Results of the 2021 school audits

27 March 2023

Iona Holsted
Secretary for Education
Ministry of Education

Tēnā koe Iona


Please find enclosed our report on the results of the 2021 school audits.

Our audit reports

We issued standard unmodified opinions for most of the schools we audited. An unmodified opinion means the school’s financial statements fairly reflected its transactions for the year and its financial position at the end of the year. Our report includes details of those school audits that were issued a modified opinion. In those instances, we either could not get enough evidence about a significant matter or we concluded there was a significant error in the financial statements.

The number of modified audit opinions we issued in 2021 (47) was similar to 2020. More than half of the modified opinions issued in 2021 were due to school boards not having appropriate evidence that their cyclical maintenance provision was based on reasonable assumptions about future maintenance requirements. Therefore, we have repeated our recommendation that the Ministry of Education ensure that schools comply with their property planning requirements by having up-to-date cyclical maintenance plans.

Observations from our audits

Financial health of schools

We carried out some analysis of the schools’ financial information. We found that schools had more cash available and increased working capital, but there were more schools that recorded a deficit. Overall, there were about the same number of schools in financial difficulty in 2021 compared to the previous year.

If we consider a school to be in financial difficulty, we ask the Ministry of Education to provide a letter confirming that it will continue to support the school. For the 2021 audits, we identified 19 schools that needed a letter of support.


We continue to see many schools not preparing and reporting full budgets (485 schools in 2021). Having a full budget, including a balance sheet and statement of cash flows, is a legislative requirement and important for good financial management. The shift to the Equity Index system at the start of this year means that schools will receive different amounts of funding from previous years. Therefore, having a full budget in place will be particularly important as schools go through these funding changes.

We have recommended that the Ministry of Education provide schools that are not preparing full budgets with the necessary support to ensure that they are completed.

Non-compliance with the Holidays Act 2003

Non-compliance with the Holidays Act 2003 has been ongoing for several years. The impact on thousands of current and former school employees who might have been incorrectly paid over many years is concerning. Progressing the remediation payments needs to be a high priority.

Although we understand your staff are working hard to identify and resolve this, the amounts attributable to each employee and how they will affect individual schools are not yet known. Until further detailed analysis has been completed, the potential effect on any specific individual or school, and any associated liability, cannot be reliably estimated.

Other matters

We also draw attention to a range of other matters identified during our audits, including sensitive expenditure and schools that claimed money through the Covid-19 Wage Subsidy Scheme.

Audit delivery

It was another challenging year for school audits, with 57% completed by 31 May 2022. The global shortage of auditors and the Omicron outbreak in early 2022 affected both schools and our ability to complete audits on time.

Changes to our audit approach also meant many school audits took longer than planned. These changes included carrying out additional audit testing due to changes to the school payroll system and additional payments made by the Ministry for Ka Ora, Ka Ako (Healthy Lunches Programme). We also needed to refine our audit of cyclical maintenance provisions in response to auditing standards changing, which added to the audit work required.

We have made steady progress since 31 May, with 91% of school audits completed by 31 December 2022.

We are working with audit service providers and your staff to complete these outstanding audits as soon as possible.

Audit challenges and the future of school financial reporting

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.

Therefore, we worked with your staff to prepare a terms of reference for a Ministry of Education work programme on the future of school financial reporting. It would be helpful to have the results from this work programme ahead of our planning for the next contracting round for school auditors in mid to late 2023.

In the meantime, we ask the Ministry of Education to continue simplifying the level of financial reporting required in the Kiwi Park model financial statements, while meeting financial reporting standards.

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.

Nāku noa, nā

John Ryan
Controller and Auditor-General