Auditor-General's overview

E ngā mana, e ngā reo, e ngā karangarangatanga maha o te motu, tēnā koutou.

For the public sector to have the social licence it needs to do its work well, it must be trusted by the public.

We know that, in many countries around the world, trust in governments is declining. In New Zealand, although we continue to have reasonably high levels of trust in the government and its institutions, parts of our society have lower levels of trust. We also know, as we have seen in recent Parliament protests, that for many, trust is vulnerable and can rapidly erode.

When we consider what drives trust in the public sector, we often talk about competence – providing core public services effectively and efficiently; reliability – providing those services in normal times and times of crisis and stewarding the system for the long-term; and whether people believe the public sector acts honestly, openly, and fairly. The perception of honesty can be far more significant than competence and reliability in determining whether the public sector is viewed as trustworthy.

As Auditor-General, I am deeply interested in the trust that the public and Parliament have in the public sector. This means considering how well the public sector is demonstrating its competence, reliability, and honesty.

Central government audits

My annual audits, including the audit of the financial statements of the Government, provide assurance that the financial reporting of the Government complies with generally accepted accounting practice. This work forms the basis for much of my reporting to Parliament and assists the annual review process where select committees, on behalf of Parliament, scrutinise the performance of public organisations.

The financial statements of the Government remain world-leading in many respects. They are prepared on a timely basis, to appropriate accounting standards, and present the information in a manner that I consider to be fair and materially correct. This is no small achievement and one we should continue to celebrate, especially in a year when major reforms and severe weather events made their preparation more complex.

The public sector also continues to ensure that it works within the authority provided to it by Parliament. Although breaches of that authority do still occur, attention to this issue over recent years has meant that these breaches have reduced.

However, good financial reporting and robust independent assurance of financial information is not sufficient to demonstrate the competence, reliability, and honesty of the public sector. If good financial reporting was all that was required, we would have few concerns about public trust.

We know that most annual reports are unlikely to be widely read or understood. They can be complex, dense, and limited in what they report on and how they are communicated. They meet statutory reporting requirements, but often do not report on what matters most to the public.

The public and Parliament can be more interested in the outcomes public organisations are seeking to achieve, the initiatives that will deliver those outcomes, the public money spent on them, what has been achieved, value for money, and the work done to sustain and protect the resources that organisations are the stewards of. But these questions are rarely answered in the public reporting provided by public organisations.

Although there is good practice in how some public organisations report on aspects of their performance, we continue to see reporting that points out how busy public organisations have been rather than what they have achieved and what impact they have had on the outcomes the public is interested in. Reporting often gives little useful information for either the public or Parliament to effectively scrutinise the performance of these public organisations. There are few other areas of our lives where we would accept paying for services with no comprehensive understanding of what we received for the money we spent.

When we consider the reforms in education and health, for example, it is important for the public to understand the challenges in these reforms, the progress being made, and the time frames over which substantive progress to achieving the intended reform outcomes will occur. This would enable an informed discussion on whether these reforms are working and are value for money.

This type of reporting is not easy and there is no legal requirement to do it. The recent Standing Orders Committee recommendation that Parliament open an inquiry into performance reporting and parliamentary accountability could inform legislative changes that I believe are needed to ensure that public organisations regularly report on what matters most to the public and Parliament.

Recurring concerns

There are other matters that affect public trust – some of which we have raised many times in recent years.

The public expect the public sector to operate fairly and transparently. We continue to see issues with the way that procurement is managed by public organisations. The appropriate management of conflicts of interest in particular, at all levels of government, has proven to be a recurring theme.

Māori continue to have lower trust in the public sector than many other New Zealanders. Our work has highlighted good practices that some public organisations have been following to build trust, with real success. But we have also seen a lack of substantive progress and leadership in embracing whānau-centred approaches across the public sector in areas where they are known to be successful.

The New Zealand Defence Force asked me to look at how it was progressing with efforts to eliminate harmful behaviours and sexual violence in its organisation. No one should feel unsafe from their colleagues in the workplace. Harmful behaviours and sexual violence are not only intolerable and damaging at a personal level, they can seriously undermine public trust in an organisation and in the public sector more generally.

Another integrity issue we have highlighted over several years is the unpaid liability for incorrectly calculated holiday pay. For the health sector, this was more than $2 billion at 30 June 2023. Although some payments to staff have recently begun to be made, this has taken many years. More attention and urgency should have been given to correctly paying staff their legal entitlements, especially when many New Zealanders are experiencing a cost-of-living crisis.

Serving New Zealanders during crises

The significant weather events in the early part of 2023 and work we have done elsewhere reinforce that the public is less interested in who provides services and more interested in how local and central government work together to provide services when and where they are needed. Although there is considerable effort put into this relationship, both central and local government report ongoing challenges in working together.

Given recent events, the public and Parliament may well want to know whether the public sector is adequately prepared to manage future emergencies. Our work on Covid-19 reiterated a message from the World Health Organisation that government responses to crises are often characterised by "panic then forget".

Whether the Government has adequately considered the likely risks to New Zealand in repeated crises (such as droughts, floods, and earthquakes) were matters we considered when looking at the Treasury's He Tirohanga Mokopuna (its 2021 long-term fiscal statement and insights briefing). There are many lessons from Covid-19 that the public sector needs to learn from and embed in how it operates. The public rightfully expects the public sector to be prepared for the next crisis.

Acknowledgements

As Auditor-General, I am often asked to look at matters that have not gone to plan. However, in our experience, the public sector generally performs its responsibilities diligently, with integrity, and with a genuine concern for the welfare of all New Zealanders. The work is hard and often thankless. There are multiple pressures on the public sector and a low tolerance for failure. Although no public sector is perfect, and there will always be matters that can be improved, I add my thanks for the work of the public sector in supporting New Zealand and New Zealanders.

I also thank my staff and audit service providers who, over recent years, have worked in difficult circumstances to assure the public and Parliament on the integrity of our public financial management system and the performance of the public sector. The need for robust independent assurance remains critical to building and maintaining trust in our public management system.

Finally, I thank Parliament for its ongoing support of my Office and the work we do.

Nāku noa, nā

John Ryan
Controller and Auditor-General | Tumuaki o te Mana Arotake

11 December 2023