Auditor-General's overview

Annual report 2020/21.

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

I am pleased to present the Controller and Auditor-General's annual report for 2020/21.

New Zealand spent much of 2020/21 responding to the health, welfare, social, and economic impacts of Covid-19. All aspects of our lives were affected, as was every public organisation in New Zealand.

My organisation was no exception. In this environment I am proud of the significant achievements of my Office, and the people who work for it, during 2020/21.

Our work is designed to help improve trust in, and the value New Zealanders receive from, public organisations. In my view, at a time when there is a significant and rapid increase in Government expenditure to respond to the impacts of Covid-19 and the reliance we all place on essential public services, the importance of our work has never been more apparent.

The value of the audit

Our annual audits of the nearly 3400 public organisations that are required to publicly report are core to our work. These audits give assurance to Parliament and the public that they can rely on the financial and performance information the public sector reports. They also provide the foundation for much of our other work.

Through our audits, we make recommendations to help public organisations address weaknesses or risks and improve their performance or accountability. How public organisations respond to these recommendations makes a critical difference to how they perform for New Zealanders.

It almost goes without saying that Covid-19 has affected the auditing process. The effects of Covid-19 meant a 25-30% increase in audit work (for example, extra work on asset valuations) required to complete the 2019/20 audits. Our audits were also less efficient as a result of Covid-19 and we were unable to recover the costs of this inefficiency from public organisations.

In response to Covid-19, I have deliberately prioritised audit quality over timeliness.

In 2020, Parliament agreed to extend the reporting deadlines of most public organisations with a 30 June balance date. This was to give them more time to prepare their financial statements and performance information and to have them audited. We also delayed the audit of the financial statements of the Government by five weeks to help ensure that there was enough time to prepare and audit this vital accountability document.

It was a significant achievement for the public sector and my auditors to complete their work in the revised time frames. My priority was maintaining quality, of the public sector's reporting and of my audits. This was important to preserve accountability during the pandemic and it further enhanced New Zealand's reputation as a country with world class, and resilient, public financial management.

My Office also, in the second half of 2020/21, had the job of completing the three-yearly audits of councils' long-term plans and the associated consultation documents.

These are fundamental accountability documents for councils. Our audit provides assurance that the documents are fit for purpose and are prepared using reasonable underlying assumptions and information. My auditors again did an excellent job in completing this work on top of their normal audit responsibilities.

Helping to get it right

Through our discretionary work we continue to shine a light on how the Government spends public money and what outcomes it achieves for that money. We are engaging sooner in the public sector's work so our observations and recommendations occur early in a programme, when they can be of the most use.

We set a deliberately ambitious work programme for 2020/21. We also responded to important issues that arose during the year, such as planning for the Covid-19 vaccine roll-out. This, together with the ongoing constraints arising from Covid-19, meant that some other work set out in our annual plan has been delayed and will be reported on in 2021/22.

I have been generally pleased with the response to our work from public organisations. We have seen many of our formal recommendations acted on and improvements being made. This reflects the constructive working relationships my staff form and the approach taken by most public organisations to our work, despite the pressure they are under with Covid-19 and, for some, preparing for or implementing significant reform.

Our inquiry work highlighted, through our review of the Auckland Light Rail procurement, the importance of following good procurement practice. Our review of the decision to purchase a house for the Vice Chancellor of the University of Auckland was a reminder of the need to carefully manage sensitive expenditure.

We continued to raise the profile of our Controller work, with regular reporting on whether Government expenditure has been appropriately authorised.

Relationships matter

Our survey work and my meetings with select committees highlight that Parliament continues to find my Office's work and advice relevant and helpful. There were many new members of Parliament after the 2020 election and we assisted with their induction. My team continues to be active in supporting select committees to hold the Government to account for its performance. We revised our briefings to committees this year, added more extensive sector level briefings, and increased the number of briefings we carried out.

I am also pleased to see the increased media coverage of our work. Ultimately, we are here to serve Parliament and the public, and the media is an important channel for reaching the public.

We have continued to build our relationships with audit and risk committee chairpersons through providing advice and facilitating forums for discussion. This year we particularly focused on the chairpersons of local government audit and risk committees, given the significant challenges facing local government and the role of these committees in the governance over long-term plans.

More broadly, we continue to update and expand our good practice guidance to help the public sector "get it right" from the start, including publishing an updated guide on sensitive expenditure.

Upholding our international responsibilities

I am currently the Secretary-General of the Pacific Association of Supreme Audit Institutions (PASAI). PASAI is the regional organisation that supports the development of Auditors-General in the Pacific.

Through this role, my Office supports (with the assistance of funding from the Ministry of Foreign Affairs and Trade) a small Secretariat in Auckland. This Secretariat works tirelessly to increase the capacity, independence, and capability of Auditors-General in Pacific nations. My Office also works directly in a twinning relationship with the Auditors-General of the Cook Islands and Samoa.

In June we hosted PASAI's 23rd Congress virtually. An online format meant we could arrange a wider range of keynote speakers than usual to share their knowledge and experience with attendees. These included former Prime Minister and former Administrator of the United Nations Development Programme the Rt Hon Helen Clark, Director Governance Global Practice at the World Bank Ed Olowo-Okere, South African Auditor-General Tsakani Maluleke, and Kiwibank New Zealander of the Year Dr Siouxsie Wiles.

As Auditor-General of New Zealand, I am also the Auditor-General for Niue and Tokelau.

The future

There is still some way to go before we know how the world might be after the immediate threats and implications of Covid-19 have been addressed.

One issue we have now, and which is likely to continue, is a severe shortage of auditors in New Zealand and Australia. This is a direct result of the border closures, where previously senior auditors could come to New Zealand to assist in the completion of public and private audits during the peak periods.

Parliament has recognised this challenge and again extended some reporting deadlines for public organisations with 30 June 2021 and 30 June 2022 balance dates. Ensuring that we have enough qualified auditors to do our work will be a challenge for the foreseeable future. Addressing this will have wide-ranging implications for recruitment and retention policies, audit methodologies and technologies, and on audit fees, which have generally been under-priced for too long.

Thank you

I want to acknowledge the extraordinary efforts made by public servants to keep New Zealanders safe and to support our well-being since Covid-19 spread around the world.

I also thank Parliament for continuing to support my Office and for the deep interest it takes in our work.

Finally, I want to thank all staff and audit service providers for producing the high-quality work, under pressure, that continues to support trust and confidence in the public sector. We will continue to prioritise quality, the well-being of our staff and service providers, and public sector trust and confidence as we carry out our role during another Covid-dominated year. As I said at the outset, I believe the importance of the work we do has never been more apparent.

Nāku noa, nā

Signature - JR

John Ryan
Controller and Auditor-General
Tumuaki o te Mana Arotake

28 September 2021