.6
The Government recognised other persons' tax revenue of $7.1 billion and corporate tax revenue of $12.1 billion for the year ended 30 June 2020.

2.7
Other persons' and corporate tax revenue for the year was estimated because the final income tax owed for a year is known only when a tax return is filed. Filing could happen more than a year after the tax year.

2.8
The estimation process relies on macro-economic forecasts about how the economy will perform. It also relies on assumptions about how these macro-economic forecasts relate to taxable profits of taxpayers.

2.9
Because of Covid-19, there is increased uncertainty about how the economy will perform. Therefore, judgements were made about the economy's performance, which were used to estimate tax revenue.

2.10
We reviewed the systems, processes, and controls for receiving and reviewing provisional and final tax returns, tax assessments, and tax revenue. This included understanding the Inland Revenue Department's (Inland Revenue) information technology system for managing tax. We also:

• assessed the controls for significant reconciliation processes;
• tested the underlying data used in the tax revenue estimation models;
• reviewed the main assumptions and judgements used to estimate tax revenue from other persons and corporates; and
• assessed the reasonableness of the most important variables in the models, given the effect of Covid-19 on the economy.

2.11
We used independent economic experts to assess the main assumptions about the future (such as economic growth), and tested how sensitive the estimates were to changes in the main assumptions. The independent economic experts also considered alternative macro-economic indicators that could reliably estimate other persons' and corporate tax revenue. We were satisfied that the macro-economic indicator used was reasonable.

2.12
As a result of the audit work, we were satisfied that other persons' and corporate tax revenue for the year ended 30 June 2020 were reasonable and that the disclosures were appropriate.

Recognising a loss on the large-scale asset purchase programme

2.13
In response to the effect of Covid-19 on the economy, the Reserve Bank of New Zealand (Reserve Bank) implemented a large-scale asset purchase programme. This programme involved repurchasing New Zealand Government Bonds (NZGBs) and Local Government Funding Agency bonds. The programme's intended effect was to increase money supply, decrease interest rates, and stimulate the economy.

2.14
The Reserve Bank purchased $21.0 billion of NZGBs and $964 million of Local Government Funding Agency bonds on the secondary market up to 30 June 2020. We broadly summarise the large-scale asset purchase programme's effect on the Government's financial statements below:

• A loss of $3.3 billion is reported in the financial statements. The loss represents the difference between the price paid by the Reserve Bank to acquire the NZGBs and the carrying value of the bonds in the Government's financial statements at the date of repurchase.
• A net increase in settlement deposits (borrowings) retail banks have with the Reserve Bank from $6.9 billion at 30 June 2019 to $23.0 billion at 30 June 2020.
• The benefit of lower borrowing costs (interest expenses) in the current year and expected for the future as the fixed interest rate payable on the NZGBs is replaced by the lower floating Official Cash Rate (currently 0.25%) payable on bank settlement deposit account borrowings.

2.15
During the audit, we discussed with the Treasury whether gains or losses arising from the large-scale asset purchases in the statement of financial performance should be included in the operating balance before gains and losses. Our view was that the loss of $3.3 billion represented an operating expense of the Government.

2.16
The operating balance before gains and losses is included in the financial commentary and other fiscal indicators. However, the Treasury removed it from the statement of financial performance in the Government's financial statements.

2.17
A model was prepared to calculate the difference between the price paid to re-purchase the bonds and the value of the bonds in the Government's financial records at the date of each transaction. A "first in first out" method was applied, which assumes that the bonds purchased first were the bonds issued earliest.

2.18
We agreed the bond information in the model to the Treasury and Reserve Bank systems, tested the accuracy of key calculations in the model, and assessed whether the "first in first out" method was correctly applied.

2.19
As a result of the audit work, we were satisfied that the calculation of the loss on the large-scale asset purchase programme for the year ended 30 June 2020 was reasonable and that the disclosures were appropriate.

Valuing property, plant, and equipment

2.20
The Government owned physical assets of $186.5 billion at 30 June 2020. Considerable judgement is needed to determine the value of some of these assets because there are inherent uncertainties in valuing them.

