Appendix: Audit results for 2020

Tertiary education institutions: What we saw in 2021.

This Appendix was originally published in Tertiary education institutions: Main findings from our 2020 audits (2021), at

Audit reports

We issued unmodified audit opinions for the financial statements of 25 of the 28 tertiary education institutions. An unmodified opinion means that we were satisfied that the information those 25 tertiary education institutions reported fairly reflected their activities for the year and their financial position at the end of the year.

We issued a qualified audit opinion for the financial statements of one tertiary education institution, and we are yet to issue our audit opinion for the financial statements of two tertiary education institutions.

Qualified audit opinion

We issued Universal College of Learning with a qualified audit opinion because the scope of our audit was limited. This limitation arose because Universal College of Learning could not reliably estimate the seismic remediation work it needs to carry out. Therefore, it did not recognise the work's effect on the value of its Manawatū and Whanganui campus buildings.

When we issued our audit report, the seismic assessment work was still ongoing. The cost for seismic remediation work could be substantial. We were unable to determine whether the book value of buildings was materially different to their fair value.

Except for the above matter, we were satisfied that the information we audited fairly reflected Universal College of Learning's activities and its financial position as at 31 December 2020.

Emphasis of matter: Impact of the Covid-19 pandemic

The Covid-19 pandemic has continued to impact the sector. Both tertiary education institutions and auditors have had to consider the implications of the Covid-19 pandemic on their entities.

All but one tertiary education institution disclosed the possible significant effects of the Covid-19 pandemic in their financial statements. Our audit reports included emphasis of matter paragraphs drawing attention to those matters.

Emphasis of matter: Te Pūkenga subsidiary companies to exist until 31 December 2022

The subsidiary companies' audit reports that our auditors issued included emphasis of matter paragraphs drawing attention to the entities only continuing to exist until 31 December 2022, when they are required to be fully integrated into Te Pūkenga.

Other matters of public interest – Te Pūkenga

Te Pūkenga came into existence on 1 April 2020 during an Alert Level 4 lockdown. The permanent senior management team was established between July and November 2020. However, responding to the impacts of the Covid-19 pandemic limited management's time for other matters, including the time needed to plan and budget for future years.

A transition pathway was established, with nine workstreams covering a variety of areas. These included partnership and equity, development of the operating model, network collaboration, transition of the industry training organisations, capital asset strategy, and academic delivery innovation.

The effect of managing the impacts of the Covid-19 pandemic and the length of time to establish the senior management team meant that progress on the workstreams by 31 December 2020 was slower than planned.

Te Pūkenga did not have a statement of intent or statement of performance expectations for 2020. These important documents establish the basis for year-end performance reporting.

In our view, the performance framework in the statement of intent and statement of performance expectations for 2021 needs significant improvement. This is because there is a risk that Te Pūkenga may be unable to adequately report on its performance in 2021 and beyond.

Disestablishment audits of institutes of technology and polytechnics

On 1 April 2020, the 16 institutes of technology and polytechnics became the subsidiary companies. Disestablishment audits for the period 1 January 2020 to 31 March 2020 were required to be carried out by 31 July 2020.

Of the 16 institutes of technology and polytechnics, 14 have now reported on the three-month period ended 31 March 2020. Out of these, only six reported on time.

Tai Poutini Polytechnic and Western Institute of Technology at Taranaki have yet to report. For Tai Poutini Polytechnic, the delay in completing its 2018 audit, client matters, and the sequencing of audit work have all affected the completion of its disestablishment audit. For Western Institute of Technology at Taranaki, the delay is because of resourcing constraints and auditor resourcing pressures.

Universal College of Learning's audit opinion continued to be qualified, as outlined above.

Timeliness of reporting for 2020

Despite the continued operational disruptions caused by the Covid-19 pandemic, all eight universities, all three wānanga, 13 of the 16 institutes of technology and polytechnics, and Te Pūkenga reported by the statutory deadline of 30 April 2021.

Tai Poutini Polytechnic, Waikato Institute of Technology, and Western Institute of Technology at Taranaki did not meet their statutory reporting deadlines. Waikato Institute of Technology adopted its audited financial statements in September 2021.

