Part 5: Audit results for 2021

Tertiary education institutions: 2021 audit results and what we saw in 2022.

Audit opinions and audit reports

We issued unmodified audit opinions for 25 of the 28 TEIs. An unmodified opinion means that we were satisfied that the information reported fairly reflected the TEIs' activities for the year and financial position at the end of the year. We issued one TEI – Universal College of Learning Limited – with a qualified audit opinion. We are yet to issue our 2021 audit opinion for two TEIs.

Qualified audit opinion

In 2021, we were satisfied that the information we audited fairly reflected Universal College of Learning Limited's activities and its financial position at 31 December 2021.

However, we issued a qualified opinion due to uncertainties in the valuation of campus buildings after a seismic issue was identified in previous-year audits.

The issue was resolved by 31 December 2021. However, we were unable to get sufficient assurance over opening balances and, consequently, in-year valuation movements.

Emphasis of matter: Te Pūkenga subsidiaries to be disestablished by 31 December 2022

All of the subsidiaries of Te Pūkenga that had audit reports issued included "emphasis of matter" paragraphs. These "emphasis of matter" paragraphs drew attention to the subsidiaries continuing until 31 December 2022 at the latest before being fully integrated into Te Pūkenga. The subsidiaries have appropriately prepared their 2021 financial statements on the basis that they will be disestablished.

Emphasis of matter: Uncertainty over Otago Polytechnic Auckland International Campus Limited Partnership's ability to continue to meet its lease payments

Our audit report on Otago Polytechnic Limited included an "emphasis of matter" paragraph that drew attention to whether Otago Polytechnic Auckland International Campus Limited Partnership could continue to meet its lease payments. Because of its dependence on international student enrolments, there is significant uncertainty over its ability to continue to meet its lease payments. This results in a risk that the Otago Polytechnic might have to honour these payments.

Timeliness of reporting in 2021

Despite the continued operational disruptions caused by the Covid-19 pandemic, the eight universities, three wānanga, and 12 of the 16 subsidiaries of Te Pūkenga met the statutory27 reporting deadline of 2 May 2022.28

Waikato Institute of Technology Limited and Northland Polytechnic Limited did not meet the statutory reporting deadline. They reported on 31 May 2022 and 3 October 2022 respectively. This was due to delays on their part and auditor resourcing challenges.

Tai Poutini Polytechnic Limited and Western Institute of Technology at Taranaki Limited have not yet reported and therefore have not met their statutory reporting deadlines.

The 2020 annual audit and the 2020 disestablishment audit29 for Tai Poutini Polytechnic Limited and Western Institute of Technology at Taranaki Limited have still not been reported. The last audit report that was issued on time for Tai Poutini Polytechnic Limited was for 2015. The last audit report issued on time for Western Institute of Technology at Taranaki Limited was for 2019.

It is important that public organisations produce timely and accurate accountability reports to ensure that audits can be completed on time and the results reported publicly. The Covid-19 pandemic and resource constraints continued to create challenges in 2021 for some public organisations and auditors.

End-of-year reporting provides the foundation for public accountability and is important for future planning. High-quality, reliable, and independently assured information is important to maintaining the trust and confidence of Parliament and the public.

Preparing for audit

Although most TEIs meet their statutory reporting deadlines every year, doing so can involve hidden costs. We approved 13 requests from auditors to charge additional costs to TEIs because of delays and rework in auditing their 2021 financial statements and performance information.

Having robust governance frameworks and internal controls are important for good stewardship of organisations and maintaining public trust and confidence. When they operate effectively, it can reduce the amount of work auditors need to do.

Some common issues that auditors had when auditing TEIs' financial statements and performance information included:

  • receiving multiple versions of the financial statements;
  • TEIs not providing suitable information and/or providing information containing significant errors;
  • land and building valuations not completed in a timely manner and/or difficulties in getting adequate supporting information from valuers and/or preparers;
  • a lack of internal quality review of the annual report by TEIs (including the financial statements and statements of service performance); and
  • accounting standards being inappropriately applied and technical accounting matters needing to be worked through.

Given the accounting judgements that might need to be made due to the effects of the Covid-19 pandemic, it is particularly important for TEIs to thoroughly prepare for the audit process.

Sensitive expenditure

Sensitive expenditure is any spending by an organisation that could be seen as giving private benefit to a staff member or member of the governing body that is additional to the business benefit to the organisation. Spending that is inappropriate or that lacks a legitimate business reason risks harming a public organisation's reputation and the reputation of the public sector more generally.

Public organisations need to manage sensitive expenditure deliberately and diligently. As with all spending, it needs to withstand public scrutiny.

Part of our role is examining how public organisations spend public money, including whether the spending provides, or might be seen to provide, some private benefit.

During our 2021 audits, we found instances of TEIs not complying with the sensitive expenditure policies, including:

  • not obtaining appropriate pre-approval for sensitive expenditure incurred; and
  • chief executives and chairpersons' expenses not approved by the appropriate person.

We have reported these instances of non-compliance to the relevant TEIs.

Issues with sensitive expenditure can arise regardless of how much money is spent. Even a small amount can raise concerns if it appears to be improper.

TEIs need to include adequate guidance about sensitive expenditure in their policies and ensure that these policies are consistent with good practice. To help public organisations, we have published good practice guides on sensitive expenditure.30 In several of our audits, we have recommended that TEIs update their sensitive expenditure policies and take our guidance into account.

Audit recommendations

The top four types of recommendations our auditors made to TEIs were to improve:

  • controls over expenditure and payroll systems;
  • processes for valuing property, plant, and equipment, including maintaining the fixed-asset register;
  • the effectiveness and application of other policies, especially for conflicts of interest and sensitive expenditure; and
  • controls over information systems and data management.

These types of recommendations are mostly consistent with recommendations we have made in previous years. There were more recommendations this year about improving conflicts of interest and sensitive expenditure policies. There were fewer recommendations about TEIs applying their accounting policies.

During the 2021 audits, we found that about 130 audit recommendations had been implemented throughout the tertiary education sector. We also made an additional 98 recommendations as part of our 2021 audits. We expect TEIs to continue focusing on making the necessary improvements and encourage TEI audit and risk committees to regularly monitor progress against them.

27: This is a statutory deadline for universities and wānanga and an expected deadline for Te Pūkenga subsidiaries. Because the subsidiaries are not parent Crown entities, they are not legally required to prepare annual financial statements. However, the Minister of Education has noted that an annual report is expected – including audited financial statements – from the subsidiaries as long as they continue to operate as subsidiaries. In our view, the subsidiaries' reporting time frames should be consistent with the statutory time frame for the other TEIs.

28: The statutory deadline is 2 May 2022 and not 30 April 2022 because the Interpretation Act 1999 states that if the last day of the set period is not a working day, then it will be the next working day. Because 30 April 2022 fell on a Saturday, the next working day became the statutory date (2 May 2022).

29: The disestablishment audit was carried out from 1 January to 31 March 2020, during which time the Te Pūkenga subsidiaries were still institutes of technology and polytechnics.

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