Summary

When auditing the financial statements for schools’ 2023 year, we provided most with a standard, unmodified, audit report. This means that, in our opinion, the financial statements for those schools fairly reflected their transactions for the year and their financial position at the end of the year.

Of the audits completed since we last reported, 88 (less than 4%) contained modified opinions. This means that we either:

• did not get enough audit evidence from the school to be entirely satisfied that the financial statements were a fair reflection of the school’s use of public money; or
• disagreed with the school about an aspect of the information it included in its financial statements.

Although a small proportion of all school audit results, it is the highest number in the last five years.

The most common reason for a modified opinion was inadequate or inaccurate information about school maintenance costs. Schools are required to have 10-year plans to maintain the Ministry of Education’s buildings and have provided for a regular cycle of maintenance. Many schools did not have adequate provisions for cyclical maintenance or lacked enough evidence to show that their provisions were a sensible amount to set aside, and some had no provision for maintenance at all.

Consider the future of schools’ financial reporting

After we reported on the school audits in 2021, the Ministry of Education agreed to set up and run a project that we would support. The project objectives are to:

• simplify financial reporting processes for schools, while ensuring that schools complied with accounting standards and provided transparency for school communities;
• consider the needs of different users of school financial information, including the Ministry of Education and the communities to which schools are accountable; and
• explore what form of assurance is needed over a school’s financial information and how that assurance can be provided in a cost-effective and timely manner.

Although the Ministry has committed to the project, it has not yet allocated resources to complete it. In our view, given how some schools struggle with the current financial reporting processes, this project is increasingly important.

Improve school payroll processes and controls

Many payroll transactions are initiated by schools, making it essential that schools have a strong control environment. Many schools do not.

Make sure that schools have up-to-date cyclical maintenance plans

We issued a significant number of qualified audit opinions because schools had not included adequate provisions for their cyclical maintenance (the regular and recurring costs of maintaining the school property and buildings).

For the 2023 audits, 14% of schools lacked reliable plans or other necessary evidence to fully support their cyclical maintenance provisions.

Schools are required to have 10-year property plans prepared by property consultants and approved by the Ministry of Education. These plans should include detailed maintenance schedules and cost estimates. Despite the requirement, many schools did not have up-to-date maintenance plans.

Given how many schools struggle with this requirement, we consider that the Ministry needs to support schools with reviewing and updating these plans.

Help schools better control sensitive expenditure

Sensitive expenditure is any spending that could give private benefit to staff in addition to any benefit to the school.

In our 2023 audits, we found incidences where schools had used funding for principals’ professional coaching and well-being support in ways that did not have any educational benefit for the school.

We also noted incidences where the educational benefit of gifts provided and overseas travel were not well defined.

Support schools to prepare full budgets

Some schools did not prepare complete budgets, and this has a negative effect on the school’s financial management. It also means the school cannot provide all the required information in the financial statements that we audit.

Review the accountability requirements for closed schools

When a school closes, it must prepare a final set of financial statements up to the date of closure and a liquidation statement detailing how any remaining assets have been distributed. These statements are required to be audited to ensure accountability and transparency.

The Ministry of Education appoints a Residual Agent to manage the closure process, settle liabilities, and disperse assets. If the auditor does not receive all the information required to audit the final set of financial statements and the liquidation statement, the audit cannot be completed.

There have been significant delays in completing audits for closed schools and some incomplete audits date back to 2014. These delays reduce the value of accountability and the audited information becomes less useful.