Appendix 1: Summary of our 2017/18 and 2018/19 annual audit recommendations to the three departments
Recommendations to the Ministry of Business, Innovation and Employment
During our 2017/18 audit, we recommended that MBIE:
- strengthen processes for the various funding arrangements allowed for in the Fund;
- set up appropriation structures, including between government departments, to ensure that investments were recorded correctly;
- improve how conflicts of interest are managed by all the organisations involved with the Fund;
- set up independent probity assurance, to avoid, mitigate, or manage risk, given the high-value, high-risk, and/or complex proposals and the range of organisations and stakeholders involved;
- set up processes and systems for monitoring and managing contract deliverables and post-contract outcomes;
- set up systems and processes for tracking and reporting investments made by the Fund; and
- continue work on preparing an appropriate evaluation framework, baseline indicators, and performance measures, and set up suitable data collection arrangements to support and inform the evaluation framework.
During our 2018/19 audit of MBIE, we noted that it had made progress in addressing our recommendations from our review of the PDU in 2018. During our audit work and review of the PDU's systems and processes since then, we observed further progress. We also noted the following:
- Better integration in appropriation and risk management would benefit the PDU in terms of its efficiency, effectiveness, and avoidance of potential duplication of systems and processes, as MBIE moves to a Ministry-wide approach to contract management.
- MBIE's decentralised approach to financial management led to initial errors in the PDU's recognition of grant expenditure, which was not in line with MBIE's overall accounting policies.
We also suggested that MBIE integrate units such as the PDU into its performance framework.
Recommendations to the Ministry for Primary Industries
During our 2017/18 audit of the Ministry for Primary Industries, we made no recommendations specific to the Fund.
During our 2018/19 audit of the Ministry for Primary Industries, we reported on the allocation to the Ministry for commercial forestry investment and grants and partnerships funding, to be delivered over multiple years as part of the Fund. We noted that the Ministry had identified a significant volume of interest in these initiatives. However, it was still in the early stages of contracting the funding, with only $10.1 million of grant and partnership expenditure recognised during 2018/19, and signed grant and partnership agreements committing the Crown to a combined contract value of $27.6 million. We recommended that the Ministry:
- implement and use its new grant management system as soon as possible for recording all key information (milestones, approvals, and total commitments) related to Fund partnership and grant arrangements; and
- formalise and implement a process to incorporate appropriate checks and reviews on a regular and timely basis throughout the term of the Fund.
Recommendations to the Ministry of Transport
During our 2017/18 audit of the Ministry of Transport, we made no recommendations specific to the Fund.
During our 2018/19 audit of the Ministry of Transport, we noted our intent to review the systems and processes the Ministry uses to address key risks associated with the Fund, including:
- having appropriate systems and controls around the review of project proposals and making recommendations to the PDU;
- disbursing the funds under the control of the Ministry of Transport, and managing the appropriations tracking and monitoring of investments; and
- the appropriate accounting treatment to apply, such as whether funding is a grant or a capital injection.
We concluded that the Ministry of Transport had the appropriate systems and controls in place for Fund-related expenditure and that it was fairly reflected in the financial statements.
As well as our annual audit report recommendations and observations, our auditors and review team provided feedback in the course of their day-to-day discussions with the three departments.