Tai Poutini Polytechnic and Western Institute of Technology at Taranaki have yet to report. The delay is because of resourcing constraints in the finance teams of each entity and at auditors.

Waikato Institute of Technology and Western Institute of Technology at Taranaki are currently sharing a chief financial officer because Western Institute of Technology at Taranaki's previous chief financial officer left in October 2020.

It is important that public organisations continue to produce timely and accurate reporting so that audits can be completed on time and results reported publicly. The challenges of the Covid-19 pandemic and resource constraints for some institutes of technology and polytechnics and our auditors have not made this possible in the current year.

Although end-of-year reporting describes events that have already happened, it provides the foundation for public accountability and is important information for future planning. High-quality, reliable, and independently assured information is important to maintaining the trust and confidence of Parliament and the public.

Preparation for audit

Even though a high proportion of tertiary education institutions meet their statutory reporting deadlines every year, doing so can involve hidden costs. We approved six requests from auditors to charge additional costs to tertiary education institutions because of delays and rework in auditing their 2020 financial statements and performance information.

Tertiary education institutions can help the audit process to run smoothly. Having robust governance frameworks and internal controls are important for good stewardship and maintaining public trust and confidence. When they operate effectively, these frameworks and controls can reduce the amount of work auditors need to do.

Some common issues auditors experienced when auditing tertiary education institutions' financial statements and performance information included:

  • auditors receiving multiple versions of the financial statements;
  • tertiary education institutions not having all the required information available at the start of the process and not providing additional support in a timely manner during the audit process;
  • auditors being unable to rely on organisations' internal controls for a range of areas;
  • tertiary education institutions not doing an internal quality review of the annual report (including the financial statements and statements of service performance);
  • accounting standards being inappropriately applied; and
  • the impact of the Covid-19 pandemic on the audit process and resources.

Given the accounting judgements and challenges that can arise from the Covid-19 pandemic, preparing for the audit process well has never been more important.

Sensitive expenditure

Sensitive expenditure is any spending by a public organisation that could be seen to be giving private benefit to a staff member, their family, or their friends. Spending that is inappropriate or that lacks a legitimate business reason risks harming a public organisation's reputation and the public sector more generally.

Therefore, like all public organisations, tertiary education institutions need to manage sensitive expenditure deliberately and diligently. As with all spending, it needs to be able to withstand public scrutiny.

Part of the Auditor-General's wider mandate is to monitor how public organisations spend public money, including whether the spending provides, or may be seen to provide, some private benefit.

We inquired into the purchase of a house in Auckland for the University of Auckland's Vice-Chancellor. The purchase gained significant public attention. We published a report on our inquiry in November 2020.46

During our 2020 audits of tertiary education institutions, we found various instances of organisations not complying with their sensitive expenditure policies. Issues with sensitive expenditure arise regardless of how much money is spent. Even a small amount can raise concerns if it appears to be improper.

Tertiary education institutions should ensure that their policies include adequate guidance about handling sensitive expenditure and that these policies are consistent with good practice for public organisations. To assist organisations, we have published our good practice guides on our website.47

Audit recommendations

In 2020, we were pleased that no instances of fraud in tertiary education institutions were reported to us.

The top five types of recommendations our auditors made were for tertiary education institutions to improve:

  • controls over their expenditure and payroll systems;
  • how they applied their accounting policies;
  • the effectiveness and application of their other policies, including those for spending on travel;
  • their processes for valuing property, plant, and equipment, including maintaining the fixed-asset register; and
  • their technical knowledge. For example, improving their knowledge of accounting standards and how to present financial statements.

These types of recommendations are consistent with those we have made in previous years. Tertiary education institutions implemented about 100 of our audit recommendations during 2020. However, at the end of 2020, the sector had still not yet addressed many of our recommendations.

We expect tertiary education institutions to maintain a focus on making the improvements that have been identified and encourage audit and risk committees to regularly monitor progress against them.

46: See Office of the Auditor-General (2020), Inquiry into the University of Auckland's decision to purchase a house in Parnell, at

47: See Office of the Auditor-General (2020), Controlling sensitive expenditure: Guide for public organisations, at