Letter to the Secretary for Education

Results of the 2022 school audits.

8 December 2023

Iona Holsted
Secretary for Education
Ministry of Education

Tēnā koe Iona


Please find enclosed our report on the results of the 2022 school audits as at 31 October 2023. The report sets out the results of the school audits completed since our last report.

Audit delivery

When I wrote last year, I noted that school audits have become more complex over time because of increased financial reporting requirements and increasing professional requirements of auditors. At the same time, the number of audit firms in New Zealand has been reducing. These challenges are alongside the ongoing and consequential effects of the Covid-19 pandemic and the global shortage of auditors.

As a result, it was another challenging year for school audits, with 55% of the 2022 school audits completed by 31 May 2023. This situation was unavoidable due to the continuing impact of auditor shortages that also caused significant delays to the 2021 school audits.

We have made progress since 31 May, with 82% of 2022 school audits completed by 31 October 2023. My audit service providers are working to complete the outstanding audits as soon as possible. Clearly a priority for my Office is to work with the Ministry of Education (the Ministry) and my audit service providers to improve this situation in the future.

However, auditors are also experiencing cost pressures, which in turn puts pressure on audit fees and their willingness to prioritise school audits. These will be important considerations in the 2024-26 school contract round, which we will begin speaking to schools about early next year.

Reviewing the school financial reporting and auditing requirements has the potential to reduce the complexity and cost of school audits and improve timeliness. The attached report includes a recommendation that the Ministry prioritise completing its proposed work programme on the future of school financial reporting.

For the reasons set out above I believe that this work is now urgent.

What we found during our school audits

We issued unmodified, (i.e. standard) opinions on the financial statements of most schools we audited. Our report includes details of those school financial statements on which we issued a modified (non-standard) opinion.

We also set out matters we identified during the 2022 school audits. This year, we have made six recommendations for the Ministry.

Sensitive expenditure – principal well-being payments

Last year, the Ministry provided a well-being support payment of $12,000 to school boards with new principals. About $6.3 million was paid to 524 eligible schools. Auditors brought to our attention several instances where this payment was used for reasons other than it was intended. We found that some schools had received guidance from the Ministry before it was finalised. This draft guidance included examples that could be interpreted to mean the funds could be used on personal expenses rather than on well-being support clearly linked to their role as a principal.

While this might have been an isolated matter, we often find that schools are not aware of, or do not fully understand what is required of them. For example, we note in the report that many boards were not aware of the requirement to report on how they comply with their policy as a good employer in their annual report, despite the Ministry providing guidance on this. We have recommended that the Ministry communicate more effectively with schools, including putting in place controls to prevent guidance being sent to schools before it is finalised and approved.

Cyclical maintenance

We have repeated our recommendation to the Ministry from previous years to ensure that schools comply with their property planning requirements by having up-to-date cyclical maintenance plans.

Auditing the cyclical maintenance provision has always been challenging and this year was no different. Many schools still do not fully understand the cyclical maintenance provision and do not always have the necessary information to calculate it. Most modified opinions this year were due to a “limitation of scope”, that is, a lack of evidence for school cyclical maintenance provisions.


As we explained last year, additional payroll audit work was required at schools for the 2021 and 2022 audits due to changes made to the payroll system. Additional reports we were told would be developed to improve the control environment at schools have not yet been put in place.

We are considering how this will affect our school payroll audit approach for the 2023 audits. The scale and number of changes to the school collective agreements during 2023 will also add to the complexity of auditing school payroll expenses.

If additional payroll work is required, this can affect the auditors’ ability to complete all audits on time and can have fee implications. I have asked that my staff work with the Ministry team to ensure we minimise any adverse impact that may arise.

Concluding comments

There continues to be strong collaboration between your staff and my staff to improve the overall accountability of schools. Thank you for this and your ongoing support for the work of the Office.

I am happy to meet with you to discuss this letter and the attached report. We intend to publish this letter and the report on our website, and send a copy of the report to the Education and Workforce Select Committee.

Nāku noa, nā

John Ryan
Controller and Auditor-General