2.21
Valuers have considered the economic effects of Covid-19 on significant estimates and judgements. These include economic indicators for interest rates and inflation, cash flow forecasts, any changes in levels of service, and replacement costs.

2.22
Assets that needed significant judgement to determine their value as at 30 June 2020 included land and buildings, state highways, and electricity generation assets. We discuss each in more detail.

Land and buildings

2.23
Land and buildings were valued at $102.9 billion at 30 June 2020. Calculating the fair value of land and buildings requires a range of valuation methods and assumptions.

2.24
The economic impact of Covid-19 had a significant effect on the assumptions made when assessing the value of land and buildings. Several valuers have identified that, although land and property prices had not changed significantly, there had been limited market information available since the Covid-19 lockdown period. It is difficult to predict what the short-term and long-term effects on values will be.

2.25
We examined how land and buildings are valued, the significant estimates and assumptions used, and how reasonable they were. We confirmed the competence, capabilities, and objectivity of the valuers, challenged the main assumptions, and assessed the valuation procedures. We considered whether there were any limitations placed on the valuers.

2.26
We considered how valuers took the economic impact of Covid-19 into account and the effect of any estimation uncertainties on the final valuations. We also checked that the revaluation movements and reversals of previous impairments were correctly accounted for.

2.27
As a result of the audit work, we were satisfied that the value of land and buildings at 30 June 2020 was reasonable and that the disclosures were appropriate.

State highways

2.28
The state highways (excluding land) were valued at $39.4 billion at 30 June 2020. The value of the state highways cannot be measured precisely. Significant estimates and assumptions are made, including assumptions about quantities and rates used to construct the state highways, the remaining useful life of the assets, and the unit costs to apply. Changes to the underlying estimates and assumptions can cause a material movement in the valuation of the state highways.

2.29
Work done during the last three years has improved the quality of the data used in the valuations, but uncertainties with the valuation remain.

2.30
We examined how the state highways are valued, the significant estimates and assumptions used, and their reasonableness. We confirmed the competence, capabilities, and objectivity of the valuer, challenged the valuer's main assumptions, and assessed the valuation procedures (including the information extracted from databases). We considered whether there were any limitations placed on the valuer and whether centrally calculated rates applied to the valuation were appropriate.

2.31
We confirmed that key controls were operating over the systems and processes used to record costs and other asset information about the state highways. We also considered how the valuer took the economic impact of Covid-19 into account and the effect of any estimation uncertainties on the final valuations.

2.32
As a result of the audit work, we were satisfied that the value of the state highways at 30 June 2020 was reasonable and that the disclosures were appropriate.

Electricity generation assets

2.33
The electricity generation assets were valued at $17.1 billion at 30 June 2020. Valuing electricity generation assets is complicated and relies on significant assumptions about the future prices of electricity, generation costs, and how much electricity will be generated. Each of these assumptions affects the others.

2.34
These assumptions are sensitive to small changes that can have a significant effect on the value of the electricity generation assets.

2.35
We examined how electricity generation assets are valued. We confirmed the competence, capabilities, and objectivity of the valuers, tested their procedures for carrying out the valuations (including the information they used), and challenged their main assumptions and judgements. Where the data was available, we compared the forecast prices of electricity to the expected longer-term wholesale prices and market data.

2.36
We considered how the valuers took the economic impact of Covid-19 into account in the valuations and the effect of any estimation uncertainties on the value of electricity generation assets.

2.37
On 9 July 2020, there was an announcement about the planned wind down of the New Zealand Aluminium Smelter at Tiwai Point. We agreed that the value of the electricity generation assets should not be adjusted as a result of the announcement, given that it was after the balance date of the Government's financial statements (30 June 2020).

2.38
As a result of the audit work, we were satisfied that the value of electricity generation assets at 30 June 2020 was reasonable and that the disclosures were appropriate.

Valuing financial assets where market data is not available

2.39
The Government had financial assets that were valued where market data is not available of $18.6 billion at 30 June 2020. These financial assets include loans, investments and deposits, including student loans, and the small business cashflow (loan) scheme, which we discuss separately (see paragraphs 2.47-2.53).

2.40
When there is no quoted market price for a financial asset, the value of the asset is estimated using an appropriate technique, such as a valuation model. These models are usually complex, using inputs from market data when available. Otherwise inputs are derived from non-market data, which requires greater judgement.

