Auditor-General’s overview

Controlling sensitive expenditure: Guide for public organisations.

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

Trust and confidence in public organisations is driven by competence, reliability, and integrity. Where there is any question about any one of those things, real or perceived, trust and confidence can be eroded. It is important that organisations and their staff are adhering to the highest standards of integrity and are seen to be doing so.

Sensitive expenditure is any spending by an organisation that could be seen to be giving private benefit to a staff member, their family, or friends. It risks harming an organisation’s reputation and the public sector more generally – for example, if the expenditure could lead to concerns that the spending is inappropriate or lacks a legitimate business reason. Issues concerning sensitive expenditure arise regardless of how much money is spent. Even a small amount can raise concerns if it appears to be improper.

Public organisations therefore need to manage sensitive expenditure deliberately and diligently and, as with all spending, be able to justify it.

Public organisations’ sensitive expenditure decisions have featured in a number of my Office’s reports over recent years, as well as in the many queries my Office receives. I intend for this guide to help board members, chief executives, and senior management to take a best-practice approach to their organisation’s handling of sensitive expenditure and to make decisions that will stand up to scrutiny.

This guide provides practical guidance on specific types of sensitive expenditure and outlines the principles for making decisions about sensitive expenditure. It also emphasises the importance of setting “the tone from the top”, along with having suitable policies and procedures in place. Leaders’ actions, inactions, and behaviours set the standards of an organisation more than a policy or procedure ever will. Leaders need to be seen to be consistently doing the right thing.

The guide is based on general public sector norms, and my Office might refer to the principles in the guide when carrying out performance audits, inquiries, annual audits, or our other assurance work.

A great deal of trust is placed in the public sector and the spending of public money. Therefore, a high level of integrity is expected. Strong controls and careful judgement should mean that sensitive expenditure in public organisations can withstand parliamentary and public scrutiny.

What is considered sensitive expenditure changes over time, and this guide will not cover every situation. Managing sensitive expenditure requires good judgement and consideration of the principles described in this guide. Appropriately identifying and managing sensitive expenditure is a critical skill expected of all public officials.

Nāku noa, nā,

Signature - JR

John Ryan
Controller and Auditor-General

27 October 2020