Public funding and auditing in the land transport sector

January 2013: Leaflet produced by the Office of the Auditor-General and New Zealand Transport Agency.

The purpose of this leaflet

This brochure is primarily for staff at local authorities, which receive public funds to spend on transport, who want to understand more clearly why their entities are subject to external reviews (or audits) by different organisations.

If you’re subject to several different audits, a reasonable question to ask is “Why?”.

These audits are carried out for different purposes, so we have produced this leaflet to help explain why they are required.

In this leaflet, we explain in brief the respective roles and functions of the organisations that carry out audits within the transport sector.

Controller and Auditor-General

The Controller and Auditor-General – more commonly called the Auditor-General – is an officer of Parliament who audits all – about 4000 – public entities to check whether public money is being spent as Parliament intended.

The role and functions of the Auditor-General are set out in the Public Audit Act 2001. The Auditor-General helps to hold public entities to account for their use of public money.

Annual audits of public entities’ financial statements by appointed auditors form most of the Auditor-General’s work.

The Office of the Auditor-General (OAG) audits all public entities in the transport sector.

This provides an overview of the performance of entities in the sector.

The OAG uses this overview to improve its understanding of the sector and to work with public entities to help them improve their performance.

The OAG:

  • carries out performance audits of aspects of public entities’ operations;
  • can inquire into any matter concerning how a public entity uses resources;
  • reports to Parliament about the performance of public entities;
  • audits local authorities’ long-term plans; and
  • provides auditing standards and guidance for appointed auditors.

A regular focus of the OAG is carrying out performance audits on transport issues.

These can be at both central and local government level.

See for more about the Auditor-General and the OAG.

Audit service providers

An audit service provider from either Audit New Zealand or a private sector accounting firm carries out annual audits on the Auditor-General’s behalf.

The Auditor-General selects the audit service provider best suited for the needs of a particular audit.

The objectives of the audit are:

  • to give an independent opinion on an entity’s financial statements and, as required, statement of service performance; and
  • to report on other matters relevant to an entity’s financial and other management systems that come to their attention.

What auditors look for

In performing audits of local authorities, auditors review the accounting treatment of the funding received for, and expenditure on, local roads.

This amounts to about $2 billion a year.

Auditors provide assurance that money has been spent as intended, and that transactions have been accurately recorded in financial records and presented in end-of-year financial statements.

Auditors also review transport performance reporting.

The auditor’s review of transport funding and expenditure helps support their audit opinion on a local authority’s financial statements.

This means that auditors ask similar questions to NZTA.

However, the focus and purpose of their work are different.

New Zealand Transport Agency

The New Zealand Transport Agency (NZTA) manages the National Land Transport Fund (NLTF), the main mechanism for funding land transport projects and activities in the National Land Transport Programme (NLTP).

The NLTF covers:

  • the full cost of the state highway system and the New Zealand Police’s road safety activities; and
  • about half the NLTP funding for local roads.

The other major funder of land transport is local government. The land transport programmes of many local authorities are limited to activities funded through the NLTP. However, some choose to do other work outside the NLTP. NZTA does not contribute to the cost of these additional activities.

An important part of planning, programming, and funding the NLTP is monitoring the Government’s investment in land transport. NZTA monitors its work and has a legal obligation to audit organisations that use NLTF money. As an investor, NZTA focuses on value for money throughout the planning and delivery of the NLTP.

Previously, NZTA’s audits were separated into Procedural Audits and Technical Reviews. They are now combined into Investment Audits and are targeted to risk. NZTA plans and scopes audits using a risk-based approach, typically on a cycle of 2-4 years.

See for more information about what NZTA does.

Frequently asked questions

Why can’t the audits be co-ordinated?

The OAG and NZTA are working together to better co-ordinate your audits. Where possible, we rely on each other’s work so that we minimise the duplication of audit work.

If the audits we are subject to are for different purposes, why do we often get asked the same questions?

Although audits are carried out for different purposes, inevitably, different auditors will ask similar questions. Ensuring that answers to audit questions and any related documents are easily accessible will help make our audits as efficient as possible.

New Zealand Transport Agency

National Office phone: 04 894 5400

Office of the Auditor-General

Phone: 04 917 1500

Page created: 4 February 2013

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