2.41
We reviewed the valuation techniques, controls, and inputs used to determine the value of financial assets where market data was not available. We tested the internal controls over data entered into financial systems for these assets and assessed the controls and valuation approaches applied where a fund manager carried out the valuation. We compared the fair value of financial assets to independent information, investigated any significant variances, and assessed the appropriateness of the inputs used in the valuation.

Student loans

2.42
At 30 June 2020, student loans from the Government were valued at $10.4 billion. Student loans are measured using actuarial models, which reflect current student loan policy and macro-economic assumptions. The value is sensitive to changes in several assumptions, including future income levels, repayment behaviour, inflation, and discount rates.

2.43
There is added uncertainty now about how Covid-19 might affect student loan repayments and the limited availability of repayment data during the economic downturn. Adjustments were made to the valuation to reflect assumptions about employment, overseas compliance, and the associated economic recovery period.

2.44
We tested a sample of student loan applications during the year to ensure that they were correctly paid out. We tested the internal controls over student loans entered into financial systems and actuarial models used by the valuer, checked that the underlying information used in the valuation was correctly extracted from the system, and assessed the controls and valuation approaches applied by the valuer.

2.45
We performed a retrospective review of the actual receipts of student loans in previous years against previous year cash flow forecasts, to consider whether there was any estimation bias.

2.46
We engaged an independent expert to review the main assumptions in the student loans model, including a review of the cash flow forecasts used to determine the fair value of loans, and adjustments for employment and overseas non-compliance due to Covid-19.

Small business cashflow (loan) scheme

2.47
The small business cashflow (loan) scheme was introduced to support businesses and organisations affected by a loss of actual or predicted revenue as a result of Covid-19.

2.48
The small business cashflow (loan) scheme provides five-year loans to eligible small businesses. Those businesses are not charged interest if the loan is fully repaid within one year. Otherwise, the interest rate is 3% for outstanding amounts from the inception of the loan. Repayments are not required in the first two years, but voluntary payments can still be made during this period.

2.49
The small business cashflow (loan) scheme was anticipated to provide loans of up to $5.2 billion. At 30 June 2020, $1.42 billion had been advanced. The value after applying an assumed default rate and discount rate was $737 million.

2.50
Because the small business cashflow (loan) scheme is new, there is no data available to determine the likely rates of repayment or default, and limited data to determine discount rates used in the valuation model at 30 June 2020. It is also difficult to predict how Covid-19 will affect the ability of businesses to repay the loans. The external valuer stated in their valuation report that the uncertain and volatile nature of future debt repayments means that there is significant uncertainty in estimating the fair value of the loans.

2.51
We considered the appropriateness of the main assumptions used in the valuation and reviewed how estimation uncertainties due to Covid-19 were reflected in the valuation process.

2.52
We used an independent economic expert to assess whether the approach to estimating the default rate was appropriate. The estimated default loss rate was reasonable, based on current economic forecasts and other available data.

2.53
As a result of the audit work on financial assets where market data was not available, we were satisfied that the value of those assets at 30 June 2020, including student loans and the small business cashflow (loan) scheme, was reasonable and that the disclosures were appropriate.

Valuing insurance liabilities, superannuation liabilities, and veterans' disability entitlements liabilities

2.54
The Government had an outstanding claims liability for the Accident Compensation Corporation (ACC) valued at $61.5 billion, an unfunded liability for public servants' superannuation entitlements valued at $14.0 billion, and a veterans' disability entitlements liability of $3.5 billion at 30 June 2020.

2.55
Determining the value of the Government's long-term liabilities is complicated. Actuaries estimate the amounts based on assumptions about the future (including the economic effects of Covid-19). There are uncertainties inherent in the valuations of each of these liabilities.

The Accident Compensation Corporation's outstanding claims liability

2.56
The assumptions used to determine the value of ACC's outstanding claims liability include assumptions about discount rates, risk margins, the effects of inflation and innovation on future medical costs, and how long it will take people to recover from injuries.

2.57
We examined how ACC's outstanding claims liability is valued. We also reviewed ACC's main assumptions about each significant type of claim to see whether these were appropriate, including the effects of Covid-19 on these assumptions and estimation uncertainties.

