Part 2: Our core assurance functions

Audit delivery

Annual audits play a crucial role in enhancing trust in how public organisations spend money and what they achieve with that money.

The Auditor-General is responsible for auditing every public organisation in New Zealand (about 3300) each year. These annual audits represent over 85% of the Office's work, and they are generally funded by fees charged to the organisations we audit. There are 131 organisations that spend more than $750 million every year or have assets of more than $500 million, which we call large organisations.

Completing annual audits on time is a longstanding challenge that was exacerbated by the Covid-19 pandemic, which both limited the supply of auditors and reduced the readiness of many organisations for the audit.

Timely completion of audits is getting back on track but is still a challenge. For example, 22 out of 78 councils did not have their 2022/23 audit opinions signed by the deadline. This is an improvement on 2021/22, where 35 councils were late despite a two-month extension to the deadline. Similarly, 79% of central government organisations had their 2022/23 audits completed on time, compared to 65% of their 2021/22 audits.

We are improving our timeliness with large public organisations (86% completed on time this year, up from 74% in 2022/23), with delays in audit completion largely due to the organisation not being ready for the audit. As noted above, audit readiness was a particular issue for councils, even some large councils. We also reduced the number of audit reports in arrears at 30 June 2024 by 151 compared to previous years, and this is a sign of progress.

However, overall timeliness is at 59%, an improvement from last year's 55% but still below our target. This is because completing the annual audits of smaller organisations remains challenging.

Within the group of smaller organisations, schools are particularly affected. Addressing the challenge with the timely completion of school audits will require increasing the number of school auditors and ensuring that those auditors are appropriately remunerated. We have discussed with the Ministry of Education the possibility of changing the scope or other requirements in the long term, but work on this has not yet started.

The quality of our audit work remains high. Public organisations' satisfaction has increased to 76% in 2023/24, up from 69% in 2022/23. Most (90%) of our auditors are currently assessed as at least satisfactory in our quality assurance reviews. Of the other 10%, our concerns relate to audit file documentation rather than the appropriateness of the audit opinion, and we were satisfied that the conclusions and opinions included in the audit reports were appropriate. No audit opinions were withdrawn in 2023/24.

Our audit work also continues to have impact, with public organisations implementing 542 of our audit recommendations in 2023/24.

Auditing long-term plans

Uncertainties faced by councils (especially the implications of the Water Services Repeal Act 2024) added complexity to the audits of councils' 2024-34 long-term plans. Territorial and unitary councils had the option to extend the deadlines for adopting their long-term plans to give them more time to respond to the changes made by the Act.

We communicated regularly with councils and auditors on how to approach the various issues involved in preparing and auditing consultation documents and long-term plans. This year, we also updated our audit methodology, trained auditors, and briefed audit and risk committee chairpersons and council staff.

In 2023/24, we completed 36 council long-term plan audits. For the councils that took the extension option, their long-term plan audit will be completed in 2024/25. There were also eight cyclone-impacted councils that were exempt from producing long-term plans.

Audits in the health sector

In 2023/24, we completed our first full audit of Te Whatu Ora, which is the largest public organisation in New Zealand. Te Whatu Ora is one of the most critical contributors to the government's overall financial position and to the well-being of New Zealanders. Our work on Te Whatu Ora is correspondingly our largest audit, requiring about 22,000 hours to complete.

We also planned to start work on the audit of the first complete New Zealand Health Plan, and committed significant effort to designing a suitable audit methodology. However, work by the Ministry of Health and Te Whatu Ora that is needed to complete the New Zealand Health Plan was deferred, and our audit work will now be mainly in 2024/25.

Controller function

Under New Zealand's constitutional and legal system, the Government needs Parliament's approval to make laws, impose taxes, borrow money, or spend public money.

The Controller function supports the fundamental principle of parliamentary control over the elected government's expenditure. Through this function, we provide independent assurance about whether the Government has incurred expenditure lawfully and within the authority provided by Parliament. We also provide assurance that any spending without authority has been identified and accurately reported to Parliament and the public, and that it has been remedied. In this way, the Auditor-General, in his Controller role, helps maintain the legitimacy and transparency of the public finance system.

In 2023/24 we met all our commitments to advise the Treasury of potential breaches and to report to Parliament on what we observed. We also produced several reports to help the public understand the importance of appropriations and form their own views about how well government departments are meeting their obligation to incur expenditure in keeping with the authority given by Parliament.

Climate reporting

We are well positioned to carry out the mandatory assurance work on greenhouse gas metrics in the climate statements of climate reporting organisations next year. We have been preparing for these new audit requirements and gaining experience in auditing climate-related information as part of our audits of organisations' performance reports.

Given the public interest in climate change, evolving reporting requirements, new standards, and risks like "greenwashing",¹ we are continually improving our climate reporting capabilities. During the year we communicated with our auditors, standard-setters, regulators, and public organisations to help resolve climate reporting challenges, influence the requirements in proposed standards, answer questions, and promote co-ordination and co-operation. We provided guidance to auditors and public organisations on the reporting of carbon targets and carbon status disclosures.