Part 4: Improving how the government reports on its performance

Observations from our central government audits: 2021/22.

In this Part, we set out our observations about performance reporting across central government. These observations build on our previous observations about how the public sector reports on its performance.22

Performance reporting is about showing what has been achieved with public money. Effective performance reporting is essential to building and maintaining trust and confidence in the public sector and, arguably, a government’s ongoing social licence to operate.

Each year, the government spends about $130 billion to $150 billion of public money (noting that a large part of recent increased spending is Covid-19 related). However, at the multiple levels at which a government operates, it is often not clear what outcomes and objectives are being sought, how the government intends to achieve its objectives through its spending, and what is being achieved.

As we have previously commented, Parliament and the public care as much about what difference the government makes for New Zealanders as they do about whether public money has been spent appropriately. Not being clear about what is achieved with that spending creates a significant risk to maintaining the public’s trust and confidence.

The Minister of Finance made comments to the House of Representatives that acknowledged the issues that we raised in last year’s report.23 The Minister also indicated, based on our report, a commitment to consider a better approach. While that was encouraging, we would like to see substantive progress to address the broad issues that we raised last year.

Parts of our public finance and accountability system, such as how the government reports on and is held to account for its finances, continue to operate and serve New Zealand well. However, public sector information and accountability processes for performance are falling short of what is expected by Parliament and the public in the 21st century.

Given the importance of improving performance reporting to build and maintain the trust and confidence of the public, there needs to be a much more concerted and systematic approach to improving how the government reports on its performance. This should include a comprehensive review of public finance legislation and associated accountability systems that ends with greater clarity on accountabilities, key outcomes, and easily understood public reporting on progress.

New service performance reporting standards

In 2022, the External Reporting Board brought into effect a new accounting standard for public benefit entities’ service performance reporting (PBE FRS 48). The standard applies to Tier 1 and Tier 2 public benefit entities24 and sets out generally accepted accounting practice (GAAP), which public organisations are statutorily required to comply with as part of their performance reporting.

The new standard presents an opportunity for public organisations to improve their performance reporting within the context of current system settings and to report on how they are making a difference for New Zealanders in a way that is meaningful to Parliament and the public.

We are expecting to see public organisations improve their performance reporting so that it better reflects their performance. Public organisations will need to carefully consider how they apply the standard and should also make use of the good practice guidance that we recently published in conjunction with the Treasury.

Reporting at an all-of-government level

A government’s goals are often broad and span different organisations in the public sector. However, the current system of performance reporting focuses almost completely on the reporting of individual public organisations. This results in fragmented information on what progress the government is making.

For a government to be held to account, it is critical that it is clear and specific about:

  • what outcomes it is seeking to achieve and how performance will be assessed;
  • how it intends to achieve these outcomes through its spending; and
  • how it has performed and what has been spent to achieve that level of performance.

Recent reports from the Parliamentary Commissioner for the Environment and the Productivity Commission reinforce the need to significantly improve how the government reports on, and is held to account for, its performance and spending.25

As the Commissioner notes, Parliament and the public should be able to readily understand what progress is being made through the about $2 billion of environmental spending each year.

In our view, these issues equally apply more widely to the government’s broader goals and to the about $130 billion to $150 billion of spending by the government each year.

There is an opportunity for the government to build on the Treasury’s Living Standards Framework and well-being reporting to identify the specific objectives and outcomes that it is aiming to achieve across a range of core areas (such as education, health, and transport).

If, for example, a government were required, through changes to system settings and legislation, to set out how it intends to achieve its outcomes through the Budget – and to produce a consolidated all-of-government report on what is being achieved, alongside the annual Government’s financial statements – the public and Parliament would have a fuller account of what difference the government is making for New Zealanders.

Reporting at a sector level and on major initiatives

Improvements are also needed for reporting on major initiatives or funds, whether these are produced by individual public organisations or jointly by public organisations working together.

Alongside the core ongoing services delivered by public organisations, major initiatives across government often play a significant role in how the government intends to make a difference for New Zealanders, and have a high level of public interest (for example, road safety initiatives).

In the case of major initiatives involving multiple public organisations (such as the Provincial Growth Fund), we see the same issue noted earlier in relation to a government’s broad goals. The reporting is spread across the different organisations’ reports, and there is often no consolidated reporting.

In last year’s report, we also highlighted that when major new initiatives are announced through the annual budget, the way in which the spending for these initiatives is authorised often makes it difficult to track spending against the initiatives.

There are system constraints that currently do not enable the government to clearly report on public spending and what is being achieved. The only circumstance where it is possible to determine the actual expenditure incurred for a particular initiative is when there is a “one-to-one” relationship between the initiative and the authorising appropriation. Although this sometimes happens, such as the Wage Subsidy Scheme and the Small Business Cashflow Scheme, it is not the norm.

However, many new policy initiatives in the Budget have a “one-to-many” or a “many-to-one” relationship with the spending authority provided through appropriations. In these instances, the actual expenditure for any initiative will either be spread across several appropriations or not be separated from other expenditure related to the larger appropriation.

We also found that the performance information for the appropriation was often not tailored to reflect the distinctive features of the initiative.

In general, there is no legislative requirement for the public sector to report on progress against major policy initiatives, even though they often play a significant role in how the government intends to achieve its objectives.