2.58
We tested the systems and controls and, in particular, tested the process for recording claims in detail. We tested the main assumptions by considering past claims. We assessed the reasonableness of forecasts by looking at the evidence supporting them. We used an independent actuary to review the scope, approach, and reasonableness of the estimated liability.

2.59
We tested the reconciliations of the underlying claims data with ACC's systems, examined the sensitivity analysis for movements in the main assumptions, and reviewed the related financial statement disclosures.

Superannuation liability

2.60
The Government's unfunded liability for public servants' superannuation entitlements for members of the Government Superannuation Fund (the Fund) has been valued by an independent actuary.

2.61
The value of the unfunded liability for public servants' superannuation entitlements for members of the Fund is sensitive to the value of the Fund's assets, expected rates of salary increases for members of the Fund, and estimated inflation and discount rates. The Fund's assets, which are mainly equities and bonds, are traded in markets. Changes in the prices of these equities and bonds affect the amount of the unfunded liability.

2.62
We examined how the Government's unfunded liability for public servants' superannuation entitlements was valued. We confirmed the competence, capabilities, and objectivity of the actuary and tested their procedures. We engaged our own actuary to review the main assumptions, judgements, and procedures used to value the unfunded liability.

2.63
We tested the main controls that ensure that membership data used in the actuary's valuation was complete and accurate. We assessed the appropriateness of the main assumptions used to estimate the value of the unfunded liability, including the expected rates of salary increases, against external benchmarks.

2.64
We tested the design, implementation, and operating effectiveness of key controls for investments of the Fund. We obtained an understanding of the valuation techniques and inputs used by the respective fund managers to value the investments. The value of the funds was reconciled to the latest valuation reports. Any movements between the last valuation date and the year-end data were checked against supporting documentation. We also considered the estimated return on assets owned by the Fund.

Veterans' disability entitlements liability

2.65
The Government recognised a veterans' disability entitlements liability at 30 June 2020 because it had to adopt a new accounting standard during the year (PBE IPSAS 39 Employee Benefits).

2.66
The value of the veterans' disability entitlements liability is subject to uncertainty because of possible deficiencies in the underlying data used to make the estimate, the extent to which veterans will take up their full entitlement, the discount rate, the inflation rate, and changes in mortality rates.

2.67
We reviewed the method used to calculate the liability and confirmed the competence, capabilities, and objectivity of the actuary. We also used an independent actuary to review the main assumptions, judgements, and procedures used to value the liability. We tested controls over the data used in the actuary's valuation. We also reviewed the accounting entries to recognise the change in accounting policy, including the restatement of the comparative figures for 2019.

Work we did for each of the types of liability

2.68
The Government's financial statements set out the sensitivity of assumptions. Changes in these assumptions can have a large effect on the amount of these liabilities and the level of actuarial gains and losses.

2.69
We evaluated the appropriateness of the main assumptions (such as inflation and discount rates) used in valuing the long-term liabilities. For discount rates and inflation assumptions, the Treasury determines a table of risk-free discount rates and inflation assumptions each year using an agreed methodology. We had an independent expert review the Treasury's risk-free discount rates and inflation assumptions.

2.70
As a result of the audit work, we were satisfied that the table of discount rates and inflation assumptions were appropriate for use in accounting valuations in the Government's financial statements. We were also satisfied that each of the long-term liabilities at 30 June 2020, as described above, were reasonable and that the disclosures were appropriate.

Entitlements under the Holidays Act 2003

2.71
We have noted before the slow progress by some public organisations to resolve historical non-compliance issues with the Holidays Act 2003. We know that some organisations have settled the liability to current and past employees, but it is important that the issues are addressed and that the liability is settled across all of government.

2.72
A number of public organisations have started or completed a review of current and historical payroll calculations to ensure that they have complied with the legislation. Where possible, provision has been made in the Government's financial statements for obligations arising from these reviews where settlement has not been made.

2.73
For certain public organisations, particularly district health boards and schools, complexities mean it is taking longer to calculate the amounts owed to each individual. District health boards and schools are significant employers, and the amounts needed to settle these obligations remain uncertain.

