Auditor-General's overview

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

The public sector is under significant and sustained pressure. The response to, and recovery from, Covid-19 is creating new and additional expectations on the public service, while restrictions due to the pandemic make it harder to meet those expectations. The Government is also introducing major reforms across the public sector, including to the health sector, the tertiary education sector, water management, and resource management, as well as increasing its response to climate change.

The public sector has responded well to this pressure. It has, for the most part, delivered what is expected of it, helped mitigate the effects of Covid-19, and actively progressed implementation of the various reforms. As a country, we can be proud of what our public sector has achieved since Covid-19 first emerged.

However, this work comes at a cost. Public servants continue to be under significant pressure, particularly those who have worked relentlessly on leading the Covid-19 response and the reforms. There is also a significant financial cost to the Government's response to Covid-19 and its reform agenda.

Increased risk is an inevitable result of the current environment. High-trust policies, new policies prepared at speed, and urgent and high-value procurement processes all come with risks to probity and, ultimately, risks to value for money. We have seen some of these risks play out. In my view, the Government and the public sector need to more actively manage these risks while tackling both the ongoing challenges that Covid-19 presents and the Government's extensive reform agenda.

In this context, it is pleasing that New Zealand's world-class financial management system has performed well despite the pressures it is under. The financial statements of the Government were completed and received an unmodified audit opinion by their normal statutory reporting deadline of 30 September 2021. Completing this on time was a considerable achievement for finance teams throughout the public sector and in the Treasury, and for my auditors.

There was the lowest occurrence of unappropriated expenditure in 2020/21 than in any year this century. This is a credit to the Treasury and finance teams in government departments. Public organisations operating within the spending authority provided by Parliament is a cornerstone of our public financial management system.

However, I do have some concerns with how government is accountable to Parliament and the public. In a time of significantly increased public spending and rising levels of debt, Parliament and the public will quite reasonably want to know how well the public sector is performing and whether public spending represents good value for money.

I would like to see increased transparency about performance and value as a feature of the major reforms currently under way. For example, I see a need for:

• a whole-of-government performance report. This would set out what has been achieved with the Government's spending (about $130 billion in 2020/21) and be an independently assured companion report to the financial statements of the Government;
• more insightful reporting of performance at an organisation level and where organisations are working together to achieve common outcomes (for example, the joint venture on family violence and sexual violence, and cross-agency initiatives such as the Provincial Growth Fund); and
• public organisations better understanding what information Parliament and the public need and tailoring their reporting to meet those needs.

The current reforms affecting the public sector provide a rare opportunity to enhance accountability to Parliament and the public. Parliament could also play a role in this by making meaningful improvements to public accountability when considering legislation to enact those reforms and in setting accountability expectations of public organisations.

Our work

My Office has continued to engage early on matters of high public interest so that our recommendations can have a more immediate impact. Our performance audits of the Wage Subsidy Scheme, the vaccination roll-out, and the joint venture on family violence and sexual violence are good examples of this. So too is our inquiry work on matters such as the procurement of saliva testing services and the national immunisation system.

However, annual audits remain the foundation for all of our work. In 2020/21, across 195 of the larger public organisations, including district health boards, tertiary education institutions, government departments, and councils, more than 900 of our annual audit recommendations were implemented. This, together with our reporting to Parliament and the public, underscores the importance of independent assurance about the integrity of New Zealand's public financial management system.

In my view, the importance of our role in supporting trust and confidence in New Zealand's system of government has never been more apparent.

There are challenges ahead for the audit profession. A severe shortage of senior auditors in New Zealand and Australia, caused by border closures, has meant audits have been deferred in both the public and private sectors. A challenge for me as Auditor-General will be to ensure that we maintain our capacity to help Parliament and the public to hold public organisations accountable for their performance by completing timely audits.

Acknowledgements

I thank all public servants for their work to keep New Zealanders safe and for continuing to deliver services that are critical to every community. I thank my staff and the private sector auditors who work in the public sector on my behalf. They too have continued to show dedication, perseverance, and resilience in carrying out their work in difficult circumstances.

I also thank Parliament for its ongoing interest in the work we do and, in particular, for extending some reporting deadlines to help alleviate the extraordinary pressures that Covid-19 has put on the audit profession in New Zealand.

Nāku noa, nā

John Ryan
Controller and Auditor-General

7 December 2021