Auditor-General says better quality reporting needed on government spending

This article was first published by the NBR on 12 May 2021 and has been republished with permission.

Imagine a board approving a company budget and setting expectations about what the chief executive will deliver for that budget. It agrees the rules for how the chief executive can alter the budget or change what they could spend the money on and, otherwise, lets the chief executive get on with their job.

If, in this scenario, the CEO chose to overspend or change what the budget was spent on – outside the rules laid down by the board – then I imagine there would be consequences for the chief executive the next time they were at the board table.

In our system of government, the board’s role is taken (at least in part) by Parliament, and the chief executive’s role by the government (also referred to as the ‘Executive branch’).

And just as an independent auditor is appointed to check on the robustness of the CEO’s management systems, and how well they are reporting the company’s results, Parliament has appointed the Controller and Auditor-General to do broadly the same on its behalf.

The term ‘Controller’ (outside the stories about a certain tank engine) is unusual. The purpose of this part of my role is to ensure the government spends public money – taxpayers’ money – only within the authority given to it by Parliament.

Rules, controls, checks

In the last budget, Parliament authorised the government to spend up to $130 billion of taxpayers’ money. There are important rules, controls, and checks aimed at ensuring this money is not spent at levels, or in areas, that Parliament has not authorised.

Overall, the system works well. Compared with the countless transactions taking place every day, unauthorised expenditure occurs about 20 times a year. In total, it is usually less than 0.2% of the budget, although this can still amount to many tens of millions of dollars.

Parliament authorises the government to spend public money. It stands to reason that the government should therefore be answerable to Parliament (and the public) for what it has done with the money.

The New Zealand government compares well with other countries in budget management, financial control, and financial reporting to Parliament and the public. In fact, The Economist (October 20, 2018) recognised New Zealand as the only country with public sector accounting that is “up to scratch”.

Importantly, the public and Parliament also want to know what they are getting for their money. Core government agencies are required to report information necessary to enable an informed assessment of the agency’s performance. While they are required to report on their service performance (and have those reports audited), current practice could be improved.

Improvement opportunities

There are improvement opportunities at several levels. Individual agency performance reporting can be hard to understand and can focus too much on activity instead of achievements. People want to know what has been achieved with public money.

As we noted in our reports on the Provincial Growth Fund and Whānau Ora, people also want to understand how well significant multi-agency initiatives are delivering for New Zealanders. And, of course, this even more true at the all-of-government level – what has been achieved with the $130b that Parliament authorised the government to spend?

Constitutional pillar

In my view, good quality reports that integrate government activities, achievements, and finances are needed to help answer important questions such as: Are services delivered efficiently and to the expected standards? Is government spending achieving the right outcomes? Are New Zealanders getting value for money? The government’s public reports still don’t allow Parliament and the public to easily answer these important questions, if at all.

The role of Controller and Auditor-General remains an important pillar in New Zealand’s constitutional arrangements. Our work aims to help ensure that Parliament and the public can have trust and confidence in the public sector. Or, in the language of business, the board and shareholders need to remain confident their chief executive is using the company’s money as intended, delivers what they have agreed to, and achieves the desired outcomes.

This article was first published by the NBR on 12 May 2021.