2.74
For the public organisations most significantly affected, we considered the progress made in resolving the payroll calculation issues.

2.75
For those public organisations that had a provision, we assessed the approach used to calculate the provision. We also reviewed the processes followed for calculating a provision and tested a sample of transactions. We considered the completeness of the data used for calculating a provision. We assessed the competence, capabilities, and objectivity of independent experts who were involved in the calculations and challenged the main assumptions and judgements made in calculating the provision, including the consideration of Covid-19 on the valuation.

2.76
For those public organisations that did not have a provision, we verified that they could not reasonably quantify an amount. We also reviewed the disclosures made in the financial statements.

2.77
As a result of the audit work, we were satisfied that the provision for entitlements under the Holidays Act 2003 at 30 June 2020 was reasonable. Where a liability cannot be reliably measured, the contingent liability disclosures were appropriate.

Other audit matters

Impairment of Air New Zealand Limited's aircraft and goodwill

2.78
The aviation sector has been significantly affected by Covid-19 because travel has been significantly restricted. This has resulted in an impairment to the value of Air New Zealand Limited's (Air New Zealand) aircraft and an impairment to the value of the goodwill on the Government's investment in Air New Zealand being recognised.

2.79
At 31 March 2020, the Treasury formed a view that there were indicators that the value of goodwill on the investment in Air New Zealand in the Treasury's financial statements was impaired based on:

• a decline in the value of Air New Zealand shares;
• an announcement of a restructure by the Chief Executive Officer;
• a significant decline (almost 95%) in revenue due to restrictions on international and domestic flights; and
• the Crown announcement of an intention to provide additional liquidity support in the form of a stand-by loan facility of up to $900 million.

2.80
At 31 March 2020, Air New Zealand's share price indicated a fair value of the Crown's holding of $499 million, which is $292 million less than the investment carrying value of $791 million. We considered that the fair value of the investment based on the 31 March share price was likely the best indication of value at 31 March.

2.81
We assessed the appropriateness of the residual values of aircraft and the impairment in value of aircraft and related assets. We confirmed the competency and independence of the valuation expert that Air New Zealand used and discussed with them their approach and assumptions made in determining the relevant aircraft values. We had our internal valuation specialists assist in evaluating the assumptions.

2.82
We reviewed the Treasury's assessment of the carrying value of goodwill related to the Government's investment in Air New Zealand. We further considered the implications of Air New Zealand's announcements about large-scale workforce reduction and restructuring for international services in response to Covid-19.

2.83
As a result of the audit work, we were satisfied that the impairment of aircraft and goodwill and their carrying values were appropriately reflected in the Government's financial statements.

Institutes of technology and polytechnics

2.84
The 16 institutes of technology and polytechnics became subsidiaries of Te Pūkenga (New Zealand Institute of Skills and Technology) on 1 April 2020. Te Pūkenga will design a sustainable and regional public network of vocational education that will provide both work-based, off-the-job, and online vocational learning and training.

2.85
Te Pūkenga's subsidiaries are considered to be controlled by the Government from 1 April 2020, and have been consolidated on a line-by-line basis in the Government's financial statements.

2.86
We assessed the appropriateness of Te Pūkenga and its subsidiaries being consolidated on a line-by-line basis rather than on an equity accounting basis. We tested the property, plant, and equipment asset balances. We also tested the consolidation journals and the accounting treatment of the adjustments to equity.

2.87
We were satisfied that Te Pūkenga and its subsidiaries have been appropriately consolidated in the Government's financial statements.

Changes in accounting standards

2.88
The Treasury adopted two new accounting standards: PBE IPSAS 35 Consolidated Financial Statements and PBE IPSAS 39 Employee Benefits when preparing the Government's financial statements. These standards mainly affected information reported by the New Zealand Super Fund and the New Zealand Defence Force.

2.89
The New Zealand Super Fund is no longer required to consolidate investments that it has a controlling interest in. This has affected the measurement and presentation of information in the Government's financial statements, including comparative figures and note disclosures.

2.90
The New Zealand Defence Force had to account for its veterans' disability entitlements liability for the first time at 30 June 2020.