The statutory requirements for central government organisations require them to report on progress against their strategic intentions and their annual service performance expectations. There is no statutory requirement to report on the spending associated with major initiatives or the impacts of these initiatives approved through the Budget. Current reporting tends to be done inconsistently and to variable quality.

The issues in how a government is required to report on major initiatives apply not only to new policy initiatives and the initiatives of this Government. They are long-standing issues that have arisen for previous governments and how they have reported on both new and existing initiatives.

In response to the concerns that we previously raised about this, the Treasury told us that it intends to publish consolidated reporting on how public money is being spent and what is being achieved through the Climate Emergency Response Fund.

This is a positive step. However, it applies to only a limited part of the Government’s spending.

In our view, current reporting requirements do not do enough to encourage governments and public organisations to report on how public money is being spent and what is being achieved through major initiatives. In our view, legislative changes are needed as part of reviewing the current statutory reporting requirements for the public sector.

The current Government has been pursuing a significant reform programme across the public sector. This has included:

  • merging institutes of technology and polytechnics into Te Pūkenga;
  • establishing Te Whatu Ora – Health New Zealand and Te Aka Whai Ora – Māori Health Authority;
  • reforming three waters services; and
  • reforming the Resource Management Act.

Alongside the reforms to parts of the public sector, the Government’s reform programme has also included:

  • changes to Public Service Act, in part to enable interdepartmental executive boards and other joint arrangements to support a more joined-up public sector; and
  • modernising the public finance system that has focused on piloting clusters and a multi-year funding approach in the justice and natural resources sectors.

Although a focus of the reforms generally has been to improve how the public sector operates, in our view, they also provide an important opportunity to improve how the public sector reports on, and is held to account for, its performance. Performance reporting could usefully include an evaluation of the effectiveness of the reforms themselves.

Modernising the public finance system and clusters

The Minister of Finance has noted that addressing our concerns would likely require significant reform to the public finance and accountability system and that this was at the centre of the Government’s work to modernise this system.

The primary focus of this work so far has been to pilot clusters and a multi-year funding approach in the justice and natural resources sectors. The pilots are aimed at supporting a more joined-up and flexible approach to public financial management to achieving the priorities of the two different sectors.

Performance reporting by the clusters is still being developed. However, the Treasury told us that the clusters will be reporting on progress against major initiatives as part of their performance reporting in response to the issues we have previously raised.

Although we are encouraged to see these improvements, we have yet to see the more general direction of the modernisation work beyond the focus on clusters. In particular, we have yet to see how the Government intends to make broader and more systemic improvements to how it reports on its performance.

Reforms of the vocational education and health and disability sectors

The reforms of the vocational education and health and disability sectors have also provided opportunity to improve how the public sector reports on, and is held to account for, its performance.

In the case of the reform of vocational education sector, an ongoing concern for us has been how Te Pūkenga reports on its performance.

Our audit of the first annual report from Te Pūkenga raised concerns about whether it was providing meaningful information about its performance. We noted in our report Tertiary education institutions: What we saw in 2021 that Te Pūkenga did not have a performance and accountability framework that was ready to be implemented. As at December 2022, we understand that still to be the case.

After the fundamental reform of the health sector, which took effect on 1 July 2022, we are closely monitoring how the sector and individual agencies will report on their performance. We will have responsibility for the audit of the New Zealand Health Plan, the key planning document for the health sector from 2024 onwards. In the meantime, we will audit the reporting by Te Whatu Ora and Te Aka Whai Ora against the Interim Health Plan in both 2023 and 2024.

The Interim Health Plan was launched on 28 October 2022. It included the proposed priorities for the health sector for 2022/23 and 2023/24. We have an interest in the health sector’s new accountability arrangements and its approach to performance reporting. We will look for whether the sector is providing more meaningful reporting on service delivery and whether the reporting helps with assessment of how the sector is improving health outcomes, including for different population groups and across regions.

For sectors undergoing reform, we intend to publish data showing how the performance information has changed and the extent to which the reforms have led to improved performance and improved reporting.

Interdepartmental executive boards

Recent changes to the Public Service Act also provide an opportunity for the public sector to improve how it reports on its performance. These changes enable the public sector to establish interdepartmental executive boards and joint ventures to support more aligned and co-ordinated strategic policy, planning, and budgeting for specific issues that involve the work of public organisations across the public sector.

In our view, the planning and reporting of the interdepartmental executive boards provide an opportunity to bring together key performance information across different areas and different public organisations to explain what progress is being made on those issues that are important to New Zealanders.

The interdepartmental executive boards are currently in the early stages of reporting on their performance. Although it is too early to assess the overall quality of the reporting by the interdepartmental executive boards, there are indications that several are developing frameworks and approaches to show how organisations across the public sector are making a difference on issues cutting across the public sector. We will watch these developments with interest.

22: Auditors-General have been raising concerns about performance reporting for many years. See for a list of our publications on this topic.

23: See New Zealand Parliament, “Debate on the 202021 Annual Reviews - Committee Stage - Video 3”, at

24: See

25: Parliamentary Commissioner for the Environment (2022), Environmental reporting, research and investment – Do we know if we’re making a difference?, at