2.91
We reviewed the restated comparatives and reclassifications and the disclosures in the Government's financial statements that included PBE IPSAS 35 Consolidated Financial Statements and PBE IPSAS 39 Employee Benefits requirements.

2.92
We were satisfied that the new accounting standards had been appropriately applied and that the disclosures were appropriate.

Accounting for the wage support subsidy for Covid-19

2.93
The wage support subsidy was aimed at helping to keep workers employed during the Covid-19 lockdown.

2.94
The size and speed at which the wage subsidy for Covid-19 was implemented and the high-trust nature of the scheme made it difficult to assess compliance with the criteria for funding.

2.95
A follow-up process to identify recoverable claims is under way, and it is important that the approach and extent of follow-up is adequate to reduce the risk of fraud.

2.96
We examined the processes, systems, and controls in place for the administration and post-payment assurance processes over the wage subsidy scheme. We also tested a sample of transactions for the wage subsidy scheme to determine whether the payments were materially correct and incurred within the scope of the appropriations.

2.97
We tested a sample of post-payment assurance processes completed to ensure that recoveries were made appropriately.

2.98
We were satisfied that the wage support subsidy is appropriately reflected in the Government's financial statements.

Valuing the Emissions Trading Scheme liability

2.99
The valuation of the liability under the Government's Emissions Trading Scheme (the Scheme) presents a risk due to its public interest, its accounting impact, the degree of judgement involved, and the inherent uncertainty due to the many governance and co-operation agreements in place between organisations.

2.100
We examined the governance and co-operation arrangements in place between the public organisations with administrative responsibilities for parts of the Scheme and the controls over the Scheme's systems.

2.101
We also reviewed the processes applied to value carbon units and the methodology and source information applied in valuation models.

2.102
We were satisfied that the valuation of the Scheme's liability at 30 June 2020 is materially correct.

Overriding internal controls

2.103
There is an inherent risk in every organisation of fraud resulting from management override of internal controls. People in management positions are in a unique position to commit fraud because of their ability to manipulate accounting records and prepare fraudulent financial statements by overriding controls that otherwise appear to be operating effectively.

2.104
We examined the controls for collecting financial information from public organisations included in the Government's financial statements and the adjustments to that information for consolidation purposes. We also tested the appropriateness of journal entries and other adjustments made in the preparation of the financial statements through review of journals and disclosures.

2.105
We reviewed significant accounting estimates for bias, and engaged specialists to assist with those reviews, where appropriate.

2.106
We were satisfied that the risk of management override of internal controls for the Government's financial statements has been adequately mitigated.

Improving disclosures

2.107
The effects of Covid-19 on the Government's financial statements were pervasive. We expected there to be relevant commentary and disclosures to help readers better understand the effects of the increased uncertainty as a result of Covid-19.

2.108
We reviewed the note disclosures in the Government's financial statements to ensure that they conveyed the appropriate information to readers in a way that is accessible and adds to the overall understanding of the financial statements.

2.109
We also reviewed the Covid-19 commentary to ensure that it was relevant and understandable to the readers of the financial statements.

2.110
We were satisfied that the effects of Covid-19 on the Government are adequately disclosed in the Government's financial statements.

Reporting of unappropriated expenditure

2.111
The Statement of Unappropriated Expenditure in the Government's financial statements is an important summary of all unappropriated expenditure incurred in the financial year.

2.112
We noted an increase in the number of instances and amount of unappropriated expenditure during the year ended 30 June 2020 compared to the previous year, which we discuss in Part 3.

2.113
During our audit, we assessed the accuracy and completeness of the disclosure of the unappropriated expenditure. This included confirming that the final listing of unappropriated expenditure, and any expenditure incurred against section 25 of the Public Finance Act, was correctly reported in the Government's financial statements. The audit included confirming the completeness and accuracy of all disclosed unappropriated expenditure with the relevant public organisations.

2.114
We recommended that the Treasury work with appropriation holders and finance teams to improve awareness and understanding of the appropriation system. We also recommended that the Treasury ensure that appropriations are properly set up and approved and the accounting for expenditure against appropriations is correct.

2.115
Overall, we were satisfied that the Statement of Unappropriated Expenditure was reasonable and that the disclosures were appropriate.